<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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, 1994
[ ] 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 ________
Commission File Number 0-7469
TJ INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 82-0250992
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(State of incorporation) (IRS employer identification number)
200 East Mallard Drive, Boise, Idaho 83706
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (208) 364-3300
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($1.00 par value)
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(Title of Class)
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 best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of the close of business on
March 14, 1995, was $224,514,000.
The number of outstanding shares of the registrant's common stock ($1.00 par
value), as of March 14, 1995 was 16,928,202.
Documents incorporated by reference: Listed hereunder the following documents
if incorporated by reference, and the Parts of this Form 10-K into which the
document is incorporated:
The registrant's definitive proxy statement to be dated on or after April, 3,
1995, for use in connection with the annual meeting of stockholders to be held
on May 24, 1995, portions of which are incorporated by reference into Part III
of this Form 10-K.
EXHIBIT INDEX ON PAGE 28
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PART I
ITEM 1. BUSINESS
ITEM 1(a). General Development of Business
RECENT DEVELOPMENTS
1994 FINANCIAL RESULTS
The Company recorded all-time record sales in 1994, and experienced
improved operating income despite the negative effect of losses at its window
business and fourth quarter non-recurring costs. The Company reported strong
growth in operating income from $32.8 million in 1993 to $41.2 million in 1994,
a 26 percent increase.
On a year-to-year comparative basis, sales for 1994 increased by 12 percent
to $618.9 million, from the all-time sales record of $551.2 million in 1993.
Net income in 1994 was $8.8 million, compared with 1993 net income of $12.5
million. Net income per fully diluted share decreased from $0.76 in 1993 to
$0.44 in 1994.
For the fourth quarter, sales increased 3 percent to $148.6 million from
the $144.7 million sold in the corresponding period in 1993. A loss of $3.6
million, or $0.23 per fully diluted share was recorded in the fourth quarter.
The Company earned $3 million, or $0.16 per fully diluted share in the fourth
quarter of 1993.
The 1994 earnings per share comparisons suffered primarily from the
dilutive effects of Company's 3.5 million share equity offering in November
1993, and from the absence of the start-up profit-sharing arrangement with its
engineered lumber joint venture partner, MacMillan Bloedel of America, Inc.
("MBA"). The start-up arrangement allocated two-thirds of the Trus Joist
MacMillan a Limited Partnership (TJM) profits to the Company in 1993. The 1994
profits from TJM were allocated 51 percent to the Company and 49 percent to MBA.
The Company also had $3.2 million of non-recurring costs in the fourth quarter
of 1994, relating to plant closures, severance and other items.
The Company's Canadian window subsidiaries, which were sold to Andersen
Corporation at year end, as described under "Window Business" below, incurred an
operating loss of $4.9 million in 1994, with nearly $1.5 million of that loss in
the fourth quarter.
NEW PRESIDENT AND CHIEF EXECUTIVE OFFICER
On January 4, 1995, the Company announced that Thomas H. Denig would
replace long-time President and Chief Executive Officer (CEO), Walter C.
Minnick, who resigned effective January 31, 1995.
Denig, 48, has led TJM as President and CEO for the past five years. He
has held a variety of marketing and general management positions in his 21-year
career with the Company. In addition to his new responsibilities as the
Company's President and CEO, he will continue to serve in the same capacities
for TJM.
In announcing the replacement, the Board of Directors said the leadership
transition resulted from the company's decision to adopt a single-business
strategy, focusing its resources and management on its engineered lumber product
business.
WINDOW BUSINESS
In October 1994, the Company formed the Outlook Window Partnership L.P.
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(Outlook), thereby combining its wholly-owned U.S. window and patio door
subsidiary, Norco Windows, Inc., with SealRite Windows, Inc. of Lincoln,
Nebraska, and Oldach Window Corp., of Colorado Springs, Colorado, two regional,
direct-to-builder wood window and door manufacturers serving the Midwest and
Rocky Mountain states. The Company has a 64 percent partnership interest in
Outlook which had 1994 pro forma sales of $115.7 million. The Outlook Window
Partnership's operations are directed toward offering highly reliable product
quality, competitive pricing and personal service through regionally tailored
distribution channels.
At year-end 1994, the Company sold its two Canadian window subsidiaries,
Dashwood Industries Limited and R. LaFlamme & Frere, Inc., to Andersen
Corporation of Bayport, Minnesota, at approximately book value. Andersen is the
world's largest manufacturer of wood windows and patio doors. The sale of the
Canadian operations removed a significant source of downward pressure on the
company's operating margins. The Canadian subsidiaries incurred an operating
loss of $4.9 million in 1994.
