SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For
the transition period from _________ to
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Commission file number 0-22978
STIMSONITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3718658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization ) Identification Number)
7542 N. Natchez Avenue
Niles, Illinois 60714
(Address of principal executive offices) (Zip Code)
(847) 647-7717
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of July 25, 1997 was 8,538,827.
<PAGE>
<TABLE>
<CAPTION>
STIMSONITE CORPORATION
Index
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4-5
Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Twelve Months Ended
------------------------- -------------------------- -------------------------
6/29/97 6/30/96 6/29/97 6/30/96 6/29/97 6/30/96
----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $23,594 $24,240 $38,196 $37,665 $83,243 $81,762
Cost of goods sold 15,029 15,099 25,367 24,129 57,073 52,132
----------- ----------- ------------ ----------- ----------- -----------
Gross profit 8,565 9,141 12,829 13,536 26,170 29,630
Operating expenses:
Selling and administrative 3,434 3,653 6,958 7,498 14,720 14,770
Research and development 369 618 1,014 1,410 2,404 2,957
Amortization of intangibles 708 710 1,419 1,419 2,846 2,835
Restructuring charge --- --- --- --- 4,000 ---
----------- ----------- ------------ ----------- ----------- -----------
Total operating expenses 4,511 4,981 9,391 10,327 23,970 20,562
----------- ----------- ------------ ----------- ----------- -----------
Operating income 4,054 4,160 3,438 3,209 2,200 9,068
Joint venture partnership loss --- --- --- --- --- 22
Interest expense 665 740 1,243 1,414 2,509 2,888
----------- ----------- ------------ ----------- ----------- -----------
Income (loss) before provision for
income taxes and extraordinary item 3,389 3,420 2,195 1,795 (309) 6,158
Provision for income taxes 1,411 1,356 993 723 77 2,689
Extraordinary item, net of tax benefit --- --- --- --- 332 ---
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) 1,978 2,064 1,202 1,072 (718) 3,469
=========== =========== =========== =========== =========== ===========
Net income (loss) per common and
common equivalent shares $0.23 $0.23 $0.14 $0.12 ($0.08) $0.38
=========== =========== =========== =========== =========== ===========
Average number of common and
common equivalent shares outstanding 8,693,643 9,016,494 8,735,508 9,024,848 8,830,153 9,068,980
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
6/29/97 12/31/96
----------- ----------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $195 $227
Trade accounts receivable less allowance
for doubtful accounts of $896 (1997)
and $1,206 (1996) 23,162 17,130
Inventories 14,430 11,938
Prepaid expenses and other 2,994 3,157
Deferred tax assets 1,670 1,670
---------- ----------
Total current assets 42,451 34,122
Property, plant and equipment, net 18,637 18,907
Intangible assets, net 12,953 14,373
Deferred financing costs, net 182 287
Long term deferred tax assets and other 4,092 4,181
---------- ----------
Total Assets $78,315 $71,870
========== ==========
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
6/29/97 12/31/96
----------- -----------
(Unaudited) (Audited)
LIABILITIES
<S> <C> <C>
Current liabilities:
Accounts payable $13,986 $11,334
Current maturities of long-term debt 2,500 2,500
Other accrued expenses 5,055 4,435
---------- ----------
Total current liabilities 21,541 18,269
Accrued postretirement benefits 631 631
Long-term debt 31,675 28,300
---------- ----------
Total liabilities 53,847 47,200
STOCKHOLDERS' EQUITY
Total stockholders' equity 24,468 24,670
---------- ----------
Total Liabilities and Stockholders' Equity $78,315 $71,870
========== ==========
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
--------------------- -----------------------
6/29/97 6/30/96 6/29/97 6/30/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $1,202 $1,072 $(718) $3,469
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,694 1,580 3,280 3,092
Amortization of intangibles, deferred financing
costs and discount on long term debt 1,446 1,538 3,032 3,478
Provision for uncollectible accounts - - 311 303
Deferred income taxes - - (1,993) (1,204)
Joint venture partnership loss - - - 22
Extraordinary item - - 332 -
Restructuring charge - - 4,000 -
Changes in assets and liabilities:
Trade account receivables (6,032) (4,422) (907) (2,488)
Inventories (2,492) (910) 1,328 (1,191)
Prepaid expense and other 331 (180) (1,725) (329)
Accounts payable 1,981 843 6,083 (1,530)
Accrued employee benefits 1,512 395 1,133 (1,145)
Accrued warranty (141) 114 144 85
Accrued income taxes - 1,156 (2,683) 1,569
------- ------- ------- -------
Net cash provided by (used in)
operating activities ($499) $1,186 $11,617 $4,131
======= ======= ======= =======
Cash flows from investing activities:
Purchase of property, plant and equipment ($1,424) ($5,843) ($4,975) ($6,674)
Acquisition of Pave-Mark - - 142 (1,433)
Investment in joint venture partnership - - 25 (72)
Other - (167) - (6)
------- ------- ------- -------
Net cash used in investing activities ($1,424) ($6,010) ($4,808) ($8,185)
======= ======= ======= =======
Cash flows from financing activities:
Proceeds from the issuance of common stock,
net of offering expenses $5 $56 $252 $148
Payments to reacquire common stock (1,030) (438) (1,899) (932)
Principal payments under capital lease obligations (80) - (114) 31
Proceeds from long-term debt 5,650 6,300 36,650 7,100
Payments on long-term debt (2,275) (1,030) (41,399) (2,971)
Cash over draft - - - 926
Financing fees paid in connection with debt refinancing - - (332) (151)
Net cash provided by (used in) ------- ------- ------- -------
financing activities 2,270 4,888 (6,842) 4,151
Effect of exchange rate changes on cash (379) (74) (13) (141)
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents (32) (10) (46) (44)
Cash and cash equivalents, beginning of period 227 251 241 285
------- ------- ------- -------
Cash and cash equivalents, end of period $195 $241 $195 $241
======= ======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $614 $1,204 $2,220 $2,311
======= ======= ======= =======
Cash paid during the period for income taxes $5 $158 $2,727 $2,987
Capital lease for property, plant & equipment - - 724 -
Property plant & equipment purchases
included in accounts payable 866 - 866 -
======= ======= ======= =======
</TABLE>
See Accompanying Notes
<PAGE>
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 1 - Financial Information
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to or as permitted by such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, the
financial information presented reflects all adjustments that are necessary to a
fair statement of results for the interim periods presented. Such adjustments
are of a normal recurring nature. These financial statements should be read in
conjunction with the consolidated financial statements and footnotes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K").
The Company's business is seasonal and accordingly comparative full year
information is provided. The financial information included herein at June 29,
1997 and for the periods ended June 29, 1997 and June 30, 1996 is unaudited, and
in the opinion of the Company, reflects all adjustments (which include only
normal recurring adjustments) necessary for the fair presentation of financial
position as of those dates and the results of operations for those periods. The
information in the condensed consolidated balance sheet at December 31, 1996 was
derived from the Company's consolidated financial statements included in the
1996 Form 10-K.
The results for the quarter ended June 29, 1997 are not necessarily indicative
of results that can be expected for the full year ending December 31, 1997.
Note 2 - Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 29, 1997 December 31, 1996
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($000) (Unaudited) (Audited)
<S> <C> <C>
Raw materials $3,994 $3,772
Work in process 1,879 1,601
Finished goods 8,557 6,565
------- -------
$14,430 $11,938
======= =======
</TABLE>
<PAGE>
Note 3 - Subsequent Event
On August 1, 1997, the Company sold its Waukegan, Illinois facility to an
unrelated third party. The $5.8 million of net proceeds were used to repay long
term debt under the Company's credit facility. A loss was realized on the sale;
however, the loss was adequately covered by a $4.0 million reserve established
during the fiscal year ended December 31, 1996. See the 1996 Form 10-K.
