SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
or
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ______
Commission File Number: 0-22352
HOLOPHANE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-1288751
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 East Broad Street
Suite 1400
Columbus, Ohio 43215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 224-3134
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained, to the best knowledge of the registrant,
in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment of this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 14, 1997 was approximately $183,772,320.
The number of shares outstanding of registrant's Common Stock as of March
14, 1997: 11,354,516
Documents incorporated by reference: The Annual Report to Stockholders and
the definitive Proxy Statement of Holophane Corporation relating to the 1996
Annual Meeting of Stockholders are incorporated by reference in Parts II and III
hereof.
<PAGE>
PART I
Item 1. Business
Holophane Corporation, a Delaware corporation, and its subsidiaries
(collectively "Holophane"), was formed in May 1989 to acquire substantially all
of the assets and capital stock of the Holophane Lighting Division of Manville
Sales Corporation and related entities.
Holophane, whose operations date back to 1895, is a vertically integrated
manufacturer and marketer of highly engineered lighting fixtures and systems for
a wide range of industrial, commercial and outdoor applications. Holophane
provides a variety of standard and specialized fixtures for both interior and
exterior lighting needs.
Holophane markets its products in North America, Europe, Latin America and
Asia/Pacific in both the new construction and retrofit markets. Holophane
focuses its sales efforts at the design phase of a lighting project by targeting
end-users and specifiers who are directly involved in the construction process,
including architectural, engineering and electrical contracting firms and
distributors.
The lighting industry has five major sectors: industrial, outdoor,
commercial/ institutional, residential and automotive. Holophane participates in
the industrial, outdoor and commercial/institutional sectors of the lighting
industry.
Products
Holophane manufactures and sells a series of industrial fixtures designed
to light large indoor spaces with high ceilings and also for facilities with
large pieces of equipment and lighting required at various mounting heights.
Holophane also produces numerous products tailored to highly specific
applications including hazardous location and explosion proof lighting.
Holophane manufactures outdoor area lighting products for highway
interchanges, tunnels and for other outdoor projects requiring large areas to be
illuminated. Holophane products are also used to light advertising billboard
signs, highway signs and building facades. In addition, Holophane produces
architectural specialty lighting for downtown renovations and housing
developments.
Holophane produces a line of commercial/institutional lighting products
designed for medium height applications where reflected light from the ceiling
can supplement the direct prismatic light source. Holophane also manufactures a
broad line of specialty fluorescent fixtures with an emphasis on optical
performance. Many of Holophane's industrial fixtures are also used in
commercial/institutional applications.
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In addition, Holophane also produces emergency lighting equipment and an
array of glass refractors for street lighting fixtures and injection molded
lenses designed to be used in fluorescent fixtures.
Manufacturing
Holophane is a vertically integrated manufacturer with the capability to
produce glass, ballasts, injection molded plastic and cast aluminum components.
Holophane has four U.S. manufacturing facilities located in Ohio and two located
in Texas. Holophane operates light manufacturing, assembly and warehousing
facilities in Milton Keynes, England. Holophane also operates an aluminum
foundry in Matamoros, Mexico.
Raw Materials
Holophane's principal raw materials are aluminum, steel and copper.
Holophane avoids some of the price volatility of these materials by purchasing
most of its requirements through annual contracts. Holophane does not rely on
any single supplier for these materials and believes it has the ability to
quickly switch sources for any of these materials should the need arise.
Research and Development
New product development is an integral part of Holophane. State of the art
facilities, located in Newark, Ohio, include optical, photometric, thermal,
electrical and environmental laboratories. Costs associated with research and
development were $5.5 million in 1996, $5.6 million in 1995 and $5.0 million in
1994.
Employees
Holophane had an average of approximately 1,612 employees during 1996.
Approximately 389 employees are represented by the American Flint Glass Workers
Union (the "AFGWU"), the International Brotherhood of Electrical Workers (the
"IBEW") or the United Automobile Workers (the "UAW"). The IBEW contract expires
April 1, 1999; the AFGWU contract expires August 3, 1998; and the UAW contract
expires May 2, 1999.
Customers
No single customer has accounted for more than 4% of Holophane's net sales
in any year. Consequently, Holophane believes that the loss of any one customer
would not have a material adverse effect on its net sales.
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Competition
The lighting industry is highly competitive. Holophane's competitors
include lighting manufacturers of all sizes, some of which have substantially
greater resources than those of Holophane. Holophane competes in the premium
quality tier of the lighting market which consists of specialized products
characterized by higher value and lower unit sales. Most of Holophane's
competitors focus on commodity products.
Backlog
Backlog represents booked orders which are believed by Holophane to be
firm. At February 28, 1997, total order backlog was $38.1 million compared to
$35.9 million at February 29, 1996.
Seasonality
Due to the typically increased level of construction activity in the third
quarter, Holophane has historically experienced modestly greater net sales in
the second half of its fiscal year.
Trademarks, Licensing Agreements and Patents
Holophane owns all of the rights to the principal trademarks used in its
domestic business and in the international markets in which it participates.
Holophane's principal trademarks are registered in the U.S. and in many other
countries, and Holophane considers protection of such trademarks to be important
to its business.
Holophane does not own the "HOLOPHANE" trademark in France. To date,
Holophane has chosen not to market any products in France and it has no present
intention to do so. However, if Holophane desired to do so, it might be
precluded under applicable law, including the laws of France and the European
Community, from marketing its products under the "HOLOPHANE" trademark.
Lenslite Pty. Ltd. ("Lenslite"), an unaffiliated company located in
Australia, owns trademark registrations for the "HOLOPHANE" trademark, in
Australia and New Zealand. Lenslite had the non-exclusive license to use certain
trademarks and trade secrets of Holophane in connection with the manufacture and
sale by Lenslite of specified lighting products in Australia, New Zealand, New
Guinea and The Philippines. The non-exclusive license expired on September 15,
1995.
Since the expiration of the non-exclusive license, the Company has been
marketing and selling lighting products manufactured by the Company under the
"Unique Lighting Solutions" trademark in Australia and New Zealand through a
joint venture arrangement among Holophane Australia Corporation Pty. Ltd., a
wholly-owned subsidiary of the Company, and two unaffiliated third parties in
Australia.
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Holophane S.A. de C.V. ("Holophane Mexico"), an unaffiliated company, has a
license to manufacture and sell specified lighting products under certain
Holophane trademarks, including the "HOLOPHANE" trademark, in Mexico and other
Latin American countries. In connection with such licenses, Holophane is
obligated to provide technological and engineering information and assistance to
Holophane Mexico relating to the lighting products that are the subject of the
licenses. The licenses and rights of Holophane Mexico generally will expire on
December 31, 1997.
In addition, Holophane owns many patents relating to the design of certain
of its products, including sign lighting, area lighting and street lighting
products. Active patents have remaining lives ranging from one year to 17 years.
International Operations
Net sales to customers of the European operations were (pound)14.9 million
($23.4 million) in 1996, (pound)14.6 million ($23.1 million) in 1995 and G13.2
million ($20.3 million) in 1994. Net sales to customers of the Canadian
operations were C$12.2 million ($8.9 million) in 1996, C$18.3 million ($13.4
million) in 1995 and C$13.9 million ($10.1 million) in 1994. With the exception
of fluctuation in foreign currencies, the Company does not believe that the
Canadian or European operations are subject to risks which are significantly
different from those of domestic operations.
Environmental
Holophane's operations are subject to federal, state and local regulatory
requirements relating to environmental protection. Compliance with these
requirements has not had a material effect upon Holophane's capital expenditure
program. It is not anticipated that Holophane will have material capital
expenditures for environmental control facilities during the next fiscal year.
Item 2. Properties
The following sets forth information regarding the Company's manufacturing
and warehouse facilities:
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Primary Square
Location Function Feet
____________________________________________________________________________
United States:
Newark, OH Assembly, Warehouse, 400,000
Glass and Plastic Mfg.
