SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER: 0-19580
INDUSTRIAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Texas 76-0289495
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
7135 Ardmore, Houston, Texas 77054
(Address of principal executive offices, including zip code)
(713) 747-1025
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
-------------------
Common Stock, $.01 par value
Class A Redeemable Warrant
Class B Redeemable Warrant
Class C Redeemable Warrant
Indicate by check mark whether the registrant (i) 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 (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates of
the registrant was $47,640,528 at March 27, 1997. At that date, there were
5,248,689 shares of Common Stock outstanding.
THE REGISTRANT'S PROXY STATEMENT, TO BE FILED PURSUANT TO REGULATION
14A OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WITH RESPECT TO THE 1997
ANNUAL MEETING OF STOCKHOLDERS, IS INCORPORATED BY REFERENCE INTO PART III OF
THIS REPORT.
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information concerning the directors and executive officers of
the Company is set forth below:
PRINCIPAL POSITION DIRECTOR
NAME WITH THE COMPANY AGE SINCE
---- ---------------- --- -----
CLASS I DIRECTORS WHOSE TERM WILL EXPIRE IN 1998
Charles J. Anderson Director 74 1991
James W. Kenney Director 55 1992
CLASS II DIRECTORS WHOSE TERM WILL EXPIRE IN 1999
John P. Madden Director 55 1992
John L. Thompson Director 37 1997
CLASS III DIRECTORS WHOSE TERM (IF RE-ELECTED) WILL EXPIRE IN 2000
Robert E. Cone Chairman of the Board; 45 1989
President and Chief Executive
Officer; Director
James H. Brock, Jr. Executive Vice President; 58 1991
Director
Barbara S. Shuler Secretary; Director 51 1991
ROBERT E. CONE has served as President, Chief Executive Officer and
Director of the Company since August 1989. From August 1987 to August 1989, Mr.
Cone served as Vice President of Broadcast Ventures, Inc ("BVI"), a partnership
formed to acquire radio stations through syndication. Mr. Cone's
responsibilities at BVI included the formation of business plans, corporate
development, financing and analysis of acquisition candidates.
JAMES H. BROCK, JR. has served as Executive Vice President and Director
of the Company since September 1991. Mr Brock previously served as Chief
Operating Officer and Chief Financial Officer. From 1988 to 1990, Mr. Brock
served as Executive Vice President and Chief Financial Officer of DRCA Medical
Corporation, a health care company specializing in the rehabilitation of injured
workers. Prior to 1988, Mr. Brock served as Vice President-Finance of National
Healthcare Alliance, a full-service managed health care service company and
Chairman of the Board of Directors of Quality Fasteners, Inc., a distributor of
construction supplies, and of Olde Time Ice, Inc., a manufacturer and
distributor of packaged ice. Mr. Brock is a Certified Public Accountant.
BARBARA S. SHULER has served as Secretary of the Company since February
1992 and as a Director of the Company since September 1991. Since 1974, Ms.
Shuler has been self-employed in auction management, marketing, advertising and
promotional aspects of the equine industry, serving as President of Shuler, Inc.
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<PAGE>
CHARLES J. ANDERSON has served as a Director of the Company since
September 1991. For the last seven years, Mr. Anderson has been engaged in
private business investments. Prior to 1985, Mr. Anderson served as Senior Sales
Vice President and Director of Sales and was a partner of the Delaware
Management Company, the manager of the Delaware Group of Mutual Funds and
certain other private pension funds.
JAMES W. KENNEY has served as a Director of the Company since October
1992. Since October 1993, Mr. Kenney has served as Executive Vice President of
San Jacinto Securities, Inc. From February 1992 to September 1993, he served as
the Vice President of Renaissance Capital Group, Inc. Prior to that time, Mr.
Kenney served as Senior Vice President for Capital Institutional Services, Inc.
and in various executive positions with major southwest regional brokerage
firms, including Rauscher Pierce Refsnes Inc. and Weber, Hall, Sale and
Associates, Inc. Mr. Kenney is a director of AmeriShop Corporation, a company
that provides services to the retail industry; Consolidated Health Care
Associates, Inc., a company that operates physical rehabilitation centers;
Scientific Measurement Systems, Inc., a developer of industrial digital
radiography and computerized tomography; Technol Medical Products, Inc., which
designs, manufactures and markets more than 300 disposable medical products;
and Tricom Corporation, a company that develops products and services for the
telecommunication industry.
JOHN P. MADDEN has served as a Director of the Company since October
1992. From January 1992 to April 1993, Mr. Madden served as Chairman of the
Board of The Rex Group, Inc. ("REX") and as its President and Chief Executive
Officer from June 1963 to January 1992 and from December 1992 to April 1993.
REX, a private company based in Houston, Texas, which was acquired by the
Company in March 1993, is a distributor of new and used machine tool equipment,
conducts a machine moving operation and is engaged in the international export
crating business.