Note 4 - Impact of New Accounting Standards Not Yet Effective
Effective for periods ending after December 15, 1997, the Company is required to
adopt SFAS 128 (Statement of Financial Accounting Standards No. 128 "Earnings
Per Share"). SFAS 128 requires companies is to calculate basic and diluted
earnings per share based upon standards designed to provide consistency and
compatibility with calculations of other countries and with that of the
International Accounting Standards Committee. The Company does not expect
earnings per share as reported to be materially different than basic or diluted
earnings per share to be reported upon adoption of the new accounting standard.
In June 1997, the FASB issued SFAS No. 130 - Reporting Comprehensive Income.
This statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements and is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods for
comparative purpose is also required. Also in June 1997, the FASB issued SFAS
131 - Disclosures about Segments of an Enterprise and Related Information. This
statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement is effective for financial
statements for periods beginning after December 15, 1997. Comparative
information for earlier years is also to be presented.
In relation to SFAS Nos. 130 and 131, the Company is in the process of
evaluating the impact of these statements on its financial reporting.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is a discussion and analysis of the consolidated financial
condition and results of operations of the Company for the quarters, six months
and twelve months ended June 29, 1997 and June 30, 1996. The following should be
read in conjunction with the condensed consolidated financial statements and
related notes appearing elsewhere herein and the consolidated financial
statements and related notes contained in the 1996 Form 10-K.
The Company manufactures and markets reflective highway safety products used in
a variety of applications where motorist and pedestrian guidance are important.
Seasonality and Quarterly Results
- ---------------------------------
The Company's sales are seasonal. The domestic highway maintenance and
construction season tends to reach its peak in the second and third quarters of
the year, and domestic sales of the Company's products are generally highest in
these quarters. While international sales are also seasonal, international
maintenance and construction seasons vary from the domestic season and tend to
offset somewhat the seasonality of domestic sales. International sales
constituted 13.2% and 11.7% of net sales in the second quarters of 1997 and
1996, respectively, 14.6% and 13.9% of net sales in the first six months of 1997
and 1996, respectively, and 12.5% of net sales in the year ended December 31,
1996. Because the Company operates with little backlog, sales in any given
quarter generally result from orders booked and shipped in that quarter.
Accordingly, net sales and operating income are particularly sensitive to the
timing of domestic market demand and tend to be highest in the second and third
quarters, whereas net sales and operating income tend to be reduced during the
first and fourth quarters, resulting in either operating losses or reduced
earnings for those periods. In addition, the Company's performance in any given
quarter is further affected by weather anomalies.
The Company's sales are dependent on the ability and willingness of the federal
and state governments to fund highway construction projects. Such sales may be
affected by real or perceived uncertainty concerning the level of government
funding for highway construction projects.
Results of Operations
- ---------------------
The following table sets forth, for the periods indicated, the percentage of net
sales of certain items in the Company's condensed consolidated statement of
operations and the percentage change in each item from the prior comparable
period.
<PAGE>
<TABLE>
<CAPTION>
Table
Percentage of Inc (Dec) Percentage of Inc (Dec) Percentage of Inc (Dec)
Net Sales Percentage Net Sales Percentage Net Sales Percentage
Quarter Ended Change from Six Months Ended Change from Twelve Months Ended Change from
6/29/97 6/30/96 Prior Period 6/29/97 6/30/96 Prior Period 6/29/97 6/30/96 Prior Period
------- ------- ---------- ------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% (2.7%) 100.0% 100.0% 1.4% 100.0% 100.0% 1.8%
Cost of goods sold 63.7 62.3 (0.5) 66.4 64.1 5.1 68.6 63.8 9.5
Gross profit 36.3 37.7 (6.3) 33.6 35.9 (5.2) 31.4 36.2 (11.7)
Selling and administrative 14.6 15.1 (6.0) 18.2 19.9 (7.2) 17.7 18.1 (0.3)
Research and development 1.6 2.5 (40.3) 2.7 3.7 (28.1) 2.9 3.6 (18.7)
Amortization of intangibles 3.0 2.9 (0.3) 3.7 3.8 -- 3.4 3.5 0.4
Restructuring charge -- -- -- -- -- -- 4.8 -- --
Operating income 17.2 17.2 (2.5) 9.0 8.5 7.1 2.6 11.1 (75.7)
Interest expense 2.8 3.1 (10.1) 3.3 3.8 (12.1) 3.0 3.5 (13.1)
Income (loss) before provision
for income taxes and
extraordinary item 14.4 14.1 (0.9) 5.7 4.7 22.3 (0.4) 7.5 --
Net income (loss) 8.4 8.5 (4.2) 3.1 2.8 12.1 (0.9) 4.2 --
</TABLE>
See Accompanying Notes
<PAGE>
Quarter Ended June 29, 1997
Compared to
Quarter Ended June 30, 1996
Net sales of $23.6 million for the second quarter ended June 29, 1997 decreased
$0.6 million or 2.7% from the comparable fiscal 1996 quarter. Net sales of
domestic highway delineation products decreased 7.1% compared with the second
quarter of 1996. The lower revenue in the current year was largely attributable
to cold and wet weather which caused an unusual level of delays in construction
projects and prevented installation of pavement markers and thermoplastic
markings in certain markets. Optical film domestic revenues increased 31.2% over
comparable fiscal 1996 quarter revenue reflecting the acceptance of the
Company's new product line introduced in the fourth quarter of 1996.
International revenues increased by 9.6% compared to the second quarter of 1996
primarily due to strong sales growth in Latin America, Central Europe and the
South Asian Pacific markets which were partially offset by the continuing soft
Western European markets.
Cost of goods sold for the second quarter of 1997 totaled $15.0 million compared
to $15.1 million for the 1996 period. As a percentage of net sales, costs of
goods sold increased from 62.3% in the second quarter of 1996 to 63.7% in 1997.
The related 0.5% decline in gross profit was largely attributable to competitive
pricing, particularly for non-plowable markers and thermoplastic products and as
the result of certain sales promotions.
Selling and administrative expenses for the second quarter of 1997 were $3.4
million, a decrease of $0.2 million. The decline was largely the result of cost
cutting measures put in place at the end of 1996 which continue to benefit the
Company in 1997.
Research and development expenses for the second quarter of 1997 were $0.4
million compared to $0.6 million in the second quarter of 1996. The decrease was
attributable to cost-cutting measures put in place at the end of 1996. As a
percentage of net sales, research and development expenses were 1.6% in the 1997
period compared to 2.5% in the 1996 period. Management believes current levels
of R&D expenditures will not have a material adverse effect on the Company.
Interest expense was $0.7 million in the second quarter of 1997 a decrease of
$0.1 million compared to the comparable 1996 period, principally due to lower
interest rates associated with the Company's current credit agreement compared
to its former credit agreement.
<PAGE>
Six Months Ended June 29, 1997
Compared to
Six Months Ended June 30, 1996
Net sales for the six months ended June 29, 1997 were $38.2 million, an increase
of $0.5 million or 1.4% compared to the comparable fiscal 1996 period. Decreases
of $0.4 million in domestic highway delineation products were offset by
increases of $0.6 million in optical film and $0.3 million in international
revenues.
Cost of goods sold for the six months ended June 29, 1997 totaled $25.4 million
compared to $24.1 million in 1996. A 2.3% decline in gross margin was largely
attributable to competitive pricing, particularly for non-plowable markers and
thermoplastic and as the result of certain sale promotions.
Selling and administrative expenses for the six months ended June 29, 1997
totaled $7.0 million, a decrease of $0.5 million or 7.2% compared to a year
earlier. The decline was largely the result of cost cutting measures put in
place at the end of 1996.
Research and development expenses for the six months ended June 29, 1997 were
$1.0 million down 28.0% compared to 1996. Expenses were lower in the six months
ended June 29, 1997 due to cost cutting measures put in place at the end of 1996
and a modest increase in revenue from the sale of insert tools, which is an
offset to research and development expense. As a percentage of net sales,
research and development expenses were 2.7% in the 1997 period compared to 3.7%
in 1996.
Interest expense was $1.2 million for the six months ended June 29, 1997, a
decrease of $0.2 million or 12.1% compared to 1996. The decrease was principally
due to lower interest rates associated with the Company's current credit
agreement compared to its former credit agreement. The decrease was achieved
despite a higher level of borrowing in 1997 related to the debt financing of the
Waukegan, Illinois property.