Springfield, OH Aluminum Foundry 45,000
Pataskala, OH Ballast Manufacturing 32,000
Utica, OH Metal Fabricating 105,000
Buda, TX Assembly, Painting 30,000
Austin, TX Manufacturing, Assembly 52,000
Mexico:
Matamoros Aluminum Foundry 86,700
UK:
Milton Keynes Assembly and Warehouse 44,000
Milton Keynes Warehouse 10,000
___________________
The Company's manufacturing and warehouse facilities are all owned, except
for the 10,000 square foot Milton Keynes warehouse. These facilities are all
located in appropriately designed buildings which are kept in good repair. The
facilities have well maintained equipment and sufficient capacity to produce
present volumes.
The principal executive offices of the Company are located in approximately
5,400 square feet of space at 250 East Broad Street, Columbus, Ohio 43215 and
are occupied pursuant to a lease which expires in July 1999.
The Company also leases sales offices and warehouse facilities in a number
of major cities or suburbs, including Norcross, Georgia; Houston, Texas; San
Bruno and Los Angeles, California; Dearborn, Michigan; Bloomington, Minnesota;
Montvale, New Jersey; Newark, Ohio and Brownsville, Texas. The leases expire
from December 1, 1998 to February 1, 2000.
The Company also leases approximately 4,500 square feet of office space in
Brampton, Ontario, Canada. The lease expires December 31, 2000.
Substantially all of the properties and other assets owned by the Company
are, and will continue to be, pledged to various lenders.
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Item 3. Legal Proceedings
The Company, from time to time, is involved in routine litigation
incidental to its business. However, the Company is not a party to any material
legal proceeding, nor, to the Company's knowledge, has any material legal
proceeding been threatened against it.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers
The following table sets forth the names and ages of the Company's
executive officers and the positions they hold with the Company:
Name Age Position with Company
________________________________________________________________________________
John R. DallePezze........ 53 Director, Chairman of the
Board, President and Chief
Executive Officer
Bruce A. Philp............ 45 Vice President, Finance,
Chief Financial Officer
and Secretary
John S. Forbes III........ 58 Vice President, Marketing
John W. Harvey............ 51 Vice President, Manufacturing
S. Lee Keller............. 49 Vice President, Sales
Robert E. Taylor.......... 51 Vice President, Human
Resources
Timothy Weisert........... 51 Vice President, Research and
Development
Mr. DallePezze has been a Director, President and Chief Executive Officer
of the Company since he joined the Company in October 1989 and Chairman of the
Board since February 1992. Prior to joining the Company, Mr. DallePezze served
from 1983 to 1989 as President of the McCullough Division of N.L. Industries
Inc. and Western Atlas International Inc. Prior to 1983, Mr. DallePezze served
as General Manager of the Lighting Products Division of Corning Inc.
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<PAGE>
Mr. Philp has served as Vice President, Finance, Chief Financial Officer
and Secretary since July 1989. From January 1988 through July 1989, Mr. Philp
was Director of Finance and Administration for the Holophane Division of
Manville and prior to that held various other finance positions within Manville,
beginning with the Holophane Division in 1974.
Mr. Forbes has served as Vice President, Marketing since October 1989. From
June 1988 through July 1989, Mr. Forbes served as General Manager of the
Holophane Division of Manville and prior to that held various management
positions within the Holophane Division. Mr. Forbes will retire effective May 9,
1997. Robert P. St. Germain will replace Mr. Forbes as Vice President,
Marketing.
Mr. Harvey has served as Vice President, Manufacturing since July 1989. Mr.
Harvey joined Holophane in 1971 and served in various management positions in
engineering, and research and development and manufacturing from 1971 through
July 1989.
Mr. Keller has served as Vice President, Sales since July 1989. Mr. Keller
joined Holophane in 1970 and was Regional Sales Manager from July 1985 through
January 1988 and National Sales Manager from January 1988 through July 1989.
Mr. Taylor has served as Vice President, Human Resources since July 1989.
From June 1987 through July 1989 Mr. Taylor served as Manager, Human Resources
for the Holophane Division of Manville and was a Director of Human Resources for
Gulf Oil Corporation from 1985 until he joined the Holophane Division in June
1987.
Mr. Weisert has served as Vice President, Research and Development since
July 1989. Mr. Weisert served as Director of Research and Development for the
Holophane Division of Manville from July 1988 through July 1989 and held various
other positions in research and development since joining the Holophane Division
in 1978.
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<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters.
The Company's Common Stock is included in the Nasdaq National Market System
under the symbol "HLPH." The table below sets forth, for the periods indicated,
the high and low sales prices of the Company's Common Stock, as reported by
Nasdaq and as adjusted to reflect the three-for-two split of the Common Stock on
December 15, 1995.
Period High Low
________________________________________________________________________________
1996:
Fourth Quarter............................... $20.00 $16.50
Third Quarter................................ 20.00 15.25
Second Quarter............................... 18.25 13.75
First Quarter................................ 22.50 16.00
1995:
Fourth Quarter............................... $23.50 $16.67
Third Quarter................................ 19.17 14.67
Second Quarter............................... 15.67 11.67
First Quarter................................ 12.50 11.33
1994:
Fourth Quarter............................... $12.67 $ 9.50
Third Quarter................................ 12.83 11.83
Second Quarter............................... 12.83 11.50
First Quarter................................ 12.83 10.67
1993:
Fourth Quarter (from November 5, 1993)....... $ 11.67 $ 9.67
A recent last sales price for the shares of Common Stock as reported by
Nasdaq was $19.00 on March 24, 1997. On March 14, 1997, there were approximately
2,300 holders of Common Stock, based upon the number of holders of record and
the number of individual participants in certain security position listings.
No dividends on Common Stock were paid during 1996 or 1995 and the Company
does not anticipate paying cash dividends on its Common Stock in the foreseeable
future. Additional information on the Company's dividend payment limitations
appears in note 5 to the consolidated financial statements on page 14 of the
1996 Annual Report to Stockholders of Holophane Corporation.
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<PAGE>
Item 6. Selected Financial Data.
The information required by Item 6 of Part II is set forth under the
caption "Financial History" on page 20 of the 1996 Annual Report to Stockholders
of Holophane Corporation and is incorporated herein by reference.
Item 7. Management Discussion and Analysis of Financial Condition and Results of
Operations.
The information required by Item 7 of Part II is set forth under the
caption "Management Discussion and Analysis" on pages 18 and 19 of the 1996
Annual Report to Stockholders of Holophane Corporation and is incorporated
herein by reference.
The Company wishes to take advantage of the safe harbor provisions included
in the Private Securities Litigation Reform Act of 1995. Accordingly, in
addition to historical information the annual report contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial and operating performance and financial
condition. These statements involve a number of risks and uncertainties,
including, but not limited to, economic, competitive, governmental and
technological factors which could adversely affect the Company's operations,
markets, services and related products and prices. Any forward-looking
statements made by the Company herein and in future reports and statements are
not guarantees of future performance, and actual results may differ materially
from those in such forward-looking statements as a result of the factors
described above.
Item 8. Financial Statements and Supplementary Data.
The Company's consolidated balance sheets as of December 31, 1996 and 1995
and the consolidated statements of income, stockholders' equity and cash flows
for each of the years ended December 31, 1996, 1995 and 1994, and the related
notes to the consolidated financial statements, together with the independent
auditors' report thereon appear on pages 8 through 17 of the 1996 Annual Report
to Stockholders of Holophane Corporation and is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by Item 10 of Part III is incorporated herein by
reference from pages 5 through 8 of Part I included herein and from the
definitive Proxy Statement of Holophane Corporation under the caption "Item 1 -
Election of Directors."
Item 11. Executive Compensation.
The information required by Item 11 of Part III is incorporated herein by
reference to the definitive Proxy Statement of Holophane Corporation under the
caption "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 of Part III is incorporated herein by
reference to the definitive Proxy Statement of Holophane Corporation under the
caption "Stock Ownership."
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 of Part III is incorporated herein by
reference to the definitive Proxy Statement of Holophane Corporation under the
caption "Certain Relationships and Certain Transactions."
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following financial statements required to be included
in items 8 and 14 (a) (1) are incorporated by reference from
pages 8 through 17 of the 1996 Annual Report to
Stockholders:
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Balance Sheets as of December 31, 1996 and
1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994
Independent Auditors' Report
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1996, 1995 and 1994
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the registrant in the
last quarter of the 1996 fiscal year.
