AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1996
REGISTRATION NO. 333-6299
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
MARKER INTERNATIONAL
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
UTAH 3949005 87-0372759
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
-------------------
1070 WEST 2300 SOUTH
SALT LAKE CITY, UTAH 84119
(801) 972-2100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------
HENRY E. TAUBER
MARKER INTERNATIONAL
1070 WEST 2300 SOUTH
SALT LAKE CITY, UTAH 84119
(801) 972-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
COPIES TO:
<TABLE>
<S> <C>
STROOCK & STROOCK & LAVAN WERBEL MCMILLIN & CARNELUTTI
SEVEN HANOVER SQUARE A PROFESSIONAL CORPORATION
NEW YORK, NEW YORK 10004 711 FIFTH AVENUE
ATTN: MARK A. ROSENBAUM, ESQ. NEW YORK, NEW YORK 10022
(212) 806-5400 ATTN: ROBERT H. WERBEL, ESQ.
(212) 832-8300
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MARKER INTERNATIONAL
CROSS REFERENCE SHEET SHOWING LOCATION OR CAPTION IN
PROSPECTUS FILED AS PART OF REGISTRATION STATEMENT
OF INFORMATION REQUIRED BY FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER
IN FORM S-1 ITEM CAPTION IN FORM S-1 LOCATION OF CAPTION IN PROSPECTUS
----------- -------------------------------------- --------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................ Outside Front Cover Page of
Registration Statement; Outside
Front Cover Page of Prospectus.
2. Inside Front and Outside Back Cover
Pages of Prospectus................... Inside Front and Outside Back Cover
Pages of Prospectus.
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.... Outside Front Cover Page of
Prospectus; Prospectus Summary; Risk
Factors.
4. Use of Proceeds....................... Use of Proceeds.
5. Determination of Offering Price....... Underwriting.
6. Dilution.............................. Not applicable.
7. Selling Security Holders.............. Principal and Selling Stockholders.
8. Plan of Distribution.................. Outside and Inside Front Cover Pages
of Prospectus; Underwriting.
9. Description of Securities to be
Registered............................ Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Capital Stock; Shares
Eligible for Future Sale.
10. Interests of Named Experts and
Counsel............................. Not applicable.
11. Information With Respect to the
Registrant............................ Outside Front Cover Page of
Prospectus; Available Information;
Prospectus Summary; Risk Factors;
Capitalization; Dividend Policy;
Price Range of Common Stock;
Selected Consolidated Financial
Information; Management's Discussion
and Analysis of Financial Condition
and Results of Operations; Business;
Management; Principal and Selling
Stockholders; Certain Relationships
and Related Transactions;
Description of Capital Stock; Shares
Eligible For Future Sale;
Consolidated Financial Statements.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... Not applicable.
</TABLE>
<PAGE>
SUBJECT TO COMPLETION--DATED JULY 16, 1996
PRELIMINARY PROSPECTUS
3,400,000 SHARES
N87735BE.G01,1170,510,H
MARKER INTERNATIONAL
COMMON STOCK
Of the 3,400,000 shares of Common Stock offered hereby, 2,500,000 are being
sold by Marker International ("Marker" or the "Company") and 900,000 are being
sold by Henry E. Tauber who is Chairman of the Board and President of the
Company and who is also the principal shareholder of the Company (the "Selling
Stockholder"). The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."
The Company's Common Stock is listed on the Nasdaq Stock Market's National
Market (the "Nasdaq National Market") under the symbol "MRKR." On July 12, 1996,
the last reported sales price for the Common Stock on the Nasdaq National Market
was $6.50 per share. See "Price Range of Common Stock."
Upon completion of the offering, assuming the Underwriters' over-allotment
option is not exercised, the Selling Stockholder will continue to own
approximately 41.2% of the outstanding Common Stock. See "Principal and Selling
Stockholders."
-------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS" BEGINNING ON PAGE 9.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). In addition, the
Company has agreed to reimburse the Representatives (as defined) for certain
expenses incurred in connection with the offering. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company, which are
estimated at $775,000, including an accountable expense allowance, estimated
at $100,000, payable to the Representatives.
(3) The Company and the Selling Stockholder, collectively, have granted the
Underwriters a 30-day option to purchase up to 510,000 additional shares of
Common Stock to cover over-allotments, if any, on the same terms and
conditions as the shares offered hereby. If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and the Proceeds to the Selling Stockholder will be
$ , $ , $ , and $ respectively. See "Underwriting."
-------------------
The shares are being offered by the Underwriters, subject to prior sale,
when, as and if accepted by them and subject to the right of the Underwriters to
reject any order in whole or in part and certain other conditions. It is
expected that delivery of the certificates for the Common Stock will be made on
or about , 1996 at the offices of Allen & Company Incorporated, 711
Fifth Avenue, New York, New York 10022.
<TABLE>
<S> <C>
ALLEN & COMPANY INCORPORATED PIPER JAFFRAY INC.
</TABLE>
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Graphic: Top view of enhanced photographic close-up of Marker binding
mechanism shown via fade away exposure through boot and binding. Computerized
design draft lines overlay photograph. Marker's logo appears bottom center.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF COMMON STOCK AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A
UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, New York, New
York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such reports, proxy
statements and other information, to the extent filed on or after May 6, 1996,
may be electronically examined at the Commission's Web site on the Internet
located at http://www.sec.gov. The Company's Common Stock is included in the
Nasdaq National Market and reports and other information concerning the Company
can be inspected and copied at the offices of Nasdaq at 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, annexes and schedules thereto, the
"Registration Statement"), pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, covering the Common Stock being offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, and to which reference is hereby
made. Any statements contained herein concerning the provisions of any document
are not necessarily complete, and, in such instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. Copies of the Registration Statement and the
exhibits may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at the address set forth above.
EXCHANGE RATE DATA
Certain monetary amounts in this Prospectus reflect a conversion of foreign
currencies into U.S. dollars ("Dollars"). Historical and pro forma conversions
are based on historical exchange rates calculated in accordance with U.S.
generally accepted accounting principles ("U.S. GAAP"). With respect to the rate
used to convert Swiss francs ("Swiss Francs" or "CHF"), the functional currency
for the Company's recent purchase of an additional interest in DNR Sportsystem
Ltd., conversions relating to the purchase price of such additional interest are
based on a rate of U.S. $1.00 to CHF 1.2453, the rate of exchange agreed to by
the Company in a forward foreign currency exchange contract entered into by the
Company on June 28, 1996 in connection with such purchase.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information set forth herein assumes that the Underwriters' over-allotment
option will not be exercised. Unless the context otherwise requires, all
references herein to the "Company" or "Marker" include Marker International and
its subsidiaries. Prospective purchasers should review carefully the information
set forth under "Risk Factors."
THE COMPANY
Marker International is the leading marketer of alpine ski bindings in the
United States and Germany and one of the three largest in the world. Since being
acquired in 1984 by Henry E. Tauber, the Company's Chairman and President,
Marker has focused its strategy on developing strong brand awareness and loyalty
through high quality, technologically advanced design, production and sales
capabilities. From 1984 through the 1996 fiscal year, sales have grown from
$16.0 million to $87.9 million, a compounded annual growth rate of approximately
15%. Marker's market share has also increased as industry surveys currently
estimate the Company's share of the United States, German and Japanese ski
binding markets at more than 45%, 40% and 16%, respectively.
Having established itself as a leader in the alpine ski binding business,
the Company believes that it is well positioned to diversify its business into
other winter sports markets. In seeking such diversification, the Company
expects to capitalize on its existing design and production capabilities as well
as its distribution and sales organization. Whether in its traditional alpine
ski binding markets or in newer markets, the Company's objective is to produce
and market products recognized for high-quality and high-performance.
THE SNOWBOARD INDUSTRY
The Company views the snowboard industry as a winter sports market with
significant growth potential. Snowboarding is a relatively new sport that began
to attract a broader following in the early 1990's and has continued to grow
steadily to date. This growth in overall popularity has led to an increase in
the sales of snowboarding equipment. According to the International Snowboard
Federation, 1.27 million snowboards were sold to retailers in the 1995/96
snowboard season, which ended March 31, 1996. The Company believes that
snowboarding is developing from a sport for young males between the ages of 12
and 24 into a mainstream sport that has growth possibilities with respect to a
wide range of consumers. One indication of the increased acceptance of the sport
is that snowboarding will be included for the first time as a full medal sport
in the 1998 Olympic Winter Games in Nagano, Japan. The Company expects that the
increased exposure of potential consumers to snowboarding through the 1998
Olympics and, later, the 2002 Olympic Winter Games in Salt Lake City, Utah, will
further enhance the popularity of the sport.
DNR SPORTSYSTEM LTD.
To enter the snowboard market, the Company acquired, in June 1995, through
its wholly-owned Swiss subsidiary, Marker AG, a 25% equity interest in
Switzerland-based DNR Sportsystem Ltd. ("DNR Sportsystem"), a leading developer,
marketer and distributor of snowboards, snowboard boots, snowboard bindings and
other related products. The Company believes that established snowboard
companies, such as DNR Sportsystem, with solid technological and production
capabilities and distribution and sales organization, are well positioned to
capitalize on the growth potential in the snowboard industry. To increase its
ownership interest in DNR Sportsystem, the Company will use substantially all of
the proceeds of this offering to satisfy the DNR Equity Purchase Notes (as
defined)
4
<PAGE>
issued in connection with the Company's recent purchase of an additional 55%
interest in DNR Sportsystem, thereby increasing the Company's ownership to 80%
(the "DNR Equity Purchase").
In February 1996, the Company, in conjunction with DNR Sportsystem and
Tecnica S.p.A., a leading Italian ski and snowboard boot manufacturer
("Tecnica"), introduced the DNR Soft Boot/Step-in Binding Interface SystemTM, an
innovative snowboard boot/binding system (the "DNR Interface System"). The
Company believes the DNR Interface System may have the potential to become a
technology standard in the newly developing step-in binding segment of the
snowboard industry. The Company has co-developed the new DNR Interface System by
utilizing its technological expertise in alpine ski bindings. Designed
specifically for the needs of snowboard riders, the goal of the new DNR
Interface System is to significantly improve snowboard rider performance while
offering step-in/step-out convenience. The Company expects that the advanced
design and quality of the new system combined with the Company's strong
distribution capabilities should permit the system to be readily integrated into
the marketplace. To date, the Company has received a substantial number of
orders for the new DNR Soft Boot/Step-in Binding Interface SystemTM for delivery
in the upcoming 1996/97 snowboard season.
DNR Sportsystem, co-founded in 1990 by its Chairman and Chief Executive
Officer, Lucio Roffi, had net sales of approximately $44.0 million and net
income of approximately $5.6 million in its last fiscal year which ended
December 31, 1995, as compared to net sales of approximately $26.5 million and
net income of approximately $3.8 million in its fiscal year ended December 31,
1994. Based on information from the International Snowboard Federation and other
industry sources, the Company estimates that, during the 1995/96 snowboard
season, DNR Sportsystem's share of the snowboard market was approximately 13%
worldwide and, in its largest markets, located in Asia, Europe and North
America, was approximately 13%, 10% and 14%, respectively. DNR Sportsystem,
which presently markets its products under the trade names of "DNR(R)," "Santa
Cruz(R)," and "Sims(R)," receives approximately 95% of its revenues from the
sales of its hard goods merchandise, which includes snowboards, snowboard boots
and snowboard bindings. The Company believes that DNR Sportsystem is a well
established, well managed company which emphasizes high quality products and
service and which, therefore, has significant synergies with the Company's own
business strategies. In this regard, the Company closed the DNR Equity Purchase
on June 26, 1996 by issuing a short-term promissory note to each of the selling
equity holders (such notes, collectively, the "DNR Equity Purchase Notes"). The
DNR Equity Purchase Notes will become due and payable upon the earlier of (i)
August 31, 1996 and (ii) the consummation of this offering. The Company will use
substantially all of the net proceeds of this offering, estimated to be $14.4
million, to pay the DNR Equity Purchase Notes. To the extent the proceeds of
this offering will be insufficient to enable the Company to pay the entire $19.4
million purchase price for the additional 55% interest, the Company will pay the
difference with funds borrowed through its short-term credit facilities.
DNR NORTH AMERICA
In December 1995, the Company announced plans to form, together with DNR
Sportsystem and Gregor Furrer & Partner Holding AG ("Gregor Furrer"), which is
the parent of the German ski and snowboard manufacturer, Volkl GmbH ("Volkl"), a
joint venture company named DNR North America, LLC ("DNR North America"). DNR
North America will be organized as a Delaware limited liability company and will
develop and manufacture snowboards at a state of the art snowboard production
facility currently being built in Salt Lake City, Utah (such facility, the "DNR
North America Production Facility"). DNR North America will be 60% directly
owned by the Company, 25% by DNR Sportsystem (thereby giving the Company an
additional 20% indirect interest through its ownership in DNR Sportsystem) and
15% by Gregor Furrer.
The Company believes that DNR North America constitutes an integral
component of the Company's plans to expand into new markets. The Company, in
collaboration with its joint venture
5
<PAGE>
partners, is currently building the state of the art DNR North America
Production Facility which is scheduled to begin production in October 1996. The
56,000 square foot facility, which will be leased by the Company to DNR North
America, is designed to eventually produce up to 200,000 snowboards annually and
will also be the location of the new DNR North America snowboard technology
center (the "DNR Snowboard Technology Center"). The DNR Snowboard Technology
Center will focus on areas of advanced research and development in snowboard
technologies, boot/board interface, and product testing procedures and will
offer its services to the industry in order to assist in the development of
standards and practices. The Company expects that the DNR North America
Production Facility will produce high quality, technologically advanced
snowboards that will be distributed by DNR Sportsystem in addition to snowboards
that will be produced by Volkl, the current exclusive supplier of snowboards to
DNR Sportsystem.
SKI BINDINGS
In addition to its new growth strategies, the Company continues to focus on
its traditional core markets. The Company's ski binding product line consists of
more than 30 models of ski bindings designed for racers, other high-performance
skiers and recreational skiers of all ages. Many Olympic ski medalists and World
Cup ski champions, with whom Marker has entered into compensatory relationships,
endorse and use Marker ski bindings.
As a result of the Company's emphasis on research and development of
advanced ski binding technology, the Company has a worldwide total of over 225
patents and patent applications covering various aspects of its technology. In
1995, the Company introduced a second generation of its patented Selective
ControlTM technology, the M51 Turbo SCTM and M41 SC2TM. These bindings,
exclusively from Marker, are designed for skiers of all levels. They feature a
patented Dynamic StabilizerTM, Carbon Composite Torsion BarTM base and exclusive
Edge Pressure SystemTM and are unique in the industry because they offer the
only adjustable interface system skiers can easily change on the mountain to
accommodate different snow conditions, speeds and varying terrain. The system is
designed to provide a better skiing experience, make turning easier, improve
control, and help all skiers attain new levels of performance and confidence.
The system has received critical praise from ski publications and the Turbo SC
was named a "break-through" product by, and was the only binding to receive a
Gold Medal rating in, the Buyer's Guide '96 published in the September 1995
issue of Ski Magazine in the United States.
The Company believes Marker ski bindings are superior to those of its
competitors due to the Company's advanced proprietary features. All current
Marker bindings feature TwincamTM and Gliding AFDTM technology. The Company
developed and patented the TwincamTM and Gliding AFDTM technology, which,
together, tightly couple the ski boot and binding toe-piece, resulting in a
binding system that is designed not to be affected by contamination between the
ski boot and binding. This provides skiers with reliable and consistent
retention and release performance under actual ski conditions. In addition,
certain models of Marker bindings also feature either the Company's
Full-SpectrumTM or V-TECHTM technology. These technologies allow the ski boot to
be released from a binding at any angle in a 180 degree full spectrum, thereby
increasing skier safety.
The Company is a holding company which operates through its subsidiaries,
Marker Deutschland GmbH ("Marker Germany"), Marker USA, Marker Japan, Ltd.
("Marker Japan"), Marker Ltd., Marker Austria GmbH ("Marker Austria"), Marker
Canada, Ltd. ("Marker Canada") and Marker AG which is located in Switzerland
("Marker Switzerland").
Substantially all of the Company's ski bindings and snowboard bindings are
manufactured by Marker Germany, which also distributes bindings in Germany, to
subsidiaries of the Company and to independent distributors in countries where
the Company does not have a distribution subsidiary. Marker USA and Marker Japan
each has its own sales force and marketing department for sales and
6
<PAGE>
marketing of Marker bindings and related parts directly to retailers in the
United States and to both retailers and wholesalers in Japan, respectively.
Marker Austria distributes the Company's ski bindings into Austria through an
independent sales force. Marker Canada distributes the Company's ski bindings
into Canada which are then sold through an independent distributor. Marker
Switzerland operates primarily as a holding company which owns an unconsolidated
25% interest in DNR Sportsystem (which is included in the aggregate 80% interest
in DNR Sportsystem held by the Company). Marker Ltd., the Company's soft goods
subsidiary, designs, distributes and markets to retailers the Company's
clothing, gloves and luggage products for skiing and other recreational
activities. Marker Ltd. products are sold mainly in the United States.
Henry E. Tauber, the Company's Chairman of the Board and President, is
actively involved in the promotion and development of the sport of skiing. Mr.
Tauber is a member of the boards of directors of the United States Ski
Association and the United States Ski Team. Mr. Tauber is also a Vice President
and Council Member of the International Ski Federation (FIS), the governing body
for international ski racing.
The Company's principal executive offices are located at 1070 West 2300
South, Salt Lake City, Utah 84119 and its telephone number at that address is
(801) 972-2100.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company.......... 2,500,000 shares
Common Stock offered by the Selling
Stockholder.................................. 900,000 shares
Common Stock to be outstanding after the
offering..................................... 10,949,127 shares(1)
Use of proceeds.............................. Substantially all of the net proceeds of this
offering, estimated to be $14.4 million, will
be used to satisfy the DNR Equity Purchase
Notes issued in connection with the Company's
recent acquisition of an additional 55%
interest in DNR Sportsystem, a company in
which the Company now holds an 80% equity
interest. To the extent that the proceeds of
this offering are insufficient to enable the
Company to pay the entire $19.4 million
purchase price for the additional 55%
interest, the Company expects to pay the
difference with funds borrowed through its
short-term credit facilities.
Nasdaq National Market symbol................ "MRKR"
</TABLE>
- ------------
(1) Based on the number of shares outstanding as of May 31, 1996. Excludes
510,000 shares of Common Stock subject to an over-allotment option granted
to the Underwriters. Excludes shares of Common Stock that may be acquired
within 60 days of May 31, 1996 pursuant to management stock options.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NOTES)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------
1996
----------------------
1992 1993 1994 1995 ACTUAL PRO FORMA(2)
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
CONSOLIDATED INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C> <C>
Net sales................................ $65,916 $84,920 $82,637 $83,962 $87,911 $131,949
------- ------- ------- ------- ------- ------------
Gross profit............................. 25,061 29,383 33,065 35,084 35,303 50,293
Operating expenses....................... 19,649 22,824 25,846 26,167 29,479 38,555
------- ------- ------- ------- ------- ------------
Operating income......................... 5,412 6,559 7,219 8,917 5,824 11,738
Other expense, net....................... (4,497) (4,832) (3,490) (3,415) (1,526) (3,122)
------- ------- ------- ------- ------- ------------
Income before income taxes, minority
interest and cumulative effect of
accounting change........................ 915 1,727 3,729 5,502 4,298 8,616
Provision for income taxes............... (103) (133) (510) (1,395) (609) (2,156)
Minority interest........................ -- -- -- -- -- (1,117)
------- ------- ------- ------- ------- ------------
Income before cumulative effect of
accounting change...................... 812 1,594 3,219 4,107 3,689 5,343
Cumulative effect of accounting change,
net of tax............................. -- -- -- -- (266) (266)
------- ------- ------- ------- ------- ------------
Net income............................... $ 812 $ 1,594 $ 3,219 $ 4,107 $ 3,423 $ 5,077
------- ------- ------- ------- ------- ------------
------- ------- ------- ------- ------- ------------
Net income applicable to common
shares(1)................................ $ 70 $ 900 $ 1,803 $ 3,653 $ 3,423 $ 5,077
------- ------- ------- ------- ------- ------------
------- ------- ------- ------- ------- ------------
Income per common share before cumulative
effect of accounting change(1)........... n/a n/a $ 0.31 $ 0.50 $ 0.43 $ 0.48
------- ------- ------- ------------
------- ------- ------- ------------
Net income per common share(1)........... n/a n/a $ 0.31 $ 0.50 $ 0.40 $ 0.46
------- ------- ------- ------------
------- ------- ------- ------------
Weighted average common shares
outstanding.............................. n/a n/a 5,785 7,368 8,595 11,095
------- ------- ------- ------------
------- ------- ------- ------------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED(3)
------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Current assets....................................................... $64,592 $ 79,714
Total assets......................................................... 87,265 115,792
Current liabilities.................................................. 51,045 63,489
Long-term debt....................................................... 15,452 15,452
Minority interest.................................................... -- 1,664
Total shareholders' equity........................................... $20,768 $ 35,187
</TABLE>
- ------------
(1) Net income applicable to common shares for fiscal years 1992 and 1993 is
based upon net income less preferred stock dividends of $742,000 and
$694,000, respectively. Net income applicable to common shares for fiscal
years 1994 and 1995 reflects the following transactions as if they occurred
on April 1, 1993 (the beginning of fiscal 1994): (a) the exchange of Series
A preferred stock (including the premium thereon) for 378,572 shares of
Common Stock resulting in the elimination of dividends totaling
approximately $387,000 and $87,000 for the fiscal years ended March 31, 1994
and 1995, respectively, and (b) the exchange of Series A-1, A-2, and A-3
redeemable preferred stock for $19 million aggregate principal amount of
Series A-1, A-2 and A-3 bonds resulting in the treatment of dividends
totaling approximately $1,416,000 and $454,000 as interest expense net of
the related tax effect for the fiscal years ended March 31, 1994 and 1995,
respectively, and (c) a 3,604 to 1 stock split of the Company's outstanding
Common Stock.
(2) Gives effect to the acquisition of a 25% equity interest in DNR Sportsystem
which occurred in June 1995 and the acquisition of an additional 55% equity
interest in DNR Sportsystem which occurred in June 1996, assuming such
transactions had occurred as of April 1, 1995. See the Company's Unaudited
Pro Forma Condensed Consolidated Financial Statements commencing on page 20.
The Company will use proceeds from this offering to satisfy the DNR Equity
Purchase Notes issued in connection with the DNR Equity Purchase.
(3) Gives effect to the additional acquisition of DNR Sportsystem described in
(2) above as if it had occurred on March 31, 1996. The additional
acquisition will be funded with (i) assumed net proceeds of approximately
$14.4 million from the sale by the Company of 2,500,000 shares of Common
Stock offered hereby and (ii) short-term borrowings of approximately $5.0
million. See the Company's Unaudited Pro Forma Condensed Consolidated
Financial Statements commencing on page 20.
8
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors,
in addition to the other information presented in the Prospectus, before
purchasing the shares of Common Stock offered hereby. The cautionary statements
set forth below and elsewhere in this Prospectus should be read as accompanying
forward-looking statements included under "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere herein. The risks described in such statements could cause the
Company's results to differ materially from those expressed in or indicated by
such forward-looking statements.
PURCHASE OF DNR SPORTSYSTEM LTD. The Company will use substantially all of
the proceeds of this offering to satisfy the DNR Equity Purchase Notes issued in
connection with the Company's recent purchase of an additional 55% equity
interest in DNR Sportsystem, a company in which the Company now holds an 80%
interest. See "Business--Recent Developments." As a result of the June 26, 1996
consummation of the DNR Equity Purchase, the Company has become the majority
holder of DNR Sportsystem and the Company's investors have thereby become
further exposed to the risks associated with DNR Sportsystem's business. The
snowboard industry is subject to many of the same risks as the ski industry. As
discussed below, risks associated with DNR Sportsystem's business include
seasonality, quarterly fluctuations in financial performance, currency
translation, competition, product liability, limited patented technology,
dependence on manufacturers or licensors of its products, dependence on key
personnel, and dependence on general economic conditions.
SEASONALITY AND QUARTERLY FLUCTUATIONS. The Company's business is seasonal
in nature and results of operations vary from quarter to quarter. Orders for the
Company's ski bindings from retailers and distributors are highest during the
Company's first fiscal quarter, which ends June 30. The Company ships its
products to fill those orders, and records significant sales, during its second
and third fiscal quarters. The Company collects a substantial portion of its
receivables during its third and fourth fiscal quarters. In accordance with
industry practice, a substantial portion of the Company's receivables remains
outstanding for five to six months, and a small percentage remains outstanding
for more than six months. These factors result in variations in the Company's
quarterly results of operations and cash flows. Due to the seasonality of the
Company's business, the Company typically experiences losses in its first and
fourth fiscal quarters and profits in its second and third fiscal quarters. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Marker-- Sales."
The snowboard season is contemporaneous with the ski season and snowboarding
is subject to seasonal fluctuations similar to those associated with skiing. Due
in large measure to seasonality, net sales for DNR Sportsystem, which has a
calendar fiscal year, have historically been much stronger in its third and
fourth fiscal quarters (i.e., the Company's second and third fiscal quarters)
than in its first and second fiscal quarters (i.e., the Company's first and
fourth fiscal quarters). See "Business--DNR Sportsystem Ltd.--Seasonality." The
Company's joint venture, DNR North America, as a manufacturer of snowboards,
will be subject to the same types of seasonal fluctuations as the Company and
DNR Sportsystem.
FOREIGN CURRENCY EXPOSURE OF MARKER. Marker Germany manufactures
substantially all of the Company's ski bindings and receives payment for the ski
bindings, including ski bindings sold to the Company's other distribution
subsidiaries, in German marks ("Marks"), except in the case of sales to Marker
USA and Marker Japan which may, at their election, make payments in their
functional currencies. Therefore, the Company's long-term competitive position
and future results of operations could be adversely affected if the currency
used by purchasers significantly decreased in value in relation to the Mark.
Such a decrease could result in an increase in the retail price of Marker ski
bindings in local markets or, if the Company considers such increases to be
undesirable, could result in reductions in gross margins, with possible adverse
effects in either case on the Company's results of
9
<PAGE>
operations. The Company enters into forward foreign exchange contracts, with
typical durations of up to one year beyond the end of each fiscal year, to
reduce the impact of currency fluctuations. Such forward foreign exchange
contracts are entered into with major financial institutions which the Company
believes are creditworthy. A default by such a financial institution in the
performance of its obligations under an exchange contract could adversely affect
the Company's results of operations. In addition, there can be no assurance that
forward foreign exchange contracts will eliminate the impact of currency
fluctuations on the results of the Company's operations on a long-term basis.
In addition, in accordance with U.S. GAAP, upon consolidation of the
Company's financial statements, the income statement and balance sheet accounts
of the Company's foreign subsidiaries are translated at the weighted average and
period-end rates of exchange, respectively, prevailing during the period.
Therefore, Marker's results of operations are subject to translation risks and
can vary as a result of fluctuations in the exchange rates between the
functional currencies of such foreign subsidiaries and the Dollar. The
translation effects from currency fluctuations are not covered with contracts,
options or other financial instruments.
INTERNATIONAL OPERATIONS. The Company has significant international
operations, including approximately 590 employees in Germany. Marker Germany
manufactures substantially all of the Company's ski bindings at its
manufacturing facility in Eschenlohe, Germany. The Company's main ski binding
research and development activities are also located at such manufacturing
facility. In fiscal 1994, 1995 and 1996, approximately 61%, 61% and 57%,
respectively, of the Company's total revenues were derived from customers and
distributors outside of the United States. In the future, the Company intends to
increase its worldwide market share by focusing its resources on international
markets and, therefore, the Company expects that international sales of its
bindings will continue to account for a significant portion of its revenues. The
international nature of the Company's business subjects it and its
representatives, agents and distributors to laws and regulations of the foreign
jurisdictions in which each operates or in which each of its products are sold.
Changes in overseas economic or political conditions, currency exchange rates,
foreign tax laws or tariffs, or other trade regulations could have a material
adverse effect on the Company's results of operations and financial condition.
The Company's business is also subject to the risks associated with the
imposition of additional legislation and regulations relating to imports,
including quotas, duties or taxes, and other charges, restrictions or actions on
imports in the U.S. and in the other countries in which its products are
developed and sold.
DNR Sportsystem's business is also subject to risks generally associated
with conducting international business. If any such risks were to render the
conduct of business in a particular country undesirable, or impracticable, or if
DNR Sportsystem's current foreign manufacturing sources were for any reason to
cease doing business with DNR Sportsystem, such a development could have a
material adverse effect on DNR Sportsystem's business, financial condition and
results of operations.
COMPETITION. The Company is subject to significant competition in the
various countries where it sells its bindings. The Company competes worldwide
primarily with other manufacturers of alpine ski bindings. Certain of the
Company's competitors are, or in the future may be, owned by larger enterprises
that may have financial resources that are greater, and may offer wider product
lines, than those of the Company. The Company competes primarily on the basis of
the quality, technology, brand name recognition and performance of its ski
bindings. There can be no assurance that the Company's business will not be
adversely affected by increased competition in the markets in which it operates.
See "Business--Marker--Competition."
The snowboard industry is highly competitive and DNR Sportsystem competes,
and DNR North America will compete, with a number of established distributors
and manufacturers, some of whom may have greater financial, distribution,
advertising or marketing resources than DNR Sportsystem and DNR North America,
respectively, and whose brand names have greater recognition than those of DNR
Sportsystem or DNR North America, as the case may be. In addition, there are
several original
10
<PAGE>
equipment manufacturers that, although they do not currently distribute their
own snowboards, could compete directly with DNR Sportsystem if they were to
begin distributing snowboards under their own brand names. Moreover, as the
snowboard industry continues to expand, DNR Sportsystem and DNR North America
could face significant competition from new entrants in each of their product
categories, including large ski and sporting goods companies that decide to
develop new snowboard brands or acquire other snowboard companies. Although the
Company believes that DNR Sportsystem's and DNR North America's products are
well positioned to compete successfully in their respective categories, there
can be no assurance that either DNR Sportsystem or DNR North America will be
able to compete successfully in the future.
DNR SPORTSYSTEM LTD.'S DEPENDENCE ON SOURCES AND SUPPLIERS. DNR Sportsystem
currently has a mutually exclusive manufacturing arrangement with Volkl of
Germany, whereby Volkl manufactures all of the snowboards that are currently
sold by DNR Sportsystem. DNR Sportsystem's supply of snowboards, is, however,
expected to be enhanced by production at DNR North America's manufacturing
facility in Salt Lake City, Utah, which is scheduled to begin production in
October 1996. DNR Sportsystem's snowboard bindings are sourced from the Company
and an Italian manufacturer, in each case on an exclusive basis. DNR
Sportsystem's snowboard boots are sourced from Tecnica and various other Italian
manufacturers, primarily on an exclusive basis. DNR Sportsystem's clothing and
accessory lines are sourced from independent contractors, primarily in Hong Kong
and other Asian countries. See "Business--DNR Sportsystem Ltd.--Sources and
Suppliers."
Although the Company believes that DNR Sportsystem has established close
relationships with its principal manufacturing sources, DNR Sportsystem's future
success may depend upon its ability to maintain such relationships. The Company
could experience increased costs, substantial disruption and resulting loss of
sales if an unexpected change in snowboard or other suppliers were to occur. In
particular, at least until the DNR North America Production Facility is
operational, if DNR Sportsystem's relationship with Volkl were interrupted, DNR
Sportsystem could experience difficulty in locating another source with
sufficient snowboard production capacity to meet DNR Sportsystem's short-term
needs. The Company expects, however, that once the DNR North America Production
Facility is operational, DNR Sportsystem should have a consistent source of
snowboards to complement its existing supply from Volkl. There can be no
assurance, however, that the DNR North America Production Facility will be
timely constructed or will become fully operational or, if it does become
operational, that it will be able to meet the manufacturing needs of DNR
Sportsystem on a cost-efficient basis.
DEPENDENCE UPON KEY PERSONNEL. The Company believes that it has developed a
strong management team which intends to continue the Company's growth and
profitability. However, the loss or unavailability of Henry E. Tauber, the
Company's Chairman of the Board and President, could adversely affect the
Company's business and prospects. Although the Company is the beneficiary of a
$5 million key man life insurance policy on the life of Mr. Tauber, there can be
no assurance that the proceeds of such policy could adequately compensate the
Company for the loss of Mr. Tauber's services. Like the Company, DNR
Sportsystem's future success depends on the services of its key employees,
including its Chairman and Chief Executive Officer, Lucio Roffi. DNR Sportsystem
currently maintains no key man life insurance policy on the life of Mr. Roffi.
DNR North America's future success depends on the services of each of Mr. Tauber
and Mr. Roffi. There can be no assurance that such services will be continued in
the future, that successful replacements for either of such persons could be
found or that any of the Company, DNR Sportsystem or DNR North America will be
able to attract and retain key personnel with the skills and expertise necessary
to manage each of their respective businesses in the future.
CONTROL OF COMPANY. After completion of this offering, Henry E. Tauber, the
Company's Chairman of the Board and President, will own approximately 41.2% of
the outstanding Common Stock (37.9% if the Underwriters' over-allotment option
is exercised in full). As a result, Mr. Tauber will
11
<PAGE>
continue to have the ability to significantly influence matters requiring the
approval of the Company's shareholders, including the election of the Company's
Board of Directors. See "Principal and Selling Stockholders."
Upon consummation of the DNR Equity Purchase, the Company expects to grant a
revocable proxy to Mr. Roffi with respect to such portion of the Company's
equity interest in DNR Sportsystem as equals 41% of the outstanding common
shares of DNR Sportsystem. This proxy would have the effect of granting Mr.
Roffi voting control over 51% of the common shares of DNR Sportsystem. See
"Business--DNR Sportsystem Ltd.--Employees." While the proxy is in effect, Mr.
Roffi, and not the Company, will have the ability to control the policies of DNR
Sportsystem.
SINGLE MANUFACTURING FACILITY. Substantially all of the Company's ski
bindings and DNR Sportsystem's snowboard bindings for the DNR Soft Boot/Step-in
Binding Interface SystemTM are manufactured at the Company's manufacturing
facility in Eschenlohe, Germany. In addition, the Company's main ski binding
research and development activities are located at such manufacturing facility.
The Company's or DNR Sportsystem's current businesses could be adversely
affected in the event of material damage to the Company's manufacturing facility
or if the facility were unable to manufacture ski bindings or snowboard
bindings, as applicable, for any reason. In addition, DNR North America's
proposed manufacture of snowboards will be handled solely at its manufacturing
facility in Salt Lake City, Utah, which facility currently is under
construction. Although such manufacturing facility is scheduled to begin
production in October 1996, there can be no assurance that such facility will
become fully operational or, if it is, that it will be able to meet the
manufacturing needs of DNR Sportsystem.
MARKER'S DEPENDENCE ON LINES OF CREDIT. The Company collects a substantial
portion of its accounts receivables during the third and fourth fiscal quarters.
In order to fund the manufacture of ski bindings during the remainder of the
year, the Company is required to draw on its lines of credit and such borrowing
typically reaches its maximum level for the fiscal year during the Company's
third fiscal quarter. The Company's primary line of credit for the manufacture
of ski bindings is with a German bank and historically has been for a term of
one year. The Company's current primary line of credit expires in July 1996. The
Company also has lines of credit with another German bank, a United States bank
and certain Japanese banks, with the U.S. and Japanese lines being used
primarily to finance the inventory and receivables of Marker USA and Marker
Japan, respectively. The U.S. line of credit expires in July 1996. Loans made
under the Japanese lines of credit typically have a term of 90 days and are
customarily extended every 90 days. The Company expects that it will be able to
renew its lines of credit that are due to expire this year and, in the event
that such lines of credit are not renewed upon expiration, the Company believes
that it would be able to obtain replacement financing from alternative sources.
