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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ________________
COMMISSION FILE NUMBER:
0-25834
-----------------------
EASCO, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3157362
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
706 SOUTH STATE STREET, GIRARD, OHIO
(Address of principal executive offices)
44420
(Zip Code)
(216) 545-4311
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 13, 1996
----- ---------------------------
Common Stock, $0.01 Par Value 10,243,144
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INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of March 30, 1996 and December 31, 1995 . . . . . . . . . . 2
Consolidated Statements of Income for the three months ended March 30, 1996
and April 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for the three months ended
March 30, 1996 and April 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 5-6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-11
PART II OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3 - Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 12
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 12-13
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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ITEM 1 - FINANCIAL STATEMENTS
EASCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
March 30, December 31,
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents.............................................. $ 923 $ 7,670
Receivables, less allowance for doubtful accounts................. 51,658 45,416
Inventories....................................................... 28,118 32,859
Other current assets.............................................. 3,464 2,677
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Total current assets........................................ 84,163 88,622
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PROPERTY, PLANT AND EQUIPMENT - NET....................................... 91,428 90,702
GOODWILL, net of accumulated amortization................................. 69,790 70,262
OTHER ASSETS.............................................................. 3,931 4,142
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Total Assets................................................ $ 249,312 $ 253,728
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, accruals and other current
liabilities....................................................... $ 40,500 $ 48,357
Notes payable to banks............................................ 1,500 - -
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Total current liabilities..................................... 42,000 48,357
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LONG-TERM DEBT............................................................ 85,000 85,000
DEFERRED INCOME TAXES..................................................... 17,099 17,069
OTHER NONCURRENT LIABILITIES.............................................. 17,985 18,188
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Total liabilities............................................. 162,084 168,614
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, authorized
1,000,000 shares; none issued and outstanding................. - - - -
Common Stock, $.01 par value, authorized
40,000,000 shares; 12,194,892
issued and outstanding........................................ 122 122
Paid-in capital................................................... 80,483 80,483
Retained earnings................................................. 26,374 24,260
Less: Treasury stock: 1,951,748 shares............................ (19,589) (19,589)
Stockholder loan.............................................. (162) (162)
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Total stockholders' equity.................................... 87,228 85,114
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Total Liabilities and Stockholders' Equity.................... $ 249,312 $ 253,728
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</TABLE>
Amounts shown are unaudited.
The accompanying notes to consolidated financial statements
are an integral part of this statement.
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EASCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
March 30, April 1,
1996 1995
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<S> <C> <C>
Net sales:
Product sales......................................................... $ 64,025 $ 75,105
Tolling fees.......................................................... 15,844 18,146
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Net sales............................................................. 79,869 93,251
Cost of products sold..................................................... 65,052 76,353
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Gross profit...................................................... 14,817 16,898
Selling, general and administrative....................................... 7,855 7,960
Amortization of goodwill and other........................................ 507 494
Management fee............................................................ 225 238
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Operating profit.................................................. 6,230 8,206
Interest expense.......................................................... 2,273 2,634
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Income before income tax.......................................... 3,957 5,572
Income tax provision...................................................... 1,741 2,359
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Net income........................................................ $ 2,216 $ 3,213
============= =============
Earnings per common share:
Net income........................................................ $ 0.22 $ 0.41
============= =============
Weighted average number of common shares outstanding...................... 10,243,144 7,743,144
============= =============
</TABLE>
Amounts shown are unaudited.
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
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EASCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
March 30, April 1,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Net income............................................................ $ 2,216 $ 3,213
Adjustments to reconcile net income to net cash flows from (for)
operating activities:
Depreciation......................................................... 1,820 1,507
Amortization of goodwill and other................................ 507 494
Amortization of deferred debt issue costs......................... 143 144
Changes in operating assets and liabilities:
Increase in receivables....................................... (6,242) (7,544)
(Increase) decrease in inventories............................ 4,741 (8,840)
(Increase) decrease in other current assets................... (960) 40
Decrease in other assets...................................... 33 28
Increase (decrease) in accounts payable, accruals and
other current liabilities................................. (7,857) 10,437
Increase (decrease) in deferred taxes - net................... 203 (90)
Decrease in other noncurrent liabilities...................... (203) (738)
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Net cash (for) operating activities................... (5,599) (1,349)
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CASH FLOWS (FOR) INVESTING ACTIVITIES:
Property additions - net.......................................... (2,546) (4,480)
Aquisition of Dolton.............................................. -- (26,400)
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Net cash flows (for) investing activities............. (2,546) (30,880)
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CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in revolving credit loans................................ 1,500 28,250
Cash dividends paid............................................... (102) --
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Net cash flows from financing activities.............. 1,398 28,250
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CASH AND EQUIVALENTS:
Net decrease for the period....................................... (6,747) (3,979)
Balance, beginning of period...................................... 7,670 8,614
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Balance, end of period............................................ $ 923 $ 4,635
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</TABLE>
Amounts shown are unaudited.