Twelve Months Ended June 29, 1997
Compared to
Twelve Months Ended June 30, 1996
Net sales for the twelve months ended June 29, 1997 were $83.2 million, an
increase of $1.5 million or 1.8%. Net sales of domestic highway delineation
products increased $1.6 million or 2.5% compared with the twelve months ended
June 30, 1996. Net international sales increased $0.2 million or 2.0% while net
sales of domestic optical film decreased $0.3 million or 4.3% compared with the
twelve months ended June 30, 1996.
Cost of goods sold for the twelve months ended June 29, 1997 totaled $57.1
million compared to $52.1 million in the comparable 1996 period. The 9.5%
increase is due to the higher level of sales and a sales mix which favored lower
margin products, such as thermoplastic products.
<PAGE>
Selling and administrative expenses for the year ended June 29, 1997 totaled
$14.7 million, a decrease of $0.1 million or 0.4% compared to a year earlier.
Decreases in expenses were the result of cost cutting measures put in place at
the end of 1996 offset by $0.3 million of income arising from recognition of a
$0.3 million gain upon the sale of a minor product line in 1996.
Research and development expenses for the year ended June 29, 1997 were $2.4
million compared to $3.0 million a year earlier. Expenses were lower for the
year ended June 29, 1997 due principally to cost-cutting measures put in place
at the end of 1996. As a percentage of net sales, research and development
expenses were 2.9% for the year ended June 29, 1997 compared to 3.6% for a year
earlier.
The Company incurred a $4.0 million restructuring charge in the fourth quarter
of fiscal year 1996 relating principally to the planned sale of certain land and
a building under construction in Waukegan, Illinois. The restructuring charge is
described in detail in the 1996 Form 10K under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Year
Ended December 31, 1996 Compared to Year Ended December 31, 1995 - Restructuring
Charge."
Interest expense for the year ended June 29, 1997 was $2.5 million, a decrease
of $0.4 million or 13.1% compared to a year earlier. The decrease was
principally due to lower interest rates associated with the Company's current
credit agreement compared to its former credit agreement.
Liquidity and Capital Resources
- -------------------------------
The Company finances working capital requirements and capital expenditures
through internally generated funds, revolving credit loans and lease financing.
During the six months ended June 29, 1997, the Company borrowed $3.4 million net
from its long term credit facility to purchase $1.0 million of outstanding
shares of common stock and $1.4 million in plant and equipment and used $0.9
million in cash in operating and other activities.
The Company's sales are seasonal, with domestic revenues tending to be highest
in the second and third quarter of the year consistent with the domestic highway
maintenance and construction season. The Company builds working capital,
principally accounts receivable and inventory, during the second and third
quarters to support sales. Positive cash flow from operations is generally
realized in the third quarter as cash collections are higher than production
levels and in the fourth quarter of the year as production and related
expenditures seasonally decline and accounts receivable are collected.
Conversely, the Company generally experiences negative cash flow in the first
quarter, when sales are lower, and in the second quarter, when the Company is
building working capital but has not yet collected revenues from second quarter
<PAGE>
sales. The Company has historically borrowed funds available under its revolving
credit facilities to fund working capital during these quarters. The Company
expended $0.5 million on operating activities in the first six months of 1997
compared to realizing $1.2 million from operating activities in the first six
months of 1996. Cash flow from operating activities in the current year was
lower than in the previous year due to larger increases in accounts receivable
and inventory, not fully offset by increases in payables and accruals. The
Company realized $11.6 million from operating activities in the twelve months
ended June 29, 1997, compared to $4.1 million from operating activities in the
twelve months ended June 30, 1996. The $7.5 million increase in cash flow from
operating activities resulted largely from $4.2 million in lower operating
income offset by a $4.0 million non-cash restructuring charge and $7.7 million
in net changes in current assets and liabilities.
On August 1, 1997, the Company sold its Waukegan, Illinois facility to an
unrelated third party. The $5.8 million of net proceeds from the sale were used
to repay long term debt under the Company's credit facility. See Note 3 to
Condensed Consolidated Financial Statements.
At June 29, 1997, the Company's outstanding borrowings under its credit
agreement consisted of $23.8 million of term loans and $10.4 million of
revolving loans. During the balance of 1997, $1.9 million of term loans become
due, and an additional $2.5 million of term loans become due during 1998. At
June 29, 1997, the additional amount available under the revolving portion of
the Company's credit agreement after consideration of all borrowing base
limitations and outstanding loans was $9.6 million.
The Company expects capital expenditure spending for additions and replacements
to approximate $4.0 million in 1997 and $4.0 million in 1998, with funding to be
provided principally from internally generated funds. Through June 29, 1997, the
Company had spent $1.4 million on capital expenditures.
The Company currently uses the major portion of its manufacturing capacity. The
Company is considering an expansion of capacity in 1998. The Company is
currently in negotiations to lease or buy additional space in the Niles, IL
area. However, there can be no assurance that these negotiations will be
successful.
In October 1995, the board of directors authorized the repurchase of up to
500,000 shares of the Company's common stock. In conjunction with the sale of
the Waukegan facility, the board of directors in July 1997 authorized an
expansion of the stock buyback program by 500,000 shares, raising the total
allowable purchases up to 1,000,000 shares. Through June 29, 1997, the Company
had purchased 407,200 shares of its common stock at an average price of $6.90
per share. Completion of this stock repurchase program is permitted under the
Company's credit agreement, subject to continued compliance with various
financial covenants.
The Company expects that cash flow from operations and borrowings under the
credit facility will be sufficient to fund working capital needs, capital
expenditures and mandatory principal payments under the credit facility through
<PAGE>
1998. From time to time, the Company considers possible acquisitions of
businesses complimentary to the Company's business. It is likely that any
significant acquisition would be funded with additional long term debt.
Adoption of new accounting standards
- ------------------------------------
Effective for periods ending after December 15, 1997, the Company is required to
adopt SFAS 128 (Statement of Financial Accounting Standards No. 128 "Earnings
Per Share"). SFAS 128 requires companies is to calculate basic and diluted
earnings per share based upon standards designed to provide consistency and
compatibility with calculations of other countries and with that of the
International Accounting Standards Committee. The Company does not expect
earnings per share as reported to be materially different than basic or diluted
earnings per share to be reported upon adoption of the new accounting standard.
This Form 10-Q contains "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations, beliefs and future financial performance and
assumptions underlying the foregoing related to product demand, ability to meet
short and long term debt requirements, expected cash flow from operations, and
projected capital spending levels. The actual results or outcomes could differ
materially from those discussed in the particular forward looking statements
based on a number of factors, including; (i) changes in economic conditions;
(ii) pricing and other actions taken by competitors; (iii) government funding
(or perceptions regarding such funding) of highway construction projects; and
(iv) the Company's ability to develop and protect its proprietary technology and
to react to increased competition resulting from expiring patents.
<PAGE>
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company took place on May
22, 1997. The following matters were voted upon at the meeting:
The following directors were elected to serve during the year or until
their successors have been elected. A summary of voting results is as
follows:
<TABLE>
<CAPTION>
Tabulation of Votes
-------------------
Name of Director For Withheld
- ---------------- --- --------
<S> <C> <C>
Terrence D. Daniels 5,457,149 17,507
Lawrence S. Eagleburger 5,457,049 17,607
Donald H. Haider 5,457,149 17,507
Edward T. Harvey, Jr. 5,461,147 13,509
Anthony R. Ignaczak 5,457,149 17,507
Richard J.M. Poulson 5,457,049 17,607
Robert E. Stutz 5,459,147 15,509
Jay R. Taylor 5,457,132 17,524
</TABLE>
The appointment of Coopers & Lybrand as the Company's independent
accountants for the 1997 fiscal year was ratified. A summary of voting
results is as follows:
<TABLE>
<CAPTION>
Number of Votes
---------------
<S> <C>
For 5,470,320
Against 1,161
Abstain 3,175
</TABLE>
<PAGE>
Item 6 - Exhibits and Reports of Form 8-K
(A) Exhibits
10.4 Purchase agreement dated July 18, 1997 between Stimsonite
Corporation (seller) and Kenneth Spungen (purchaser) for the sale
of the Company's facility in Waukegan, Illinois.
