SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1995 2-44764
BALTEK CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2646117
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Fairway Court, P.O. Box 195, Northvale, New Jersey 07647
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-767-1400
------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
----------------------------
(Title of Class)
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 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 [ ]
<PAGE>
The aggregate market value of the voting stock held by non affiliates on March
1, 1996 amounted to $9,876,193.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date, March 1, 1996: 2,523,261 shares,
Common Stock, $1.00 par value.
Documents incorporated by reference: Portions of the registrant's proxy
statement dated April 26, 1996 for use in connection with its 1996 annual
meeting of stockholders are incorporated by reference in Part III of this Annual
Report on Form 10-K to the extent set forth in items 10, 11, and 12 hereof.
PART I
Item 1. Business.
Principal Products
The registrant and its subsidiaries (hereinafter collectively
referred to as the "Company") mill and sell graded and finished balsa lumber in
standard sizes and balsa wood strips and blocks. "Standard sizes" of balsa
lumber are measured in boardfeet (12" x 12" x 1") for the English system of
measure or in cubic meters for the metric system of measure. Shipments to
Europe, (except the U.K.) and Japan are made in cubic meters while shipments to
the U.S. and the U.K. are in boardfeet. The Company, for production and
statistical purposes, converts all metric measurements into boardfeet, thus the
Company's "standard" is boardfeet. The Company also manufactures and sells
custom-made bonded panels, blocks and beams of balsa wood, and a flexible balsa
wood block mat called "Contourkore ."
Glued-up balsa blocks are marketed in two ways. Part is sold
directly to customers in block or panel form, the balance is shipped to the
Company's factory in Northvale, N.J. for further processing into Contourkore and
other products. Blocks and Contourkore are used by the Company's customers to
manufacture a variety of products by laminating metal or fiberglass reinforced
plastic skins to both sides of the balsa, thereby creating a sandwich structure
in which balsa is the core or center. The products manufactured by the Company's
customers include fiberglass boats, aircraft cargo pallets, aircraft flooring,
fiberglass storage and processing tanks and fiberglass tub and shower bottoms.
Balsa lumber is used mostly by the hobby industry to manufacture model
airplanes.
In addition, the Company sells a non-balsa continuous strand
fabric, imported from Holland and Japan and resold without further
manufacturing. This product is marketed as "Coremat" and "BaltekMat" to the
pleasure boat industry.
In September 1995 the Company entered into an agreement with
Airex AG of Sins, Switzerland, a division of A.L. Alusuisse - Lanza Group to
become the sole North American source of Airex(R) (a registered trademark of
Aires AG) and Airlite(TM), structural PVC foam products. The Company does not
expect sales or income to be generated from these foam products until mid to
late 1996. However these additional products, together with its Balsa products,
should solidify the Company's leadership as a complete supplier to the composite
structural core market and result in growth opportunities for the future.
<PAGE>
All the Company's balsa and shrimp are produced in Latin
America, principally in Ecuador, South America. The dependence on foreign
countries for raw materials represents some inherent risks. However, the
Company, or its predecessors, have maintained operations in Ecuador since 1940.
The Company does not consider its reliance on Ecuador to represent an undue
business risk; in fact, the Company believes that operating in Ecuador is one of
its strengths, where quality raw materials are produced at a reasonable cost in
a politically stable atmosphere.
The Company is also in the aquaculture business, specifically
shrimp farming in Ecuador. This operation consists of a hatchery, a farm and a
packing plant. Shrimp larvae are supplied by the hatchery to the farm and after
harvest, transferred to the packing plant for processing and shipment to
customers in the United States and Europe.
Principal Markets and Methods of Distribution
The Company's balsa products are sold throughout the United
States, Canada, Europe, Japan, and Australia to approximately 1,600 ultimate
users. The Company's salesmen are used extensively in the sale of its balsa
products. Approximately 40% of its balsa product sales are made by the Company
directly. The remainder of the sales are handled through regional distributors
in the United States, Europe, Canada, and Japan. Sales of Contourkore to
customers outside the United States are handled through a wholly-owned Foreign
Sales Corporation.
In 1995, approximately 40% of all the shrimp production was
sold to the U.S. market through food brokers; the balance was sold to the
European market.
Competitive Conditions
As part of their overall business, other companies, with
aggregate facilities and financial resources substantially greater than those of
the Company, manufacture and sell various natural and synthetic products for
nearly all the purposes for which balsa lumber and products are sold by the
Company. Some of these competitive products are produced and sold at a lower
cost than the Company's balsa lumber and products, and sales of these competing
products are substantially greater than the Company's sales of balsa lumber and
products.
The Company's shrimp business competes against many larger
companies which produce shrimp through similar methods in addition to fishing
for shrimp in the traditional method of trawling.
Material Customer
During the period ended December 31, 1995, the Company had
sales to one customer in excess of 10% of the Company's consolidated revenues.
<PAGE>
Backlog
As of December 31, 1995, the Company had a backlog of orders
believed to be firm in the total amount of $5,955,000 all of which is reasonably
expected to be filled within the current fiscal year.
As of December 31, 1994, the Company had a backlog of orders
believed to be firm in the total amount of $9,671,000.
Sources and Availability of Raw Materials
The Company acquires, partly from its own plantations and
partly from others, substantially all of its balsa wood from western and coastal
Ecuador, accessible by roads so that the balsa lumber can be transported by
truck to its sawmills. The Company considers the timber presently standing in
this area, combined with its planned plantation expansion program, to be ample
to supply all the Company's requirements in the foreseeable future. The Company
also receives small quantities of balsa from other Latin American countries. The
resins, fiberglass and other materials used in the Company's manufacturing
processes are available from numerous commercial sources. To date the Company
has experienced no difficulty in obtaining such materials needed for its
operations.
The Company owns and operates a shrimp farm and a shrimp
hatchery in Ecuador for the production of a steady and plentiful supply of
shrimp. The hatchery supplies substantially all the larvae required by the
Company's ponds. The Company also owns a shrimp packing company in Ecuador,
thereby achieving complete vertical integration of the shrimp business.