The accompanying notes to financial statements
are an integral part of this statement.
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EASCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 30, 1996 and April 1, 1995
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of Easco, Inc. (the "Company") and its wholly-owned subsidiary
Easco Corporation ("Easco") and Easco's wholly-owned subsidiary, Dolton
Aluminum Company, Inc. ("Dolton"). These financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and accordingly do not include all of the information and
disclosures generally required for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been made.
Revenue is recognized when products are shipped to customers. Included
in net sales are tolling fees from casting and extruding customer-supplied
material.
Certain amounts in the 1995 financial statements have been reclassified
to conform to the 1996 classifications.
2. PER SHARE CALCULATIONS
Earnings per share have been computed based upon the "Treasury Stock
Method" using the weighted average outstanding shares of 10,243,144 and
7,743,144 for the three months ended March 30, 1996 and April 1, 1995,
respectively.
3. INVENTORIES
Inventories are valued at the lower of cost or market, with cost
determined using the last-in, first-out (LIFO) method. If the first-in,
first-out (FIFO) method had been used, inventories would have been approximately
$2.8 million greater at March 30, 1996 and $3.7 million greater at December 31,
1995. The LIFO valuation method had the effect of increasing gross profit by
$876,000 for the three month period ended March 30, 1996 and reducing gross
profit by $2.1 million for the three month period ended April 1, 1995.
4. LONG-TERM DEBT
At March 30, 1996 and December 31, 1995, long-term debt consisted of
$85.0 million of 10% Senior Notes, due 2001.
5. CONTINGENCIES
Litigation
Lawsuits and claims are filed from time to time against the Company in
the ordinary course of business. Management of the Company, after reviewing
developments to date with legal counsel, is of the opinion that the outcome of
such matters will not have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
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Environmental Cleanup
The Company is subject to a wide variety of environmental laws which
continue to be adopted and amended. While the ultimate extent of the Company's
liability for pending or potential fines, penalties, remedial costs, claims and
litigation relating to environmental laws and health and safety matters and
future capital expenditures that may be associated with environmental laws
cannot be determined at this time, outside environmental consultants have
periodically assessed the Company's environmental contingencies. Based on the
most recent assessment, the consultants estimated that the cost of all the
Company's known potential environmental liabilities ranged from $1.8 million to
$31.3 million. The Company's best estimate within this range is $10.0 million,
for which reserves have been established.