The formation of Outlook and sale of the Canadian subsidiaries were part of
the company's decision to reduce its investment in and exposure to the window
business. This decision was made in response to the strategic decision to
focus on the engineered lumber business and because of the lack of profitability
on the part of the company's window business during the current business cycle.
The Company presently intends to sell or otherwise divest of Outlook depending
on available opportunities. Until such sale or other divestiture occurs, the
company's window operations in the United States will continue as currently
conducted, and the Company will retain a majority ownership and shared control
over the new partnership's operations.
MARKET DEVELOPMENTS
The Company believes that its engineered lumber products offer advantages
in both performance and cost effectiveness over natural lumber and that such
products are achieving increased market acceptance in residential construction.
The company's engineered lumber sales, per North American housing start,
increased from $75 per start in 1989 to $250 per start in 1994, an increase of
330%. During 1994, residential engineered lumber sales per start increased 2%
despite a significant decline in prices for wide dimension lumber. Prices for
2" x 10" green 14' douglas fir lumber declined 16% during 1994 from $565 per
thousand board feet in January 1994 to $475 per thousand board feet at the end
of the year. Wide dimension lumber remains the primary competition to the
company's engineered lumber products.
Also during 1994, the company's traditional distributors and retail
customers reduced their inventories and maintained significantly lower stock at
year-end 1994 compared to year-end 1993.
North American housing starts were 1.61 million in 1994 as compared to 1.44
million in 1993. The Company anticipates lower housing starts in 1995 in
response to rising interest rates and other general economic factors.
COMPANY STRATEGY
The company's primary objective remains increasing market penetration for
its engineered lumber products. The Company believes that the fundamentals
which have driven the company's growth over the past several years remain in
place, including the declining availability of high-quality, large diameter
timber, the superior performance of engineered lumber products, and the
company's continuing transition to proprietary, lower-cost technologies. In
addition, the Company continues to enjoy strong brand name recognition,
supported by an extensive North American
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distribution network. Most importantly, the Company believes there continues to
be growth in market acceptance of engineered lumber products.
The Company has adopted an aggressive four-point pre-emptive strategy to
maintain its historic dominance in the engineered lumber industry -- a dominance
which is reflected in an estimated market share in excess of 60 percent for
engineered lumber products sold in North America. The company's strategy
includes the following:
1. LOW-COST PROPRIETARY TECHNOLOGIES AND DOMINANT PRODUCTION CAPACITY.
The Company intends to pursue the advantages of its technological leadership.
The Company believes its technologies in engineered lumber enable it both to use
smaller logs and to make more efficient use of wood fiber than the current
sawmill production of sawn structural lumber. The Company also intends to
capitalize on its proprietary technologies -- Parallam[REGISTERED TRADEMARK] PSL
and TimberStrand-TM- LSL which allow the Company to manufacture engineered
lumber from non-traditional tree species such as aspen and poplar. These
species are lower in cost, more abundant and less environmentally sensitive than
traditional fir and pine species. The Company believes it is well positioned to
benefit from the increasing scarcity and associated higher prices of the high
quality, large diameter logs utilized to make the sawn structural lumber
products with which its products compete.
The Company is in the second year of a two-year capital expansion program,
which is intended to enhance the company's leading position in engineered lumber
products through the capacity expansion of existing facilities and the
construction of new production facilities. Through the expansion of existing
plants and the addition of two new production facilities, as described below,
the Company believes it will maintain its dominant 60 percent share of
engineered lumber industry capacity.
The company's capital expansion program includes:
HAZARD, KENTUCKY, TIMBERSTRAND-TM- (LSL) PLANT. The Company is
proceeding with construction of a TimberStrand[REGISTERED TRADEMARK] LSL
engineered lumber production facility for approximately $100 million near
Hazard, Kentucky. Construction of the facility commenced in the fall of 1993
with initial production expected late in the second quarter of 1995.
BUCKHANNON, WEST VIRGINIA, COMBINATION PLANT. The Company is
proceeding with construction of a combination facility in Buckhannon, West
Virginia, which will manufacture both Microllam-TM- LVL and Parallam[REGISTERED
TRADEMARK] PSL. It will cost approximately $85 million. Initial production of
LVL is expected in the second quarter` of 1995 and PSL production is scheduled
for fall 1995. The Company believes that combining its LVL and PSL technologies
into one manufacturing plant will increase operating efficiencies and improve
raw material utilization over traditional stand-alone LVL facilities.