Patents, Trademarks and Licenses
The Company features its registered trademark "Belcobalsa(R)"
for lumber, dimension stock, and bonded panels and blocks, "Contourkore(R)"
"LamPrep(R)" and "AL-600(R)" for the flexible wood block mat, "Durakore(R)", a
balsa hardwood composite, "D100(R) " for end-grain panels and "Decolite(R)" a
balsa composite panel used as an alternative to plywood, and low-density
laminate bulkers, marketed as "BaltekMat(R)" and "Firet Coremat(R)".
The Company also features "Airlite(TM)", a cross-linked PVC
foam, and "Airex(R)" (registered trademark of Airex AG) a linear foam.
Estimated Research Costs
The Company has incurred approximately $415,000 during 1995
for research and development, compared to expenditures of $447,000 in 1994 and
$535,000 in 1993. All expenditures are related to the balsa division and include
customer service activities. The Company continues to actively explore possible
new applications of balsa, and new manufacturing processes.
<PAGE>
Environmental Impact
The Company has experienced no material impact upon its
capital expenditures, earnings or competitive position as a result of its
compliance with federal, state or local provisions relating to the protection of
the environment. Balsa is not a rainforest species, nor does it grow in the
rainforest. It is usually harvested within five years. The fast growth rate
makes balsa similar to short-cycle agricultural crops and an ideal tree species
for forest plantations.
Employees
The Company has approximately 956 employees in Ecuador, 125 in
the United States and 10 in Europe, aggregating 1091 employees.
Seasonality
The Company's business is not seasonal.
Classes of Products
The following table sets forth the amount and percentage of
total sales and revenue represented by each of the Company's product classes in
the three years ended December 31, 1995 (dollars in thousands):
<TABLE>
<CAPTION>
Balsa and Other
Balsa Products for
Year Lumber Composite Industries Shrimp Total
- ---- ------ -------------------- ------ -----
<S> <C> <C> <C> <C>
1993 $3,651 $23,635 $5,084 $32,370
11% 73% 16% 100%
1994 $3,811 $29,022 $7,297 $40,130
10% 72% 18% 100%
1995 $4,233 $32,187 $9,364 $45,784
9% 70% 21% 100%
</TABLE>
Segment Information
The Company is engaged in two lines of business, that of
manufacturing and supplying balsa wood and balsa wood products, laminate bulkers
and PVC foams, used principally as the core material in various industries, and
in the aquaculture business, namely, shrimp farming in Ecuador.
Reference is made to the information set forth in Note 11 to
the Notes to Consolidated Financial Statements, Part II, Item 8 hereof, with
respect to assets and operating results for different business segments.
<PAGE>
Foreign Operations
The Company, through its Ecuadorean subsidiaries, owns and
operates five woodworking plants and approximately 15,346 acres of forest land
in Ecuador. In addition, the Company owns and operates a shrimp farm on
approximately 2,000 acres, a shrimp hatchery and a shrimp packing plant.
At the Company's woodworking plants, rough balsa lumber is
received from independent loggers and then processed into finished lumber and
other manufactured products.
The Company's shrimp ponds are stocked with larvae. After
feeding, controlling the pond environment and monitoring the growth of the
shrimp for a period of approximately six months, the shrimp are harvested,
frozen, packed and sold for export.
The Company, through its European subsidiaries, operates sales
offices in France, the United Kingdom and Denmark.
Reference is made to the information set forth in Note 11 to
the Notes to Consolidated Financial Statements, Part II, Item 8 hereof, with
respect to assets and operating results by geographic areas.
Foreign Sales
Approximately 29% of the Company's net sales for the year
ended December 31, 1995 was derived from sales to customers outside the United
States.
No prediction can be made as to any future increase or
decrease of the Company's foreign business. The Company has experienced
differences in profitability between foreign and domestic sales due to the
changing value of the U.S. dollar in relation to the foreign currencies of
countries where its products are sold.
<PAGE>
Item 2. Properties.
The Company owns or leases the properties indicated in the
following table:
<TABLE>
<CAPTION>
Property and Location Status
- --------------------- ------
<S> <C>
One story concrete and steel building containing the Leased Company's principal
offices and the plant for manufacturing Contourkore(R), 85,000 square feet on
4-1/2 acres (Northvale, New Jersey). Leased
Woodworking plant housed in several wood, concrete and steel buildings,
approximately 180,000 square feet (Guayaquil, Ecuador). Owned
Woodworking plant housed in several wood and concrete buildings, approximately
30,000 square feet on 7 acres of land (Guayaquil, Ecuador). Owned
15,346 acres of Timberland in Ecuador. Owned
2,000 acres of land for shrimp farming in Ecuador, including ten wood buildings
and one concrete building totaling approximately 11,000 square feet. Owned
Shrimp hatchery housed in several concrete buildings on 3.7 acres of land (San
Pablo, Ecuador). Owned
Shrimp packing plant housed in three concrete and steel buildings on 2.6 acres
of land (Duran, Ecuador). Owned
Woodworking plant housed in four concrete and steel buildings, 165,000 square
feet on approximately 28 acres of land (Santo Domingo de los Colorados,
Ecuador). Owned
Woodworking plant housed in one concrete and steel building, 62,000 square feet
on approximately 7 acres of land (Manta, Ecuador). Owned
Woodworking plant housed in one wood building, 26,000 square feet on
approximately 8 acres of land (Quevedo, Ecuador). Owned
Maintenance facilities for the Balsa Raw Material Department in a concrete and
wood building, 16,875 square feet (Quevedo, Ecuador). Owned
Office space in concrete building, 7,100 square feet (Guayaquil, Ecuador). Owned
Office space in concrete building, 1,000 square feet (Croydon, U.K.). Leased
Office space in stone and wood building, 2,000 square feet (Paris, France). Leased
Approximately 16,000 square feet of wareouse space (Norwood, N.J.) Leased
</TABLE>
All of the above properties except the shrimp farming land, hatchery and packing
plant are used in the balsa wood business.
<PAGE>
The lease of the property at Northvale, New Jersey, continues
until February 28, 2002, at an average annual rental of approximately $383,000.
The lease of the Company's office space in Paris continues until March 31, 1998
at an annual rental equivalent to approximately $28,800. The lease of the
Company's office in Croydon, U.K. runs until December 25, 2008 at an annual
rental of approximtely $13,200.
All of the Company's properties, plants and equipment are
considered to be presently sufficient for their respective purposes.