6. COMMON STOCK OFFERING
On April 21, 1995, the Company issued 2.5 million shares of common
stock in an initial public offering (the "Offering"). Cash proceeds received by
the Company from the Offering, after underwriting discounts and commissions and
other expenses totaling approximately $3.7 million, were $31.3 million. As a
result of the Offering, long-term debt decreased and stockholders' equity
increased by approximately $31.3 million. If the Offering had occurred as of
January 1, 1995, net income and the weighted average number of common shares
outstanding would have increased by $191,000 and 2.5 million, respectively, and
net income per common share would have decreased $0.08 for the quarter ended
April 1, 1995.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The following table sets forth, for the periods shown, net sales, gross
profit, operating profit, net income, pounds shipped, the calculation of
Adjusted EBITDA, gross profit and Adjusted EBITDA per pound, and the average
market price of aluminum per pound. For the reasons discussed below management
focuses on pounds shipped, gross profit per pound (excluding non-cash LIFO
charges or income) and Adjusted EBITDA per pound as important measures of the
Company's performance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
MARCH 30, APRIL 1,
1996 1995
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<S> <C> <C>
(AMOUNTS IN MILLIONS, EXCEPT PER POUND DATA)
Net
sales................................................................... $79.9 $93.3
Gross profit............................................................ 14.8 16.9
Operating profit........................................................ 6.2 8.2
Net income.............................................................. 2.2 3.2
============= =============
Pounds shipped:
Company-owned material.......................................... 47.1 48.8
Customer Conversion Program..................................... 28.7 32.9
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Total pounds shipped.................................................... 75.8 81.7
============= =============
Other performance measures:
Operating profit........................................................ $6.2 $8.2
Non-cash charges (income):
Depreciation and amortization................................... 2.4 2.0
LIFO charges (income)........................................... (0.9) 2.1
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Adjusted EBITDA......................................................... $7.7 $12.3
============= =============
Gross profit per pound.................................................. $0.195 $0.207
Adjusted EBITDA per pound............................................... 0.101 0.151
Average market price of aluminum per pound.............................. 0.757 0.943
</TABLE>
Pounds Shipped. Pounds shipped includes the weight of all aluminum and vinyl
extrusions shipped, including shipments to customers under the Company's
Customer Conversion Program (described below). Because aluminum price
fluctuations and the relative prevalence of sales under the Company's Customer
Conversion Program and other aluminum price fluctuation management programs
affect reported net sales but generally have no material effect on the overall
level of profitability, management believes that pounds shipped is the most
important indicator of overall business activity for the Company and the
aluminum extrusion industry as a whole. The Company's volume, measured in pounds
shipped, directly impacts profitability due in part to the Company's fixed
costs.
Performance Measures. Management believes that the Company's ability to control
other variable costs (such as scrap reprocessing costs, delivery costs, and
labor costs relative to productivity) is a significant determinant of
profitability. As a result, in an effort to control variable costs, management
measures variable cost performance levels on a per pound basis. Management
believes the Company's gross profit per pound (excluding non-cash LIFO charges
or income) and Adjusted EBITDA per pound are the best indicators of the
Company's performance.
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Aluminum Prices; LIFO Adjustments. A substantial portion of the Company's net
sales and cost of products sold reflects the cost of raw materials, principally
aluminum. Changes in aluminum prices are generally passed through to the
Company's customers. As a result, increases and decreases in aluminum prices
generally cause similar increases and decreases in selling prices, reported net
sales and cost of products sold but historically have generally had little
impact on the Company's level of profitability. The Company values its inventory
under the LIFO method. This practice is intended to match most recently incurred
costs to current sales. Accordingly, during periods of rising aluminum prices,
compared to historical LIFO inventory values, the Company may incur non-cash
LIFO charges which reduce taxable income. Generally if these charges are
incurred, non-cash LIFO income may be recognized when aluminum prices
subsequently decline. Because the Company routinely matches its inventory levels
to its sales commitments in order to minimize the effects of aluminum price
fluctuations, management believes that LIFO adjustments are not related to the
Company's underlying level of business activity, including its shipments and
cash flow.
Aluminum Price Fluctuation Management Programs. Under its Customer Conversion
Program, the Company's customers supply aluminum directly to the Company, and
the Company converts this aluminum into finished product for an agreed tolling
charge. Accordingly, neither net sales nor cost of products sold reflect the raw
material cost for these sales, and depending upon the degree to which aluminum
is customer-supplied, net sales and cost of products sold will fluctuate without
regard to underlying business activity. This program and other fixed-spread or
hedged fixed-price arrangements with customers were utilized for over 60% of
the Company's shipments in 1995 and the first quarter of 1996. Combined with the
Company's turnover of its aluminum inventory, these programs serve to minimize
the impact of aluminum price changes on the Company.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
Demand for the Company's products is cyclical in nature and subject to
changes in general market conditions that affect demand. The Company's customers
operate primarily in industries (e.g., building and construction and
transportation) that are affected by changes in economic conditions, which in
turn can affect orders for extrusions. The Company and the extrusion industry
generally operate without significant order backlogs. As a result, economic
slowdowns and recessions could adversely affect the extrusion industry and the
Company. In addition, the Company's performance may also be affected by other
risks and uncertainties that may cause actual performance to materially differ
from any forward-looking statements, including but not limited to the following:
the Company's level of utilization of its extrusion capacity and the impact of
capacity utilization on costs; the Company's ability to increase its market
share, which may be necessary to increase capacity utilization; the highly
competitive nature of the extrusion industry and the relatively greater
capitalization and lower levels of indebtedness of certain competitors,
particularly integrated aluminum producers; developments with respect to
contingencies such as environmental matters (including those described under
"Business-Environmental Matters" in the Company's Annual Report on Form 10-K)
and litigation; labor market conditions and raw materials costs (primarily
aluminum); seasonal variations in the extrusion business which is generally
stronger in the second and third quarters and weaker in the first and fourth
quarters; whether and to what extent the Company's capital expenditures can
facilitate reductions in variable costs; and the Company's ability to integrate
and operate acquired facilities on a profitable basis.