EXISTING PLANTS. In 1994, the Company completed its approximate $25
million plan to expand capacity at its existing Natchitoches Microllam-TM- LVL,
and Vancouver Parallam[REGISTERED TRADEMARK] PSL facilities.
ADDITIONAL FACILITIES. The Company also is examining potential sites
for a third TimberStrand[REGISTERED TRADEMARK] LSL plant, or an additional
combination LVL and PSL plant. Commitment to this third plant is contingent
upon continued market demand and acceptance of engineered lumber products.
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The Company believes that the new housing construction industry is
undergoing a transition toward increased use of engineered lumber for structural
building material, as wide-dimension commodity lumber generally increases in
price and decreases in quality. The Company believes its expansion plan is
appropriate because its proprietary technology plants are expected to give the
Company a significant cost, wood source, and product breadth and flexibility
advantage which the Company believes will further strengthen its market leading
position. The Company also believes that undertaking this capital expansion
program on an accelerated time schedule is prudent given the demand for these
new technology products and competition in these markets that the Company
expects will develop over time. However, there can be no assurance that the
market for engineered lumber products will increase or that markets for new
products will develop.
The Company has financed its capital expansion program through several
sources, including a portion of the proceeds from the sale of common stock of
the Company in 1993, equity contributions by TJM's limited partner, the proceeds
of a 1994 bond offering, and internally generated funds. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
2. A SYSTEM OF INTEGRATED COMPONENTS AND SERVICES AND VALUE ADDED
MARKETING. The Company intends to focus future marketing efforts on a system of
integrated components, rather than individual products. The Company is in the
process of introducing a complete structural system, called the
FrameWorks[REGISTERED TRADEMARK] System, which represents a complete system in
engineered lumber to build the entire structural frame of a home. The
FrameWorks[REGISTERED TRADEMARK] System will include roof, wall, stair,
foundation and frame systems, to be delivered house by house, which the Company
believes will be a benefit to architects, builders, dealers and home buyers.
The Company believes it enjoys a competitive advantage over other
engineered lumber producers in that it offers a complete support and service
system for its FrameWorks[REGISTERED TRADEMARK] system of products, including
(i) a system performance guarantee for the lifetime of the home; (ii) technical
service in the field; (iii) engineering assistance and performance
recommendations; and (iv) computer-generated framing plans and materials
specifications from its TJ-Xpert-TM- software, which gives the Company the
ability to optimize design on a house-by-house basis.
3. EXTENSIVE DISTRIBUTION CHANNELS. The Company will continue its
emphasis on a broad and aggressive North American distribution network,
emphasizing product availability and just-in-time delivery and services. The
Company currently enjoys its partnership with MacMillan Bloedel Limited and
strategic alliances with Weyerhaeuser Company and other regional distributors
and retailers for the distribution of its engineered lumber products. The
Company believes this distribution network gives its products the broadest
reach into the market place and that these arrangements will continue to enhance
the visibility, acceptance and sales of its products.
4. COMPETITIVE PRICING. The Company intends to minimize any price
differentials between its products and those of its engineered lumber
competitors. During 1994, the Company priced its products by as much as 15 to
20 percent over those offered by competitors in the marketplace, which adversely
impacted sales growth.
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OTHER DEVELOPMENTS
In November 1994, the Company acquired a shut-down veneer peeling facility
located in Elma, Washington. The Company intends to use the facility as part of
its strategy designed to move toward alternative species such as Hemlock and
reduce its dependence on Douglas Fir. It is anticipated that the Elma facility
will supply approximately 30 percent of the veneer needs for the company's PSL
and LVL plants in British Columbia and Oregon.
In December 1994, the Company announced it would close its Alpine
Structures wood I-joist manufacturing facility in Oxford, North Carolina. The
closure, which is expected to occur during the first quarter of 1995, resulted
in approximately $1.5 million of nonrecurring costs. The plant is being closed
because of inefficiencies in its location and manufacturing process. The
closure affects only the Alpine I-joist manufacturing capability, which will be
shifted to the company's other eastern I-joist manufacturing facilities. The
Company will continue to actively market Alpine's full line of other engineered
wood products through its existing sales and distribution channels.
ITEM 1(b). FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company classifies its manufactured products into two business
segments: engineer lumber products and window and door products. Financial
information relating to industry segments is presented in Note 12 of the
consolidated financial statements, page 51 of this report.