There can be no assurance, however, that such replacement financing would in
fact be available, or if available, would be available on satisfactory terms.
QUALITY OF SKI AND SNOWBOARD SEASON AND ECONOMIC CONDITIONS. A portion of
each of the Company's or DNR Sportsystem's sales depend on the length and
quality of the ski and snowboard seasons, respectively, which typically run from
mid-November through mid-April, and snow conditions where retailers sell Marker
or DNR Sportsystem bindings, snowboards and other products. To a lesser extent,
the Company's and DNR Sportsystem's sales are also affected by the previous
year's ski/snowboard season, as some winter sport enthusiasts plan vacations and
make purchases based, in part, on their experiences during the previous
ski/snowboard season. Because the principal markets of the Company and DNR
Sportsystem are geographically diverse, the Company believes that the Company's
and DNR Sportsystem's respective exposure to the risks of decreased sales due to
a poor ski/snowboard season in any one geographic area is mitigated to a certain
extent by sales in other geographic areas.
Each of the Company's, DNR Sportsystem's and DNR North America's businesses
is also subject to economic cycles. Any significant decline in general economic
conditions or continued uncertainties
12
<PAGE>
regarding future economic prospects that affect consumer spending generally, and
purchases of discretionary sporting goods specifically, could have a material
adverse effect on each or any of their respective businesses.
PATENTS AND TECHNOLOGY. The Company utilizes its patented technology to
manufacture Marker ski bindings. The Company believes that its present line of
ski bindings is well protected by patents. However, the Company's business could
be adversely affected if a competitor were successful in an infringement action
or if the Company's technology became available to the public or a competitor.
To the Company's knowledge, no such infringement action against the Company
currently exists; however, there can be no assurance that such an action will
not be filed in the future. The Company believes it offers a highly competitive
ski binding; however, there can be no assurance that a competitor will not
develop more advanced technology. In such event, the Company's business may be
adversely affected. The Company has applied for patent protection in Germany
and, when appropriate, will apply for such protection in the United States and
other countries with respect to the technology incorporated in the DNR Soft
Boot/Step-in Binding Interface SystemTM. There can be no assurance that any such
patents will be awarded, or if awarded, that successful infringement actions
will not be brought against such patents or that the underlying technology will
not otherwise become available to the public or competitors of the Company or
DNR Sportsystem. See "Business--Marker--Product Development" and "--Intellectual
Property."
DNR Sportsystem markets products under the DNRTM, DNR SportsystemTM, I-manTM
and PROTM trademarks, each of which is registered, or pending registration, in
the name of DNR Sportsystem on a worldwide basis, except for the PROTM
trademark, which is to be registered only in European countries. Although the
Company believes that DNR Sportsystem's existing trademarks are well protected,
there can be no assurance that such trademarks will not be successfully
challenged or that pending trademark applications will be approved. DNR
Sportsystem currently has not applied for and/or obtained patent protection for
any of its technology; however, it relies on unpatented proprietary technology
relating to its manufacturing of snowboards. To protect its rights in these
areas, DNR Sportsystem generally requires its key employees to enter into
confidentiality agreements. There can be no assurance, however, that these
agreements will provide meaningful protection for DNR Sportsystem's trade
secrets, know-how or other proprietary information. If DNR Sportsystem were
unable to maintain the proprietary nature of its significant products, through
trademarks, confidentiality agreements or other protection, its business could
be materially adversely affected. See "Business--DNR Sportsystem
Ltd.--Intellectual Property."
PRODUCT LIABILITY CLAIMS AND INSURANCE COVERAGE. Because of the inherent
risks in the sport of skiing, the manufacture and sale of ski bindings involves
the risk of product liability claims. The Company maintains product liability
insurance in amounts which it believes are appropriate to cover the risks of
such claims. The Company evaluates its coverage on a regular basis and in
connection with the introduction of products currently under development. Also,
in the United States, the Company contractually agrees to indemnify the retail
stores which install the bindings provided that the technicians who install the
bindings have successfully completed a technical instruction course offered by
the Company and follow certain required procedures. The Company's insurance
policy coverage extends to indemnification claims against the Company resulting
from this arrangement. See "Business--Marker--Legal Proceedings and Product
Liability Insurance."
Like skiing, snowboarding involves inherent risks which can lead to product
liability claims. Neither the Company nor DNR Sportsystem is aware of any such
claims against DNR Sportsystem. Moreover, DNR Sportsystem maintains product
liability insurance in amounts it believes are appropriate to cover the risks of
such claims. See "Business--DNR Sportsystem--Legal Proceedings and Product
Liability Insurance."
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<PAGE>
Insurance of the type maintained by the Company and DNR Sportsystem is
expensive and in the future may not be available on acceptable terms, in
sufficient amounts of coverage or at all. Furthermore, there can be no assurance
that the coverage limits of the Company's or DNR Sportsystem's current insurance
policies will be adequate. A successful claim brought against the Company or DNR
Sportsystem, in excess of its insurance coverage could have a material adverse
effect on the business of the Company or DNR Sportsystem, as the case may be.
LIMITED PUBLIC MARKET; DILUTION. Prior to August 16, 1994, there was no
public market for the Company's Common Stock. Since August 16, 1994, the
Company's Common Stock has been listed on the Nasdaq National Market. To date,
only 2,635,855 shares of Common Stock have been freely tradeable in the public
market and, accordingly, there has been limited trading of the Common Stock. The
number of outstanding shares of Common Stock which are freely tradeable in the
public market will increase to 6,035,855 shares (excluding the Underwriters'
over-allotment option) upon the completion of the offering made hereby. There
can be no assurance that a more active trading market for the Common Stock will
develop following completion of the offering or that, if one does develop, it
will be sustained. There can also be no assurance that the market price of the
Common Stock will not decline below the public offering price. Purchasers of the
shares of Common Stock offered hereby will experience immediate and substantial
dilution in the net tangible book value per share of the Common Stock from the
public offering price.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the public market after this offering could adversely affect the market
price of the shares of Common Stock to be issued and outstanding after this
offering. Of the 10,949,127 shares of Common Stock to be outstanding upon
completion of this offering, only 6,035,855 shares of Common Stock will be
freely tradeable and the remaining 4,913,272 outstanding shares will be
"restricted" securities within the meaning of the Securities Act. The Company
and Messrs. Anderson, Isomura, McMillian, Sommerville and Tauber, the holders of
an aggregate of 4,656,127 shares of Common Stock (after this offering, assuming
the exercise of the Underwriters' over-allotment), have agreed to deliver to the
Representatives, prior to the date of this Prospectus, lock-up agreements under
which they agree not to sell any shares of Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of Allen &
Company Incorporated, on behalf of the Underwriters. Subject to compliance with
Rule 144 promulgated under the Securities Act, following expiration of or
release from such 180-day lock-up agreements, approximately 4,656,127 shares of
Common Stock will be eligible for sale. See "Shares Eligible for Future Sale"
and "Certain Relationships and Related Transactions."
DIVIDEND POLICY. The Company intends, for the foreseeable future, to retain
any earnings to finance the operations and expansion of the Company's business
and not to pay dividends on its Common Stock.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, after deducting the underwriting discounts and commissions and estimated
expenses of this offering, are estimated to be approximately $14.4 million
(approximately $16.0 million if the Underwriters' over-allotment option is
exercised in full).
Substantially all of the net proceeds will be used by the Company to satisfy
the DNR Equity Purchase Notes issued in connection with its recent acquisition
of an additional 55% of the common shares of DNR Sportsystem, a Swiss
corporation of which the Company now owns 80% of the common shares, with 25% of
such shares being owned through its wholly-owned subsidiary, Marker Switzerland,
and 55% being owned directly by Marker International. See "Company,"
"Business--Recent Developments" and "Business--DNR Sportsystem Ltd." To the
extent the net proceeds of this offering are insufficient to enable the Company
to pay the entire $19.4 million purchase price for the additional 55% interest,
the Company expects to pay the difference with funds borrowed through its
short-term credit facilities.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) as of March 31, 1996 and (ii) on a pro forma as adjusted basis after
giving effect to (a) the sale by the Company of the 2,500,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds therefrom
and (b) borrowing by the Company of an estimated $5.0 million under its
short-term credit facilities, as described under "Use of Proceeds." The table
should be read in conjunction with the historical Consolidated Financial
Statements of the Company and the Notes thereto, and the other financial
information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
Short-term debt (including current portion of long-term debt).......... $41,632 $46,622
------- -----------
Long-term debt......................................................... 5,452 5,452
------- -----------
Series A Bonds......................................................... 10,000 10,000
------- -----------
Shareholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized and none
issued and outstanding actual and pro forma as adjusted............ -- --
Common Stock, $.01 par value; 25,000,000 shares authorized, 8,447,877
shares issued and outstanding actual; 10,947,877 shares issued and
outstanding pro forma as adjusted(1)............................... 84 109
Additional paid-in capital........................................... 21,531 35,925
Accumulated deficit.................................................. (1,293) (1,293)
Cumulative foreign currency translation adjustments.................. 446 446
------- -----------
Total shareholders' equity........................................... 20,768 35,187
------- -----------
Total capitalization................................................. $77,852 $97,261
------- -----------
------- -----------
</TABLE>
- ------------
(1) Does not include shares subject to the over-allotment option granted to the
Underwriters. See "Underwriting."
16
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock since
1984. The Company does not anticipate paying any dividends on the Common Stock
in the foreseeable future. It is the present intention of the Company's Board of
Directors to retain all earnings in the Company to finance its operations and
the expansion of its business. Any determination in the future to pay dividends
will depend upon the Company's earnings, financial condition, cash requirements,
future prospects and such other factors as the Board of Directors deems
appropriate at the time.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is included in the Nasdaq National Market under
the symbol "MRKR." To date, only 2,635,855 shares of common Stock have been
freely tradeable, and, accordingly, there has been limited trading in the Common
Stock. The following table sets forth for the periods indicated the high and low
closing sales prices per share of the Common Stock as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW
- ----------------------------------------------------------- ------ -----
<S> <C> <C>
Second Quarter (from August 16, 1994 through
September 30, 1994)...................................... $7.50 $7.00
Third Quarter (ended December 31, 1994).................... 7.63 7.00
Fourth Quarter (ended March 31, 1995)...................... 8.00 7.13
FISCAL 1996
- -----------------------------------------------------------
First Quarter (ended June 30, 1995)........................ $7.63 $5.88
Second Quarter (ended September 30, 1995).................. 9.75 6.00
Third Quarter (ended December 31, 1995).................... 12.25 9.75
Fourth Quarter (ended March 31, 1996)...................... 12.38 7.13
FISCAL 1997
- -----------------------------------------------------------
First Quarter (ended June 30, 1996)........................ $ 8.88 $7.00
Second Quarter (through July 12, 1996)..................... 7.75 6.50
</TABLE>
On July 12, 1996, the last reported sales price of the Common Stock on the
Nasdaq National Market was $6.50 per share. Based on information available from
the Company's registrar and transfer agent, the Company estimates that, as of
March 31, 1996, the Company had approximately 900 stockholders of record.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NOTES)
The selected consolidated financial data presented below for each of the
five years in the period ended March 31, 1996 has been derived from the
Company's financial statements, which financial statements have been audited by
Arthur Andersen LLP, independent public accountants. Their report on the
financial statements as of March 31, 1995 and 1996 and for each of the three
years in the period ended March 31, 1996 are included elsewhere in this
Prospectus. The data presented below should be read in conjunction with, and is
qualified in its entirety by reference to, the Consolidated Financial Statements
and the Notes thereto appearing elsewhere in this Prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------
1996
----------------------
1992 1993 1994 1995 ACTUAL PRO FORMA(2)
------- ------- ------- ------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Net sales................................... $65,916 $84,920 $82,637 $83,962 $87,911 $131,949
Cost of sales............................... 40,855 55,537 49,572 48,878 52,608 81,656
------- ------- ------- ------- ------- ------------
Gross profit................................ 25,061 29,383 33,065 35,084 35,303 50,293
------- ------- ------- ------- ------- ------------
Operating expenses:
Selling.................................... 9,082 11,020 13,029 13,049 14,592 18,499
General and administrative................. 7,597 8,480 9,316 9,314 10,559 13,727
Research and development................... 1,772 1,999 2,158 2,349 2,762 4,763
Warehouse and shipping..................... 1,198 1,325 1,343 1,455 1,566 1,566
------- ------- ------- ------- ------- ------------
Total operating expenses............... 19,649 22,824 25,846 26,167 29,479 38,555
------- ------- ------- ------- ------- ------------
Operating income........................... 5,412 6,559 7,219 8,917 5,824 11,738
------- ------- ------- ------- ------- ------------
Other income (expense):
Interest expense........................... (5,112) (5,322) (4,316) (4,999) (5,193) (5,592)
Equity in earnings of unconsolidated
subsidiary.................................. -- -- -- -- 1,595 --
Other, net................................. 615 490 826 1,584 2,072 2,470
------- ------- ------- ------- ------- ------------
Total other expense, net............... (4,497) (4,832) (3,490) (3,415) (1,526) (3,122)
------- ------- ------- ------- ------- ------------
Income before income taxes, minority
interest and cumulative effect of
accounting change........................... 915 1,727 3,729 5,502 4,298 8,616
Provision for income taxes.................. (103) (133) (510) (1,395) (609) (2,156)
Minority interest........................... -- -- -- -- -- (1,117)
------- ------- ------- ------- ------- ------------
Income before cumulative effect of
accounting change.......................... 812 1,594 3,219 4,107 3,689 5,343
Cumulative effect of accounting change, net
of tax...................................... -- -- -- -- (266) (266)
------- ------- ------- ------- ------- ------------
Net income.................................. $ 812 $ 1,594 $ 3,219 $ 4,107 $ 3,423 $ 5,077
------- ------- ------- ------- ------- ------------
------- ------- ------- ------- ------- ------------
Net income applicable to common shares(1)... $ 70 $ 900 $ 1,803 $ 3,653 $ 3,423 $ 5,077
------- ------- ------- ------- ------- ------------
------- ------- ------- ------- ------- ------------
Income per common share before cumulative
effect of accounting change(1)............. n/a n/a $ 0.31 $ 0.50 $ 0.43 $ 0.48
------- ------- ------- ------------
------- ------- ------- ------------
Net income per common share(1).............. n/a n/a $ 0.31 $ 0.50 $ 0.40 $ 0.46
------- ------- ------- ------------
------- ------- ------- ------------
Weighted average common shares
outstanding................................. n/a n/a 5,785 7,368 8,595 11,095
------- ------- ------- ------------
------- ------- ------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET:
Current assets.................................. $50,266 $42,411 $45,093 $66,856 $64,592
Total assets.................................... 58,189 52,316 56,540 82,998 87,265
Current liabilities............................. 41,218 34,624 36,922 44,930 51,045
Long-term debt (including Series A Bonds)....... 2,619 2,685 3,324 19,744 15,452
Redeemable preferred stock...................... 8,000 8,000 19,000 -- --
Total Shareholders' equity (deficit)............ 6,352 7,007 (2,706) 18,324 20,768
</TABLE>
- ------------
(1) Net income applicable to common shares for fiscal years 1992 and 1993 is
based upon net income less preferred stock dividends of $742,000 and
$694,000, respectively. Net income applicable to common shares for fiscal
years 1994 and 1995 reflects the following transactions as if they occurred
on April 1, 1993 (the beginning of fiscal 1994): (a) the exchange of Series
A preferred stock (including the premium thereon) for 378,572 shares of
Common Stock resulting in the elimination of dividends totaling
approximately $387,000 and $87,000 for the fiscal years ended March 31, 1994
and 1995, respectively, and (b) the exchange of Series A-1, A-2 and A-3
redeemable preferred stock for $19 million aggregate principal amount of
Series A-1, A-2 and A-3 bonds resulting in the treatment of dividends
totaling approximately $1,416,000 and $454,000 as interest expense net of
the related tax effect for the fiscal years ended March 31, 1994 and 1995,
respectively, and (c) a 3,604 to 1 stock split of the Company's outstanding
Common Stock.
(2) Gives effect to the acquisition of a 25% equity interest in DNR Sportsystem
which occurred in June 1995 and the acquisition of an additional 55% equity
interest in DNR Sportsystem which occurred in June 1996, assuming such
transactions had occurred as of April 1, 1995. See the Company's Unaudited
Pro Forma Condensed Consolidated Financial Statements commencing on page 20.
The Company will use substantially all of the net proceeds from this
offering to satisfy the DNR Equity Purchase Notes issued in connection with
the DNR Equity Purchase.
19
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial data is
based upon the historical consolidated financial statements of the Company,
included elsewhere in this Prospectus, adjusted to give effect to the recent
acquisition of an additional 55% of the common shares of DNR Sportsystem.
The pro forma adjustments are based upon available information and certain
assumptions that management of the Company believes are reasonable. The
unaudited pro forma condensed consolidated statement of income is not
necessarily indicative of the future results of operations of the Company, its
financial position or the results of operations which may have occurred had this
transaction occurred on April 1, 1995. The unaudited pro forma adjustments are
described in the accompanying notes to the unaudited pro forma financial data.
The unaudited pro forma condensed consolidated financial data should be read
in conjunction with the Consolidated Financial Statements of the Company and
related notes thereto, and Management's Discussion and Analysis of Financial
Condition and Results of Operations, included elsewhere in this Prospectus.
20
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------
DNR PRO FORMA
MARKER SPORTSYSTEM ADJUSTMENTS PRO FORMA
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents................. $ 6,189 $12,786 $ 18,975
Accounts receivable, net.................. 22,151 1,682 $ (540)(2b) 23,293
Inventories............................... 32,668 198 32,866
Prepaid and other......................... 3,584 996 4,580
------- ----------- ----------- ---------
Total current assets.................. 64,592 15,662 (540) 79,714
Property and Equipment, net................. 13,121 624 13,745
Investment in DNR Sportsystem............... 6,832 -- (6,832)(2a) --
Other assets................................ 2,720 30 19,583(2a) 22,333
------- ----------- ----------- ---------
Total assets.......................... $87,265 $16,316 $12,211 $ 115,792
------- ----------- ----------- ---------
------- ----------- ----------- ---------
Current Liabilities:
Notes payable to banks.................... $30,556 $-- $ 4,990(2a) $ 35,546
Current maturities of debt................ 11,076 -- 11,076
Related party payable..................... -- 540 (540)(2b) --
Accounts payable.......................... 2,899 3,720 6,619
Other current liabilities................. 6,514 3,734 10,248
------- ----------- ----------- ---------
Total current liabilities............. 51,045 7,994 4,450 63,489
------- ----------- ----------- ---------
Long-term Liabilities:
Long-term debt, net....................... 5,452 -- 5,452
Series A Bonds, net....................... 10,000 -- 10,000
------- ----------- ----------- ---------
Total long-term liabilities........... 15,452 -- 15,452
------- ----------- ----------- ---------
Minority interest........................... -- -- 1,664(2a) 1,664
------- ----------- ----------- ---------
Shareholders' Equity:
Common stock.............................. 84 432 (407)(2a) 109
Additional paid-in capital................ 21,531 -- 14,394(2a) 35,925
Retained earnings (deficit)............... (1,293) 6,531 (6,531)(2a) (1,293)
Cumulative foreign currency translation
adjustments................................. 446 1,359 (1,359)(2a) 446
------- ----------- ----------- ---------
Total shareholders' equity............ 20,768 8,322 6,097 35,187
------- ----------- ----------- ---------
Total liabilities and equity.......... $87,265 $16,316 $12,211 $ 115,792
------- ----------- ----------- ---------
------- ----------- ----------- ---------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial data.
21
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------
DNR PRO FORMA
MARKER SPORTSYSTEM ADJUSTMENTS PRO FORMA
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $87,911 $44,038 $131,949
Cost of sales.................................. 52,608 29,048 81,656
------- ----------- ---------
Gross profit................................... 35,303 14,990 50,293
Operating expenses............................. 29,479 8,258 $ 818(2c) 38,555
------- ----------- ----------- ---------
Operating income............................... 5,824 6,732 (818) 11,738
Other income (expense), net.................... (1,526) 398 (1,595)(2e) (3,122 )
(399)(2d)
------- ----------- ----------- ---------
Income before income taxes, minority interest
and cumulative effect of accounting change... 4,298 7,130 (2,812) 8,616
Provision for income taxes..................... (609) (1,547) (2,156 )
Minority interest.............................. -- -- (1,117)(2d) (1,117 )
Cumulative effect of accounting change......... (266) -- (266 )
------- ----------- ----------- ---------
Net income..................................... $ 3,423 $ 5,583 $ (3,929) $ 5,077
------- ----------- ----------- ---------
------- ----------- ----------- ---------
Income per common share before cumulative
effect of accounting change.................. $ 0.43 $ 0.48
Accounting change per common share............. (0.03) (0.02 )
------- ---------
Net income per common share.................... $ 0.40 $ 0.46
------- ---------
------- ---------
Weighted average common shares outstanding..... 8,595 2,500(2f) 11,095
------- ----------- ---------
------- ----------- ---------
</TABLE>
See accompanying notes to pro forma condensed consolidated financial data.
22
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(1) BASIS OF PRESENTATION
The accompanying pro forma condensed consolidated balance sheet and
statement of income are presented to give effect to the acquisition of an
additional 55% of the common stock of DNR Sportsystem, a Swiss corporation,
which closed on June 26, 1996. In June 1995, the Company through a wholly-owned
subsidiary acquired 25% of DNR Sportsystem's common stock. This presentation
assumes that the additional acquisition occurred as of March 31, 1996 for
purposes of the pro forma condensed balance sheet. For purposes of the pro forma
condensed statement of income, this presentation assumes that the Company
acquired its total 80% common stock ownership interest in DNR Sportsystem as of
April 1, 1995, the beginning of Marker's fiscal 1996 year.
The historical income statement period for DNR Sportsystem is for the year
ended December 31, 1995. The historical balance sheet of DNR Sportsystem is as
of December 31, 1995.
The purchase method of accounting has been used in preparing the pro forma
condensed consolidated financial data.
(2) PRO FORMA ADJUSTMENTS
Balance Sheet Adjustments
(a) In June 1995, Marker acquired 25% of the common shares of DNR
Sportsystem for Swiss Francs 6.2 million (U.S. $5.4 million). In June 1996, the
Company acquired an additional 55% for Swiss Francs 24.2 million (U.S. $19.4
million). The June 1996 acquisition amount in Dollars is based on an exchange
rate of 1.2453 Swiss Francs per Dollar which is the rate of exchange agreed to
by the Company in a forward foreign currency exchange contract entered into by
the Company on June 28, 1996. The $19.4 million purchase price will be paid
primarily from the proceeds of the issuance of approximately 2,500,000 shares of
Common Stock at an assumed offering price of $6.50 per share. The balance of the
purchase price will be funded through the issuance of short-term debt of
approximately $5.0 million. The total purchase price of $24.8 million for the
80% has been allocated as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Tangible net assets.............................................. $ 5,218
Intangible assets (goodwill, tradenames and licenses)............ 19,583
-------
$24,801
-------
-------
</TABLE>
This adjustment (i) eliminates the Company's investment in DNR Sportsystem
for its 25% ownership as of March 31, 1996 of $6,832,000, (ii) records
intangible assets totaling $19,583,000, (iii) reflects the issuance of 2,500,000
shares of Common Stock with estimated net proceeds of approximately $14,419,000
and the use of such proceeds to fund the majority of the purchase price, (iv)
records the issuance of approximately $4,990,000 of short-term debt to fund the
balance of the purchase price and (v) consolidates the accounts of DNR
Sportsystem and Marker by eliminating DNR Sportsystem's equity accounts and
recording minority interest of $1,664,000.
(b) Adjustment to eliminate intercompany payables and receivables of
approximately $540,000 related to a snowboard binding development services
agreement between Marker and DNR Sportsystem. See Note 8 to DNR Sportsystem's
consolidated financial statements.
23
<PAGE>
Statement of Income Adjustments
(c) Adjustment to reflect total amortization expense of $818,000 relating to
intangibles using amortization periods of 3 to 30 years.
(d) Adjustment to record interest expense of approximately $399,000 related
to short-term debt issued to fund the additional acquisition. An assumed
interest rate of 8% was used for purposes of this pro forma adjustment.
(e) Adjustment to (i) eliminate the equity in earnings of DNR Sportsystem of
approximately $1,595,000 recorded by Marker for the year ended March 31, 1996
for its 25% ownership in DNR Sportsystem and (ii) to record minority interest of
$1,117,000 for the minority shareholders' 20% interest in DNR Sportsystem's
earnings.
(f) Adjustment to increase the number of weighted average common shares
outstanding by 2,500,000 for the Common Stock which will be issued to finance
the DNR Equity Purchase.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the Company's historical financial condition and
results of operations should be read in conjunction with the historical
Consolidated Financial Statements and the Notes thereto and the other financial
information appearing elsewhere in this Prospectus.
OVERVIEW
Marker International is a leading designer, developer, manufacturer and
marketer of alpine ski bindings in the United States and throughout the world.
The Company is a holding company which operates through its subsidiaries, Marker
Germany, Marker USA, Marker Japan, Marker Austria, Marker Canada and Marker
Switzerland. Substantially all of the Company's ski bindings are manufactured by
Marker Germany, which also distributes bindings in Germany, to subsidiaries of
the Company and to independent distributors in countries where the Company does
not have a distribution subsidiary. Marker USA and Marker Japan each has its own
sales force and marketing departments for sales and marketing of bindings and
related parts directly to retailers in the United States, and to both retailers
and wholesalers in Japan, respectively. Marker Austria distributes the Company's
ski bindings into Austria through an independent sales force. Marker Canada
distributes the Company's ski bindings into Canada which are then sold through
an independent distributor. Marker Switzerland, a Swiss holding company and a
subsidiary of the Company, holds a 25% equity interest in DNR Sportsystem (which
is included in the aggregate 80% interest in DNR Sportsystem held by the
Company), an entity which develops, markets and distributes snowboards,
snowboard boots, snowboard bindings and other related products. Marker Ltd.,
also a subsidiary of the Company, designs, distributes and sells to retailers
the Company's clothing, gloves and luggage products for skiing and other
recreational activities. The principal markets for the Company's products are
North America, Europe and Asia.
Marker Germany receives payment primarily in Marks for ski bindings sold.
For subsidiaries of the Company (principally Marker USA and Marker Japan),
Marker Germany may allow payment for ski bindings sold to be made in the
functional currency of the subsidiary. Marker Germany or the distribution
subsidiary, as applicable, routinely enters into forward foreign exchange
contracts with financial institutions in order to fix the cost of converting the
functional currency to Marks. Sales prices for the ski bindings offered to the
subsidiaries and ultimately the price the subsidiaries offer for the sale of the
ski bindings to their customers are based upon, among other things, the rate
afforded by the forward foreign exchange contracts and market conditions.
Accordingly, the relationship of the exchange rate between the functional
currency of the subsidiary and the Mark has a direct impact on the cost of the
products sold by the distribution subsidiary.
From fiscal 1993 to fiscal 1994, fiscal 1994 to fiscal 1995 and fiscal 1995
to fiscal 1996, based upon forward foreign exchange contracts entered into by
the Company, the Dollar increased in value 2.5%, 1.0% and decreased in value
12.3%, respectively, against the Mark. During the same periods, based upon
forward foreign exchange contracts entered into by the Company, the Japanese yen
("Yen") appreciated 4.9%, 3.1% and 1.9%, respectively, against the Mark.
Assuming that foreign exchange rates between the Dollar and the Mark and between
the Yen and the Mark had remained constant from fiscal 1993 to fiscal 1994,
fiscal 1994 to fiscal 1995 and fiscal 1995 to fiscal 1996, the Company's cost of
sales would have increased by approximately $1.2 million, $0.6 million and would
have decreased by $2.4 million, respectively. The total deferred gain on forward
foreign exchange contracts which were accounted for as hedges of firm
commitments was approximately $2.7 million at March 31, 1996.
In accordance with U.S. GAAP, upon consolidation with the Company's
financial statements, the income and expense items of the Company's foreign
subsidiaries are translated at the weighted average rates of exchange prevailing
during the period. Therefore, Marker's results of operations are subject to
25
<PAGE>
translation risks and can vary as a result of fluctuations in the exchange rates
between the functional currencies of such foreign subsidiaries and the Dollar.
In addition, upon consolidation of the Company's financial statements, the
assets and liabilities of the Company's foreign subsidiaries are translated into
Dollars from their functional currencies at the rate of exchange on the last day
of the fiscal year. Therefore, Marker's consolidated assets and liabilities may
vary as a result of fluctuations in the exchange rates between the functional
currencies of such foreign subsidiaries and the Dollar. The resulting
translation adjustments from foreign currency fluctuations are recorded in
shareholders' equity as cumulative foreign currency translation adjustments.
The Company's business is seasonal in nature and results of operations vary
from quarter to quarter. Orders for the Company's ski bindings from retailers
are highest during the Company's first fiscal quarter, which ends June 30. The
Company ships its products to fill those orders, and records a significant
portion of its annual sales, during its second and third fiscal quarters. The
Company then collects a substantial portion of its receivables during its third
and fourth fiscal quarters. In accordance with industry practice, a substantial
portion of the Company's accounts receivables remains outstanding for five to
six months and a small percentage remains outstanding for more than six months.
These factors result in variations in the Company's results of operations and
cash flows.
RESULTS OF OPERATIONS
Fiscal 1996 Compared to Fiscal 1995
The Company's net sales increased 4.6% in fiscal 1996 to $87.9 million,
compared to $84.0 million in fiscal 1995. The increase in net sales was the
result of an increase in market share in Germany and the United States and an
increase in sales price of the Company's products in those markets. However, as
a result of large amounts of inventory on hand at the retail level in the
Japanese market, sales decreased at Marker Japan. In addition, Marker Ltd., the
Company's soft goods subsidiary, increased sales during fiscal 1996, compared to
fiscal 1995. During fiscal 1996, Marker Ltd. obtained an exclusive, one-year
license to market in Utah apparel with the imprint and embroidery of the Salt
Lake City 2002 Olympic Winter Games. Sales of Olympic items, combined with an
extended product line, served to increase sales at Marker Ltd.
Gross profit for fiscal 1996 increased to $35.3 million, but decreased as a
percentage of sales to 40.2%, compared to $35.0 million, or 41.7% of sales, for
fiscal 1995. The reduction in gross profit percentage was primarily a result of
the rate of forward exchange contracts used to convert Dollars and Yen to Marks
which resulted in an increase in the cost of goods sold of approximately $2.4
million for fiscal 1996, compared to fiscal 1995.
Operating expenses increased to $29.5 million for fiscal 1996, compared to
$26.2 million for fiscal 1995. Approximately $1.3 million of the increase
resulted from fluctuations in the foreign currency exchange rates used to
translate operating expenses into Dollars in fiscal 1996, compared to fiscal
1995. In addition, research and development expenses increased as a result of
increased research and development for alpine bindings and snowboard bindings
during fiscal 1996. Moreover, selling and general and administrative expenses
increased in fiscal 1996, compared with fiscal 1995, because of additional
marketing and advertising costs believed necessary to promote the Marker brand
name and costs associated with being a public company for the full 1996 fiscal
year.
Interest expense increased approximately $200,000 to $5.2 million for fiscal
1996, compared to $5.0 million for fiscal 1995. The increase was a result of the
$5.3 million loan which the Company obtained to finance its investment in DNR
Sportsystem. This loan contributed approximately $244,000 in additional interest
expense during fiscal 1996.
26
<PAGE>
Other income items increased in total to $3.7 million for fiscal 1996,
compared $1.6 million for fiscal 1995. The increase was attributable to the
recognition of the Company's equity share of an unconsolidated subsidiary's net
income which totaled approximately $1.6 million for fiscal 1996. In addition,
during fiscal 1996, the Company purchased and sold forward foreign exchange
contracts which were not accounted for as hedging transactions. As a result, the
Company recorded a net gain of approximately $1.0 million, which has been
recorded in other income.
The provision for income taxes decreased from $1.4 million in fiscal 1995 to
approximately $0.6 million in fiscal 1996. The decrease in the provision for
income taxes was attributable to reduced pre-tax income and recognition of
deferred tax benefit through reduction of the valuation allowance on deferred
tax assets. As the Company has recorded taxable income during its past several
years, circumstances regarding the valuation allowance have changed and the
allowance has been adjusted to reflect deferred tax assets which are more likely
than not to be utilized in the future by the Company. As a result, the effective
tax rate to be realized by the Company in the future is expected to increase as
a result of the recognition of the deferred tax asset.
Fiscal 1995 Compared to Fiscal 1994
Net sales increased 1.7% in fiscal 1995 to $84.0 million from $82.6 million
in fiscal 1994. The increase in net sales represents an increase in market share
of the Company's primary markets. In general, the worldwide market for ski
products decreased in fiscal 1995 as a result of high inventory levels at retail
shops and poor snow conditions during the first half of the ski season.
Specifically, the market for ski products in Japan decreased during fiscal 1995
as a result of the severe earthquake which occurred in January 1995.
Gross profit increased 6.0% to $35.1 million, or 41.8% of net sales, in
fiscal 1995 from $33.1 million, or 40.1% of net sales, in fiscal 1994. The
improved gross profit was primarily a result of production efficiencies at the
Company's manufacturing facility in Germany and the mix of products sold. In
addition, an increase in gross profit occurred as a result of an improvement in
the rate on forward exchange contracts used to convert the Dollar and Yen to the
Mark.
Operating expenses increased to $26.2 million, or 31.2% of net sales, in
fiscal 1995 from $25.8 million, or 31.2% of sales, in fiscal 1994. This increase
was primarily attributable to an increase in research and development expenses
related to introduction of new technology in January 1995.
Other expense decreased 3% to $3.4 million in fiscal 1995 from $3.5 million
in fiscal 1994. Interest expense increased $1.0 million in fiscal 1995 as a
result of the conversion of the Company's Series A-1, A-2 and A-3 redeemable
preferred stock (collectively, the "Redeemable Preferred Stock") to Series A-1,
A-2 and A-3 bonds (collectively, the "Series A Bonds"); however, interest
expense related to bank borrowings decreased in fiscal 1995, compared to fiscal
1994, as a result of lower outstanding balances in the United States and lower
interest rates in Germany and Japan. Other income, excluding interest expense,
increased $0.4 million as a result of interest income recognized on the
investment of the proceeds received from the Company's initial public offering
of its Common Stock in August 1994 (the "Initial Public Offering").
The provision for income taxes increased $0.9 million to $1.4 million in
fiscal 1995. The increase in income tax was a result of increased pre-tax income
and the reduction on foreign net operating loss carryforwards available to
reduce taxable income.
Fiscal 1996 Pro Forma Compared to Fiscal 1996 Historical
On a pro forma basis, assuming that the Company had acquired its total 80%
common stock ownership in DNR Sportsystem as of April 1, 1995, pro forma gross
profit would have decreased to 38.1% of sales, compared to 40.2% of sales for
the historical sales and gross profit for fiscal 1996. Pro forma operating
expenses would have decreased to 29.2% of sales, compared to 33.5% of sales for
the
27
<PAGE>
historical fiscal 1996 results. The decrease in pro forma gross profit as a
percentage of sales, as well as the decrease in operating expenses as a
percentage of sales, is primarily attributable to the fact that DNR Sportsystem
distributes its products to distributors and does not sell directly to
retailers. As a result, the gross profit is lower than if the products were sold
directly to retailers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are for purchases of raw materials
inventory for production, finished goods inventory, funding of accounts
receivable, capital expenditures and strategic business acquisitions.