Item 3. Legal Proceedings.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
There was no submission of matters to a vote of security
holders during the fourth quarter of 1995.
<PAGE>
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters.
The Company's common stock is traded in the over-the-counter
market (NASDAQ). The following is the bid price range for the last two years.
<TABLE>
<CAPTION>
1995 1994
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HIGH LOW HIGH LOW
--------- -------- -------- --------
<C> <C> <C> <C> <C>
1st Quarter ........... $ 8.25 $ 6.75 $ 9.25 $ 7.25
2nd Quarter ........... 9.00 7.00 8.50 7.25
3rd Quarter ........... 10.25 7.50 9.25 7.50
4th Quarter ........... 9.25 8.25 7.75 6.50
</TABLE>
The Company had approximately 216 stockholders of record as of
March 1, 1996.
No cash dividends were paid during the past two years.
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales ........ $ 45,784 $ 40,130 $ 32,370 $ 28,215 $ 31,101
Income (loss) .... $ 1,962 $ 1,212 $ 113 $ (543) $ 805
Income (loss) per $ .78 $ .48 $ .04 $ (.22) $ .32
common share
Total Assets ..... $ 38,816 $ 34,541 $ 33,385 $ 30,646 $ 29,009
Long Term ........ $ 2,298 $ 2,388 $ 2,616 $ 2,715 $ 438
obligations (a)
Cash dividends de- -- -- -- -- --
clared per common
share
Average shares 2,523,261 2,523,261 2,523,261 2,523,261 2,523,261
outstanding
Note (a): Excluding deferred income taxes.
</TABLE>
<PAGE>
Management's Discussion and Analysis of
Item 7. Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital ratio (current assets divided by
current liabilities) decreased in 1995 to 2.50:1 from 2.97:1, after increasing
in 1994 from 2.87:1.
Cash was provided and used in varying amounts during the three
year period, principally as a result of changes in the elements of current
assets and current liabilities and in the amount of cash provided by net income.
Inventories increased in 1995 and 1993 but decreased in 1994. The increase in
1995 was due to new products and inventory buildup for anticipated increases in
sales. The 1994 decrease was caused by greater sales than anticipated. The
increase in 1993 was due to an inventory buildup in anticipation of the 1994
sales increase.
Cash used in investing activities for the three year period
was due to increased investments in balsa plantations, replacement of old
equipment, reconstruction of the shrimp ponds and purchase of new equipment
required for the manufacture of the Company's new products. The Company has no
material commitments for capital expenditures.
Debt increased in 1995 and 1993 due to working capital and
investment requirements. In 1994 the company repaid debt of $1,887,000 from
funds generated by profits.
The Company had unused lines of credit of $5.0 million with a
domestic bank, $1.8 million with Ecuadorean banks and $1.0 million with European
banks. The Company expects that future operations and its unused lines of credit
will provide sufficient resources to support its planned expansion and to
maintain its favorable liquid position.
RESULTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1995, 1994 AND 1993
Total sales increased 14%, 24% and 15% in 1995, 1994 and 1993,
respectively. The gains in all three years were due to increased demands from
all industries using our balsa products together with substantial increases in
shrimp sales.
Balsa sales were favorably affected by the continuing recovery
of the pleasure boat industry. The pleasure boat industry represented
approximately 40% of the Company's 1995 balsa sales. Fluctuating interest rates
make it impossible to forecast short or long range trends in the boating
industry. The increases in balsa sales in all three years were due to volume
increases, increased sales of value-added products and to price increases. The
Company continues to explore and develop alternative applications for its balsa
products.
<PAGE>
Shrimp sales were $9,364,000, $7,297,000 and $5,084,000 in
1995, 1994 and 1993, respectively. The substantial increases in 1995 and 1994,
after a decline in 1993, were the result of increased world wide market prices
and increased yield at the Company's shrimp farm. The decline in 1993 was due to
unfavorable weather conditions in Ecuador, where the shrimp farm is located,
during the first nine months of 1993. The Company 's reconstruction program to
increase yields at its shrimp farm commenced in the middle of 1993 and has
proved successful. The program should be concluded in 1997.
Cost of products sold as a percentage of sales was
approximately the same in 1995 and 1994 after increasing 2% in 1993. All three
years were affected in varying degrees by inflationary pressures on operating
expenses partially offset by currency devaluation and operating efficiencies
resulting from the 1994 and earlier restructuring. Additionally, 1995 and 1994
benefited from increased absorption of overhead expenses due to increased
production. The Company recorded a special charge of $323,977 in 1994 associated
with a decision to reduce costs by making operational and personnel changes at
the Company's factories in Ecuador. This charge was effected within the year
with no related reserve balance remaining at year end.
Selling, general and administrative expenses as a percentage
of sales remained approximately the same in 1995 as in 1994 due mostly to the
addition of sales personnel required to market the Company's existing and new
products and to support the Company's continuing search for new markets and
applications for its products. These additions were offset by increased
absorption of fixed expenses. The decline in 1994 by 3% and in 1993 by 4% was
due to a better absorption of fixed expenses as a result of increased sales.
Sales and expenses were slightly affected in all three years
by the different exchange rates applied in translating the books of accounts of
the Company's European subsidiaries.
Interest expense increased in 1995 and 1994 due to rising
interest rates and increased borrowings after declining in 1993 as a result of
lower interest rates.
Translation losses varied greatly during the three year
period. Translation losses are caused by the relationship of the U.S. dollar to
the foreign currencies in the countries where the Company operates, and arise
when translating foreign currency balance sheets into U.S. dollars in order to
present consolidated financial statements. Management is unable to forecast the
impact of translation gains or losses on future periods due to the
unpredictability in the fluctuation of foreign exchange rates.
The effective income tax rate amounted to 21% in 1995, 39% in
1994, and 40% in 1993. Reconciliation of the effective rate with the U.S.
statutory rate is detailed in footnote 8 to the financial statements.
In summary of the foregoing discussion, the Company realized
net income of $1,962,253, $1,212,459, and $112,835 in 1995, 1994 and 1993,
respectively.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the registrant and
subsidiaries, and supplemental schedule are annexed hereto and made part hereof.