JOHN L. THOMPSON has served as a Director of the Company since February
1997 when he was appointed to fill the unexpired term of a retiring director.
Mr. Thompson is a director and President of St. James Capital Corp., a
Houston-based merchant banking firm. St. James Capital Corp. also serves as the
General Partner of St. James Capital Partners L.P., an investment limited
partnership specializing in merchant banking related investments. Additionally,
he is Chairman of the Board of Herlin Industries, Inc., a publicly- held holding
company engaged in energy services. Prior to co-founding St. James, Mr. Thompson
served as a Managing Director of Corporate Finance at Harris Webb & Garrison, a
regional investment banking firm with a focus on mergers and acquisitions,
financial restructuring and private placements of debt and equity issues.
OTHER EXECUTIVE OFFICERS
THOMAS C. LANDRETH has served as Executive Vice President since
September 1996. Mr. Landreth has served as President of Landreth Engineering
Company ("LEC") since 1977 and as President of the Fastener Manufacturing and
Sales Division since the Company's divisional reorganization in June 1996. Mr.
Landreth has worked in all technical areas of LEC since 1967 and is responsible
for numerous cold heading machine designs and improvements as well as numerous
innovative tool and die designs.
CHRISTINE A. SMITH has served as Chief Financial Officer of the Company
since January 1995. From April 1989 through December 1994, Ms. Smith was a
Principal at The Spinnaker Group, an investment banking firm providing services
primarily to manufacturing and distribution companies. Prior to joining The
Spinnaker Group, Ms. Smith, a Certified Public Accountant, was a Senior Manager
with Ernst & Young.
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<PAGE>
BOARD AND COMMITTEE ACTIVITY: STRUCTURE AND COMPENSATION
The Company's operations are managed under the broad supervision of the
Board of Directors, which has ultimate responsibility for the establishment and
implementation of the Company's general operating philosophy, objectives, goals
and policies. During 1996, the Board of Directors convened on two regular
occasions. Each director attended all of the meetings held by the Board or
meetings of Board committees of which he was a member during his tenure in 1996,
except for Charles J. Anderson who attended no Board of Directors meetings and
all Committee meetings of which he was a member. During 1996, directors received
no cash compensation for attendance at Board or Committee meetings. Directors
are, however, entitled to reimbursement for reasonable travel expenses incurred
in attending such meetings. In 1996, each non-employee director (Messrs.
Anderson, Kenney and Madden and Ms. Shuler) was awarded under the Company's 1995
Non-Employee Director Stock Option Plan (the "Director Plan") options to
purchase 5,000 shares of the Company's Common Stock at $4.06 per share. Employee
directors are eligible to participate in the Company's 1994 Amended and Restated
Incentive Stock Plan (the "Employee Plan"). Non-employee directors are entitled
to participate in the Director Plan.
Pursuant to delegated authority, various Board functions are discharged
by the standing committees of the Board. The Audit Committee of the Board of
Directors, currently composed of Messrs. Brock and Anderson and Ms. Shuler,
makes recommendations to the Board of Directors concerning the selection and
engagement of the Company's independent public accountants and reviews the scope
of the annual audit, audit fees and results of the audit. The Audit Committee
also reviews and discusses with management and the Board of Directors such
matters as accounting policies, internal accounting controls and procedures for
preparation of financial statements. The Audit Committee convened on one
occasion in 1996. The Compensation Committee sets the compensation for
executive, managerial and technical personnel of the Company and administers the
Company's stock option and other compensation plans. The Compensation Committee
was composed of Mr. Madden, Ms. Shuler and Mr. Anderson and met on one occasion
in 1996.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Commission. Officers, directors and
greater than 10% shareholders are required to furnish the Company with copies of
all Section 16(a) reports they file. Based solely on its review of the forms
received by it, the Company believes that during the year ended December 31,
1996 Messrs. Cone, Madden, Anderson and Kenney and Ms. Shuler and Ms. Smith were
late in filing a form 4 report of an exempt transaction. The Company believes
that these failures to file reports on a timely basis were inadvertent and has
implemented routine procedures designed to periodically remind its officers and
directors of the filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table provides certain
summary information covering compensation paid or accrued during the fiscal
years ended December 31, 1996, 1995 and 1994 to the Company's Chief Executive
Officer and the other executive officers, whose annual compensation, determined
as of the end of the last fiscal year, exceeds $100,000.