10.5 First Amendment dated March 27, 1997 to loan agreement dated July
23, 1996 between LaSalle National Bank and Harris Trust and Savings
Bank as a co-lendors and Stimsonite Corporation.
10.6 Second Amendment dated July 1, 1997 to loan agreement dated July
23, 1996 between LaSalle National Bank and Harris Trust and Savings
Bank as co-lendors and Stimsonite Corporation.
11.1 Statement Regarding Computation of Per Share Earnings.
27.1 Financial Data Schedule
(B) Reports on Form 8-K
The Company did not file any Forms 8-K during the quarter ended June 29,
1997.
<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.
Dated August 13, 1997 STIMSONITE CORPORATION
/s/THOMAS C. RATCHFORD
-----------------------
Thomas C. Ratchford
Vice President-Finance, Treasurer,
Secretary and Chief Financial Officer
(Its Duly Authorized Officer and
Principal Financial and Accounting Officer)
<PAGE>
<TABLE>
Exhibit Index
-------------
<CAPTION>
Sequential
Exhibit Page
Number Description Number
- ------ ----------- --------
<S> <C>
10.4 Purchase agreement dated July 18, 1997 between Stimsonite Corporation
(seller) and Kenneth Spungen (purchaser) for the sale of the Company's
facility in Waukegan, Illinois.
10.5 First Amendment dated March 27, 1997 to loan agreement dated July 23, 1996
between LaSalle National Bank and Harris Trust and Savings Bank as a
co-lendors and Stimsonite Corporation.
10.6 Second Amendment dated July 1, 1997 to loan agreement dated July 23, 1996
between LaSalle National Bank and Harris Trust and Savings Bank as
co-lendors and Stimsonite Corporation.
11.1 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
</TABLE>
Stimsonite Corporation
Computation of Per Share Earnings
For the Periods Indicated
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Year Ended
---------------------------- ----------------------------- ----------------------------
Description 6/29/97 6/30/96 6/29/97 6/30/96 6/29/97 6/30/96
- ----------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Average Shares Outstanding 8,569,027 8,852,900 8,608,764 8,854,650 8,696,624 8,882,442
Net additional shares assuming dilutive stock options exercised and proceeds
used to purchase treasury shares at fair market
value 124,616 149,914 126,744 155,229 132,418 168,227
Options issued within one year prior to the initial filing date of registration
statement for an initial public offering in accordance with Staff Accounting
Bulletin No. 83 0 13,680 0 14,969 1,111 18,311
------------ ------------ ------------ ------------ ----------- -----------
Average number of common
shares and common equivalent
shares outstanding 8,693,643 9,016,494 8,735,508 9,024,848 8,830,153 9,068,980
============ ============ ============ ============ ============ ============
Net Income (loss) $1,978,000 $2,064,000 $1,202,000 $1,072,000 ($718,000) $3,469,000
Per share data:
Net Income (loss) $0.23 $0.23 $0.14 $0.12 ($0.08) $0.38
</TABLE>
See Accompanying Notes
EXHIBIT 10.4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made this 18th day of
July, 1997, by and between STIMSONITE CORPORATION, a Delaware corporation
("Seller"), and KENNETH SPUNGEN, an individual ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner of fee simple title to a parcel of land
containing approximately twenty (20) acres, commonly known as 3801 Norman Drive,
Waukegan, Illinois, and legally described on Exhibit A attached to and made a
part of this Agreement, together with all rights, privileges and easements which
are appurtenant to such land, and all improvements located on and in such land,
including, but not limited to, that certain office/industrial building (the
"Building") containing approximately 144,000 square feet (collectively, the
"Property"); and
WHEREAS, Seller wishes to sell, and Purchaser wishes to purchase, all
of Seller's right, title and interest in and to the Property, on the terms,
conditions and provisions set forth in this Agreement.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid,
the mutual covenants contained herein, and other good and valuable
consideration, the receipt and adequacy of which are acknowledged, Seller and
Purchaser agree as follows:
1. Purchase and Sale; Conveyance. Purchaser agrees to purchase and
acquire from Seller, and Seller agrees to sell and transfer to Purchaser, all of
Seller's right, title and interest in and to the Property upon the terms,
conditions and provisions set forth in this Agreement. Seller shall convey title
to the Property in fee simple to Purchaser or his nominee (as Purchaser shall
direct) by recordable special warranty deed (the "Deed") and subject only to the
Permitted Exceptions (as defined below).
2. Purchase Price. The purchase price for the Property shall be
SIX MILLION ONE HUNDRED NINETY FOUR THOUSAND DOLLARS ($6,194,000.00) (the
"Purchase Price"). Purchaser shall pay the Purchase Price as follows:
(a) THREE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($325,000.00),
as earnest money (the "Earnest Money"), was deposited into an interest-bearing
escrow account with the Title Insurer (as defined below) as escrowee (the
"Escrowee") on May 16, 1997, and all interest earned thereon shall be for the
benefit of the Purchaser; and
(b) The balance of the Purchase Price, plus or minus the
prorations authorized by this Agreement, shall be delivered to Seller at Closing
(as defined below).
3. Title Commitment. Seller shall deliver to Purchaser, not later than
ten (10) days prior to Closing, a written commitment for an ALTA Owner's Form
B-1990 policy of title insurance (the "Commitment"), covering the Property,
issued by Chicago Title Insurance Company (the "Title Insurer"), in the amount
of the Purchase Price, dated as of a date not earlier than the date of this
Agreement, showing fee title to the Property solely in Seller, and including an
extended coverage endorsement insuring over so-called "general or "standard"
exceptions contained in the Commitment to the extent of the work completed and
paid for, a zoning 3.1 endorsement, an access endorsement, a contiguity
endorsement, and a waiver of creditors rights (collectively, the
"Endorsements"). Seller shall also deliver with the Commitment legible and
complete copies of all title exceptions shown or referenced in the Commitment
(the "Underlying Documents").
4. Survey. Seller shall deliver to Purchaser, not later than ten (10)
days prior to Closing, a current as-built ALTA survey of the Property prepared
by a surveyor licensed by the State of Illinois and in accordance with the
"Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys" jointly
established and adopted by ALTA and ACSM in 1992 for Urban Class surveys, and
including flood plain certification, dated as of a date not earlier than the
date of this Agreement, and certified to Purchaser and Title Insurer (the
"Survey").
5. Title and Survey Review.
(a) Purchaser shall have seven (7) days after Purchaser shall
have received all of: (i) the Commitment, (ii) the Underlying Documents, and
(iii) the Survey (the "Title Review Period"), in which to review the same. In
the event that the Commitment or the Survey shall show any exceptions to, or
matters affecting, Seller's title to the Property, which are unacceptable to
Purchaser (each, an "Unpermitted Exception"), Purchaser may, by written notice
to Seller sent within the Title Review Period (the "Purchaser's Title Notice"),
disapprove of such exceptions. Seller shall have five (5) days after receipt of
Purchaser's Title Notice (the "Cure Period") to cause such Unpermitted
Exceptions to be removed from the Commitment.
(b) In the event that Seller is unable or unwilling to cause
any or all of the Unpermitted Exceptions to be removed within the Cure Period,
Purchaser shall have the right to:
(i) terminate this Agreement by sending written
notice of such termination to Seller within two (2) days after the
expiration of the Cure Period, and thereafter neither Seller nor
Purchaser shall have any further obligations under this Agreement; or
(ii) accept title to the Property subject to such
Unpermitted Exceptions and request the Title Insurer to issue such
affirmative title insurance coverage over the same as may be available,
all at Purchaser's cost.
