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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(MARK ONE)
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NO. 1-7399
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TCC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
TEXAS 74-1366626
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
816 CONGRESS AVENUE 78701
SUITE 1250 (Zip Code)
AUSTIN, TEXAS
(Address of principal executive offices)
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Registrant's phone number, including area code: 512/320-0976
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Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.00 par value New York Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Preferred Stock
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K. [X]
AS OF MARCH 12, 1997, 2,762,115 COMMON SHARES WERE OUTSTANDING AND THE AGGREGATE
MARKET VALUE OF THE COMMON SHARES HELD BY NON-AFFILIATES (BASED UPON THE CLOSING
PRICE OF THESE SHARES ON THE NEW YORK STOCK EXCHANGE) WAS APPROXIMATELY
$4,398,609.
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE INTO THE
INDICATED PART OR PARTS OF THIS REPORT:
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS -- PART III.
================================================================================
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PART I
ITEM 1. BUSINESS
(a) General Development of Business
TCC Industries, Inc. ("TCC Industries" or "Company") through its
subsidiaries, designs and manufactures a proprietary line of specialized bulk
material conveying and processing equipment and systems for the food,
pharmaceutical and chemical industries (the MEYER Group); and designs and
distributes an extensive line of souvenir, novelty and gift items to theme,
national and state parks, souvenir, novelty, gift and airport shops, military
bases, truck stops, zoos, discount and variety stores; and other distributors
(Allen-Lewis Manufacturing Company). TCC Industries was incorporated under the
laws of the State of Texas in October 1958. Its principal offices are located at
816 Congress Avenue, Suite 1250, Austin, Texas 78701. Its telephone number is
(512) 320-0976. Unless the context otherwise requires, the terms "Company",
"Registrant", and "TCC Industries" refer to TCC Industries, Inc. and its
subsidiaries.
In June 1994, the name of the company was changed from TeleCom Corporation
to TCC Industries, Inc.
On March 26, 1990, Meyer Europe Limited ("Meyer Europe"), a wholly owned
subsidiary of Meyer Machine Company ("Meyer Machine"), a subsidiary of TCC
Industries, acquired 27% of the outstanding capital stock of Vi-Tech Conveyors
Limited, a manufacturer of conveying systems used primarily in the food industry
based in Walsall, England. On May 1, 1990, Meyer Europe exercised its option to
acquire an additional 53% of Vi-Tech Conveyors Limited. During 1990 the company
was renamed Meyer Vi-Tech Limited ("Meyer Vi-Tech"). On July 9, 1991, Meyer
Europe purchased a 5% interest from a minority interest shareholder to bring its
total ownership of Meyer Vi-Tech to 85%. On January 7, 1993, Meyer Europe
purchased another 5% interest from a minority interest shareholder but
subsequently sold this 5% interest to the remaining minority interest
shareholders leaving its total ownership at 85%. On November 30, 1994, Meyer
Europe purchased a 7% interest from a minority interest shareholder, increasing
its ownership interest to 92%.
On March 14, 1990, Meyer Tempco, Inc. ("MTI"), a wholly owned subsidiary of
Meyer Machine, acquired the assets of Tempco Machine and Design, Inc., a
manufacturer of food processing equipment that complements the systems
manufactured by Meyer Machine. In July 1992, the operations of MTI were moved to
San Antonio, Texas from California. In the later part of 1992, Meyer Machine
formed the Tempco Division of Meyer Machine ("Meyer Tempco") to market and
manufacture the product line of MTI under a licensing agreement with MTI. In
1995, the rights to the MTI product line were transferred to Meyer Tempco.
(b) Financial Information About Industry Segments
TCC Industries' identifiable industry segments are manufacturing and
wholesale distribution. Through these segments, TCC Industries employs
approximately 168 people. The revenue, operating income and identifiable assets
of each of the Company's industry segments for the years ended December 31,
1996, 1995 and 1994, are set forth in Note 11 to the Consolidated Financial
Statements, appearing elsewhere herein.
(c) Narrative Description of Business
MANUFACTURING
Meyer Machine Company ("Meyer Machine")
Meyer Vi-Tech Limited ("Meyer Vi-Tech")
TCC Industries' manufacturing operations, which are organized informally as
the MEYER Group for marketing purposes, are comprised of Meyer Machine, which
includes the Tempco Division of Meyer Machine ("Meyer Tempco") and Meyer
Vi-Tech. Meyer Machine and Meyer Vi-Tech design and manufacture a proprietary
line of specialized bulk material conveying equipment and systems. These
products are sold primarily to the dry food processing industry to handle
products such as breakfast cereal, candy, pasta, snack foods and frozen foods;
the pharmaceutical industry to handle tablets and capsules; and the chemical
industry to handle pelletized chemicals. Meyer Tempco designs and manufactures
food processing equipment
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primarily for the snack food industry. Through the engineering and design
capabilities of the MEYER Group, each line of equipment can be customized to
meet the special requirements of each customer. Meyer Machine also sells a
complete line of edible nut processing equipment.
With its broad product line, the MEYER Group is capable of providing bulk
material handling and food processing systems complete with integrated control
systems using state-of-the-art microprocessors. Meyer Machine's product line
includes SIMPLEX conveying elevators, VIBRA-FLEX(R), DYNA-FLEX(R),
MAGNE-FLEX(TM) and HYDRA-FLEX vibratory conveyors and feeders, belt conveyors,
storage systems, distribution systems, bulk box unloaders, Accu-Flow(TM) low
capacity feeders and combination hopper/feeders, and edible nut processing
machinery that includes crackers, shellers, sizers, separators and inspection
tables. In January 1997, Meyer Machine acquired the exclusive rights, through a
licensing agreement, to market and manufacture the patented Multi-Router, a
device used to switch flow paths for multiple pneumatic conveying systems used
in the handling of plastic pellets. Meyer Vi-Tech's product line is similar to
that of Meyer Machine, with the exception of the edible nut processing equipment
and the Meyer Tempco line of processing equipment. Meyer Tempco's product line
includes sheeters, baking ovens, continuous and batch fryers, seasoning
equipment, roasters, broilers, and accessory equipment for the snack food
industry. The Meyer Tempco line of equipment complements Meyer Machine's product
offering in that Meyer Machine offers the conveying equipment that transports
the pre-processed raw material to Meyer Tempco's processors and then conveys the
processed product to packaging.
The MEYER Group's products are sold directly by their own sales force and
by outside sales representatives who represent the companies in specific
marketing areas while also selling complementary equipment of other
manufacturers. Meyer Machine's primary marketing area for the bulk material
handling equipment is the United States, Canada, Latin America and Asia. Meyer
Vi-Tech's primary marketing area is Europe, North Africa and the Middle East.
The Meyer Tempco line is marketed primarily in the United States, Canada, Latin
America, Europe and Asia.
Manufacturing revenue accounted for 58%, 52% and 53% of the Company's total
consolidated revenue for the years ended December 31, 1996, 1995 and 1994,
respectively. Conveying equipment, processing equipment and other machinery
sales accounted for 70% of the 1996 manufacturing revenues, while sales of
replacement parts and field service accounted for 30% of the manufacturing
revenues. The applicable percentages for 1995 and 1994 were 67% and 71%,
respectively, for conveying equipment, processing equipment and other machinery,
and 33% and 29%, respectively, for replacement parts, field service and other
miscellaneous products. During 1995 and 1996, no one customer accounted for more
than 10% of the MEYER Group's revenue. During 1994 two customers accounted for
approximately 17% and 11%, respectively, of the MEYER Group's revenues. It is
the opinion of management that the loss of any single customer would not have a
material adverse impact on the manufacturing operations over an extended period
of time because of the MEYER Group's ability to replace this business with
business from others in its broad customer base.
Meyer Machine has granted two foreign licensing agreements allowing for the
manufacture of its line of SIMPLEX conveying elevators in three countries and a
licensing agreement allowing for the manufacture of its line of vibratory
conveyors in Canada. The Meyer Machine and Meyer Tempco product lines are also
actively marketed in 11 other foreign countries through manufacturers'
representative offices. The domestic manufacturing operations generated
approximately $1,170,000, $647,000 and $710,000 of export sales in 1996, 1995
and 1994, respectively.
Meyer Machine holds U.S. patents for four products with remaining lives
ranging from 9 to 13 years. Management believes the patents for these products
contribute to Meyer Machine's ability to maintain a competitive edge for the
applicable product line.
While the sales for the manufacturing operations may fluctuate during the
year, such fluctuations are not generally attributable to seasonality. The raw
materials used by each company are plastic and steel, as well as motors,
controllers and processors, all of which are readily available from several
sources. As such, none of the companies are dependent on any single source of
supply.
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There are numerous companies engaged in the manufacture of equipment and
machinery similar to that manufactured by the MEYER Group of companies. The
MEYER Group competes with manufacturers of various types of mechanical
equipment, many of which are substantially larger. The companies are able to
compete with such manufacturers by selling their equipment at competitive prices
and by manufacturing custom equipment for specific uses.
The manufacturing operations' backlog at December 31, 1996 and 1995 was
approximately $1,503,000 and $1,338,000, respectively. It is anticipated that
substantially all of the backlog at December 31, 1996 will be shipped during
1997.
The manufacturing operations have approximately 120 employees.
WHOLESALE DISTRIBUTION
A.L. Investors, Inc., doing business as Allen-Lewis Manufacturing Company
("Allen-Lewis")
Allen-Lewis designs and distributes an extensive line of souvenir, novelty
and gift items. In addition, Allen-Lewis designs and sells silk-screened soft
goods such as T-shirts, sweatshirts and caps. Allen-Lewis's product line is sold
in the continental 48 states and Alaska, on a wholesale basis, to theme parks,
national and state parks, souvenir shops, novelty shops, gift shops, airport
shops, military bases, truck stops, zoos and discount and variety stores. The
company also sells to distributors who service retail outlets that are generally
not served by the company's sales force.
Allen-Lewis sells its product offerings through company direct field sales
personnel and independent commissioned sales representatives who have assigned
sales territories, directly through its in-house sales force and by attendance
at trade shows. Allen-Lewis's in-house sales personnel service and cultivate
relationships with large customers and also serve the needs of customers reached
by a catalog mailed annually. Allen-Lewis's revenue accounted for 42%, 48% and
46% of the Company's total consolidated revenue for the years ended December 31,
1996, 1995, and 1994, respectively.
The Allen-Lewis product line consists of approximately 6,000 different
items. Product mix and product design change constantly according to market
trends. Allen-Lewis's products are geared toward the travel and leisure
(tourism) and entertainment industries. Allen-Lewis's major merchandise
categories are:
Souvenirs -- Typically low cost/low priced items which are imprinted
or shielded with a design that has been tailored to denote a state, city,
and/or attraction. Examples include: collectible spoons, plates, shot
glasses, playing cards, key chains and mugs.
Gifts -- Low cost/low priced impulse items sold in conjunction with
souvenirs. Examples include: small toys, beaded belts and jewelry, pens,
pencils, jewelry, plastic and flocked animals, and money banks.
Novelty Items -- Low cost "gag" or joke items. Examples include:
masks, jumbo cigars and whoopee cushions.
Silk-screened Soft Goods -- Products such as T-shirts, sweatshirts,
hats and caps that are imprinted with an artistic or souvenir design.
Most of the souvenir, gift and novelty inventory (other than soft goods) is
purchased from suppliers in the Far East and is manufactured by companies with
which Allen-Lewis has long-standing relationships. However, these suppliers
could be negatively affected by changes in the economic and political climate of
the countries in which they are located. Management of the Company believes that
if a disruption of supply of products from these sources were to occur, the
Company would be able to source similar products from suppliers located in other
countries. If this were to occur, there could be a delay in receipt of
merchandise and possible loss of sales, which would affect operating results
adversely. Due to minimum order quantity requirements of suppliers and the
length of time required to receive inventory shipped from the Far East,
Allen-Lewis maintains significant levels of certain stock inventory items. The
minimum order quantity requirements and long lead times result in low inventory
turns. Recently, Allen-Lewis has added new products to its line which are
manufactured in the United States and has begun using suppliers located in the
United
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States for certain products which heretofore were strictly imported. Most of
Allen-Lewis's soft goods inventory is purchased from domestic textile mills and
distributors of soft goods inventory. These items are available from several
suppliers.