Historically, the Company's primary sources of cash for its business activities
have been cash flows from operations and borrowings under its lines of credit
and term loans.
Working capital declined from $21.9 million at March 31, 1995 to $13.5
million at March 31, 1996. The decrease in working capital is primarily
attributable to the repayment of Series A Bonds, capital expenditures and the
issuance of a note to finance the purchase of the Company's initial investment
in DNR Sportsystem. In addition, the Company began binding production in January
1996 to reduce overtime and other costs associated with cyclical manufacturing
schedules. At March 31, 1996, this production plan has served to increase
inventory levels and related short-term borrowings necessary to finance
production, but the plan is expected to reduce operating expenses and product
costs over the 1997 fiscal year.
During fiscal 1996, the Company spent nearly $4.4 million on capital
expenditures which consisted primarily of manufacturing equipment, furniture and
fixtures, automobiles, and construction of the DNR North America Snowboard
Production Facility located adjacent to the Company's Salt Lake City, Utah
headquarters. The Company anticipates spending approximately $4.9 million on
capital expenditures in fiscal 1997. The majority of these expenditures
represent costs necessary to complete construction of the DNR North America
Production Facility and to bring the facility on line in October 1996. The
Company expects to fund the construction of such facility with debt.
On June 30, 1995, the Company invested approximately 6.2 million Swiss
Francs ($5.4 million) to acquire 25% of the common shares of DNR Sportsystem.
DNR Sportsystem is recognized worldwide as a leading developer, marketer and
distributor of snowboards, snowboard boots, snowboard bindings and other related
products. The Company borrowed 7.3 million Marks ($5.3 million) to fund the
investment in DNR Sportsystem.
At March 31, 1996, the Company's primary sources of liquidity consisted of
cash and short-term investments and available borrowings under lines of credit.
The Company has approximately $84.2 million available under various lines of
credit. At March 31, 1996, the Company had approximately $30.6 million borrowed
under such credit agreements. The Company's borrowings under lines of credit
typically reach their maximum during the Company's third fiscal quarter. In
fiscal 1996 and 1995, the Company had maximum borrowings outstanding under its
lines of credit of approximately $59.7 and $46.9 million, respectively. The
Company believes that it has adequate bank lines to meet cash flow demands in
fiscal 1997.
The Company anticipates being able to fund its current operations and
capital expenditures in the foreseeable future with existing cash and short-term
investments together with internally generated funds and borrowings under
available lines of credit. Additional borrowings under the Company's credit
facilities or public offerings of equity securities are also available if the
need arises. As the Company continues to grow, investments will continue to be
made in product development and strategic business acquisitions which will
enhance the Company's ability to compete on a worldwide basis.
28
<PAGE>
BUSINESS
OVERVIEW
SKI AND SNOWBOARD INDUSTRIES OVERVIEW
Information regarding the United States ski and snowboard industry is based
on studies conducted by market research firms and industry associations.
According to the preliminary Kottke National End of Season Survey for the
1995/96 season, produced by RRC Associates and released in May 1996 at the
National Ski Areas Association conference, there were 53.1 million skier and
snowboard rider visits in the United States during the 1995/96 season as
compared to 52.6 million visits during the 1994/95 season, with "visits" being
defined as one person visiting a ski area for all or part of a day for the
purpose of skiing or snowboarding.
The Company believes that snowboarding visits will continue to increase as
the popularity of the sport expands. Snowboarding, which began in the late
1970s, has historically attracted young males between the ages of 12 and 24.
Today, the sport is experiencing a new acceptance from both female and older
demographic groups, as well as individuals who are also skiers. This growth in
overall popularity has led to an increase in the sales of snowboarding
equipment. According to the International Snowboard Federation, 1.27 millon
snowboards were sold to retailers in the 1995/96 snowboard season, which ended
March 31, 1996. The Company believes that snowboard sales will continue to grow
as the overall number of snowboard riders increases and new equipment
facilitates higher performance and better ease of use.
BUSINESS STRATEGY
The Company designs, develops, manufactures and markets high-quality,
high-performance, technologically advanced alpine ski bindings and step-in
snowboard bindings. The Company has achieved its status as a leader in the
German and United States alpine ski binding markets by producing what it
believes to be a superior ski binding for skiers of all levels. In order to
develop such products, the Company commits substantial resources to its product
development activities. Research and development operating expenses were
approximately $2.2 million, $2.3 million and $2.8 million for the 1994, 1995 and
1996 fiscal years, respectively.
Based on market surveys of the alpine ski binding market (computed in
Dollars), the Company estimates that its share of the United States alpine ski
binding market was more than 45% for the 1995/1996 ski season. Foreign market
surveys indicate that the Company's alpine ski binding market share for such
period was more than 40% in Germany and more than 16% in Japan.
Having established itself as a leader in the alpine ski binding business,
the Company believes that it is well positioned to diversify its business into
other winter sports markets. In seeking such diversification, the Company
expects to capitalize on its existing design and production capabilities and its
existing distribution and sales organization. Whether in its traditional alpine
ski binding markets or in newer markets, the Company's objective is to produce
and market products recognized for high-quality and high-performance.
The Company views the snowboard industry as a winter sports market with
significant growth potential. Snowboarding is a relatively recent sport that
began to attract a broader following in the early 1990's and has continued to
grow steadily to date. The Company believes that snowboarding is developing from
a sport for young males into a mainstream sport that has growth possibilities
with respect to a wide range of consumers. One indication of the increased
acceptance of the sport is that snowboarding will be included for the first time
as a full medal sport in the 1998 Olympic Winter Games in Nagano, Japan. The
Company expects that the increased exposure of potential consumers to
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snowboarding through the 1998 Olympics and, later, the 2002 Olympic Winter Games
in Salt Lake City, Utah will further promote and enhance the popularity of the
sport.
RECENT DEVELOPMENTS
DNR SPORTSYSTEM. To enter into the snowboard market, the Company acquired,
in June 1995, through its wholly-owned subsidiary, Marker Switzerland, a 25%
equity interest in DNR Sportsystem of Zurich, Switzerland for $5.4 million in
cash pursuant to the terms of a purchase agreement among the Company and the
shareholders of DNR Sportsystem, Lucio Roffi and Gregor Furrer. DNR Sportsystem
is a leading developer, marketer and distributor of snowboards, snowboard boots,
snowboard bindings and other related products. The Company believes that
established snowboard companies, such as DNR Sportsystem, with solid
technological, production, distribution and sales capabilities, are well
positioned to capitalize on the growth potential in the snowboard industry.
Co-founded in 1990 by its Chairman and Chief Executive Officer, Lucio Roffi,
DNR Sportsystem had net sales of approximately $44.0 million and net income of
approximately $5.6 million in its last fiscal year which ended December 31,
1995, as compared to net sales of approximately $26.5 million and net income of
approximately $3.8 million in its fiscal year ended December 31, 1994. Based on
information from the International Snowboard Federation, the Company estimates
that, during the 1995/96 snowboard season, DNR Sportsystem's share of the
snowboard market was approximately 13% worldwide and, in its largest markets,
located in Asia, Europe and North America, was 13%, 10% and 14%, respectively.
The Company believes that DNR Sportsystem is a well established, well managed
company which emphasizes high quality products and service and which, therefore,
has significant synergies with the Company's own business strategies.
Consequently, as part of its growth plans, the Company has recently purchased an
additional 55% interest in DNR Sportsystem from its other two equity holders,
thereby increasing the Company's ownership of DNR Sportsystem to an 80%
interest. The Company closed the DNR Equity Purchase on June 26, 1996 and issued
short-term promissory notes, the DNR Equity Purchase Notes, for the full
purchase price to each of Mr. Roffi and Gregor Furrer. The DNR Equity Purchase
Notes are due and payable in full upon the earlier of (i) August 31, 1996 and
(ii) the consummation of this offering. The Company will use substantially all
of the proceeds of this offering to pay the DNR Equity Purchase Notes. To the
extent the net proceeds of this offering will be insufficient to enable the
Company to pay the aggregate amount of the Notes, the Company expects to pay the
difference with funds borrowed through its short term credit facilities. See
"--DNR Sportsystem Ltd." below for a fuller description of DNR Sportsystem's
business.
DNR NORTH AMERICA. In December 1995, the Company announced plans to form a
joint venture with DNR Sportsystem and Gregor Furrer to develop and manufacture
snowboards in the United States. The joint venture is expected to be organized
as a Delaware limited liability company, under the name DNR North America, LLC,
of which Marker International will directly own 60% of the equity interest, DNR
Sportsystem will own 25% (thereby giving the Company an additional 20% indirect
interest through its ownership in DNR Sportsystem) and Gregor Furrer will own
15%. The Company believes that its plans for DNR North America constitute an
integral component of the Company's plans to expand into new markets.
DNR NORTH AMERICA PRODUCTION FACILITY. The Company, in collaboration with
its joint venture partners, is currently building the state of the art DNR North
America Production Facility which is scheduled to begin production in October
1996. The 56,000 square foot facility is situated on approximately five acres of
land adjacent to Marker's worldwide headquarters in Salt Lake City, Utah and
will be leased by the Company to DNR North America. The facility is designed to
eventually produce up to 200,000 snowboards annually and will also be the
location of the new DNR Snowboard Technology Center. The DNR Snowboard
Technology Center will focus on areas of advanced research and development in
snowboard technologies, boot/board interface, and product testing procedures and
will offer its services to the industry in order to assist in the development of
standards and practices. The
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Company expects that the DNR North America Production Facility will produce high
quality, technologically advanced snowboards that will be distributed by DNR
Sportsystem in addition to snowboards that will be produced by Volkl. Volkl, an
operating subsidiary of Gregor Furrer, is the current sole supplier of
snowboards to DNR Sportsystem.
DNR SOFT BOOT/STEP-IN BINDING INTERFACE SYSTEMTM. In February 1996, the
Company, in conjunction with DNR Sportsystem and Tecnica, introduced the DNR
Soft Boot/Step-in Binding Interface SystemTM. The Company believes the DNR
Interface System may have the potential to become a technology standard in the
newly developing step-in binding segment of the snowboard industry. The Company
has developed the new DNR Interface System by utilizing its technological
expertise in the development of alpine ski bindings in concert with DNR
Sportsystem's substantial knowledge of the snowboard industry and Tecnica's
expertise with respect to boot design and manufacture. Designed specifically for
the needs of snowboard riders, the goal of the new system is to significantly
improve snowboard rider performance while offering step-in/step-out convenience.
The Company expects that the advanced design and quality of the new system
combined with the Company's strong distribution capabilities should permit the
system to be readily integrated into the marketplace. To date the Company has
received a substantial number of orders for the DNR Soft Boot/Step-in Binding
Interface SystemTM for delivery in the upcoming 1996/97 season.
MARKER
PRODUCTS
ALPINE SKI BINDINGS. The Company offers more than 30 models of high-quality
ski bindings. The models range from high-performance racing models, such as the
M51 Turbo SCTM and other top-end models featuring the Company's patented
Selective Control SystemTM, to the children's M9TM model. Suggested retail
prices in the United States of such models range from $390 to $115. Each model
is available in a variety of colors selected by the Company based on its
analysis of consumer preferences.
In addition to a ski binding's primary function of attaching a ski to a ski
boot, the binding serves as a safety mechanism. The timing of a binding's
release mechanism is significant in both its retention and release functions.
When a skier applies an amount of force to a ski binding that exceeds the
customized safety setting of the binding, the binding is designed to release the
boot from the ski in order to decrease the risk of injury to the skier.
Therefore, a binding must be designed to recognize specific levels of force
exerted against it.
All current Marker bindings feature TwincamTM and Gliding AFDTM technology.
The Company developed and patented the TwincamTM and Gliding AFDTM technology,
which together tightly couple the ski boot and binding toe-piece, resulting in a
binding system that is designed not to be affected by contamination between the
ski boot and binding. This provides skiers with reliable and consistent
retention and release performance under actual ski conditions. In addition,
certain models of Marker bindings also feature either the Company's
Full-SpectrumTM or V-TECHTM technology. These technologies allow the ski boot to
be released from a binding at any angle in a 180 degree full spectrum, thereby
increasing skier safety.
In 1995, the Company introduced a second generation of its patented
Selective ControlTM technology, the M51 Turbo SCTM and M41 SC2TM. This
technology has received critical praise from ski publications and the Turbo SC
was named a "break-through" product by, and was the only binding to receive a
Gold Medal rating in, the Buyer's Guide '96 published in the September 1995
issue of Ski Magazine in the United States. These bindings, exclusively from
Marker, are designed for skiers of all levels. They feature a patented Dynamic
StabilizerTM, Carbon Composite Torsion BarTM base and exclusive Edge Pressure
SystemTM and are unique in the industry because they offer the only adjustable
interface system skiers can easily change on the hill to accommodate different
snow conditions, speeds
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and varying terrain. The system is designed to provide a better skiing
experience, make turning easier, improve control, and help all skiers attain new
levels of performance and confidence.
In 1995, the Company also introduced its FastrackTM rental system for quick,
easy adjustment accommodating a wide range of boot sizes. The new FastrackTM
system enables the Company to meet the demands of the rental market at all
performance levels.
As is customary in the industry, the Company provides a warranty program for
its bindings. The Company will, at its sole discretion, repair, replace or
refund the purchase price of a binding deemed to be defective due to material
failure or defect in workmanship. This warranty extends for four years from the
date of purchase in the United States and for two years in other countries.
APPAREL, GLOVES AND LUGGAGE. In 1989, the Company founded Marker Ltd., which
designs, distributes and markets apparel for adults and children, gloves and ski
and non-ski luggage. Marker Ltd.'s clothing line features quality, functional
and versatile performance wear for year-round sports and recreational activities
in a wide range of prices. Marker Ltd. received The People's Choice award for
High Tech Women's Apparel in Snow Country's National Skiwear Design Awards in
1995 and Snow Country's Runner Up Award for High Tech Women's Apparel in 1996.
In October 1995, Marker Ltd. was selected by the Salt Lake Olympic Organizing
Committee for the 2002 Olympic Winter Games ("SLOC") as the licensee for the
sale in the state of Utah of winter outerwear, polar fleece, luggage and gloves
with the imprint and embroidery of the 2002 Olympic Winter Games. In February
1996, Marker Ltd. was selected as licensee for sale in the state of Utah of
t-shirts, sweatshirts, golf shirts and related apparel with the imprint and
embroidery of the 2002 Olympic Winter Games. Marker Ltd. pays a royalty to SLOC
for such licensing rights and its current agreements are valid through December
31, 1996. Marker Ltd.'s other product lines are sold year round to retailers
mainly in the United States through Marker Ltd.'s own sales force.
MARKETING
ADVERTISING. The Company actively advertises and markets its products. The
Company spends the majority of its advertising budget on advertisements in ski
magazines, such as Skiing Magazine, Ski Magazine, Snow Country and Powder
Magazine, in the United States, and similar magazines in foreign markets.
SALES STRATEGY. To increase brand recognition, in addition to offering
technologically advanced bindings, the Company aggressively markets the Marker
brand name. To influence its presence in retail shops, the Company devotes
resources to maintaining and improving its relationships with retailers and shop
personnel so that they will use Marker products and recommend them to their
retail customers. In this regard, the Company, through its sales force, conducts
in-shop sales clinics. In addition, the Company, as part of the United States
Authorized Retailer Program, requires that all authorized retail shops employ a
technician who has been trained and certified by the Company concerning the
installation and adjustment of Marker bindings. Additionally, the Company sells
its bindings to the sales staff of its retailers and to professional skiers at
special prices so that they will be able to recommend the Company's products as
a result of personal experience.
ENDORSEMENTS. To foster recognition of the Marker brand name, the Company
also establishes endorsement relationships with national ski teams and racing
professionals. These endorsement contracts typically run from one to two years
and provide for a base payment to the racer, with additional payments for
placing in competitions. Racers using and endorsing Marker bindings have been
among the winners in World Cup, World Championship and Olympic competitions.
Many of the United States' best-known skiers, including 1996 World Alpine
Downhill champion Picabo Street, three-time World Cup Champion and Olympic Gold
medalist Phil Mahre, World Champions Steve Mahre and Tamara McKinney and Olympic
Gold medalist Stein Eriksen endorse and use Marker bindings.
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Many Olympic, World Cup and professional ski competitions have been won by
racers endorsing and using Marker bindings. Skiers endorsing and using Marker
bindings dominated the 1996 FIS Alpine World Ski Championship in Sierra Nevada,
Spain in February 1996 by winning 5 of the 10 Gold medals and 13 of the total 30
medals awarded. World Championship Gold medalists endorsing and using Marker
bindings included Picabo Street of the United States in the Alpine Downhill,
Marc Giradelli of Luxembourg in the Alpine Combined, Pernilla Wiberg of Sweden
in the Alpine Slalom and Alpine Combined and Isolde Kostner of Italy in the
Alpine Super G.
Skiers endorsing and using Marker bindings also excelled in the season long
1996 FIS World Cup competition. Marker skiers include Katja Seizinger of
Germany, the 1996 Women's Overall World Cup Champion, Picabo Street of the
United States, the 1996 Women's World Cup Downhill Champion, Martina Ertl of
Germany, the 1996 Women's World Cup Giant Slalom Champion, Michael Von Gruenigen
of Switzerland, the 1996 Men's World Cup Giant Slalom Champion, Jonny Moseley of
the United States, the 1996 Men's Overall World Cup Freestyle Champion, and
Donna Weinbrecht of the United States, the Women's World Cup Moguls Champion.
Skiers endorsing and using Marker bindings also won 8 of the 10 titles in the
1996 United States Alpine Ski Championships and included Hans Hofer of Austria,
the 1996 U.S. Pro Ski Tour Overall Champion. The Company believes that winning
World Cup, World Championship and Olympic competitions at places like Kitzbuhl,
Sierra Nevada and Lillehammer increases the Company's visibility in the
marketplace. Marker engineers use the races as opportunities to work with the
Marker skiers to develop new products and to test and refine prototypes, with
the goal of benefiting skiers of all levels in the future.
SALES
PROGRAMS. Approximately 60% of the Company's total ski binding orders for a
fiscal year are obtained through its "Pre-Season Sales Program," which runs from
February 1 through September 15. In clothing, luggage and gloves approximately
75% of the total orders for a fiscal year are obtained during this period. The
volume of Pre-Season orders is affected by the volume of the retailers' prior
season's sales and inventory levels. See "Risk Factors--Seasonality and
Quarterly Fluctuations." Marker bindings ordered under the Pre-Season Sales
Program are shipped to retailers from July through November and are recorded by
the Company as sales on the date of shipment. This results in the recording of
the majority of the Company's annual sales during its second and third fiscal
quarters.
Approximately 35% of the Company's total orders for a fiscal year are
obtained through its "Reorder Program," which includes products ordered after
September 15 and shipped before March 31 of each year. Bindings sold under the
Reorder Program usually include models in the Company's existing inventory and
products which will be discontinued in the upcoming season. The success of the
Reorder Program primarily affects the Company's third and fourth fiscal quarter
results. See "Risk Factors--Seasonality and Quarterly Fluctuations."
Approximately 5% of the Company's total orders for a fiscal year are
obtained through its "Shop and Pro Programs," which offer reduced pricing on the
Company's products to retail ski shop employees, ski instructors and other
professionals in the industry. The Company believes that a recommendation from a
sales person or a professional skier is an important factor influencing a
consumer's decision to purchase a particular binding brand. See
"--Marketing--Sales Strategy."
CREDIT REVIEW AND RECEIVABLES. The Company's internal Credit Department
continually monitors the credit worthiness of the Company's customers using
criteria typical in the industry. The Company does not ship its bindings until a
customer has successfully undergone the credit review process. For the past five
years, the Company has experienced bad debts of less than 1% of sales.
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The timing of the payments to the Company by its retailers is subject to the
industry-wide custom of the country in which the retailer is located. In keeping
with industry practice, the Company may offer volume discounts to its retailers
and permit discounts for payments made within specified periods.
In the United States, payment is due for orders shipped pursuant to its
Pre-Season Sales Program in two equal installments in December and January, in
the case of a retailer not located in a ski area, and in January and February,
in the case of a retailer who is located in a ski area. With respect to orders
shipped pursuant to the Company's Reorder Program, payment is due either within
60 days from the date the order is shipped or pursuant to the "split-dating"
schedule described above, whichever results in payment in full on a later date.
All sales pursuant to the Company's "Shop and Pro Programs" are due in advance
of shipment.
In Germany, payment for bindings shipped pursuant to the Company's
Pre-Season Sales Program by Marker Germany to retailers located in Germany is
due December 1. Payment for bindings shipped to German retailers pursuant to the
Company's Reorder Program is due 30 days from the date of shipment. Payment for
bindings shipped by Marker Germany pursuant to the Company's Pre-Season Sales
Program to the Company's subsidiaries and to independent distributors is due in
three installments, 25% in November, 50% in December and 25% in January. In
Japan, as is customary in the industry, payment from retailers is due within 60
days from the date the order is shipped.
The Company believes that because Marker bindings are viewed as one of the
premier ski bindings and an important product to be offered by a retailer,
retailers will strive to honor their financial obligations to the Company on a
timely basis in order to assure future deliveries. The Company also believes
that its experience with payments from retailers has been good and will continue
in the future.
As of May 31, 1996, the Company had received orders of $52.7 million,
subject to credit review and acceptance by the Company, as compared to $54.2
million of such orders on May 31, 1995.
PRODUCT DEVELOPMENT
In order to maintain its leadership position and to continue to offer
technologically advanced bindings, the Company continues to devote resources to
improving its current bindings and developing technology that it will use in the
future. The Company's research, development and design of ski bindings is
managed by the Company's Research and Development Department (the "R&D
Department") at the Company's plant in Eschenlohe, Germany. The R&D Department
has developed substantially all of the Company's proprietary technology used in
manufacturing Marker ski bindings. As is customary in Germany, the Company has
agreements with each of its engineers pursuant to which the Company is assigned
the proprietary rights to all inventions. The Company has spent approximately
$2.2 million, $2.3 million and $2.8 million in 1994, 1995 and 1996,
respectively, on research and development.
Product development is a result of the integrated efforts of the Company's
R&D, Manufacturing and Sales Departments, all of which work together to generate
new ideas to be incorporated into Marker ski bindings. The Company also receives
suggestions from ski racers who use Marker bindings. After the Company decides
to use a new component in its ski binding, the R&D Department, with the
assistance of machine shop personnel, integrates the mechanical process, and
refines the product design and mechanism of the developing product.
Simultaneously with the development of the internal mechanisms of the ski
binding, the Company engages an outside design firm to assist in the
determination of the binding colors and the integration of Marker ski bindings'
signature shape with the new technology.
The Company's state of the art laboratory is used for the testing of
products in the development stage and products currently on the market.
Additionally, the laboratory technicians regularly test products produced by the
Company's competitors.
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INTELLECTUAL PROPERTY
The R&D Department is continually developing new components for which the
Company may obtain patents. Patents may be sought for innovations for which the
Company does not have plans for current use. The Company typically files its
patent applications in the name of Marker International or the appropriate
subsidiary. Patent applications have been filed in the United States, Germany
and Japan, and in certain cases, the countries in which the Company's
competitors manufacture ski bindings. The Company filed more than 15 patent
applications over the past two years and currently has over 225 patents and
patent applications covering its technology filed in numerous countries around
the world, of which over 30 are devoted to technology currently used by the
Company in manufacturing Marker ski bindings.
The Company has been involved in patent disputes with its competitors in the
past. In connection with the resolution of such disputes, the Company has
negotiated settlements which include cross-licensing agreements, involving
certain technology believed by the Company to be insignificant. Based on the
Company's analysis of its competitors' products, the Company believes it may
have present patent infringement claims. The Company has not determined whether
to pursue any such claims, nor is there any assurance that if so pursued, the
Company would be successful on the merits. See "Risk Factors--Patents and
Technology."
The Company markets its products under a number of trademarks registered in
various countries throughout the world. The Company believes that the MARKER
trademark is widely known as identifying high-quality, high technology ski
bindings and is deemed a valuable asset of the Company. The Company is aware of
no third party violations of its trademarks.
MANUFACTURING AND QUALITY CONTROL
SKI BINDINGS. Substantially all Marker ski bindings are manufactured at the
Company's state-of the art facility in Eschenlohe, Germany, which was completed
in 1989. Approximately 590 employees of the Company's approximately 700
employees are employed in this facility. See "Risk Factors-- Single
Manufacturing Facility" and "--International Operations."
The Company considers itself to be a leader in the mechanization of the ski
binding assembly process. By continually evaluating and upgrading its assembly
process, the Company has achieved a position as one of the most technologically
advanced ski binding manufacturers. The Company anticipates that its current
facility and recently added equipment will allow the Company to meet any growth
in the demand for Marker ski bindings and reduce its production costs. During
fiscal 1996, the Company invested approximately $4.4 million in property, plant
and equipment. In addition, the Company historically pays in excess of $2.0
million annually for leased property, plant and equipment.
In the ordinary course of its manufacturing process, the Company may dispose
of plastic and metal components. As required by law, the waste created by these
materials is transported by independent waste management companies. To date the
Company has not experienced any significant environmental problems, although
there can be no assurance that such problems will not arise in the future.
QUALITY CONTROL. In order to ensure the quality of its ski bindings, the
Company conducts random testing of the parts and components that are used in
assembling its ski bindings. Testing is also conducted at various stages of the
assembly process. Once a ski binding is completely assembled, it is individually
tested and calibrated.
In addition to meeting the Company's high quality standards, each ski
binding must meet the standards set by various international organizations, such
as the American Society for Testing and Materials (ASTM), the International
Organization for Standardization (ISO) and the Deutsches Institut fur Normung
(DIN). It has been the policy of the Company to manufacture ski bindings which
exceed the highest standards set by the various international organizations.
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MARKER LTD. PRODUCT LINES. The Marker Ltd. product lines are designed and
developed by Marker Ltd.'s design professionals located at the Company's
headquarters in Salt Lake City, Utah. Independent contractors located primarily
in the United States, Hong Kong and Korea produce the Marker Ltd. product lines.
The Company believes it is not dependent on any one independent contractor or
any group of independent contractors, and would be able to replace any such
contractor if it becomes necessary or desirable.
DISTRIBUTION
The Company distributes its ski bindings through its subsidiaries, Marker
Germany, Marker USA, Marker Japan, Marker Austria and Marker Canada, and
independent distributors. Marker Germany, in addition to manufacturing the
Company's ski bindings, distributes Marker ski bindings to retailers in Germany,
to subsidiaries of the Company and to independent distributors where the Company
does not have a distribution subsidiary. Marker USA and Marker Japan are the
Company's distributors in the United States and Japan, respectively, and sell
Marker ski bindings to retailers in the United States, and to both retailers and
wholesalers in Japan, respectively. Marker Austria distributes the Company's ski
bindings into Austria through an independent sales force. Marker Canada
distributes the Company's ski bindings into Canada which are then sold through
an independent distributor. All of the Company's subsidiaries and independent
distributors order ski bindings from Marker Germany and pay for the ski bindings
in Marks, except Marker USA and Marker Japan which may, at their election, make
payments in their functional currencies. The Company has distribution
arrangements for the sale of its products in more than 30 countries. The Company
believes that it has developed a close working relationship with its
distributors. See Note 12 to "Consolidated Financial Statements" for a summary
of the Company's operations by geographic region.
The Company believes it is not dependent upon any one customer or any group
of customers. The Company has a broad worldwide retail distribution network,
with no one retailer accounting for more than five percent of the Company's
total annual worldwide sales. The Company's products are carried in more than
6,100 retail stores in the United States, Germany and Japan.
COMPETITION
The Company competes on the basis of the quality, technology, brand name
recognition and performance of its ski bindings. Other competitive factors among
ski binding marketers are marketing and distribution methods, customer service
and the management of sales promotion activities.
The Company devotes resources to establishing and maintaining strong
relationships with retailers and shop personnel through sales clinics, technical
training and certification, and discounted prices to shop personnel. The Company
believes that its strong relationships with retailers and shop personnel accord
the Company advantageous shelf space in certain retail outlets and
recommendations from shop personnel. The Company has consistently increased its
market share and believes that it has not suffered any competitive disadvantage
as a result of its position as a single product marketer of ski bindings. See
"--Marketing--Sales Strategy."
The Company's primary competitors are Salomon, Tyrolia, Rossignol, Look and
ESS. Certain of the Company's competitors offer other ski equipment in addition
to ski bindings. Based on market surveys of the alpine ski binding market in the
United States (computed in Dollars), the Company estimates that its share of the
United States alpine ski binding market was more than 45% for the 1995/1996 ski
season. Foreign market surveys available to the Company indicate that its alpine
ski binding market share for such period was more than 40% in Germany and more
than 16% in Japan.
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Due to existing technological and manufacturing barriers, as well as the
difficulty of overcoming lack of brand recognition and quality concerns, the
Company does not anticipate the entry of new competitors into the ski binding
market. See "Risk Factors--Competition."
LEGAL PROCEEDINGS AND PRODUCT LIABILITY INSURANCE
Currently, the Company is not a party to or subject to any material pending
legal proceedings. However, in September 1995, the Company along with other
significant companies in the ski business received a letter from the United
States Department of Justice (the "DOJ") explaining that the pricing practices
of various companies in the ski industry were being reviewed. Although to date
the Company has not received further correspondence from the DOJ, there can be
no assurance that the DOJ will not pursue these matters further.
Moreover, the nature of the sport of skiing entails an inherent risk of
injury and, thus, it is expected that the Company from time to time will be
subject to claims and lawsuits due to the nature of its business. During the
past ten years, approximately eight claims per year have resulted in lawsuits
being filed against the Company. The Company has never had a final judicial
finding entered against it holding that its product was inherently defective.
The Company maintains insurance that it believes meets industry standards to
protect itself against such product liability claims. In fiscal year 1996, the
Company spent approximately $508,000 for liability insurance premiums, claim
deductibles and legal fees to defend itself against these claims. The adequacy
of the insurance coverages and reserves established by the Company to cover
known and unknown claims is evaluated at the end of each fiscal year. There can
be no assurance, however, that such coverages or reserves will be sufficient
protection against any future legal proceedings (including any related payments,
settlements or costs). See "Risk Factors--Product Liability Claims and Insurance
Coverage."
In general, the Company intends to vigorously defend against any legal
proceedings commenced against it. There can be no assurance, however, that the
Company would be successful in the defense of such proceedings or that such
proceedings (including any related payments, settlements or costs) would not
have a material adverse effect on the Company's business, reputation or
financial condition.
RAW MATERIALS
The Company requires various readily available metals and plastics to
manufacture its ski bindings. The Company furnishes its suppliers with the
tooling for the metals and the moldings for the plastics used in production. The
suppliers then provide the Company with the required parts. The Company believes
it is not dependent on any one supplier or any group of suppliers for the raw
materials necessary for the manufacture of its ski bindings.
EMPLOYEES
None of the Company's approximately 700 full- and part-time worldwide
employees are unionized. In Germany, the Company's employees are represented by
a worker's counsel. As required by German law, one of the counsel members is
paid by the Company to represent the interests of the workers. It is the
responsibility of these representatives to facilitate the resolution of employee
grievances and to ensure that the employees' interests are protected to the
extent required under German law. The Company believes that its relations with
its employees are good.
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PROPERTIES
The Company owns its headquarters and distribution facility in Salt Lake
City, Utah, which contains 57,000 square feet and was completed in 1995. The
Company's headquarters and distribution facility is suited to the Company's
business and is presently being utilized at 65% of its productive capacity. The
Company also leases a 8,600 square foot warehouse in Manchester, New Hampshire
for use as its Eastern United States distribution hub. The Company believes that
the additional warehouse space is adequate to meet the needs of the Company's
Eastern customers.
The Company leases its 124,146 square foot office, research and development
and manufacturing facility in Germany. Nearly all of the Company's binding
products are manufactured at this facility which houses technologically advanced
production and quality assurance machinery. The Company believes that the
facility is well suited to meet the manufacturing needs of the Company and is
presently utilized at approximately 70% of total capacity. The terms of the
lease on the manufacturing facility expire in 2012.
The Company also leases three offices in Japan from which sales and
distribution activities are directed. These offices are located in the cities of
Tokyo, Sapporo and Osaka and contain approximately 3,500, 500 and 675 square
feet, respectively. In addition, Marker Japan leases warehouse space for
inventory storage in Tokyo and Osaka totalling approximately 12,900 and 1,080
square feet, respectively. Management believes that these facilities are
suitable for the required operational needs of Marker Japan.
The Company currently owns five acres of land adjacent to its worldwide
headquarters in Salt Lake City on which, as described above under "--Recent
Developments," the 56,000 square foot DNR North America Production Facility is
under construction. The facility will be leased to DNR North America to
manufacture snowboards.
DNR SPORTSYSTEM LTD.
OVERVIEW
DNR Sportsystem, a Swiss company co-founded in 1990 by its Chairman and
Chief Executive Officer, Lucio Roffi, is a leading developer, marketer and
distributor of snowboards, snowboard boots, snowboard bindings and other related
products. The Company believes that, since its inception, DNR Sportsystem has
been able to achieve a leading position in the growing snowboard industry
because of the high quality of its technology, products, personnel and service.
In its fiscal year ended December 31, 1994, DNR Sportsystem had net sales of
approximately $26.5 million and net income of approximately $3.8 million. In its
last fiscal year which ended December 31, 1995, DNR Sportsystem had net sales of
approximately $44.0 million and net income of approximately $5.6 million.
Currently, DNR Sportsystem has received orders for its products of approximately
$50.3 million for delivery in the upcoming 1996/97 season as compared to $42.8
million for the 1995/96 season. DNR Sportsystem, which presently markets its
products under the trade names of "DNR(R)," "Santa Cruz(R)" and "Sims(R),"
receives approximately 95% of its revenues from the sales of its hard goods
merchandise, which includes snowboards, snowboard boots and snowboard bindings.
The Company acquired a 25% equity interest in DNR Sportsystem in June 1995.
To diversify and increase its position in the growing snowboard segment of the
winter sports market, the Company purchased an additional 55% interest from the
two other equity holders of DNR Sportsystem, thereby increasing the Company's
total ownership of DNR Sportsystem to an 80% interest on June 26, 1996. The
Company issued the DNR Equity Purchase Notes for the entire purchase price to
the selling equity owners at the June 1996 closing. The Company will use
substantially all of the proceeds of this offering to satisfy the DNR Equity
Purchase Notes.
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The Company believes that it has significant existing synergies with DNR
Sportsystem and that, as a result of the DNR Equity Purchase, it has the
potential to develop even greater synergies. In cooperation with Tecnica, the
Company and DNR Sportsystem have recently developed and introduced its
innovative DNR Soft Boot/Step-in Binding Interface SystemTM. In this regard, in
addition to its equity ownership in DNR Sportsystem, the Company, through Marker
Germany, currently manufactures snowboard bindings distributed by DNR
Sportsystem. In addition, the Company is currently building a 56,000 square foot
snowboard production facility in Salt Lake City, Utah which is scheduled to
begin production in October 1996 and which has been designed to eventually
produce up to 200,000 snowboards annually. The Company believes that the DNR
North America Production Facility will produce state of the art snowboards that
will be distributed by DNR Sportsystem in addition to snowboards that will be
produced by Volkl of Germany which is the current exclusive supplier of
snowboards to DNR Sportsystem. The Company believes that its investment in DNR
Sportsystem provides both companies the opportunity to profit from their
combined technologically advanced design and production capabilities and their
distribution and sales operations, with expected savings in production and
distribution costs. There can be no assurance, however, that the Company's
expectations as to its or DNR Sportsystem's future performance will be met.
INDUSTRY
Snowboarding is a relatively new sport that began to attract a broader
following in the early 1990's and has continued to grow steadily to date.