ITEM 1(c). NARRATIVE DESCRIPTION OF BUSINESS.
BUSINESS
GENERAL
The Company is the leading manufacturer and marketer of engineered lumber
products in the world and is also a manufacturer of windows and patio doors in
the United States. Engineered lumber products are high quality substitutes for
solid sawn structural lumber historically obtained from the logging of older,
large diameter trees. The Company utilizes advanced technology to manufacture
engineered lumber at fourteen facilities located in the United States and Canada
and estimates that its market share is in excess of 60 percent for engineered
lumber products sold in North America. The company's residential engineered
lumber sales per North American housing start have increased from $75 per start
in 1989 to $250 in 1994, an increase of more than 330 percent. The Company also
manufactures and markets a full line of window and patio doors in the United
States.
STRATEGY. The company's strategy in engineered lumber is to be a leading
manufacturer and marketer of value-added specialty building products to the
residential and light commercial construction industry. The Company believes it
is well positioned to benefit from the increasing scarcity and associated higher
prices of the high quality, large diameter logs historically utilized to make
the sawn structural lumber products with which the company's products compete.
The company's strategy is to increase the product acceptance of its engineered
lumber products and to strengthen its market leadership in these products. To
increase product acceptance, the company's selling efforts highlight product
advantages including consistent quality, superior strength, relatively light
weight and ease of installation targeted at end users such as architects and
contractors. The Company
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seeks to strengthen its leading market position through (i) competitive pricing;
(ii) value-added marketing of technical support and services; (iii) maintenance
of industry production capacity dominance through the construction of new
engineered lumber manufacturing facilities, the expansion of existing plants and
the construction of other facilities as market conditions warrant; (iv) the
ongoing development of proprietary technologies including processes utilizing
relatively low-cost wood fiber from tree species, such as aspen and yellow
poplar, (v) the promotion of a complete system of structural frame components
rather than individual products; and (vi) reliance on an extensive North
American distribution network, including its partnership with MacMillan Bloedel
Limited and strategic alliances with the Weyerhaeuser Company and other regional
distributors and retailers.
In its window operations, the company's strategy is to market its products
on a regional basis, directly to builders and dealers, supporting these efforts
with high levels of personal service and by building relationships with
customers. The company's product line includes windows with price points and
features that allow its products to be cost competitive in the entire range of
homes from entry level housing to high-end custom housing. The Company also has
recently added all-vinyl window manufacturing capacity to capitalize on the
decline in the all-aluminum window market as consumers and regulators demand the
higher insulating qualities of vinyl and wood windows. The Company has six
production facilities in five states. With the addition of the product lines
contributed by SealRite/Oldach to Outlook the Company offers one of the broadest
product lines in the industry.
TIMBER SUPPLY. In general, the supply of public timber in the Pacific
Northwest has declined over the past several years principally due to the
historical harvest rate of large diameter resources. In addition,
environmentally-related pressures have greatly slowed the harvest of the
remaining timber supply. Non-federally-owned timber has provided approximately
two-thirds of the volume harvested annually in Oregon and Washington. The
Company believes that the combined effect of reduced supply and more restrictive
environmental regulation on federally-owned timberlands will continue to reduce
the volume of high grade timber available from this source.
Most of the company's technologies can use wood fiber from trees that were
previously not suitable for the manufacture of structural lumber, and this
allows the Company to access the current inventory of wood fiber in North
America. The current inventory of wood fiber differs from that in the past,
primarily in the species and size of the trees available for harvest. Much of
today's potential wood fiber supply consists of smaller second growth logs or is
found in the interior forests of Appalachia, the upper Midwest and the Canadian
interior forests. These forests include faster-growing, more abundant and
competitively priced species of trees such as aspen and yellow poplar. These
trees are not regarded as sufficiently large, straight, or strong enough to be
sawn into structural lumber. The company's new technologies now allow the use
of these species for high grade structural products. The Company will continue
to use substantial volumes of Douglas fir in the West and southern yellow pine
wood fiber in the South at its existing LVL plants from the available supply of
mature trees or smaller second growth logs.
Unlike many of its principal competitors in engineered lumber, the Company
does not currently own any timberlands or significant amount of standing timber.
The Company buys its raw materials on contract both from small independent
suppliers and larger integrated forest products companies. In addition, a
portion of its wood raw materials are purchased on the spot market. The reduced
supplies could result in more volatile wood markets. The Company has
experienced and believes it may continue to experience volatility in its
quarter-to-quarter results due to raw material price volatility.