Since Allen-Lewis serves a very seasonal industry, inventory levels are
higher during January through June. Normally, inventory levels start to decrease
during the summer, and the lowest inventory point occurs during the months of
September through November. Maintaining adequate stock merchandise levels is key
to Allen-Lewis's ability to service customers during the busy tourist season.
Due to the seasonality of the business, certain customers may receive extended
payment terms so inventory can be shipped prior to the tourist season but
payment to the company is not due until after the season begins.
During the months of August through December, theme, national and state
parks, chain stores, large retailers and wholesalers are contacted to book
orders to be shipped during the following January through June for the summer
tourist season. During the months of January through July, other customers are
contacted for orders for current shipment. Replacement orders are filled and
shipped for all customers during the months of May through August. As a result,
during 1996 approximately 84% of Allen-Lewis's sales occurred from January
through August.
Allen-Lewis has no patents, trademarks, concessions or substantial
licenses. The company claims copyright protection for all of its original
designs and has registered a copyright for one design. The loss of copyright
protection on any one design would not have a material adverse effect on the
operations of the company.
Allen-Lewis experiences substantial competition in its markets. Allen-Lewis
competes based on price, availability of inventory, product development (which
includes development of new artwork), reliability of service, and extended
payment terms offered to certain customers. Management believes that no one
company or group of companies is dominant in the industry.
During the years ended December 31, 1996 and 1995, no one customer
accounted for more than 10% of Allen-Lewis's sales. During the year ended
December 31, 1994, one customer accounted for 11% of Allen-Lewis's sales. It is
the opinion of management that the loss of any one customer would not have a
material adverse impact on the wholesale distribution operations over an
extended period of time due to the ability to replace this business with
business from other customers. The backlog of orders as of December 31, 1996 was
approximately $2,067,000, as compared to approximately $3,245,000 as of December
31, 1995. It is anticipated that substantially all of the backlog at December
31, 1996 will be shipped during 1997.
Allen-Lewis has approximately 46 employees.
(d) Financial Information About Domestic and Foreign Operations and Export
Sales
For information on foreign operations, see Note 11 to the Consolidated
Financial Statements, appearing elsewhere herein.
ITEM 2. PROPERTIES
The Registrant maintains its principal executive offices in approximately
2,800 square feet of leased office space at 816 Congress Avenue, Suite 1250,
Austin, Texas 78701.
MANUFACTURING
Meyer Machine owns an office and manufacturing facility in San Antonio,
Texas, aggregating approximately 103,000 square feet that is fully utilized. The
properties are maintained in good condition. Meyer Machine owns land adjacent to
its current facility that can be used for future plant and office expansion of
up to 18,000 square feet. Meyer Machine also leases 2,500 square feet of
portable office space for its sales department.
Meyer Vi-Tech owns an office and manufacturing facility in Walsall, England
containing approximately 23,200 square feet of manufacturing space and 2,300
square feet of office space. This facility will provide
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ample square footage for current as well as future production needs. This
facility is pledged as collateral for two notes payable.
WHOLESALE DISTRIBUTION
Allen-Lewis owns two buildings in Denver, Colorado, aggregating 61,000
square feet. These facilities are for general office, showroom, warehousing and
the silk-screening operations. The properties are fully utilized by Allen-Lewis
and maintained in good condition. Both of Allen-Lewis's buildings are pledged as
collateral for notes payable. From time-to-time, Allen-Lewis also leases
temporary warehouse space in Denver, Colorado, to accommodate inventory levels
in excess of what can be stored in the company's warehouse. Allen-Lewis leases
1,500 square feet in Orlando, Florida, that serves as both an office and
warehouse for the company's Florida sales territory.
ITEM 3. LEGAL PROCEEDINGS
See Note 5 to the Consolidated Financial Statements, appearing elsewhere
herein, for a discussion of legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
There were 2,762,115 shares of the Company's common stock, par value $1,
outstanding as of March 12, 1997 owned of record by approximately 2,800
shareholders, as reported by the Company's transfer agent, excluding individual
participants in security position listings such as Cede & Co. At March 12, 1997,
officers and directors owned 10.6% of the stock as calculated in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934. The common stock is listed
on the New York Stock Exchange (trading symbol: TEL). The following table sets
forth the high and low sales prices for the common stock as reported by the New
York Stock Exchange for each quarterly period during the last two years.
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1996 1995
HIGH-LOW HIGH-LOW
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First Quarter............................................... $2 3/4-2 $ 3-2
Second Quarter.............................................. 2 5/8-2 2 3/8-1 3/4
Third Quarter............................................... 2 1/2-1 5/8 2 3/4-1 7/8
Fourth Quarter.............................................. 2-1 1/2 2 5/8-2
</TABLE>
The closing price of the Company's common stock on March 12, 1997, as
reported by the New York Stock Exchange, was $1.75 per share.
The Company has not paid dividends during the past two fiscal years. See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" -- "Liquidity and Capital Resources," appearing elsewhere in this
annual report on Form 10-K, for a description of restrictions in bank loan
agreements of the Company that could negatively impact the Company's ability to
pay cash dividends in the future.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
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AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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Revenue...................................... $20,002 $19,266 $23,061 $25,453 $27,339
Income (loss) from continuing operations..... (1,536) (90) (77) 612 (88)
Earnings (loss) per share from continuing
operations................................. (.56) (.03) (.03) .19 (.02)
Shareholders' equity per share............... 4.17 4.69 4.73 4.74 3.53
Total assets................................. 17,729 19,306 19,864 19,975 30,114
Long-term debt............................... 1,755 2,459 2,142 1,572 2,735
Cash dividends per common share.............. -- -- -- -- --
</TABLE>
The foregoing should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations, and the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
When used in this discussion, the words "believes," "anticipated" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The Company undertakes no obligation to publicly release
the results of any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
RESULTS OF OPERATIONS:
1996 vs. 1995
Consolidated revenue increased $736,000 (3.8%) to $20.0 million for the
year ended December 31, 1996, as compared to revenue of $19.3 million in 1995.
The increased revenue is primarily the result of an increase at the
manufacturing segment, offset by a decline in revenue at the wholesale
distribution segment. Revenue at the MEYER Group, which comprises the
manufacturing segment, increased 15.6% to $11.5 million in 1996, up from $10.0
million in 1995. This increase resulted from a $759,000 (8.8%) increase at Meyer
Machine, which serves the markets in North and South America, and Asia; and a
$792,000 (58.4%) increase at Meyer Vi-Tech, which serves Europe. The increase at
Meyer Machine is primarily the result of a 10.1% increase in sales of equipment
and a 6.6% increase in parts and service sales. The increase in equipment sales
primarily resulted from a 26.9% increase in new orders received in 1996, when
compared to 1995, which offset the 19.2% lower backlog Meyer Machine had at the
beginning of 1996. The increase in new orders received is primarily attributable
to increased demand for equipment from customers in the markets traditionally
served by Meyer Machine, as well as an increase in orders from new geographic
markets served (primarily Asia), and the introduction of new products. The
increase in parts and service sales is the result of a larger installed base of
equipment. The increase at Meyer Vi-Tech is primarily the result of its higher
backlog at January 1, 1996, which exceeded the backlog at January 1, 1995 by
513.6%, the effect of which was offset by a 13.7% decline in new orders received
during 1996, when compared to 1995. The higher backlog at January 1, 1996
primarily resulted from overall improved market conditions and Meyer Vi-Tech's
increased market penetration. The lower level of new orders entered in 1996,
when compared to 1995, is primarily the result of the timing of when orders were
received. Overall, the MEYER Group realized a 17.2% increase in new orders
received in 1996, when compared to 1995, resulting in a 12.3% increase in the
backlog to $1,503,000 at December 31, 1996, when compared to December 31, 1995.
Revenue at Allen-Lewis Manufacturing, which comprises the wholesale distribution
segment decreased 8.0% to $8.4 million in 1996, when compared to 1995. The
decline in
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revenue is primarily the result of an overall decline in demand for merchandise
due to weak market conditions, a condition the company has experienced for the
past two years, and increased competition in the markets served by the wholesale
distribution segment.
For 1996, the Company recorded consolidated gross profit of $6.2 million
(30.9% of sales), as compared to $6.3 million (32.5% of sales) for 1995. The
decline in gross profit is primarily the result of an increase in gross profit
at the MEYER Group, more than offset by a decline in gross profit at Allen-Lewis
Manufacturing, as follows:
- At the MEYER Group, gross profit increased $355,000 primarily resulting
from the increase in revenue, discussed above, the effect of which was
offset by a 1.0 percentage point decline in gross profit margins.
- At Allen-Lewis Manufacturing, gross profit declined $354,000 primarily as
a result of the decline in revenue, discussed above, and a 1.3 percentage
point decline in gross profit margins for 1996, when compared to 1995. This
decline is primarily the result of a change in the product mix with more
sales qualifying for quantity discounts and with increased of sales of slow
moving and discontinued items at discounted prices.
The Company reported an operating loss of $1,150,000 for 1996, as compared
to an operating loss of $316,000 for 1995. The increased operating loss is the
result of the decline in gross profit, discussed above, and a $752,000 (11.4%)
increase in selling, general and administrative expenses in 1996, when compared
to 1995, a year in which the Company realized a $981,000 reduction in selling,
general and administrative expenses, when compared to the previous year (see
discussion below). The increase in selling, general and administrative expenses
in 1996 primarily resulted from a $309,000 increase in selling and marketing
expenses at the MEYER Group, which principally resulted from an increase in
commissions, trade show and advertising expenses incurred as part of a program
to increase sales, and a $117,000 increase in selling and marketing expenses at
Allen-Lewis Manufacturing, primarily resulting from an increase in catalog,
travel and trade show expenses.
Other expense, net of other income, increased $527,000 to a net expense of
$303,000 for the year ended December 31, 1996, as compared to other income, net
of other expense, of $224,000 in 1995. The primary reason for the variance is a
$397,000 decrease in the gains on sale of fixed assets and assets held for sale
in 1996, when compared to 1995.
1995 vs. 1994
For the year ended December 31, 1995, the Company reported consolidated
revenue of $19.3 million, which was 16.5% below consolidated revenue of $23.1
million in 1994. The decline is attributable to lower sales at both the
manufacturing and wholesale distribution segments of the Company. Revenue at the
MEYER Group was $10.0 million in 1995, which is 18.7% below 1994 revenue of
$12.3 million. The decline is primarily attributable to $2.0 million lower sales
of equipment in the markets served by Meyer Machine. Sales in the markets served
by Meyer Vi-Tech were approximately the same in 1995 as in 1994. The lower
equipment sales in 1995 are primarily due to the $1.1 million lower backlog at
December 31, 1994 when compared to the backlog at December 31, 1993. The lower
backlog, and consequently the lower equipment sales, were a result of the
increased competition and continuing weakness in the markets severed by the
manufacturing segment, a condition that began in the second quarter of 1994.
Revenue at Allen-Lewis was $9.2 million in 1995, which is 14.0% below 1994
revenue of $10.6 million. The decline in revenue is primarily attributable to
continuing weakness and increased competitiveness of the markets it serves.
Allen-Lewis sales in 1995 were also negatively impacted by delays in receipt of
merchandise that had been ordered from foreign suppliers in anticipation of
filling customers' orders, however, the company is not capable of separately
quantifying the impact of the delays on revenue.