(c) Exhibits:
3.1 Restated Certificate of Incorporation of the Company.
(Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1, No.
33-68116.)
3.2 Bylaws of the Company. (Incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form S-1, No. 33-68116.)
10.1 Employment Agreement dated as of August 30, 1993 among
Holophane Lighting, Inc., the Company and John R.
DallePezze. (Incorporated by reference to Exhibit 10.7
to the Company's Registration Statement on Form S-1,
No. 33-68116.)
10.2 Termination Benefits Agreement dated as of September
15, 1993 among Holophane Lighting, Inc., the Company
and Bruce Philp. (Identical agreements were entered
into with John S. Forbes, John W. Harvey, S. Lee
Keller, Robert P. St. Germain, Robert E. Taylor,
Timothy Weisert and Jerome Henderson). (Incorporated by
reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1, No. 33-68116.)
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<PAGE>
10.3 Incentive Stock Plan. (Incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on
Form S-1, No. 33-68116.)
10.4 1996 Incentive Stock Plan. (Incorporated by reference
to Appendix I of the Company's 1996 Proxy Statement.)
10.5 Supplemental Executive Retirement Plan. (Incorporated
by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-1, No. 33-68116.)
10.6 Second Amended and Restated Credit Agreement dated as
of November 5, 1993 among Holophane Company, Inc., the
lenders named therein and Wells Fargo Bank, N.A., as
Administrative Agent. (Incorporated by reference to
Form 10-K for fiscal year ended December 31, 1993, File
No. 0-22352.)
10.7 Amended and Restated Stockholders Agreement dated as of
October 15, 1993. (Incorporated by reference to Exhibit
10.14 to the Company's Registration Statement on Form
S-1, No. 33-68116.)
10.8 Termination Agreement dated as of September 1, 1993
between Holophane Lighting, Inc. and Raebarn
Corporation. (Incorporated by reference to Exhibit
10.15 to the Company's Registration Statement on Form
S-1, No. 33-68116.)
10.9 Holophane Bonus Plan Revised February 19, 1997.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
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<PAGE>
(d) Financial Statement Schedule
The following independent auditors' report and financial
schedule for the years ended December 31, 1996, 1995 and
1994 are included in this Annual Report on Form 10-K and
should be read in conjunction with the Consolidated
Financial Statements contained in the Annual Report to
Stockholders of Holophane Corporation:
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
All other financial statement schedules are omitted because
they are not applicable or the required information is shown
in the Consolidated Financial Statements or Notes thereto.
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<PAGE>
<TABLE>
Schedule II
HOLOPHANE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS (In 000's)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Column A Column B Column C Column D Column E
- ----------------------------- ---------------- ------------------------------------- ---------------- ----------------
Additions
-------------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Year Expenses Accounts Deductions (a) of Year
- ----------------------------- ---------------- ----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1996 $1,015 $31 $80 $110 $1,016
1995 782 322 61 150 1,015
1994 869 76 163 782
Inventory valuation allowance:
1996 $465 $519 $41 $336 $689
1995 640 232 39 446 465
1994 714 612 686 640
___________________________
(a) Represents uncollectible accounts written off or inventory items disposed
of, respectively.
</TABLE>
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<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
To the Stockholders and Directors of Holophane Corporation
Columbus, Ohio
We have audited the consolidated financial statements of Holophane Corporation
and subsidiaries as of December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, and have issued our report thereon
dated February 21, 1997; such financial statements and report are included in
your 1996 Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the consolidated financial statement
schedules of Holophane Corporation and subsidiaries, listed in Item 14. These
financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audit. In
our opinion, such consolidated financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Columbus, Ohio
February 21, 1997
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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, in the City of
Columbus, State of Ohio, on the 27th day of March, 1997.
Holophane Corporation
By: /s/ John R. DallePezze
_____________________________________________
John R. DallePezze
Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
________________________________________________________________________________
/s/ John R. DallePezze Chairman of the Board of March 27, 1997
__________________________ Directors; President and
John R. DallePezze Chief Executive Officer
(Principal Executive Officer)
/s/ Bruce A. Philp Vice President Finance; March 27, 1997
__________________________ Chief Financial Officer
Bruce A. Philp and Secretary (Principal
Financial and
Accounting Officer)
/s/ R. David Andrews Director March 27, 1997
__________________________
R. David Andrews
/s/ William R. Michaels Director March 27, 1997
__________________________
William R. Michaels
/s/ Robert L. Purdum Director March 27, 1997
__________________________
Robert L. Purdum
/s/ Anthony P. Scotto Director March 27, 1997
__________________________
Anthony P. Scotto
/s/ Tadd C. Seitz Director March 27, 1997
__________________________
Tadd C. Seitz
/s/ Jeffrey M. Wilkins Director March 27, 1997
__________________________
Jeffrey M. Wilkins
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Exhibit 10.9
HOLOPHANE BONUS PLAN
REVISED FEBRUARY 19, 1997
Each year, the Compensation Committee will approve a list of participants
in the Holophane Bonus Plan, along with the bonus participation percentage for
each participant. The CEO may modify this list during the year as required by
organizational changes; however, any change in Executive Officer participation
will require approval of the Compensation Committee.
Each participant has an annual target bonus equal to his salary times his
bonus participation percentage. "Salary" means total base salary earned in the
respective calendar year. The target for the Company bonus pool equals the total
target for all participants.
Annual Bonus Plan
Funding of the Company bonus pool will be based upon annual achievement vs.
the following objectives:
Objective Weight
------------- --------
Sales Growth 50%
EBITDA Growth 50%
Each objective will be individually scored using interpolation based upon
the following table:
Achievement Score
------------- --------
85% 0%
90% 50%
100% 100%
120% or more 150% Maximum
Scores above 100% for any objective can be earned only if EBITDA growth
exceeds 5%.
The Company performance factor will be the weighted average score of all
objectives. The Company bonus pool will equal the bonus pool target times the
Company performance factor.
Payments to each participant are based upon a combination of Company
performance and the achievement of individual objectives. At the beginning of
the year, each participant will establish three to five individual objectives.
Upon approval by the CEO, these objectives will be weighted based on priority
and importance to the performance of the Company. The collective impact of these
<PAGE>
individual objectives is expected to exceed the corporate plan. At year-end, the
CEO will score achievement against these objectives and develop a composite
individual performance factor for each participant. The scoring will utilize the
above table as a guideline, but may also consider other relevant factors.
The bonus pool will be divided among participants proportional to the
individual performance factor times the participants' target bonus.
Any residual left in the pool may be distributed by the CEO based upon
over-achievement of individual objectives or other extraordinary
accomplishments.
Long-Term Bonus Plan
Beginning at the end of 1996, and for each year thereafter, long-term bonus
awards can be earned based upon growth in Company Earnings Per Share before
extraordinary events, measured over the preceding three years.
The long-term target bonus for each participant will equal the annual
target bonus established for the first year of each measurement period.
At the end of each measurement period, employees, who continue to be
participants in the Bonus Plan, will be paid a long-term bonus as determined by
the following table using interpolation:
Three Year EPS Growth % of Long-Term Target Bonus Earned
_____________________ __________________________________
20% Minimum 25%
30% 50%
40% or More 100% Maximum
For the transition period ending in 1996, the measurement period will be
two years and the Earnings Per Share growth targets will be reduced by
one-third.
Extraordinary Achievement Awards
In addition to the above, an Extraordinary Achievement Fund of $25,000 will
be established annually. Awards may be granted from this fund by the CEO for
significant achievements by Holophane personnel not included in the Holophane
Bonus Plan. Awards may be granted at any time during the year.
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
(i) Holophane Canada Inc., a Canadian corporation.
(ii) Luxfab Limited, a United Kingdom corporation and the holding company for
Holophane Europe Limited and Holophane Lichttechnik.
(iii) Holophane Lichttechnik, a German GmbH.
(iv) Holophane Europe Limited, a United Kingdom corporation.
(v) MetalOptics, Inc., a Texas corporation.
(vi) Antique Street Lamps, Inc., a Texas corporation, and the holding company
for Castlight.
(vii) Castlight, a Mexican corporation.
(viii) Holophane International, Inc., a Barbados company.