(c) Notwithstanding anything contained in this Paragraph 5 or
elsewhere in this Agreement to the contrary, express or implied, Seller
covenants and agrees that all liens and exceptions to Seller's title to the
Property which secure the payment of money only, including, without limitation,
judgment liens, mortgages, mechanics' liens and delinquent taxes or taxes which
are otherwise due and payable on or before the Closing (the "Monetary Liens")
shall be removed by Seller at the Closing, whether or not Purchaser has
designated such Monetary Liens as Unpermitted Exceptions. All the exceptions
shown on the Commitment (other than the so-called "general" or "standard"
exceptions) to which Purchaser has not objected as provided herein (or if
objected to, to which Purchaser thereafter waives its objection) shall be
referred to collectively herein as the "Permitted Exceptions."
(d) Seller shall cause Title Insurer to issue to Purchaser an
ALTA Owner's Policy of Title Insurance, in the amount of the Purchase Price,
dated as of the Closing Date (as hereinafter defined), insuring title to the
Property in Purchaser, subject only to the Permitted Exceptions, with extended
coverage over all general exceptions to the extent of work completed and paid
for and containing the Endorsements (the "Title Policy"). At Closing, the Title
Insurer shall issue to Purchaser or his nominee a mark-up of the Commitment
meeting all the requirements of the Title Policy. The cost of the Title Policy
shall be borne by Seller.
(e) Purchaser acknowledges that the Building is, and on the
Closing Date shall be, in "shell" condition and that, at Seller's direction, the
remaining construction work described in the Construction Contract (as
hereinafter defined) was suspended and has not been performed. Seller has
informed Purchaser that all amounts due under the Construction Contract have
been paid in full, with the exception of FIFTY EIGHT THOUSAND NINE HUNDRED FIFTY
TWO DOLLARS ($58,952.00) (the "Final Payment"). At Closing, Seller shall pay, or
cause the Title Insurer to pay, the Final Payment to the General Contractor from
the closing proceeds. In addition, Seller agrees to deliver to the Title Insurer
at Closing the following (collectively, the "Lien Coverage Materials"): (i) a
sworn owner's statement from Seller in the form attached hereto as Exhibit C;
(ii) a sworn contractor's statement (the "Contractor's Statement") listing all
subcontractors and suppliers engaged by General Contractor in the construction
of the Building and the amounts paid to each; (iii) final waivers of lien from
each subcontractor or supplier listed on the Contractor's Statement; (iv) a
final waiver of lien from the General Contractor; and (v) such other affidavits
or documentation as the Title Insurer may reasonably require in order to delete
or affirmatively insure over any exception relating to possible mechanics' liens
against the Property.
6. Covenants of Seller.
(a) From the date of this Agreement through the Closing Date,
Seller shall, at Seller's sole cost and expense, maintain the Property in the
same condition as it exists as of the date hereof.
(b) From the date of this Agreement through the Closing Date,
Seller shall cause to be maintained in full force casualty insurance on an
all-risk basis in the full replacement value of the Property.
(c) Seller shall transfer to Purchaser at Closing all existing
licenses, permits, easements, and rights of way, including proof of dedication,
required to make use of utilities serving the Property and to insure vehicular
and pedestrian ingress or egress to and from the Property to the extent that
such licenses, permits, easement and rights of way are assignable and such
assignment is permitted by law and to the extent that such licenses, permits,
easements and rights of way are applicable to the Property or any part thereof.
(d) Seller shall endeavor to obtain the consent of Power
Construction Company (the "General Contractor") to the assignment to Purchaser
of the contract between Seller and General Contractor for construction of the
Building (the "Construction Contract"). If Seller obtains such consent, Seller
will assign the Construction Contract to Purchaser at Closing.
7. Representations and Warranties of Seller. To induce Purchaser to
execute and deliver this Agreement and to perform his obligations hereunder and
without regard to any independent investigation of Purchaser, Seller hereby
represents and warrants to Purchaser on and as of the date hereof, and on and as
of the Closing Date, as follows:
(a) All representations and warranties of Seller appearing in
this and other paragraphs of this Agreement are true and correct in all material
respects.
(b) Seller has full capacity, right, power and authority to
execute, deliver and perform this Agreement and all documents to be executed by
Seller pursuant hereto and all required action and approvals therefor have been
duly taken and obtained or will be duly taken or obtained by the Closing Date.
The individuals signing this Agreement and all other documents executed or to be
executed pursuant hereto on behalf of Seller are and shall be duly authorized to
sign the same on Seller's behalf and to bind Seller thereto. This Agreement and
all documents to be executed pursuant hereto by Seller are and shall be binding
upon and enforceable against Seller in accordance with their respective terms.
(c) Except for Seller there are no persons in possession or
occupancy of the Property or any part thereof; nor are there any persons who
have possessory rights, either legal or adverse, in respect to the Property or
any part thereof.
(d) Seller has not received service or written notice of any
claims, causes of action or other litigation or proceedings pending, and Seller
has no actual knowledge that any such claims are threatened, in respect to the
ownership, construction of the Building, the operation of the Property, nor
environmental conditions of the Property or any part thereof.
(e) Seller has not received service or written notice of any
violations of any health, safety, pollution, environmental, zoning or other
laws, ordinances, rules or regulations with respect to the Property, and Seller
has no actual knowledge of any such violations.
(f) Seller has not received service or written notice of any
existing or pending, nor does Seller have actual knowledge of any threatened (i)
condemnation of any part of the Property, (ii) widening, change of grade or
limitation on use of the streets, roads or highways abutting the Property, (iii)
special tax or assessment to be levied against the Property, (iv) change in the
zoning classification of the Property, or (v) change in the tax assessment of
the Property.
Seller agrees to indemnify, defend and hold Purchaser harmless from and against
any and all loss, damage, liability and expense (including reasonable attorneys'
fees and other litigation expenses), Purchaser may suffer, sustain or incur as a
result of any misrepresentation or breach of warranty made by Seller in this
Paragraph 7. Seller shall notify Purchaser promptly if Seller becomes aware of
any transaction or occurrence prior to the Closing Date which would make any of
the representations or warranties of Seller contained in this Paragraph 7 untrue
in any material respect.
8. Representations of Purchaser. To induce Seller to execute and
deliver this Agreement and to perform its obligations hereunder, Purchaser
hereby represents to Seller on and as of the date hereof, and on and as of the
Closing Date, as follows:
(a) All representations of Purchaser appearing in this
and other sections of this Agreement are true and correct.
(b) Purchaser has full capacity, right, power and authority to
execute, deliver and perform this Agreement and all documents to be executed by
Purchaser pursuant hereto and, subject to the provisions of Paragraph 9 below,
all required action and approvals therefor have been duly taken and obtained or
will be duly taken or obtained by the Closing Date. The individuals signing this
Agreement and all other documents executed or to be executed pursuant hereto on
behalf of Purchaser are and shall be duly authorized to sign the same on
Purchaser's behalf and to bind Purchaser thereto. This Agreement and all
documents to be executed pursuant hereto by Purchaser are and shall be binding
upon and enforceable against Purchaser in accordance with their respective
terms.
9. Due Diligence Contingency.
(a) Purchaser and his agents, engineers, surveyors,
appraisers, auditors and other representatives shall have the right, during the
period commencing on May 14, 1997 and terminating July 11, 1997, unless sooner
waived by Purchaser (the "Due Diligence Period"), to enter unto the Property to
inspect, examine, survey, and conduct soil tests, borings and other engineering
and architectural tests, to determine the availability of adequate water and
sewer supply and other utility services for the Property, to determine the
physical condition and operability of the Property, to investigate all
applicable zoning ordinances, regulations, building codes and restrictions, to
determine the availability of building permits, site plan and zoning approvals
and other authorizations from applicable governmental authorities, to determine
those factors, if any, that will increase the development costs of the Property,
to determine the environmental condition of the Property, to investigate the
status of payments to the General Contractor, and to secure such assurances and
otherwise to do that which, in Purchaser's sole opinion, is necessary to
determine the suitability of the Property for Purchaser's intended use.
(b) Notwithstanding anything to the contrary contained herein,
Purchaser shall conduct no surface or subsurface invasive testing or sampling of
the Property ("Subsurface Testing") without Seller's prior written approval
(which shall not be unreasonably withheld) and unless Purchaser has afforded
Seller the opportunity to have a representative present at the Subsurface
Testing by giving Seller at least two (2) days notice prior to conducting such
Subsurface Testing.
