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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 JUNE 29, 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 office)
44420
(Zip Code)
(330) 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 AUGUST 12, 1996
Common Stock, $0.01 Par Value 10,243,144
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INDEX
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<CAPTION>
PAGE
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PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of June 29, 1996 and December 31, 1995 ............................2
Consolidated Statements of Income for the three months and six months
ended June 29, 1996 and July 1, 1995...........................................................3
Consolidated Statements of Cash Flows for the six months
ended June 29, 1996 and July 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........................................................12-14
Signature...........................................................................................15
</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>
ASSETS
June 29, December 31,
1996 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents .............................. $ 3,852 $ 7,670
Receivables, less allowance for doubtful accounts . 56,403 45,416
Inventories ....................................... 29,075 32,859
Other current assets .............................. 3,671 2,677
--------- ---------
Total current assets ........................ 93,001 88,622
--------- ---------
PROPERTY, PLANT AND EQUIPMENT - NET ....................... 91,219 90,702
GOODWILL, net of accumulated amortization ................. 69,318 70,262
OTHER ASSETS .............................................. 3,757 4,142
========= =========
Total Assets ................................ $ 257,295 $ 253,728
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, accruals and other current
liabilities ....................................... $ 48,238 $ 48,357
--------- ---------
Total current liabilities ................... 48,238 48,357
--------- ---------
LONG-TERM DEBT ............................................ 85,000 85,000
DEFERRED INCOME TAXES ..................................... 17,399 17,069
OTHER NONCURRENT LIABILITIES .............................. 17,003 18,188
</TABLE>
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<TABLE>
<S> <C> <C>
--------- ---------
Total liabilities ............................. 167,640 168,614
--------- ---------
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 ................................. 28,801 24,260
Less: Treasury stock: 1,951,748 shares ............ (19,589) (19,589)
Stockholder loan ............................ (162) (162)
--------- ---------
Total stockholders' equity ................ 89,655 85,114
--------- ---------
Total Liabilities and Stockholders' Equity.. $ 257,295 $ 253,728
========= =========
</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 SIX MONTHS ENDED
------------------------- ------------------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales:
Product sales ................................... $ 71,628 $ 71,546 $ 135,653 $ 146,651
Tolling fees .................................... 18,125 15,823 33,969 33,969
----------- ----------- ----------- ----------
89,753 87,369 169,622 180,620
Cost of products sold ............................... 73,704 69,828 138,756 146,181
----------- ----------- ----------- ----------
Gross profit ................................ 16,049 17,541 30,866 34,439
Selling, general and administrative ................. 8,389 6,974 16,244 14,934
Amortization of goodwill and other .................. 507 491 1,014 985
Management fee ...................................... 225 212 450 450
----------- ----------- ----------- ----------
Operating profit ............................ 6,928 9,864 13,158 18,070
Interest expense .................................... 2,314 2,205 4,587 4,839
----------- ----------- ----------- ----------
Income before income tax .................... 4,614 7,659 8,571 13,231
Income tax provision ................................ 2,085 3,061 3,826 5,420
----------- ----------- ----------- ----------
Net income .................................. $ 2,529 $ 4,598 $ 4,745 $ 7,811
=========== =========== =========== ==========
Earnings per common share ........................... $ 0.25 $ 0.45 $ 0.46 $ 0.85
=========== =========== =========== ==========
Weighted average number of common shares outstanding 10,243,144 10,328,569 10,243,144 9,208,896
=========== =========== =========== ==========
</TABLE>
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Amounts shown are unaudited
The accompanying notes to consolidated financial statements
are an integral part of this statement
EASCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 29, JULY 1,
1996 1995
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CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Net income ..................................................... $ 4,745 $ 7,811
Adjustments to reconcile net income to net cash flows from (for)
operating activities:
Depreciation ............................................... 3,666 3,054
Amortization of goodwill and other ......................... 1,014 985
Amortization of deferred debt issue costs .................. 286 283
Changes in operating assets and liabilities:
Increase in receivables .............................. (10,987) (6,419)
</TABLE>
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<TABLE>
<S> <C> <C>
(Increase) decrease in inventories ................... 3,784 (5,080)
(Increase) decrease in other current assets .......... (1,014) 285
(Increase) decrease in other assets .................. 29 (57)
Decrease in accounts payable, accruals and
other current liabilities ........................ (118) (3,864)
Increase in deferred taxes - net ..................... 350 859
Decrease in other noncurrent liabilities ............. (1,185) (1,033)
-------- --------
Net cash from (for) operating activities ..... 570 (3,176)
-------- --------
CASH FLOWS (FOR) INVESTING ACTIVITIES:
Property additions - net ................................... (4,183) (8,701)
Acquisition of Dolton ...................................... -- (26,400)
-------- --------
Net cash flows (for) investing activities .... (4,183) (35,101)
-------- --------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in revolving credit loans ......................... -- 750
Issuance of common stock ................................... -- 31,320
Cash dividends paid ........................................ (205) --
-------- --------
Net cash flows from (for) financing activities (205) 32,070
-------- --------
CASH AND EQUIVALENTS:
Net decrease for the period ................................ (3,818) (6,207)
Balance, beginning of period ............................... 7,670 8,614
======== ========
Balance, end of period ..................................... $ 3,852 $ 2,407
======== ========
</TABLE>
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Amounts shown are unaudited.
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE> 9
EASCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 29, 1996 and July 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 for the
three and six months ended June 29, 1996, respectively, and 10,328,569 and
9,208,896 for the three and six months ended July 1, 1995.
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
$2.5 million greater at June 29, 1996 and $3.7 million greater at December 31,
1995. The LIFO valuation method had the effect of increasing gross profit by
$295,000, $1.2 million and $1.4 million for the three and six months ended June
29, 1996 and the three months ended July 1, 1995, respectively, and reducing
gross profit by $681,000 for the six month period ended July 1, 1995.
4. LONG-TERM DEBT
At June 29, 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.
8
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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 $9.6 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 for the three and six months ended July 1, 1995
would have increased by $59,000 and $250,000, respectively, and the weighted
average number of common shares outstanding would have increased 273,692 and
1,393,365, respectively. Net income per common share would have decreased $0.01
and $0.09 for three and the six months ended July 1, 1995, respectively.