The Company realized consolidated gross profit of $6.3 million (32.5% of
sales) in 1995, which represents a 16.1% decline from the $7.5 million (32.3% of
sales) recorded in 1994. The decline in gross profit is primarily attributable
to the decline in revenue discussed above.
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The Company reported an operating loss of $316,000 in 1995 as compared to
an operating loss of $99,000 in 1994. The decline is primarily the result of the
lower revenue, and resulting lower gross profit, discussed above, offset by a
$981,000 reduction in selling, general and administrative expenses. The
reduction in selling, general and administrative expenses is primarily due to a
$243,000 reduction in employee and employee related expenses; and a $350,000
reduction in selling and marketing expense at the MEYER Group, when comparing
1995 to 1994. These reductions were implemented at the beginning of 1995 as a
direct result of the lower revenue the Company experienced in 1994 in an attempt
to bring expenses in line with current revenue levels until such time as the
markets served by the Company improved.
Other income, (net of other expense) was $224,000 in 1995, an increase of
$185,000 over 1994. This increase is primarily the result of gains realized on
the sale of assets held for sale and other fixed assets of $451,000 in 1995,
compared to gains of $250,000 in 1994. These increased gains were offset by a
$91,000 increase in interest expense which primarily resulted from higher
outstanding balances and higher interest rates on Allen-Lewis's line of credit
in 1995 when compared to 1994.
OUTLOOK
During 1997, the Company will be pursuing two strategies simultaneously.
Internally, the Company will continue its aggressive efforts to increase revenue
and profitability at both of the Company's business segments, as more fully
discussed below. In addition, pursuant to a decision made by the Company's Board
of Directors in February 1997, management and the Board will be working with the
Company's investment banking firm, for the purpose of evaluating all strategic
alternatives for enhancing shareholder value, including having the firm assist
with such alternatives as a material acquisition of or merger with another
company, the sale of all or part of the Company, or a leveraged buyout by
management and/or new investors. This decision, which was an expansion of the
scope of the investment banking firm's engagement which began in June 1996, was
made by the Board because of developments in the Company's business segments and
in the market for the Company's stock during 1996 and because it believes the
stock market has not been properly valuing the Company's stock. Our concern
about undervaluation is demonstrated by the closing quoted price of the
Company's stock on the New York Stock Exchange on December 31, 1996, of $1.625
in comparison to the underlying values of the Company. On the same day, the
Company had working capital of $7.9 million ($2.85 per share), of which, $2.7
million ($0.99 per share) was in cash; and the Company's book value was $4.17
per share. While we believe the strategies we are pursuing offer the best
opportunity for success, there can be no assurances that they will result in
improved results or a transaction on terms that are favorable to the Company and
its shareholders. The internal strategies to be pursued are as follows:
MEYER Group. The MEYER Group has significantly more manufacturing capacity
available to handle an increase in revenue above the level recorded in 1996,
therefore, efforts have been focused on increasing revenue because we believe
profits will increase as volume increases. During 1996, the MEYER Group realized
a 15.6% increase in revenue as a result of improvements in the markets served by
the MEYER Group and the steps it has taken over the last several years in order
to increase sales. Some of the steps that have been, and will be taken, with a
view of further increasing revenue include:
- Penetrating new geographic markets. The MEYER Group has increased its
selling and marketing presence in markets outside the United States by
adding manufacturers' representatives to its sales organization in many
countries in Latin and South America, parts of Asia and parts of Eastern
Europe. It has also added a direct sales office in France and is
currently considering representation in India.
- Penetrating new industry markets. The MEYER Group is adding new products
to its offering and adding new sales representatives in order to
penetrate the chemical, pharmaceutical and other nonfood markets where
the MEYER Group's products have applications, but where the company has
historically not focused marketing efforts. In January 1997, the MEYER
Group announced it had entered into an exclusive arrangement for the
marketing and manufacture of the patented Multi-Router, a device used to
switch flow paths for multiple pneumatic conveying systems, used
primarily in the handling of plastic pellets. It is anticipated this new
product will give the MEYER Group a unique product to complement its
existing product line in the chemical and plastics industries.
8
<PAGE> 10
- Changing the structure of the sales department. In an effort to better
penetrate the markets where the MEYER Group's products have applications,
such as additional segments of the food industry and the chemical,
pharmaceutical and other nonfood markets, Meyer Machine has recently
reorganized the structure of its sales department with a view of
achieving a better focus on, and improve response to, these markets.
It is believed that the increase in revenue in 1996 and the 12.3% increase
in the MEYER Group's backlog at December 31, 1996, as compared to the same time
in 1995, resulted in part from the initiation of the steps mentioned above and
from improvement in market conditions. However, it is believed that the primary
market served by the MEYER Group, the dry food manufacturing industry, is not as
strong as it was in the early 1990's and competition continues to be active.
Therefore, no assurance can be given that the MEYER Group will be able to record
an increase in revenue again in 1997.
During the last two years, gross profit margins at the MEYER Group have
been below historical levels. In 1996, the lower gross profit margins primarily
resulted from (a) a significant shift in the MEYER Group's business towards more
customized orders, which are more difficult to estimate and bid, (b) the cost of
a learning curve on the first time manufacture of certain products and (c)
increased competition. Since most of the equipment manufactured by the MEYER
Group contains some customization and the MEYER Group sometimes discounts prices
for its equipment below that which would yield target profit margins (for
competitive reasons), it is difficult to predict what gross profit margins will
be in the future. While we can give no assurances, we are cautiously optimistic
that gross profit margins will improve because (a) we have taken steps to
further improve controls in the internal bidding process and to control costs,
and (b) the benefits of the learning experience on products manufactured for the
first time in 1996 should be reflected in future results.
The increase in selling and marketing expenses incurred by the MEYER Group
in 1996, as a result of our program to increase sales, is expected to benefit
the company in the future; however, there can be no assurance that the benefits
will be realized. It is anticipated that nonvariable selling, general and
administrative expenses will increase at a slower rate than in 1996. However,
the company will incur research, development and marketing expenses in 1997
related to the Multi-Router. It is difficult to determine at this time whether
these additional expenses will benefit 1997 with additional revenue from the new
product line, or whether the main benefit will come in future periods.
Allen-Lewis Manufacturing Company. We believe that the 8% decline in
revenue at Allen-Lewis in 1996 was the result of continued soft market
conditions and increased competition, a condition that began to develop in the
markets it serves several years ago. Allen-Lewis has not yet received the
benefits of its program to increase sales. Some of the steps that have been
taken include:
- Improving market coverage in the U.S. Allen-Lewis began taking steps
several years back to improve its market coverage. As a result, we
believe that it is the only company with a complete line of souvenirs for
the continental 48 states and Alaska. It also opened a sales office and
warehouse to serve Florida. Getting to this point has been costly in
terms of expense and investment in inventory. However, we believe that
this approach provides a unique opportunity for Allen-Lewis to serve the
needs of its customers, especially those which have a nationwide presence
and prefer a one-stop shop to supply all their souvenir needs.
- Improving marketing materials. During 1996, Allen-Lewis invested heavily
in revamping its sales catalogue to improve its appearance and make it
more user friendly. While the majority of these costs were expensed in
1996, we expect that the benefits of the expenditures will be seen in
1997 and beyond.
Many of Allen-Lewis's customers have approached the upcoming tourist season
cautiously and pre-bookings were down 36% at December 31, 1996, when compared to
December 31, 1995. While the lower bookings will likely lead to lower sales at
Allen-Lewis in the first quarter, it does not necessarily mean that sales will
be lower in 1997 when compared to 1996. Allen-Lewis carries a complete inventory
of souvenirs and gifts and if market conditions improve in 1997, Allen-Lewis
will be positioned to benefit by filling customers' "at once" orders. It is too
early to determine, at this time, if this might be the case in 1997. In
addition, Allen-Lewis is taking steps to increase sales to customers that are
open throughout the year and are not dependent
9
<PAGE> 11
strictly on the summer tourist season. Once again, it is too early to determine
if these efforts will result in improved orders during 1997.
Allen-Lewis experienced a decline in gross profit margins in 1996 due to a
shift in product sales mix towards more sales qualifying for quantity discounts
and more sales of slow moving and discontinued items at discounted prices. While
1996 was impacted negatively by this move, we anticipate future periods will
benefit.
Allen-Lewis made a strategic decision to increase selling and marketing
related expenses in 1996. We believe the increased efforts will benefit future
periods. In addition, due to steps that have been taken, we believe selling,
general and administrative expenses at Allen-Lewis will be lower in 1997 when
compared to 1996.
During 1996, the Company took steps to reduce corporate overhead expenses
by approximately $200,000. While it is anticipated the positive impact of these
expense reductions will be realized in 1997, they will be offset by an increase
in legal and other expenses, in an amount which is yet undetermined, associated
with an anticipated election contest concerning the election of two directors to
the Company's Board of Directors at the 1997 Annual Shareholders Meeting. In
addition, fees paid to the Company's financial advisors will be higher in 1997
than in 1996 as a result of the expansion of their engagement in February 1997,
as mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $7.9 million and a
current ratio of 2.9 to 1, as compared to working capital of $9.5 million and a
current ratio of 3.6 to 1 at December 31, 1995. The decrease in the level of
working capital and decline in the current ratio at December 31, 1996, compared
to December 31, 1995, is primarily due to a conversion of approximately $700,000
of long-term debt at Allen-Lewis to notes payable as part of the refinancing of
Allen-Lewis's line of credit in 1996, and a reduction in the level of
receivables and inventory by approximately $1.5 million. The decline in
receivables and inventory, despite an increase in sales in 1996 of approximately
four percent, resulted primarily from a combination of (a) a targeted effort to
reduce balances in these accounts in order to improve cash flow by increasing
inventory turns and reducing days sales outstanding, and (b) the timing of how
jobs were shipped at the manufacturing segment. Primarily as a result of these
factors, cash balances increased by approximately $500,000 at December 31, 1996,
when compared to December 31, 1995. During 1996, the cash flow from financing
activities includes the payment of long-term debt through refinancings at: (a)
Meyer Machine, in the amount of $280,000, which was refinanced with proceeds
from new long-term debt, and (b) Allen-Lewis, where approximately $1,150,000 of
term debt, including approximately $700,000 classified as long-term debt at
December 31, 1995 (referred to above), was refinanced with borrowings from a new
line of credit. In addition, Meyer Vi-Tech made payments of approximately
$58,000 on long-term debt during 1996, from cash flow from operations. Long-term
debt, as a percentage of shareholders' equity, was 15.2% at December 31, 1996,
versus 19.0% at December 31, 1995. The improvement is primarily due to the above
mentioned conversion of long-term debt to notes payable which offset the
reduction in shareholders' equity resulting from the reported loss for the year.
At December 31, 1995, the Company had working capital of $9.5 million and a
current ratio of 3.6 to 1 as compared to working capital of $8.9 million with a
current ratio of 3.0 to 1 at December 31, 1994. The improvement in the working
capital and current ratio at December 31, 1995, compared to December 31, 1994,
is primarily due to a $683,000 reduction in current liabilities at December 31,
1995, when compared to December 31, 1994. This reduction is primarily the result
of a $1.3 million reduction in notes payable, which primarily results from the
conversion of $1.2 million of Allen-Lewis's line of credit to a three year term
note, offset by (a) a $383,000 increase in current maturities of long-term debt,
which is primarily the result of the current portion of the $1.2 million term
note discussed above, and (b) a $371,000 increase in customer deposits, which is
a result of a higher level of deposits for the orders included in the backlog of
the MEYER Group at December 31, 1995 when compared to December 31, 1994.