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However, the Company believes it will be able to satisfy its needs for raw
materials and it is not currently aware of any potential shortages for its
longer-term requirements. The Company believes that it has significant
competitive advantages over companies marketing traditional sawn lumber products
in an environment of reduced timber supply because its engineered lumber
technologies are able to utilize non-traditional sources of wood fiber, which
are both more abundant and less expensive.
In November 1994, the Company acquired a closed veneer peeling mill in
Elma, Washington. It is anticipated that the opening of this plant will allow
the Company to move toward alternative species; such as Hemlock, and reduce the
company's West Coast dependence on Douglas Fir. The Elma plant is expected to
provide approximately 30 percent of the veneer needs of the company's British
Columbia PSL and Oregon LVL plants.
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ENGINEERED LUMBER PRODUCTS
OVERVIEW. The Company believes that the new housing construction industry
is undergoing a transition in its use of structural building materials as sawn
structural lumber increases in price and decreases in quality. Engineered
lumber is enjoying increased market acceptance and is displacing sawn structural
lumber.
This transition is driven by the changing composition of the North American
timberlands, both in terms of regional log supply restrictions and the type and
size of logs currently available for use as raw material. The availability of
timber from federally-owned forests in the Pacific Northwest has been greatly
restricted, and the size of an average sawlog has decreased to the point where
it is often too small to produce significant quantities of high grade, wide-
dimension structural lumber.
TECHNOLOGY. The Company is the industry leader in developing and
commercializing proprietary technologies that enable the manufacture of
engineered lumber products from wood that has been regarded as not sufficiently
large, strong, straight, or free of defects to be sawn into structural lumber.
The following table outlines the principal features of the company's
technologies:
<TABLE>
<CAPTION>
TECHNOLOGY RAW MATERIAL MAXIMUM SIZE PRODUCTION FACILITIES
---------- ------------ ------------ ---------------------
<S> <C> <C> <C>
Microllam-TM- LVL Rectangular high- 80 feet long by Eugene, Oregon
grade veneer 4 feet wide by Stayton, Oregon
3 1/2 inches thick Junction City, Oregon
Natchitoches, Louisiana
Valdosta, Georgia
Buckhannon, West Virginia*
Parallam[REGISTERED Irregular veneer from 80 feet long by Colbert, Georgia
TRADEMARK] PSL first and last peels 20 inches wide by Vancouver, British Columbia
of the log 11 inches thick Buckhannon, West Virginia*
TimberStrand[REGISTERED 12-inch long flakes 35 feet long by Deerwood, Minnesota
TRADEMARK] LSL 8 feet wide by Hazard, Kentucky*
5 1/2 inches thick
<FN>
* Start-up expected in 1995
</TABLE>
The company's three engineered lumber technologies are: laminated veneer
lumber, or LVL, the oldest and most commercialized of the technologies; parallel
strand lumber, or PSL, first introduced in the mid-1980's in Canada; and
laminated strand lumber, or LSL, a new technology introduced in the fall of
1991. Both PSL and LSL are proprietary to the Company, while equipment to
produce LVL is now available from several machinery manufacturers and is
utilized by an increasing number of forest products manufacturers. The Company
believes its LVL manufacturing process, however, enjoys several advantages which
make this process cost-competitive compared to the commercially available
alternatives.
Although the Company has been issued or has applied for a number of patents
on its current processes, the Company believes that its technological
competitiveness depends more upon continued innovation and technical expertise
than on legal protection of its patent rights. There can be no assurance that
the company's
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efforts to protect its proprietary rights will be successful.
LAMINATED VENEER LUMBER (LVL): LVL uses thin sheets of veneer peeled from
a log. Each sheet is carefully dried and individually graded using ultrasonic
measurements to determine its strength characteristics. Sheets are then placed
in specific sequence and location within the product to maximize the stronger
veneer grades and randomize wood defects, such as knots. This engineered
configuration of veneers is then laminated with adhesives under heat and
pressure to form a piece of wood in widths of 24 inches or 48 inches,
thicknesses from 3/4 inches to 3-1/2 inches, and up to 80 feet in length.