<PAGE> 11
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 SIX MONTHS ENDED
---------------------- ----------------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
(AMOUNTS IN MILLIONS, EXCEPT PER POUND DATA) 1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .................................. $ 89.8 $ 87.4 $ 169.6 $ 180.6
Gross profit ............................... 16.0 17.5 30.9 34.4
Operating profit ........................... 6.9 9.9 13.2 18.1
Net income ................................. 2.5 4.6 4.7 7.8
========= ========= ========= =========
Pounds shipped:
Company-owned material ............. 53.4 48.6 100.5 97.4
Customer Conversion Program ........ 32.6 28.3 61.3 61.2
--------- --------- --------- ---------
Total pounds shipped ....................... 86.0 76.9 161.8 158.6
========= ========= ========= =========
Other performance measures:
Operating profit ........................... $ 6.9 $ 9.9 $ 13.2 $ 18.1
Non-cash charges (income):
Depreciation and amortization ..... 2.4 2.0 4.7 4.0
LIFO charges (income) ............. (0.3) (1.4) (1.2) 0.7
--------- --------- --------- ---------
Adjusted EBITDA ............................ $ 9.0 $ 10.5 $ 16.7 $ 22.8
========= ========= ========= =========
Gross profit per pound ..................... $ 0.186 $ 0.228 $ 0.191 $ 0.217
Adjusted EBITDA per pound .................. 0.105 0.137 0.103 0.144
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Average market price of aluminum per pound . 0.738 0.871 0.747 0.907
</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.
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 the first half 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, and the costs
associated with any such effects; 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
<PAGE> 13
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, new marketing
channels and shorter manufacturing lead times, progress can be made in 1996 to
improve capacity utilization compared to 1995.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 29, 1996 COMPARED TO
THREE MONTHS AND SIX MONTHS ENDED JULY 1, 1995
Pounds shipped during the second quarter and first six months of 1996
increased to 86.0 million and 161.8 million, respectively from 76.9 million and
158.6 million for the corresponding periods in 1995, representing increases of
11.8% and 2.0%, respectively. This increase in shipments compared to the prior
year periods is due primarily to an increase in demand during the second quarter
of 1996 in most of the end-use markets served by the Company. The increase in
shipments was particularly strong in the transportation, distribution and
consumer durables markets during the second quarter and first six months of
1996, offsetting a decline in the electrical sector. Net sales increased 2.7%
during the second quarter of 1996 compared to the second quarter of 1995, on
higher shipments at lower per pound selling prices due to lower raw materials
costs, and decreased 6.1% during the first six months of 1996 compared to the
same period in 1995 as a result of slightly increased shipments and lower
selling prices.
Gross profit decreased to $16.0 million (after giving effect to
$295,000 of non-cash LIFO income) in the second quarter of 1996 compared to
$17.5 million (after giving effect to $1.4 million of non-cash LIFO income) in
the second quarter of 1995, a decrease of $1.5 million or 8.6%. For the first
six months of 1996, gross profit declined 10.2% to $30.9 million from $34.4
million in 1995, after giving effect to $1.2 million of non-cash LIFO income in
the 1996 period compared to $681,000 non-cash LIFO expense in the 1995 period.
The decrease in gross profit in the 1996 periods compared to the same periods in
1995 despite higher shipment levels is principally the result of some narrowing
of the spread between selling prices and aluminum costs, particularly those
associated with developing new accounts (e.g., costs of new extrusion dies,
training operations personnel and price concessions to acquire the new
business), higher production costs, including fuel which impacted gross profit
during the first quarter of 1996, and an increase in the proportion of shipments
to the transportation sector, which produced somewhat smaller spreads. To
improve gross profit margins, management has announced selling price increases
in certain areas where selling prices have not kept pace with production cost
increases. Management has achieved some progress toward eliminating production
difficulties reported in earlier periods; however, these difficulties continued
to contribute to the lower three and six month 1996 operating results, compared
to the same periods in 1995. As a result of these factors, gross profit per
pound in the three and six month periods ended June 29, 1996 declined to $0.186
and $0.191 compared to $0.228 and $0.217 in the 1995 periods.
Selling, general and administrative expenses increased by $1.4 million
or 20.0% to $8.4 million during the second quarter of 1996 compared to the
second quarter of 1995, and $1.3 million or 8.7% to $16.2 million for the first
six months of 1996. The increases in the three and six month 1996 periods are
due primarily to the effect of higher shipping and delivery costs during the
second quarter of 1996 resulting from increased shipments during this period and
increased interplant billet shipments. On a per pound basis, overall selling,
general and administrative expenses increased by 7.7% and 6.4%, respectively,
from $0.091 and $0.094 in the first three and six months of 1995 to $0.098 and
$0.100 in the 1996 three and six month periods,
12
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primarily due to increased interplant billet shipments and higher fuel costs.
These increases over the prior year periods are expected to be reflected in
selling, general and administrative expense for the remainder of the year.
Operating profit for the three and six month 1996 periods decreased by
$3.0 million and $4.9 million, respectively, from $9.9 million and $18.1 million
in the 1995 periods to $6.9 million and $13.2 million in 1996, after including
non-cash LIFO income of $295,000 and $1.2 million in the second quarter and
first six months of 1996, respectively, compared to $1.4 million of non-cash
LIFO income in the second quarter of 1995 and $681,000 of non-cash LIFO expense
in the first six months of 1995. The lower operating profit results for the
three and six month 1996 periods compared to the corresponding periods in 1995
was the result of the narrower gross profit spreads discussed above, and to the
impact of higher shipping and delivery costs on higher volumes.
Interest expense increased $109,000 in the second quarter of 1996
compared to 1995, and decreased $252,000 in the first six months of 1996
compared to 1995. The increase in the second quarter of 1996 is the result of
somewhat higher revolving credit expense compared to the prior year, while the
overall decrease in interest expense in the first half of 1996 is the 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 second quarter and first six months of
1996 was 45.2% and 44.6%, respectively, compared to 40.0% and 41.0% for the same
periods in 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. The increase in the effective tax rate for 1996
primarily resulted from higher non-deductible amortization of goodwill in
proportion to pre-tax income and to the utilization of alternative minimum tax
credits during 1995.