Changes in and Disagreements With Accountants
Item 9. on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Omitted from this Report since a definitive Proxy Statement,
pursuant to Regulation 14A containing the required information, will be filed
with the Commission not later than 120 days after the close of registrant's
fiscal year.
Item 11. Executive Compensation.
Omitted from this Report since a definitive Proxy Statement,
pursuant to Regulation 14A containing the required information, will be filed
with the Commission not later than 120 days after the close of the registrant's
fiscal year.
Security Ownership of Certain Beneficial
Item 12. Owners and Management.
Omitted from this Report since a definitive Proxy Statement,
pursuant to Regulation 14A containing the required information, will be filed
with the Commission not later than 120 days after the close of the registrant's
fiscal year.
Item 13. Certain Relationships and Related Transactions.
Inapplicable.
<PAGE>
PART IV
Exhibits, Financial Statement
Item 14. Schedules, and Reports on Form 8-K
(a)(1) and (2) Consolidated Financial Statements
and Financial Statement Schedule
See Index to Consolidated Financial Statements and Financial
Statement Schedule annexed hereto and made part hereof.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by or on behalf of the
registrant for the quarter ended December 31, 1995, the last
quarter in the period covered by this Annual Report on Form
10-K.
(c) List of Exhibits
Exhibit No. Item Filing
- ----------- ---- ------
3 Articles of Incorporation Pre-Filed
(Bylaws)
10 Material Contracts None
21 Subsidiaries of Registrant Filed Herewith
27 Financial Data Schedule Filed Herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALTEK CORPORATION
Registrant
By /s/ Jacques Kohn
---------------------------
Jacques Kohn,
President
By /s/ Benson J. Zeikowitz
----------------------------
Benson J. Zeikowitz,
Treasurer (Principal
Financial officer and
Principal accounting
officer)
Dated: March 21, 1996
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
By /s Margot W. Kohn By /s/ Jacques Kohn
----------------------------- -----------------------------
Margot W. Kohn, Jacques Kohn,
Director Director
By /s/ Theodore Ness By /s/ Benson J. Zeikowitz
----------------------------- -----------------------------
Theodore Ness, Benson J. Zeikowitz,
Director Director
Dated: March 21, 1996
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
AS OF DECEMBER 31, 1995 AND 1994 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
PREPARED FOR FILING AS PART OF THE
ANNUAL REPORT (FORM 10-K)
TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1995
**********
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
PREPARED FOR FILING AS PART OF THE ANNUAL REPORT
(FORM 10-K) TO THE SECURITIES AND EXCHANGE COMMISSION
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for Each of the Three Years
in the Period Ended December 31, 1995
Consolidated Statements of Changes in Stockholders' Equity
for Each of the Three Years in the Period Ended December 31, 1995
Consolidated Statements of Cash Flows for Each of the Three Years
in the Period Ended December 31, 1995
Notes to Consolidated Financial Statements for Each of the Three
Years in the Period Ended December 31, 1995
FINANCIAL STATEMENT SCHEDULE AS OF AND FOR EACH OF
THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995:
II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable regulations of
the Securities and Exchange Commission have been omitted because of the absence
of the conditions under which they are required or because the required
information called for is set forth in the consolidated financial statements or
notes thereto.
<PAGE>
Deloitte &
Touche LLP
[GRAPHIC -- COMPANY LOGO]
____________________________________________________________
Two Hilton Court Telephone: (201) 631-7000
P.O. Box 319 Facsimile: (201) 631-7459
Parsippany, New Jersey 07054-0319
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Baltek Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Baltek
Corporation and its subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. Our audits also included the financial statement schedule listed in the
accompanying index. These financial statements and financial statement schedule
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Baltek Corporation and its
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/Deloitte & Touche LLP
March 11, 1996
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------------------------------------
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 841,056 $ 1,696,215
Accounts receivable (less allowance for doubtful
accounts - 1995, $92,759; 1994, $75,985) ............ 5,350,211 4,919,172
Inventories (Note 3) .................................. 12,875,203 9,403,216
Prepaid expenses ...................................... 287,861 293,936
Other ................................................. 1,374,637 1,156,746
----------- -----------
Total current assets ......................... 20,728,968 17,469,285
PROPERTY, PLANT AND EQUIPMENT - Net (Notes 4 and 10) .... 11,079,132 10,935,665
TIMBER AND TIMBERLANDS (Note 5) ......................... 6,338,152 5,509,051
OTHER ASSETS ............................................ 670,244 627,288
----------- -----------
TOTAL ASSETS ............................................ $38,816,496 $34,541,289
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 6) ................................ $ 4,424,783 $ 1,716,563
Accounts payable ...................................... 1,910,642 1,889,096
Income tax payable .................................... 9,952 624,469
Accrued salaries, wages and bonuses payable ........... 927,739 873,394
Accrued expenses and other liabilities ................ 808,835 573,120
Current portion of long-term debt ..................... 17,558 33,558
Current portion of obligation under capital lease (Note 188,065 174,517
----------- -----------
Total current liabilities .................... 8,287,574 5,884,717
OBLIGATION UNDER CAPITAL LEASE (Note 10) ................ 1,974,768 2,162,833
LONG-TERM DEBT .......................................... 17,910 7,319
UNION EMPLOYEE TERMINATION BENEFITS (Note 9) ............ 305,195 217,624
----------- -----------
Total liabilities ............................ 10,585,447 8,272,493
----------- -----------
STOCKHOLDERS' EQUITY: (Note 7)
Preferred stock, $1.00 par; 5,000,000 shares
authorized and unissued ............................. -- --
Common stock, $1.00 par; 10,000,000 shares authorized,
2,523,261 shares issued and outstanding ............. 2,523,261 2,523,261
Additional paid-in capital ............................ 2,157,492 2,157,492
Retained earnings ..................................... 23,550,296 21,588,043
----------- -----------
Total stockholders' equity ................... 28,231,049 26,268,796
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............. $38,816,496 $34,541,289
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES .......................... $ 45,783,629 $ 40,129,579 $ 32,369,773
COST OF PRODUCTS SOLD .............. 32,759,376 28,784,739 23,537,855
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES .......... 9,743,221 8,509,343 7,784,070
SPECIAL CHARGE (Note 12) ........... -- 323,977 --
------------ ------------ ------------
Operating income ........ 3,281 2,511 1,047
------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest expense (Notes 6 and 10) (530,231) (452,352) (400,787)
Foreign exchange loss ............ (307,716) (96,001) (483,667)
Interest income .................. 36,669 28,047 17,685
Other ............................ 10,969 -- 6,442