OUTLOOK
The following forward-looking statement is qualified by the Cautionary
Statement set forth above. In 1995, the Company expanded its annual
manufacturing capacity from 310 million to 450 million pounds. One of the
Company's primary objectives is to maximize the use of its expanded capacity.
Assuming modest growth in the economy in 1996 and satisfactory levels of
economic activity in the markets the Company serves, management continues to
believe that, through the Company's broader product offerings,
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new marketing channels and shorter manufacturing lead times, progress can be
made in 1996 to improve capacity utilization compared to 1995.
RESULTS OF OPERATIONS
QUARTER ENDED APRIL 1, 1996 COMPARED TO QUARTER ENDED MARCH 30, 1995
Pounds shipped during the first quarter of 1996 decreased to 75.8
million from 81.7 million in the first quarter of 1995, representing a decrease
of 7.2%. The decrease in shipments from the first quarter of 1995, a period in
which the Company and the extrusion industry experienced high shipment levels,
is due principally to a reduction in demand in certain of the end-use markets
served by the Company, primarily the electrical and building and construction
sectors. These declines were offset in part by an improvement in shipments to
the transportation market, despite overall weakness in this sector. Net sales
decreased 14.4% during the first quarter of 1996 compared to the first quarter
of 1995. The rate of decrease in net sales exceeded the rate of shipment
decreases because of lower aluminum prices.
Gross profit was $14.8 million (after giving effect to $876,000
non-cash LIFO income) in the first quarter of 1996 compared to $16.9 million
(after giving effect to a $2.1 million non-cash LIFO charge) in the first
quarter of 1995, a decrease of $2.1 million or 12.4%. The decrease in gross
profit in the 1996 period compared to the same period in 1995 is principally the
result of the lower shipment levels, described above, some narrowing of the
spread between selling prices and aluminum costs and higher industrial fuel
costs, offset in part by $876,000 of non-cash LIFO income in 1996 compared to
$2.1 million of non-cash LIFO expense in 1995. Higher industrial fuel costs,
including both natural gas and propane, was primarily the result of severe
winter weather, and negatively impacted gross profit by approximately $500,000.
The Company has taken steps to limit exposure to natural gas price fluctuations.
As a result of these factors, gross profit per pound in the three month period
ended March 30, 1996 was $0.195 compared to $0.207 in the three months ended
April 1, 1995, after including non-cash LIFO income of $0.012 and non-cash LIFO
expense of $0.026 for the two periods, respectively.
Selling, general and administrative expenses decreased by $105,000 or
1.3% to $7.9 million during the first quarter of 1996 compared to the first
quarter of 1995. The decrease in the three month 1996 expense is due to the
effect of lower shipment levels on the variable component of selling, general
and administrative expenses and lower salary incentive bonus expense, offset in
part by higher shipping and delivery associated primarily with increased
interplant billet shipments. On a per pound basis, overall selling, general
and administrative expenses increased by 7.2% from $0.097 in the first quarter
of 1995 to $0.104 in the first quarter 1996 period.
Operating profit for the three month 1996 period decreased by $2.0
million from $8.2 million in 1995 to $6.2 million in 1996. The lower operating
profit for the first quarter of 1996 compared to the first quarter of 1995 was
primarily the result of lower shipments and margins described above, offset by
LIFO income in 1996 compared to LIFO expense in 1995.
Interest expense decreased $361,000 in the first quarter of 1996
compared to 1995, primarily as a result of the effect during 1996 of the
Company's issuance of 2.5 million of shares of common stock in an initial public
offering (the "Offering") during April 1995, which reduced indebtedness by
approximately $31.3 million.