(ix) Holophane Australia Corporation Pty. Limited, holding company for 50.2% of
Unique Lighting Solutions Pty. Limited and 50.2% of The Austphane Trust.
(x) Unique Lighting Solutions Pty. Limited, an Australian corporation, Trustee
of The Austphane Trust.
(xi) The Austphane Trust, an Australian unit trust.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-71034 and No. 33-71488 of Holophane Corporation on Form S-8 of our reports
dated February 21, 1997, appearing in and incorporated by reference in the
Annual Report on Form 10-K of Holophane Corporation for the year ended December
31, 1996.
Deloitte & Touche LLP
Columbus, Ohio
March 27, 1997
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Holophane Corporation and Subsidiaries
(in thousands except per share data) Year Ended December 31,
1996 1995 1994
_____________________________________________________________________________________________________
<S> <C> <C> <C>
Net Sales $ 190,939 $ 181,069 $ 150,997
Cost of goods sold 117,284 110,591 92,590
_____________________________________________________________________________________________________
Gross Margin 73,655 70,478 58,407
Selling and administrative 39,405 35,743 30,599
Research and development 5,533 5,559 4,979
Nonrecurring items 0 0 3,875
Other expense 700 454 374
_____________________________________________________________________________________________________
Operating Income 28,017 28,722 18,580
Interest expense (including related party of
$181 in 1996, $191 in 1995 and $200 in 1994) 2,139 2,826 2,707
Interest income (527) (581) (452)
_____________________________________________________________________________________________________
Income Before Income Taxes 26,405 26,477 16,325
Provision for income taxes 9,937 10,435 6,837
_____________________________________________________________________________________________________
Net Income $ 16,468 $ 16,042 $ 9,488
=====================================================================================================
Primary Earnings Per Share $ 1.40 $ 1.38 $ 0.82
=====================================================================================================
Fully Diluted Earnings Per Share $ 1.40 $ 1.35 $ 0.82
=====================================================================================================
Weighted Average Number of Shares Outstanding:
Primary 11,770 11,667 11,580
Assuming Full Dilution 11,770 11,863 11,580
=====================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(in thousands except per
share and market data) 1ST 2ND 3RD 4TH
________________________________________________________________________________
1996
________________________________________________________________________________
Net sales $38,056 $44,605 $51,288 $56,990
Gross margin 13,912 17,184 20,369 22,190
Operating income 3,577 6,336 9,393 8,711
Net income 1,953 3,640 5,642 5,233
Net earnings per share $ 0.17 $ 0.31 $ 0.48 $ 0.44
Market Prices: High $ 22.50 $ 18.25 $ 20.00 $ 20.00
Low $ 16.00 $ 13.75 $ 15.25 $ 16.50
________________________________________________________________________________
1995
________________________________________________________________________________
Net sales $43,912 $43,673 $49,617 $43,867
Gross margin 17,306 16,931 19,445 16,796
Operating income 6,947 6,535 9,036 6,204
Net income 3,823 3,596 5,258 3,365
Net earnings per share $ 0.33 $ 0.31 $ 0.45 $ 0.28
Market Prices: High $ 12.50 $ 15.67 $ 19.17 $ 23.50
Low $ 11.33 $ 11.67 $ 14.67 $ 16.67
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Holophane Corporation and Subsidiaries
($ in thousands except per share data)
December 31,
1996 1995
______________________________________________________________________________________
Assets
______________________________________________________________________________________
<S> <C> <C>
Current Assets:
Cash and equivalents $ 8,072 $ 13,356
Accounts receivable (less allowance of
$1,016 and $1,015, respectively) 33,104 24,849
Inventories 13,302 13,530
Prepaid and other deferred expenses 3,848 4,350
______________________________________________________________________________________
Total Current Assets 58,326 56,085
______________________________________________________________________________________
Property, plant and equipment, net 39,413 35,582
Goodwill (net of accumulated amortization of
$3,184 and $2,581, respectively) 21,276 15,764
Other Assets 4,952 3,348
______________________________________________________________________________________
Total $ 123,967 $ 110,779
======================================================================================
Liabilities and Stockholders' Equity
______________________________________________________________________________________
Current Liabilities:
Current maturities of long term debt $ 6,390 $ 6,319
Trade payables 10,537 9,408
Compensation and employee benefits 8,383 8,660
Income taxes payable 1,238 1,924
Other accrued liabilities 4,589 3,730
______________________________________________________________________________________
Total Current Liabilities 31,137 30,041
______________________________________________________________________________________
Long Term Debt (less current maturities) 18,866 25,091
Other Long Term Liabilities 6,820 5,258
Stockholders' Equity:
Preferred stock (par value $.01 per share:
1,000,000 shares authorized; none issued)
Common stock (par value $.01 per share:
20,000,000 shares authorized;
11,895,861 shares issued) 119 119
Additional paid-in capital 43,801 42,969
Retained earnings 30,527 14,059
Common shares in treasury, at cost
(1996: 473,369 shares; 1995: 425,148 shares) (6,534) (4,529)
Cumulative translation adjustments (769) (2,229)
______________________________________________________________________________________
Total Stockholders' Equity 67,144 50,389
______________________________________________________________________________________
Total $ 123,967 $ 110,779
======================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Holophane Corporation and Subsidiaries
($ in thousands)
Year Ended December 31,
1996 1995 1994
___________________________________________________________________________________________________________
Cash Flows From Operating Activities:
___________________________________________________________________________________________________________
<S> <C> <C> <C>
Net Income $ 16,468 $ 16,042 $ 9,488
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,487 6,107 6,803
Loss on disposal of property, plant & equipment 232 106 2,706
Provision for deferred income taxes 253 521 1,015
Change in assets and liabilities net of effects from
acquisitions:
Accounts receivable (4,053) (4,607) (2,217)
Inventories 1,568 (138) (452)
Prepaid and other deferred expenses (281) (1,296) (58)
Trade payables (1,171) 1,275 (2,066)
Compensation and employee benefits (732) 1,150 284
Income taxes payable (780) (904) 2,301
Other accrued liabilities 892 173 1,682
Other, net 63 298 178
___________________________________________________________________________________________________________
Net cash provided by operating activities 18,946 18,727 19,664
___________________________________________________________________________________________________________
Cash Flows From Investing Activities:
___________________________________________________________________________________________________________
Purchase of investment securities (1,551) (907) (1,005)
Sale of investment securities 1,005 0 0
Capital expenditures (4,956) (9,741) (3,804)
Proceeds from the sale of assets 42 48 1,559
Acquisitions, net of cash acquired (6,100) 0 (3,772)
___________________________________________________________________________________________________________
Net cash used in investing activities (11,560) (10,600) (7,022)
___________________________________________________________________________________________________________
Cash Flows From Financing Activities:
___________________________________________________________________________________________________________
Principal payments on long term debt (9,359) (6,312) (9,855)
Purchase of treasury shares (3,769) 0 (3,164)
Proceeds from the sale of treasury shares 385 41 0
___________________________________________________________________________________________________________
Net cash used in financing activities (12,743) (6,271) (13,019)
___________________________________________________________________________________________________________
Effect of exchange rate changes on cash 73 27 62
___________________________________________________________________________________________________________
Net increase (decrease) in cash and equivalents (5,284) 1,883 (315)
Cash and equivalents at beginning of year 13,356 11,473 11,788
___________________________________________________________________________________________________________
Cash and equivalents at end of year $ 8,072 $ 13,356 $ 11,473
===========================================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest, net of amount capitalized $ 2,160 $ 2,897 $ 2,832
Income taxes paid, net 10,472 11,611 3,370
Non-cash investing and financing activity:
Treasury shares used for acquisitions 2,145 -- 508
Additional goodwill relating to contingent purchase price 1,381 964 --
Trade payables for property, plant and equipment 252 -- --
===========================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
Retained
Holophane Corporation and Subsidiaries Common Stock Additional Earnings
($ in thousands) _______________________ Paid-in (Accumulated
Shares Amount Capital Deficit)
______________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1993 11,895,861 $119 $42,967 ($11,471)
Net income for the year 9,488
Shares used for acquisition 7
Purchase of treasury shares
Translation adjustments
______________________________________________________________________________________________________________________
Balance at December 31, 1994 11,895,861 119 42,974 (1,983)
Net income for the year 16,042
Stock options exercised (5)
Translation adjustments
______________________________________________________________________________________________________________________
Balance at December 31, 1995 11,895,861 119 42,969 14,059
Net income for the year 16,468
Shares used for acquisitions 780
Purchase of treasury shares
Stock options exercised,
including related tax benefits 52
Translation adjustments
______________________________________________________________________________________________________________________
Balance at December 31, 1996 11,895,861 $119 $43,801 $30,527
======================================================================================================================
</TABLE>
***ABOVE TABLE SPLIT AT RIGHT MARGIN -- CONTINUED BELOW***
<TABLE>
Treasury Stock Cumulative
______________________ Translation Stockholders'
Shares Amount Adjustments Equity
________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1993 191,250 ($1,912) ($2,502) $27,201
Net income for the year 9,488
Shares used for acquisition (40,161) 501 508
Purchase of treasury shares 277,734 (3,164) (3,164)
Translation adjustments 689 689
________________________________________________________________________________________________________
Balance at December 31, 1994 428,823 (4,575) (1,813) 34,722
Net income for the year 16,042
Stock options exercised (3,675) 46 41
Translation adjustments (416) (416)
________________________________________________________________________________________________________
Balance at December 31, 1995 425,148 (4,529) (2,229) 50,389
Net income for the year 16,468
Shares used for acquisitions (121,629) 1,365 2,145
Purchase of treasury shares 206,000 (3,769) (3,769)
Stock options exercised,
including related tax benefits (36,150) 399 451
Translation adjustments 1,460 1,460
________________________________________________________________________________________________________
Balance at December 31, 1996 473,369 ($6,534) ($769) $67,144
========================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
I N D E P E N D E N T A U D I T O R S ' R E P O R T
TO THE STOCKHOLDERS AND DIRECTORS OF HOLOPHANE CORPORATION
We have audited the accompanying consolidated balance sheets of Holophane
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Holophane Corporation and
subsidiaries at December 31, 1996 and 1995, and results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Columbus, Ohio
February 21, 1997
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
The company is engaged in the manufacture and sale of lighting fixtures and
systems primarily for industrial, commercial and outdoor applications. The
company has operations in the United States, Canada, Mexico, United Kingdom,
Germany and Australia.