------------ ------------ ------------
Total ................... (790,309) (520,306) (860,327)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES ......... 2,490,723 1,991,214 187,521
INCOME TAX PROVISION (Note 8) ...... 528,470 778,756 74,686
------------ ------------ ------------
NET INCOME ......................... $ 1,962,253 $ 1,212,458 $ 112,835
============ ============ ============
NET INCOME PER COMMON SHARE (Note 7) $ 0.78 $ 0.48 $ 0.04
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------------
Additional
Common Stock, Paid-in Retained
$1 Par Capital Earnings
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $ 2,523,261 $ 2,157,492 $20,262,750
Net income - 1993 ...... -- -- 112,835
----------- ----------- -----------
BALANCE, DECEMBER 31, 1993 2,523,261 2,157,492 20,375,585
Net income - 1994 ...... -- -- 1,212,458
----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 2,523,261 2,157,492 21,588,043
Net income - 1995 ...... -- -- 1,962,253
----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 $ 2,523,261 $ 2,157,492 $23,550,296
=========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALTEK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 1,962,253 $ 1,212,458 $ 112,835
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization ........................ 1,905,415 1,839,453 1,950,960
Foreign exchange loss ................................ 307,716 96,001 483,667
Deferred taxes ....................................... (68,107) (20,404) 5,576
Increase in accounts receivable ...................... (432,057) (829,872) (435,727)
(Decrease) increase in income taxes payable/receivable (702,623) 854,250 54,076
(Increase) decrease in inventories ................... (3,471,987) 844,158 (1,736,704)
Increase in prepaid expenses and other current assets (124,577) (143,782) (298,734)
(Increase) decrease in other assets .................. (12,050) 4,451 (76,892)
Increase in accounts payable and accrued expenses .... 324,813 1,219,862 141,209
Other ................................................ 100,011 (20,675) 82,668
----------- ----------- -----------
Net cash (used in) provided by operating activites (211,193) 5,055,900 282,934
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property, plant and equipment ...... (1,626,255) (859,662) (1,044,683)
Increase in timber and timberlands ..................... (1,205,006) (1,055,691) (1,340,731)
----------- ----------- -----------
Net cash used in investing activities ......... (2,831,261) (1,915,353) (2,385,414)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable ................... 2,691,892 (1,673,709) 2,506,786
Payments of long-term debt ............................. (23,863) (66,134) (25,532)
Principal payments under capital lease ................. (174,517) (147,748) (68,720)
----------- ----------- -----------
Net cash provided by (used in)
financing activities ....................... 2,493,512 (1,887,591) 2,412,534
----------- ----------- -----------
Effect of exchange rate changes on cash .................. (306,217) (75,538) (470,392)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalent ...... (855,159) 1,177,418 (160,338)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR ...................................... 1,696,215 518,797 679,135
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR ............................................ $ 841,056 $ 1,696,215 $ 518,797
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ............................................. $ 268,808 $ 407,383 $ 169,746
=========== =========== ===========
Income taxes ......................................... $ 1,388,134 $ 56,690 $ 57,285
=========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
BALTEK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Baltek Corporation is a multinational manufacturing and marketing company.
The Company's lines of business are supplying core materials (principally
balsa products) to various composite industries, farming and processing
shrimp, and manufacturing and selling balsa lumber and other balsa wood
products. The Company reported its sales in two segments in 1995: the
balsa segment including all balsa sales and other materials sold to the
composite industry (80%), and the shrimp segment (20%).
The principal market for the Company's core materials and balsa products
is in the United States, while the shrimp market is divided between the
United States and Europe.
The balsa and shrimp products are produced in Ecuador, South America. The
supply of raw materials has been without interruption for over 50 years.
The balsa and shrimp identifiable assets located at various facilities in
Ecuador are included in the Company's consolidated balance sheet and total
approximately $23 million at December 31, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents - Cash equivalents consist of short-term highly
liquid investments with maturities of three months or less when purchased.
Investments are carried at cost, which approximates market.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from Baltek's operations in foreign
countries are calculated based on their reporting currencies. As a result
of this, amounts related to changes in assets and liabilities reported on
the consolidated statement of cash flows will not necessarily agree to
changes in the corresponding balances on the consolidated balance sheets.
The effect of exchange rate changes on cash balances held in foreign
currencies is reported on a separate line below cash flows from financing
activities.
Inventories - Inventories are valued at the lower of cost or market. Cost
is determined by use of the first-in, first-out (FIFO) method.
Property - Property, plant and equipment is stated at cost. Depreciation
is provided for depreciable assets over their estimated useful lives using
various accepted depreciation methods. The assets under capital leases and
leasehold improvements are amortized over their useful lives, or the life
of the lease, whichever is shorter. The cost of major improvements to
existing facilities is capitalized. The cost of repairs, maintenance and
replacements which do not significantly improve or extend the life of the
respective assets is charged to expense as incurred.
<PAGE>
Income Taxes - Taxes on current income are provided by the Company and
each subsidiary as prescribed by local tax laws. The Company follows the
practice of comprehensive interperiod income tax allocation. Effective
January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109
required a change from the deferred method's income statement approach of
accounting for income taxes under APB Opinion 11 to an asset and liability
approach of accounting for income taxes. Under the asset and liability
approach of SFAS 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases.
Timber and Timberlands - Timberlands are carried at cost. Deferred
cultivation costs represent the cost of preparing, clearing and seeding
the Company's balsa wood plantations. Amortization of timber and
timberlands is based on units of production. Timber carrying costs, which
include the regular maintenance and overseeing of timberlands, are
expensed as incurred.
Foreign Currency Translation - The financial statements of the Company's
foreign subsidiaries are remeasured into U.S. dollars, the Company's
functional currency, in accordance with Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation." The majority of the
foreign exchange gains and losses relate to the manufacturing process in
Ecuador, and such amounts are separately stated in the accompanying
consolidated statements of operations.