According to the International Snowboard Federation, 1.27 million snowboards
were sold to retailers in the 1995/96 snowboard season, which ended March 31,
1996.
The Company believes that snowboarding is developing from a sport for young
males between the ages of 12 and 24 into a mainstream sport that has growth
potential with respect to a wide range of consumers. One indication of the
increased acceptance of the sport is that snowboarding will be included, for the
first time, as a full medal sport in the 1998 Olympic Winter Games in Nagano,
Japan. The Company expects that the increased exposure of potential consumers to
snowboarding through the 1998 Olympics and, later, the 2002 Olympic Winter Games
in Salt Lake City, Utah, will further enhance and promote the popularity of the
sport. The Company believes that established snowboard companies, such as DNR
Sportsystem, with solid technological and production capabilities and
distribution and sales organization, are well positioned to capitalize on such
growth potential.
COMPETITION
Although a number of small snowboard companies have developed over the past
several years, the Company estimates that the top five snowboard companies,
including DNR Sportsystem, account for more than half of the market for
snowboards and related products. Based on information from the International
Snowboard Federation and other industry sources, the Company estimates that,
during the 1995/96 snowboard season, DNR Sportsystem's share of the snowboard
market was approximately 13% worldwide and, in its largest markets, located in
Asia, Europe and North America, was 13%, 10% and 14%, respectively.
The snowboard industry is highly competitive and DNR Sportsystem competes
with a number of established manufacturers and distributors, some of whom may
have greater financial, distribution, advertising or marketing resources than
DNR Sportsystem and whose brand names may have greater recognition than those of
DNR Sportsystem. In addition, there are several original equipment manufacturers
that, although they do not currently distribute their own snowboards, could
compete directly with DNR Sportsystem if they were to begin distributing
snowboards under their own brand names. Moreover, as the snowboard industry
continues to expand, DNR Sportsystem could face significant competition from new
entrants in each of its product categories, including large ski and sporting
goods companies that decide to develop new snowboard brands or to acquire other
snowboard companies.
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Although the Company believes that DNR Sportsystem's products are well
positioned to compete successfully in their respective categories, there can be
no assurance that DNR Sportsystem will be able to continue to compete
successfully in the future.
PRODUCTS
DNR Sportsystem's product line includes a range of top-end snowboard models
and a variety of snowboard bindings, boots and accessories.
SNOWBOARDS. DNR Sportsystem currently offers more than 75 snowboard models
designed for novice to world-class snowboard riders. DNR Sportsystem's line of
snowboard models accommodates the needs of a full range of snowboarding styles,
including racers, freeriders, freestylers and freecarvers. The snowboards range
in suggested retail price, in the United States, from approximately $230 to
$510.
DNR Sportsystem seeks to apply innovative technologies to the manufacture of
snowboards. Innovations introduced by DNR include the Lightweight Volkl Sensor
Wood Core, used in top-end DNR Sportsystem models to enhance snowboard
durability and performance, as well as torsion frame and carbon torsion frame
snowboard construction to increase snowboard edge pressure.
In addition to providing technologically advanced snowboards, DNR
Sportsystem produces creative graphics for its snowboards. The Company believes
that DNR Sportsystem's use of transparent constructions, three-dimensional
topsheets and innovative color schemes have helped to establish it as a leader
in snowboard graphic design. One of DNR Sportsystem's high performance snowboard
models, the H-Type Riders Choice which is marketed under the Santa Cruz brand
name, has been exhibited for its design at the Museum of Modern Art in New York
City.
SNOWBOARD BINDINGS. Snowboard bindings connect the snowboard rider to the
snowboard and can have a significant effect on the performance of the board. DNR
Sportsystem offers more than 15 models of traditional snowboard bindings that
incorporate lightweight designs and high grade materials. Moreover, in
developing its traditional snowboard bindings, DNR Sportsystem seeks to provide
durability, comfort, ease of use and performance for riders of all levels,
through such innovations as its one-piece wrap back, quick release ratchet
buckle and sole spikes technologies. DNR Sportsystem's traditional snowboard
bindings range in suggested retail price, in the United States, from
approximately $100 to $210.
DNR SOFT BOOT/STEP-IN BINDING INTERFACE SYSTEMTM. In addition to its
traditional bindings and boots, in order to expand its market position and to
continue to offer technologically advanced products, DNR Sportsystem
continuously seeks product development opportunities. In this regard, in
February 1996, DNR Sportsystem introduced the new DNR Soft Boot/Step-in Binding
Interface SystemTM for snowboards that was developed by DNR Sportsystem in
cooperation with Marker and Tecnica, a leading ski and snowboard boot
manufacturer. The Company believes that the new DNR Interface System includes
innovative features which provide entry and exit convenience and incorporates a
new soft boot design which offers comfort, mobility and more precise power
transmission and edge pressure distribution than was previously available in the
industry. The DNR Soft Boot/Step-in Binding Interface SystemTM is expected to
retail in the United States at prices from approximately $400 to $525.
SNOWBOARD BOOTS. DNR Sportsystem has developed a wide range of snowboard
boots for snowboard riders of varying riding types, ages and abilities. DNR
Sportsystem currently offers more than 17 models of snowboard boots that
incorporate innovative technologies, including one-piece linerless softboot
construction, laceless liner, gel-cushioned soles and dual-density shock
absorbing soles. Such innovations have served to reduce snowboard boot weight
and increase rider comfort. DNR Sportsystem's snowboard boots range in price, in
the United States, from approximately $110 to $220.
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PRODUCT DEVELOPMENT
As part of its long-term growth strategy, DNR Sportsystem expects to expand
its snowboard product lines to meet growing market demands. In this regard, the
Company expects that DNR North America will produce, at its new manufacturing
facility in Salt Lake City, Utah, high quality, technologically advanced
snowboards to meet the expanding needs of DNR Sportsystem. Although the Company
believes that DNR Sportsystem is well positioned to configure and implement its
plans for expansion, there can be no assurance that any such plans will be
realized.
At present, 12 employees of DNR Sportsystem, most of whom are based at its
Zurich, Switzerland headquarters, participate in research and development for
DNR Sportsystem, with much of their research conducted during on-site visits to
DNR Sportsystem's exclusive manufacturers.
In each of calendar 1993, 1994 and 1995, DNR Sportsystem spent approximately
$0.8 million, $0.9 million and $2.0 million, respectively, on research and
development. The increased expenditure in 1995 was primarily attributable to
research and development relating to the DNR Soft Boot/Step-in Binding Interface
SystemTM.
INTELLECTUAL PROPERTY
The Company has applied for patent protection in Germany and, when
appropriate, will apply for such protection in the United States and other
countries for the technology incorporated into the DNR Soft Boot/Step-in Binding
Interface SystemTM. DNR Sportsystem currently has not applied for or obtained
patent protection for any of its technology as it believes that, at the present
time, snowboard manufacturing technology throughout the industry is not of a
patentable nature. However, DNR Sportsystem enters into confidentiality
agreements with its key employees in an effort to protect its proprietary
information. Moreover, DNR Sportsystem has applied for, or obtained, registered
trademark protection for its DNRTM, DNR SportsystemTM, I-ManTM and PROTM logos.
Trademark protection has been obtained or is being sought in DNR Sportsystem's
major worldwide markets, except for the PROTM logo, for which protection is
being sought only in DNR Sportsystem's major European markets.
SOURCES AND SUPPLIERS
DNR Sportsystem has a mutually exclusive manufacturing arrangement with
Volkl, whereby Volkl manufactures all of the boards that are currently sold by
DNR Sportsystem. In addition, DNR Sportsystem's supply of snowboards is expected
to be significantly enhanced by production at DNR North America's manufacturing
facility in Salt Lake City, Utah, which is scheduled to begin production in
October 1996. DNR Sportsystem's snowboard bindings for the new DNR Interface are
sourced from the Company and its traditional bindings are manufactured by an
Italian manufacturer, in each case pursuant to exclusive arrangements. DNR
Sportsystem's new soft snowboard boots are manufactured by Tecnica and its
traditional boots are sourced from Tecnica and other Italian manufacturers, in
each case on an exclusive basis. DNR Sportsystem's clothing and accessory line
is sourced from independent contractors, primarily in Hong Kong and other Asian
countries. The Company believes that DNR Sportsystem's exclusive sourcing
arrangements permit DNR Sportsystem to retain control over the high quality of
its products.
Although the Company believes that DNR Sportsystem has established close
relationships with its principal manufacturing sources, DNR Sportsystem's future
success may depend upon its ability to maintain such relationships. The Company
could experience increased costs, substantial disruption and resulting loss of
sales if an unexpected change in snowboard or other suppliers were to occur. In
particular, at least until the DNR North America Production Facility is
operational, if DNR Sportsystem's relationship with Volkl were interrupted, DNR
Sportsystem could experience difficulty in locating another source with
sufficient snowboard production capacity to meet DNR Sportsystem's short-term
needs. The Company expects, however, that once the DNR North America Production
Facility is
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operational, DNR Sportsystem should have a consistent source of snowboards to
complement its existing supply from Volkl.
RAW MATERIALS
DNR Sportsystem requires various readily available woods, fiber glass,
epoxy, plastics and metals to have its products manufactured by third parties.
The Company does not believe that DNR Sportsystem is dependent on any one
supplier or group of suppliers for the raw materials necessary for the
manufacture of DNR Sportsystem's products.
DISTRIBUTION AND MARKETING
DNR Sportsystem markets its products in 31 countries and its principal
geographic markets are located in Asia, Europe and North America, where 41%, 35%
and 24% of its products were sold in calendar 1995, respectively. DNR
Sportsystem has the right to market products under the "DNRTM" and "Santa
CruzTM" brand names on a worldwide basis and has the right to market products
under the "SimsTM" brand name on a worldwide basis, other than in North America
(where such rights are retained by the licensor of the brand name). As a result,
with respect to the "SimsTM" brand name, DNR Sportsystem has no distribution
responsibility in North America and serves solely as a supplier of snowboards
and related products to Sims in such territory. DNR Sportsystem actively markets
its products by selling such products to retailers in specific geographic
regions. Although there can be no assurance as to future performance, the
Company believes that DNR Sportsystem has well-established distribution
channels.
The retail cost of DNR Sportsystem's snowboards in the United States ranges
from approximately $230 to $510, which constitutes the top-end of prices in the
snowboard market. The new DNR Soft Boot/Step-in Binding Interface SystemTM
developed by DNR Sportsystem, the Company and Tecnica, is also expected to
retail in the United States at the top-end of the snowboard boot and binding
market, at approximately $400 to $525. The Company believes that DNR
Sportsystem's products can be sold at top-end prices because of the high quality
of such products, which quality DNR Sportsystem emphasizes as part of its sales
strategy.
DNR Sportsystem primarily relies on its distributors to implement its
product advertising programs. DNR Sportsystem also sponsors teams of
professional riders as part of its marketing and communications strategy. These
riders typically enter into endorsement contracts with DNR Sportsystem, with a
length of one to two years, providing for a base payment to the rider, with
additional payments for placing in a competition. These riders are involved in
the testing phase of new or prototype DNR Sportsystem products and often
contribute ideas for future developments. The riders participate in
International World-Cup, Pro Tour and other events to promote DNR Sportsystem
products. Bertrand Denervaud, who rides Santa Cruz snowboards and is the
five-time overall World Pro Tour winner (1992-1996), endorses DNR Sportsystem
products.
CERTAIN LICENSE AGREEMENTS
DNR Sportsystem is party to a license agreement (the "Santa Cruz License")
with California-based N.H.S., Inc. ("Santa Cruz"). The Santa Cruz License, upon
one year's prior notice by either party, may be terminated on May 31, 2001 and
unless so terminated will continue for successive two year periods. Among other
things, the Santa Cruz License requires that DNR Sportsystem pay Santa Cruz
certain royalties as a percentage of DNR Sportsystem's gross sales arising from
products sold under the Santa CruzTM brand name.
DNR Sportsystem is also party to a license agreement (the "Sims License")
with Thomas Sims ("Sims") which, upon one year's prior notice by either party,
may be terminated on July 1, 2001 and
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unless so terminated will continue for successive two year periods. Among other
things, the Sims License requires (i) that DNR Sportsystem pay Sims certain
royalties as a percentage of DNR Sportsystem's gross sales arising from products
sold under the Sims brand name and from bindings sold on an OEM basis and (ii)
that Sims products comprise at least 60% of DNR Sportsystem's total sales.
CUSTOMERS
DNR Sportsystem transacts business with distributors around the world.
Although its ultimate customer is the snowboarding public, DNR Sportsystem sells
to distributors who, in turn, supply the snowboarding public. In viewing DNR
Sportsystem's distributors as customers, the Company does not believe that DNR
Sportsystem is dependent on any one customer. If DNR Sportsystem were to become
dissatisfied with any distributor, the Company believes that DNR Sportsystem
would be able to select a replacement distributor with relative ease.
DNR Sportsystem receives more than 90% of its total orders for delivery for
the upcoming snowboard season from February through May.
BACKLOG
The total approximate amount of DNR Sportsystem's backlog orders was CHF
60.3 million (U.S. $50.3 million) as of May 15, 1996, as compared to CHF 51.4
million (U.S. $42.8 million) as of May 15, 1995. Orders placed with DNR
Sportsystem are typically accompanied by letters of credit and are subject to
acceptance and fulfillment by DNR Sportsystem.
SEASONALITY AND ECONOMIC CYCLES
The snowboard season is contemporaneous with the ski season and, as a winter
sport, snowboarding is subject to seasonal fluctuations similar to those
associated with skiing. Due in large measure to seasonality, net sales for DNR
Sportsystem, which has a calendar year fiscal year, have historically been much
stronger in its third and fourth fiscal quarters than in its first and second
fiscal quarters. In addition to its seasonal quarterly fluctuations, DNR
Sportsystem's business is also subject to economic cycles. Purchases of
discretionary sporting goods tend to decline in periods of economic uncertainty.
WORKING CAPITAL
DNR Sportsystem maintains little to no inventory, which the Company believes
is not typical of the snowboard industry. Instead, inventory is carried by the
manufacturers and shipped directly to DNR Sportsystem's customers from such
manufacturers. In addition, notwithstanding that DNR Sportsystem's customers
usually provide letters of credit with their purchase orders, DNR Sportsystem
has not historically resorted to borrowing against its CHF 4.2 million (U.S.
$3.5 million) credit line to finance its activities; instead it has been able to
finance its activities through retained earnings. The Company believes that this
also is not typical of the industry and demonstrates the management strengths of
DNR Sportsystem.
EMPLOYEES
At May 30, 1996, DNR Sportsystem had 22 full-time and 4 freelance employees.
DNR Sportsystem's future success depends on the services of its key employees,
including its Chairman and Chief Executive Officer, Lucio Roffi. DNR Sportsystem
does not currently maintain key man life insurance coverage on the life of Mr.
Roffi. There can be no assurance that in the future DNR Sportsystem will able to
attract and retain key personnel with the skills and expertise necessary to
manage its business.
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Upon consummation of the DNR Equity Purchase, whereby the Company purchased
an additional 55% interest in DNR Sportsystem, the Company assumed DNR
Sportsystem's employment contract with Mr. Roffi, pursuant to which Mr. Roffi
continues to serve as DNR Sportsystem's Chairman and Chief Executive Officer.
See "Management--Employment Contracts." In addition upon such consummation, the
Company also granted a revocable proxy to Mr. Roffi entitling him to assume
voting control of DNR Sportsystem. Pursuant to the proxy, Mr. Roffi, who now
beneficially owns 10% of the common shares after the Company's additional
purchase, will control 51% of any vote of DNR Sportsystem shares while the proxy
remains in effect.
PROPERTIES
DNR Sportsystem leases an approximately 2,580 square foot property in
Zurich, Switzerland, where its headquarters are located, as well as an
approximately 3,440 square foot property in Baar, Switzerland, where its
marketing and sales force is located. The lease for the Zurich property expires
in March 2001. The lease for the Baar property is a year-to-year tenancy
requiring one year's notice, as of any December 31, for termination. In
addition, DNR Sportsystem subleases its former headquarters property in
Feldmeilen, Switzerland to several unrelated third parties, with such subleases
scheduled to continue until the expiration of the term of the master lease in
December 1997.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
DNR Sportsystem's products are manufactured in Europe, where its hard goods
are produced, and Asia, where its soft goods are produced, and distributed
worldwide. DNR Sportsystem's headquarters and other offices are located in
Switzerland; its 51% owned subsidiary, DNR-Italy, a distributor of Santa CruzTM
products, is located in Italy; and its 25% owned joint venture, DNR North
America, will be located in the United States. See "Risk Factors--International
Operations."
LEGAL PROCEEDINGS AND PRODUCT LIABILITY INSURANCE
Neither the Company nor DNR Sportsystem is aware of any pending or
threatened lawsuit involving DNR Sportsystem. However, the nature of the sport
of snowboarding entails an inherent risk of injury and, thus, the Company
expects that DNR Sportsystem from time to time will be subject to claims and
lawsuits due to the nature of its business. DNR Sportsystem currently maintains
a CHF 5.0 million (U.S. $4.2 million) liability insurance policy which provides
worldwide coverage for third party risks that arise from DNR Sportsystem's
development, design and distribution of snowboards, snowboard bindings and
accessories. DNR Sportsystem believes that the amounts of its insurance coverage
are appropriate to cover products liability claims against it; however, there
can be no assurance that the coverage limits of DNR Sportsystem's current
insurance policies will be adequate or that such insurance will, in the future,
be available on acceptable terms, in sufficient amounts of coverage, or at all.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's full Board of Directors consists of seven members. Currently,
there are two vacancies on the Board. The Board of Directors intends to fill one
of these vacancies upon the closing of this offering by appointing Lucio Roffi
to the Board. The Board intends to fill the other vacancy with a yet to be
determined non-management director.
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES
- ----------------------------- --- --------------------------------------------------------
<S> <C> <C>
Henry E. Tauber.............. 55 President, Chief Executive Officer and Chairman of the
Board of Marker International
Eiichi Isomura............... 59 Chairman of Marker Japan, Executive Vice President and a
Director of Marker International
Lucio Roffi.................. 50 Chairman and Chief Executive Officer of DNR Sportsystem
Masayuki Chiba............... 53 President of Marker Japan
Dr. Wilhelm Fahrngruber...... 55 Chairman and Managing Director of Marker Germany
Otto H. Harsanyi............. 48 Director of Marker Germany and Assistant Secretary of
Marker International
Kirk S. Langford............. 41 Executive Vice President of Marker USA
Daryl P. Santos.............. 44 Vice President of Marker International
Premek Stepanek.............. 59 Managing Director of Marker Germany
Brad L. Stewart.............. 38 Vice President--Finance, Chief Financial Officer,
Secretary and Treasurer of Marker International
Sally F. Tauber.............. 35 Vice President of Marker Ltd.
Grace Galdi.................. 38 Head Designer and Merchandiser of Marker Ltd.
Graham S. Anderson........... 63 Director
John G. McMillian............ 69 Director
Vinton H. Sommerville........ 59 Director
</TABLE>
Henry E. Tauber, President, Chief Executive Officer and Chairman of the
Board of Marker International, has served in these capacities since 1984. Since
1981, Mr. Tauber has served as the President of Marker International and since
1980 as President of Marker USA. From 1974 to 1979, Mr. Tauber was the Alpine
Director of the Men's and Women's United States Ski Teams. From 1970 to 1972,
Mr. Tauber served as Head Women's Coach of the United States Ski Team and from
1967 to 1969 as Assistant Alpine Coach of the United States Ski Team. Currently,
Mr. Tauber is also a Vice President and Council Member of the International Ski
Federation, the governing body for international ski racing. Since 1995, Mr.
Tauber has also served as a director of Powdr Corp., a holding company which
owns Park City Ski Area in Utah and Alpine Meadows in California, among other
ski areas. Mr. Tauber received a B.A. from Middlebury College, Vermont and an
M.A. from the University of Colorado, Boulder.
Eiichi Isomura, Chairman of Marker Japan and Executive Vice President and a
director of Marker International, has served in these capacities since 1981 and
1990, respectively. Mr. Isomura is also the President of Isomura Sangyo Kaisha
Ltd., a diversified holding company that engages in the
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construction of water treatment facilities, real estate development and other
ownership activities. Mr. Isomura is also President of Isomura Seisakusho KK., a
manufacturer and distributor of snow making and ski equipment. Mr. Isomura
received a Mechanical Engineering degree from Waseda University, Japan.
Masayuki Chiba, President of Marker Japan, has served in this capacity since
1992. From 1988 to 1992, Mr. Chiba was Executive Vice President of Marker Japan.
Prior thereto, Mr. Chiba served in various positions at Yamaha Co., Ltd.,
including from 1981 to 1986 as Manager of the Sporting Goods Division. Mr. Chiba
received an Economics degree from Hosei University, Japan.
Dr. Wilhelm Fahrngruber, Chairman and Managing Director of Marker Germany,
has served in this capacity since 1990. From 1976 to 1990, Dr. Fahrngruber was a
Managing Director at Atomic Germany, a ski manufacturer. From 1972 to 1976, Dr.
Fahrngruber worked at Marker Germany in sales and marketing. Dr. Fahrngruber
received a Doctorate in Economics and Political Science from the University of
Graz, Austria.
Otto H. Harsanyi, Patent Engineer, Legal Manager and Product Manager of
Marker Germany, has served in this capacity since 1992. From 1986 to 1992, Mr.
Harsanyi was a Patent Engineer and General Manager with Group Bernard Tapie, a
ski binding manufacturer which then owned Look, Geze, Authier and Donnay. From
1972 to 1986, Mr. Harsanyi was a Patent Engineer with Geze GmbH, a designer and
manufacturer of building equipment. From 1966 to 1972, Mr. Harsanyi served as
Patent Engineer with Porsche. Mr. Harsanyi received a Masters Degree in
Engineering from the University of Stuttgart, Germany.
Kirk S. Langford, Executive Vice President of Marker USA, has served in this
capacity since 1992. From 1988 to 1992, he served in various sales and marketing
positions with Marker USA and in 1990 was appointed Director of Sales of Marker
USA. From 1987 to 1988, Mr. Langford served as a Product Information Manager at
Salomon North America, a ski equipment manufacturer and developer, and from 1986
to 1987 as a Product Specialist at Salomon and from 1982 to 1986 as a Race
Technician in Salomon's product development area. From 1980 to 1981, Mr.
Langford served as a Promotional Coordinator for Rossignol, a ski equipment
manufacturer and distributor. Mr. Langford received a B.S. from the University
of Utah.
Daryl P. Santos, Vice President of Marker International, has served in this
capacity since 1985. From 1984 to 1985, Mr. Santos served as Vice President and
Merchandise Manager for ski hard goods, ski accessories, sporting goods and
water sports with Udisco Corporation, a sporting goods retail chain. From 1974
to 1984, Mr. Santos served in various sales and buying positions with Udisco
Corporation. Mr. Santos received a B.A. from the College of Idaho.
Premek Stepanek, Managing Director of Marker Germany, has served in this
capacity since 1991. Mr. Stepanek began with Marker Germany in 1981 as a
construction engineer in the Research and Development Department. From 1984 to
1991, Mr. Stepanek served as Manager of Research and Development. Prior to his
arrival at Marker Germany, Mr. Stepanek was a construction engineer at Kluckner,
Humbold and Deutz Company. Mr. Stepanek received a Masters Degree in Engineering
from the University of Prague.
Brad L. Stewart, Vice President--Finance and Chief Financial Officer of
Marker International, has served in these capacities since 1991. From 1988 to
1991, Mr. Stewart served as a manager at Arthur Andersen LLP and from 1983 to
1988 in various other positions at such firm. Mr. Stewart is a member of
American Institute of Certified Public Accountants and Arizona Society of
Certified Public Accountants. Mr. Stewart received a B.S. from Brigham Young
University.
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Sally F. Tauber, Vice President of Marker Ltd., has served in this capacity
since 1989. From 1988 to 1989, Ms. Tauber served as Product Manager for Marker's
luggage, glove and accessory programs. Ms. Tauber received a B.A. from the
University of Utah. Ms. Tauber is the wife of Henry E. Tauber.
Grace Galdi, Head Designer and Merchandiser of Marker Ltd., has served in
these capacities since 1995. Ms. Galdi served as the Head Designer/Merchandiser
at Powderhorn in addition to performing freelance design work for Marker Ltd.,
The North Face, and Couloir from 1993 to 1995. From 1991 to 1993, Ms. Galdi was
Head Designer/Product Manager at Pedigree. From 1984 to 1991 Ms. Galdi was Head
Designer/Merchandiser for Slalom Skiwear. Ms. Galdi received a B.S. degree from
the University of Vermont and studied specialized fashion design at the American
Fashion College in Lucerne, Switzerland.
Graham S. Anderson, a director of Marker International, has served in this
capacity since 1985. From 1987 until 1994, Mr. Anderson has served as the
Chairman and Chief Executive Officer of Pettit-Morry Co., a regional insurance
broker, and for more than five years prior thereto, Mr. Anderson served as
President and Chief Executive Officer. Mr. Anderson served as President of the
United States Ski Association from 1980 to 1982 and was a member of the United
States Olympic Games Ski Committee from 1964 to 1986. Mr. Anderson also serves
as a director of Commerce Bank Corporation, of Gray Harbor Paper Company and of
Acordia Northwest Inc., the successor corporation to Pettit-Morry Co. In
addition, Mr. Anderson serves as Chairman of the National Association of
Insurance Brokers and of Alberg Holding Co. Mr. Anderson received a B.A. from
the University of Washington.
John G. McMillian, a director of Marker International, has served in this
capacity since 1990. From 1987 to 1995, Mr. McMillian served as the Chairman of
the Board, President and Chief Executive Officer of Allegheny & Western Energy
Corporation. From 1986 to 1989, Mr. McMillian owned and operated Burger Boat
Company, Inc. Mr. McMillian also served as Chairman and Chief Executive Officer
of Northwest Energy Corporation for nine years until 1983. Marker International
was a subsidiary of Northwest Energy Corporation until 1984. Mr. McMillian also
serves as a director of SunBank Miami N.A. (SunTrust). Mr. McMillian received a
Petroleum Engineering degree from the University of Texas at Austin.
Vinton H. Sommerville, a director of Marker International, has served in
this capacity since 1990. In 1988, Mr. Sommerville founded Slim Sommerville,
Inc. a private investing and consulting corporation and has served as Chief
Executive Officer and Chairman of the Board since its inception. Mr. Sommerville
served as President of U.S. Marine, the parent company of Bayliner Marine
Corporation from 1977 to 1989. Prior affiliations include Owens Yacht Company,
Head Ski Company and Brunswick Corp. Mr. Sommerville received a B.A. from the
University of Oregon.
Lucio Roffi, to be named a director of Marker International upon the closing
of this offering, has served as the Chairman and Chief Executive Officer of DNR
Sportsystem since its inception in 1990. Mr. Roffi's prior affiliations include
consulting arrangements in the automotive, furniture and clothing industries,
with companies such as Automobili Lamborghini S.p.A. and Giorgio Armani S.p.A.
Mr. Roffi received degrees in Psychology and Engineering from the University of
Zurich.
47
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
each of the four most highly compensated executive officers of the Company for
the fiscal years ended March 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------ ALL OTHER
NAME AND PRINCIPAL FISCAL OTHER ANNUAL NUMBER OF (4)
POSITIONS YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------------------------- ------ -------- ------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Henry E. Tauber...................... 1996 $300,000 $75,000 (2) 0 $1,000
President and Chief Executive 1995 300,000 0 (2) 0 3,908
Officer of Marker International 1994 300,000 0 (2) 0 2,572
Eiichi Isomura....................... 1996 212,150 0 (2) 0 0
Chairman Marker Japan and Vice 1995 212,150 0 (2) 0 0
President of Marker International(1) 1994 212,150 0 (2) 0 0
Masayuki Chiba....................... 1996 207,414 0 (2) 0 0
President Marker Japan(1) 1995 207,414 0 (2) 15,000 0
1994 207,414 0 (2) 0 0
Dr. Wilhelm Fahrngruber.............. 1996 206,996 0 (2) 10,000 0
Chairman and Managing Director of 1995 179,996 0 $27,000(3) 40,000 0
Marker Germany(1) 1994 179,996 0 27,000(3) 0 0
Premek Stepanek...................... 1996 146,817 0 (2) 10,000 0
Managing Director of Marker 1995 142,431 0 (2) 40,000 0
Germany(1) 1994 131,346 0 (2) 0 0
</TABLE>
- ------------
(1) The Company pays salaries to its employees in the applicable local currency.
The above salaries are translated into Dollars based on exchange rates of
U.S. $ 1 for 1.667 Marks and U.S. $ 1 for Yen 107 with respect to the
employees employed by Marker Germany and Marker Japan, respectively.
(2) The amount of perquisites and other personal benefits received by the
indicated officer did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for the year.
(3) Represents reimbursement of interest expense related to a personal mortgage.
(4) Amounts indicated pertain to Company contributions to the Company's 401(k)
retirement plan.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an officer or consultant
receives an annual fee of $6,000 for serving on the Board of Directors and
reimbursement of expenses for each Board or committee meeting attended.
Directors are eligible to participate in the Company's stock option plans.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with Premek Stepanek,
Managing Director of Marker Germany, Dr. Wilhelm Fahrngruber, Chairman and
Managing Director of Marker Germany and Otto H. Harsanyi, Director of Marker
Germany. Mr. Stepanek, Dr. Fahrngruber and Mr. Harsanyi receive base salaries of
$137,972, $206,996 and $104,979, respectively (based on an exchange of the Mark
to the Dollar of U.S. $1 to 1.667 Marks). Mr. Harsanyi's contract expires in
1998 and Mr. Stepanek's and Dr. Fahrngruber's contracts each expire in 2000.
Lucio Roffi has entered into an employment contract with DNR Sportsystem as
of April 10, 1995 (the "Roffi Employment Agreement"). Pursuant to the Roffi
Employment Agreement, Mr. Roffi serves
48
<PAGE>
as Chief Executive Officer and Chairman of the Board of DNR Sportsystem. The
Agreement entitles Mr. Roffi, among other things, to CHF 30,000 (U.S. $25,000)
per month salary, CHF 2,000 (U.S. $1,667) per month for expenses and CHF 316,000
(U.S. $263,333) annual bonus. Mr. Roffi's contract is scheduled to expire on
December 31, 1997, and will thereafter extend for successive two year periods,
unless terminated by either party upon six months' notice. Upon consummation of
the DNR Equity Purchase, the Company assumed the Roffi Employment Agreement.
STOCK OPTION PLAN
The Company has established its 1994 non-qualified and incentive stock
option plan (the "Stock Option Plan") for the purpose of attracting and
retaining the Company's directors, executive officers and certain key employees.
Of the Company's Common Stock, 2,500,000 shares have been reserved for
issuance under the Stock Option Plan. The Stock Option Plan allows for the grant
of "incentive" or "non-qualified" options and is administered by the
Compensation Committee of the Board of Directors.
In the case of grants of non-qualified stock options, the exercise price per
share will be fixed by the Compensation Committee on the date of grant and the
term of the option will be up to ten years. The number of shares as to which
options can be granted to any individual in any calendar year is limited to
100,000 shares.
The exercise price per share of incentive stock options, which is determined
by the Compensation Committee, may not be less than 100% of the fair market
value of the Common Stock underlying the grant on the date of such grant;
provided, however, in the case of an incentive stock option granted to an
individual who owns (or is deemed to own) at least 10% of the total combined
voting power of all classes of stock of the Company, the plan provides that the
exercise price must be at least 110% of the fair market value on the date of
grant. The aggregate fair market value (determined at the time the option is
granted) of shares which may be purchased for the first time during any calendar
year pursuant to an incentive stock option granted under the Stock Option Plan,
or any other incentive stock option plan of the Company, may not exceed
$100,000.
An optionee under the Stock Option Plan may, with the consent of the
Compensation Committee, elect to pay for the shares to be received upon exercise
of his options in cash, shares of Common Stock or any combination thereof.
The Compensation Committee has the authority to determine the terms of
options granted under the Stock Option Plan including, among other things, the
individuals who shall receive options, the times when they shall receive them,
whether an incentive stock option and/or non-qualified option shall be granted,
the number of shares to be subject to each option and the date or dates each
option shall become exercisable.
49
<PAGE>
As of March 31, 1996 and 1995, the Company had the following options
outstanding and exercisable:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996 AMOUNT PRICE PER SHARE
- --------------------------------------------------- ------- ---------------
<S> <C> <C>
Options Granted.................................... 359,500 $6.00-7.13
Options Exercised.................................. (1,000) $7.13
Options Expired/Forfeited.......................... (25,000) $7.13-7.25
Options outstanding at March 31, 1996.............. 856,000 $6.00-7.13
Options exercisable at March 31, 1996.............. 125,375 $7.13
YEAR ENDED MARCH 31, 1995
- ---------------------------------------------------
Options Granted.................................... 522,500 $7.13-7.25
Options Exercised.................................. 0 --
Options Expired/Forfeited.......................... 0 --
Options outstanding at March 31, 1995.............. 522,500 $7.13-7.25
Options exercisable at March 31, 1995.............. 0 --
</TABLE>
OTHER PLANS
The Company has adopted a qualified retirement plan, with a salary deferral
feature designed to qualify under Section 401(k) (the "401(k) Plan") of the
Internal Revenue Code of 1986, as amended (the "Code") covering substantially
all of the United States officers and employees of the Company. The terms of the
401(k) Plan permit each participant to elect to defer, until termination of
employment, up to a maximum of 4% of his or her compensation and have the
Company contribute compensation to the 401(k) Plan on such participant's behalf,
up to an annual statutory limitation ($9,500 for 1996) in accordance with
Section 401(k) of the Code. In addition, contributions of participants are
matched by the Company in an amount equal to 50% of the participant's salary
deferral contribution for the year which is not in excess of 4% of the
participant's compensation. All contributions to the 401(k) Plan are subject to
nondiscrimination requirements and annual limitations under the Code. The salary
deferral contributions of officers and employees and the 50% matching
contribution made by the Company to them are always fully vested. Under the
Code, neither salary deferral contributions nor the Company's contributions are
taxable to the participant until such amounts are distributed to the
participant, and all contributions are tax deductible to the Company.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information on stock option grants made by
the Company to the executive officers named in the Summary Compensation Table
during the fiscal year ended March 31, 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
GRANTED TO ANNUAL RATES OF STOCK
EMPLOYEES PRICE APPRECIATION FOR
OPTIONS IN OPTION TERM
GRANTED FISCAL EXERCISE EXPIRATION -----------------------
NAME (1) YEAR PRICE DATE 5% 10%
- ------------------------------- ------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Henry E. Tauber................ 0 0.0% $-- -- $ 0 $ 0
Eiichi Isomura................. 0 0.0 -- -- 0 0
Masayuki Chiba................. 0 0.0 -- -- 0 0
Dr. Wilhelm Fahrngruber........ 10,000 2.8 6.00 5/24/05 37,734 95,625
Premek Stepanek................ 10,000 2.8 6.00 5/24/05 37,734 95,625
</TABLE>
- ------------
(1) Each option granted is for one share of the Company's Common Stock. The
options granted are exercisable in cumulative 25% installments commencing
one year from the date of grant, with full vesting occurring on the fourth
anniversary date.