CONSOLIDATION
The consolidated financial statements include the accounts of Holophane
Corporation and all of its majority-owned subsidiaries. All significant
intercompany accounts, transactions and profits have been eliminated.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the company's subsidiaries outside the United
States are translated into U.S. dollars at the rates of exchange in effect at
the balance sheet dates. Income and expense items are translated at the average
exchange rates prevailing during the period. Gains and losses resulting from
foreign currency transactions are recognized currently in income and those
resulting from translation of financial statements are accumulated in a separate
component of stockholders' equity.
DISCLOSURES REGARDING FINANCIAL
INVESTMENTS
The carrying value of cash and equivalents, receivables, accrued liabilities and
accounts payable are considered to approximate fair value due to the relatively
short maturity of the respective instruments. For long-term debt, the interest
rates fluctuate with LIBOR or prime rate and thus their carrying value is a
reasonable estimate of fair value.
CASH AND EQUIVALENTS
The company considers money market funds and all highly liquid debt instruments
with an initial maturity of three months or less to be cash equivalents. At
December 31, 1996 and 1995, the company had approximately $5,238,000 and
$10,806,000, respectively, invested in bank commercial paper and U.S. treasury
related investments at three independent trust companies.
INVENTORIES
Inventories are valued at the lower of cost, determined on the first-in,
first-out basis, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets
which range from one and one-half to forty years.
GOODWILL
The excess of purchase price over the fair values of net assets acquired is
amortized on a straight-line basis over forty years.
ASSET IMPAIRMENTS
Annually, or more frequently if events or circumstances change, a determination
is made by management, in accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, to ascertain whether property, plant and equipment,
goodwill and other intangible assets have been impaired based on the sum of
expected future undiscounted cash flows from operating activities. Based upon
its most recent analysis, the company believes that property, goodwill and other
intangibles at December 31, 1996 are realizable and the depreciation and
amortization periods are appropriate.
SELF INSURANCE
The company is self-insured for certain health insurance and workers'
compensation programs in the United States. The health insurance plan agreement
contains a stop-loss ceiling of $100,000 per eligible individual per year and
aggregate annual stop-loss ceiling (based on enrollment) of $1,585,000,
$1,759,000 and $2,412,000 for 1996, 1995 and 1994, respectively. The workers'
compensation plan agreement contains a stop-loss ceiling of $300,000 per event.
The company accrues for both claims reported but not yet paid and claims
incurred but not yet reported.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues are recognized at the time the products are shipped.
PER SHARE INFORMATION
All earnings per share and share data is computed based on the weighted average
number of shares of common stock outstanding during each period, as adjusted for
the 3:2 stock split in December 1995, including common stock equivalents
consisting of shares subject to stock options and contingently issuable shares
of stock.
<PAGE>
2. ACQUISITIONS
MetalOptics, Inc. - On September 1, 1996, the company acquired the stock of
MetalOptics, Inc. for $6,100,000 of cash and $1,181,000 (77,296 shares) of
common stock. Under the terms of the purchase agreement, the company may be
required to make additional payments beginning in 1996 of up to $500,000 and
154,589 additional shares of common stock, contingent upon MetalOptics, Inc.
achieving certain operating results during the five-year period ending December
31, 2000. At the date of acquisition, the market value of assets acquired was
$13,509,000 and liabilities assumed were $6,228,000. Any future amounts earned
under this agreement will be recorded as additional goodwill and amortized over
the remaining life of the goodwill recognized at the time of acquisition.
Results of operations after the acquisition date are included in the 1996
Consolidated Statements of Income. The following pro forma information has been
prepared assuming the acquisition had taken place at the beginning of the
respective periods. The pro forma information includes adjustments for interest
expense that would have been incurred to finance the purchase, additional
depreciation based on the fair market value of the property, plant and equipment
acquired and the amortization of goodwill arising from the transaction, net of
tax. The pro forma financial information is not necessarily indicative of the
results of operations as they would have been had the transaction been effected
on the assumed dates.
December 31,
1996 1995
__________________________________________________
(In thousands, except per share amounts)
Net Sales $204,545 $202,912
==================================================
Net Income $17,088 $16,709
==================================================
Net Income per Share $1.45 $1.42
==================================================
Antique Street Lamps, Inc. - On October 1, 1994, the company acquired all of the
assets and assumed certain liabilities of Antique Street Lamps, Inc. for
$3,772,000 of cash and $508,000 (26,774 shares) of common stock. Under the terms
of the purchase agreement, the company may be required to make additional
payments beginning in 1995 of up to 161,000 additional shares of common stock,
contingent upon Antique Street Lamps, Inc. achieving certain profit levels
during the four-year period ending December 31, 1998. At the date of
acquisition, the market value of assets acquired was $7,602,000 and liabilities
assumed were $3,322,000. Any future amounts earned under this agreement will be
recorded as additional goodwill and amortized over the remaining life of the
goodwill recognized at the time of acquisition. Had the acquisition occurred at
the beginning of 1994, operating results on a pro forma basis would not have
been significantly different.
3. INVENTORIES
Inventories consist of the following (in thousands):
December 31,
1996 1995
==================================================
Raw materials $7,997 $8,239
Work in process 3,620 3,613
Finished goods 2,374 2,143
==================================================
Total 13,991 13,995
Less valuation allowance (689) (465)
__________________________________________________
Total $13,302 $13,530
==================================================
4. PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment are summarized as follows (in
thousands):
December 31,
1996 1995
__________________________________________________
Land $2,112 $1,275
Buildings and improvements 23,240 19,712
Machinery and equipment 46,897 42,101
Office and computer equipment 9,863 8,411
Construction in progress 731 1,739
__________________________________________________
Total 82,843 73,238
Less accumulated depreciation (43,430) (37,656)
__________________________________________________
Total $39,413 $35,582
==================================================
================================================================================
MetalOptics #2 -- GRAPHIC OMITTED
================================================================================
<PAGE>
5. LONG TERM DEBT AND CREDIT FACILITIES
Long term debt consists of the following (in thousands):
December 31,
1996 1995
__________________________________________________
Term loan $24,880 $31,100
Capital lease obligations 330 310
(Note 6)
Other borrowings 46 0
__________________________________________________
Total 25,256 31,410
Less current maturities (6,390) (6,319)
__________________________________________________
Total long term debt $18,866 $25,091
==================================================
The company has a bank credit agreement consisting of a term loan that reduces
semi-annually until scheduled maturity on September 30, 2000 and a revolving
commitment of up to $15,000,000 through the scheduled maturity date. No amounts
were borrowed under the revolving commitment at December 31, 1996 and 1995.