Research and Development - Research and development costs are charged to
expense as incurred. Research and development expenditures, including
customer service activities, charged to operations were $414,675, $447,311
and $534,781 in 1995, 1994 and 1993, respectively.
Concentrations of Credit Risk - Baltek's principal products, balsa lumber
and related end products, as well as shrimp products, are sold to a number
of markets, including boating, transportation, military, hobby, and the
retail food industry. Baltek's products are sold throughout the United
States, Canada, Europe, Japan and Australia to approximately 1,600
ultimate users. Credit risk related to Baltek's trade receivables is
limited due to the large number of customers in differing industries and
geographic areas.
Income Per Common Share - Income per common share amounts are computed
based on the weighted average number of shares outstanding during the
period.
Foreign Currency Risk Management - The Company uses foreign currency
forward contracts to reduce currency exchange rate risk on firm commitment
purchases denominated in foreign currencies. Gains or losses resulting
from these contracts are deferred and are included in the purchase price
of the materials. The maximum term of these contracts is less than one
year.
Use of Estimates - In conformity with generally accepted accounting
principles, the Company's financial statements include the use of
estimates and assumptions which have been developed by management based on
available facts and information. Actual results could differ from those
estimates.
<PAGE>
Revenue Recognition - The Company generally recognizes revenues when goods
are shipped.
Reclassifications - Certain amounts in prior year financial statements
have been reclassified to conform with the current year presentation.
3. INVENTORIES
Inventories of the balsa and shrimp segments are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Raw materials ...................... $ 3,913,332 $ 2,580,806
Work-in-process .................... 4,075,895 3,582,410
Finished goods ..................... 4,885,976 3,240,000
----------- -----------
Inventories ........................ $12,875,203 $ 9,403,216
=========== ===========
</TABLE>
Included in the above amounts are inventories relating to the Company's
shrimp operations of $1,337,154 and $976,751 at December 31, 1995 and
1994, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land ............................................. $ 125,311 $ 125,311
Shrimp properties ................................ 14,166,327 13,472,624
Buildings and improvements ....................... 1,309,330 1,220,998
Machinery and equipment .......................... 9,034,964 8,477,222
Leasehold improvements ........................... 677,817 585,152
Assets under capital leases ...................... 2,498,719 2,498,719
Construction-in-progress ......................... 5,000 --
----------- -----------
Total ............................................ 27,817,468 26,380,026
Less accumulated depreciation and amortization ... 16,738,336 15,444,361
----------- -----------
Property, plant and equipment - net .............. $11,079,132 $10,935,665
=========== ===========
</TABLE>
Shrimp properties consist principally of shrimp ponds, a hatchery and a
packing plant.
<PAGE>
5. TIMBER AND TIMBERLANDS
Timber and timberlands are comprised of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Timberlands .............................. $2,897,973 $2,664,363
Deferred cultivation costs ............... 3,440,179 2,844,688
---------- ----------
Timber and timberlands ................... $6,338,152 $5,509,051
========== ==========
</TABLE>
6. NOTES PAYABLE
Notes payable under various agreements at December 31, 1995 and 1994
consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Bank loan - France, with interest at 11.5% ........... $ 4,783 $ 16,563
Ecuadorean bank loans, payable in dollars,
due within one year from the origination date,
with interest rates between 9% and 17% in 1995 and
9% in 1994 ......................................... 4,420,000 1,700,000
---------- ----------
Notes payable ........................................ $4,424,783 $1,716,563
========== ==========
</TABLE>
The Company has an unsecured revolving line of credit with a domestic bank
for a maximum credit limit of $5,000,000 with interest at the bank's prime
rate. This line of credit, which is renewable annually, expires on May 31,
1996. There were no borrowings outstanding against this line of credit at
December 31, 1995. The Company was in compliance with all related loan
covenants at December 31, 1995.
The Ecuadorian bank loans are unsecured. At December 31, 1995, unused
lines of credit available under Ecuadorian borrowing arrangements amounted
to approximately $1,830,000, and under European borrowing arrangements
amounted to approximately $998,000.
The credit facilities discussed above do not require compensating balances
or the payment of commitment fees. The weighted average interest rate on
borrowings outstanding at December 31, 1995 and 1994 was 11.3% and 9.8%,
respectively. The carrying amount of the notes payable approximates their
fair value based on the short-term nature and the terms of the loans.
These amounts were paid subsequent to the balance sheet date at par.
<PAGE>
7. COMMON STOCK AND STOCK OPTIONS
The weighted average number of common shares outstanding used in the
calculation of income per common share amounts was 2,523,261 in 1995, 1994
and 1993.
The Company has a stock option plan under which options to purchase up to
100,000 shares may be granted to certain key employees. As of December 31,
1995, 2,000 options were available for grant and no options were
outstanding.
8. INCOME TAXES
The Company adopted SFAS 109 as of January 1, 1993. Such adoption resulted
in no net effect on the Company's consolidated statement of operations.
Income (loss) before income taxes is comprised of:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Domestic ............ $ 1,717,492 $ 2,242,143 $ 206,555
Foreign ............. 773,231 (250,929) (19,034)
----------- ----------- -----------
Total ............... $ 2,490,723 $ 1,991,214 $ 187,521
=========== =========== ===========
</TABLE>
The provision (benefit) for income taxes for the years ended December 31,
1995, 1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current ................ $ 519,517 $ 770,788 $ (3,091)
Deferred ............... (68,107) (20,404) 5,576
State .................... 87,885 94,649 5,928
Foreign .................. (10,825) (66,277) 66,273
--------- --------- ---------
Total .................... $ 528,470 $ 778,756 $ 74,686
========= ========= =========
</TABLE>
<PAGE>
The reconciliation between the Company's effective tax rate and the
statutory Federal tax rate for 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate .......................... 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
Foreign income - effect of rates
differing from statutory rates, effect
of nontaxable exchange gains and losses,
and foreign losses with no current benefit ........ (11.8) 0.5 40.4
Refunds and reversal of current valuation allowance . (6.4) (1.4) (38.9)
State and local taxes, net of Federal income
tax benefit ....................................... 2.3 3.1 2.2
Other - net ......................................... 2.1 1.9 1.1
---- ---- ----
Effective tax rate .................................. 21.2% 39.1% 39.8%
==== ==== ====
</TABLE>
As a result of various incentives provided by the Ecuadorian government,
the effective foreign tax rate is lower than the U.S. Federal statutory
tax rate.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
--------- ---------
<S> <C> <C>
Current
Inventory capitalization ................... $ 77,448 $ 49,071
Unexpired insurance ........................ (80,171) (80,943)
Other - net ................................ 24,746 13,895
--------- ---------
Total current asset (liability) .............. $ 22,023 $ (17,977)
========= =========
Noncurrent
Capital lease .............................. $ 203,946 $ 175,839
Foreign tax credit carryforwards ........... -- 140,000
Less valuation allowance ................... -- (140,000)
--------- ---------
Total noncurrent asset ....................... $ 203,946 $ 175,839
========= =========
</TABLE>
As of December 31, 1994, the Company had a full valuation allowance
recorded against the foreign tax credit carryforwards of $140,000.