(c) If Purchaser, in Purchaser's sole discretion, deems the
Property unsuitable for his intended use or that any condition on the Property
is unacceptable, Purchaser shall have the right to terminate this Agreement by
giving written notice to the Seller, with a copy of such notice also sent to
Escrowee, within the Due Diligence Period, in which event this Agreement shall
be null and void. In the event that Purchaser does not provide Seller such
notice within the Due Diligence Period, then Purchaser shall be deemed to have
waived the contingencies described in Paragraph 9(a) hereof.
(d) Purchaser hereby agrees to indemnify, defend, and hold
harmless Seller from and against any and all losses, costs, claims, demands,
suits, causes of actions, proceedings, and liabilities incurred by or asserted
against Seller as a result of the acts of Purchaser pursuant to Paragraph 9(a)
hereof. Purchaser agrees to keep any reports generated as a result of any
inspections, assessments or testing conducted by or on behalf of Purchaser
(collectively, the "Confidential Information") strictly confidential and shall
not disclose the Confidential Information to any third party, other than
employees, advisors and consultants of Purchaser who are involved in the
transaction on behalf of Purchaser, and Purchaser and such third parties shall
not use the Confidential Information other than in connection with their
examination of the Property. Notwithstanding the foregoing, the provisions of
this Paragraph 9(d) shall be inoperative as to such portions of the Confidential
Information which Purchaser is required to disclose by any applicable law,
ordinance or regulation.
(e) The obligation of Purchaser to close the transaction
contemplated hereby is further subject to all representations and warranties of
Seller contained in this Agreement being true and correct in all respects at and
as of the Closing Date, and all obligations of Seller to have been performed on
or before the Closing Date having been timely and duly performed.
10. Repair Escrow. The caulking, positioning and flashing of certain
windows in the Building must be corrected to be in accordance with the
manufacturer's installation specifications, and certain pitch pockets in the
roof of the Building must be corrected (the "Repair Work"). To ensure that
Seller causes the Repair Work to be completed after the Closing Date, TWENTY
FIVE THOUSAND DOLLARS ($25,000.00) of the Purchase Price shall be retained in
escrow with the Title Insurer at Closing. The money will be held in escrow until
the Repair Work is completed to the reasonable satisfaction of Purchaser, at
which time Purchaser will sign any documents required by Title Insurer to
release the money to Seller.
11. "AS IS" Condition. Except as may be expressly provided herein,
Purchaser shall accept the Property at Closing "AS IS". Purchaser agrees and
acknowledges that neither Seller nor any agent, attorney, employee or
representative of Seller has made any representation respecting or has made any
warranty whatsoever, express or implied, regarding the Property except as may be
expressly set forth herein. Purchaser acknowledges that he has examined and
inspected the Property and that this transaction is an "AS IS" conveyance.
12. Brokerage. Seller hereby represents and warrants to Purchaser that
Seller has not dealt with any broker or finder in respect to the transaction
contemplated hereby except for Grubb & Ellis and CB Commercial whose commission
shall be paid solely by Seller. Seller hereby agrees to indemnify and hold
Purchaser harmless from and against any claim for brokerage commissions or
finder's fees or other like fees asserted by any person, firm or corporation
with respect to the Property. Purchaser hereby represents to Seller that
Purchaser has not dealt with any broker or finder in respect to the transaction
contemplated hereby, and Purchaser hereby agrees to indemnify and hold Seller
harmless from and against any claim for brokerage commissions or finder fees or
other like fees asserted by any other person, firm or corporation with respect
to the Property claiming by, through, or under Purchaser.
13. Condemnation. If, after the date of this Agreement and prior to the
Closing Date, all or any portion of the Property is taken by exercise of the
power of eminent domain or any proceedings are threatened or instituted to
effect such a taking, Seller shall immediately give Purchaser notice of such
occurrence, and Purchaser may, within seven (7) days after receipt of such
notice, elect to (a) terminate this Agreement (in which event the Earnest Money
shall be forthwith returned to Purchaser along with all interest earned thereon)
and all obligations of the parties hereunder shall cease and this Agreement
shall have no further force and effect, or (b) close the transaction
contemplated hereby as scheduled (except that if the Closing Date is less than
seven (7) days following Purchaser's receipt of such notice, closing shall be
delayed until Purchaser makes such election), in which event Seller shall assign
and/or pay to Purchaser at closing all condemnation awards or other damages
collected or claimed with respect to such taking.
14. Damage and Destruction. If, after the effective date of this
Agreement and prior to the Closing Date, the Building shall be damaged or
destroyed by fire or other casualty, Seller shall immediately give Purchaser
notice of such occurrence, and Purchaser may, within seven (7) days after
receipt of such notice, elect to (a) terminate this Agreement (in which event
the Earnest Money shall be forthwith returned to Purchaser along with all
interest earned) and all obligations of the parties hereunder shall cease and
this Agreement shall have no further force and effect, or (b) close the
transaction contemplated hereby as scheduled (except that if the Closing Date is
less than seven (7) days following Purchaser's receipt of such notice closing
shall be delayed until Purchaser makes such election); provided, however, that
Purchaser shall have the right to participate in the adjustment and settlement
of any insurance claim relating to said damage and at the closing, Seller shall
assign the interest of Seller in and to any insurance proceeds with respect to
said damage to Purchaser.
15. Closing Date. Provided that this Agreement has not been terminated
pursuant to any provision hereof, the closing of the transaction contemplated
hereby ("Closing") shall take place at 10:00 a.m. on August 1, 1997 at the
offices of Title Insurer, 171 N. Clark, Chicago, Illinois, 60601, or at such
other earlier date, place or time as the parties may mutually agree. The Closing
shall, at Purchaser's option, be accomplished either through: (i) an escrow with
the Title Insurer, or (ii) a "New York" style face-to-face-closing at the office
of the Title Insurer.
16. Closing Adjustments. At Closing, general and special real estate
taxes, installments of assessments not due and payable as of Closing, and all
other proratable items, if any (the "Proratable Items") shall be prorated as of
the Closing Date based on 100% of the last ascertainable bills therefor, and
said prorations shall be a credit against the Purchase Price due Seller on the
Closing Date. Seller and Purchaser hereby agree to reprorate the Proratable
Items when the actual bills for such Proratable Items are issued. Seller and
Purchaser acknowledge that Seller shall be responsible for all Proratable Items
relating to periods prior to the Closing Date regardless of when such Proratable
Items shall become due and payable, and Purchaser shall be responsible for all
such Proratable Items relating to periods from and after the Closing Date.
Seller shall cause all utility meters to be read on the Closing Date and will be
responsible for the cost of all utilities used prior to the Closing Date. The
obligations of this Paragraph 15 shall survive the Closing and the delivery of
the Deed.
17. Seller's Closing Deliveries. On the Closing Date, Seller
shall deliver the following to Purchaser, all of which shall be in form,
execution and substance satisfactory to Purchaser and his counsel:
(a) the Deed subject only to the Permitted Exceptions;
(b) a Bill of Sale conveying all personal property on the
Property owned by Seller, including, but not limited to, those items
listed on Exhibit B hereto;
(c) Seller's executed Affidavit of Title;
(d) Seller's executed FIRPTA Affidavit;
(e) an Illinois Responsible Property Transfer Act
("IRPTA") Disclosure Document, if required under the provisions of
IRPTA.