Long-term debt measured as a percentage of shareholders' equity was 19.0% at
December 31, 1995, versus 16.4% at December 31, 1994. The slight change is
primarily due to a $317,000 increase in long-term debt, which is primarily due
to the impact of
10
<PAGE> 12
the conversion of $1.2 million of Allen-Lewis's line of credit to a three year
term note (discussed above), less payments made in 1995 and the current
maturities of such note; offset by payments on long-term debt of $487,000 in
1995.
Meyer Machine maintains a $1,200,000 working capital line of credit with a
bank, of which approximately $859,000 was available under the borrowing base
formula for the line, after a reduction of $162,000 to support a letter of
credit issued by the bank as partial collateral for the real estate lien note
payable to a bank by Meyer Vi-Tech. Meyer Machine continues to provide Meyer
Europe a working capital line of credit which is used to provide financial
support for Meyer Vi-Tech. The cash used to fund this line of credit has come
from general corporate funds of Meyer Machine generated through internal cash
flow. No cash advances were made under the line of credit in 1996, however,
Meyer Machine did sell parts to Meyer Vi-Tech under the line of credit.
Management believes cash flows from operations along with the working capital
line of credit will provide sufficient working capital to meet Meyer Machine's
and Meyer Vi-Tech's needs in 1997. Meyer Machine has a commitment from its bank
to provide a line of credit for up to $500,000, if needed, for equipment
purchases. This commitment expires in June 1998.
Allen-Lewis maintains a line of credit with a financial institution that
provides maximum borrowing capabilities of $4.0 million, subject to a borrowing
base calculation, for working capital purposes and support for letters of
credit. At December 31, 1996, Allen-Lewis had approximately $276,000 available
under this line of credit. As this is a revolving line of credit, the
availability fluctuates on a daily basis. Management believes cash flows from
operations along with the line of credit will provide sufficient working capital
to meet Allen-Lewis's needs in 1997.
TCC Industries, Inc. (parent company) has an $85,000 line of credit and a
$500,000 line of credit, both of which are used to supplement the short-term
cash needs of the parent company. Neither of these lines of credit had balances
outstanding at December 31, 1996.
Each of the subsidiaries' bank lines of credit agreements contain
provisions that limit or restrict the transfer of funds to the parent company in
the form of cash dividends, loans or advances, based on each such subsidiaries'
income and other formulas contained in the respective loan agreements.
Management does not believe the restrictions will have a significant effect on
the parent company's ability to meet ordinary cash obligations in 1997. However,
these restrictions could negatively impact the Company's ability to pay cash
dividends in the future, if the respective banks do not waive such restrictions.
Management anticipates that each subsidiary will be able to finance the current
installments on its debt agreements through their own cash flow from operations
during 1997.
Certain of Allen-Lewis's customers are offered extended payment terms
whereby shipments of inventory made early in the year do not have to be paid for
until later in the summer. Due to the customized nature of the products sold by
the manufacturing operations, the MEYER Group frequently receives deposits from
customers when an order is placed. These deposits are used to help meet working
capital requirements.
During 1996, the Company incurred approximately $254,000 in capital
expenditures, as compared to $194,000 in 1995 and $1,115,000 in 1994 that were
financed through cash flow from operations. In addition, the Company incurred
capital expenditures that were financed with capital leases amounting to
$13,000, $1,000 and $22,000 in the years ended December 31, 1996, 1995 and 1994,
respectively. The Company expects 1997 capital expenditures to approximate
$365,000, with such expenditures to be financed from cash flow from operations,
borrowings and financing leases.
Management does not believe foreign currency fluctuations have had a
significant impact on the Company's financial condition.
For information on the impact of future changes in accounting principles,
see Note 1 to the Consolidated Financial Statements, appearing elsewhere herein.
11
<PAGE> 13
INFLATION AND CHANGING PRICES
The Company believes that the effect of inflation and changing prices has
not had, and for the foreseeable future will not have, a material impact on
revenue and/or operating income of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and supplementary data are as listed in the attached
Index To Consolidated Financial Statements and Financial Statement Schedules
appearing on page F-1 in this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information with regard to Directors and executive officers and their
business experience is set forth under "ELECTION OF DIRECTORS" in the
Registrant's Definitive Proxy Statement for the 1997 Annual Meeting of
Shareholders, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with regard to executive compensation and pension or similar
plans is set forth under "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION" and "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" in the
Registrant's Definitive Proxy Statement for the 1997 Annual Meeting of
Shareholders, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with regard to security ownership of certain beneficial owners
and management is set forth under "PRINCIPAL SHAREHOLDERS" and "ELECTION OF
DIRECTORS" in the Registrant's Definitive Proxy Statement for the 1997 Annual
Meeting of Shareholders, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with regard to certain relationships and related transactions
is set forth under "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" in the
Registrant's Definitive Proxy Statement for the 1997 Annual Meeting of
Shareholders, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedules.
See Index to Consolidated Financial Statements and Financial Statement
Schedules appearing on Page F-1 in this Annual Report on Form 10-K.
(3) Exhibits
12
<PAGE> 14
(Asterisk (*) indicates exhibits previously filed with the Securities
and Exchange Commission which are incorporated herein by reference to
this Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
(3) Articles of Incorporation and By-laws:
(i) Articles of Incorporation:
<TABLE>
<S> <C>
*3.11 Amendment to the Company's Articles of Incorporation dated
May 9, 1988.
*3.17 Articles of Amendment dated June 1, 1994.
(ii) By-laws
*3.1 Second Amended and Restated Bylaws of the Company.
*3.12 Amendment to Bylaws of the Company.
*3.13 Amendment to Bylaws of the Company, dated April 23, 1991.
*3.14 Amendment to Bylaws of the Company, dated January 9, 1992.
*3.15 Amendment to Bylaws of the Company, dated March 16, 1993.
*3.16 Third Amended and Restated Bylaws of the Company, dated
March 14, 1994.
*3.18 Amendment No. 1 to Third Amended and Restated By-Laws of the
Company.
*3.19 1995 Amendment No. 1 to the Third Amended and Restated
By-Laws of TCC Industries, Inc.
3.20 1997 Amendment No. 1 to the Third Amended and Restricted
Bylaws of TCC Industries, Inc.
(4) Instruments Defining the Rights of Security Holders Including
Indentures:
*4.2 Rights Agreement dated as of May 1, 1991, between the
Company and Ameritrust Company National Association, which
includes the form of Statement of Resolution Establishing
Series of Shares setting forth the terms of the Series A
Preferred Stock, no par value, as Exhibit A, the form of
Rights Certificate as Exhibit B and the Summary of Rights to
Purchase Series A Preferred Stock as Exhibit C.
*4.3 Form of Rights Certificate (included as Exhibit B to Rights
Agreement incorporated herein by reference pursuant to 4.2
above.) Pursuant to the Rights Agreement, printed Right
Certificates will not be mailed until as soon as practicable
after the date the Rights become detachable from shares of
the Company's Common Stock (the "Distribution Date").
*4.4 Form of Summary of Rights to Purchase Series A Preferred
Stock (included as Exhibit C to Rights Agreement
incorporated herein by reference pursuant to 4.2 above)
which, together with certificates representing the
outstanding Common Shares of the Company, shall represent
the Rights until the Distribution Date.
*4.5 Specimen of legend to be placed, pursuant to Section 3(c) of
the Rights Agreement, on all new Common Share certificates
issued after May 6, 1991 and prior to the Distribution Date
upon transfer, exchange or new issuance.
*4.6 Amendment No. 2 to Amended and Restated Rights Agreement of
the Company.
(10) Material Contracts:
*10.2 1985 Non-Employee Directors Stock Option Plan.
*10.2.1 First Amendment to 1985 Non-Employee Directors Stock Option
Plan adopted May 9, 1988.
*10.2.2 TCC Industries, Inc. 1995 Non-Employee Directors Stock
Option Plan (Which Amends and Restates the 1985 Non-Employee
Directors Stock Option Plan)
*10.3 1985 Incentive Stock Option Plan as amended.
</TABLE>
13
<PAGE> 15
<TABLE>
<S> <C>
*10.3.1 Second Amendment to the 1985 Incentive Stock Option Plan of
the Company.
*10.5 Agreement of Purchase and Sale of Stock by and between
Delwin W. Morton, Morton Realty Associates, Inc. and TeleCom
Industrial Group, Inc., dated September 30, 1986.
*10.6 Agreement of Purchase and Sale of Stock by and between David
B. McCall, III and J. Bryan McCall and TeleCom Industrial
Group, Inc., dated September 30, 1986.
*10.7 Agreement of Purchase and Sale of Warrants by and between
A.L. Investors, Inc., MVenture Corp and TeleCom Industrial
Group, Inc., dated September 30, 1986.
*10.9 Stock Purchase Agreement for the sale of Meyer Conveyair,
Inc., dated October 11, 1991, by and among Jetstream
Systems, Inc., Barry-Wehmiller Company, Meyer Machine
Company and the Company.
*10.10 Employment Agreement by and among the Company and Lawrence
W. Schumann, dated March 24, 1993.
*10.10.1 Amendment to Employment Agreement by and among the Company
and Lawrence W. Schumann.
*10.11 Employment Agreement by and among the Company and Larry T.
Marek, dated March 24, 1993.
*10.11.1 Amendment to Employment Agreement by and among the Company
and Larry T. Marek.
*10.12 Non-transferable Stock Option for the Purchase of Common
Stock of the Company granted to W. Grogan Lord on February 27,
1991.
*10.13 Stock Purchase Agreement dated May 25, 1993 among TeleCom
Industrial Group, Inc., Registrant, Watsco, Inc., and CSI
Acquisition Corp.
*10.14 Consulting and Noncompetition Agreement between Lawrence W.
Schumann and the Company dated May 10, 1994.
*10.15 Consulting and Noncompetition Agreement between W. Grogan
Lord and the Company dated May 10, 1994.
*10.16 Consulting and Noncompetition Agreement between William E.
Callahan and the Company dated May 10, 1994.
*10.17 Consulting and Noncompetition Agreement between Frank W.
Denius and the Company dated May 10, 1994.
*10.18 Consulting and Noncompetition Agreement between Ed R. L.
Wroe, Jr. and the Company dated May 10, 1994.
*10.19 Consulting Agreement between J. Patrick Kaine and the
Company dated August 2, 1994.
*10.20 Consulting and Noncompetition Agreement between J. Patrick
Kaine and the Company dated August 2, 1995.
*10.21 TCC Industries, Inc. Annual Incentive Plan Text and
Operating Rules As Amended January 9, 1992, January 12,
1995, and January 11, 1996.
*10.21.1 1996 Supplement to TCC Industries, Inc. Annual Incentive
Plan Basic Plan Text and Operating Rules.
(21) Subsidiaries of Registrant.
(23) Consents of Experts and Counsel:
23.1 Consent of Independent Accountants.
(27) Financial Data Schedule
</TABLE>
14
<PAGE> 16
(99) Additional Exhibits (Previously filed as Exhibits 28X):
<TABLE>
<S> <C>
*99.2 The TeleCom Corporation Legal Defense Indemnification Trust
Agreement, dated July 22, 1986.
*99.3 Form of Indemnification Agreement Between Officers and
Directors Executed Pursuant to the TeleCom Corporation Legal
Defense Indemnification Trust Agreement.
*99.3.1 Form of Amendment No. 1 to Indemnification Agreement.
*99.4 Item 1 to Registration Statement on Form 8-A filed by the
Company with the Securities and Exchange Commission on May
6, 1991.
</TABLE>
(b) Reports on Form 8-Ks.
The following is the date and description of the events reported on Form
8-K covering events in the fourth quarter of 1996.
<TABLE>
<CAPTION>
DATE FILED DATE OF EARLIEST EVENT
WITH SEC REPORTED ON FORM 8-K DESCRIPTION
---------- ---------------------- -----------
<C> <C> <C>
None
</TABLE>
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TCC INDUSTRIES, INC.