Management believed that it was more likely than not that the credits
would expire unutilized. The Company was, however, able to utilize these
credits and has included the income from the reversal of the valuation
allowance in the tax provision for the year ended December 31, 1995.
<PAGE>
The total current and noncurrent amounts presented above, to the extent
not shown separately on the consolidated balance sheets, are included in
other assets (current and noncurrent) and accrued expenses and other
liabilities.
The Company does not accrue Federal income taxes on the equity in the
undistributed earnings of its foreign subsidiaries, which amounted to
approximately $5,775,000 at December 31, 1995, because such earnings are
permanently reinvested. It is not practicable to estimate the tax
liability that might arise if these earnings were remitted.
9. EMPLOYEE BENEFIT PLANS
The Company has a profit-sharing plan under which an annual contribution
may be paid from accumulated profits at the discretion of the Board of
Directors for the benefit of eligible employees upon their retirement.
Contributions to this plan by the Company amounted to $327,445 and
$281,787 in 1995 and 1994, respectively. There were no contributions to
the plan by the Company in 1993.
The Company has adopted an amendment to the profit sharing plan described
above providing an election to all participants, pursuant to Section
401(k) of the Internal Revenue Code, to defer between 2 percent and 10
percent of salary. Amounts deferred are paid to the trustee of the plan.
The amendment does not provide for matching Company contributions.
Certain employees of the Company's Ecuadorian subsidiary companies are
covered by termination and retirement plans incorporated under statutory
requirements of labor laws and collective bargaining agreements. Included
in the accompanying consolidated balance sheets are union employee
termination benefits which approximate unpaid vested benefits under such
plans. The amount of benefits to be received by an employee is established
by the collective bargaining agreements and is based on length of service
and compensation. Provisions of approximately $111,000, $63,000 and
$106,000 were charged to income during 1995, 1994 and 1993, respectively.
10. LEASES
The Company leases its office space and plant facilities in Northvale, New
Jersey, under a long-term capital lease agreement which expires in 2002.
The lease provides that the Company pay all real estate taxes, maintenance
and insurance relating to the facilities. Accumulated amortization related
to the asset under capital lease at December 31, 1995 and 1994 was
$957,851 and $707,965, respectively.
Rent expense under operating leases relates principally to office
buildings and amounted to $53,343, $51,210 and $51,701 in 1995, 1994 and
1993, respectively.
Future minimum lease payment obligations, as of December 31, 1995, for the
capital lease described above, as well as operating leases, are summarized
below. The operating leases are for space at the Company's offices in
England and France and space in a warehouse in Norwood, New Jersey, for
which lease payments begin in 1996.
<PAGE>
<TABLE>
<CAPTION>
Capital Operating
Year Lease Leases
- ---- ---------- ---------
<C> <C> <C>
1996 $ 341,764 $111,3343
1997 430,765 99,779
1998 448,565 20,379
1999 466,365 13,184
2000 469,926 13,184
Remainder 569,607 105,472
---------- ----------
Total 2,726,992 363,341
Less amounts representing interest 564,159 --
---------- ----------
Capital lease obligation $2,162,833 $ --
========== ==========
Operating lease obligations $ -- $ 363,341
========== ==========
</TABLE>
11. SEGMENT INFORMATION
The Company and its subsidiaries operate primarily in two segments, as a
manufacturer and supplier of balsa wood products used principally as a
core material in various industries, and in the shrimp farming business.
Information about the Company's operations by segment for 1995, 1994 and
1993 is as follows:
<PAGE>
<TABLE>
<CAPTION>
(In Thousands)
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues from unaffiliated customers
Balsa segment .................................. $ 36,420 $ 32,833 $ 27,286
Shrimp segment ................................. 9,364 7,297 5,084
-------- -------- --------
Total revenues ................................. $ 45,784 $ 40,130 $ 32,370
======== ======== ========
Operating income
Balsa segment .................................. $ 2,776 $ 2,639 $ 2,411
Shrimp segment ................................. 2,327 1,572 239
General corporate expenses ..................... (1,822) (1,699) (1,602)
-------- -------- --------
Total operating income ......................... $ 3,281 $ 2,512 $ 1,048
======== ======== ========
Income before income taxes
Balsa segment .................................. $ 2,608 $ 2,618 $ 2,024
Shrimp segment ................................. 2,187 1,572 239
General corporate expenses ..................... (1,822) (1,699) (1,602)
-------- -------- --------
Operating income after exchange gain/loss ...... 2,973 2,415 564
Interest expense ............................... (530) (452) (401)
Other income - net ............................. 48 28 25
-------- -------- --------
Income before income taxes ..................... $ 2,491 $ 1,991 $ 188
======== ======== ========
Identifiable assets
Balsa segment .................................. $ 29,647 $ 26,048 $ 24,424
Shrimp segment ................................. 9,170 8,493 8,961
-------- -------- --------
Total identifiable assets ...................... $ 38,817 $ 34,541 $ 33,385
======== ======== ========
Capital expenditures, net, including timberlands
and capital leases
Balsa segment .................................. $ 2,169 $ 1,424 $ 1,977
Shrimp segment ................................. 694 492 408
-------- -------- --------
Total capital expenditures ..................... $ 2,863 $ 1,916 $ 2,385
======== ======== ========
Depreciation expense
Balsa segment .................................. $ 778 $ 754 $ 771
Shrimp segment ................................. 736 708 696
-------- -------- --------
Total depreciation expense ..................... $ 1,514 $ 1,462 $ 1,467
======== ======== ========
</TABLE>
<PAGE>
Information pertaining to the Company's operations in different geographic
areas is as follows:
<TABLE>
<CAPTION>
(In Thousands)
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues from unaffiliated sources
United States - domestic ......... $ 32,453 $ 29,780 $ 22,926
United States - export ........... 7,534 5,062 1,353
Ecuador .......................... 87 87 54
Europe ........................... 5,710 5,201 8,037
-------- -------- --------
Total revenues ................... $ 45,784 $ 40,130 $ 32,370
======== ======== ========
Transfers between geographic areas
United States .................... $ 2,167 $ 1,628 $ 1,676
Ecuador .......................... 17,781 13,227 13,241
-------- -------- --------
Total transfers .................. $ 19,948 $ 14,855 $ 14,917
======== ======== ========
Operating income (loss)
United States .................... $ 2,422 $ 3,412 $ 1,083
Ecuador .......................... 1,055 (656) (205)
Europe ........................... (196) (244) 170
-------- -------- --------
Total operating income ........... $ 3,281 $ 2,512 $ 1,048
======== ======== ========
Identifiable assets
United States .................... $ 12,576 $ 10,792 $ 9,926
Ecuador .......................... 22,732 20,370 19,584
Europe ........................... 3,509 3,379 3,875
-------- -------- --------
Total identifiable assets ........ $ 38,817 $ 34,541 $ 33,385
======== ======== ========
</TABLE>
Transfers between geographic areas are at prices which permit the recovery
of manufacturing costs and a reasonable operating profit. The majority of
export sales from the Company's United States operations were to
unaffiliated customers in Europe.