(f) Seller's executed ALTA statement;
(g) Seller's executed GAP Undertaking or equivalent which
may be required by the Title Insurer;
(h) Certificate of Seller dated as of the Closing Date
confirming that the representations set forth in Paragraph 7 and elsewhere in
this Agreement are true and correct in all material respects as of the Closing
Date;
(i) All assignable warranties and guaranties for the
Building, building systems and any equipment and machinery to the extent
available (collectively, the "Warranties");
(j) Seller's executed counterpart of an assignment of all
Seller's right, title and interest in and to all assignable warranties,
licenses, permits, authorizations and approvals issued by any governmental
authority relating to the operation, ownership or maintenance of the Property
(the "Assignment of Warranties and Other Rights");
(k) Seller's executed counterpart of an assignment of all
Seller's right, title, and interest in and to the Construction Contract and
General Contractor's consent to such assignment, if General Contractor consents
to such assignment;
(l) All plans, specifications and blueprints relating to the
Property to the extent available, as well as all building permits, zoning
permits, certificates of occupancy and other licenses and permits relating to
the Property and its operation to the extent available;
(m) the Title Policy, or a mark-up of the Commitment
meeting the requirements of the Title Policy, to be followed promptly by the
issuance of the final Title Policy;
(n) All keys, security codes and all other items
necessary to access the Property or items thereon;
(o) Seller's executed counterpart of an agreed proration
statement;
(p) Seller's executed counterparts of all applicable
state, county and municipal transfer tax declarations;
(q) A certificate of Seller's corporate resolutions
authorizing Seller to execute this Agreement and perform its obligations
thereunder;
(r) the Lien Coverage Materials; and
(s) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by the Title Insurer
to fully effect and consummate the transactions contemplated hereby.
18. Purchaser's Closing Deliveries. On the Closing Date, Purchaser
shall deliver or cause to be delivered to Seller the following:
(a) the Earnest Money and the balance of the Purchase
Price, by, at Purchaser's option, either cashier's check or wire transfer of
immediately available funds;
(b) Purchaser's executed ALTA statement;
(c) Purchaser's executed GAP Undertaking or equivalent
which may be required by the Title Insurer;
(d) Certificate of Purchaser dated as of the Closing Date
confirming that the representations set forth in Paragraph 8 and elsewhere in
this Agreement hereof are true and correct in all materials respects as of the
Closing Date;
(e) Purchaser's executed counterpart of an agreed
proration statement;
(f) Purchaser's executed counterpart of the Assignment of
Contracts, Warranties and Other Rights;
(g) Purchaser's executed counterpart of an assignment of
all Seller's right, title and interest in and to the Construction Contract;
(h) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by the Title Insurer
to fully effect and consummate the transactions contemplated hereby.
19. Closing Costs.
(a) Seller shall be responsible for payment of (i) title
expenses, including, but not limited to, the cost of the Title Policy; (ii)
one-half (1/2) of the Escrow and/or New York style closing charges, if any;
(iii) all State of Illinois and Lake County transfer taxes; (iv) the cost of the
Survey; and (v) recording fees for the Deed and any releases of Monetary Liens.
(b) Purchaser shall be responsible for the payment of (i)
one-half (1/2) of the Escrow and/or New York style closing charges, if any; and
(ii) any other customary buyer's charges.
(c) Local or municipal transfer taxes, if any, shall be paid
by the party designated in the statute or ordinance creating such tax.
20. Default by Seller. In the event of a default by Seller hereunder,
Purchaser shall be entitled, in lieu of any and all other remedies to which
Purchaser may be entitled at law or in equity, (i) to terminate this Agreement
by written notice to Seller, in which event the Earnest Money, with interest
accrued, if any, shall be returned to Purchaser and neither party shall have any
further rights, obligations, or liabilities hereunder, or (ii) to enforce
Seller's obligations hereunder by a suit for specific performance, in which
event Purchaser shall be entitled to such injunctive relief as may be necessary
to prevent Seller's disposition of the Property pending final judgment in such
suit.
21. Default by Purchaser. In the event of a default by Purchaser
hereunder, Seller shall be entitled, in lieu of any and all other remedies to
which Purchaser may be entitled at law or in equity, (i) to terminate this
Agreement by written notice to Purchaser, in which event the Earnest Money, with
interest accrued, if any, shall be paid to Seller as liquidated damages, and
neither party shall have any further rights, obligations, or liabilities
hereunder, or (ii) to enforce Purchaser's obligations hereunder by a suit for
specific performance, in which event, if Seller is successful in such an action,
the Earnest Money shall be paid to Seller and credited against the Purchase
Price. In the event Seller elects to pursue the remedy described in clause (i)
above, the parties acknowledge and agree that the actual damages in such event
are uncertain in amount and difficult to ascertain, and that said amount of
liquidated damages was reasonably determined.
22. Notices. Any notice, request, demand, approval, instruction or
other document to be given or served hereunder or under any document or
instrument executed pursuant hereto shall be in writing and shall be delivered
personally, by telecopy, by nationally recognized overnight courier service or
sent by United States registered or certified mail, return receipt requested,
postage prepaid and addressed to the parties at their respective addresses set
forth below. Any such notice shall be effective (i) upon receipt if delivered
personally, (ii) on the next business day if deposited with a nationally
recognized overnight courier service, prepaid, (ii) three business days after
deposit in the mails if mailed, or (iv) upon confirmation of complete receipt if
given by telecopy during normal business hours (or the next business day if not
confirmed during normal business hours). A party may change its address for
receipt of notices by service of a notice of such change in accordance herewith.
If to Purchaser: Peer International
241 W. Palatine Road
Wheeling, IL 60090
Attention: Lawrence Spungen
Fax:________________________
With a copy to: Lowell L. Ruffer
5301 W. Dempster Street
Suite 200
Skokie, Illinois 60077
Fax: 847/965-8299
If to Seller: Stimsonite Corporation
7542 N. Natchez Avenue
Niles, Illinois 60714-3804
Attention: Thomas Ratchford
Fax: 847/647-0269
With a copy to: Susan I. Matejcak, Esq.
Jones, Day, Reavis & Pogue
77 W. Wacker, Suite 3500
Chicago, Illinois 60601-1692
Fax: 312/782-8585
23. Entire Agreement, Amendments and Waivers. This Agreement contains
the entire agreement and understanding of the parties in respect to the subject
matter hereof, and the same may not be amended, modified or discharged nor may
any of its terms be waived except by an instrument in writing signed by the
party to be bound thereby.
24. Further Assurances. The parties each agree to do, execute,
acknowledge and deliver all such further acts, instruments and assurances and to
take all such further action before or after the closing as shall be necessary
or desirable to fully carry out this Agreement and to fully consummate and
effect the transactions contemplated hereby.
25. Survival and Benefit. All representations, warranties, agreements
and obligations of the parties shall, notwithstanding any investigation made by
any party hereby, survive closing for a period of six (6) months and shall then
be extinguished, unless a longer survival period is expressly specified herein.
26. Miscellaneous.
(a) This Agreement and any document or instrument executed
pursuant hereto may be executed in any number of counterparts each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(b) Whenever under the terms of this Agreement the time for
performance of a covenant or condition falls upon a Saturday, Sunday or holiday,
such time for performance shall be extended to the next business day. Otherwise
all references herein to "days" shall mean calendar days.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
(d) Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PURCHASER:
KENNETH SPUNGEN,
an individual
/s/Lawrence Spungen with
power of attorney for
Kenneth Spungen
SELLER:
STIMSONITE CORPORATION,
a Delaware corporation
By: /s/Thomas C. Ratchford
Its: Vice President
EXHIBIT 10.5
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into as
of the 24th day of March, 1997, and effective as of December 31, 1996, by and
between LaSalle National Bank, a national banking association ("LaSalle"),
Harris Trust and Savings Bank, an Illinois banking corporation ("Harris")
(LaSalle and Harris are referred to herein collectively as the "Banks"), and
Stimsonite Corporation, a Delaware corporation ("Borrower"). LaSalle National
Bank, a national banking association, as agent for the Banks for certain limited
purposes ("Agent"), shall also be deemed a party hereto for the purpose of
acting as agent.
W I T N E S S E T H:
WHEREAS, Banks, Agent and Borrower entered into a Loan Agreement dated
as of July 23, 1996 (the "Agreement"), and now desire to amend such Agreement
pursuant to this Amendment.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the purposes of setting forth the terms and
conditions of this Amendment, the parties, intending to be bound, hereby agree
as follows:
1. Incorporation of the Agreement. All capitalized terms which are not
defined hereunder shall have the same meanings as set forth in the Agreement,
and the Agreement to the extent not inconsistent with this Amendment is
incorporated herein by this reference as though the same were set forth in its
entirety. To the extent any terms and provisions of the Agreement are
inconsistent with the amendments set forth in paragraph 2 below, such terms and
provisions shall be deemed superseded hereby. Except as specifically set forth
herein, the Agreement shall remain in full force and effect and its provisions
shall be binding on the parties hereto.