50
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-END VALUES
The following table sets forth information with respect to the exercise of
stock options to acquire shares of the Company's Common Stock by the executive
officers named in the Summary Compensation Table during the fiscal year ended
March 31, 1996, as well as the aggregate number and value of unexercised options
held by such officers on March 31, 1996:
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT MARCH 31, 1996 OPTIONS AT MARCH 31, 1996
EXERCISE REALIZED ------------------------------ ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry E. Tauber........... 0 0 0 0 $ 0 $ 0
Eiichi Isomura............ 0 0 0 0 0 0
Masayuki Chiba............ 0 0 3,750 11,250 4,219 12,656
Dr. Wilhelm Fahrngruber... 0 0 10,000 40,000 11,250 56,250
Premek Stepanek........... 0 0 10,000 40,000 11,250 56,250
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors appointed a Compensation Committee comprising John G.
McMillian and Graham S. Anderson and an Audit Committee comprising Vinton H.
Sommerville and Mr. Anderson in 1994. Prior to 1994, the Board of Directors of
the Company did not have a compensation committee and decisions with respect to
executive officer compensation were made by Henry E. Tauber, President, Chief
Executive Officer and Chairman of the Board of the Company. None of the
Company's executive officers currently serve, nor in the future are they
expected to serve, (i) as a member of the compensation committee (or other board
committee performing equivalent functions) of any other entity, one of whose
executive officers will serve on the Company's Compensation Committee, (ii) as a
director of any other entity, one of whose executive officers will serve on the
Company's Compensation Committee or (iii) as a member of the compensation
committee (or other board committee performing equivalent functions) of any
other entity, one of whose executive officers will serve as a director of the
Company.
51
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 31, 1996, and as
adjusted to reflect the sale of Common Stock offered hereby by (i) each person
who is known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) the Company's
Chief Executive Officer and the four executive officers listed in the Summary
Compensation Table above, (iv) the Selling Stockholder and (v) all directors and
officers as a group.
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING NUMBER OF
DIRECTORS, OFFICERS, ----------------------- ----------------------- SHARES
5% STOCKHOLDERS NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE OFFERED IN
AND SELLING STOCKHOLDER SHARES(1) OF CLASS SHARES(1) OF CLASS THE OFFERING
- -------------------------------------- --------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
NAME AND ADDRESS OF BENEFICIAL OWNER:
Chancellor Capital Management, Inc.... 829,500 9.6% 829,500 7.5% --
1166 Avenue of the Americas
New York, NY 10036
OFFICERS AND DIRECTORS:
Henry E. Tauber....................... 5,406,055 62.8% 4,506,055 41.2% 900,000(2)
Graham S. Anderson.................... 43,286 * 43,286 * --
Eiichi Isomura........................ 142,857 1.7 142,857 1.3 --
John G. McMillian..................... 164,643 1.9 164,643 1.5 --
Vinton H. Sommerville(3).............. 54,286 * 54,286 * --
All directors and officers as a group
(13 persons)(4)....................... 5,907,022 68.6% 5,007,022 45.1% 900,000(2)
</TABLE>
- ------------
* Less than 1%.
(1) The shares beneficially owned by an individual are determined in accordance
with the definition of "beneficial ownership" set forth in the regulations
of the Securities and Exchange Commission. Accordingly, they may include
shares owned by or for, among others, the spouse, minor children or certain
other relatives of such individual, as well as other shares as to which the
individual has or shares voting or investment power or has the right to
acquire within 60 days after May 31, 1996.
(2) Does not include exercise of Underwriters' over-allotment option.
(3) Mr. Sommerville purchased 15,000 shares of Common Stock in May 1996 in the
open market for $7.38 to $7.50 per share.
(4) Shares held by officers and directors as a group include 93,750 options
which are currently exercisable. None of the officers and directors named
above holds any such options.
52
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of the Company's outstanding Series A Bonds are held by Isomura Sangyo
Kaisha Ltd., a Japanese corporation ("Isomura Sangyo" or the "Bondholder"),
controlled by Eiichi Isomura, a director of the Company, and his family. The
Company issued the Series A Bonds on the effective date of the Initial Public
Offering in exchange for the Redeemable Preferred Stock which was held by
Isomura Sangyo at the time of the Initial Public Offering. The Series A Bonds
are subject to redemption upon not less than 30 days' notice, in whole or in
part, at the option of the Company.
The Series A-1 bonds had an original aggregate face value amount of $8.0
million and bore interest, payable semi-annually on September 30 and March 31,
at the effective borrowing rate for the bondholder (the "Japanese Bank Rate"),
which was approximately 6.9% and 7.2% for fiscal years ended March 31, 1995 and
1996, respectively. During fiscal year 1995 and 1996, in accordance with the
terms of the bonds, Isomura Sangyo redeemed $2.0 million and $1.0 million of the
Series A-1 bonds, respectively. Upon six months prior written notice, the
Bondholder may elect to have the Company redeem a portion of the Series A-1
Bonds, according to the following schedule:
<TABLE>
<CAPTION>
NOTICE REDEMPTION FACE AMOUNT
ON OR AFTER ON OR AFTER TO BE REDEEMED
- -------------------------------------------- --------------- --------------
<S> <C> <C>
April 1, 1996............................... October 1, 1996 $1,000,000
April 1, 1997............................... October 1, 1997 2,000,000
April 1, 1998............................... October 1, 1998 2,000,000
</TABLE>
The redemption price of the Series A-1 Bonds equals the face amount of the
portion of such Bonds redeemed plus accrued but unpaid interest thereon.
The Series A-2 Bonds have an original aggregate face value amount of $10.0
million and bear interest, payable semi-annually on September 30 and March 31,
at the Japanese Bank Rate plus 3% of the face value of the bonds outstanding.
During the fiscal year ending March 31, 1996, the Bondholder redeemed $2.5
million of Series A-2 Bonds. Upon six months prior written notice, the
Bondholder may elect to have the Company redeem a portion of the Series A-2
Bonds, according to the following schedule:
<TABLE>
<CAPTION>
NOTICE REDEMPTION FACE AMOUNT
ON OR AFTER ON OR AFTER TO BE REDEEMED
- ----------------------------------------- ----------------- --------------
<S> <C> <C>
June 16, 1996............................ December 16, 1996 $2,500,000
June 16, 1997............................ December 16, 1997 2,500,000
June 16, 1998............................ December 16, 1998 2,500,000
</TABLE>
The redemption price of the Series A-2 Bonds equals the face amount of the
portion of such Bonds redeemed plus accrued but unpaid interest thereon.
The Series A-3 Bond has an aggregate face value amount of $1.0 million and
bears interest, payable semi-annually on September 30 and March 31, at the
Japanese Bank Rate plus 3% of the face value of the Bond outstanding. Upon six
months' prior written notice, the Bondholder may elect to have the Company
redeem the Series A-3 Bond, according to the following schedule:
<TABLE>
<CAPTION>
NOTICE REDEMPTION FACE AMOUNT
ON OR AFTER ON OR AFTER TO BE REDEEMED
- ----------------------------------------- ----------------- --------------
<S> <C> <C>
June 16, 1998............................ December 16, 1998 $1,000,000
</TABLE>
The redemption price of the Series A-3 Bond equals the face amount of the
Bond redeemed plus accrued but unpaid interest thereon.
53
<PAGE>
During fiscal years 1994, 1995 and 1996, Marker Japan purchased ski bindings
and services totaling approximately $4.6 million, $0.6 million and $13,000,
respectively, from Isomura Seisakusho KK ("Isomura Seisakusho"), a company of
which Mr. Isomura is the president, a director and owner of more than 10% of the
outstanding stock. In fiscal year 1995, a customer of Marker Japan returned
snowmaking equipment of approximately $0.5 million to Marker Japan for warranty
purposes. Marker Japan returned this equipment to Isomura Seisakusho, the
supplier of such equipment, for reimbursement. As of March 31, 1996, the net
account receivable from Isomura Seisakusho was approximately $0.5 million. As of
March 31, 1995, the net account receivable from Isomura Seisakusho was
approximately $0.6 million. As of March 31, 1994, the net account payable to
Isomura Seisakusho was approximately $0.5 million.
During the Company's 1994 fiscal year, Isomura Sangyo exchanged 1,000 shares
of the Common Stock for 1,000 shares of Series A-2 Preferred Stock and 1,000
shares of Series A-3 Preferred Stock, which were subsequently exchanged for
Series A Bonds, as discussed above.
At March 31, 1996, the Company had outstanding notes in an aggregate amount
equal to approximately U.S. $7.5 million, payable to Japanese banks. Of these
amounts, approximately U.S. $1.9 million was secured by assets of Mr. Isomura, a
shareholder and director of the Company, and assets of Isomura Sangyo, a
shareholder of the Company.
Marker Japan leases office space in Tokyo, Japan and receives services from
Isomura Sangyo. In connection therewith, for the fiscal years 1994, 1995 and
1996, Marker Japan made payments to Isomura Sangyo totaling approximately
$268,000, $272,000 and $428,000, respectively.
The Company purchased insurance through an insurance broker, Acordia
Northwest Inc., of which Graham S. Anderson, a director of the Company, is also
a director. The Company paid approximately $700,000, $821,000 and $746,000 in
premiums for such insurance during fiscal 1994, 1995 and 1996, respectively.
On June 11, 1996, the Company entered into agreements (collectively, the
"Purchase Agreement") with Lucio Roffi, who will be named a director of the
Company upon the closing of this offering, and Gregor Furrer, pursuant to which
the Company purchased on June 26, 1996 an aggregate of 330 shares of DNR
Sportsystem from Mr. Roffi and Gregor Furrer for a purchase price of
approximately CHF 73,241 (U.S. $58,814) per share, or a total purchase price of
approximately CHF 24,169,530 (U.S. $19.4 million). The 330 shares represent 55%
of the total outstanding shares of DNR Sportsystem. Among other things, the
Purchase Agreement grants each shareholder of DNR Sportsystem ongoing rights of
first refusal with respect to future transfers of DNR Sportsystem shares.
The Company, which previously held 150 shares, or 25% of the outstanding
shares of DNR Sportsystem, now holds an 80% interest in DNR Sportsystem as a
result of the DNR Equity Purchase. Mr. Roffi and Gregor Furrer now each hold a
10% interest in DNR Sportsystem.
As described above under "Business--DNR Sportsystem Ltd.--Employees," the
Company, upon consummation of the DNR Equity Purchase, also granted a revocable
proxy to Mr. Roffi entitling him to assume voting control of DNR Sportsystem.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is subject to
the Utah Revised Business Corporation Act, as amended (the "URBCA"), and to
provisions contained in the Company's Restated Articles of Incorporation (the
"Articles of Incorporation") and By-Laws (the "By-Laws"), copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. Reference is made to such exhibits for a detailed description of
the provisions thereof summarized below.
Upon consummation of the offering made hereby, the authorized capital stock
of the Company will consist of 5,000,000 shares of Preferred Stock, $.01 par
value per share, none of which will be issued and outstanding and 25,000,000
shares of Common Stock, $.01 par value per share, of which 10,949,127 shares
will be issued and outstanding.
COMMON STOCK
DIVIDENDS. After any requirements with respect to dividends on any
outstanding Preferred Stock have been met, the holders of Common Stock will be
entitled to receive such dividends, if any, as may be declared from time to time
by the Board of Directors on the Common Stock, which dividends will be paid out
of assets legally available therefor and will be distributed pro rata in
accordance with the number of shares of Common Stock held by each such holder.
See "Dividend Policy."
VOTING RIGHTS. Each holder of Common Stock is entitled to one vote per share
on all matters to be voted upon by shareholders. The shares of Common Stock have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting can elect all the directors, if they so choose, and, in such
event, the holders of the remaining shares cannot elect any directors. Because
the Company's President and Chief Executive Officer will own approximately 41.2%
of the outstanding shares of Common Stock immediately after the offering being
made hereby (37.9% if the Underwriters' over-allotment option is exercised in
full), he will be able to significantly influence the election of the directors
and other actions requiring a shareholder vote. See "Risk Factors--Control of
the Company."
LIQUIDATION RIGHTS. In the event of any liquidation, distribution or sale of
assets, dissolution or winding-up of the Company, holders of Common Stock will
be entitled to share equally and ratably in all assets available for
distribution to shareholders after payment of creditors and distribution in full
to the holders of any Preferred Stock outstanding at the time of any
preferential amount to which they may be entitled.
OTHER TERMS. The Common Stock carries no preemptive rights and is not
convertible, redeemable or assessable, or entitled to the benefit of any sinking
fund.
All of the outstanding shares of Common Stock are fully paid and
nonassessable, and the shares of Common Stock offered by the Company hereunder,
when issued, will be validly issued, fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
Company's Common Stock is First Security Bank of Utah, N.A.
PREFERRED STOCK
PREFERRED STOCK. The Articles of Incorporation provide that the Board of
Directors may, without action of its shareholders, authorize the issuance of up
to 5,000,000 shares of Preferred Stock from time to time in one or more series.
The Board of Directors is authorized to determine, among other things, with
respect to each series that may be issued, the preferences, voting powers,
qualifications and special or relative rights or privileges. With regard to
dividends, redemption and liquidation preference, any
55
<PAGE>
particular series of Preferred Stock may rank junior to, on a parity with, or
senior to any other series of Preferred Stock and Common Stock. The Board of
Directors, without shareholder approval, can issue Preferred Stock with voting
and conversion rights that could adversely affect the voting power of the
holders of Common Stock. Currently, the Company has no plans to issue shares of
Preferred Stock.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION, BY-LAWS AND
UTAH REVISED BUSINESS CORPORATION ACT
The Company's Articles of Incorporation and By-Laws require (i) advance
notice procedures with respect to nominations of directors or other matters to
be voted on by shareholders other than by or at the direction of the Board of
Directors and (ii) the filling of vacancies on the Board of Directors only by a
vote of a majority of directors then in office.
The Articles of Incorporation limit the personal liability of directors to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such limitation of liability is not
permitted under the URBCA. The URBCA provides that the liability of a director
may not be limited (i) for any transaction from which the director derived an
improper personal benefit, (ii) for an intentional infliction of harm on the
Company or its shareholders, (iii) for liability for payments of dividends or
stock purchases or redemptions in violation of the URBCA, or (iv) for an
intentional violation of criminal law.
In addition, the Company's Articles of Incorporation and By-Laws provide
that the Company shall indemnify any and all of its directors, or former
directors, to the fullest extent permitted by law against claims and liabilities
to which such persons may become subject. The URBCA provides that
indemnification is permissible only when the director acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, only
when the director had no reasonable cause to believe the conduct was unlawful.
Pursuant to the Company's Articles of Incorporation and By-Laws, directors and
officers may be indemnified for liabilities arising under the Securities Act.
Such indemnification may be limited by applicable law.
The Company has made an election not to be governed by the Utah Control
Shares Acquisitions Act (the "Control Shares Act"), Utah Code Ann. 61-6-1 et
seq. In general, the Control Shares Act provides that any time an acquiring
person makes or proposes to make a control share acquisition, which is defined
as the acquisition of shares which entitle the acquiring person to exercise
voting control over (i) one-fifth but less than one-third of all voting power,
(ii) one-third or more but less than a majority of all voting power, or (iii) a
majority of all voting power, a majority of the remaining shareholders must
approve voting rights for those shares.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, 10,949,127 shares of the Company's Common
Stock will be outstanding (11,204,127 shares of Common Stock if the
Underwriters' over-allotment option is exercised in full). Of those shares,
6,035,855 shares (6,545,855 shares if the over-allotment option is exercised in
full) will be freely tradeable without restriction or further registration under
the Securities Act. The remaining 4,913,272 shares (4,658,272 shares if the
over-allotment option is exercised in full) of Common Stock will be classified
as "restricted" securities under the Securities Act. Restricted securities may
not be sold unless they are registered under the Securities Act or sold pursuant
to an exemption from registration, including an exemption pursuant to Rule 144.
Rule 144 provides a means for disposing of restricted shares in the open
market without compliance with the registration provisions of the Securities
Act. In general, Rule 144 permits a person who has owned restricted shares for
at least two years to sell those shares in ordinary broker transactions or to a
market maker in an amount that, within any three-month period commencing 90 days
after the date of this Prospectus, does not exceed the greater of: (i) 1% of the
then outstanding shares of Common Stock of the Company, or (ii) the average
weekly trading volume of the shares during the four calendar weeks preceding the
sale, provided that certain public information about the Company, as required by
Rule 144, is available and the seller complies with certain other requirements.
Restricted shares which have been owned for at least three years by a person who
is not an "affiliate" of the Company (and has not been an affiliate within the
90 day period preceding the date of sale) may be sold without regard to the
foregoing requirements. Affiliates of the Company must comply with the
restrictions and requirements of Rule 144, other than the two-year holding
period requirement, to effect sales of common stock that are not "restricted"
securities.
The Company and Messrs. Anderson, Isomura, McMillian, Sommerville and
Tauber, the holders of an aggregate of 4,656,127 shares of Common Stock (after
this offering, assuming the exercise of the Underwriters' over-allotment), have
agreed to deliver to the Representatives prior to the date of this Prospectus
lock-up agreements under which they agree not to sell, offer for sale, contract
to sell or otherwise dispose of any shares of Common Stock or any securities
exercisable for or convertible into its Common Stock or any rights to acquire
Common Stock for a period of 180 days after the date of this Prospectus without
the prior written consent of Allen & Company Incorporated, on behalf of the
Underwriters. Subject to compliance with Rule 144 of the Securities Act,
following expiration of or release from such 180-day lock-up agreements,
approximately 4,656,127 shares of Common Stock will be eligible for sale.
No reliable predictions can be made regarding the effect, if any, that sales
of restricted shares will have on the market price of the Common Stock. It is
possible, however, that sales of substantial amounts of restricted shares in the
public market could adversely affect the prevailing market prices. The Common
Stock is listed and currently trades on the Nasdaq National Market under the
symbol "MRKR."
57
<PAGE>
UNDERWRITING
The Underwriters named below, for whom Allen & Company Incorporated and
Piper Jaffray Inc. are acting as representatives (the "Representatives"), have
severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Company the aggregate number of
shares of Common Stock set forth below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---------------------------------------------------------------- ---------
<S> <C>
Allen & Company Incorporated....................................
Piper Jaffray Inc...............................................
---------
Total..................................................... 3,400,000
---------
---------
</TABLE>
Pursuant to the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions therein, to purchase all of the
shares offered hereby (other than shares that may be purchased under the
over-allotment option) if any are purchased. The Underwriters propose initially
to offer the shares to the public at the public offering price set forth on the
cover page of this Prospectus. The Underwriters may allow a selling concession
not exceeding $ per share of Common Stock to certain dealers. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to other dealers. The public offering price and concessions
may be changed by the Representatives after this offering.
The Company has agreed to reimburse the Representatives for up to $100,000
of their out-of-pocket expenses in connection with this offering.
The Company and the Selling Stockholder, collectively, have granted to the
Underwriters an option, expiring 30 days after the date of the Underwriting
Agreement, to purchase up to an additional 510,000 shares of Common Stock at the
public offering price, less underwriting discounts and commissions, all as set
forth on the cover page of this Prospectus. The Company and the Selling
Stockholder shall contribute an equal number of shares to cover such
over-allotments. The Underwriters may exercise the option only to cover
over-allotments, if any, in the sale of shares of Common Stock in this offering.
To the extent that the Underwriters exercise their option, each Underwriter will
be committed, subject to certain conditions, to purchase a number of such
additional shares proportionate to such Underwriter's initial commitment.
The Company and Messrs. Anderson, Isomura, McMillian, Sommerville and
Tauber, the holders of an aggregate of 4,656,127 shares of Common Stock (after
this offering, assuming the exercise of the Underwriters' over-allotment), have
agreed to deliver to the Representatives prior to the date of this Prospectus
lock-up agreements under which they agree not to sell, offer for sale, contract
to sell or otherwise dispose of any shares of Common Stock or any securities
exercisable for or convertible into its Common Stock or any rights to acquire
Common Stock for a period of 180 days after the date of this Prospectus, without
the prior written consent of Allen & Company Incorporated, on behalf of the
Underwriters.
The Representatives intend to engage in passive market making transactions
in the Company's Common Stock, in accordance with Rule 10b-6A under the Exchange
Act. Rule 10b-6A generally allows the Nasdaq Stock Market's market makers
participating in the distributions of the Common Stock to conduct passive market
making activities in the two business day "cooling off period" prior to
commencement of the distribution if, among other things, (i) bids offered for
the Company's Common Stock during such period by any such market maker are at
prices no greater than the independent bid prices offered for the Company's
Common Stock by other market makers not participating in such distribution, and
(ii) purchases of the Company's Common Stock during such period by any such
market maker do not exceed the volume and other limitations established by Rule
10b-6A.
The Company, the Selling Stockholder and the Underwriters have each agreed
to indemnify one another against certain liabilities, including liabilities
under the Securities Act.
58
<PAGE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Stroock & Stroock & Lavan, New York, New York. Stroock & Stroock &
Lavan will rely as to all matters of Utah law on the opinion of Prince, Yeates &
Geldzahler, A Professional Corporation, Salt Lake City, Utah. Certain legal
matters will be passed upon for the Underwriters by Werbel McMillin &
Carnelutti, A Professional Corporation, New York, New York.
EXPERTS
The consolidated financial statements and schedule included or incorporated
by reference in this Prospectus and elsewhere in the Registration Statement, to
the extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
59
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidated Financial Statements of Marker International
<S> <C>
Report of Independent Public Accountants......................................... F-2
Consolidated Balance Sheets as of March 31, 1995 and 1996........................ F-3
Consolidated Statements of Income for the years ended March 31, 1994, 1995 and
1996................................................................................. F-4
Consolidated Statements of Shareholders' Equity for the years ended March 31,
1994, 1995 and 1996............................................................. F-]5
Consolidated Statements of Cash Flows for the years ended March 31, 1994, 1995
and 1996........................................................................ F-]6
Notes to Consolidated Financial Statements....................................... F-]7
Consolidated Financial Statements of DNR Sportsystem
Report of Independent Public Accountants......................................... F-22
Consolidated Balance Sheets as of December 31, 1994 and 1995..................... F-23
Consolidated Statements of Income and Retained Earnings for the years ended
December 31, 1993, 1994 and 1995..................................................... F-24
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995............................................................................. F-25
Notes to Consolidated Financial Statements....................................... F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Marker International:
We have audited the accompanying consolidated balance sheets of Marker
International (a Utah corporation) and subsidiaries as of March 31, 1995 and
1996, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended March 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Marker International and
subsidiaries as of March 31, 1995 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1996 in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, effective April 1, 1995,
the Company changed its method of accounting for advertising costs.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
June 7, 1996
F-2
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1995 1996
------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $12,281 $ 6,189
Accounts receivable, net of allowance for doubtful accounts
of $1,725 and $2,173, respectively.................................. 22,846 22,151
Inventories........................................................... 28,259 32,668
Prepaid and other current assets...................................... 3,470 3,584
------- --------
Total current assets................................................ 66,856 64,592
------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land.................................................................. 386 386
Building and improvements............................................. 4,900 4,912
Machinery and equipment............................................... 23,531 19,973
Furniture, fixtures and office equipment.............................. 4,100 4,225
Construction in progress.............................................. -- 913
------- --------
32,917 30,409
Less accumulated depreciation and amortization........................ (19,998) (17,288)
------- --------
Net property, plant and equipment................................... 12,919 13,121
------- --------
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY................................. -- 6,832
------- --------
OTHER ASSETS............................................................ 3,223 2,720
------- --------
$82,998 $ 87,265
------- --------
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks................................................ $30,100 $ 30,556
Current maturities of long-term debt.................................. 2,764 7,576
Current maturities of Series A Bonds, issued to a related party....... 3,500 3,500
Accounts payable...................................................... 2,992 2,899
Other current liabilities............................................. 5,574 6,514
------- --------
Total current liabilities........................................... 44,930 51,045
------- --------
LONG-TERM DEBT, net of current maturities............................... 6,244 5,452
------- --------
SERIES A BONDS, net of current maturities, issued to a related party.... 13,500 10,000
------- --------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 5,000,000 shares authorized
and none issued..................................................... -- --
Common stock, $0.01 par value, 25,000,000 shares authorized; issued
and outstanding: 1995--8,446,877 shares, 1996--8,447,877 shares..... 84 84
Additional paid-in capital............................................ 21,524 21,531
Accumulated deficit................................................... (4,716) (1,293)
Cumulative foreign currency translation adjustments................... 1,432 446
------- --------
Total shareholders' equity.......................................... 18,324 20,768
------- --------
$82,998 $ 87,265
------- --------
------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-3
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
NET SALES................................................. $ 82,637 $ 83,962 $ 87,911
COST OF SALES............................................. 49,572 48,878 52,608
--------- --------- ---------
GROSS PROFIT.............................................. 33,065 35,084 35,303
--------- --------- ---------
OPERATING EXPENSES:
Selling................................................. 13,029 13,049 14,592
General and administrative.............................. 9,316 9,314 10,559
Research and development................................ 2,158 2,349 2,762
Warehousing and shipping................................ 1,343 1,455 1,566
--------- --------- ---------
25,846 26,167 29,479
--------- --------- ---------
OPERATING INCOME.......................................... 7,219 8,917 5,824
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense........................................ (4,316) (4,999) (5,193)
Equity in earnings of unconsolidated subsidiary......... -- -- 1,595
Other, net.............................................. 826 1,584 2,072
--------- --------- ---------
(3,490) (3,415) (1,526)
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE......................................... 3,729 5,502 4,298
PROVISION FOR INCOME TAXES................................ 510 1,395 609
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE...... 3,219 4,107 3,689
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, net of tax (Note
1)........................................................ -- -- (266)
--------- --------- ---------
NET INCOME................................................ $ 3,219 $ 4,107 $ 3,423
--------- --------- ---------
--------- --------- ---------
NET INCOME APPLICABLE TO COMMON SHARES (Note 1)........... $ 1,803 $ 3,653 $ 3,423
--------- --------- ---------
--------- --------- ---------
INCOME PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE......................................... $ 0.31 $ 0.50 $ 0.43
ACCOUNTING CHANGE PER COMMON SHARE........................ -- -- (0.03)
--------- --------- ---------
NET INCOME PER COMMON SHARE............................... $ 0.31 $ 0.50 $ 0.40
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................ 5,784,627 7,367,531 8,595,453
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-4
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
CUMULATIVE
SERIES A FOREIGN
PREFERRED STOCK COMMON STOCK ADDITIONAL CURRENCY TOTAL
---------------- ------------------- PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENTS EQUITY (DEFICIT)
------ ------- ---------- ------ ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
MARCH 31, 1993.......... 2,500 $ 2,500 9,010,092 $ 90 $ 12,284 $(8,138) $ 270 $ 7,006
Exchange of common for
redeemable preferred
stock.................... -- -- (3,604,037) (36) (9,592) (1,372) -- (11,000)
Net income.............. -- -- -- -- -- 3,219 -- 3,219
Translation
adjustments.............. -- -- -- -- -- -- (90) (90)
Dividends on preferred
stock.................... -- -- -- -- -- (1,841) -- (1,841)
------ ------- ---------- ------ ---------- ----------- ----------- --------
BALANCE,
MARCH 31, 1994.......... 2,500 2,500 5,406,055 54 2,692 (8,132) 180 (2,706)
Exchange of series A
preferred stock for
common stock............. (2,500) (2,500) 378,572 4 2,496 -- -- --
Initial public offering
of common stock,
net...................... -- -- 2,662,250 26 16,336 -- -- 16,362
Net income.............. -- -- -- -- -- 4,107 -- 4,107
Translation
adjustments.............. -- -- -- -- -- -- 1,252 1,252
Dividends on preferred
stock.................... -- -- -- -- -- (691) -- (691)
------ ------- ---------- ------ ---------- ----------- ----------- --------
BALANCE,
MARCH 31, 1995.......... -- -- 8,446,877 84 21,524 (4,716) 1,432 18,324
Common stock options
exercised................ -- -- 1,000 -- 7 -- -- 7
Net income.............. -- -- -- -- -- 3,423 -- 3,423
Translation
adjustments.............. -- -- -- -- -- -- (986) (986)
------ ------- ---------- ------ ---------- ----------- ----------- --------
BALANCE,
MARCH 31, 1996.......... -- $ -- 8,447,877 $ 84 $ 21,531 $(1,293) $ 446 $ 20,768
------ ------- ---------- ------ ---------- ----------- ----------- --------
------ ------- ---------- ------ ---------- ----------- ----------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-5
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 3,219 $ 4,107 $ 3,423
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization.............................. 2,963 2,521 3,131
Equity in earnings of unconsolidated subsidiary............ -- -- (1,595)
Change in assets and liabilities:
Accounts receivable, net................................. 1,716 (1,431) (753)
Inventories.............................................. (5,054) (1,868) (7,127)
Prepaid and other assets................................. (261) (526) (317)
Accounts payable......................................... 450 (569) 45
Other current liabilities................................ (127) 1,940 684
------- ------- -------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES............ 2,906 4,174 (2,509)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................... (4,773) (5,167) (4,380)
Investment in unconsolidated subsidiary...................... -- -- (5,325)
Proceeds from disposition of equipment....................... 14 72 361
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES.......................... (4,759) (5,095) (9,344)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on notes payable to banks.......... 837 (2,727) 3,833
Issuance of common stock, net of issuance costs.............. -- 16,362 --
Dividends paid on preferred stock............................ (1,197) (1,551) --
Proceeds from common stock options exercised................. -- -- 7
Proceeds from issuance of long-term debt..................... 3,225 5,367 8,037
Principal payments on long-term debt......................... (2,040) (2,875) (3,262)
Redemption of Series A Bonds................................. -- (2,000) (3,500)
------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................... 825 12,576 5,115
------- ------- -------
Effect of foreign exchange rate changes on cash................ (127) 157 646
------- ------- -------
Net (decrease) increase in cash and cash equivalents........... (1,155) 11,812 (6,092)
Cash and cash equivalents at beginning of year................. 1,624 469 12,281
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $ 469 $12,281 $ 6,189
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-6
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Marker International (the "Company") is a holding company which designs,
develops, manufactures, and markets alpine ski bindings through its
subsidiaries, Marker Deutschland GmbH ("Marker Germany"), Marker USA, Marker
Japan, Ltd. ("Marker Japan"), Marker Austria GmbH ("Marker Austria") and Marker
Canada, Ltd. ("Marker Canada"). Substantially all of the Company's ski bindings
are manufactured by Marker Germany, which also distributes bindings in Germany,
to subsidiaries of the Company and to independent distributors in countries
where the Company does not have a distribution subsidiary. Marker AG, a Swiss
holding company and subsidiary of the Company, holds a 25% equity interest in an
entity which develops, markets, and distributes snowboards and snowboard
accessories. Marker Ltd., also a subsidiary of the Company, designs, distributes
and sells to retailers the Company's clothing, gloves and luggage products for
skiing and other recreational activities. The principal markets for the
Company's products are North America, Europe and Asia.
PERVASIVENESS OF 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 period. Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of Marker
International and its subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
The functional currency for the Company's foreign operations is the
applicable local currency; Marker Germany--Deutsch Marks, Marker Japan--Japanese
Yen, Marker Canada--Canadian Dollars, Marker Austria--Austrian Schillings, and
Marker AG--Swiss Francs. The financial statements of foreign subsidiaries are
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52. Assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at the applicable rates of
exchange at the end of the reporting period. Income and expense items are
translated at the weighted average rates of exchange prevailing during the
period. Translation gains and losses are reflected as a separate component of
shareholders' equity as "cumulative foreign currency translation adjustments."
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include investments in certificates of deposit
with original maturities of less than 30 days. As of March 31, 1996, the Company
has granted a security interest in a $3.5 million time deposit held in the
Company's name at a United States branch of a German bank. This deposit is
restricted for use as collateral on borrowings from such bank.
F-7
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ACCOUNTS RECEIVABLE
The Company has certain sales programs which result in the majority of the
annual net sales occurring in the second and third fiscal quarters. The
remaining balance of the annual net sales occurs primarily during the fourth
fiscal quarter. In accordance with industry practice, the Company grants payment
terms to its customers in excess of 30 days. As of March 31, 1996, the Company
has certain accounts receivable from customers which are not due for over six
months.
INVENTORIES
Inventories include direct materials, direct labor and manufacturing
overhead costs and are recorded at the lower of cost (using the first-in,
first-out method) or market. The major classes of inventories are as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Raw materials........................................... $ 149 $ 489
Work in process......................................... 2,815 2,551
Finished goods.......................................... 25,295 29,628
------- -------
$28,259 $32,668
------- -------
------- -------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Major additions and
improvements are capitalized, while costs for minor replacements, maintenance
and repairs that do not increase the useful life of an asset are expensed as
incurred.
For financial reporting purposes, the provision for depreciation and
amortization is determined using the straight-line or declining-balance methods
based on the expected remaining economic useful lives of the assets as follows:
<TABLE>
<CAPTION>
DESCRIPTION USEFUL LIVES
- --------------------------------------------------------------- ------------
<S> <C>
Machinery and equipment........................................ 2-10 years
Furniture, fixtures and office equipment....................... 2-10 years
Building and improvements...................................... 2-30 years
</TABLE>
In March 1996, the Company began construction of a snowboard manufacturing
facility located on property adjacent to the Company's headquarters in Salt Lake
City. Construction costs related to this facility have been capitalized as
construction in progress at March 31, 1996 and includes land with a cost of
approximately $708,000. The total projected cost of the manufacturing facility
(excluding machinery and equipment) is approximately $3.0 million and the
building is expected to be placed in service during October 1996.
For the year ended March 31, 1995, the Company capitalized interest costs
totaling approximately $34,000, related to the construction of corporate
facilities. No interest was capitalized during fiscal 1996.
F-8
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ADVERTISING
Prior to fiscal 1996, the Company capitalized certain advertising costs and
amortized those costs over the period for which the revenue related to the costs
was recognized. During fiscal 1996, the Company adopted the provisions of
Statement of Position 93-7, Reporting on Advertising Costs, which requires
advertising costs to be expensed the first time the advertising takes place or
when incurred. The Company has elected to expense advertising costs the first
time the advertising takes place. In fiscal 1996, the cumulative effect of
adopting this change in accounting principle, net of the related income tax
effect, was approximately $266,000. On a pro forma basis, this change would have
had no material impact on fiscal 1994 and 1995 net income.
For the years ended March 31, 1994, 1995 and 1996, advertising expenses
totaled approximately $4.0 million, $3.3 million and $4.2 million, respectively.
NET INCOME PER COMMON SHARE
Net income per common share is based upon the weighted average number of
shares of common stock and dilutive common stock equivalent shares outstanding
during the periods presented. Common stock equivalent shares consist of stock
options that have a dilutive effect when applying the treasury stock method.
In connection with the Initial Public Offering in August 1994, all of the
outstanding shares of the Series A preferred stock were exchanged for 378,572
shares of common stock, and all of the outstanding shares of Redeemable
Preferred Stock were converted to Series A Bonds issued to a related party with
an aggregate principal amount of $19,000,000 (See Note 3).
Net income applicable to common shares for fiscal years 1994 and 1995
reflects a pro forma presentation of the transactions described above as if the
exchanges occurred on April 1, 1993 (the beginning of the 1994 fiscal year).
Accordingly, net income applicable to common shares was computed by eliminating
dividends totaling approximately $387,000 and $87,000 on Series A preferred
stock for the years ended March 31, 1994 and 1995, respectively, and by
subtracting from net income dividends that would have been treated as interest
expense, net of the related tax effect, had the exchange of the Redeemable
Preferred Stock occurred on April 1, 1993. The amount by which net income was
reduced totaled approximately $1,416,000 and $454,000 for the years ended March
31, 1994 and 1995, respectively. No dividends were paid during fiscal 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's long-term debt is approximately $13.3
million at March 31, 1996. The book value of all other financial instruments
approximates fair value except for derivatives (See Note 9). The estimated fair
values have been determined using appropriate market information and valuation
methodologies.