Net income for the three months ended June 29, 1996 was $2.5 million or
$0.25 per share compared to $4.6 million or $0.45 per share, for the three
months ended July 1, 1995, resulting from the decrease in operating profit and
increased interest expense. For the six months ended June 29, 1996 net income
was $4.7 or $0.46 per share compared to $7.8 million or $0.85 per share for the
six months ended July 1, 1995, as the decrease in operating profit was partially
offset by the decrease in interest expense. Non-cash LIFO charges and income,
resulted in increases of $0.02, $0.07 and $0.08 per share in the three and six
month 1996 periods and the three month 1995 period, and a decrease of $0.05 per
share in the six month 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 for the three and six month periods are based on 10,328,569
and 9,208,896 shares outstanding, respectively. The changes are due to the
Offering.
Adjusted EBITDA, which represents operating profit adjusted for
non-cash items, decreased 14.3% and 26.8%, respectively for the three and six
month 1996 periods from $10.5 million and $22.8 million in 1995, respectively,
to $9.0 million and $16.7 million in 1996, respectively, for the reasons set
forth above.
FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
Total working capital at June 29, 1996 was $44.8 million compared to
$40.3 million at December 31, 1995. This net overall increase in working capital
is principally the result of increases in accounts receivable relating to higher
shipments in the second quarter of 1996 compared to the fourth quarter of 1995,
and in other current assets relating to increased receivable balances in
aluminum hedge trading accounts, offset in-part by decreases in both inventory
relating to lower physical quantities and per pound prices and in cash and
equivalents primarily to fund these working capital components, and capital
spending.
Capital expenditures for equipment totaled $4.2 million for the first
six months of 1996 compared to $8.7 million in the first six months of 1995.
During the first six months 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 $11.0 million for the year.
On January 18, 1995 the Company acquired all of the stock of Dolton
Aluminum Company, Inc. ("Dolton") for $26.4 million including fees and expenses
related to the transaction, with possible additional
<PAGE> 15
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 unlikely. The acquisition, which was
accounted for as a purchase, was financed with cash and borrowings under the
Company's credit facility.
Long-term debt was $85.0 million at June 29, 1996 and December 31,
1995. 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 entered into agreements with various customers to sell
finished product at set prices during 1996, and hedged most of these sales
commitments through offsetting raw material purchases at corresponding prices
and delivery dates. Futures contracts are used to reduce the risks associated
with fluctuations in aluminum prices by matching exposed inventory positions
that are not subject to corresponding sales agreements. As of August 12, 1996,
the Company had no open forward aluminum commodity sales contracts.
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 second
quarter and first six months of 1996 the Company reported non-cash LIFO income
of $295,000 and $1.2 million, compared to non-cash LIFO income of $1.4 million
for the second quarter and non-cash LIFO expense of $681,000 for the first six
months 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.
14
<PAGE> 16
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/ Michael M. Hagerty
August 12, 1996
Michael M. Hagerty
President and Chief Executive Officer
(Officer duly authorized
to sign on behalf of the Registrant)
/s/ James R. Darlington
James R. Darlington
Corporate Controller
(Principal Accounting Officer duly authorized
to sign on behalf of the Registrant)
18
<PAGE> 17
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 to the Amended and
Restated Certificate of Incorporation
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+
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)
<PAGE> 18
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)
10.15 Employment and Separation Agreement between Easco
Corporation and Frank L. Rich+(filed herewith)
10.16 Consulting Agreement between Easco Corporation and
Frank L. Rich+(filed herewith)
10.17 Separation and Consulting Agreement between Easco
Corporation and Donald W. Folkwein+(filed herewith)
21.1* Subsidiaries of Easco, Inc.
* 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.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
16
<PAGE> 1
Exhibit 10.15
EMPLOYMENT AND SEPARATION AGREEMENT
This Employment and Separation Agreement ("Agreement") is
entered into by and between Easco Corporation (hereinafter "Easco") and Frank L.
Rich (hereinafter "Rich"):
Preamble:
---------
WHEREAS, Rich has been an employee for Easco for approximately
27 years;
WHEREAS, Easco desires to employ Rich and Rich desires to be
so employed by Easco on the terms and conditions set forth herein; and
WHEREAS, Easco and Rich desire to negotiate the terms of a
termination of employment.
Agreements:
-----------
NOW, THEREFORE, in consideration of the premises, mutual promises and covenants
contained in this Agreement, Easco and Rich hereby agree as follows:
1. TERM OF EMPLOYMENT. Easco hereby offers, and Rich hereby
accepts, employment through August 31, 1998.
2. BASE COMPENSATION. Effective July 1, 1996 Easco shall pay
to Rich a monthly salary of $12,500.00 through and including June 30, 1997.
Effective July 1, 1997 Easco shall pay to Rich a monthly salary of $13,125.00
through and including August 31, 1998.
3. OTHER COMPENSATION AND FRINGE BENEFITS. During the duration
of this Agreement, Rich shall be eligible for and Easco shall pay to Rich all
fringe benefits, pension plans and compensation based bonus plans set forth in
Exhibit A hereto.
4. DUTIES AND SERVICES. As directed by the President and/or
his designee, Rich shall devote his full time, attention and energies to
furthering Easco's business as an officer of the Corporation and such other
related business as Easco shall engage. Rich shall not during his employment
hereunder engage in any other full or part time business activity.
5. RETIREMENT. Effective September 1, 1998 Rich agrees to
voluntarily retire from Easco with full credit for 29 years of service. Rich's
retirement benefits will be calculated pursuant to the terms of the retirement
plans currently in effect, specifically, the Pension Plan for Salaried Employees
of Easco Corporation and its Affiliates, Easco Corporation's Supplemental
Executive Retirement Plan (SERP I) and Easco Corporation's Retirement Plan for
Corporate Vice Presidents and Other Selected Executives (SERP II). For purposes
of the SERP II plan, Rich's retirement shall be considered a termination. The
parties acknowledge that any and all existing or future severance programs,
including the May 15, 1992 Memorandum of Understanding setting forth a certain
severance policy, are expressly superseded by this Agreement. The parties
further
Page 1 of 5
<PAGE> 2
acknowledge that upon retirement Rich will continue to receive the fringe
benefits set forth in Exhibit B hereto.