2. Amendment of the Agreement. The Agreement is hereby amended
as follows:
(a) The definition of the term "EBITDA " in Paragraph 1.1 is
hereby amended and restated -------------- to read in its entirety as follows:
"EBITDA" means, with respect to any fiscal period of Borrower,
Borrower's (a) net income (determined in accordance with GAAP)
for such period, plus (b) the aggregate amounts deducted in
determining such net income in respect of (i) Interest
Expense, (ii) income taxes, (iii) depreciation, (iv)
amortization, (v) extraordinary losses up to $500,000 in the
aggregate in any fiscal year and (vi) $4,000,000 of
restructuring charges for fiscal year 1996, minus (c)
extraordinary gains, each determined in accordance with GAAP
consistently applied.
(b) Paragraph 5.18 is hereby added to the Agreement and
shall read as follows:
5.18 Proceeds from Sale of Waukegan Facility. In the
event that Borrower sells the Waukegan Facility before all
amounts of principal and interest due in respect of the Term
Loan are paid in full to and discharged by the Banks, the net
proceeds from such sale shall be applied to the unpaid
principal portions of the Term Loan in the inverse order of
their maturities.
(c) A final sentence of Paragraph 9.3(b) is hereby
added to the Agreement and shall read as follows:
Notwithstanding the foregoing, Borrower may sell or otherwise
dispose of the Waukegan Facility if, and only if, the net
proceeds of such sale are $6,000,000 or greater and Borrower
complies in full with the provisions of Paragraph 5.18.
(d) Paragraph 9.2(g)(i) is hereby amended and restated to
read in its entirety as follows:
Not permit the ratio of Funded Debt to EBITDA minus Capital
Expenditures to exceed (A) 4.50:1 as of the end of each fiscal
quarter through September 30, 1997 and (b) 3.75:1 for the
fiscal quarter ending December 31, 1997. Notwithstanding the
foregoing, such ratio shall be immediately reduced to 3.75:1
if Borrower sells the Waukegan Facility prior to December 31,
1997.
3. Closing Documents. The following documents and other items
shall be delivered concurrently with this Amendment:
(a) Payment of an amendment fee to the Banks in the
amount of $25,000 in accordance with their Pro Rata Shares.
(b) Four executed copies of this Amendment.
4. Representations and Warranties; No Event of Default. The
representations and warranties set forth in Paragraph 9 are deemed remade as of
the date hereof and, upon full execution of this Amendment in accordance with
Section 5 below, Borrower represents that such representations and warranties
are true and correct as of the date hereof (other than representations and
warranties made as of a specific date). Upon full execution of this Amendment in
accordance with Section 5 below, no Event of Default exists nor does there exist
any event or condition which with notice, lapse of time and/or the consummation
of the transactions contemplated hereby would constitute an Event of Default.
5. Effectuation. The amendments to the Agreement contemplated by this
Amendment shall be deemed effective as of December 31, 1996 upon the full
execution of this Amendment and without any further action required by the
parties hereto. There are no conditions precedent or subsequent to the
effectiveness of this Amendment except as set forth in Section 3 above.
6. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
LASALLE NATIONAL BANK STIMSONITE CORPORATION
By: By:
Its Vice President Its President
LASALLE NATIONAL BANK, as HARRIS TRUST AND SAVINGS BANK
Agent
By: By:
Its Vice President Its Vice President
EXHIBIT 10.6
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Second Amendment") is
entered into as of the 18 day of July 1997, by and between LaSalle National
Bank, a national banking association ("LaSalle"), Harris Trust and Savings Bank,
an Illinois banking corporation ("Harris") (LaSalle and Harris are referred to
herein collectively as the "Banks"), and Stimsonite Corporation, a Delaware
corporation ("Borrower"). LaSalle National Bank, a national banking association,
as agent for the Banks for certain limited purposes ("Agent"), shall also be
deemed a party hereto for the purpose of acting as agent.
W I T N E S S E T H:
WHEREAS, Banks, Agent and Borrower entered into a Loan Agreement dated
as of July 23, 1996 as amended by the Amendment to Loan Agreement dated as of
March 24, 1997 (the "Agreement"), and now desire to further amend such
Agreement.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the purposes of setting forth the terms and
conditions of this Second Amendment, the parties, intending to be bound, hereby
agree as follows:
1. Incorporation of the Agreement. All capitalized terms which are not
defined hereunder shall have the same meanings as set forth in the
Agreement, and the Agreement, to the extent not inconsistent with this
Second Amendment, is incorporated herein by this reference as though
the same was set forth in its entirety. To the extent any terms and
provisions of the Agreement are inconsistent with the amendments set
forth in paragraph 2 below, such terms and provisions shall be deemed
superseded hereby. Except as specifically set forth herein, the
Agreement shall remain in full force and effect and its provisions
shall be binding on the parties hereto.
2. Amendment of the Agreement. The Agreement is hereby amended as follows:
a. Paragraph 9.2(g) of the Agreement is hereby amended and
restated in its entirety as follows:
(g) Financial Covenants (each of which in clauses (i), (ii)
and (iii) below shall be measured each quarter on a rolling four (4)
quarter basis taking into account the immediately preceding four fiscal
quarters of Borrower).
(i) Not permit the ratio of Funded Debt to EBITDA
minus Capital Expenditures to exceed (A) 4.50:1 as of the end
of each fiscal quarter through September 30, 1997 and (B)
3.75:1 for the fiscal quarter ending December 31, 1997.
Notwithstanding the foregoing, such ratio shall be immediately
reduced to 3.75:1 if Borrower sells the Waukegan Facility
prior to December 31, 1997.
(ii) Not permit the Cash Flow Coverage Ratio to
be less than 1.3:1.
(iii) Not permit the Leverage Ratio to exceed (A) for
the fiscal quarters ending June 30, 1996 to September 30,
1997, .60:1; (B) for the fiscal quarters ending December 31,
1997 to September 30, 1998, .55:1; and (C) for the fiscal
quarters ending December 31, 1998 and each quarter thereafter,
.40:1.
b. The final sentence of Paragraph 9.3(b) is hereby amended
and restated in its entirety as follows:
Notwithstanding the foregoing, Borrower may sell or otherwise
dispose of the Waukegan Facility if, and only if, the net proceeds of
such sale are $5,700,000 or greater and Borrower complies in full with
the provisions of Paragraph 5.18.
3. Closing Documents. The following documents and other items shall be
delivered concurrently with this Second Amendment:
a. Four executed copies of this Second Amendment.
4. Representations and Warranties; No Event of Default. The
representations and warranties set forth in Paragraph 9 are deemed
remade as of the date hereof and, upon full execution of this Second
Amendment in accordance with Section 5 below, Borrower represents that
such representations and warranties are true and correct as of the date
hereof (other than representations and warranties made as of a specific
date). Upon full execution of this Second Amendment in accordance with
Section 5 below, no Event of Default exists nor does there exist any
event or condition which with notice, lapse of time and/or the
consummation of the transactions contemplated hereby would constitute
an Event of Default.
5. Effectuation. The amendments to the Agreement contemplated by this
Second Amendment shall be deemed effective as of the date first written
above upon the full execution of this Second Amendment and without any
further action required by the parties hereto. There are no conditions
precedent or subsequent to the effectiveness of this Second Amendment
except as set forth in Section 3 above.
6. Counterparts. This Second Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Second
Amendment as of the date first above written.
LASALLE NATIONAL BANK STIMSONITE CORPORATION
By: By:
Its Vice President Its President
HARRIS TRUST AND SAVINGS BANK
By:
Its Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED JUNE 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
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<NAME> STIMSONITE CORPORATION
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-29-1997
<EXCHANGE-RATE> 1.000
<CASH> 195
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<RECEIVABLES> 24,058
<ALLOWANCES> 896
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0
0
<COMMON> 90
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<INCOME-PRETAX> 2,195
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