By /s/ LAWRENCE W. SCHUMANN
------------------------------------
(Lawrence W. Schumann)
Chairman of the Board of Directors,
President
and Chief Executive Officer
March 27, 1997
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 dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
/s/ LAWRENCE W. SCHUMANN Chairman of the Board of March 27, 1997
- ----------------------------------------------------- Directors, President and Chief
(Lawrence W. Schumann) Executive Officer, Principal
Financial and Accounting
Officer
/s/ W. GROGAN LORD Senior Chairman of the March 27, 1997
- ----------------------------------------------------- Board of Directors
(W. Grogan Lord)
/s/ WILLIAM E. CALLAHAN Director March 27, 1997
- -----------------------------------------------------
(William E. Callahan)
/s/ FRANK W. DENIUS Director and Secretary March 27, 1997
- -----------------------------------------------------
(Frank W. Denius)
/s/ J. PATRICK KAINE Director March 27, 1997
- -----------------------------------------------------
(J. Patrick Kaine)
/s/ ED R.L. WROE, JR. Director and Assistant March 27, 1997
- ----------------------------------------------------- Secretary
(Ed R.L. Wroe, Jr.)
</TABLE>
16
<PAGE> 18
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-3
Financial Statements:
Consolidated Balance Sheet as of December 31, 1996 and
1995................................................... F-4
Consolidated Statement of Operations for the years ended
December 31, 1996, 1995 and
1994................................................... F-6
Consolidated Statement of Shareholders' Equity for the
years ended December 31, 1996,
1995 and 1994.......................................... F-7
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and
1994................................................... F-8
Notes to Consolidated Financial Statements................ F-9
Financial Statement Schedules:
I -- Condensed Financial Information of Registrant
(Parent Company)....................................... F-22
II -- Valuation and Qualifying Accounts................... F-27
</TABLE>
All other financial statements and schedules not listed have been omitted
since the required information is either included in the Consolidated Financial
Statements and the Notes thereto as included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 or is not applicable or required.
F-1
<PAGE> 19
(This page intentionally left blank)
F-2
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS,
TCC INDUSTRIES, INC.
We have audited the consolidated financial statements and the financial
statement schedules of TCC Industries, Inc. and Subsidiaries listed in the index
on page F-1 of this Form 10-K. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
TCC Industries, Inc. and Subsidiaries as of December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Austin, Texas
February 26, 1997
F-3
<PAGE> 21
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31,
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 2,723 $ 2,224
Receivables:
Trade receivables, net of allowance of $104 and $118,
respectively.......................................... 2,518 3,136
Other, including interest.............................. 48 66
------- -------
2,566 3,202
------- -------
Inventories:
Raw materials.......................................... 877 892
Work in process........................................ 90 347
Finished goods......................................... 5,664 6,252
------- -------
6,631 7,491
------- -------
Other..................................................... 185 270
------- -------
Total current assets.............................. 12,105 13,187
------- -------
Property, plant and equipment:
Land...................................................... 1,133 1,107
Buildings and improvements................................ 3,755 3,720
Machinery and equipment................................... 4,991 4,908
------- -------
9,879 9,735
Less accumulated depreciation.......................... (5,652) (5,283)
------- -------
4,227 4,452
------- -------
Intangible assets:
Goodwill.................................................. 1,181 1,158
Patents and trademarks.................................... 57 74
------- -------
1,238 1,232
Less accumulated amortization.......................... (443) (400)
------- -------
795 832
------- -------
Other assets................................................ 602 835
------- -------
Total assets...................................... $17,729 $19,306
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 22
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Current liabilities:
Notes payable............................................. $ 2,033 $ 882
Current maturities of long-term debt...................... 225 664
Accounts payable.......................................... 565 839
Accrued expenses.......................................... 971 828
Customer deposits......................................... 432 430
------------- -------------
Total current liabilities......................... 4,226 3,643
Long-term debt, less current maturities..................... 1,755 2,459
Deferred liabilities........................................ 224 254
------------- -------------
Total liabilities................................. 6,205 6,356
------------- -------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, authorized 2,000,000 shares, no par
value, no shares issued................................ -- --
Common stock, authorized 10,000,000 shares, par value $1
per share, 2,841,601 and 2,840,601 shares issued,
respectively........................................... 2,842 2,841
Additional paid-in capital................................ 8,746 8,748
Cumulative foreign currency translation adjustment........ 54 (53)
Retained earnings......................................... 144 1,680
------------- -------------
11,786 13,216
Less treasury stock, 80,486 and 81,486 shares,
respectively, at cost.................................. (262) (266)
------------- -------------
Total shareholders' equity............................. 11,524 12,950
------------- -------------
Total liabilities and shareholders' equity........ $ 17,729 $ 19,306
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 23
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue..................................................... $20,002 $19,266 $23,061
Cost of goods sold.......................................... 13,831 13,013 15,610
------ ------ ------
Gross profit........................................... 6,171 6,253 7,451
Selling, general and administrative expenses................ 7,321 6,569 7,550
------ ------ ------
Operating loss......................................... (1,150) (316) (99)
------ ------ ------
Other income (expense):
Interest income........................................... 109 113 105
Interest expense.......................................... (518) (502) (411)
Other, net................................................ 106 613 345
------ ------ ------
(303) 224 39
------ ------ ------
Loss before provision (benefit) for income taxes............ (1,453) (92) (60)
Provision (benefit) for income taxes........................ 83 (2) 17
------ ------ ------
Net loss............................................... $(1,536) $ (90) $ (77)
====== ====== ======
Weighted average number of common and common equivalent
shares outstanding........................................ 2,760 2,760 2,807
====== ====== ======
Loss per share.............................................. $ (.56) $ (.03) $ (.03)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 24
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
PAR VALUE ADDITIONAL CURRENCY
NUMBER OF COMMON PAID-IN TRANSLATION RETAINED TREASURY
OF SHARES SHARES CAPITAL ADJUSTMENT EARNINGS STOCK
--------- --------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994........... 2,840 $2,840 $8,799 $(53) $1,847 $ (80)
Net loss.......................... (77)
Alternative minimum tax........... (50)
Purchase of common stock
for treasury................... (163)
Exercise of stock options......... 1 1 (1) 2
Foreign currency translation
adjustment..................... 31
----- ------ ------ ---- ------ -------
Balances, December 31, 1994......... 2,841 2,841 8,748 (22) 1,770 (241)
Net loss.......................... (90)
Purchase of common stock
for treasury................... (25)
Foreign currency translation
adjustment..................... (31)
----- ------ ------ ---- ------ -------
Balances, December 31, 1995......... 2,841 2,841 8,748 (53) 1,680 (266)
Net loss.......................... (1,536)
Exercise of stock options......... 1 1 (2) 4
Foreign currency translation
adjustment..................... 107
----- ------ ------ ---- ------ -------
Balances, December 31, 1996......... 2,842 $2,842 $8,746 $ 54 $ 144 $ (262)
===== ====== ====== ==== ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 25
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,536) $ (90) $ (77)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation........................................... 526 546 554
Amortization........................................... 54 54 58
Provision in-lieu of taxes............................. -- -- (50)
Deferred compensation.................................. (11) (9) 56
Provision for losses on receivables.................... 40 26 18
Gain on sale of assets, net............................ (42) (451) (250)
Other.................................................. 72 (74) 8
Change in current assets and liabilities:
Receivables.......................................... 586 202 724
Inventories.......................................... 860 (8) (513)
Other current assets................................. 85 (134) 79
Accounts payable..................................... (274) 239 (402)
Accrued expenses..................................... 143 (358) (368)
Customer deposits.................................... 2 371 (485)
------ ------ ------
Net cash provided (used) by operating activities............ 505 314 (648)
------ ------ ------
Cash flows from investing activities:
Additions to property, plant and equipment................ (254) (194) (1,115)
Proceeds from sale of assets.............................. 253 570 655
Other, net................................................ 3 37 (111)
------ ------ ------
Net cash provided (used) by investing activities............ 2 413 (571)
------ ------ ------
Cash flows from financing activities:
Net borrowings (repayments) of notes payable.............. 1,151 (1,318) 743
Proceeds from long-term debt.............................. 293 1,200 850
Long-term debt paid....................................... (1,484) (487) (196)
Purchase of common stock for treasury..................... -- (25) (163)
Proceeds from exercise of stock options................... 2 -- 2
------ ------ ------
Net cash provided (used) by financing activities............ (38) (630) 1,236
------ ------ ------
Effect of foreign exchange rate changes on cash............. 30 3 (4)
Net increase in cash and cash equivalents................... 499 100 13
Cash and cash equivalents at beginning of year.............. 2,224 2,124 2,111
------ ------ ------
Cash and cash equivalents at end of year.................... $2,723 $2,224 $2,124
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE> 26
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of TCC
Industries, Inc. and Subsidiaries (the "Company"), the business of which is more
fully described in Note 11. The operating subsidiaries include A.L. Investors,
Inc., doing business as Allen-Lewis Manufacturing Company ("Allen-Lewis") and
Meyer Machine Company ("Meyer Machine"), which indirectly owns 92% of the common
stock of Meyer Vi-Tech Limited ("Meyer Vi-Tech"). Certain prior year amounts
have been reclassified for consistency in presentation. Earnings and losses of
all wholly owned and majority owned subsidiaries since their respective date of
acquisition have been included in the results of operations. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Inventories
Inventories are valued at the lower of last-in, first-out (LIFO) cost or
market at Meyer Machine (17.8% and 17.0% of total inventories at December 31,
1996 and 1995, respectively) and at the lower of first-in, first-out (FIFO) cost
or market for all of the other subsidiaries. The excess current cost over LIFO
value of Meyer Machine's inventory was approximately $656,000 and $761,000 at
December 31, 1996 and 1995, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Major renewals and
betterments are capitalized, and maintenance and repairs which do not improve or
extend the life of the respective assets are charged to expense as incurred.
Gains and losses on sales and retirements of property, plant and equipment are
reflected in income.
The Company provides for depreciation based on the straight line method
over the estimated useful lives of the assets. The ranges of the estimated lives
used in computing financial depreciation are: buildings and improvements -- 2 to
33 years; and machinery and equipment -- 2 to 25 years.
Research and Development
The Company incurred and expensed approximately $39,000, $10,000 and
$65,000 of research and development costs for the years ended December 31, 1996,
1995 and 1994, respectively.
Goodwill, Patents and Trademarks
Intangible assets consist primarily of goodwill, patents and trademarks
obtained in the Company's acquisitions. These assets are amortized over their
estimated useful lives ranging from 17 to 25 years.
The Company periodically evaluates the propriety of the carrying amount of
goodwill and other intangible assets for each business giving rise to the
intangible asset, as well as the amortization period for each intangible. If an
indicator of impairment is present, the Company compares the projected
undiscounted operating income for the related business with the unamortized
balance of the related intangible asset. If an imminent loss exists, management
estimates the fair value of the intangible asset based on future operating
income for the next ten years, discounted at the Company's primary borrowing
rate. The excess of the unamortized balance of the intangible asset over the
fair value, as determined, is charged to impairment loss. At this time, the
Company believes that no impairment of the goodwill and other intangibles has
occurred and that no reduction of the carrying amounts or estimated useful lives
is warranted.
F-9
<PAGE> 27
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED:
Income Taxes
The Company and its wholly owned domestic subsidiaries join in filing a
consolidated federal income tax return. Separate state and foreign income tax
returns are filed by subsidiaries where required. The Company adopted Statement
of Financial Accounting Standards ("SFAS") 109, "Accounting for Income Taxes,"
effective January 1, 1993.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
The Company paid interest of approximately $501,000, $515,000 and $382,000
for the years ended December 31, 1996, 1995 and 1994, respectively. The Company
paid state income taxes of $31,000, $5,000 and $41,000 in the years ended
December 31, 1996, 1995 and 1994, respectively. An alternative minimum tax of
$86,000 was paid in the year ended December 31, 1994. During the year ended
December 31, 1995, the Company received a refund of $8,000 for an overpayment in
1994 of alternative minimum taxes.