Under the Agreement, the company can elect to borrow Eurodollars at .75% to
2.125% ("Eurodollar Margin") in excess of the London Interbank Offered Rate
("LIBOR") or domestic funds at 0% to .375% ("Base Rate Margin") in excess of the
base rate ("Prime"). Eurodollar or Base Rate Margins are determined by the debt
service coverage ratio, as defined, for any four fiscal quarter period.
Applicable rates for domestic and composite Eurodollar loans were 8.25% and
6.66%, respectively, at December 31, 1996. A commitment fee of .25% to .375% is
charged on the average daily unused portion of the available commitment. Loans
under the Agreement are collateralized by substantially all of the company's
assets. The Agreement contains certain financial and operating covenants and
also contains provisions that limit, among other things, the amount that can be
expended for annual cash dividends and purchase of the company's stock, to 50%
of consolidated net income for the previous year.
Long term debt, excluding capital lease obligations and other borrowings,
matures as follows for the years ended December 31 (in thousands):
December 31,
__________________________________________________
1997 $6,220
1998 6,220
1999 6,220
2000 6,220
__________________________________________________
Total $24,880
==================================================
6. LEASES
The company leases certain computer and plant equipment under capital leases.
The cost of these assets leased under capital leases is approximately $627,000
and $495,000 at December 31, 1996 and 1995, respectively. In addition, the
company leases certain equipment and office space under non-cancelable operating
leases.
Future minimum lease payments are as follows for years ending December 31 (in
thousands):
Capital Operating
Leases Leases
_________________________________________________
1997 $167 $966
1998 155 805
1999 38 497
2000 0 240
2001 0 104
Thereafter 0 332
_________________________________________________
Total minimum lease
payments 360 $2,944
Less amount representing
interest (30)
______________________________________
Present value of net minimum
lease payments (Note 5) $330
======================================
Total rent expense under operating leases for 1996, 1995 and 1994 was
approximately $1,381,000, $1,032,000 and $1,065,000, respectively.
7. INCOME TAXES
The company follows the provisions of SFAS No. 109. The components of income
before income taxes for 1996, 1995 and 1994 are as follows (in thousands):
1996 1995 1994
__________________________________________________
Domestic $24,781 $24,134 $15,836
Foreign 1,624 2,343 489
__________________________________________________
Total $26,405 $26,477 $16,325
===================================================
<PAGE>
The components of the provision (credit) for income taxes for 1996, 1995 and
1994 are as follows (in thousands):
1996 1995 1994
_________________________________________________
Current:
Federal $7,918 $7,691 $4,396
State and local 1,279 1,384 769
Foreign 487 839 657
_________________________________________________
Total 9,684 9,914 5,822
_________________________________________________
Deferred:
Federal 171 538 874
State and local 37 (17) 141
Foreign 45 0 0
_________________________________________________
Total 253 521 1,015
_________________________________________________
Total $9,937 $10,435 $6,837
=================================================
The principal items accounting for the difference in the expected tax expense on
income before income taxes computed at the United States statutory rate for
1996, 1995 and 1994 are as follows (in thousands):
1996 1995 1994
_________________________________________________
Computed expense at
35% of pre-tax income $9,242 $9,267 $5,714
State and local taxes 905 963 628
Operating losses
generating no
current tax benefit 0 0 393
Other (210) 205 102
__________________________________________________
Total $9,937 $10,435 $6,837
==================================================
The tax effect of the items comprising the company's net deferred tax asset as
of December 31, 1996 and 1995 are as follows (in thousands):
================================================================================
Glass Furnace #3 - GRAPHIC OMITTED
================================================================================
December 31,
1996 1995
__________________________________________________
Deferred tax assets:
Difference between book and
tax basis of intangibles $710 $1,171
Reserves not currently 2,104 1,280
deductible
Liabilities not currently
deductible 2,415 2,499
Other 99 322
__________________________________________________
Total 5,328 5,272
Deferred tax liabilities:
Difference between book and
tax basis of property, plant 2,049 1,458
and equipment
__________________________________________________
Net deferred tax asset $3,279 $3,814
==================================================
At December 31, 1996 the company had foreign net operating loss carryforwards
(NOLs) totaling $1,425,000 which expire as follows: 1999 - $509,000 and 2001 -
$916,000. For financial reporting purposes, the company has provided a full
valuation allowance for the foreign NOLs. This valuation allowance amounted to
$712,000 and $892,000 at December 31, 1996 and 1995, respectively.
At December 31, 1996 unremitted earnings of subsidiaries outside the United
States were approximately $6,000,000. The company intends to indefinitely
reinvest the undistributed earnings of its foreign subsidiaries or to repatriate
them only when it is tax effective to do so. Accordingly, no deferred income
taxes for additional United States federal income taxes from distribution of
foreign earnings have been recorded.
8. EMPLOYEE BENEFIT PLANS
The company has four 401(k) defined contribution savings plans covering
substantially all United States union and non-union employees. The plans, which
provide for both mandatory and optional company contributions of 3-5%, are
intended to qualify under Section 401(k) of the Internal Revenue Code. The
company matches participant contributions of up to 2% of their salary. The
company's Canadian subsidiary has a defined contribution savings plan covering
substantially all non-union employees. In addition, prior to 1995, the company's
Canadian subsidiary's union employees were covered under a multi-employer
defined contribution plan. The expense charged to operations under these plans
was $2,133,000, $2,357,000 and $1,910,000 for 1996, 1995 and 1994, respectively.
<PAGE>
The company's Supplemental Executive Retirement Plan (SERP) allows participants
to defer up to 50% of their annual bonus. Salary deferrals under the SERP are
used to fund a Rabbi Trust. Gains and losses on participant's accounts directly
offset the SERP liability for each participant. The fair value of the investment
and offsetting liability included in other assets and other long term
liabilities was $2,458,000 at December 31, 1996.
Holophane Europe has a defined benefit plan, covering substantially all of its
employees, in which benefits are based primarily on years of service and
employee compensation near retirement. The company's funding policy is in
accordance with local laws and income tax regulations. Fund assets consist
primarily of common stocks, common trust funds and government securities.
Pension expense for Holophane Europe's pension plan included in the company's
Consolidated Statements of Income for 1996, 1995 and 1994 was $258,000, $294,000
and $296,000, respectively.
The following table sets forth the funding status of Holophane Europe's plan and
amounts recognized in the company's balance sheets (in thousands):
December 31,
1996 1995
_________________________________________________
Accumulated benefit
obligation, all vested $7,427 $6,304
=================================================
Plan assets at fair value $9,914 $8,979
Projected benefit obligation (8,750) (6,926)
_________________________________________________
Overfunded projected benefit
obligation 1,164 2,053
Unrecognized net gain from
past experience different
than that assumed and
effects of changes in
assumptions (767) (1,848)
_________________________________________________
Pension asset, net of
cumulative translation
adjustment $397 $205
=================================================
================================================================================
Glass Furnace Shot #1 -- GRAPHIC OMITTED
================================================================================
Net periodic pension cost included the following components (in thousands):
Year Ended December 31,
1996 1995 1994
___________________________________________________
Service cost $460 $468 $454
Interest cost 545 528 442
Actual (return) loss
on Plan assets (569) (1,284) 194
Net amortization and
deferral (178) 582 (794)
___________________________________________________
Net periodic pension
cost $258 $294 $296
===================================================
Actuarial assumptions used in the accounting for the plan were as follows:
1996 1995 1994
___________________________________________________
Discount rate 8.5% 8.5% 8.5%
Expected long term rate of
return on Plan assets 8.5% 9.0% 8.0%
Average rate of increase
in compensation levels 6.25% 6.5% 6.5%
===================================================
9. NONRECURRING ITEM
Nonrecurring charges of $3,875,000 were incurred by the company relating to the
discontinuance of assembly operations in Canada in November 1994. These charges
consisted primarily of the loss on sale of property and severance liability.