PARALLEL STRAND LUMBER (PSL): This technology, which is proprietary to the
Company, starts with sheets of thin veneer peeled from a log. These are then
clipped into strands, which are four feet long and 5/8 inches wide. The ability
to use this very narrow strand allows a significantly higher percentage of the
log to be manufactured into a value-added product. The strand is then coated
with adhesive. The next step in the process employs a pressing system in which
microwaves are used to cure the adhesives and form a large block, or billet, of
engineered lumber measuring up to 11 inches by 20 inches and 80 feet long. The
company's PSL process is protected by 20 patents in 16 countries. These patents
expire in the years 1995 through 2008.
The Company believes that the combination of the PSL and LVL technologies
in a single manufacturing facility, such as currently under construction in
Buckhannon, West Virginia, will allow it to be among the most efficient
converters of wood fiber to a high value product. See "Recent Developments--
Company Strategy" above.
LAMINATED STRAND LUMBER (LSL): The company's other proprietary engineered
lumber technology, LSL, begins with small-diameter, 8-foot-long logs such as
aspen and yellow poplar. These are species traditionally used in lower value
applications such as pulp logs, and are therefore substantially less expensive
than traditional sources of sawn lumber. These logs are flaked into strands
about 12 inches long, which are then treated with an adhesive. The strands are
put into a steam-injection press that significantly densifies the wood and
creates boards 35 feet long, up to 5-1/2 inches thick, and 8 feet wide. The
company's LSL process is protected by 19 patents in 25 countries. In addition,
one patent is pending approval. These patents expire in the years 1995 through
2010.
The company's future success will depend in large part on its ability to
achieve market acceptance of its LSL technology and to obtain cost reductions in
the implementation of this technology sufficient to provide the Company with an
adequate return. The company's Deerwood plant, where LSL is manufactured,
operated at a break-even basis at the manufacturing level for the first half of
1994. The Deerwood plant's performance was adversely affected by a fire in June
1994, and resulting difficulties in restarting the facility which hampered
productivity and profitability for the remainder of the year. In addition,
contributing to the facility's performance level was the company's strategic
decision to operate the plant to achieve manufacturing efficiencies in higher
value TimberStrand[REGISTERED TRADEMARK] LSL products that are still in start-
up, to develop a broad and deep product line and to test equipment designs for
the larger plant near Hazard, Kentucky. There can be no assurance that the
Company will be able to achieve such market acceptance or to lower manufacturing
costs to a level sufficient to earn an adequate return.
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PRODUCTS. The Company produces the broadest line of structural engineered
lumber building products in the industry, possesses certain exclusive product
technologies, and believes it enjoys a reputation for superior quality and
service. The table on the following page lists the company's products, the
technology utilized, product size, and end use of such products.
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TJ INTERNATIONAL ENGINEERED LUMBER PRODUCTS
<TABLE>
<CAPTION>
RESIDENTIAL PRODUCTS ENGINEERED LUMBER TECHNOLOGY PRODUCT SIZE END USE
-------------------- ---------------------------- ------------ -------
<S> <C> <C> <C>
TJI[REGISTERED TRADEMARK] Microllam-TM- LVL on the top and 9 1/2" to 16" deep Residential construction
I-joists bottom with enhanced composite Width from 1 1/2" to floor joists and roof
panel webs in the middle 3 1/2" Up to 80" long trusses. Substitutes for
traditional 2x10 and 2x12
sawn lumber systems.
Rim joists TimberStrand[REGISTERED 1 1/4" thick Residential construction
TRADEMARK] LSL 9 1/2" to 16" deep frames in perimeter of floor.
17" to 35" long Substitutes for laterally
ripped plywood and/or 2x10
and 2x12 sawn lumber.
Headers, beams, and columns Microllam-TM- LVL 1 3/4" to 7 1/4" thick Residential construction.
Parallam[REGISTERED 9 1/2" to 18" deep Ranges from main carrying
TRADEMARK] PSL Up to 80" long beam in home to support
TimberStrand[REGISTERED structures above a window or
TRADEMARK] LSL door (header). Substitutes
for traditional 2x10 and 2x12
sawn lumber.
COMMERCIAL PRODUCTS
-------------------
Open-web truss Microllam-TM- or strength-rated 14" to 114" deep Roof support structure in
lumber on the top and bottom with Spans lengths up to 120 light commercial buildings.
tubular steel webs in the middle feet long
TJI[REGISTERED TRADEMARK] Microllam-TM- LVL 2.3" to 4.65" thick Roof structure for smaller
roof truss series 4 1/2" to 37.1" deep commercial buildings.
Up to 80" long
INDUSTRIAL PRODUCTS
-------------------
Window and door core TimberStrand[REGISTERED Various Substitutes for finger
material TRADEMARK] LSL jointed Ponderosa pine lumber
in the manufacture of wood
windows and doors.