The effective tax rate for the first quarter of 1996 was 44.0% compared
to 42.3% for the first quarter of 1995. These rates differ from the federal
statutory rate of 35% primarily due to state and local income taxes and the
non-deductible amortization of goodwill.
Net income for the three months ended March 30, 1996 was $2.2 million
or $0.22 per share compared to $3.2 million or $0.41 per share, for the three
months ended April 1, 1995, as the decrease in operating profit (including
non-cash LIFO charges and income) was partially offset by decreased interest
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expense and a lower income tax provision. Non-cash LIFO charges and income,
resulted in an increase of $0.05 per share in the 1996 period and a decrease of
$0.16 per share in the 1995 period, compared to the reported amounts. The per
share amounts for 1996 are based on 10,243,144 shares outstanding while the 1995
per share amounts are based on 7,743,144 shares outstanding. The increase is due
to the Company's Offering in April 1995.
Adjusted EBITDA, which represents operating profit adjusted for
non-cash items, decreased 37.4% from $12.3 million in 1995 to $7.7 million in
1996 for the reasons set forth above.
FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
Total working capital at March 30, 1995 was $42.2 million compared to
$40.3 million at December 31, 1995. This net overall increase in working capital
is principally the result of an increase in accounts receivable relating to
higher shipments in the first quarter of 1996 compared to the fourth quarter of
1995, a decrease in accounts payable, accruals and other current liablilities
due to lower purchases of inventory and lower per pound raw materials costs in
the 1996 period, offset in part by a decrease in inventory relating to lower
physical quantities as well lower per pound prices, mentioned previously and a
decrease in cash and equivalents and an increase in revolving credit debt,
primarily to finance these working capital components and capital spending.
Capital expenditures for equipment totaled $2.6 million for the first
three months of 1996 compared to $4.5 million in the first three months of 1995.
During the first quarter of 1996 the Company completed two major projects. These
included the upgrade of an extrusion press at the Dolton plant and the
refurbishment of a paint line at the Company's Winton, North Carolina plant.
Since 1993 the Company has invested to increase its total aluminum and vinyl
capabilities and to improve its overall efficiency and productivity. The Company
intends to continue its capital spending programs during 1996 at a level of
between $8.0 million and $12.0 million, for the year.
On January 18, 1995 the Company acquired all of the stock of Dolton
Aluminum Co., Inc. ("Dolton") for $26.4 million including fees and expenses
related to the transaction, with possible additional consideration of up to $3.3
million payable after three years, depending on Dolton's performance during that
period. Management currently believes the payment of such additional
consideration is not likely. The acquisition, which was accounted for as a
purchase, was financed with cash and borrowings under the Company's revolving
credit facility.
Long-term debt was $85.0 million at March 30, 1995 and December 31,
1995. During the first quarter of 1996, the Company borrowed $1.5 million of its
$55.0 million revolving credit facility, primarily to fund working capital
needs and capital expenditures. Management expects these borrowings to be
repaid prior to December 31, 1996. The Company has no scheduled principal
amortization requirements with respect to any of its debt until 2000.
On April 21, 1995 the Company issued 2.5 million shares of common stock
in the Offering. Cash proceeds received by the Company from the Offering, after
underwriting discounts and commissions and before deducting other expenses
totaling approximately $3.7 million, were $31.3 million. As a result of the
Offering, stockholders' equity increased and long-term debt (incurred primarily
to effect the Dolton acquisition) decreased by approximately $31.3 million.
HEDGING ACTIVITIES
The Company has entered into agreements with various customers to sell
finished product at set prices throughout 1996, and has hedged most of these
sales commitments through offsetting raw material purchases at corresponding
prices and delivery dates. These commitments are subject to the Company's
determination that the creditworthiness of the customers participating in these
programs is satisfactory. In addition, futures contracts are used to reduce the
risks associated with fluctuations in aluminum prices by
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matching exposed inventory positions that are not subject to corresponding sales
agreements. At May 13, 1996, the Company was a party to forward aluminum
commodity sales contracts through a nationally recognized brokerage firm for
July through December 1996 delivery covering 8.0 million pounds of aluminum
ranging from $0.732 to $0.804 per pound. These contracts are expected to be
settled for cash.