Sales to one customer from the Balsa segment amounted to approximately
13%, 13% and 20% of total revenues in 1995, 1994 and 1993, respectively.
<PAGE>
12. SPECIAL CHARGE
In 1994, the Company recorded a special charge of $323,977, associated
with a decision to reduce costs by making personnel changes at the
Company's mills in Ecuador. This charge was comprised primarily of
severance payments for 68 employees. This action was effected within 1994
and no related reserve balance remained by year-end 1994.
******
<PAGE>
<TABLE>
<CAPTION>
Schedule II
BALTEK CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions of Year
-------- -------- -------- --------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful
accounts receivable ..... $ 75,985 $ 97,176 $ 80,402 $ 92,759
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful
accounts receivable ..... $145,955 $ 74,312 $144,282 $ 75,985
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful
accounts receivable ..... $173,751 $ 24,584 $ 52,380 $145,955
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 21
Voting
Where Securities
Incorporated Owned
------------ ----------
<S> <C> <C>
Marines C.A. (7) Ecuador 100%(1)
Maderas Secas C.A. (Maseca) (3) Ecuador 100%(1)
Ecuatoriana de Crustaceos, S.A.(4) Ecuador 100%(1)
Balmanta S.A. (3) Ecuador 100%(1)
Productos del Pacifico, S.A. Ecuador 100%(1)
Frabepasa S.A. (8) Ecuador 100%(1)
Compania Ecuatoriana de Balsa, S.A. Ecuador 100%(1)
Servicios Contables, S.A.(6) Ecuador 100%(1)
Vanalarva, S.A.(7) Ecuador 100%(1)
Tecnicos Del Centro Tedece S.A.(2) Ecuador 100%(1)
Balsa Ecuador Lumber Corporation New Jersey 100%
Balsa Development Corporation New Jersey 100%
Sanlam Corporation New York 100%
Baltek, S.A. France 100%(1)
Baltek, Ltd. Great Britain 100%(1)
Pacific Timber Ltd.(5) Great Britain 100%(1)
Cryogenic Structures Corporation Delaware 94%
Baltek GmbH Germany 100%
Plantaciones De Balsa, S.A. Ecuador 100%(1)
Baltek Foreign Sales Corporation U.S. Virgin
Islands 100%
Crustacea Corporation Delaware 100%
Fomentadora De Balsa, S.A. Ecuador 100%(1)
Futuracorp. S.A. (2) Ecuador 100%(1)
Baltek Scandinavia Aps (9) Denmark 100%
</TABLE>
(1) Includes qualifying shares in the names of individuals associated with the
Company.
(2) Wholly-owned by Maderas Secas C.A., Balmanta, S.A., Compania Ecuatoriana de
Balsa, S.A., Productos del Pacifico, S.A. and Servicios Contables, S.A.
(3) Wholly-owned by Products del Pacifico, S.A. and Compania Ecuatoriana de
Balsa, S.A.
(4) Wholly-owned by Maderas Secas, C.A., Balmanta, S.A., Baltek Corporation and
Marines C.A.
(5) Wholly-owned by Baltek Ltd.
(6) Wholly-owned by Compania Ecuatoriana de Balsa, S..A., Maderas Secas C.A.,
Balmanta, S.A., and Productos del Pacifico, S.A.
(7) Wholly-owned by Ecuatoriana de Crustaceos, S.A., and Baltek Corporation.
(8) Wholly-owned by Servicios Contables, S.A.
(9) Wholly-owned by Baltek, S.A.
The above subsidiaries are included in the Company's consolidated
financial statements.
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 841,056
<SECURITIES> 0
<RECEIVABLES> 5,442,970
<ALLOWANCES> 92,759
<INVENTORY> 12,875,203
<CURRENT-ASSETS> 20,728,968
<PP&E> 27,817,469
<DEPRECIATION> 16,738,337
<TOTAL-ASSETS> 38,816,496
<CURRENT-LIABILITIES> 8,287,574
<BONDS> 0
0
0
<COMMON> 2,523,261
<OTHER-SE> 25,707,788
<TOTAL-LIABILITY-AND-EQUITY> 38,816,496
<SALES> 45,783,629
<TOTAL-REVENUES> 45,783,629
<CGS> 32,759,376
<TOTAL-COSTS> 42,502,597
<OTHER-EXPENSES> 790,309
<LOSS-PROVISION> 97,176
<INTEREST-EXPENSE> 530,231
<INCOME-PRETAX> 2,490,723
<INCOME-TAX> 528,470
<INCOME-CONTINUING> 1,962,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,962,253
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
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