Concrete forming and shoring Microllam-TM- LVL 1 1/2" to 5 1/4" thick Support members in the
support members Parallam[REGISTERED 6 1/2" to 20" deep structure into which wet
TRADEMARK] PSL Up to 80" long concrete is poured in both
residential and commercial
buildings. Substitutes for
2x10, 2x12, 4x4 and larger
sawn lumber and for aluminum
form support systems.
Scaffold plank Microllam-TM- LVL 1 1/2" to 2 1/2" thick Decking material in scaffold
9" to 11 3/4" wide frames. Substitutes for high
Up to 80" long strength rated 2x6 and 2x8
sawn lumber.
</TABLE>
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<PAGE>
The Company continues to explore the development of new and improved
engineered lumber products which have superior performance and quality
characteristics relative to traditional sawn lumber. The Company currently has
a focused effort to develop further TimberStrand[REGISTERED TRADEMARK] LSL
products including a product which substitutes for premium length lumber
(lengths over 22 feet), a fascia board which substitutes for 2x8, rough sawn,
clear spruce, and a solid floor joist targeted at the multi-family construction
market and other structural and industrial products, including rim joists and
long-length garage door headers. The Company is also in the process of
developing a series of I-joists utilizing TimberStrand[REGISTERED TRADEMARK] LSL
as the flange material.
The Company owns a number of registered and non-registered trademarks for
its promotional literature and engineered lumber products. The Company believes
that its engineered lumber trademarks, and in particular, its Silent
Floor[REGISTERED TRADEMARK] brand of residential structural products, have
achieved significant name recognition in the engineered lumber industry.
MARKETS. The company's engineered lumber is sold primarily to three
markets. The largest market is the new construction residential housing market,
which includes single-family detached homes, apartments, condominiums,
townhouses, and manufactured housing. Industrial uses are another market and
include core components for the millwork and furniture industry, scaffold plank,
and concrete forming and shoring products. The third market is the light-
commercial construction markets, which include structures such as warehouses,
schools, gymnasiums, shopping centers, and low-rise office buildings.
SALES, MARKETING, AND DISTRIBUTION. The company's residential engineered
lumber products are sold directly to stocking retail lumber dealers in the
United States and Canada. In addition, the company's sales through its network
of wholesale lumber distributors, which include the MacMillan Bloedel Building
Materials Distribution Centers and the Weyerhaeuser Building Materials Customer
Service Centers (as described below), broadens the company's market to include
an extensive range of smaller lumber dealers and outlets. The Company believes
this distribution network gives it the broadest and deepest reach into the
market of any engineered lumber producer.
Since July 1993, the Company has operated under an arrangement with the
Weyerhaeuser's Building Material Distribution Division, pursuant to which
approximately 45 Weyerhaeuser customer service centers in the United States and
Canada distribute the company's engineered lumber products. In addition,
Weyerhaeuser has assumed an expanded role as a supplier of veneer and oriented
strand board to the company's manufacturing facilities. The Company believes
this arrangement has enhanced the visibility and sales of its products.
The company's products are supported by an advanced computer-assisted
software package. The company's proprietary TJ-Xpert-TM- software, which is
receiving increasing acceptance by builders, translates a builder's blueprints
into a complete framing plan for a structural system using engineered lumber
products.
The Company employs the engineered lumber industry's largest sales force
consisting of approximately 215 technical sales representatives who market the
company's products directly to architects, project engineers, contractors,
developers, independent lumber dealers, national wholesale building material
suppliers, and industrial users. This enables the Company to better educate and
assist customers in the use of engineered lumber and simultaneously helps create
demand, further enabling the Company to differentiate its products from those of
its competitors.
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<PAGE>
The Company also has sales offices and representatives in Japan and the
United Kingdom, and conducts business in much of Europe through several
distributors and agents. While not currently comprising a significant portion
of the company's business, the Company believes these markets present future
growth opportunities for its products.
COMPETITION. Sawn lumber products produced in traditional sawmills remain
the primary competition for the company's engineered lumber products.
The company's competition in the growing engineered lumber industry
includes five large competitors producing LVL in six plants across North
America, and eight that are manufacturing wood I-joists. Competition is
expected to continue to increase as a number of the company's competitors,
including Louisiana-Pacific Corporation, Boise Cascade Corporation, and Georgia
Pacific Corporation have announced capacity expansion plans in the LVL and I-
joist business. In particular, competition may emerge or increase from
established wood products companies that now sell primarily traditional wood
products. A number of existing competitors such as Louisiana-Pacific
Corporation, Boise Cascade Corporation, Willamette Industries, Inc., and
Georgia-Pacific Corporation, own a significant portion of their own raw
materials and generally have greater financial resources than the Company.