6. TERMINATION. This Agreement may be terminated by mutual
agreement of the parties; death or permanent and total disability of Rich (as
defined in the Social Security Act, as amended); or for "cause" by Easco, which
shall be defined as theft of company property, improper use or disclosure of
trade secrets or proprietary information; misconduct or commission of an act of
moral turpitude or repeated failure to follow directives from the President
and/or his designee to the extent those directives do not violate the law and
are within the scope of duties commensurate with Rich's title and position.
7. RELEASE. Rich individually and on behalf of his heirs,
successors, assigns, executors and representatives of any kind, hereby fully and
forever releases and discharges Easco and all of Easco's past, present, and
future officers, directors, employees, agents, beneficiaries, shareholders,
affiliates, predecessors, successors, divisions, subsidiaries, and attorneys
("Easco Releasees") from any and all manner of actions, suits, causes of action,
debts, demands, costs, expenses (including, but not limited to, attorneys'
fees), judgments, losses, damages, liabilities and other claims of every kind,
nature and character whatsoever, known or unknown, which Rich now has, ever had,
or may hereafter have against the Easco Releasees based upon any act,
transaction, or omission existing or taking place on or at any time prior to the
date of signature on this Agreement, including but not limited to any and all
manner of actions, suits, causes of action, debts, demands, costs, expenses
(including, but not limited to, attorneys' fees), judgments, losses, damages,
liabilities and other claims ("claims") arising under federal, state and local
statutory or common law or ordinance, such as Title VII of the Civil Rights Act
of 1964, as amended; the Civil Rights Act of 1866, as amended; the Age
Discrimination in Employment Act, as amended; the Equal Pay Act of 1963, as
amended; the Fair Labor Standards Act, as amended; the Employee Retirement
Income Security Act, as amended; and the Older Workers Benefit Protection Act,
as amended, the law of contract and tort and claims arising under state or
common law and any other laws and regulations relating to employment or
employment discrimination and/or the payment of wages or benefits, including but
not limited to any claims that have been asserted or could have been asserted
arising out of or related to Rich's employment with Easco. Rich agrees and
understands that the claims that he is waiving and releasing and promising never
to assert include claims that he now knows or has reason to know exist, as well
as those that he does not presently have any reason to know, believe or suspect
that he has: unknown, unforeseen, unanticipated and unsuspected injuries,
damages, loss and liability and the consequences thereof. By signing this
Agreement Rich agrees that he is expressly waiving any provision of any state,
federal or local statute, and common-law doctrine, providing, in substance, that
a release shall not extend to claims, demands, injuries or damages, loss or
liability, which are unknown or unsuspected to exist, by the person making the
release, when s/he is making the release. By agreeing to this release Rich does
not waive any pension or other benefits he is otherwise entitled to under this
Agreement.
8. CONFIDENTIAL AND PROPRIETARY INFORMATION. Rich recognizes
and acknowledges that as an officer of the Corporation he has knowledge of
proprietary and/or confidential information which is valuable, special and a
unique asset of Easco and that disclosure
Page 2 of 5
<PAGE> 3
of same to anyone outside of Easco could create irreparable harm to Easco.
Therefore, Rich agrees that he shall not, either during or subsequent to the
term of his employment with Easco, disclose any such information or any part
thereof to any person, firm, corporation, association, or other entity outside
of Easco for any reason or purpose whatsoever. This covenant shall survive the
termination of Rich's employment with Easco and shall remain in effect and be
enforceable against Rich for a period of two years following the date upon which
he is last employed by Easco under this Agreement.
9. RETURN OF DOCUMENTS. Upon the termination of his employment
hereunder or the termination of any consulting agreement Rich may reach with
Easco, Rich shall forthwith return and deliver to Easco, and shall not retain
any original or copies of, any books, papers, price lists, customer contracts,
bids, customer list, files, books of accounts, notebooks and other documents and
data, or other writings, tapes or records related to the confidential
information describe in section 8 hereof, all of which materials are hereby
agreed to be the property of Easco.
10. RESTRICTIVE COVENANT. Rich acknowledges the possibility of
irreparable and great loss and damage to Easco if he directly or indirectly
engages in competition with Easco, for which loss and damage the parties
recognize no adequate remedy at law exists. Accordingly, Rich agrees, for a
period of two years following the date upon which he is last employed by Easco
under this Agreement (the "Restrictive Covenant Period"), that he will not (a)
represent, offer for sale, attempt to establish a business for personal benefit
in any fashion, or solicit orders for any items of the same or similar nature,
or competitive with, the products currently or in the future sold by Easco to
customers or customer prospects of the company; and (b) will not accept
employment, be employed by, consult for or with, or take any compensation
whatsoever for services or advice rendered from a current or future competitor
of Easco, or attempt to interfere with the employment or any employee, agent,
sale representative or independent contractor of Easco or attempt to persuade
any person to end or alter their relationship with Easco. This covenant shall
survive the termination of Rich's employment with Easco and shall remain in
effect and be enforceable against Rich for the Restrictive Covenant Period.
11. CONFIDENTIALITY OF THIS AGREEMENT. Rich and Easco each
agree that, except as is necessary for the performance of his or its obligations
under this Agreement or the enforcement thereof, the terms, conditions, and
existence of this Agreement shall remain confidential, and that none of them
will disclose the Agreement or any of its terms to any third party, except to a
party's attorneys or accountants or as may be required by law.
12. LEGAL REMEDIES. Rich and Easco each hereby acknowledges
that Easco would suffer irreparable injury if the provisions of Sections 8 and
10 were breached and that Easco's remedies at law would be inadequate in the
event of such breach. Accordingly, Rich and Easco each hereby agrees that any
such breach or threatened breach may, in addition to any and all other available
remedies, be preliminarily enjoined by Easco with bond not to exceed $500
dollars.