F-9
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT
Notes payable to banks at March 31, 1995 and 1996, consisted of the
following:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Credit arrangement with a German bank, with maximum borrowing of DM
70,000,000 ($47,397,000). The arrangement provides for maximum
borrowings at the bank's base rate or a combination of borrowings at
the bank's base rate with DM 45,000,000 ($30,469,500) maximum available
for Euroloans and DM 25,000,000 ($16,927,500) available as a revolving
line of credit. The line of credit includes provisions for discounting
customer notes with recourse. Amounts outstanding under these credit
arrangements at March 31, 1996 consisted of Euroloans of DM 26,000,000
($17,604,600), bearing interest rates ranging from 4.95% to 6.95%
subject to an interest rate swap for the initial DM 10,000,000
($6,771,000) which limits the interest rate to a maximum rate of 6.95%,
and DM 7,267,291 ($4,920,683) on the revolving line of credit which had
an interest rate of 8.5% at March 31, 1996. Borrowings are secured by
the accounts receivable, inventory, and equipment of Marker Germany and
are guaranteed by Marker International and Marker USA. The current
agreement extends through July 1996 ................................... $19,702 $22,525
Credit arrangements with five Japanese banks, with maximum borrowing of
YEN 2,450,000,000 ($22,836,450). At March 31, 1996, YEN 800,000,000
($7,456,800) outstanding with interest rates ranging from 1.04% to
2.25%, due in installments at various dates through March 1997, YEN
200,000,000 ($1,864,200) secured by the assets of a director of the
Company, YEN 450,000,000 ($4,194,450) co-guaranteed by an officer of
Marker Japan and Marker International, YEN 100,000,000 ($932,100)
guaranteed by Marker International and YEN 50,000,000 ($466,050)
secured by certain accounts receivable ................................ 10,398 7,457
Line of credit with a U.S. bank, maximum borrowings of $18,000,000,
subject to a borrowing base limitation (maximum amount available at
March 31, 1996 was $14,000,000). Interest at the bank's prime rate
(8.25% at March 31, 1996) secured by the accounts receivable and
inventory of Marker USA and Marker Ltd. and guaranteed by Marker
International, expires July, 1996 ....................................... -- 574
------- -------
$30,100 $30,556
------- -------
------- -------
</TABLE>
For the years ended March 31, 1995 and 1996, the weighted average interest
rate on short-term borrowings outstanding at year end was 5.5 percent and 4.9
percent, respectively, the maximum short-term borrowing amount outstanding
during the year was $46.9 million and $59.7 million, respectively, the average
amount outstanding during the year was $34.3 million and $40.5 million,
respectively, and the weighted average interest rate during the years ended
March 31, 1995 and 1996 was 6.1 percent and 5.3 percent, respectively.
F-10
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT--(CONTINUED)
Long-term debt at March 31, 1995 and 1996, consisted of the following:
<TABLE>
<CAPTION>
1995 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to a German bank, interest rates ranging from 7.20% to
9.75%, due in installments through September 1999, secured by accounts
receivable, inventory and equipment of Marker Germany and guaranteed by
Marker International and Marker USA..................................... $5,943 $4,946
Note payable to a U.S. branch of a German bank, interest at 6.31% due
December 1996, secured by a $3,500,000 time deposit held in the
Company's name at the bank.............................................. -- 4,932
Note payable to a U.S. bank, interest at 9.7%, due in monthly installments
through July 2004, secured by a building................................ 1,707 1,590
Note payable to a Japanese bank, interest at 2.13%, due in installments
through November 2000, secured by the assets of a director of the
Company................................................................... -- 1,211
Notes payable to a Japanese bank paid in full during fiscal 1996.......... 895 --
Other..................................................................... 463 349
------ -------
9,008 13,028
Less current maturities................................................... (2,764) (7,576)
------ -------
$6,244 $5,452
------ -------
------ -------
</TABLE>
The following are scheduled principal maturities of long-term debt as of
March 31, 1996 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
- ----------------------------------------------------------------- -------
<S> <C>
1997............................................................. $7,576
1998............................................................. 973
1999............................................................. 1,471
2000............................................................. 1,847
2001............................................................. 396
Thereafter....................................................... 765
-------
$13,028
-------
-------
</TABLE>
Total cash paid for interest during the years ended March 31, 1994, 1995 and
1996 was approximately $4,173,000, $3,635,000 and $5,172,000, respectively.
Included in total cash payments for interest are Series A Bond (See Note 3)
interest payments which totaled approximately $183,000 and $1,556,000 for the
years ended March 31, 1995 and 1996, respectively.
F-11
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. BONDS
The holder of the outstanding Series A-1, A-2, and A-3 Redeemable Preferred
Stock (collectively, the "Redeemable Preferred Stock") exchanged, on the
effective date of the Initial Public Offering (August 1994), its shares of
Redeemable Preferred Stock for Series A-1, A-2 and A-3 bonds (collectively, the
"Series A Bonds") of the Company. The holder of the Series A Bonds is a Japanese
corporation (the "Bondholder") controlled by a director of the Company. The
Series A Bonds are subject to redemption upon not less than 30 days notice, in
whole or in part, at the option of the Company.
SERIES A-1 BONDS
The Series A-1 bonds had an original aggregate face value of $8,000,000 and
bear interest, payable semi-annually on September 30 and March 31, at the
effective borrowing rate for the Bondholder (the "Japanese Bank Rate"). The
effective Japanese Bank Rate at March 31, 1995 and 1996 was 7.5 percent and 6.95
percent, respectively. The effective Japanese bank rate during the years ended
March 31, 1995 and 1996 was 6.9 percent and 7.2 percent, respectively. During
the fiscal year ended March 31, 1995 and 1996, $2,000,000 and $1,000,000,
respectively, of the Series A-1 bonds were redeemed. The remaining $5,000,000
aggregate principal amount of Series A-1 bonds outstanding may be redeemed
according to the following schedule:
<TABLE>
<CAPTION>
REDEMPTION FACE AMOUNT
NOTICE ON OR AFTER ON OR AFTER TO BE REDEEMED
- ------------------ --------------- --------------
<S> <C> <C>
April 1, 1996 October 1, 1996 $1,000,000
April 1, 1997 October 1, 1997 2,000,000
April 1, 1998 October 1, 1998 2,000,000
</TABLE>
SERIES A-2 BONDS
The Series A-2 bonds had an original aggregate face value of $10,000,000 and
bear interest, payable semi-annually on September 30 and March 31, at the
Japanese Bank Rate plus three percent of the face value of the bonds
outstanding. The effective rate on Series A-2 bonds at March 31, 1995 and 1996
was 10.5 percent and 9.95 percent, respectively. During the year ended March 31,
1996, $2,500,000 of the Series A-2 bonds were redeemed by the bondholder. The
Bondholder of the Series A-2 bonds may redeem the remaining bonds according to
the following schedule:
<TABLE>
<CAPTION>
REDEMPTION FACE AMOUNT
NOTICE ON OR AFTER ON OR AFTER TO BE REDEEMED
- ------------------ ----------------- --------------
<S> <C> <C>
June 16, 1996 December 16, 1996 $2,500,000
June 16, 1997 December 16, 1997 2,500,000
June 16, 1998 December 16, 1998 2,500,000
</TABLE>
SERIES A-3 BOND
The Series A-3 bond has an aggregate face value amount of $1,000,000 and
bears interest, payable semi-annually on September 30 and March 31, at the
Japanese Bank Rate plus three percent of the face value of the bond outstanding.
The effective rate on the Series A-3 bond at March 31, 1995 and 1996 was 10.5
percent and 9.95 percent, respectively. The Bondholder of the Series A-3 bond
may redeem the bond by providing six months prior written notice on or after
June 16, 1998 for redemption on or after December 16, 1998.
F-12
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. COMMITMENTS AND CONTINGENCIES
LETTERS OF CREDIT
The Company has available letters of credit with a U.S. bank of $2,500,000.
As of March 31, 1996, letters of credit totaling approximately $176,000 were
outstanding.
LEASES
The Company is committed under various long-term noncancellable operating
leases requiring minimum annual rentals as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
- ----------------------------------------------------------------- -------
<S> <C>
1997............................................................. $ 2,394
1998............................................................. 2,148
1999............................................................. 1,476
2000............................................................. 1,291
2001............................................................. 1,242
Thereafter....................................................... 13,644
-------
$22,195
-------
-------
</TABLE>
Rent and lease expense was approximately $2,936,000, $2,996,000 and
$3,572,000 for the years ended March 31, 1994, 1995 and 1996, respectively.
DISCOUNTED NOTES RECEIVABLE
At March 31, 1996, Marker Japan was contingently liable for discounted trade
notes receivable on a full recourse basis of approximately $7,629,000. The notes
receivable mature in various amounts through January 1997.
ROYALTY AGREEMENT
During fiscal year 1996, the Company was selected by the Salt Lake
Organizing Committee for the 2002 Olympic Winter Games as licensee for the sale
in the state of Utah of apparel with the imprint and embroidery for the 2002
Olympic Winter Games to be held in Salt Lake City. The Company was awarded
licenses for both winter and summer apparel with the agreements extending
through December 31, 1996. Over the remaining term of the agreements, the
Company is required to pay the Salt Lake Organizing Committee periodic minimum
royalty payments totaling approximately $281,000.
LEGAL MATTERS
The Company is subject to various legal matters associated with the risks
inherent in the sport of skiing which it considers normal for its business
activities. Management believes that these matters will not have a material
impact on the financial condition, liquidity, or results of operations of the
Company.
In September 1995, the Company along with other significant companies in the
ski business received a letter from the United States Department of Justice (the
"DOJ") explaining that the pricing practices of various companies in the ski
industry were being reviewed. Although to date the Company
F-13
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
has not received further correspondence from the DOJ, there can be no assurance
that the DOJ will not pursue these matters further.
NOTE 5. INCOME TAXES
The Company recognizes a liability or asset for the deferred tax
consequences of temporary differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements.
The Company's entities file tax returns in their applicable jurisdictions.
U.S. income tax is not provided on unrepatriated foreign earnings because
management considers such amounts to be permanently invested abroad. Management
has deemed it impracticable to determine the amount of unrecognized deferred tax
liability on temporary differences related to earnings which are considered
permanently invested abroad. However, the Company has provided for U.S. income
taxes on the undistributed earnings of its investment in an unconsolidated
subsidiary.
The domestic and foreign components of income before provision for income
taxes for the years ended March 31, 1994, 1995 and 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Domestic.......................................... $1,699 $1,233 $ 386
Foreign........................................... 2,030 4,269 3,912
------ ------ ------
$3,729 $5,502 $4,298
------ ------ ------
------ ------ ------
</TABLE>
The Company's provision for income taxes for the years ended March 31, 1994,
1995 and 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---- ------ -----
<S> <C> <C> <C>
Current:
Federal........................................... $ 16 $ 180 $ 15
State............................................. 56 72 7
Foreign........................................... 438 1,143 1,210
---- ------ -----
510 1,395 1,232
Deferred............................................ -- -- (623)
---- ------ -----
$510 $1,395 $ 609
---- ------ -----
---- ------ -----
</TABLE>
For the years ending March 31, 1994, 1995 and 1996, the federal and state
current provisions for income taxes are presented net of the benefits realized
from operating loss carryforwards which totaled approximately $393,000, $463,000
and $123,000, respectively. In addition, the foreign current provision for
income taxes are presented net of benefits realized from operating loss
carryforwards of approximately $914,000, $931,000 and $213,000, respectively.
F-14
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
The provision for income taxes as a percentage of income before provision
for income taxes differed from the statutory Federal rate due to the following:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Statutory Federal income tax rate............................. 34.0% 34.0% 34.0%
State income taxes net of Federal income tax benefit.......... 1.5 3.7 0.6
Change in deferred tax asset valuation allowance.............. (40.5) (30.4) (20.2)
Foreign earnings taxed at different rates..................... 18.2 16.1 12.1
Investment in unconsolidated subsidiary....................... -- -- (12.6)
Other......................................................... 0.5 2.0 0.3
----- ----- -----
13.7% 25.4% 14.2%
----- ----- -----
----- ----- -----
</TABLE>
The components of the net deferred tax assets and liabilities at March 31,
1995 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C> <C>
Deferred tax assets:
Intercompany profit...................................... $639 $842
Domestic net operating loss carryforwards................ 291 226
Allowance for doubtful accounts.......................... 329 343
Accrued expense reserves................................. 311 404
Foreign tax credits...................................... 215 215
Other.................................................... 316 341
------ ------
Total deferred tax assets.............................. 2,101 2,371
Valuation allowance........................................ (1,441) (574)
------ ------
660 1,797
------ ------
Deferred tax liabilities:
Equity investment........................................ -- (224)
Other.................................................... (240) (360)
------ ------
Total deferred tax liabilities......................... (240) (584)
------ ------
Net deferred tax assets................................ $420 $1,213
------ ------
------ ------
</TABLE>
The recognition of deferred tax assets is based upon judgments regarding the
potential realization of such assets in the future. Based upon positive evidence
such as a recent history of earnings and utilization of net operating loss
carryforwards, management has deemed that a reduction of the valuation allowance
is appropriate to reflect utilization of certain recorded tax asset amounts.
Although realization is not assured, management believes it is more likely than
not that a portion of the net deferred tax asset will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.
As of March 31, 1996, the Company has domestic tax net operating loss
carryforwards of approximately $559,000 which expire in 2006.
Cash paid for income taxes in the years ended March 31, 1994, 1995 and 1996
was approximately $417,000, $507,000 and $1,114,000, respectively.
F-15
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. PREFERRED STOCK
Upon the effective date of the Initial Public Offering, the holders of the
Series A Preferred Stock exchanged all of the outstanding shares of such stock
for 378,572 shares of Common Stock. On the same date, the holder of the Series
A-1, A-2 and A-3 Redeemable Preferred Stock exchanged all of the outstanding
shares of such stock for Series A-1, A-2 and A-3 Bonds with an aggregate face
value of $19,000,000 (Note 3).
Dividends on the Series A preferred stock totaled approximately $387,000 and
$87,000 for the years ended March 31, 1994 and 1995, respectively. Cumulative
annual dividends were computed in accordance with prescribed formulas which
resulted in total dividends for Series A-1 Redeemable Preferred Stock of
approximately $391,000 and $231,000 for the years ended March 31, 1994 and 1995,
respectively. Dividends for Series A-2 Redeemable Preferred Stock totaled
$967,000 and $339,000 for the years ended March 31, 1994 and 1995, respectively.
Series A-3 Redeemable Preferred Stock dividends totaled $97,000 and $34,000 for
the years ended March 31, 1994 and 1995, respectively.
NOTE 7. COMMON STOCK TRANSACTIONS
STOCK OFFERING
In connection with the Initial Public Offering held during fiscal 1995, the
Company issued 2,662,250 shares of Common Stock, including 347,250 shares issued
in connection with the closing of the underwriters over-allotment option. The
proceeds received from the offering, net of underwriting commissions and
offering costs, totaled approximately $16,362,000.
WARRANTS
The Company issued to the representative of the underwriters nontransferable
warrants to purchase 231,500 shares of the common stock, exercisable for a
period of four years commencing in August 1995 at an exercise price of $8.75.
Accordingly, at March 31, 1996, 57,875 warrants were exercisable. The warrants
provide for registration rights, anti-dilution protection, and other customary
terms. No warrants were exercised during the fiscal year ended March 31, 1996.
STOCK OPTION PLAN
During fiscal 1995, the Company established a nonqualified and incentive
stock option plan (the "Stock Option Plan"). The Stock Option Plan provides for
the issuance of a maximum of 2,500,000 shares of common stock to officers,
directors, consultants, and other key employees. The Stock Option Plan allows
for the grant of incentive or nonqualified options and is administered by the
Board of Directors. Incentive options are granted at not less than 100 percent
of the fair market value of the underlying common stock on the date of the
grant. The aggregate fair market value of shares which may be purchased for the
first time during any calendar year pursuant to an incentive stock option grant
may not exceed $100,000. Nonqualified stock options will be granted at a price
as determined by the
F-16
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. COMMON STOCK TRANSACTIONS--(CONTINUED)
Board of Directors. No stock options granted are exercisable after ten years
from the date of grant. As of March 31, 1995 and 1996, the Company had the
following options outstanding and exercisable:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1995 AMOUNT PRICE PER SHARE
- --------------------------------------------------- ------- ---------------
<S> <C> <C>
Options Granted.................................... 522,500 $7.13--7.25
Options Exercised.................................. none
Options Expired/Forfeited.......................... none
Options outstanding at March 31, 1995.............. 522,500 $7.13--7.25
Options exercisable at March 31, 1995.............. none
<CAPTION>
YEAR ENDED MARCH 31, 1996 AMOUNT PRICE PER SHARE
- --------------------------------------------------- ------- ---------------
<S> <C> <C>
Options Granted.................................... 359,500 $6.00--7.13
Options Exercised.................................. (1,000) $7.13
Options Expired/Forfeited.......................... (25,000) $7.13--7.25
Options outstanding at March 31, 1996.............. 856,000 $6.00--7.13
Options exercisable at March 31, 1996.............. 125,375 $7.13
</TABLE>
NOTE 8. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
On June 30, 1995, the Company acquired 25% of the common shares of DNR
Sportsystem Ltd. ("DNR Sportsystem"), a Swiss Corporation, for approximately
$5.4 million in cash. DNR Sportsystem is a developer, marketer and distributor
of snowboards, snowboard boots, snowboard bindings and other related products
primarily under the trade names of "DNR(R)", "Santa Cruz(R)" and "Sims(R)".
DNR Sportsystem is a privately owned company with its operating headquarters
located in Switzerland. DNR Sportsystem has a calendar year end and as a foreign
private company does not have the same reporting requirements as the Company.
Accordingly, the Company uses a 90-day lag in reporting its equity portion of
DNR Sportsystem's net income. The Company accounts for its investment in DNR
Sportsystem using the equity method of accounting and recognized approximately
$1.6 million of income from its equity interest in DNR Sportsystem for the
fiscal year ended March 31, 1996 which represents the earnings of DNR
Sportsystem from July 1995 through December 31, 1995. Selected financial
information for DNR Sportsystem as of and for the year ended December 31, 1995
is as follows (U.S. dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
BALANCE SHEET INFORMATION:
Current Assets................................................... $15,662
Total Assets..................................................... 16,316
Current Liabilities.............................................. 7,994
INCOME STATEMENT INFORMATION:
Net Revenues..................................................... $44,038
Gross Profit..................................................... 14,990
Operating Income................................................. 6,732
Net Income....................................................... 5,583
</TABLE>
F-17
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments held by the Company are used to manage
well-defined foreign exchange and interest rate risks which occur in the normal
course of business.
FOREIGN EXCHANGE CONTRACTS
Forward foreign exchange contracts are used by the Company to reduce the
potential impact of unfavorable fluctuations in foreign exchange rates. The
Company has commitments to buy and sell foreign currencies relating to foreign
exchange contracts in order to hedge against future currency fluctuations. The
Company has available, through its credit arrangement with a German bank, the
ability to enter into forward foreign exchange contracts to purchase up to the
equivalent of DM 60.0 million. In addition, the Company has the ability to enter
into forward foreign exchange contracts with four United States banks to
purchase, in aggregate, up to the equivalent of $70.0 million.
The Company holds forward exchange contracts to purchase German marks with
U.S. dollars and Japanese Yen and to sell German marks for U.S. dollars. The
contracts mature at various dates through May 1997. The outstanding forward
exchange purchase and sale contracts at March 31, 1996 are as follows:
<TABLE>
<CAPTION>
SELLING BUYING CONTRACTED
AMOUNT AMOUNT FORWARD RATE
- ---------------- ------------- -------------
<S> <C> <C>
Y 1,436,939,000 DM 24,000,000 59.284--60.924
DM 3,001,000 $ 2,171,000 1.3791--1.3841
$ 4,500,000 DM 6,665,000 1.4810
</TABLE>
Gains and losses on foreign currency denominated payables and receivables
are included in the determination of net income. The net gain (loss) recognized
on foreign currency transactions was approximately $65,000, $(58,000) and
$(29,000) for the years ended March 31, 1994, 1995 and 1996 respectively, which
have been recorded as other income. With respect to firm commitments, any gains
and losses are deferred and are recognized as part of the cost of the underlying
transaction being hedged.
For the year ended March 31, 1996, the Company purchased and sold forward
foreign exchange contracts which were not accounted for as hedges. As a result,
the Company recorded a net gain of approximately $1.0 million which was recorded
in other income.
Counterparties to the foreign exchange contracts are typically major
international financial institutions. At March 31, 1996, the fair value of the
foreign exchange contracts indicates a potential gain of $2.7 million, which
represents the total deferred gain on such contracts. The Company's theoretical
risk in these transactions is the cost of replacing, at current market rates,
these contracts in the event of default by the counterparty. Management believes
the risk of incurring such losses is remote.
INTEREST RATE SWAP AGREEMENT
The Company has entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on its variable rate revolving credit
agreement (See Note 2). The differential to be paid or received on the interest
rate swap agreement is recognized over the term of the agreement as either an
increase or decrease of interest expense. As of March 31, 1996, the net
unrealized loss on this agreement
F-18
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS--(CONTINUED)
was approximately $59,000 (DM 87,500) which is the estimated amount that the
financial institution would receive in order for the Company to terminate the
swap agreement as of March 31, 1996.
NOTE 10. RELATED PARTY TRANSACTIONS
During fiscal years 1994, 1995 and 1996, Marker Japan purchased ski bindings
and services totaling approximately $4,600,000, $600,000 and $13,000,
respectively, from Isomura Seisakusho KK ("Isomura Seisakusho"), a company of
which Mr. Isomura, a shareholder and director of the Company and president of
Marker Japan, is the president, director and owner of more than ten percent of
the outstanding stock. In fiscal year 1995, a customer of Marker Japan returned
snowmaking equipment of approximately $500,000 to Marker Japan for warranty
purposes. Marker Japan returned this equipment to Isomura Seisakusho, the
supplier of such equipment, for reimbursement. As of March 31, 1995 and 1996,
the net account receivable from Isomura Seisakusho was approximately $600,000
and $461,000, respectively.
At March 31, 1996, the Company had outstanding notes in an aggregate amount
equal to approximately $7,457,000 payable to Japanese banks. Of this amount,
approximately $1,864,000 was secured by assets of Mr. Isomura.
Marker Japan leases office space in Tokyo, Japan and receives services from
Isomura Sangyo, a company of which Mr. Isomura is a shareholder. In connection
therewith, for the fiscal years 1994, 1995 and 1996, Marker Japan made payments
to Isomura Sangyo totaling approximately $268,000, $272,000 and $428,000,
respectively.
The Company purchased insurance through an insurance broker, Acordia
Northwest Inc., of which, Graham S. Anderson, a director of the Company, is also
a director. The Company incurred approximately $700,000, $821,000 and $746,000
of premiums for such insurance during the fiscal years 1994, 1995 and 1996,
respectively.
NOTE 11. BENEFIT PLAN
The Company sponsors a qualified retirement plan under Section 401(k) of the
Internal Revenue Code which covers substantially all eligible domestic
employees. Under the terms of the plan, each participant may elect to defer up
to the annual statutory limit of eligible compensation. The Company matches 50
percent of each participant's contribution up to 4 percent of the participant's
eligible compensation. During the years ended March 31, 1994, 1995 and 1996,
employer contributions totaled approximately $39,000, $43,000 and $41,000,
respectively.
NOTE 12. INTERNATIONAL OPERATIONS
The Company's operations involve a single industry segment. The Company's
three geographic regions are North America, Europe, and Asia. Net sales to
affiliates consist primarily of inventory
F-19
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. INTERNATIONAL OPERATIONS--(CONTINUED)
transactions and are made at transfer prices which approximate prices charged to
unaffiliated customers. The following is a summary of the Company's operations
by geographic region for the years ended March 31, 1994, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net Sales to Unaffiliated Customers:
North America............................... $34,010 $34,545 $40,702
Europe...................................... 26,296 29,569 30,245
Asia........................................ 22,331 19,848 16,964
------- ------- -------
Total Consolidated...................... $82,637 $83,962 $87,911
------- ------- -------
------- ------- -------
Export Sales From Europe to Asia:............. $ 830 $ 848 $ 1,649
------- ------- -------
------- ------- -------
Net Sales to Affiliates:
North America............................... $ 296 $ 658 $ 515
Europe...................................... 31,343 34,141 42,905
Asia........................................ 98 -- 22
------- ------- -------
Total................................... $31,737 $34,799 $43,442
------- ------- -------
------- ------- -------
Operating Income:
North America............................... $ 2,091 $ 2,177 $ 2,681
Europe...................................... 4,121 5,462 4,064
Asia........................................ 1,328 1,036 (389)
Eliminations.............................. (321) 242 (532)
------- ------- -------
Total Consolidated...................... $ 7,219 $ 8,917 $ 5,824
------- ------- -------
------- ------- -------
Identifiable Assets:
North America............................... $24,447 $35,111 $37,072
Europe...................................... 29,299 40,764 50,339
Asia........................................ 12,623 15,666 14,814
Eliminations.............................. (9,829) (8,543) (14,960)
------- ------- -------
Total Consolidated...................... $56,540 $82,998 $87,265
------- ------- -------
------- ------- -------
</TABLE>
F-20
<PAGE>
MARKER INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
For the fiscal years ended March 31, (in thousands except per share
amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1994
Sales............................................... $ 1,553 $28,156 $37,177 $15,751
Gross Profit........................................ 122 11,372 15,428 6,143
Net Income (Loss)................................... (5,123) 3,558 5,584 (800)
Net Income (Loss) Applicable to Common Shares....... (5,443) 3,189 5,221 (1,164)
Net Income (Loss) Per Common Share.................. $ (0.94) $ 0.55 $ 0.90 $ (0.20)
1995
Net Sales........................................... $ 1,052 $30,895 $34,726 $17,289
Gross Profit........................................ 295 13,346 15,504 5,939
Net Income (Loss)................................... (4,299) 4,313 5,072 (979)
Net Income (Loss) Applicable to Common Shares....... (4,583) 4,161 5,054 (979)
Net Income (Loss) Per Common Share.................. $ (0.79) $ 0.61 $ 0.60 $ (0.12)
1996
Net Sales........................................... $ 2,244 $30,008 $33,965 $21,694
Gross Profit........................................ 126 13,697 13,895 7,585
Net Income (Loss)................................... (4,271) 3,802 3,500 392
Net Income (Loss) Applicable to Common Shares....... (4,271) 3,802 3,500 392
Net Income (Loss) Per Common Share.................. $ (0.51) $ 0.45 $ 0.40 $ 0.05
</TABLE>
NOTE 14. SUBSEQUENT EVENT
Subsequent to year end, the Company entered into an agreement to acquire an
additional 55% of DNR Sportsystem, the Company's unconsolidated subsidiary for
approximately Swiss Francs 24.2 million (approximately $19.4 million US
dollars). The Company will hold a 80% interest in DNR Sportsystem following the
acquisition of the additional shares.
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DNR Sportsystem Ltd.:
We have audited the accompanying consolidated balance sheets of DNR
Sportsystem Ltd. (a Swiss corporation) and subsidiaries as of December 31, 1994
and 1995, and the related consolidated statements of income and retained
earnings and cash flows for each of the three years in the period ended December
31, 1995. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of DNR Sportsystem
Ltd. and subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles in
the US.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
May 17, 1996
F-22
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 8,531 $12,786
Accounts receivable, less allowance for doubtful accounts
of $119 and $135, respectively....................................... 3,459 1,682
Inventories............................................................ 53 198
Prepaids and other current assets...................................... 442 996
------- -------
Total current assets............................................... 12,485 15,662
------- -------
PROPERTY AND EQUIPMENT, at cost:
Office equipment....................................................... 340 822
Vehicles............................................................... 254 343
------- -------
594 1,165
Less--accumulated depreciation and amortization........................ (309) (541)
------- -------
Net property and equipment......................................... 285 624
------- -------
OTHER ASSETS............................................................. 5 30
------- -------
$12,775 $16,316
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................................... $ 3,482 $ 3,720
Accrued liabilities.................................................... 1,167 1,870
Income taxes payable................................................... 1,966 1,864
Payable to related party............................................... -- 540
------- -------
Total current liabilities.......................................... 6,615 7,994
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock........................................................... 432 432
Retained earnings...................................................... 5,215 6,531
Cumulative foreign currency translation adjustments.................... 513 1,359
------- -------
Total shareholders' equity......................................... 6,160 8,322
------- -------
$12,775 $16,316
------- -------
------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
F-23
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-----------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net sales...................................................... $18,779 $26,499 $44,038
Cost of sales.................................................. 11,960 16,372 29,048
------- ------- -------
Gross profit................................................... 6,819 10,127 14,990
------- ------- -------
Operating expenses:
Selling...................................................... 1,489 2,211 3,907
General and administrative................................... 1,106 2,413 2,350
Research and development..................................... 776 923 2,001
------- ------- -------
3,371 5,547 8,258
------- ------- -------
Operating income............................................... 3,448 4,580 6,732
------- ------- -------
Other income (expense):
Interest income.............................................. 262 291 245
Other, net................................................... (339) 83 153
------- ------- -------
(77) 374 398
------- ------- -------
Income before provision for income taxes....................... 3,371 4,954 7,130
Provision for income taxes..................................... 791 1,115 1,547
------- ------- -------
Net income..................................................... 2,580 3,839 5,583
Retained earnings beginning of year............................ 1,220 3,598 5,215
Dividends...................................................... (202) (2,222) (4,267)
------- ------- -------
Retained earnings end of year.................................. $ 3,598 $ 5,215 $ 6,531
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-24
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
----------------------------
1993 1994 1995
------ ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $2,580 $ 3,839 $ 5,583
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 61 167 188
Change in assets and liabilities:
Accounts receivable, net................................. (101) (2,327) 2,208
Inventories.............................................. 736 1,664 (137)
Prepaids and other assets................................ (168) (170) (510)
Accounts payable......................................... (481) (480) (226)
Accrued liabilities...................................... (453) 408 1,070
Income taxes payable..................................... 346 943 (360)
------ ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................... 2,520 4,044 7,816
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................... (76) (334) (485)
------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends......................................... -- (2,424) (4,267)
------ ------- -------
Effect of foreign exchange rate changes on cash................ (63) 853 1,191
------ ------- -------
Net increase in cash and cash equivalents...................... 2,381 2,139 4,255
Cash and cash equivalents at beginning of year................. 4,011 6,392 8,531
------ ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $6,392 $ 8,531 $12,786
------ ------- -------
------ ------- -------
SUPPLEMENTAL DISCLOSURES:
Cash paid for income taxes................................... $ 419 $ 500 $ 1,777
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-25
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
DNR Sportsystem Ltd. (the "Company"), a corporation domiciled in
Switzerland, develops, markets and distributes snowboards, snowboard boots,
snowboard bindings and other related products primarily under the trade names of
"DNR", "Santa Cruz" and "Sims". The Company markets and distributes these
products through distributors in North America, Europe and Asia.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of 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 period. Actual results could differ from those estimates.
Consolidation
The consolidated financial statements include the accounts of DNR
Sportsystem, Ltd. and its subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
Foreign Currency Translation
The functional currency for the Company is Swiss Francs. The consolidated
financial statements are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52. Assets and
liabilities are translated into U.S. dollars at the applicable rates of exchange
at the end of a reporting period. Income and expense items are translated at the
weighted average rates of exchange prevailing during the period. Translation
gains and losses are reflected as a separate component of shareholders' equity.
Cash Equivalents
Cash equivalents consist of time deposits and money market funds with
original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost and depreciated using
accelerated methods over their estimated useful lives ranging from 2 to 5 years.
Major renewals and betterments are capitalized, while costs for minor
replacements, maintenance and repairs are charged to expense as incurred.
Income Taxes
The Company recognizes deferred tax assets or liabilities for expected
future tax consequences of events that have been recognized in the financial
statements or tax returns. Under this method, deferred tax assets or liabilities
are determined based upon the difference between financial statement and
F-26
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
income tax bases of assets and liabilities using the enacted tax rates expected
to apply when differences are expected to be settled or realized.
NOTE 3. MAJOR SUPPLIERS, SIGNIFICANT CUSTOMERS AND GEOGRAPHICAL
INFORMATION
Significant Suppliers
The Company has an exclusive agreement with a shareholder to manufacture
snowboards for the Company. The agreement requires that all snowboards be
manufactured by this shareholder. The agreement can only be terminated upon the
earlier of the occurrence of certain events as outlined in the agreement or
September 1999 (see Note 8).
The Company has an agreement with a shareholder to develop and manufacture
snowboard bindings exclusively for the Company. The agreement requires the
Company to obtain advance approval from the Company before snowboard bindings
can be manufactured by other parties. This agreement expires in September 2000
(see Note 8).
Significant Customers
For the years ended December 31, 1993 and 1994, three customers accounted
for 15, 11 and 15 percent, and 18, 9 and 17 percent, respectively, of net sales.
For the year ended December 31, 1995 these same customers accounted for 26, 15,
and 14 percent of net sales, respectively.
Geographical Information
For the years ended December 31, 1993, 1994 and 1995, the Company had sales
to the following geographical regions (in thousands).
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
North America.................................................. $ 4,791 $ 6,087 $10,633
Europe......................................................... 8,092 12,992 15,536
Asia........................................................... 5,896 7,420 17,869
------- ------- -------
Total........................................................ $18,779 $26,499 $44,038
------- ------- -------
------- ------- -------
</TABLE>
All of the Company's identifiable assets are located in Europe.
NOTE 4. LINE OF CREDIT
The Company has a line of credit arrangement with a bank which provides for
maximum borrowings of Swiss Francs 4,200,000 (approximately $3,600,000 at
December 31, 1995). Interest on borrowings is at the bank's established rate.
For the years ended December 31, 1994 and 1995, the credit lines were not used.
The agreement requires that the Company maintain certain financial covenants.
F-27
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31, 1993, 1994 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ------
<S> <C> <C> <C>
Current provision................................................... $848 $1,259 $1,481
Deferred provision (benefit)........................................ (57) (144) 66
---- ------ ------
Total provision................................................... $791 $1,115 $1,547
---- ------ ------
---- ------ ------
</TABLE>
NOTE 6. RESTRICTED RETAINED EARNINGS
As of December 31, 1995, approximately $791,000 of the Company's retained
earnings are restricted as to dividend payments.
NOTE 7. COMMITMENTS AND CONTINGENCIES
License Agreements
The Company has entered into license agreements to use the tradenames Sims
and Santa Cruz. The agreements require the Company to pay royalties ranging from
2 to 6 percent of gross sales for snowboards, bindings and accessories. The
agreements expire in 2001 with options for renewal. Under the Sims license
agreement, 60 percent of DNR's total sales must be comprised of Sims products.
Royalty expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $684,000, $813,000 and $1,834,000, respectively.
Leases
The Company is committed under various long-term noncancellable operating
leases for office space and certain equipment which require minimum annual
rentals as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------- ------
<S> <C>
1996............................................................... $189
1997............................................................... 220
1998............................................................... 148
1999............................................................... 145
2000............................................................... 145
Thereafter......................................................... 36
------
$883
------
------
</TABLE>
Lease expense for the years ended December 31, 1993, 1994 and 1995 totalled
approximately $77,000, $153,000 and $202,000, respectively.
F-28
<PAGE>
DNR SPORTSYSTEM LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Legal Matters
The Company is subject to various legal matters associated with the risks
inherent in the sport of snowboarding which it considers normal for its business
activities. Management believes that these matters have been provided for and
will not have a material impact on the financial condition, liquidity, or
results of operations of the Company.
Based on a favorable settlement of a claim in early 1996, the Company
reduced its related liability as of December 31, 1995 by approximately $341,000.