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<PAGE>
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OPTION EXERCISE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) AWARDS PRICE
- ------------------------------------------- ---- -------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Cone ............................ 1996 $160,000 $10,000 150,000 $4.06-5.50
President and 1995 $160,000 -- -- -- --
Chief Executive Officer 1994 $146,250 -- -- 65,000 $2.375
James H. Brock, Jr. ....................... 1996 $150,000 $10,000 -- -- --
Executive Vice President and 1995 $150,000 -- -- -- --
President - Energy Products and 1994 $135,000 -- -- 20,000 $2.375
Services Division
Thomas C. Landreth ........................ 1996 $120,000 $24,518 $ 4,745 30,000 $ 4.06
Executive Vice President and 1995 $120,000 $54,430 $103,932 -- --
President - Fastener 1994 $120,000 $41,350 $ 32,430 -- --
Manufacturing and Sales Division
Christine A. Smith ........................
Vice President and 1996 $ 95,000 $30,000 -- 30,000 $ 4.06
Chief Financial Officer 1995 $ 85,000 -- -- 25,000 $ 3.31
</TABLE>
- ----------------------
(1) Additional payments under the terms of the Landreth Engineering Company
purchase agreement.
STOCK COMPENSATION TABLE. The following table provides certain
information with respect to options granted to the executive officers during the
fiscal year ended December 31, 1996 under the Company's stock option plans:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE
SHARES OF VALUE AT ASSUMED
COMMON PERCENT OF ANNUAL RATES OF STOCK
STOCK TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERMS(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Robert E. Cone ............ 150,000(2) 64% $4.25-5.50 02/19/06 $457,835 $1,160,245
President and
Chief Executive Officer
Thomas C. Landreth ........ 30,000(1) 13% $4.06 02/19/06 76,599 194,118
Executive Vice President
and President - Fastener
Manufacturing and Sales
Division
Christine A. Smith ........ 30,000(1) 13% $4.06 02/19/06 76,599 194,118
Vice President and
Chief Financial Officer
</TABLE>
- --------------
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<PAGE>
(1) 20,000 of these options were fully vested at December 31, 1996.
(2) 50,000 of these options were fully vested at December 31, 1996.
(3) These calculations are based on the market value of the Common Stock on
the date of grant. The market value is calculated by averaging the
closing bid and ask price for the stock as quoted by NMS on the date of
grant. The exercise price is determined by the same method which is
equal to the market value on the date of grant.
OPTION EXERCISES AND YEAR END VALUES
The following table sets forth information with respect to the
unexercised options to purchase shares of Common Stock which were granted to the
executive officers in 1996 or prior years under the Company's stock option
plans. Thomas C. Landreth exercised options for 10,000 shares at $4.06 per share
under the Company's stock option plans during the fiscal year ended December 31,
1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
HELD AT FISCAL YEAR END YEAR END(1)
---------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert E. Cone ......... 165,000 100,000 $1,301,250 $584,500
James H. Brock, Jr. .... 65,000 -- $520,000 --
Thomas C. Landreth ..... 10,000 10,000 $70,620 $70,620
Christine A. Smith ..... 45,000 10,000 $ 336,615 $70,620
</TABLE>
- ---------------------
(1) Represents the difference between the average of the closing bid and
ask price for the Common Stock as quoted by NMS on December 31, 1996
and any lesser exercise price.
PLAN BENEFITS
The following table provides information concerning options granted
under the Company's Employee Plan and Director Plan during 1996:
<TABLE>
<CAPTION>
NAME AND POSITION OPTIONS GRANTED (#) EXERCISE PRICE
----------------- ------------------- --------------
<S> <C> <C>
EMPLOYEE PLAN:
Robert E. Cone, President and Chief Executive Officer ..... 150,000 $4.25-5.50
Thomas C. Landreth, Executive Vice President .............. 30,000 $4.06
Christine A. Smith, Vice President and Chief ..............
Financial Officer 30,000 $4.06
Executive Officers as a group (4 persons) ................. 210,000 $4.06-5.50
All employees who are not officers as a group ............. 23,000 $4.06-9.25
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OPTIONS GRANTED (#) EXERCISE PRICE
----------------- ------------------- --------------
<S> <C> <C>
DIRECTOR PLAN:
James W. Kenney, Director ................................. 5,000 $4.06
John P. Madden, Director .................................. 5,000 $4.06
Barbara S. Shuler, Secretary and Director ................. 5,000 $4.06
Charles J. Anderson, Director ............................. 5,000 $4.06
All non-employee directors as a group ..................... 20,000 $4.06
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
For the fiscal year ended December 31, 1996, Mr. Madden, Mr. Anderson
and Ms. Shuler served on the Compensation Committee of the Board of Directors
(the "Committee"). Ms. Shuler has served as the Company's Secretary since
February 1992.