13. JOINT NEGOTIATION. It is specifically understood and
agreed by and between the parties that this Agreement is the result of
negotiation between the parties. Accordingly, it is
Page 3 of 5
<PAGE> 4
understood and agreed that all parties shall be deemed to have drawn these
documents in order to avoid any negative inference by any court as against the
preparer of the documents. Moreover, this Agreement shall be construed as a
whole in accordance with its fair meaning.
14. ASSIGNABILITY. It is acknowledged and agreed that Rich's
rights, duties, benefits and obligations under this Agreement are not delegable
or assignable by Rich and that any purported or attempted assignment or transfer
by Rich of this Agreement or any of Rich's duties, responsibilities or
obligations hereunder shall be void. Easco's rights, duties, benefits and
obligations under this Agreement shall be fully assignable by Easco without
consent of or notice to Rich in Easco's sole and absolute discretion for any
consideration or no consideration in connection with sale or transfer of Easco
or otherwise, provided any assignee must be obligated to perform Easco's
commitments under this Agreement and have the financial ability to satisfy such
commitment. This Agreement shall be binding upon Easco, its successors and
assigns.
15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed one and the same instrument.
16. APPLICABLE LAW AND FORUM. Any dispute over the terms or
conditions of this Agreement shall be subject to interpretation under Ohio law.
17. SAVINGS CLAUSE. If any portion of this Agreement is deemed
to be illegal or unenforceable due to conflict with local, state or federal law,
the remaining terms of this Agreement shall continue in full force and effect.
18. CAPTIONS AND HEADINGS. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
19. ENTIRE AGREEMENT. Except as otherwise set forth in this
Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and understandings of every kind
and nature between them as to such subject matter.
20. OLDER WORKERS BENEFIT PROTECTION ACT. RICH ACKNOWLEDGES
THAT EASCO HAS ADVISED HIM AS FOLLOWS PURSUANT TO THE OLDER WORKERS BENEFIT
PROTECTION ACT OF 1990:
(A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY
BEFORE SIGNING THIS AGREEMENT;
(B) HE WAS MADE AWARE OF HIS RIGHT TO CONSIDER
THIS AGREEMENT FOR TWENTY-ONE DAYS PRIOR TO
ITS EXECUTION;
(C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS
AGREEMENT TO REVOKE THE AGREEMENT, AND THE
AGREEMENT WILL NOT BE EFFECTIVE UNTIL THAT
REVOCATION PERIOD HAS EXPIRED.
This Agreement shall be binding upon the parties hereto and
upon their respective
<PAGE> 5
Page 4 of 5
<PAGE> 6
successors, assigns, executors and administrators. The with parties
acknowledge that they have read, understand, and agree to the contents of this
Employment and Separation Agreement. Easco has advised Rich of his right to
consult with an attorney before executing this agreement.
EASCO CORPORATION FRANK L. RICH
By: /s/ MICHAEL M. HAGERTY /s/ FRANK L. RICH
----------------------------- -------------------------------
Title: President & CEO Date: August 2, 1996
------------------------- -------------------------
Date: August 2, 1996
--------------------------
WITNESS:
By: /s/ SHERRY ROSS
----------------------------
Titlle: Admin. Asst.
------------------------
Date: August 2, 1996
--------------------------
Page 5 of 5
<PAGE> 7
EXHIBIT A TO
EMPLOYMENT AND SEPARATION AGREEMENT
FRINGE BENEFITS DURING EMPLOYMENT
- ---------------------------------
Executive Life Insurance
Executive Long Term Disability
Executive Accidental Death and Dismemberment
Executive Prescription Coverage
Executive Dental Coverage
Executive Vision Coverage
Workers Compensation Plan
Stock Option Plan
401-K Plan
Country Club Membership
Company Vehicle
Cellular Car Phone and Calling Card
American Express Membership
Vacation, as policy presently dictates, or as may be amended by Easco
Holidays, as policy presently dictates, or as may be amended by Easco
COMPENSATION BASED BONUS PLAN
- -----------------------------
Easco Cash Incentive Program, as policy presently dictates, or as may be amended
by Easco
PENSION PLANS
- -------------
The Pension Plan for Salaried Employees of Easco Corporation and its affiliates,
as policy presently dictates
Easco Corporation Supplemental Retirement Plan (SERP I), as policy presently
dictates
Easco Corporation's Retirement Plan for Corporate Vice Presidents and Other
Selected Executives (SERP II), as policy presently dictates
Exh. A, Page 1 of 1
<PAGE> 8
EXHIBIT B TO
EMPLOYMENT AND SEPARATION AGREEMENT
FRINGE BENEFITS UPON RETIREMENT
- -------------------------------
Life Insurance, as policy presently dictates, or as may be amended
Medical Insurance, as policy presently dictates, or as may be amended
Prescription Coverage, as policy presently dictates, or as may be amended
Exh. B, Page 1 of 1
<PAGE> 1
Exhibit 10.16
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into by and between
Easco Corporation (hereinafter "Easco") and Frank L. Rich (hereinafter "Rich"):
Preamble:
---------
WHEREAS, Rich has been an employee for Easco for approximately 27
years;
WHEREAS, Easco and Rich have entered into an Employment and Separation
Agreement whereby Rich's employment with Easco will terminate on August 31,
1998;
WHEREAS, after August 31, 1998 Easco desires to employ Rich as a
consultant and Rich desires to be so employed by Easco on the terms and
conditions set forth herein;
Agreements:
-----------
NOW, THEREFORE, in consideration of the premises, mutual promises and covenants
contained in this Agreement, Easco and Rich hereby agree as follows:
1. TERM OF CONSULTING AGREEMENT. Easco hereby offers and Rich hereby
agrees to act as a consultant for Easco Corporation from September 1, 1998
through August 31, 1999. The term of this Agreement to consult may be extended
on a quarterly basis upon mutual agreement of the parties. Rich agrees to act as
a consultant when called upon for any Easco facility.