Such amount is reflected as a reduction of general and administrative expenses
in 1995.
NOTE 8. RELATED PARTY TRANSACTIONS
During 1994 and 1995, the Company purchased snowboards totalling
approximately $6,010,000 and $18,281,000 from a certain shareholder under a
manufacturing contract (see Note 3). As of December 31, 1994 and 1995
approximately $1,543,000 and $1,288,000 was owed to this entity and included in
accounts payable.
During 1995, a shareholder of the Company performed certain binding
development services and charged the Company approximately $540,000 (see Note
3). As of December 31, 1995, this amount remains owing.
During 1993 the Company made product sales totalling approximately
$1,549,000 to companies owned at that time by certain shareholders of the
Company. During 1994 and 1995, the Company continued to sell to these companies.
However, the individuals were no longer shareholders of the Company.
NOTE 9. BENEFIT PLAN
The Company sponsors a defined contribution plan for substantially all full
time employees. The Company's contribution is discretionary and is based upon a
percentage of the eligible employees' salaries. For the years ended December 31,
1993, 1994 and 1995 Company contributions totalled $15,000, $248,000 and
$611,000, respectively.
NOTE 10. COMMON STOCK
The capital stock of Company consists of 600 registered and issued shares of
common stock with a nominal value of Swiss Francs 1,000 per share.
F-29
<PAGE>
Graphic: Photograph of Picabo Street beneath the wording "Picabo Street 1996
World Champion." Against the backdrop of the American flag, a smiling Ms.
Street displays two medals at chest level and has skis with Marker bindings
resting on her right shoulder. The Marker logo appears in the lower right
corner.
<PAGE>
========================================= ====================================
- ----------------------------------------- ------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE 3,400,000 SHARES
UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO [LOGO]
SELL, OR SOLICITATION OF AN OFFER TO
BUY, ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL,
SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES IN ANY JURISDICTION TO ANY
PERSON WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION MARKER INTERNATIONAL
THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AT ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
-------------------
COMMON STOCK
TABLE OF CONTENTS
Available Information............ 3
Exchange Rate Data............... 3
Prospectus Summary............... 4 ----------------
Risk Factors..................... 9 PROSPECTUS
Use of Proceeds.................. 15 ----------------
Capitalization................... 16
Dividend Policy.................. 17
Price Range of Common Stock...... 17
Selected Consolidated
Financial Information........... 18
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations..................... 25 ALLEN & COMPANY
Business......................... 29 INCORPORATED
Management....................... 45
Principal and Selling
Stockholders.................... 52
Certain Relationships and
Related Transactions........... 53 PIPER JAFFRAY INC.
Description of Capital
Stock........................... 55
Shares Eligible for Future
Sale............................ 57
Underwriting..................... 58 , 1996
Legal Matters.................... 59
Experts.......................... 59
Index to Consolidated
Financial Statements............ F-1
- ---------------------------------------- -------------------------------------
======================================== =====================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following sets forth the estimated fees and expenses in connection with
the issuance and distribution of the Registrant's securities being registered
hereby, other than underwriting discounts and commissions, all of which will be
borne by the Registrant:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee.............................. $ 10,112
National Association of Securities Dealers, Inc. filing fee...................... $ 3,433
Nasdaq National Market Listing Fee............................................... $ 17,500
Printing and engraving expenses.................................................. $ 75,000
Legal fees and expenses.......................................................... $300,000
Accounting fees and expenses..................................................... $200,000
Blue Sky fees and expenses....................................................... $ 20,000
Transfer Agent's fees............................................................ $ 300
Miscellaneous expenses........................................................... $148,655
--------
Total........................................................................ $775,000
--------
--------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Articles of Incorporation provide for the
indemnification of the Company's directors and officers to the fullest extent
permitted by the Utah Revised Business Corporation Act ("URBCA"). The liability
of directors and officers of the Company is limited such that a director or
officer is not liable to the Company or its shareholders for any action taken or
any failure to take any action, as an officer or director, as the case may be,
unless: (i) the director or officer has breached or failed to perform the duties
of the office in compliance with Section 16-10a-841 of the URBCA; and (ii) the
breach or failure to perform constitutes gross negligence, willful misconduct,
or intentional infliction of harm on the Company or its shareholders. Directors
of the company are personally liable if such director votes for or assents to an
unlawful distribution under the URBCA or the Company's Restated Articles of
Incorporation.
The Company will pursuant to Section 16-10a-902 of the URBCA, indemnify an
individual, made party to a proceeding because he was a director, against
liability incurred in the proceeding if: (i) the director's conduct was in good
faith; (ii) the director reasonably believed that his conduct was in, or not
opposed to, the Company's best interests; and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful;
provided that, the company may not indemnify the same director if (a)
indemnification is sought in connection with a proceeding by or in the right of
the Company in which the director was adjudged liable to the Company or (b)
indemnification is sought in connection with any other proceeding charging that
the director derived an impersonal personal benefit, whether or not including
action in his official capacity, in which proceeding he was adjudged liable on
the basis that he derived an improper personal benefit. Indemnification under
this Section in connection with a proceeding by or in the right of the Company
is limited to reasonable expenses incurred in connection with the proceeding.
In accordance with Section 16-10a-903 of the URBCA the Company shall
indemnify a director or an officer, who is successful on the merits or
otherwise, in defense of any proceeding, or in the defense of any claim, issue
or matter in the proceeding, to which he was a party because he is or was a
director or an officer of the Company, as the case may be, against reasonable
expenses incurred by him in connection with the proceeding or claim with respect
to which he has been successful.
II-1
<PAGE>
In accordance with Section 16-10a-904 of the URBCA, the Company will pay or
reimburse the reasonable expenses incurred by a party to a proceeding in advance
of the final disposition of the proceeding, provided that, (i) the director
furnishes the corporation a written affirmation of his good faith belief that he
has met the applicable standard of conduct described in Section 16-10a-902 of
the URBCA; (ii) the director furnishes to the Company a written undertaking,
executed personally or on his behalf, to repay the advance of it is ultimately
determined that he did not meet such standard of conduct; and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification thereunder.
Section 16-10a-905 permits a director or officer who is or was a party to a
proceeding to apply for indemnification to the court conducting the proceeding
or another court of competent jurisdiction.
The Company will indemnify and advance expenses to an officer, employee,
fiduciary or agent of the Company to the same extent as a director; or to a
greater extent in some instances if not inconsistent with public policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company issued 1,000 shares of Common Stock and 8,000 shares of Series
A-1 Preferred Stock to Isomura Sangyo in fiscal 1993 for $10 million and $8
million, respectively. In fiscal 1994, Isomura Sangyo exchanged the 1,000 shares
of Common Stock for 10,000 shares of Series A-2 Preferred Stock and 1,000 shares
of Series A-3 Preferred Stock.
As of August 24, 1994, the effective date of the Company's initial public
offering, (i) the holders of the Series A Preferred Stock exchanged all of the
outstanding shares of Series A Preferred Stock for 378,572 shares of Common
Stock (at an initial public offering price of $7.00 per share) and (ii) the
holder of Series A-1 Preferred Stock, Series A-2 Preferred Stock and Series A-3
Preferred Stock exchanged all of the outstanding shares of such stock for $8
million aggregate principal amount of Series A-1 Bonds, $10 million aggregate
principal amount of Series A-2 Bonds and $1 million aggregate principal amount
of Series A-3 Bonds, respectively.
The issuances and exchanges of securities described above were effected in
reliance on the exemption from registration under Section 4(2) of the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
<C> <S>
1.1 Form of Underwriting Agreement among the Company and the Underwriters.
2.1 Share Purchase and Shareholders Agreement among Lucio Roffi, Gregor Furrer &
Partner Holding AG and Marker International, dated June 11, 1996 (filed as Exhibit
2(a) to the Company's Current Report on Form 8-K dated June 19, 1996 and
incorporated herein by reference).
2.2 Letter Agreement between Lucio Roffi and Marker International, dated June 11, 1996
(filed as Exhibit 2(b) to the Company's Current Report on Form 8-K dated June 19,
1996 and incorporated herein by reference).
2.3 Intentionally omitted.
2.4 Short-term Promissory Note for CHF 12,084,832.65 executed by the Company and
payable in full to Gregor Furrer & Partner Holding AG on or prior to August 31,
1996 (filed as Exhibit 2(c) to the Company's Current Report on Form 8-K dated July
11, 1996 and incorporated herein by reference).
2.5 Short-term Promissory Note for CHF 12,084,832.65 executed by the Company and
payable in full to Lucio Roffi on or prior to August 31, 1996 (filed as Exhibit
2(d) to the Company's Current Report on Form 8-K dated July 11, 1996 and
incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
3.1 Form of Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to
the Company's Form S-1 Registration Statement Amendment No. 1 dated July 14, 1994
(File No. 33-80100) and incorporated herein by reference).
3.2 Form of Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Form S-1 Registration Statement, Amendment No. 1 dated July 14, 1994
(File No. 33-80100) and incorporated herein by reference).
4.1 Form of Certificate representing Common Stock (filed as Exhibit 4.1 to the
Company's Form S-1 Registration Statement, Amendment No. 1 dated July 14, 1994
(File No. 33-80100) and incorporated herein by reference).
5.1 Opinion of Stroock & Stroock & Lavan as to the legality of the Shares.
5.2 Opinion of Prince, Yeates & Geldzahler as to the legality of the Shares.
10.1 Employment Agreement for Premek Stepanek (filed as Exhibit 10.1 to the Company's
Form S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and
incorporated herein by reference).
10.2 Employment Agreement for Dr. Wilhelm Fahrngruber (filed as Exhibit 10.2 to the
Company's Form S-1 Registration Statement dated June 10, 1994 (File No. 33-80100)
and incorporated herein by reference).
10.3 Employment Agreement for Otto Harsanyi (filed as Exhibit 10.3 to the Company's Form
S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and incorporated
herein by reference).
10.4 Form of 1994 Stock Option Plan (filed as Exhibit 10.4 to the Company's Form S-1
Registration Statement dated June 10, 1994 (File No. 33-80100) and incorporated
herein by reference).
10.5 401(k) Plan (filed as Exhibit 10.5 to the Company's Form S-1 Registration Statement
dated June 10, 1994 (File No. 33-80100) and incorporated herein by reference).
10.6 Manufacturing Facility Lease Agreement (filed as Exhibit 10.6 to the Company's Form
S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and incorporated
herein by reference).
10.7 Second Amended and Restated Revolving Credit Agreement with First Security Bank of
Utah, N.A., including Extension Agreement (filed as Exhibit 10.7 to the Company's
Form S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and
incorporated herein by reference).
10.8 Loan Agreement with First Interstate Bank (filed as Exhibit 10.8 to the Company's
Form S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and
incorporated herein by reference).
10.9 Agreement with Bayerischi Hypotheken-und Wechsel-Bank ("Hypo Bank") for a DM
60,000,000 Line of Credit (filed as Exhibit 10.9 to the Company's Form S-1
Registration Statement dated June 10, 1994 (File No. 33-80100) and incorporated
herein by reference).
10.10 Loan Agreement with Hypo Bank for a DM 4,000,000 loan (filed as Exhibit 10.10 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No.
33-80100) and incorporated herein by reference).
10.11 Loan Agreement with Hypo Bank for a DM 1,863,333 loan (filed as Exhibit 10.11 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No.
33-80100) and incorporated herein by reference).
10.12 Loan Agreement with Hypo Bank for a DM 2,220,000 loan (filed as Exhibit 10.12 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No.
33-80100) and incorporated herein by reference).
10.13 Loan Agreement with Hypo Bank for a DM 3,000,000 loan (filed as Exhibit 10.13 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No.
33-80100) and incorporated herein by reference).
10.14 Loan Agreement with Hypo Bank for a DM 10,000,000 loan (filed as Exhibit 10.14 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No. 33-
80100) and incorporated herein by reference).
10.15 Loan Agreement with Hypo Bank for a DM 64,000,000 Line of Credit (filed as Exhibit
10.15 to the Company's Form S-1 Registration Statement, Amendment No. 1 dated July
14, 1994 (File No. 33-80100) and incorporated herein by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.16 Loan Agreement with Hypo Bank for a DM 7,284,205 loan (filed as Exhibit 10.16 to
the Company's Quarterly Report on Form 10-Q dated August 11, 1995 and incorporated
herein by reference).
10.17 Pledge Agreement and Conditional Assignment with Hypo Bank for a $3.5 million time
deposit (filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q
dated August 11, 1995 and incorporated herein by reference).
10.18 Line of Credit Agreement Between Marker Deutschland GmbH and Hypo Bank for DM
70,000,000 and a Foreign Exchange Line of Credit for DM 60,000,000 (filed as
Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q dated November 13,
1995 and incorporated herein by reference).
10.19 Amended and Restated Revolving Credit Agreement with First Security Bank for up to
$18,000,000 (filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q
dated November 13, 1995 and incorporated herein by reference).
20.1 Press Release of Marker International, dated June 12, 1996 (filed as Exhibit 20(a)
to the Company's Current Report on Form 8-K dated June 19, 1996 and incorporated
herein by reference).
20.2 Press Release of Marker International dated June 28, 1996 (filed as Exhibit 20(a)
to the Company's Current Report on Form 8-K dated July 11, 1996 and incorporated
herein by reference).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Stroock & Stroock & Lavan (included in Exhibit 5.1 filed herewith).
23.3 Consent of Prince, Yeates & Geldzahler (included in Exhibit 5.2 filed herewith).
*25.1 Power of attorney.
</TABLE>
- ------------
* Previously filed.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts for the Years Ended March 31,
1994, 1995 and 1996.
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 16, 1996.
MARKER INTERNATIONAL
By: /s/ BRAD L. STEWART
..................................
Name: Brad L. Stewart
Title: Vice President--Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ----------------------------------------- --------------
<S> <C> <C>
* Chairman of the Board and President July 16, 1996
.................................. (Principal Executive Officer)
Henry E. Tauber
* Director and Executive Vice President of July 16, 1996
.................................. Marker International; Chairman of
Eiichi Isomura Marker Japan
/s/ BRAD L. STEWART Vice President--Finance and Chief July 16, 1996
.................................. Financial Officer (Principal Financial
Brad L. Stewart and Principal Accounting Officer)
* Director July 16, 1996
..................................
Graham S. Anderson
* Director July 16, 1996
..................................
John G. McMillian
* Director July 16, 1996
..................................
Vinton H. Sommerville
*By: /s/ BRAD L. STEWART
..............................
Brad L. Stewart,
as Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement among the Company and the Underwriters.
2.1 Share Purchase and Shareholders Agreement among Lucio Roffi, Gregor Furrer
& Partner Holding AG and Marker International, dated June 11, 1996 (filed
as Exhibit 2(a) to the Company's Current Report on Form 8-K dated June 19,
1996 and incorporated herein by reference).
2.2 Letter Agreement between Lucio Roffi and Marker International, dated June
11, 1996 (filed as Exhibit 2(b) to the Company's Current Report on Form 8-K
dated June 19, 1996 and incorporated herein by reference).
2.3 Intentionally omitted.
2.4 Short-term Promissory Note for CHF 12,084,832.65 executed by the Company
and payable in full to Gregor Furrer & Partner Holding AG on or prior to
August 31, 1996 (filed as Exhibit 2(c) to the Company's Current Report on
Form 8-K dated July 11, 1996 and incorporated herein by reference).
2.5 Short-term Promissory Note for CHF 12,084,832.65 executed by the Company
and payable in full to Lucio Roffi on or prior to August 31, 1996 (filed as
Exhibit 2(d) to the Company's Current Report on Form 8-K dated July 11,
1996 and incorporated herein by reference).
3.1 Form of Restated Articles of Incorporation of the Company (filed as Exhibit
3.1 to the Company's Form S-1 Registration Statement Amendment No. 1 dated
July 14, 1994 (File No. 33-80100) and incorporated herein by reference).
3.2 Form of Amended and Restated By-Laws of the Company (filed as Exhibit 3.2
to the Company's Form S-1 Registration Statement, Amendment No. 1 dated
July 14, 1994 (File No. 33-80100) and incorporated herein by reference).
4.1 Form of Certificate representing Common Stock (filed as Exhibit 4.1 to the
Company's Form S-1 Registration Statement, Amendment No. 1 dated July 14,
1994 (File No. 33-80100) and incorporated herein by reference).
5.1 Opinion of Stroock & Stroock & Lavan as to the legality of the Shares.
5.2 Opinion of Prince, Yeates & Geldzahler as to the legality of the Shares.
10.1 Employment Agreement for Premek Stepanek (filed as Exhibit 10.1 to the
Company's Form S-1 Registration Statement dated June 10, 1994 (File No. 33-
80100) and incorporated herein by reference).
10.2 Employment Agreement for Dr. Wilhelm Fahrngruber (filed as Exhibit 10.2 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No.
33-80100) and incorporated herein by reference).
10.3 Employment Agreement for Otto Harsanyi (filed as Exhibit 10.3 to the
Company's Form S-1 Registration Statement dated June 10, 1994 (File No. 33-
80100) and incorporated herein by reference).
10.4 Form of 1994 Stock Option Plan (filed as Exhibit 10.4 to the Company's Form
S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and
incorporated herein by reference).
10.5 401(k) Plan (filed as Exhibit 10.5 to the Company's Form S-1 Registration
Statement dated June 10, 1994 (File No. 33-80100) and incorporated herein
by reference).
10.6 Manufacturing Facility Lease Agreement (filed as Exhibit 10.6 to the
Company's Form S-1 Registration Statement dated June 10, 1994 (File No. 33-
80100) and incorporated herein by reference).
10.7 Second Amended and Restated Revolving Credit Agreement with First Security
Bank of Utah, N.A., including Extension Agreement (filed as Exhibit 10.7 to
the Company's Form S-1 Registration Statement dated June 10, 1994 (File No.
33-80100) and incorporated herein by reference).
10.8 Loan Agreement with First Interstate Bank (filed as Exhibit 10.8 to the
Company's Form S-1 Registration Statement dated June 10, 1994 (File No. 33-
80100) and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------------- ----
<C> <S> <C>
10.9 Agreement with Bayerischi Hypotheken-und Wechsel-Bank ("Hypo Bank") for a
DM 60,000,000 Line of Credit (filed as Exhibit 10.9 to the Company's Form
S-1 Registration Statement dated June 10, 1994 (File No. 33-80100) and
incorporated herein by reference).
10.10 Loan Agreement with Hypo Bank for a DM 4,000,000 loan (filed as Exhibit
10.10 to the Company's Form S-1 Registration Statement dated June 10, 1994
(File No. 33-80100) and incorporated herein by reference).
10.11 Loan Agreement with Hypo Bank for a DM 1,863,333 loan (filed as Exhibit
10.11 to the Company's Form S-1 Registration Statement dated June 10, 1994
(File No. 33-80100) and incorporated herein by reference).
10.12 Loan Agreement with Hypo Bank for a DM 2,220,000 loan (filed as Exhibit
10.12 to the Company's Form S-1 Registration Statement dated June 10, 1994
(File No. 33-80100) and incorporated herein by reference).
10.13 Loan Agreement with Hypo Bank for a DM 3,000,000 loan (filed as Exhibit
10.13 to the Company's Form S-1 Registration Statement dated June 10, 1994
(File No. 33-80100) and incorporated herein by reference).
10.14 Loan Agreement with Hypo Bank for a DM 10,000,000 loan (filed as Exhibit
10.14 to the Company's Form S-1 Registration Statement dated June 10, 1994
(File No. 33-80100) and incorporated herein by reference).
10.15 Loan Agreement with Hypo Bank for a DM 64,000,000 Line of Credit (filed as
Exhibit 10.15 to the Company's Form S-1 Registration Statement, Amendment
No. 1 dated July 14, 1994 (File No. 33-80100) and incorporated herein by
reference).
10.16 Loan Agreement with Hypo Bank for a DM 7,284,205 loan (filed as Exhibit
10.16 to the Company's Quarterly Report on Form 10-Q dated August 11, 1995
and incorporated herein by reference).
10.17 Pledge Agreement and Conditional Assignment with Hypo Bank for a $3.5
million time deposit (filed as Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q dated August 11, 1995 and incorporated herein by
reference).
10.18 Line of Credit Agreement Between Marker Deutschland GmbH and Hypo Bank for
DM 70,000,000 and a Foreign Exchange Line of Credit for DM 60,000,000
(filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q
dated November 13, 1995 and incorporated herein by reference).
10.19 Amended and Restated Revolving Credit Agreement with First Security Bank
for up to $18,000,000 (filed as Exhibit 10.19 to the Company's Quarterly
Report on Form 10-Q dated November 13, 1995 and incorporated herein by
reference).
20.1 Press Release of Marker International, dated June 12, 1996 (filed as
Exhibit 20(a) to the Company's Current Report on Form 8-K dated June 19,
1996 and incorporated herein by reference).
20.2 Press Release of Marker International dated June 28, 1996 (filed as Exhibit
20(a) to the Company's Current Report on Form 8-K dated July 11, 1996 and
incorporated herein by reference).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Stroock & Stroock & Lavan (included in Exhibit 5.1 filed
herewith).
23.3 Consent of Prince, Yeates & Geldzahler (included in Exhibit 5.2 filed
herewith).
*25.1 Power of attorney.
</TABLE>
- ------------
* Previously filed.
EXHIBIT 1.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,400,000 SHARES
MARKER INTERNATIONAL
COMMON STOCK
------------------------------
UNDERWRITING AGREEMENT
----------------------
------------------------------
July 17, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
3,400,000 SHARES
MARKER INTERNATIONAL
COMMON STOCK
---------------------------
UNDERWRITING AGREEMENT
---------------------------
July 17, 1996
ALLEN & COMPANY INCORPORATED
PIPER JAFFRAY INC.
As Representatives of the Several
Underwriters
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Dear Sirs:
Marker International, a Utah corporation (the "Company"), and the
selling stockholder, Henry E. Tauber, (the "Selling Stockholder"), hereby
confirm their agreement with the several Underwriters named in Schedule A
hereto (the "Underwriters"), for which you are acting as representatives (the
"Representatives"), as follows:
1. Description of Securities. The Company has authorized by
appropriate corporate action and proposes to issue and sell to the
Underwriters up to 2,500,000 shares of Common Stock, $.01 par value. The
Selling Stockholder proposes to sell to the Underwriters an aggregate of
900,000 shares of the Company's Common Stock. The 3,400,000 shares of Common
Stock to be sold to the Underwriters by the Company and the Selling
Stockholder hereunder, as further described herein, are herein referred to as
the "Purchased Shares". In addition, as provided in Section 3 hereof, the
Company and the Selling Stockholder are granting to the Underwriters an
option to purchase up to 510,000 additional shares of the Company's Common
Stock (the "Option
<PAGE>
Shares"). The Purchased Shares and the Option Shares are herein collectively
referred to as the "Shares".
2. Representations, Warranties and Agreements of the Company and of the
Selling Stockholder.
(a) The Company represents and warrants to and agrees with each
Underwriter that:
(i) A registration statement on Form S-1 (File No.333-6299) with
respect to the Shares, including a preliminary form of prospectus, copies of
which have heretofore been delivered to you, has been prepared by the Company
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") under the Act, and
has been filed with the Commission under the Act; such amendment or
amendments to such registration statement, copies of which have heretofore
been delivered to you, as may have been made prior to the date of this
Agreement have been so prepared and filed; and the Company has so prepared
and proposes so to file in a timely manner after the effective date of such
registration statement the final form of prospectus. Such registration
statement (including all exhibits thereto), as finally amended and revised as
of the time the Underwriters first offer the Shares for sale to the public
together with information, if any, which is permitted to be, and is,
subsequently filed pursuant to Rule 430A of the Rules and Regulations, is
herein referred to as the "Registration Statement". Such prospectus in the
form filed pursuant to Rule 424(b) of the Rules and Regulations, or, if no
final prospectus is filed with the Commission pursuant to Rule 424(b), in
such form as such final prospectus is included in the Registration Statement,
is herein referred to as the "Prospectus". Each preliminary form of
prospectus is herein referred to as a "Preliminary Prospectus".
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time of filing of
each Preliminary Prospectus, such prospectus did not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. When the Registration Statement was or is
declared effective and at all times subsequent thereto up to and at each
Closing Date (hereinafter defined) (i) the Registration Statement contained
or will contain as of its date all material statements and information which
are required to be included therein in accordance with the Act and Rules and
Regulations and will in all material respects conform to the requirements of
the Act and the Rules and Regulations, and (ii)
2
<PAGE>
the Registration Statement did not or will not include as of its date any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the Prospectus
or any amendment or supplement thereto is filed with the Commission pursuant
to Rule 424(b) (or, if the Prospectus or such amendment or supplement is not
required to be so filed, when the Registration Statement or the amendment
thereto containing such amendment or supplement to the Prospectus was or is
declared effective), on the date when the Prospectus is otherwise amended or
supplemented and on each Closing Date (as hereinafter defined), the
Prospectus, as amended or supplemented at any such time, (i) contained or
will contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the requirements
of, the Act and the Rules and Regulations and (ii) did not or will not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
representations and warranties shall not apply to information contained in or
omitted from the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon, and in conformity with, written
information furnished to the Company by any Underwriter through you
specifically for use in the preparation thereof.
(iii) Set forth on Schedule B hereto is the name of each
subsidiary of the Company which holds assets or conducts operations which are
material to the condition (financial or otherwise), results of operations,
business or prospects of the Company and its subsidiaries taken as a whole,
and, unless otherwise indicated thereon, the Company holds all right, title
and interest in and to the entire equity interest in each such subsidiary.
Except as described in the Prospectus, subsequent to the respective dates as
of which information is given in the Registration Statement and the
Prospectus, neither the Company, nor any entity which is either identified in
the Prospectus as a subsidiary of the Company or listed on Schedule B hereto
(each individually a "Subsidiary" and collectively the "Subsidiaries"), taken
as a whole, has incurred any direct or, to the best of the Company's
knowledge, contingent material liabilities or material obligations, or
entered into any material transactions or contracts not in the ordinary
course of business, and there has not been any change in its capital shares,
options or warrants, nor any material increase or decrease in the amount
thereof outstanding or in any of its long-term debt outstanding, except
pursuant to the terms of the instruments governing the same, or any material
adverse change in the condition (financial or otherwise), results of
operations, business or prospects of the Company and the Subsidiaries taken
as a whole.
(iv) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened,
3
<PAGE>
any action, suit or proceeding to which the Company or any Subsidiary is a
party before any court or governmental agency or body which could reasonably
be expected to result in any material adverse change in the condition
(financial or otherwise), results of operations, business or prospects of the
Company and the Subsidiaries taken as a whole, or could reasonably be
expected to materially and adversely affect the properties, assets or ability
to do business as contemplated in the Prospectus of the Company and the
Subsidiaries taken as a whole; and there are no contracts or documents
required to be filed as exhibits to the Registration Statement by the Act or
by the Rules and Regulations which have not been filed as exhibits to the
Registration Statement.
(v) This Agreement has been duly authorized, executed and
delivered on behalf of the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms, except
(1) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (2) as rights to indemnity or contribution
hereunder may be limited by federal or state securities laws; the execution,
delivery and performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of
any term or provision of, or constitute a default under, (i) any currently
existing statute, any indenture, mortgage, deed of trust, note agreement or
other agreement or instrument filed as an exhibit to the Registration
Statement or any other material indenture, mortgage, deed of trust, note or
agreement or other agreement or instrument to which the Company or any
Subsidiary is a party or by which it or its property is bound; (ii) the
charter or by-laws of the Company or any Subsidiary; or (iii) any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company or over their properties; no consent, approval,
authorization or order of any court or governmental agency or body is
required for the consummation by the Company of the transactions on its part
herein contemplated, except such as have been obtained or such as may be
required under the Act or as may be required under state or other securities
or blue sky laws in connection with the purchase and distribution of the
Shares by the Underwriters; and neither the Company nor any of the
Subsidiaries is now in default, and no event has occurred which with the
giving of notice or lapse of time or both would be a default, under any
contract, agreement, indenture, mortgage or other undertaking to which such
entity is a party and which is material to the condition (financial or
otherwise), results of operations, business or prospects of the Company and
the Subsidiaries taken as a whole.
(vi) Each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its
4
<PAGE>
incorporation, with full power and authority, corporate or otherwise, to own
its properties and conduct its business as described and contemplated in the
Registration Statement, and is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions where its operations
or ownership of property requires such qualifications and where failure so to
qualify would impair title to any material properties of the Company or its
rights to enforce contracts against others or expose it to liabilities
material to the Company and the Subsidiaries taken as a whole in such
jurisdictions.
(vii) The Company has the authorized and outstanding capital stock
set forth in the Prospectus; the outstanding capital stock of the Company
conforms, and the Shares when issued and sold as herein contemplated will
conform, in all material respects, to all statements in relation thereto
contained in the Registration Statement and the Prospectus and all such stock
has been duly authorized and the outstanding capital stock has been and the
Shares, when issued and delivered against payment therefor as provided
herein, will be validly issued, fully-paid and nonassessable; except as
stated in the Prospectus, the stockholders of the Company have no preemptive
rights with respect to the Shares and there are no outstanding rights,
options or warrants to acquire any securities of the Company; to the extent
that any rights, options or warrants to acquire any securities of the Company
are outstanding, except as otherwise set forth in the Prospectus, the
issuance of the Shares as described in the Prospectus will not result in an
adjustment of the exercise price or number of shares issuable upon the
exercise in respect of any such rights, options or warrants; and, except as
otherwise set forth in the Prospectus or herein, the Company owns (directly or
indirectly) under valid title the respective outstanding shares of capital
stock of the Subsidiaries, free and clear of any material liens, encumbrances
or claims.
(viii) Except as otherwise set forth in the Prospectus, each of
the Company and the Subsidiaries owns or possesses, or can acquire on
reasonable terms, adequate patents, patent licenses, trademarks, service
marks and trade names necessary to carry on its business as presently
conducted, and except as set forth in the Prospectus, neither the Company nor
any of the Subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any patents, patent
licenses, trademarks, service marks or trade names which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
could materially and adversely affect the condition (financial or otherwise),
earnings, affairs, business or prospects of the Company and the Subsidiaries
taken as a whole.
5
<PAGE>
(ix) Except as set forth in the Prospectus, the Company and its
Subsidiaries hold in good standing or have applied for all licenses, permits,
authorizations, franchises, consents and orders of all federal, state, local,
and foreign governmental bodies necessary to carry on their business as
reflected or contemplated in the Prospectus; except as stated in the
Prospectus the Company has good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
it, in each case free and clear of all liens, encumbrances and defects with
such exceptions as are not material to the Company and the Subsidiaries taken
as a whole; and the real property and personal property referred to in the
Prospectus as held under lease by the Company is held by it under valid,
subsisting and enforceable leases with only such exceptions as in the
aggregate are not material and do not materially interfere with the conduct
of the business of the Company and the Subsidiaries taken as a whole as
contemplated by the Prospectus.
(x) The Company is conducting and proposes to conduct its business
so as to comply in all material respects with all applicable federal, state,
local and foreign governmental statutes, rules and regulations; and except as
set forth in the Prospectus, neither the Company nor any Subsidiary is
charged with, or, is under investigation with respect to, any violation of
any of such statutes, rules or regulations or is the subject of any pending
or threatened proceeding by a governmental body or regulatory authority
relating to any such violation.
(xi) The Company and each of the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the business in which
they are engaged; and neither the Company nor any of the Subsidiaries has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the business or financial condition
of the Company and the Subsidiaries taken as a whole, except as described or
contemplated in the Prospectus.
(xii) Arthur Andersen LLP, which has examined and expressed its
opinion on certain of the financial statements of the Company filed with the
Commission as a part of the Registration Statement, are, to the Company's
best knowledge, independent accountants with respect to the Company within
the meaning of the Act and the Rules and Regulations; the financial
statements, together with the related notes, forming part of the Registration
Statement and Prospectus fairly present the financial condition of the
Company and its results of operations as of the dates and for the periods
described in such opinion in
6
<PAGE>
the Prospectus; and such financial statements have been prepared in
accordance with the requirements of the Commission.
(xiii) The Company and each of the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurances
that transactions are executed in accordance with management's general or
specific authorizations and are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles.
(xiv) Except as stated in the Prospectus, the Company knows of no
outstanding claims for services, either in the nature of a finder's fee or
origination fee, with respect to the transactions contemplated hereby, and
the Company agrees to indemnify and hold the Underwriters harmless from any
such claim for any such services of such nature arising from the act of any
person other than any Underwriter.
(xv) Except for the Selling Stockholder, no person holds a right
to require or participate in the registration under the Act of the Common
Stock of the Company to be effected by the Registration Statement, which
right has not been effectively waived by the holder thereof as of the date
hereof.
(xvi) The Company has obtained from each of its officers and
directors an executed agreement that they will not, without the prior written
consent of Allen & Company Incorporated on behalf of the Underwriters, sell,
offer for sale, contract to sell or otherwise dispose of any shares of the
Company's Common Stock or any securities exercisable for or convertible into
its Common Stock or any rights to acquire Common Stock for a period of 180
days from the date of the final Prospectus.
(b) The Selling Stockholder represents and warrants to, and agrees
with, each Underwriter and the Company that:
(i) All consents, approvals, authorizations, and orders necessary
for the execution and delivery by such Selling Stockholder of this Agreement,
and for the sale and delivery of the Shares to be sold by such Selling
Stockholder hereunder (other than, at the time of execution hereof, (if the
Registration Statement has not yet been declared effective by the Commission)
the issuance of the order of the Commission declaring the Registration
Statement effective and such authorizations, approvals or consents as may be
necessary from the NASD or under state or other securities or Blue Sky laws)
have been obtained. Such Selling Stockholder has full right, power and
authority to enter into this Agreement and to sell, assign, transfer, and
deliver the Purchased Shares to be sold by such Selling Stockholder
hereunder. This Agreement has been duly executed and delivered by such
Selling Stockholder and is a valid and binding
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agreement, enforceable in accordance with its terms, except (1) that such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, (2) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought and (3) as rights to indemnity or contribution hereunder may be
limited by federal or state securities laws.
(ii) Neither the sale of Shares to be sold by such Selling Stockholder
hereunder, nor the execution, delivery, and performance of this Agreement
will result in a breach or violation of any material term or provision of, or
constitute a default under, any currently existing material and relevant
statute, any material indenture, mortgage, deed of trust, loan or note
agreement, or other material agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound, or any
order, rule, or regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or over any of such Selling
Stockholder's properties.
(iii) Such Selling Stockholder has, and immediately prior to the
Closing Date such Selling Stockholder will have, valid and marketable title
to the Shares to be sold by such Selling Stockholder hereunder, free and
clear of all liens, encumbrances, equities, and claims (other than pursuant
to this Agreement). Upon delivery of such Shares and payment therefor
pursuant hereto, valid and marketable title to such Shares, free and clear of
all liens, encumbrances, equities, and claims, will pass to the Underwriters.
(iv) Such Selling Stockholder has not taken and will not take (directly
or indirectly) any action which is designed to or which has constituted or
might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company in order to
facilitate the sale or resale of the Shares.
(v) Any statement or omission in the Registration Statement, the
Prospectus, or any post-effective amendment or supplement thereto that is or
was made in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly for use
therein is true, complete and correct in all material respects and does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make such statements, in
light of the circumstances under which they were made, not misleading.
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<PAGE>
(vi) Nothing has come to such Selling Stockholder's attention to cause
it to have reason to believe that the Company's representations and
warranties contained in this Agreement are not accurate in any material
respect.