Foreign Currency Translation
The financial statements of Meyer Vi-Tech are translated into U.S. dollars
in accordance with SFAS 52, "Foreign Currency Translation". SFAS 52 requires the
foreign operations to be translated using current exchange rates for assets and
liabilities, historical rates for capital accounts, and weighted average
exchange rates for income statement items. The resulting translation adjustments
are recorded directly into a separate component of shareholders' equity.
Earnings (Loss) Per Share
Earnings per share is calculated using the weighted average number of
common and common equivalent shares outstanding. In 1996, 1995 and 1994, the
Company's common stock equivalents were anti-dilutive and, therefore, were not
included in the computation of loss per share.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Future Changes in Accounting Principles
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS 128, "Earnings Per Share" and SFAS 129, "Disclosure of Information About
Capital Structure." SFAS 128 contains new computational guidelines and
disclosure requirements for reporting earnings per share. SFAS 129 requires that
disclosure about an entity's capital structure include a brief discussion of
rights and privileges for securities outstanding, including dividend an
liquidation preferences, participation rights, call prices and dates, conversion
or exercise prices or rates and pertinent dates, sinking-fund requirements,
unusual voting rights, and significant terms of contracts to issue additional
shares. Both of the new standards become effective for financial statements
issued for periods ending after December 15, 1997. Management believes that the
F-10
<PAGE> 28
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED:
Company currently substantially complies with the requirements of these new
standards and that the implementation of the standards will not have a material
impact on the Company's financial results.
Fair Value of Financial Instruments
The Company's financial instruments as defined by SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," include cash and cash
equivalents, trade receivables, other receivables, accounts payable, accrued
expenses, customer deposits and debt. All financial instruments are accounted
for on a historical cost basis which approximates fair value at December 31,
1996 and 1995.
(2) RESTRICTIONS ON NET ASSETS:
Certain of the Company's subsidiaries have bank loan agreements which
contain provisions that can limit or restrict the transfer of funds to the
parent company in the form of cash dividends, loans or advances. Such
restrictions are based on each subsidiaries' income and other formulas contained
in the respective loan agreements. Substantially all of the Company's net assets
are restricted by the loan agreements, except as to the aforementioned transfers
of funds allowed under the loan agreements.
(3) NOTES PAYABLE:
Meyer Machine maintains a $1,200,000 working capital line of credit with a
bank. Under its borrowing base calculation, Meyer Machine had borrowing
capabilities of $1,021,000 and approximately $859,000 was available under the
line at December 31, 1996, after a reduction of $162,000 to support a letter of
credit issued by the bank as partial collateral for the real estate lien note
payable to a European bank by Meyer Vi-Tech (see Note 4). This line of credit is
collateralized by inventory and accounts receivable of Meyer Machine. The line
is generally available to provide support for working capital needs and carries
interest at prime when drawn upon. In addition, Meyer Machine is required to,
among other things, maintain a designated debt to equity ratio and a minimum net
worth.
Allen-Lewis maintains a line of credit with a financial institution that
provides maximum borrowing capabilities of $4,000,000, subject to a borrowing
base calculation, for working capital purposes and support for letters of credit
(maximum limit $150,000). The daily cash receipts of Allen-Lewis are used to
reduce the outstanding borrowings under the line. At December 31, 1996,
$2,033,000 of this line was outstanding. Under the borrowing base calculation,
Allen-Lewis had approximately $276,000 available under this line of credit at
December 31, 1996. The line of credit is collateralized by all of the assets of
Allen-Lewis. The interest rate for the line of credit is adjusted quarterly and
can range from prime plus one percentage point to prime plus three and one-half
percentage points, depending on an interest coverage ratio. At December 31,
1996, the line of credit had an interest rate of prime plus two and one-half
percentage points. The line of credit contains provisions that require, among
other things, the maintenance of a designated current ratio, debt to equity
ratio and tangible net worth.
TCC Industries, Inc. (parent company) has an $85,000 line of credit bearing
interest at prime plus 1% collateralized by vacant land held for sale and a
$500,000 line of credit bearing interest at prime plus 1% collateralized by the
common stock of Meyer Machine. At December 31, 1996, the entire balance was
available for each line of credit. These lines of credit are used to supplement
the short-term cash needs of the parent company. There were no amounts drawn on
the lines of credit during 1996.
F-11
<PAGE> 29
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) NOTES PAYABLE -- CONTINUED:
The following is a summary of borrowings under the credit agreements
(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Month-end maximum loan balance during the year........... $2,740 $3,775 $3,494
Average loan balance during the year..................... $1,962 $1,968 $2,309
Balance at year-end...................................... $2,033 $ 882 $2,200
Weighted average interest rate during the year........... 10.0% 9.1% 7.2%
Weighted average interest rate at year-end............... 10.8% 9.0% 8.5%
</TABLE>
The average loan balance during the year was calculated by using a twelve
month average of the month-end balances of short-term debt. The weighted average
interest rate during the year was calculated by dividing the annual interest
cost by the average loan balance during the year.
(4) LONG-TERM DEBT:
Long-term debt consisted of the following at December 31 (dollars in
thousands):
<TABLE>
<CAPTION>
TYPE OF INDEBTEDNESS INTEREST RATE 1996 1995
-------------------- ---------------- ------ ------
<S> <C> <C> <C>
Note payable to a bank, due through December 2001,
collateralized by all machinery and equipment of
Meyer Machine........................................ Prime (a) + 0.5% $ 280 --
Real estate lien note payable to a bank, collateralized
by deed of trust on land, improvements, buildings,
equipment, accounts receivable and inventory of Meyer
Machine.............................................. Prime (a) + 0.5% -- $ 176
Notes payable to a bank, collateralized by specific
machinery and equipment of Meyer Machine............. Prime (a) + 0.5% -- 103
Real estate lien note payable to a European bank due on
demand (c), collateralized by deed of trust on land
and buildings of Meyer Vi-Tech and a letter of
credit............................................... Base (b) + 2.0% 107 135
Real estate lien note payable to the European Coal and
Steel Community, a governmental industry, due through
June 2003, collateralized by deed of trust on land
and buildings of Meyer Vi-Tech....................... 9.75% 343 310
Notes payable to the former owner of Allen-Lewis, due
through June 2001, collateralized by land and
buildings of Allen-Lewis............................. 10.0% 1,117 1,171
Notes payable to a bank, due through December 1999,
collateralized by the computer system of
Allen-Lewis.......................................... 10.9% 105 147
Notes payable to a bank, collateralized by inventory,
accounts receivable and the common and preferred
stock of Allen-Lewis................................. Prime (a) + 0.5% -- 1,024
Capital lease obligations.............................. Various 28 57
------ ------
1,980 3,123
Less current maturities................................ 225 664
------ ------
$1,755 $2,459
====== ======
</TABLE>
- ---------------
(a) The prime interest rate at December 31, 1996 was 8.25%.
(b) The base interest rate at December 31, 1996 was 6%.
(c) The Company has received a letter from the bank waiving its right to call
this note through March 1998.
F-12
<PAGE> 30
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LONG-TERM DEBT -- CONTINUED:
The notes payable to a bank by Meyer Machine and the notes payable to a
bank by Allen-Lewis contain restrictive covenants requiring, among other things,
the maintenance of a designated current ratio, debt to equity ratio and tangible
net worth.
The scheduled maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 225
1998........................................................ 254
1999........................................................ 224
2000........................................................ 203
2001........................................................ 210
Thereafter.................................................. 864
------
Total....................................................... $1,980
======
</TABLE>
(5) COMMITMENTS, CONTINGENCIES AND CONCENTRATION OF CREDIT RISKS:
Commitments
The Company and its subsidiaries occupy several facilities under
noncancellable operating leases expiring at various dates through 2004. One of
the lease agreements contains provisions for termination of the agreement under
certain circumstances and adjustments in the annual rental amount for variances
in operating expenses of the building. Future minimum rentals under
noncancelable operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 73
1998........................................................ 63
1999........................................................ 64
2000........................................................ 65
2001........................................................ 62
Thereafter.................................................. 152
----
Total....................................................... $479
====
</TABLE>
Total lease and rent expense for the years ended December 31, 1996, 1995
and 1994 were approximately $173,000, $162,000 and $142,000, respectively.
Contingencies
In March 1993, the Company entered into agreements with its two executive
officers pursuant to which they are entitled to certain benefits if their
employment is terminated following a change in control at the Company,
bankruptcy or ceasing to do business or certain changes in the executive's
circumstances (such as a material change in duties) or if their employment is
terminated for any reason, except cause, as defined in the agreement. As of
December 31, 1996, the aggregate amount that would be payable to the executive
officers under the agreements was $428,000 (excluding benefits). Subsequent to
year-end, the employment agreement with the parent company's chief executive
officer was amended and each operating subsidiary of the Company entered into a
similar agreement with its respective president providing for the payment of an
amount equal to one month's salary for each full year of employment with the
Company; bonuses accrued but unpaid during the twelve-month period preceding
termination; and any other compensation owed by the Company as of the date of
termination, including benefits, in the event such president's employment is
terminated under certain circumstances.
F-13
<PAGE> 31
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) COMMITMENTS, CONTINGENCIES AND CONCENTRATION OF CREDIT RISKS -- CONTINUED:
There are sundry claims pending against certain of the Company's
subsidiaries all of which are incidental to the ordinary course of business and,
in the opinion of management, should not result in any significant liability.
Concentration of Credit Risks
Generally, the Company does not require collateral on its trade accounts
receivables. Each customer's financial condition and the aging of the accounts
receivables has been considered in determining the allowance for doubtful
accounts.
The Company's cash and cash equivalents are maintained in demand deposit
accounts with financial institutions located in the Company's area of operations
in amounts that may exceed federally insured limits and in uninsured money
market mutual funds that invest primarily in securities of the United States
government. Management does not believe there is undue risk of loss inasmuch as,
in management's opinion, the financial institutions in which cash is deposited
are high credit quality institutions and the money market funds in which it
invests primarily invest in obligations of the United States government.
However, management estimates that approximately $1,771,000 and $1,291,000 of
its cash and cash equivalent balances at December 31, 1996 and 1995,
respectively, were not covered by federal insurance programs, and therefore,
were subject to potential loss.
(6) EMPLOYEE BENEFIT PLANS
Meyer Machine provides retirement benefits for its employees who are
twenty-one years old and who have one year of service with the company by
sponsoring a defined contribution profit-sharing plan. Contributions to the plan
are discretionary and, when made, are based upon a fixed percentage of the
aggregate compensation of all eligible employees. Expenses related to this plan
were $121,000, $119,000 and $119,000 for the fiscal years ended December 31,
1996, 1995, and 1994, respectively.
(7) SHAREHOLDERS' EQUITY:
The Company has authorized 2,000,000 shares of cumulative preferred stock,
no par value, none of which have been issued. Of such 2,000,000 authorized
shares, the Company has designated up to 10,000 shares of a new Series A
Preferred Stock in connection with the Shareholder Rights Plan adopted by the
Board of Directors in 1991, as described below.
On April 23, 1991, the Board of Directors of the Company adopted a
Shareholder Rights Plan consisting of Rights to purchase a unit consisting of
one one-thousandth (1/1000th) of a share of a new Series A Preferred Stock, no
par value. The Rights were distributed as a dividend at the rate of one Right
for each share of TCC Industries' common stock held of record on May 6, 1991,
and the rights have also attached to all shares of TCC Industries, Inc. common
stock that have become outstanding subsequent to May 6, 1991. (2,761.12 shares
of Series A Preferred Stock would have become issuable if the Rights had become
exercisable on December 31, 1996).