2. COMPENSATION FOR CONSULTING SERVICES. Easco agrees to pay Rich a
monthly retainer for the period beginning on or about September 1, 1998 through
August 31, 1999, or as may be extended, an amount equal to the difference
between Rich's monthly salary as of the date of retirement ($13,125.00) and
total monthly pension benefits paid to Rich during the period by Easco. Upon
retirement Rich will no longer participate in the Easco Cash Incentive Program.
As a consultant, Easco will provide to Rich a "Substitute Cash Incentive
Program", which shall continue through the duration of the consulting term. The
Substitute Cash Incentive Program shall have the same structure as the Easco
Cash Incentive Program and bonus payments of up to 60% of base pay will be
calculated upon the following assumptions(s): (a) for calculation purposes, an
annual base salary level of $157,500.00; (b) 75% of the bonus payment will be
based on company consolidated EBIT or as defined in the Easco Cash Incentive
Program as amended; and (c) 25% of the bonus payment will be determined on a
discretionary basis by the President of Easco. Easco hereby reserves the right,
in its sole discretion, to set the incentive targets and all applicable target
definitions pursuant to the Easco Cash Incentive Program and the Substitute Cash
Incentive Program.
3. CONDITIONS OF COMPENSATION. If, during the term of this Agreement,
Rich
Page 1 of 5
<PAGE> 2
works reduced hours (less than an average of 40 hours per week), the retainer
and Substitute Cash Incentive Program payments shall be reduced proportionately.
However, the monthly payment made to Rich for services rendered as a consultant
pursuant to this Agreement shall not in any case be reduced (during the
consulting term) to less than 25% of the amount Rich would have received had he
not reduced his hours.
4. DUTIES AND SERVICES. As directed by the President and/or his
designee, Rich shall devote his full time, attention and energies to furthering
Easco's business as a consultant to the Corporation and such other related
business as Easco shall engage. Rich shall not during his employment hereunder
engage in any other full or part time business activity.
5. FRINGE BENEFITS. During the term of this Agreement, in addition to
any pension and related benefits, Rich shall be eligible for and Easco shall pay
to Rich all fringe benefits and compensation based bonus plans set forth in
Exhibit A hereto. Easco also agrees to reimburse Rich for any and all reasonable
and customary expenses personally incurred as a result of performance of duty
and/or obligation pursuant to this Agreement.
6. TERMINATION. This Agreement may be terminated by mutual agreement of
the parties; death or permanent and total disability of Rich (as defined in the
Social Security Act, as amended); or for "cause" by Easco, which shall be
defined as theft of company property, improper use or disclosure of trade
secrets or proprietary information; misconduct or commission of an act of moral
turpitude or repeated failure to follow the directives of the President and/or
his designee to the extent those directives do not violate the law.
7. CONFIDENTIAL AND PROPRIETARY INFORMATION. Rich recognizes and
acknowledges that as an officer of the Corporation he has knowledge of
proprietary and/or confidential information which is valuable, special and a
unique asset of Easco and that disclosure of same to anyone outside of Easco
could create irreparable harm to Easco. Therefore, Rich agrees that he shall
not, either during or subsequent to the term of his consulting employment with
Easco, disclose any such information or any part thereof to any person, firm,
corporation, association, or other entity outside of Easco for any reason or
purpose whatsoever. This covenant shall survive the termination of Rich's
consulting employment with Easco and shall remain in effect and be enforceable
against Rich for a period of one year following the date upon which he is last
employed by Easco under this Agreement, or as a consultant to Easco under any
other agreement, and/or otherwise employed by Easco.
8. RETURN OF DOCUMENTS. Upon the termination of his consulting
employment or any other employment or consulting Agreement Rich may reach with
Easco, Rich shall forthwith return and deliver to Easco, and shall not retain
any original or copies of, any books, papers, price lists, customer contracts,
bids, customer list, files, books of accounts, notebooks and other documents and
data, or other writings, tapes or records related to the confidential
information describe in section 7 hereof, all of which materials are hereby
agreed to be the property of Easco.
Page 2 of 5
<PAGE> 3
9. RESTRICTIVE COVENANT. Rich acknowledges the possibility of
irreparable and great loss and damage to Easco if he directly or indirectly
engages in competition with Easco, for which loss and damage the parties
recognize no adequate remedy at law exists. Accordingly, Rich agrees, for a
period of one year following the date upon which he is last employed by Easco
under this Agreement, or as a consultant to Easco under any other agreement,
and/or otherwise employed by Easco (the "Restrictive Covenant Period"), that he
will not (a) represent, offer for sale, attempt to establish a business for
personal benefit in any fashion, or solicit orders for any items of the same or
similar nature, or competitive with, the products currently or in the future
sold by Easco to customers or customer prospects of the company; and (b) will
not accept employment, be employed by, consult for or with, or take any
compensation whatsoever for services or advice rendered from a current or future
competitor of Easco, or attempt to interfere with the employment or any
employee, agent, sale representative or independent contractor of Easco or
attempt to persuade any person to end or alter their relationship with Easco.
This covenant shall survive the termination of Rich's employment with Easco and
shall remain in effect and be enforceable against Rich for the Restrictive
Covenant Period.
10. CONFIDENTIALITY OF THIS AGREEMENT. Rich and Easco each agree that,
except as is necessary for the performance of his or its obligations under this
Agreement or the enforcement thereof, the terms, conditions, and existence of
this Agreement shall remain confidential, and that none of them will disclose
the Agreement or any of its terms to any third party, except to a party's
attorneys or accountants or as may be required by law.
11. LEGAL REMEDIES. Rich and Easco each hereby acknowledges that Easco
would suffer irreparable injury if the provisions of Sections 7 and 9 were
breached and that Easco's remedies at law would be inadequate in the event of
such breach. Accordingly, Rich and Easco each hereby agrees that any such breach
or threatened breach may, in addition to any and all other available remedies,
be preliminarily enjoined by Easco with bond not to exceed $500 dollars.
12. JOINT NEGOTIATION. It is specifically understood and agreed by and
between the parties that this Agreement is the result of negotiation between the
parties. Accordingly, it is understood and agreed that all parties shall be
deemed to have drawn these documents in order to avoid any negative inference by
any court as against the preparer of the documents. Moreover, this Agreement
shall be construed as a whole in accordance with its fair meaning.