10. STOCK OPTIONS
The Holophane Stock Option Plan authorizes the grant of options, restricted
stock and awards of performance shares of common stock to officers and key
employees. Options are to be granted at exercise prices equal to the fair market
value of such stock as of the date of grant. The number of authorized options to
be granted under this plan is 1,982,000. Stock option activity is summarized as
follows:
<PAGE>
Year Ended December 31,
1996 1995 1994
___________________________________________________
Outstanding at
beginning 802,425 537,000 297,000
of year
Weighted average $11.27 $11.03 $10.00
exercise price
Granted 209,600 271,500 240,000
Weighted average $19.88 $11.73 $12.31
exercise price
Exercised (36,150) (3,675) 0
Weighted average $10.67 $10.90 ---
exercise price
Canceled (3,050) (2,400) 0
Weighted average $14.15 $12.33 ---
exercise price
___________________________________________________
Outstanding at end of
year 972,825 802,425 537,000
Weighted average $13.14 $11.27 $11.03
exercise price
===================================================
Exercisable at end of
year 385,800 225,225 86,250
===================================================
Available for grant at
end of year 963,900 373,500 645,000
===================================================
The company applies APB Opinion 25 in accounting for its fixed stock
compensation plans. Accordingly, no compensation cost has been recognized for
the plan in 1996, 1995 or 1994. All options granted have a maximum term of 10
years and vest ratably over four years. The weighted average remaining
contractual life of these options is 7.8 years.
The fair value of the options presented above was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions for 1996 and 1995, respectively: risk-free interest rates of 7.24%
and 5.68%; dividend yields of 0%; volatility factor of .23; and a weighted
average expected option life of six years. Because the effect of applying the
fair value method to the company's stock options results in net income and
earnings per share that are not materially different from amounts reported in
the consolidated statements of income, pro forma information has not been
provided.
11. RELATED PARTY TRANSACTIONS
The company had an agreement with a stockholder to pay a management consulting
fee and certain other transactional fees, through June 1999 with a base of
$250,000 per year, adjusted for inflation. The agreement was terminated in 1993
in connection with the company's initial public offering. At December 31, 1996
and 1995, a liability of $2,181,000 and $2,318,000, respectively, net of
discount at 8%, has been included in other long term liabilities related to the
termination of this agreement. Payments under this agreement were $316,000,
$306,000 and $299,000 for 1996, 1995 and 1994, respectively.
12. GEOGRAPHICAL AREA INFORMATION
(in thousands)
1996 1995 1994
___________________________________________________
Net Sales to Customers
___________________________________________________
United States $157,981 $144,548 $120,574
Europe 23,376 23,137 20,282
Other 9,582 13,384 10,141
___________________________________________________
Total $190,939 $181,069 $150,997
===================================================
Transfers Between Geographic Areas
(eliminated in consolidation)
___________________________________________________
United States $7,694 $11,781 $4,350
Other 0 0 577
___________________________________________________
Total $7,694 $11,781 $4,927
===================================================
Operating Income (loss)
___________________________________________________
United States $25,882 $25,825 $17,290
Europe 1,791 2,743 2,200
Other 344 154 (910)
___________________________________________________
Total $28,017 $28,722 $18,580
===================================================
Identifiable assets
___________________________________________________
United States $101,361 $89,771 $79,881
Europe 20,166 18,356 17,644
Other 2,440 2,652 1,827
___________________________________________________
Total $123,967 $110,779 $99,352
===================================================
================================================================================
Castlight #6 -- GRAPHIC OMITTED
================================================================================
<PAGE>
================================================================================
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
RESULTS OF OPERATIONS 1996 COMPARED WITH 1995
Net sales for the year were at a record level of $190.9 million, an increase of
$9.8 million, or 5.4% over 1995. Domestic sales of $158.0 million grew a total
of 9.3% in 1996, up 4.6% due to internal growth and 4.7% from the MetalOptics
acquisition completed in September. In 1996, results were negatively impacted by
softness in new retail store construction and severe winter weather conditions
in North America that delayed construction projects. Canadian sales were down
33.5% in local currency compared to the previous year, a result of poor winter
weather in the first quarter of the year and decreased activity in highway
infrastructure projects. European sales revenues were up 1.6% in local currency,
reflecting a soft business climate in the United Kingdom, offset by continued
volume growth in continental Europe. 1996 operating results reflect competitive
pricing conditions in all of the company's lighting markets.
Gross margin increased $3.2 million or 4.5% to $73.7 million in 1996, primarily
the result of higher sales volume. Gross margin as a percent of sales decreased
slightly in 1996 to 38.6% compared to 38.9% in 1995. Adjusting for the
MetalOptics acquisition, gross margin as a percent of sales was flat in 1996
compared to 1995.
Aggregate selling and administrative expenses were $39.4 million, or 20.6% of
sales, compared to $35.7 million or 19.7% of sales in 1995. Sales force
expansion and process improvement programs contributed to increased selling and
administrative spending in 1996. Research and development expenses were 2.9% of
sales in 1996 (3.0% adjusting for the MetalOptics acquisition) compared to 3.1%
in 1995.
Interest expense of $2.1 million decreased $0.7 million in 1996 compared to 1995
due to lower outstanding balances and lower average interest rates. Interest
income also decreased $0.1 million in 1996 due to lower average interest rates.
The effective tax rate in 1996 was 37.6%, down from 39.4% experienced in 1995.
The lower effective income tax rate in 1996 is the result of tax benefits
generated from the utilization of a Foreign Sales Corporation and Canadian
income on which no net tax expense was recognized for financial reporting
purposes.
Net income was $16.5 million in 1996, compared to $16.0 million in 1995 and
primary earnings per share rose to $1.40 per share, up from $1.38 in 1995.
Overall, increased net sales, lower net interest costs and a lower effective tax
rate led to higher net earnings for 1996.
RESULTS OF OPERATIONS 1995 COMPARED WITH 1994
1995 net sales were $181.1 million, an increase of $30.1 million, or 20%, over
1994. Sales increased across all divisions and geographical areas. Domestic
sales grew 20% to $144.5 million in 1995, fueled by internal growth of 15% and
5% from the acquisition of the Antique Street Lamps' business in the fourth
quarter of 1994. Canadian sales were up 32% in local currency compared to
previous year, a result of the restructuring of operations during 1995 and
increased activity in highway infrastructure projects. European sales revenues
were up 11% in local currency, reflecting significant volume growth in
continental Europe. 1995 operating results reflect competitive pricing
conditions in all of the company's lighting markets.
Gross margin increased $12.1 million or 20.7%, to $70.5 million in 1995. The
increase is primarily the result of higher sales volume. Gross margin as a
percent of sales increased slightly in 1995 to 38.9% compared to 38.7% in 1994.
Aggregate selling and administrative expenses were $35.7 million, or 19.7% of
sales, compared to $30.6 million or 20.3% of sales in 1994. Research and
development expenses were 3.1% of sales in 1995 and increased approximately
11.6% over 1994.
Although our debt was lower, interest expense of $2.8 million increased $0.1
million in 1995 compared to 1994. This increase was the result of higher
interest rates. Interest income also increased $0.1 million in 1995 due to
higher average interest rates.
The tax rate in 1995 was 39.4%, down from the 41.9% rate experienced in 1994.
The higher effective 1994 income tax rate was due to the Canadian restructuring
charge in 1994 on which no tax benefit was realizable for financial reporting
purposes.
Net income was $16.0 million in 1995 and primary earnings per share rose from
$0.82 to $1.38 per share. Pro forma earnings per share were $1.06 in 1994,
adjusted for the Canadian restructuring charge.
Overall, increased net sales and improved gross margin led to higher net
earnings from continuing operations for 1995.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The company's principal sources of liquidity have been cash generated from
operating activities and amounts available under the company's bank agreements.