Initially, the Rights are not exercisable and are not detachable from the
Company's common stock. Ten days after any person or group acquires 17% or more
of the Company's outstanding common stock or announces a tender offer for 22% or
more of the Company's common stock, the Rights will become exercisable.
Thereafter, the Rights will trade separately from the Company's common stock. If
the Rights become exercisable, a holder will be entitled to purchase from the
Company one one-thousandth of a share of preferred stock for $8, or under
certain circumstances, the Rights would be modified so that each Right not owned
by the acquiror or acquiring group would be exercisable so as to entitle the
holder to buy the number of common shares having a market value of two times the
$8 exercisable price of each Right.
F-14
<PAGE> 32
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) SHAREHOLDERS' EQUITY -- CONTINUED:
The Rights will expire on May 6, 2001, and may be redeemed by the Company
for one cent per Right under certain circumstances.
On December 1, 1993, the Company initiated an offer to purchase its common
stock from owners of fewer than 100 shares. As of December 31, 1993, the Company
had purchased 15,334 shares at $3.125 per share. During the first quarter of
1994, an additional 5,852 shares were purchased by the Company at $3.625 per
share. Costs incurred for the buy-back program have been included in the cost of
the treasury shares. During the period August 1994 through December 1994, the
Company purchased 47,000 shares of its common stock in the open market, at
prices ranging from $2.125-$3.375 per share. During January 1995, an additional
8,900 shares were purchased in the open market at prices ranging from
$2.625 - $2.875. Costs incurred to purchase the shares have been included in the
cost of treasury shares.
(8) STOCK-BASED COMPENSATION PLANS:
The Company sponsors the "TCC Industries, Inc. 1985 Incentive Stock Option
Plan" and the "TCC Industries, Inc. 1995 Non-employee Directors Stock Option
Plan" (the "Plans"), which are stock-based incentive compensation plans as
described below. The Company applies APB Opinion 25 and related Interpretations
in accounting for the Plans. In 1995, the FASB issued SFAS 123 "Accounting for
Stock-Based Compensation" which, if fully adopted by the Company, would change
the methods the Company applies in recognizing the cost of the Plans. Adoption
of the cost recognition provisions of SFAS 123 is optional and the Company has
decided not to elect these provisions of SFAS 123. However, pro forma
disclosures as if the Company adopted the cost recognition provisions of SFAS
123 in 1995 are required by SFAS 123, if material.
Under the TCC Industries, Inc. 1985 Incentive Stock Option Plan, which
expired in 1995, the Company was authorized to issue 320,000 shares of common
stock pursuant to incentive stock options (qualified under Section 422 of the
Internal Revenue Code of 1986, as amended) to selected employees. Under the TCC
Industries, Inc. 1995 Non-Employee Directors Stock Option Plan, the Company is
authorized to issue up to 75,000 shares of Common Stock pursuant to
non-qualified stock options to non-employee directors. Each Plan contains
provisions that the price at which the Company's stock can be purchased,
pursuant to the options granted under the Plan, should not be less than 100% of
the fair market value at the date of grant. The options issued under both Plans
vest 20% each year and terminate 10 years after the date of grant, except in the
case of a significant shareholder whose options would expire five years after
the date of grant.
An 8,000 share stock option was granted in 1991 by the Company to a
Director who was not eligible to participate in either of the Company's stock
option plans. The option granted is fully vested and was issued at fair market
value on the date of the grant.
F-15
<PAGE> 33
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) STOCK-BASED COMPENSATION PLANS -- CONTINUED:
A summary of the status of the Company's stock options as of December 31,
1994, 1995 and 1996, and the changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES AVAILABLE --------------------------
FOR GRANT WEIGHTED AVERAGE
UNDER STOCK EXERCISE PRICES
OPTION PLANS SHARES PER SHARE
---------------- ------- ----------------
<S> <C> <C> <C>
Balance, January 1, 1994..................... 59,000 315,500 $2.78
Granted.................................... -- -- --
Exercised.................................. -- (1,600) $1.06
Forfeited.................................. 11,500 (11,500) $3.16
------- -------
Balance, December 31, 1994................... 70,500 302,400 $2.78
Granted.................................... (68,500) 68,500 $2.07
Expired.................................... 40,000 (40,000) $3.13
Forfeited.................................. 25,000 (25,000) $2.13
Expiration of plan......................... (43,000) -- --
Amendment of plan.......................... 28,500 -- --
------- -------
Balance, December 31, 1995................... 52,500 305,900 $2.63
Granted.................................... -- -- --
Exercised.................................. -- (2,000) $1.00
Forfeited.................................. -- (36,500) $2.89
------- -------
Balance, December 31, 1996................... 52,500 267,400 $2.60
======= =======
Exercisable at December 31, 1994........... 182,000 $2.38
Exercisable at December 31, 1995........... 147,500 $2.44
Exercisable at December 31, 1996........... 170,400 $2.51
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: no dividend yield; risk-free interest rates are
different for each grant and range from 5.73% to 6.45%; the expected lives of
options are 6 years; and volatility of 53.2461% for all grants (based on monthly
low stock prices for the most recent 6-year period).
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- ---------------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER OUTSTANDING REMAINING WEIGHTED AVERAGE NUMBER EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES AT DECEMBER 31, 1996 CONTRACT LIFE EXERCISE PRICE AT DECEMBER 31, 1996 EXERCISE PRICE
- --------------- -------------------- ---------------- ---------------- -------------------- ----------------
<C> <C> <C> <C> <C> <C>
$0.75 to $2.00 134,900 3.46 $1.84 96,500 $1.78
$2.01 to $3.50 132,500 6.99 $3.38 73,900 $3.46
- -------------- ------- ----- ------ ------- ------
$0.75 to $3.50 267,400 5.21 $2.60 170,400 $2.51
- -------------- ------- ----- ------ ------- ------
</TABLE>
During 1996 and 1995, the Company did not incur any compensation costs for
the Plans under APB Opinion 25 and, if the Company had fully adopted SFAS 123,
the compensation costs that would have been incurred would not have been
significant. This may not be indicative of the effect in future periods. SFAS
123 does not apply to awards prior to 1995. The Company anticipates making
awards in the future under its stock-based compensation plans.
F-16
<PAGE> 34
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES:
The components of the provision (benefit) for income taxes are (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal..................................................... $-- $-- $--
State....................................................... 83 (2) 17
--- --- ---
Total provision (benefit).............................. $83 $(2) $17
=== === ===
</TABLE>
Reconciliations of the differences between income taxes computed at the
statutory federal tax rate and consolidated provisions (benefit) for income
taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ------
<S> <C> <C> <C>
Expected income tax benefit at statutory rate............... $(494) $(31) $ (20)
State taxes, net of federal tax benefit..................... 55 (1) 11
Operating (income) loss from foreign subsidiary............. (51) 26 9
Amortization of intangible assets not deducted for tax
purposes.................................................. 15 16 14
Increase in valuation allowance............................. 528 13 1
Other....................................................... 30 (25) 2
----- ---- ------
Total provision (benefit)......................... $ 83 $ (2) $ 17
===== ==== ======
</TABLE>
Due to the Company's net operating loss carryforward position, for federal
income tax purposes, future provisions for federal income taxes will be an
"in-lieu of tax" provision pursuant to the accounting principles applicable to
quasi-reorganizations and accordingly will not require a significant cash
payment and will not reduce shareholders' equity since the tax benefits
resulting from the utilization of these carryforwards will be credited directly
to additional paid-in capital.
As of December 31, 1996, the Company had available for federal income tax
purposes net operating loss carryforwards which expire as follows (in
thousands):
<TABLE>
<S> <C>
1999........................................................ $18,087
2001........................................................ 2,704
2002........................................................ 385
2003........................................................ 1,232
2004........................................................ 810
2005........................................................ 1,257
2006 and thereafter......................................... 3,403
-------
$27,878
=======
</TABLE>
The Company has foreign tax loss carryforwards of approximately $422,000
which do not expire.
Primarily due to the net operating loss carryforwards, the Company recorded
a deferred tax asset with the adoption of SFAS 109. The fact that the Company
has incurred losses the last three years provides objective "negative" evidence
supporting a need for a valuation allowance on the Company's net deferred tax
asset. Accordingly, the Company has recorded a valuation allowance equal to the
net deferred tax asset generated principally by the net operating loss
carryforwards due to the possibility that the net deferred tax asset may not be
realized. As of December 31, 1996, the Company had deferred tax assets totaling
$10,273,000, deferred tax liabilities totaling $341,000 and a valuation
allowance in the amount of $9,932,000.
F-17
<PAGE> 35
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES -- CONTINUED:
The components of the December 31, 1996 and December 31, 1995 deferred tax
amounts are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
ASSET ASSET
(LIABILITY) (LIABILITY)
------------ ------------
<S> <C> <C>
Net domestic operating loss carryforwards................... $ 9,479 $8,901
Net foreign operating loss carryforwards.................... 143 195
Inventory................................................... 357 364
Capitalized leases.......................................... 79 75
Other....................................................... 215 218
Depreciation................................................ (341) (349)
------- ------
Net deferred tax asset before valuation allowance......... 9,932 9,404
Less valuation allowance.................................... 9,932 9,404
------- ------
Net deferred tax asset recognized in the balance sheet.... $ -- $ --
======= ======
</TABLE>
(10) SUBSEQUENT EVENT:
On February 26, 1997, the Board of Directors of the Company decided to
expand the scope of the engagement of Rauscher Pierce Refsnes, the Company's
investment banking firm, for the purpose of evaluating all strategic
alternatives for enhancing shareholder value, including having the firm assist
with such alternatives as a material acquisition of or merger with another
company, the sale of all or part of the Company, or a leveraged buyout by
management and/or new investors.
(11) SEGMENT INFORMATION:
The Company has two industry segments. The manufacturing segment, which is
comprised of Meyer Machine, Meyer Vi-Tech and the Tempco division of Meyer
Machine, is primarily involved in the manufacture of specialized bulk material
conveying and food processing equipment, and systems. The food processing
equipment and systems are sold in the United States, Canada, Latin America,
Europe and Asia, primarily to snack food processing companies. The bulk material
conveying equipment and systems are sold worldwide primarily to the food,
pharmaceutical and chemical industries.
The wholesale distribution segment, which is comprised of Allen-Lewis, is
primarily involved in the design and distribution of souvenir, gift and novelty
items throughout the continental 48 United States and Alaska. Its products are
sold primarily to theme, national and state parks; souvenir, novelty, gift and
airport shops, military bases, truck stops, zoos, discount and variety stores;
and other distributors. A significant amount of the products sold by the
wholesale distribution segment are sourced from suppliers in the Far East who
could be negatively affected by changes in the economic and political climate of
the countries in which they are located. Management of the Company believes that
if a disruption of supply of products from these sources were to occur, the
Company would be able to source similar products from suppliers located in other
countries. If this were to occur, however, there could be a delay in receipt of
merchandise and possible loss of sales, which would affect operating results
adversely.