13. ASSIGNABILITY. It is acknowledged and agreed that Rich's rights,
duties, benefits and obligations under this Agreement are not delegable or
assignable by Rich and that any purported or attempted assignment or transfer by
Rich of this Agreement or any of Rich's duties, responsibilities or obligations
hereunder shall be void. Easco's rights, duties, benefits and obligations under
this Agreement shall be fully assignable by Easco without consent of or notice
to Rich in Easco's sole and absolute discretion for any consideration or no
consideration in connection with sale or transfer of Easco or otherwise,
provided any assignee must be obligated to perform Easco's commitments under
this Agreement and have the financial ability to satisfy such commitment. This
Agreement shall be binding upon Easco, its successors and assigns.
Page 3 of 5
<PAGE> 4
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed one and the same instrument.
15. APPLICABLE LAW AND FORUM. Any dispute over the terms or conditions
of this Agreement shall be subject to interpretation under Ohio law.
16. SAVINGS CLAUSE. If any portion of this Agreement is deemed to be
illegal or unenforceable due to conflict with local, state or federal law, the
remaining terms of this Agreement shall continue in full force and effect.
17. CAPTIONS AND HEADINGS. The captions and paragraph headings used in
this Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
18. ENTIRE AGREEMENT. Except as otherwise set forth in this Agreement,
this Agreement constitutes the sole and entire agreement and understanding
between the parties hereto as to the subject matter hereof, and supersedes all
prior discussions, agreements and understandings of every kind and nature
between them as to such subject matter.
This Agreement shall be binding upon the parties hereto and upon their
respective successors, assigns, executors and administrators. The within parties
acknowledge that they have read, understand, and agree to the contents of this
Consulting Agreement. Easco Corporation has advised Rich of his right to consult
with an attorney before executing this agreement.
EASCO CORPORATION FRANK L. RICH
By /s/ MICHAEL M. HAGERTY /s/ FRANK L. RICH
--------------------------- -------------------------------
Title: President & CEO Date: August 2, 1996
------------------------- -------------------------
Date: August 2, 1996
--------------------------
WITNESS:
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<PAGE> 5
By: /s/ SHERRY ROSS
---------------------------
Title: Admin. Asst.
------------------------
Date: August 2, 1996
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<PAGE> 6
EXHIBIT A TO CONSULTING AGREEMENT
FRINGE BENEFITS DURING CONSULTING AGREEMENT
- -------------------------------------------
Executive Life Insurance
Executive Long Term Disability
Executive Accidental Death and Dismemberment
Executive Prescription Coverage
Executive Dental Coverage
Executive Vision Coverage
Workers Compensation Plan
Stock Option Plan
401-K Plan
Country Club Membership
Company Vehicle
Cellular Car Phone and Calling Card
American Express Membership
Vacation, as policy presently dictates, or as may be amended by Easco
Holidays, as policy presently dictates, or as may be amended by Easco
COMPENSATION BASED BONUS PLAN
- -----------------------------
Substitute Cash Incentive Program, as policy presently dictates, or as may be
amended by Easco
Exh. A, Page 1 of 1
<PAGE> 1
Exhibit 10.17
EASCO CORPORATION
Girard, Ohio
-------
SEPARATION AND CONSULTING
AGREEMENT
BETWEEN EASCO AND DONALD W. FOLKWEIN
This Separation and Consulting Agreement between Easco and
Donald W. Folkwein ("Agreement") outlines the terms under which Don Folkwein
shall elect to retire from employment at Easco Corporation ("Easco" or
"Company") and then act as a consultant to Easco for the time and for the
compensation described below. In consideration of the items listed below, the
Company and Folkwein intend to be bound by this Agreement as follows:
1. Effective August 1, 1996 Folkwein agrees to voluntarily
retire from Easco.
2. Effective with his retirement from Easco, Folkwein agrees
to act as a consultant when called upon by the President and/or his designee for
any Easco facility. As compensation for these consulting services, Easco will
pay Folkwein a monthly retainer fee for the period which begins with his August
1, 1996 retirement through March 31, 1997. The retainer fee shall be equal to
the difference between Folkwein's current monthly salary and the total pension
plan (Pension Plan for Salaried Employees of Easco Corporation and its
Affiliates, SERP I - Easco Corporation Supplemental Executive Retirement Plan,
SERP II -Easco Corporation Retirement Plan for Corporate Vice Presidents and
Other Selected Executives) monthly payments payable by Easco to Folkwein at the
time of Folkwein's actual retirement. In addition to the retainer as set forth
above, Folkwein shall receive an additional $267.00 a month to accommodate his
lost 401(k) matching funds.
3. Folkwein will act as a consultant to the Company from the
date of his August 1, 1996 retirement through March 31, 1997. The consulting
term may be extended on a quarterly basis upon mutual agreement of the parties.
4. Upon retirement, Folkwein shall no longer participate in
the Easco Cash Incentive Program. As a consultant to the Company, he shall
participate in a "Substitute Cash Incentive Program" for the year 1996. The
Substitute Cash Incentive Program shall have the same structure as the Easco
Cash Incentive Program and bonus payment of up to 60% of base pay will be
calculated upon the following assumptions: (a) for calculation purposes, a base
salary level of $160,000; (b) 75% of the bonus payment will be based upon
Company consolidated EBIT for the year 1996 as defined in the Easco Cash
Incentive Program; and (c) 25% of the bonus payment will be determined on a
discretionary basis by the President of Easco.
Page 1 of 4
<PAGE> 2
5. This Agreement may be terminated by mutual agreement of the
parties; death or permanent and total disability of Folkwein (as defined in the
Social Security Act, as amended); or for "cause" by Easco, which shall be
defined as theft of company property, improper use or disclosure of trade
secrets or proprietary information; misconduct or commission of an act of moral
turpitude or repeated failure to follow directives from the President and/or his
designee.
6. Upon retirement, Folkwein shall retain the use of his
current company car at Easco's expense through March 31, 1997, under the same
terms and conditions as currently in use, including any repairs at Company
expense to the extent approved by the Fleet Manager and PHH.