EMPLOYMENT AGREEMENTS
Effective July 1, 1991, the Company entered into employment agreements
with Messrs. Cone and Brock, which agreements were subsequently amended and
extended. Mr. Cone's amended employment agreement provides for a 1996 base
salary of $175,000, a 1997 base salary of $185,000, and a base salary of
$200,000 for 1998 through 2000. Mr. Brock's amended employment agreement
provides for a 1996 base salary of $160,000, a 1997 base salary of $170,000, and
a 1998 base salary of $180,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the beneficial
ownership of Common Stock at April 27, 1997 by (i) each person known to the
Company to beneficially own more than 5% of its Common Stock, (ii) each
director, (iii) each executive officer and (iv) all directors and executive
officers as a group.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS
---------------- --------------------- -----
St. James Capital Partners, L.P.
1980 Post Oak Blvd., Suite 2030
Houston, Texas 77056................. 1,385,000(2) 21.2%
Directors and Executive Officers:
Robert E. Cone........................ 379,548(3) 6.4%
James H. Brock, Jr.................... 115,000(4) 1.9%
Thomas C. Landreth.................... 68,445(5) 1.2%
Christine A. Smith.................... 55,071(6) *
Charles J. Anderson................... 72,000(7) 1.2%
James W. Kenney....................... 25,000(8) *
John P. Madden........................ 149,373(9) 2.5%
Barbara S. Shuler..................... 82,393(10) 1.4%
John L. Thompson...................... 5,000(11) *
All officers and directors
as a group (9 persons) (3) - (11)... 951,830 15.1%
------------------------------------
* Less than one percent.
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<PAGE>
(1) Subject to community property laws where applicable, each person has
sole voting and investment power with respect to the shares listed,
except as otherwise specified. Each person is a United States citizen.
This table is based upon information supplied by officers, directors
and principal shareholders and Schedules 13D and 13G, if any, filed
with the Securities and Exchange Commission.
(2) Includes 620,000 shares that may be acquired upon the exercise of
currently exercisable warrants.
(3) Includes 165,000 shares that may be acquired upon the exercise of
currently exercisable stock options.
(4) Includes 65,000 shares that may be acquired upon the exercise of
currently exercisable stock options.
(5) Includes 10,000 shares that may be acquired upon the exercise of
currently exercisable stock options.
(6) Includes 45,000 shares that may be acquired upon the exercise of
currently exercisable stock options.
(7) Includes 15,000 shares that may be acquired upon the exercise of
currently exercisable stock options.
(8) Includes 25,000 shares that may be acquired upon the exercise of
currently exercisable stock options.
(9) Includes 20,000 shares that may be acquired upon the exercise of
currently exercisable stock options. Excludes 178,609 shares owned by
persons related to Mr. Madden, but as to which Mr. Madden disclaims
beneficial ownership.
(10) Includes 20,000 shares that may be acquired upon the exercise of
currently exercisable options.
(11) Includes 5,000 shares that may be acquired upon the exercise of
currently exercisable stock options. Excludes 765,000 shares and
620,000 warrants owned by St. James Capital Partners, L.P., of which
Mr. Thompson is a director and president of the General Partner and may
be deemed to share voting and investment power with respect to such
shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company enters into transactions with related parties only with the
approval of a majority of the independent and disinterested directors and only
on terms the Company believes to be comparable to or better than those that
would be available from unaffiliated parties. In the Company's view, all of the
transactions described below meet that standard.
In connection with the purchase of Landreth Engineering Co.
("Landreth") in 1992, the Company entered into a lease agreement with Scranton
Acres, a general partnership of which Mr. Tom Landreth is a partner, for the
Landreth facility. The lease expire in 2002. Rental payments are $106,800
annually.
In connection with the purchase of Landreth, the former Landreth
Shareholders, including Mr. Tom Landreth, are entitled to additional
consideration based upon the level of Landreth's pretax profits through 1997,
not to exceed $500,000 in the aggregate. For fiscal 1996, 1995 and 1994, the
Company paid Mr. Landreth $14,745, $103,932 and $32,430.
Mr. John Thompson, a director of the Company since February 1997, is
also a director and President of St. James Capital Corp. ("St. James Capital"),
a merchant banking firm. St. James Capital serves as General Partner of St.
James Capital Partners, L.P. ("St. James"). During 1995, St. James provided
$1,000,000 in short-term financing to the Company in connection with an
acquisition. In 1996, $804,100 of principal of this note was converted by St.
James into 215,000 shares of the Company's common stock. The remaining principal
and $65,995 in interest was repaid by the Company to St. James. In 1996, St.
James provided $1.9 million in short term financing in connection with an
acquisition and acquired 540,000 warrants to purchase the Company's common stock
at an exercise price of $7.00 per share. Additionally, St. James Capital
received $180,600 in investment banking fees. In 1996, the Company received
$100,000 in fees from St. James in connection with consulting services provided
to certain investee companies of St. James.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
April 1997.
INDUSTRIAL HOLDINGS, INC.
By: /S/ CHRISTINE A. SMITH
Christine A. Smith (Chief
Financial Officer and Vice
President)
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