F-18
<PAGE> 36
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) SEGMENT INFORMATION -- CONTINUED:
Information relating to the Company's operations for each of the three
years in the period ended December 31, 1996 for these segments is as follows (in
thousands):
<TABLE>
<CAPTION>
GENERAL
WHOLESALE CORPORATE AND
MANUFACTURING DISTRIBUTION OTHER TOTAL
------------- ------------ ------------- -------
<S> <C> <C> <C> <C>
1996:
Identifiable assets............................ $ 8,400 $ 8,172 $ 1,157 $17,729
Depreciation and amortization expense.......... 358 210 12 580
Additions to property, plant and equipment..... 195 56 3 254
Revenue........................................ 11,527 8,420 55 20,002
Operating income (loss)........................ 550 (653) (1,047) (1,150)
1995:
Identifiable assets............................ 8,300 9,346 1,660 19,306
Depreciation and amortization expense.......... 378 213 9 600
Additions to property, plant and equipment..... 136 56 2 194
Revenue........................................ 9,975 9,152 139 19,266
Operating income (loss)........................ 576 34 (926) (316)
1994:
Identifiable assets............................ 8,051 9,953 1,860 19,864
Depreciation and amortization expense.......... 418 175 19 612
Additions to property, plant and equipment..... 843 262 10 1,115
Revenue........................................ 12,263 10,642 156 23,061
Operating income (loss)........................ 502 306 (907) (99)
</TABLE>
For each of the three years in the period ended December 31, 1996, the
manufacturing segment information includes revenues of $2,149,000, $1,357,000
and $1,355,000, respectively, and an operating profit of $184,000 and operating
losses of $24,000 and $57,000, respectively, generated by a foreign subsidiary
located in England. Identifiable assets of the foreign subsidiary are
$1,935,000, $1,715,000 and $1,340,000 at December 31, 1996, 1995 and 1994,
respectively.
During the years ended December 31, 1996, 1995 and 1994, the Company
realized gains of $41,000, $436,000 and $242,000, respectively, on the sale of
assets held for sale which were included in other non-current assets. Such
realized gains are included in "other income, net" in the accompanying
consolidated statement of operations.
F-19
<PAGE> 37
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) QUARTERLY DATA, UNAUDITED:
The results of operations for each quarter in 1996 and 1995 were as follows
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996:
Revenue.......................................... $5,312 $5,845 $4,853 $3,992
====== ====== ====== ======
Gross profit..................................... $1,633 $1,805 $1,515 $1,218
====== ====== ====== ======
Net loss......................................... $ (193) $ (159) $ (372) $ (812)
====== ====== ====== ======
Loss per share................................... $ (.07) $ (.06) $ (.13) $ (.30)
====== ====== ====== ======
1995:
Revenue.......................................... $5,249 $5,531 $4,019 $4,467
====== ====== ====== ======
Gross profit..................................... $1,789 $1,827 $1,166 $1,471
====== ====== ====== ======
Net income (loss)................................ $ 19 $ 6 $ (308) $ 193
====== ====== ====== ======
Earnings (loss) per share........................ $ 0.01 $ 0.00 $(0.11) $ .07
====== ====== ====== ======
</TABLE>
During the fourth quarter of 1995, the Company sold an asset held for sale
which had been classified in other non-current assets for a net gain before
income taxes of approximately $398,000. There were no unusual or infrequent
events that impacted the results of operations in the fourth quarter of 1996.
F-20
<PAGE> 38
(This page intentionally left blank)
F-21
<PAGE> 39
TCC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (PARENT COMPANY)
CONDENSED BALANCE SHEET
AS OF DECEMBER 31,
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 196 $ 198
Other..................................................... 25 17
------- -------
Total current assets.............................. 221 215
------- -------
Investments in and advances from subsidiaries (eliminated in
consolidation):
Investments, at equity.................................... 15,686 18,014
------- -------
Advances from subsidiaries, net........................... (4,570) (5,568)
------- -------
Property, plant and equipment............................... 107 104
Less accumulated depreciation............................. (99) (95)
------- -------
8 9
------- -------
Other assets................................................ 375 471
------- -------
Total assets...................................... $11,720 $13,141
======= =======
</TABLE>
The condensed financial information should be read in conjunction with the
accompanying Notes to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which
information is included elsewhere herein.
F-22
<PAGE> 40
TCC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (PARENT COMPANY) -- (CONTINUED)
CONDENSED BALANCE SHEET -- (CONTINUED)
AS OF DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Current liabilities:
Accrued expenses and other................................ $ 196 $ 191
------- -------
Total current liabilities......................... 196 191
------- -------
Total liabilities................................. 196 191
------- -------
Commitments and contingencies (Note A)
Shareholders' equity:
Preferred stock, authorized 2,000,000 shares, no par
value, no shares issued................................ -- --
Common stock, authorized 10,000,000 shares, par value $1
per share, 2,841,601 and 2,840,601 shares issued,
respectively........................................... 2,842 2,841
Additional paid-in capital................................ 8,746 8,748
Cumulative foreign currency translation adjustment........ 54 (53)
Retained earnings......................................... 144 1,680
------- -------
11,786 13,216
Less treasury stock, 80,486 and 81,486 shares,
respectively, at cost.................................. (262) (266)
------- -------
Total shareholders' equity........................... 11,524 12,950
------- -------
Total liabilities and shareholders' equity........ $11,720 $13,141
======= =======
</TABLE>
Note (A) -- In the normal course of business, the parent company
is required to guarantee performance bonds issued by
the Company's insurance carrier for the benefit of
certain subsidiary companies. As of December 31,
1996, a bond amounting to $475,000 had been issued
which has been guaranteed by the parent company.
The condensed financial information should be read in conjunction with the
accompanying Notes to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which
information is included elsewhere herein.
F-23
<PAGE> 41
TCC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (PARENT COMPANY) -- (CONTINUED)
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Income:
Interest.................................................. $ 18 $ 26 $ 21
Other..................................................... -- 58 17
------- ------ ------
18 84 38
------- ------ ------
Expenses:
General and administrative, net of management fee
income................................................. 1,063 1,027 954
Interest.................................................. 3 2 2
------- ------ ------
1,066 1,029 956
------- ------ ------
Loss before benefit for income taxes and other items shown
below..................................................... (1,048) (945) (918)
Benefit for income taxes.................................... (115) (265) (263)
------- ------ ------
Loss before equity in income (loss) of consolidated
subsidiaries.............................................. (933) (680) (655)
Equity in income (loss) of consolidated subsidiaries........ (603) 590 578
------- ------ ------
Net loss.......................................... $(1,536) $ (90) $ (77)
======= ====== ======
Weighted average number of common and common equivalent
shares outstanding........................................ 2,760 2,760 2,807
======= ====== ======
Net loss per share.......................................... $ (.56) $ (.03) $ (.03)
======= ====== ======
</TABLE>
The condensed financial information should be read in conjunction with the
accompanying Notes to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which
information is included elsewhere herein.
F-24
<PAGE> 42
TCC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (PARENT COMPANY) -- (CONTINUED)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net cash flows used by operating activities................. $(718) $(712) $(926)
----- ----- -----
Cash flows from investing activities:
Additions to property, plant and equipment................ (3) (1) (9)
Additions to assets held for sale......................... -- (1) (97)
Collection of notes receivable............................ -- 34 4
Increase (decrease) in net advances from subsidiaries..... (997) 204 418
Dividends from subsidiaries............................... 1,714 395 215
Proceeds from sale of assets.............................. -- 20 35
----- ----- -----
Net cash flows provided by investing activities............. 714 651 566
----- ----- -----
Cash flows from financing activities:
Purchase of common stock for treasury..................... -- (25) (163)
Proceeds from exercise of stock options................... 2 -- 2
----- ----- -----
Net cash flows provided by (used by) financing activities... 2 (25) (161)
----- ----- -----
Net decrease in cash and cash equivalents................... (2) (86) (521)
Cash and cash equivalents at beginning of year.............. 198 284 805
----- ----- -----
Cash and cash equivalents at end of year.................... $ 196 $ 198 $ 284
===== ===== =====
</TABLE>
The condensed financial information should be read in conjunction with the
accompanying Notes to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which
information is included elsewhere herein.
F-25
<PAGE> 43
TCC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT (PARENT COMPANY) -- (CONTINUED)
SCHEDULE OF CASH DIVIDENDS PAID TO REGISTRANT
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------ ---- ----
<S> <C> <C> <C>
TeleCom Industrial Group, Inc., a wholly-owned subsidiary of
TCC Industries, Inc....................................... $ 214 $395 $215
TeleCom Properties, Inc., a wholly-owned subsidiary of TCC
Industries, Inc. ......................................... 1,500 -- --
------ ---- ----
Total............................................. $1,714 $395 $215
====== ==== ====
</TABLE>
The condensed financial information should be read in conjunction with the
accompanying Notes to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which
information is included elsewhere herein.
F-26
<PAGE> 44
TCC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ --------- ----------------------- --------- ---------
ADDITIONS
BALANCE -----------------------
AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTION OF PERIOD
----------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowances:
1996
Doubtful accounts.................... $118 $40 $ 9(A) $63(B) $104
==== === === === ====
1995
Doubtful accounts.................... $121 $26 $ 7(A) $36(B) $118
==== === === === ====
1994
Doubtful accounts.................... $100 $18 $20(A) $17(B) $121
==== === === === ====
</TABLE>
- ---------------
(A) Accounts collected, previously written off.
(B) Accounts written off.
F-27
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
3.20 -- 1997 Amendment No. 1 to the Third Amended and Restated
Bylaws of TCC Industries, Inc.
21 -- Subsidiaries of the Registrant
23.1 -- Consent of Independent Accountants
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.20
1997 AMENDMENT NO. 1 TO
THIRD AMENDED AND RESTATED BYLAWS OF
TCC INDUSTRIES, INC.
Section 3.02 of the Third Amended and Restated Bylaws, as amended, of
TCC Industries, Inc., a Texas corporation (the "Corporation"), was amended by
Unanimous Written Consent of the Board of Directors of the Corporation dated as
of March 3, 1997, by deleting the first four sentences thereof and inserting in
lieu of such sentences, the following, effective as of the date of such consent:
"The Board of Directors shall consist of six (6) members, each to hold
office until the next annual meeting of shareholders or until his or her
successor shall be elected and shall have qualified. Notwithstanding the
immediately preceding sentence, any person elected as a director prior to the
1997 Annual Meeting of Shareholders of the Corporation shall hold office for
the term which they were elected, unless they are removed or resign in
accordance with these Bylaws."
The undersigned Secretary of the Corporation hereby certifies that the
foregoing is true and correct.
/s/ FRANK W. DENIUS
--------------------------
Frank W. Denius, Secretary
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES OF REGISTRANT
The following is a list of the significant subsidiaries of the Registrant,
showing the percentage of voting securities owned by the Registrant or one or
more of its other subsidiaries at December 31, 1996.
Percentage
State/County of Voting
of Security
Name of Corporation Incorporation Owned
------------------- ------------- ----------
1. TeleCom Industrial Group, Delaware 100
Inc.
2. A.L. Investors, Inc. doing
business as Allen-Lewis
Manufacturing Company Texas 100
3. Meyer Machine Company Delaware 100
4. Meyer Europe Limited United Kingdom 100
5. Meyer Vi-Tech Limited United Kingdom 92
6. TeleCom Properties, Inc. Delaware 100
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
TCC Industries, Inc.:
We consent to the incorporation by reference in the registration statement of
TCC Industries, Inc. and Subsidiaries on Form S-8 (File No. 33-67730) of our
report dated February 26, 1997, on our audits of the consolidated financial
statements and financial statement schedules of TCC Industries, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and for the years ended December
31, 1996, 1995 and 1994, which report is included in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
Austin, Texas
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,723
<SECURITIES> 0
<RECEIVABLES> 2,622
<ALLOWANCES> 104
<INVENTORY> 6,631
<CURRENT-ASSETS> 12,105
<PP&E> 9,881
<DEPRECIATION> 5,652
<TOTAL-ASSETS> 17,729
<CURRENT-LIABILITIES> 4,226
<BONDS> 1,755
0
0
<COMMON> 2,842
<OTHER-SE> 8,682
<TOTAL-LIABILITY-AND-EQUITY> 17,729
<SALES> 20,002
<TOTAL-REVENUES> 20,002
<CGS> 13,831
<TOTAL-COSTS> 13,831
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 40
<INTEREST-EXPENSE> 518
<INCOME-PRETAX> (1,453)
<INCOME-TAX> 83
<INCOME-CONTINUING> (1,536)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,536)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