7. During the consulting term, Easco shall pay Folkwein's
country club membership dues, fees, and minimums consistent with past practice.
8. Folkwein individually and on behalf of his heirs,
successors, assigns, executors and representatives of any kind, hereby fully and
forever releases and discharges Easco and all of Easco's past, present, and
future officers, directors, employees, agents, beneficiaries, shareholders,
affiliates, predecessors, successors, divisions, subsidiaries, and attorneys
("Easco Releasees") from any and all manner of actions, suits, causes of action,
debts, demands, costs, expenses (including, but not limited to, attorneys'
fees), judgments, losses, damages, liabilities and other claims of every kind,
nature and character whatsoever, known or unknown, which Folkwein now has, ever
had, or may hereafter have against the Easco Releasees based upon any act,
transaction, or omission existing or taking place on or at any time prior to the
date of signature on this Agreement, including but not limited to any and all
manner of actions, suits, causes of action, debts, demands, costs, expenses
(including, but not limited to, attorneys' fees), judgments, losses, damages,
liabilities and other claims ("claims") arising under federal, state and local
statutory or common law or ordinance, such as Title VII of the Civil Rights Act
of 1964, as amended; the Civil Rights Act of 1866, as amended; the Age
Discrimination in Employment Act, as amended; the Equal Pay Act of 1963, as
amended; the Fair Labor Standards Act, as amended; the Employee Retirement
Income Security Act, as amended; and the Older Workers Benefit Protection Act,
as amended, the law of contract and tort and claims arising under state or
common law and any other laws and regulations relating to employment or
employment discrimination and/or the payment of wages or benefits, including but
not limited to any claims that have been asserted or could have been asserted
arising out of or related to Folkwein's employment with Easco. Folkwein agrees
and understands that the claims that he is waiving and releasing and promising
never to assert include claims that he now knows or has reason to know exist, as
well as those that he does not presently have any reason to know, believe or
suspect that he has: unknown, unforeseen, unanticipated and unsuspected
injuries, damages, loss and liability and the consequences thereof. By signing
this Agreement Folkwein agrees that he is expressly waiving any provision of any
state, federal or local statute, and common-law doctrine, providing, in
substance, that a release shall not extend to claims, demands, injuries or
damages, loss or liability, which are unknown or unsuspected to exist, by the
person making the release, when
Page 2 of 4
<PAGE> 3
s/he is making the release, provided, however, notwithstanding the provisions
above, this release does not extend to any unknown physical ailments or health
related claims Folkwein may have. By agreeing to this release Folkwein does not
waive any pension or other benefits he is otherwise entitled to under this
Agreement.
9. Folkwein recognizes and acknowledges that as an officer of
the Corporation he has knowledge of proprietary and/or confidential information
which is valuable, special and a unique asset of Easco and that disclosure of
same to anyone outside of Easco could create irreparable harm to Easco.
Therefore, Folkwein agrees that he shall not, either during or subsequent to the
term of his consulting employment with Easco, disclose customer lists, price
lists, financial data, and/or market share data or any part thereof to any
person, firm, corporation, association, or other entity outside of Easco for any
reason or purpose whatsoever.
10. Upon the termination of his consulting employment or any
other employment or consulting Agreement Folkwein may reach with Easco, Folkwein
shall forthwith return and deliver to Easco, and shall not retain any original
or copies of, any books, papers, price lists, customer contracts, bids, customer
list, files, books of accounts, notebooks and other documents and data, or other
writings, tapes or records related to the confidential information describe in
section 11 hereof, all of which materials are hereby agreed to be the property
of Easco.
11. In return for the consideration described in this
Agreement, Folkwein agrees to the following Non-Compete Provision. For the
period of August 1, 1996 through March 31, 1997, Folkwein agrees that: (a) he
will not represent, offer for sale, attempt to establish a business for his
personal benefit in any fashion, or solicit orders for any items of the same or
similar nature, or competitive with, the products currently sold by or in the
future sold by Easco to customers or customer prospects of the Company; and (b)
he will not accept employment, be employed by, consult for or with, or take any
compensation whatsoever for services or advice rendered from a current or future
competitor of Easco, or attempt to interfere with the employment of any
employee, agent, sales representative or independent contractor of Easco or
attempt to persuade any person to end or alter their relationship with Easco.
Page 3 of 4
<PAGE> 4
12. OLDER WORKERS BENEFIT PROTECTION ACT. FOLKWEIN
ACKNOWLEDGES THAT EASCO HAS ADVISED HIM AS FOLLOWS PURSUANT TO THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990:
(A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY
BEFORE SIGNING THIS AGREEMENT;
(B) HE WAS MADE AWARE OF HIS RIGHT TO CONSIDER
THIS AGREEMENT FOR TWENTY-ONE DAYS PRIOR TO
ITS EXECUTION;
(C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS
AGREEMENT TO REVOKE THE AGREEMENT, AND THE
AGREEMENT WILL NOT BE EFFECTIVE UNTIL THAT
REVOCATION PERIOD HAS EXPIRED.
NOTE: The parties acknowledge that any and all existing or future severance
programs, including the May 15, 1992 Memorandum of Understanding setting forth a
certain severance policy, are expressly superseded by this Agreement.
In connection with the acceptance of his early retirement, and in consideration
for this release, Easco Corporation and Donald W. Folkwein have agreed to the
above conditions as payment for obligations due him or to become due him.
Further, Easco Corporation has advised Folkwein of his right to consult with an
attorney before signing this Agreement. Each party acknowledges they have read,
understand, and agree to the contents of this Agreement and release.
/s/ MICHAEL M. HAGERTY /s/ DONALD W. FOLKWEIN
- -------------------------------- -------------------------------
Easco Corporation Donald W. Folkwein
By: Michael M. Hagerty
President and Chief July 22, 1996
Executive Officer -------------------------------
Date
/s/ FRANK L. RICH /s/ DEBRORAH LOWTHER
- -------------------------------- -------------------------------
Easco, Inc. Witness
By: Frank L. Rich
Executive Vice President July 22, 1996
Administration -------------------------------
July 22, 1996
- --------------------------------
Date
Page 4 of 4
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