(vii) Such Selling Stockholder has carefully read the Registration
Statement, the Prospectus, and this Agreement and that to its best knowledge
its representations, warranties, and other statements contained in this
Agreement are accurate in all material respects on the date hereof and will
be accurate in all material respects on and as of the First Closing Date (as
defined in Section 3 hereof) with the same effect as if made on the First
Closing Date, and such Selling Stockholder has performed all of its
obligations and satisfied all conditions on its part to be performed or
satisfied at or prior to the First Closing Date.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Stockholder agree to sell to each Underwriter and each Underwriter agrees,
severally and not jointly, to purchase from the Company and the Selling
Stockholder, at a purchase price of $_______ per Share, the aggregate number
of Shares set forth opposite the name of such Underwriter in Schedule A
hereto. Of such aggregate number of Shares to be purchased by each
Underwriter, (i) the number of Purchased Shares to be purchased from the
Company shall be in the same proportion as 2,500,000 bears to 3,400,000 and
(ii) the number of Purchased Shares to be purchased from the Selling
Stockholder shall be in the same proportion as 900,000 bears to 3,400,000.
The Company and the Selling Stockholder will deliver the Purchased
Shares to you for the accounts of the several Underwriters at the office of
Allen & Company Incorporated, 711 Fifth Avenue, New York, New York, against
payment of the purchase price therefor by certified or official bank check or
checks in New York Clearing House funds, payable to the order of Marker
International for the Purchased Shares to be sold by it and payable to the
order of the name of the Selling Stockholder as set forth on the signature
page hereto for the Purchased Shares to be sold by the Selling Stockholder,
at 10:00 A.M., New York Time, on July 23, 1996 or at such other time and date
not later than five full business days thereafter as you and the Company and
the Selling Stockholder may determine, such time and date of delivery and
payment being herein called the "First Closing Date". The certificates for
the Purchased Shares to be so delivered will be made available to you at such
office for checking at least one full business day prior to such Closing Date
and will be in such names and denominations as you may request in writing not
less than two full business days prior to such Closing Date.
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<PAGE>
On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Company and the Selling Stockholder grant to the Underwriters an option
to purchase up to 510,000 Option Shares at the same price per share as the
Underwriters shall pay for the Purchased Shares. The number of Option Shares
to be contributed by the Company and the Selling Stockholder to cover such
over-allotments shall be divided equally between the Company and the Selling
Stockholder. Such option may be exercised only to cover over-allotments
arising in connection with the sale of Purchased Shares by the Underwriters,
such exercise to be upon written notice by you to the Company and the Selling
Stockholder within 30 days of the date hereof setting forth the number of
Options Shares as to which the Underwriters are exercising the option, the
denominations and names in which certificates for such Shares should be
registered and the time and place at which such certificates are to be
delivered. Such time and place (unless such time is the First Closing Date),
herein referred to as the "Second Closing Date", shall be determined by you
but shall not be earlier than the First Closing Date, nor earlier than three
full business days or later than ten full business days after the exercise of
such option. The Company will deliver the Option Shares to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by certified or official bank check or checks in New York Clearing
House funds payable to the order of Marker International or Henry E. Tauber,
as the case may be. The number of Option Shares to be purchased by each
Underwriter shall be in the same proportion to the aggregate number of Option
Shares purchased as the number of Purchased Shares set forth opposite the
name of such Underwriter in Schedule A hereto bears to 3,400,000.
It is understood that you, individually and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment on behalf of any Underwriter or Underwriters for Shares to
be purchased by such Underwriter or Underwriters. Any such payment by you
shall not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters propose to offer the Shares to the public as set forth in the
Prospectus.
4. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any subsequent amendment thereto to become
effective as promptly as possible; it will notify you, promptly after it
shall receive notice thereof, of the time when
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<PAGE>
the Registration Statement or any subsequent amendment to the Registration
Statement has become effective or any supplement to the Prospectus has been
filed; it will notify you promptly of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus or for
additional information; it will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in your reasonable opinion, may be necessary
or advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have
occurred as a result of which the Prospectus or any other prospectus relating
to the Shares as then in effect would include an untrue statement of a
material fact or omit to
state any material fact necessary to make the statements therein not
misleading; in case any Underwriter is required to deliver a prospectus after
the nine-month period referred to in Section 10(a)(3) of the Act in
connection with sales of the Shares purchased by the Underwriters from the
Company pursuant to Section 3 or otherwise acquired by the Underwriters
during the distribution of the Shares in connection with stabilization or
otherwise, the Company will prepare and file with the Commission promptly
upon request of, but at the expense of, such Underwriter, any amendments or
supplements to the Registration Statement or Prospectus as may be necessary,
in such Underwriter's reasonable opinion, to permit the sale of such Shares
in the manner determined by such Underwriter, in compliance with the
requirements of the Act, including Section 10(a)(3) thereunder; and it will
file no amendment or supplement to the Registration Statement or Prospectus
that shall not previously have been submitted to you in writing a reasonable
time prior to the proposed filing thereof or to which you shall reasonably
object in writing.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order suspending trading in the Shares or other of the Company's
securities or of the initiation or threat of any proceeding for that purpose;
and it will use promptly its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such a stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares
for sale under the blue sky or securities laws of such jurisdictions as you
may reasonably designate and to continue such qualifications in effect for so
long as may be required for
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<PAGE>
purposes of the distribution of the Shares, except that the Company shall not
be required in connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of process in
any state.
(d) The Company will furnish to you, as soon as available, copies
of the Registration Statement (two of which will be signed and will include
all exhibits), each Preliminary Prospectus, the Prospectus, and any
amendments or supplements to such documents, including any prospectus
prepared to permit compliance with Section 10(a)(3) of the Act, all in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its security
holders as soon as practicable, an earnings statement (which will be in
reasonable detail but need not be audited) covering a 12-month period
beginning after the effective date of the Registration Statement which shall
satisfy the provisions of Section 11(a) of the Act.
(f) The Company agrees, during each fiscal year for a period of
five years from the date hereof, to furnish to its stockholders as promptly
as may be practicable an annual report (including financial statements
audited by independent public accountants) and to furnish quarterly financial
statements (which need not be audited) for each of the first three quarters
of each fiscal year, and to furnish, upon request, to each Underwriter
hereunder (i) as soon as practicable after the end of each of the first three
quarters of each fiscal year, the Company's quarterly report on Form 10-Q or
statements of operations and surplus of the Company for such quarter in
reasonable detail and certified by the Company's principal financial or
accounting officer; (ii) as soon as practicable after the end of each fiscal
year, financial statements of the Company as at the end of such fiscal year,
including statements of operations, retained earnings and changes in
financial position of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the report thereon of independent public
accountants or the Company's annual report on Form 10-K; and (iii) as soon as
they are available, copies of all reports and financial statements furnished
to or filed with the Commission. During such period, if and so long as the
Company shall have active subsidiaries, the foregoing financial statements
shall be on a combined or consolidated basis to the extent that the accounts
of the Company and its subsidiaries are combined or consolidated.
(g) The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements, and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act; (ii) all other
expenses in connection with the preparation, printing, and filing of the
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<PAGE>
Registration Statement, each Preliminary Prospectus, and the Prospectus and
amendments and supplements thereto, and the mailing and delivering of copies
thereof to the Underwriters and dealers; (iii) the cost of printing this
Agreement, the Selected Dealer Agreement, the Blue Sky Memorandum, and any
other documents in connection with the offering, purchase, sale and delivery
of the Shares; (iv) all costs and expenses in connection with the issuance
and delivery of the Shares hereunder to the Underwriters, including related
transfer taxes, if any; (v) all expenses in connection with the qualification
of the Shares for offering and sale under the securities laws of various
jurisdictions, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky Survey; (vi) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms
of the sale of the Shares; (vii) the costs of preparing stock certificates;
(viii) the cost and charges of any transfer agent or registrar; and (ix) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
4. The Company shall reimburse the Underwriters upon request from time to
time for their reasonable itemized out-of-pocket expenses up to a maximum of
$100,000 in the aggregate including their legal fees and disbursements and
travel, roadshow and syndicate expenses. If the Company determines not to
proceed with the offering for any reason, other than the Underwriters'
unwillingness to proceed on the terms and conditions set forth in this
Agreement, or if the Representatives exercise their right to terminate
this Agreement pursuant to Section 10(b)(i) hereof, the Company shall
reimburse the Underwriters for all reasonable out-of-pocket expenses
including legal fees and disbursements and travel, roadshow and syndicate
expenses actually incurred by the Underwriters. The Company shall not in
any event be liable to any of the Underwriters for the loss of anticipated
profits from the transactions covered by this Agreement.
(h) The Company will not, without the prior written consent of
Allen & Company Incorporated on behalf of the Underwriters, sell, offer for
sale, contract to sell or otherwise dispose of any shares of Common Stock or
any securities exercisable for or convertible into shares of its Common Stock
or any rights to acquire Common Stock, for a period of 180 days after the
date of final Prospectus. In addition, the Company also agrees to obtain the
written agreement of each officer and director of the Company that such
person will not without such prior written consent, sell, offer for sale,
contract to sell or otherwise dispose of any of such Common Stock or any
securities exercisable for or convertible into shares of its Common Stock or
any rights to acquire Common Stock held by such holder for a period of 180
days after the date of the final Prospectus.
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<PAGE>
5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Purchased Shares on the
First Closing Date and the Option Shares on the Second Closing Date, as
provided herein shall be subject to the accuracy, as of the date hereof and
such Closing Date (as if made on and as of such Closing Date), of the
representations and warranties of the Company and the Selling Stockholder, to
the performance by the Company and the Selling Stockholder of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York City Time, on the date of this Agreement, or
such later date as shall be consented to in writing by you; if required, the
Prospectus and any amendment or supplement thereto shall have been filed with
the Commission in the manner and within the time period required by Rule
424(b) under the Act; and no stop order suspending the effectiveness thereof
shall have been issued and no proceedings for that purpose shall have been
initiated or, to the knowledge of the Company or any Underwriter, threatened
by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to your satisfaction.
(b) Prior to such Closing Date, except as contemplated in the
Prospectus, there shall not have been any change in the capital shares, nor
the issuance of any rights, options, or warrants to purchase any capital
shares, nor any material increase or decrease in any long-term debt of the
Company or any of the Subsidiaries or any material adverse change in the
condition (financial or otherwise), results of operations, business or
prospects of the Company or any of the Subsidiaries which in your reasonable
judgment renders it inadvisable to proceed with the offering and sale of the
Shares.
(c) You shall have received the opinion of Stroock & Stroock &
Lavan, counsel for the Company, in form and substance satisfactory to you and
dated such Closing Date, to the effect that:
(i) each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation with
full corporate power and authority to own its properties and to
conduct its business as described in the Registration Statement and
is duly qualified to do business as a foreign corporation in each
state or jurisdiction where its operations and the ownership of its
properties requires such qualification, except with respect to
qualification as a foreign corporation in such
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<PAGE>
jurisdictions in which the failure to so qualify has not had and
will not have a material adverse effect on the business of the
Company and the Subsidiaries taken as a whole;
(ii) the Company has authorized capital stock as set forth in
the Prospectus; all shares of Common Stock, including the Shares,
conform as to legal matters in all material respects to the
appropriate descriptions thereof under the heading "Description of
Capital Stock" in the Prospectus; all outstanding shares of Company
capital stock have been duly authorized and are validly issued,
fully paid and non-assessable; and the issuance of the Shares has
been duly authorized and, when issued and delivered in accordance
with this Agreement, the Shares will be validly issued, fully paid
and non-assessable; and, except as described in the Prospectus, the
issuance of the Shares as described in the Prospectus will not
result in any adjustment of the exercise price or number of shares
issuable upon exercise in respect of any outstanding options or
warrants of the Company; and, except as otherwise set forth in the
Registration Statement and Schedule B to this Agreement, the
Company owns (directly or indirectly) under valid title all of the
respective outstanding shares of capital stock of each of the
Subsidiaries, to the best of the knowledge of such counsel, free
and clear of any material liens, encumbrances or claims;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms,
except that (1) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (2) rights to
indemnity or contribution hereunder may be limited by federal or
state securities laws; the sale of the Shares under this Agreement
and the consummation of the transactions herein contemplated do not
result in a breach or violation of any terms or provisions of, or
constitute a default under, any presently existing statute, or any
indenture, mortgage, deed of trust, note agreement or other
agreement or instrument filed as an exhibit to the Registration
Statement or otherwise known to counsel to which the Company is a
party or by which it or its properties are bound or affected, or to
which any of the material property or assets of the Company or the
Subsidiaries is subject, the Company's certificate of incorporation
and by-laws, or, to the best of such counsel's
15
<PAGE>
knowledge, any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
the Subsidiaries or over their respective properties;
(iv) no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by
the Company of the transactions contemplated by this Agreement that
has not been obtained, except such as may be required under the Act
or as may be required under state securities or blue sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters;
(v) the Registration Statement has become effective under the
Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
are pending or threatened under the Act;
(vi) except as set forth in the Prospectus, the Company and
the Subsidiaries hold in good standing or have applied for all
material licenses, permits, authorizations, franchises, consents
and orders, of Federal, State or local, and foreign governmental
bodies necessary to carry on their respective businesses as
reflected in the Registration Statement;
(vii) the agreements or documents to which the Company or the
Subsidiaries are a party which are summarized under the headings
"Management - Employment Contracts" and "Certain Relationships and
Related Transactions" in the Prospectus conform in all material
respects to such summaries;
(viii) to the best of such counsel's knowledge after due inquiry
(it being understood that for purposes of this opinion, due inquiry
does not include any search of court or administrative records),
there are no legal or governmental proceedings pending or
threatened to which the Company or any Subsidiary is a party or to
which any properties of the Company or the Subsidiaries are subject
which is required to be described in the Registration Statement or
the Prospectus and is not so described;
(ix) the Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective
or issue dates, comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations
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<PAGE>
(except that such counsel need express no opinion as to the
financial statements, notes to financial statements, related
schedules or other financial data contained in the Registration
Statement or the Prospectus);
(x) to the best of such counsel's knowledge after due
inquiry, all contracts and documents pertaining to the Company
required to be filed as Exhibits to the Registration Statement have
been filed as required and all contracts and documents required to
be described in the Prospectus have been accurately described
therein in all material respects;
(xi) Such counsel shall also state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the
Company and the representatives of the Underwriters, at which the
contents of the Registration Statement and the Prospectus and
related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in
the Registration Statement and the Prospectus, on the basis of the
foregoing (relying as to materiality to a large extent upon the
opinions of officers and other representatives of the Company), no
facts have come to such counsel's attention which lead such counsel
to believe that the Registration Statement (except with respect to
the financial statements and schedules thereto and other financial
or statistical data, as to which such counsel need not make any
statement) at the time it became effective or at the Closing Date
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus
(except with respect to the financial statements and schedules
thereto and other financial or other statistical data, as to which
such counsel need not make any statement) on the date thereof or on
the Closing Date contained any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances in which they
were made, not misleading.
In rendering the foregoing opinions, such counsel may rely as to
factual matters on certificates of officers and representatives of the
Company or any Subsidiary and of public officials, and will not be required
to independently verify the
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accuracy or completeness of information or documents furnished to it in
respect to the Registration Statement or the Prospectus. To the extent that
such counsel's opinion relates to the laws of jurisdictions other than New
York or Delaware, such counsel shall be permitted to rely on the opinion of
local counsel reasonably satisfactory to counsel for the several
Underwriters.
(d) You shall have received from Werbel McMillin & Carnelutti, A
Professional Corporation, counsel for the several Underwriters, an opinion or
opinions, dated such Closing Date, in form and substance satisfactory to you,
with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(e) You shall have received, at the time of execution of this
Agreement and on such Closing Date from Arthur Andersen LLP, independent
public accountants, a letter or letters, dated the date of delivery thereof,
substantially in the form and substance heretofore approved by you.
(f) You shall have received a certificate, dated such Closing
Date, of each of the President and Chief Executive Officer and the Chief
Financial Officer of the Company, delivered on behalf of the Company, to the
effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of such Closing
Date; and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or, to their knowledge, are
contemplated by the Commission; and
(iii) except as contemplated in the Prospectus, the Company
and/or its Subsidiaries taken as a whole have not incurred any
direct or, to the best of the Company's knowledge, contingent
material liabilities or obligations, or entered into any material
transactions or contracts not in the ordinary course of business,
and there has not been any change in the capital shares of the
Company and/or its Subsidiaries, nor the issuance of any rights,
options, or warrants to purchase any capital shares, nor any
material increase
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or decrease in any thereof or in any long-term debt or any material
adverse change in the condition (financial or otherwise) results of
operations, business or prospects of the Company and its
Subsidiaries taken as a whole.
(g) The Company and the Selling Stockholder shall have furnished
to you such certificates, in addition to those specifically mentioned herein,
as you may have reasonably requested, as to the accuracy and completeness at
such Closing Date of any statement in the Registration Statement or
Prospectus, as to the accuracy at such Closing Date of the representations
and warranties of the Company herein, as to the performance by the Company of
its obligations hereunder, and as to the fulfillment of the conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
(h) The Company shall have furnished to you the agreements
described in Section 2(a)(xvi) of this Agreement.
6. Indemnification. (a) The Company and the Selling Stockholder,
severally and not jointly, will indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending against any such loss, claim, damage, liability or action;
provided, however, that neither the Company nor the Selling Stockholder will
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, such Preliminary Prospectus, the Prospectus or such amendment or
such supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through you specifically for use
therein; and provided further, that the foregoing indemnity with respect to
Preliminary Prospectuses shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) if such untrue
statement or
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<PAGE>
omission or alleged untrue statement or omission made in any Preliminary
Prospectus is eliminated or remedied in the Prospectus and a copy of the
Prospectus has not been furnished to the person asserting any such losses,
claims, damages, or liabilities at or prior to the written confirmation of
the sale of such Shares to such person; and provided further, that the
liability of the Selling Stockholder under this Section 6(a), if any, shall
not exceed the gross proceeds (minus the amount of the underwriting discount
paid thereon) received by such Selling Stockholder from the sale of his
Shares pursuant to this Agreement. Such indemnity obligation will be in
addition to any liability which the Company and the Selling Stockholder may
otherwise have. The indemnity agreement of the Company and the Selling
Stockholder contained in this paragraph (a) and the representations and
warranties of the Company and the Selling Stockholder contained in Section 2
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Shares.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, each person, if any, who controls the
Company within the meaning of the Act and the Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which the
Company, or any such director, officer, or controlling person, or the Selling
Stockholder may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through you
specifically for use therein; and will reimburse any legal or other expenses
reasonably incurred by the Company, or any such director, officer or
controlling person, or the Selling Stockholder in connection with
investigating or defending against any such loss, claim, damage, liability or
action. Such indemnity obligation will be in addition to any liability which
such Underwriter may otherwise have. The indemnity agreement of each
Underwriter contained in this paragraph (b) shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Shares.
20
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
this Section, notify the indemnifying party of the commencement thereof.
Indemnification shall not be available to any party who shall fail so to give
notice, if the party to whom notice was required to be given was unaware of
the action, suit, investigation, inquiry or proceeding to which the notice
would have related, to the extent that such party was prejudiced by the
failure to be given notice; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel chosen by such indemnifying party which is reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that (i) if the indemnified party reasonably determines that there
may be a conflict between the positions of the indemnifying party and of the
indemnified party in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party different from or in addition to those
available to the indemnifying party, then counsel for the indemnified party
shall be entitled to conduct the defense to the extent reasonably determined
by such counsel to be necessary to protect the interests of the indemnified
party and (ii) in any event, the indemnified party shall be entitled to have
counsel chosen by such indemnified party participate in, but not conduct, the
defense. No indemnifying party shall be liable to any indemnified party in
respect to any settlement effected without its prior written consent, which
consent shall not be unreasonably withheld. In addition, the indemnifying
party will not, without the prior written consent of an indemnified party,
settle or compromise or consent to the entry of any judgment in any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such indemnified
party is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of such
indemnified party from all liability arising out of such claim, action, suit
or proceeding.
21
<PAGE>
7. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 6(a) or
6(b) hereof is for any reason, other than the first proviso to Section 6(a),
held to be unavailable, the Company, the Selling Stockholder and the
Underwriters shall contribute to the aggregate losses, claims, damages and
liabilities of the nature contemplated by such indemnification provisions
(including any investigation, legal and other expenses incurred in connection
with, any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting any contribution received by the Company
and the Selling Stockholder from persons other than the Underwriters, such as
persons who control the Company within the meaning of Section 15 of the Act,
officers of the Company who signed the Registration Statement and directors
of the Company, who may also be liable for contribution) to which the
Company, the Selling Stockholder and one or more of the Underwriters may be
subject, in such proportions so that the Underwriters are responsible for
that portion in each case represented by the percentage that the respective
underwriting discounts appearing on the cover page of the Prospectus bear to
the public offering price of the Shares, and the Company and the Selling
Stockholder are responsible for the remaining portion in such proportion as
the Purchased Shares offered by the Company and the Selling Stockholder bear
to the total number of Purchased Shares; provided, however, that (i) except
as may be provided in its Master Agreement Among Underwriters provided to
Allen & Company Incorporated, in no case shall any Underwriter be responsible
for any amount in excess of the underwriting discount applicable to the
Shares purchased by such Underwriter hereunder, (ii) the liability of the
Selling Stockholder under this Section 7, if any, shall not exceed the gross
proceeds (minus the amount of the underwriting discount paid thereon)
received by such Selling Stockholder from the sale of his Shares pursuant to
this Agreement, and (iii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act shall
have the same rights to contribution as such Underwriter, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act,
each officer of the Company who shall have signed the Registration Statement
and each director of the Company shall have the same right to contribution as
the Company, subject in each case to clauses (i) and (ii) of this Section 7.
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or
parties under this Section 7, notify such party or parties from whom
22
<PAGE>
contribution may be sought, but the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise
than under this Section 7. No party shall be liable for contribution with
respect to any action or claim settled without its consent, which consent
shall not be unreasonably withheld.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company, the Selling
Stockholder and the Underwriters herein or in certificates delivered pursuant
hereto shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling
person, the Company, or any of its officers, directors, or controlling
persons or the Selling Stockholder, and shall survive delivery of the Shares
to the several Underwriters hereunder.
9. Substitution of Underwriters. If any Underwriter or
Underwriters shall fail to take up and pay for the number of Shares to be
purchased by such Underwriter or Underwriters hereunder upon tender of such
Shares in accordance with the terms hereof, and if the aggregate number of
Shares which such defaulting Underwriter or Underwriters so agreed but failed
to purchase does not exceed 10% of the Shares, the remaining Underwriters
shall be obligated severally in proportion to their respective commitments
hereunder to take up and pay for the Shares of such defaulting Underwriter or
Underwriters. If one or more of the Underwriters shall fail or refuse (other
than for a reason sufficient to justify the termination of this Agreement) to
purchase on any Closing Date the aggregate number of Shares agreed to be
purchased by such Underwriter or Underwriters and the aggregate number of
Shares agreed to be purchased by such Underwriter or Underwriters shall
exceed 10% of the aggregate number of Shares to be sold on any Closing Date
hereunder by the Company and the Selling Stockholder to the Underwriters,
then the other Underwriters shall have the right to purchase or procure one
or more other underwriters to purchase, in such proportions as they may agree
upon and upon the terms herein set forth, the Shares which such defaulting
Underwriter or Underwriters agreed to purchase, and this Agreement shall be
carried out accordingly. If such other Underwriters do not exercise such
right within thirty-six hours after receiving notice of any such default,
which notice the Representatives shall have also promptly delivered to the
Company, then the Company shall have the right to procure another party or
parties reasonably satisfactory to the Representatives to purchase or agree
to purchase such Shares on the terms herein set forth. If the Company is
unable to procure another such party, the Company may notify the
Representatives that the non-defaulting Underwriters are, by the giving of
such notice, released from their obligations to purchase such number of
Shares being sold hereunder by the Company and the Selling Stockholder as are
indicated in such notice as, when subtracted from the total number of Shares
23
<PAGE>
originally agreed to be purchased by all of the Underwriters hereunder, shall
leave a reduced number of Shares to be purchased by the non-defaulting
Underwriters not in excess of 110% of the aggregate number of Shares
originally contracted to be purchased hereunder by the non-defaulting
Underwriters, and each of them, in which event such non-defaulting
Underwriters shall purchase such reduced number of Shares. In any such case,
either the Representatives or the Company shall have the right to postpone
any Closing Date for a period of not more than seven business days in order
that necessary changes and arrangements may be effected by the
Representatives and the Company. If neither the non-defaulting Underwriters
nor the Company shall make arrangements within the period stated for the
purchase of the Shares which such defaulting Underwriter or Underwriters
agreed to purchase, including such arrangements for the purchase of a reduced
number of Shares as are provided for in this Section 9, then this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriters to the Company or the Selling Stockholder and without liability
on the part of the Company or the Selling Stockholder to the Underwriters.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section, neither the Company nor the Selling
Stockholder shall be under any liability to any Underwriter (except as
provided in Section 4(g) and 6 hereof) nor shall any Underwriter (other than
an Underwriter who shall have failed, otherwise than for some reason
permitted under this Agreement, to purchase the number of Shares to be
purchased by such Underwriter hereunder, which Underwriter shall remain
liable to the Company, the Selling Stockholder and the other Underwriters for
damages resulting from such default) be under any liability to the Company or
the Selling Stockholder (except as provided in Section 6 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 9.
10. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective upon the later of the
declaration by the Commission of the effectiveness of the Registration
Statement or the execution by the Representatives of this Agreement. For the
purposes of this Section the Shares shall be deemed to have been released for
sale to the public upon release by you for publication of a newspaper
advertisement relating to the Shares or upon release by you of letters or
telegrams offering the Shares for sale to securities dealers, whichever shall
first occur. By giving notice as hereinafter specified before the time this
Agreement becomes effective, you, as Representatives of the several
Underwriters, or the Company may prevent this Agreement from becoming
effective without liability on the part of the Company or the Selling
24
<PAGE>
Stockholder to any Underwriter or of any Underwriter to the Company or the
Selling Stockholder, other than as provided in Sections 4(g) and 6 hereof.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time at or prior to the First Closing Date if (i) either the
Company or the Selling Stockholder shall have failed, refused or been unable,
at or prior to the First Closing Date, to perform any material agreement on
its part to be performed, or because any other material condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company
is not fulfilled; (ii) trading on the New York Stock Exchange shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required, on the New
York Stock Exchange by the New York Stock Exchange or by order of the
Commission or any other governmental authority having jurisdiction, since the
execution of this Agreement; (iii) a banking moratorium shall have been
declared by Federal or New York authorities since the execution of this
Agreement; or (iv) an outbreak of major hostilities or other national
calamity shall have occurred. Any such termination shall be without
liability on the part of the Company or the Selling Stockholder to any
Underwriter or of any Underwriter to the Company or the Selling Stockholder
other than as provided in Sections 4(g) and 6 hereof.
(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section, the Company and
the Selling Stockholder shall be notified promptly by you by telephone or
telegram, confirmed by letter. If the Company shall elect to prevent this
Agreement from becoming effective, you and the Selling Stockholder shall be
notified promptly by the Company by telephone or telegram, confirmed by
letter.
11. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to
you shall be mailed, delivered or telecopied and confirmed to you c/o Allen &
Company Incorporated, 711 Fifth Avenue, New York, New York 10022, with copy
to Werbel McMillin & Carnelutti, a Professional Corporation, 711 Fifth
Avenue, New York, New York 10022, Attention: Robert H. Werbel, Esq. or if
sent to the Company or the Selling Stockholder shall be mailed, delivered or
telecopied and confirmed to the Company or the Selling Stockholder, as the
case may be, at 1070 West 2300 South, Salt Lake City, Utah 84119, with a copy
to Stroock & Stroock & Lavan at 7 Hanover Square, New York, New York 10004,
Attention: Mark A. Rosenbaum, Esq. Notice to any Underwriter pursuant to
Section 6 shall be mailed, delivered or telecopied and confirmed to such
Underwriter's address as set forth in its
25
<PAGE>
Master Agreement Among Underwriters furnished to Allen & Company
Incorporated.
12. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company, the Selling Stockholder
and their respective successors and assigns. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person or
corporation, other than the parties hereto and their respective successors
and assigns and the controlling persons, officers and directors referred to
in Section 6, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained; this Agreement
and all conditions and provisions hereof being intended to be and being for
the sole and exclusive benefit of the parties hereto and their respective
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or corporation. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign merely by reason of such purchase.
In all dealings with the Company and the Selling Stockholder under
this Agreement, you shall be and are authorized to act on behalf of each of
the several Underwriters, and the Company and the Selling Stockholder shall
be entitled to act and rely upon any statement request, notice or agreement
on behalf of each of the several Underwriters if the same shall have been
made or given in writing by you.
13. Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made, and to be fully performed, therein.
14. Counterparts. This Agreement may be executed in several
counterparts and by each party on a separate counterpart, each of which when
so executed and delivered shall be an original, but all of which together
shall constitute one instrument.
26
<PAGE>
If the foregoing correctly sets forth the understanding between the
Company and the several Underwriters, please so indicate in the space
provided below for that purpose whereupon this letter shall constitute a
binding agreement between the Company and the several Underwriters.
Very truly yours,
MARKER INTERNATIONAL
By:_________________________
President
____________________________
Henry E. Tauber
Accepted as of the date
first above written:
ALLEN & COMPANY INCORPORATED
PIPER JAFFRAY INC.
By: Allen & Company Incorporated
By:___________________________
Vice President
On behalf of each of the several
Underwriters named in Schedule A hereto.
27
<PAGE>
SCHEDULE A
Number
Name of Underwriter of Shares
---------
Allen & Company Incorporated . . . . . . . . . . . . . . . .
Piper Jaffray Inc. . . . . . . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400,000
28
<PAGE>
SCHEDULE B
SUBSIDIARIES OF THE COMPANY
- Marker USA
- Marker Japan, Ltd.
(98.5% owned by Marker International)
- Marker Deutschland GmbH
- Marker Ltd.
- Marker Austria GmbH
- Marker Canada Ltd.
- Marker AG
- DNR Sportsystem Ltd. (80% owned directly
or indirectly by Marker International)
29
EXHIBIT 5.1
[Letterhead of Stroock & Stroock & Lavan]
July 16, 1996
Marker International
2300 South 1070 West
Salt Lake City, Utah 84119
Ladies and Gentlemen:
We have acted as counsel to Marker International, a Utah corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"), of a Registration Statement on Form S-1 (Registration
No. 333-6299), as amended to the date hereof (the "Registration Statement"),
relating to the proposed public offering (the "Offering") of 3,400,000 shares
of Common Stock, par value $.01 per share (the "Common Stock"), of which
2,500,000 shares are being sold by the Company and 900,000 shares are being
sold by Henry E. Tauber who is Chairman of the Board, President and the
principal stockholder of the Company (the "Selling Stockholder"), and up to
an additional 510,000 shares of Common Stock which may be offered for sale,
contributed in equal amounts by the Company and the Selling Stockholder, in
the event the underwriters for the Offering elect to exercise their over-
allotment option (all such shares of Common Stock being hereinafter referred
to as the "Shares").
As such counsel, we have examined copies of the Amended and Restated Certificate
of Incorporation and By-Laws of the Company, each as amended to the date hereof,
the Registration Statement,
<PAGE>
Marker International
July 16, 1996
Page 2
the Prospectus which forms a part of the Registration Statement and originals or
copies of such corporate minutes, records, agreements and other instruments of
the Company, certificates of public officials and other documents, and have made
such examinations of law, as we have deemed necessary to form the basis for the
opinion hereinafter expressed. In our examination of such materials, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
copies submitted to us. As to various questions of fact material to such
opinion, we have relied, to the extent we deemed appropriate, upon
representations, statements and certificates of officers and representatives of
the Company and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not purport to be experts on, or to
express any opinion herein concerning, any law other than the laws of the State
of New York and federal laws of the United States of America. With respect to
all matters of Utah law, we have relied solely upon the opinion of Utah counsel,
Prince, Yeates & Geldzahler, dated the date hereof, a copy of which is filed as
an exhibit to the Registration Statement.
Based upon and subject to the foregoing, we are of the opinion that the Shares
to be offered by the Company, when and if issued and sold, and the Shares to
be offered by the Selling Stockholder, when and if sold, in each case under the
circumstances contemplated in the Registration Statement, will be legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons
<PAGE>
Marker International
July 16, 1996
Page 3
whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ STROOCK & STROOCK & LAVAN
- -----------------------------
STROOCK & STROOCK & LAVAN
EXHIBIT 5.2
[Letterhead of Prince, Yeates & Geldzahler]
July 16, 1996
Marker International
2300 South 1070 West
Salt Lake City, UT 84119
Gentlemen:
We have acted as Utah counsel to Marker International, a Utah
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-1
(Registration No. 333-6299), as amended to the date hereof (the "Registration
Statement"), relating to the proposed public offering (the "Offering") of
3,400,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock"), of which 2,500,000 shares are being sold by the Company and
900,000 shares are being sold by Henry E. Tauber, who is Chairman of the Board,
President and the principal shareholder of the Company (the "Selling
Shareholder"), and up to an additional 510,000 shares of Common Stock which may
be offered for sale, contributed in equal amounts by the Company and the Selling
Shareholder, in the event the underwriters for the Offering elect to exercise
their over-allotment option (all such shares of Common Stock being hereinafter
referred to as the "Shares").
As such counsel, we have examined the original or copies, certified or
otherwise authenticated to our satisfaction, of such corporate records of the
Company and other instruments and documents as we have deemed necessary to form
the basis for the opinion hereinafter expressed.
Based upon and subject to the foregoing, we are of the opinion that
the Shares to be offered by the Company, when and if issued and sold, and the
Shares to be offered by the Selling Shareholder, when and if sold, in each case
under the circumstances contemplated in the Registration Statement, will be
legally issued, fully paid and non-assessable.
We hereby grant permission to Stroock & Stroock & Lavan to rely on
this opinion as if it were addressed to them.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the caption
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons whose consent is required under
<PAGE>
Marker International
July 16, 1996
Page 2
Section 7 of the Act or the Rules and Regulations of the Commission promulgated
thereunder.
Sincerely,
PRINCE, YEATES & GELDZAHLER
/s/ Gregory E. Lindley
-------------------------------
Gregory E. Lindley, Shareholder
EXHIBIT 21.1
SUBSIDIARIES OF MARKER INTERNATIONAL*
<TABLE>
<CAPTION>
STATE OR JURISDICTION OF NAMES UNDER WHICH
INCORPORATION OR SUBSIDIARIES DO
NAMES OF SUBSIDIARIES ORGANIZATION BUSINESS
- ------------------------------------------------- ------------------------ --------------------
<C> <S> <C> <C>
1. Marker USA................................. Utah Marker USA
2. Marker Ltd................................. Utah Marker Ltd.
3. Marker Canada, Ltd......................... Quebec Marker Canada, Ltd.
4. Marker Japan Kabushiki
Kaisha
(English translation:
Marker Japan, Ltd.)**...................... Japan Marker Japan
Kabushiki Kaisha
5. Marker Deutschland
Gesellschaft Mit
Beschrankter Haftung
(English translation:
Marker Germany)............................ Munich Marker Deutschland
GmbH
6. Marker Austria
Gesellschaft Mit
Beschrankter Haftung....................... Austria Marker Austria
GmbH
7. Marker AG.................................. Zurich Marker AG
8. DNR Sportsystem Ltd.***.................... Zurich DNR Sportsystem Ltd.
</TABLE>
- -------------------
* All of the subsidiaries are 100% owned by Marker International, unless
indicated otherwise.
** Marker International owns 98.5% of the common shares.
*** Marker International owns 80% of the common shares, with 25% of such shares
being owned through Marker AG and 55% of such shares being owned by Marker
International directly.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement on Form S-1 filed by Marker International.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
July 16, 1996