LIFO ADJUSTMENTS; INFLATION
The largest component of the Company's cost of sales is raw material
costs. These costs vary due to changes in aluminum prices, and reported results
may vary due to LIFO adjustments, as previously discussed. For the first quarter
of 1996 the Company reported non-cash LIFO income of $876,000 compared to
non-cash LIFO charges of $2.1 million for the first quarter of 1995. With the
exception of these non-cash LIFO adjustments, the Company does not believe that
inflation has had a significant impact on the results of operations over the
periods presented.
11
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Part II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description
------ -----------
2.1* Stock Purchase Agreement dated as of January 18, 1995, among
Easco Corporation, Dolton Aluminum Company, Inc. ("Dolton")
and Stockholders of Dolton
3.1(a)* Amended and Restated Certificate of Incorporation
3.1(b)*** Certificate of Correction dated June 2, 1995
3.2* By-Laws of Easco, Inc.
4.1* Form of Common Stock Certificate
4.2* Indenture dated March 18, 1994 between Easco and United
States Trust Company, as Trustee, with respect to 10% Senior
Notes due 2001
4.3(a)* Credit Agreement dated March 18, 1994 between Easco and Bank
of America - Illinois (formerly Continental Bank)
4.3(b)* First Amendment to Credit Agreement dated January 31, 1995
4.4* Information and Registration Rights Agreement dated as of
May 15, 1992
10.1** Amended and Restated Services Agreement for general
management, financial and other services between Easco and
American Industrial Partners Management Company, Inc.
10.3(a)* Option Agreement for the right to purchase stock of Easco,
Inc. between Easco, Inc. and Alumen, Inc. (CVC)
10.3(b)* Amendment to Option Agreement dated as of April 12, 1995
10.4* Stock Purchase Agreement dated as of December 21, 1993 among
AIP, Easco, Inc. and Michael M. Hagerty
10.5(a)* Easco, Inc. Stock Option Plan dated December 17, 1993, as
amended effective October 12, 1994+
12
<PAGE> 14
10.5(b) Easco, Inc. Stock Option Plan dated December 17,1993, as
amended effective October 12, 1994 and December 15, 1995+
(incorporated by reference to the Company's Form 10-K for
the year ended December 31, 1995) (SEC file number 0-25834)
10.6* Stock Option Agreement between Easco, Inc. and Michael M.
Hagerty dated December 17, 1993+
10.7* Secured Promissory Note of Michael M. Hagerty, payable to
Easco, Inc. dated December 21, 1993
10.8* Easco Corporation Supplemental Executive Welfare Benefit
Plan+
10.9* Easco Corporation Supplemental Executive Retirement Plan(+)
10.10* Easco Corporation Retirement Plan for Corporate Vice
Presidents and Other Selected Executives+
10.11* Severance Policy for Specified Executives+
10.12* Employment Agreement between Easco Corporation and Michael
M. Hagerty+
10.13** Stock Option Agreement between Easco, Inc. and:
(a) Donald W. Folkwein+
(b) Frank L. Rich+
(c) L. Stephen Miner+
(d) David R. Best+
10.14 Cash Incentive Bonus Plan of Easco Corporation for 1996+
(incorporated by reference to the Company's Form 10-K for
the year ended December 31, 1995) (SEC file number 0-25834)
21.1* Subsidiaries of Easco, Inc.
27 Financial Data Schedule
* Incorporated by reference to corresponding exhibit filed as an
exhibit to the Company's Registration Statement on Form S-1 dated
February 15, 1995, as amended by Amendment No. 1 thereto filed
March 22, 1995, Amendment No. 2 filed March 28, 1995, and
Amendment No. 3 filed April 12, 1995. (Registration Statement
Number 33-89556).
** Incorporated by reference to corresponding exhibit filed as an
exhibit to Form 10-Q filed May 15, 1995. (SEC file number
0-25834)
*** Incorporated by reference to corresponding exhibit filed as an
exhibit to Form 10-Q filed November 13, 1995. (SEC file number
0-25834)
+ Executive compensation plan or arrangement.
(b) Reports on Form 8-K
None
13
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
EASCO, INC.
/s/ David R. Best
May 13, 1996 ----------------------------
David R. Best
Treasurer - Secretary
(Principal financial or accounting
officer and officer duly authorized
to sign on behalf of the Registrant)
14
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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