During the three year period ended December 31, 1996, the company generated
approximately $57.3 million of cash from operating activities and an additional
$1.6 million from the sale of assets. The company has significantly reduced
working capital requirements through programs that emphasize accounts
receivable, inventory and accounts payable management. As of December 31, 1996,
the company had approximately $8.1 million in cash.
At December 31, 1996, outstanding long-term indebtedness amounted to $25.3
million (including the current portion of $6.4 million). This represents a net
decrease of $6.2 million from December 31, 1995.
The company's Credit Agreement provides for a reducing term loan and a revolving
credit facility of up to $15 million, through September 30, 2000. At December
31, 1996 there was $15 million available for borrowing under the Credit
Agreement. The Agreement contains provisions that limit, among other things, the
amount that can be expended for annual cash dividends and purchase of the
company's stock to 50% of consolidated net income for the previous year.
The company's primary liquidity requirements are the funding of capital
expenditures, scheduled principal and interest payments on indebtedness and
working capital needs. Capital expenditures in 1996 totaled $5.0 million, as
compared to $9.7 million in 1995 and $3.8 million in 1994. Cash on hand, funds
generated from operations and amounts available under the Credit Agreement are
expected to adequately fulfill the company's anticipated requirements in 1997
and in the foreseeable future.
IMPACT OF INFLATION
The company is subject to the effects of inflation. While the company attempts
to pass along inflationary increases in its costs by increasing the selling
prices of its products, it has not always been successful in passing along the
entire amount of such increases due to the level of competition in its markets.
The operating efficiencies and reduced unit cost of production which have been
achieved through the company's capital expenditure programs and other process
improvements have mitigated the impact of inflation on the company's cost
structure.
SAFE HARBOR STATEMENT
Except for the historical information contained herein, the matters discussed in
this annual report are forward-looking statements which involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the company's operations, markets, services
and related products, prices and other factors discussed in the company's prior
filings with the Securities and Exchange Commission.
STOCK MARKET PRICES AND DIVIDENDS
Since November 3, 1993, the company's common stock has been listed on the Nasdaq
National Market under the symbol "HLPH." As of March 14, 1997, there were
approximately 2,300 record holders of the company's common stock. See Quarterly
Results of Operations on page 8 for market prices on common stock during 1996
and 1995. No dividends on the common stock were paid in 1996 or 1995.
================================================================================
U.K. -- GRAPHIC OMITTED
================================================================================
<PAGE>
<TABLE>
FINANCIAL HISTORY
Holophane Corporation and Subsidiaries
(in thousands except % and per share data) Year Ended December 31,
1996 1995 1994 1993
_________________________________________________________________________________________________________________________
Summary of Operations
_________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Net sales $190,939 $181,069 $150,997 $138,818
Gross margin 73,655 70,478 58,407 53,594
Nonrecurring items 0 0 3,875 3,424
Operating income 28,017 28,722 18,580 13,880
Interest expense, net 1,612 2,245 2,255 6,230
Income (loss) before income taxes, cumulative effect
of accounting change and extraordinary item 26,405 26,477 16,325 7,650
Provision for income taxes 9,937 10,435 6,837 3,075
Income (loss) before cumulative effect of
accounting change and extraordinary item 16,468 16,042 9,488 4,575
Cumulative effect of accounting change (a) 0 0 0 3,693
Extraordinary items, net of tax (b) 0 0 0 (4,098)
Net income (loss) 16,468 16,042 9,488 4,170
Preferred stock dividends 0 0 0 2,137
Net income (loss) available to common shareholders $16,468 $16,042 $9,488 $2,033
_________________________________________________________________________________________________________________________
Balance Sheet Data
_________________________________________________________________________________________________________________________
Working capital:
Cash $8,072 $13,356 $11,473 $11,788
Other 19,117 12,688 8,437 5,550
Total assets 123,967 110,779 99,352 95,915
Long term debt, including current maturities 25,256 31,410 37,722 45,671
Redeemable, preferred stock 0 0 0 0
Stockholders' equity (deficit) $67,144 $50,389 $34,722 $27,201
_________________________________________________________________________________________________________________________
Per Common Share Data (c)
_________________________________________________________________________________________________________________________
Primary net earnings (loss) before cumulative effect of
accounting change and extraordinary items $1.40 $1.38 $0.82 $0.29
Primary net earnings (loss) $1.40 $1.38 $0.82 $0.24
Fully diluted net earnings (loss) $1.40 $1.35 $0.82 $0.24
Book value $5.88 $4.39 $3.03 $2.33
_________________________________________________________________________________________________________________________
Other Data
_________________________________________________________________________________________________________________________
Gross margin as a % of net sales 38.6% 38.9% 38.7% 38.6%
Operating income as a % of net sales 14.7% 15.9% 12.3% 10.0%
Weighted average number of primary common shares 11,770 11,667 11,580 8,414
Weighted average number of fully diluted common shares 11,770 11,863 11,580 8,414
_________________________________________________________________________________________________________________________
</TABLE>
*** ABOVE TABLE SPLIT AT RIGHT MARGIN -- CONTINUED BELOW***
<TABLE>
_________________________________________________________________________________________________
Summary of Operations 1992 1991 1990
_________________________________________________________________________________________________
<S> <C> <C> <C>
Net sales $129,863 $118,166 $115,650
Gross margin 47,074 42,029 39,261
Nonrecurring items 0 0 0
Operating income 12,035 7,773 9,468
Interest expense, net 8,220 9,887 10,848
Income (loss) before income taxes, cumulative effect
of accounting change and extraordinary item 3,815 (2,114) (1,380)
Provision for income taxes 661 64 227
Income (loss) before cumulative effect of
accounting change and extraordinary item 3,154 (2,178) (1,607)
Cumulative effect of accounting change (a) 0 0 0
Extraordinary items, net of tax (b) 0 0 (5,464)
Net income (loss) 3,154 (2,178) (7,071)
Preferred stock dividends 2,260 1,958 1,845
Net income (loss) available to common shareholders $894 ($4,136) ($8,916)
_________________________________________________________________________________________________
Balance Sheet Data
_________________________________________________________________________________________________
Working capital:
Cash $3,013 $1,145 $2,156
Other 5,498 16,121 16,647
Total assets 88,014 99,745 111,494
Long term debt, including current maturities 63,777 76,677 82,550
Redeemable, preferred stock 16,905 14,645 12,687
Stockholders' equity (deficit) ($10,608) ($7,546) ($2,858)
_________________________________________________________________________________________________
Per Common Share Data (c)
_________________________________________________________________________________________________
Primary net earnings (loss) before cumulative effect of
accounting change and extraordinary items $0.11 ($0.53) ($0.45)
Primary net earnings (loss) $0.11 ($0.53) ($1.16)
Fully diluted net earnings (loss) $0.11 ($0.53) ($1.16)
Book value --- --- ---
_________________________________________________________________________________________________
Other Data
_________________________________________________________________________________________________
Gross margin as a % of net sales 36.2% 35.6% 33.9%
Operating income as a % of net sales 9.2% 6.6% 8.2%
Weighted average number of primary common shares 7,775 7,765 7,665
Weighted average number of fully diluted common shares 7,775 7,765 7,665
_________________________________________________________________________________________________
(a) Represents the effect of adopting SFAS No. 109 "Accounting for Income Taxes."
(b) Relates to early retirement of debt.
(c) Adjusted to reflect stock splits.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,072
<SECURITIES> 0
<RECEIVABLES> 34,120
<ALLOWANCES> 1,016
<INVENTORY> 13,302
<CURRENT-ASSETS> 58,326
<PP&E> 82,843
<DEPRECIATION> 43,430
<TOTAL-ASSETS> 123,967
<CURRENT-LIABILITIES> 31,137
<BONDS> 0
0
0
<COMMON> 119
<OTHER-SE> 67,144
<TOTAL-LIABILITY-AND-EQUITY> 123,967
<SALES> 190,939
<TOTAL-REVENUES> 190,939
<CGS> 117,284
<TOTAL-COSTS> 162,222
<OTHER-EXPENSES> 700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,139
<INCOME-PRETAX> 26,405
<INCOME-TAX> 9,937
<INCOME-CONTINUING> 16,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,468
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>