The Company believes that the principal competitive factors in the market
for engineered lumber are price, performance, market acceptance, distribution
capabilities, and customer support. During 1994, the Company allowed the price
gap between its products and competitors products to widen, which adversely
affected sales during the year. The Company has determined to minimize any
future price differentials between its products and those of its engineered
lumber competitors.
The Company believes its broader product line, based in part on its
proprietary technologies PSL and LSL lumber, provide an important advantage over
its competition. In addition, the Company believes it enjoys a competitive
advantage in terms of brand name recognition, value-added services to builders,
an aggressive and broad distribution network and a stable of products which have
received building code approval in substantially all markets.
Other building materials, including steel, plastic, brick, and cement, are
alternative basic materials for construction. However, these materials may not
readily lend themselves to traditional residential framing methods or tools and
have certain inherent manufacturing and performance deficiencies.
WINDOW AND DOOR PRODUCTS
OVERVIEW. The Company entered the window industry in 1986 with the
acquisition of Norco Windows, Inc., located in Hawkins, Wisconsin. This was
followed by the acquisitions of Dashwood Industries Limited of Centralia,
Ontario, in 1987, and R. Laflamme & Frere Inc. of St. Appollinaire, Quebec, in
1992. In October 1994, the Company combined its wholly-owned U.S. window and
door subsidiary, Norco Windows, Inc., with SealRite Windows, Inc. of Lincoln,
Nebraska, and Oldach Window Corp., of Colorado Springs, Colorado, to form
Outlook Window Partnership, L.P. ("Outlook"). The Company currently owns a 64%
partnership interest in Outlook and shares control over its operations. By
year-end 1994, the Company had sold its Canadian subsidiaries to Andersen
Corporation, the world's largest manufacturer of wood windows and patio doors.
The company's strategy is to offer highly reliable product quality and
personal service through locally tailored distribution channels. The Company
manufactures and markets full lines of all-vinyl windows and all-wood windows
and doors which
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<PAGE>
include maintenance-free exterior options such as cladding with aluminum or
vinyl or encapsulating in vinyl.
The company's window operations have achieved high penetration in regional
markets in portions of the United States. The company's U.S. window operations
are best established in the upper Midwest and Ohio River Valley, where its
products are marketed primarily under the SiteLine[REGISTERED TRADEMARK], Teton-
TM- and Sierra-TM- brands, and in the Midwest and Rocky Mountain states, where
its market products are marketed under the SealRite[REGISTERED TRADEMARK],
Oldach-TM- and Teton brand names. In recent years, the Company has sought to
expand distribution and build new manufacturing capacity in the western U.S.
The Company may sell or otherwise divest of Outlook as opportunities arise.
RAW MATERIAL RESOURCES. The company's windows and patio doors employ vinyl
(PVC) or wood as the primary raw materials for construction of the window sash
and frames. A portion of the company's wood windows and patio doors use
Ponderosa pine cutstock, which is obtained from independent suppliers. The
Company is actively pursuing substitutes in the form of alternate species and
composite or engineered lumber to reduce its dependence on Ponderosa pine. The
company's window subsidiaries have substituted engineered lumber for frame
components in several window and patio door products. The Company obtains vinyl
and insulating glass from several suppliers and is not aware of any potential
shortages for its long-term requirements.
TECHNOLOGY. The Company believes that wood and vinyl windows will benefit
from a fundamental and accelerating shift away from the use of energy-
inefficient aluminum windows to with superior insulating characteristics. This
reflects an overall construction industry trend toward products that can best
substitute new energy- and material-efficient composites and components in place
of poorly performing or inefficient materials.
PRODUCTS. The company's window and door product line is among the
industry's broadest. The Company manufactures the SiteLine[REGISTERED
TRADEMARK] wood window at Hawkins, Wisconsin, the Oldach wood window in Colorado
Springs, Colorado, and the SealRite wood window in Lincoln, Nebraska. It
markets these products to builders for use in custom and single family homes.
The Company positions these products as a value-priced window with wide local
distribution. The Company manufactures the Teton-TM- wood window at a plant in
Twin Falls, Idaho, primarily for use in high-end custom homes. The product is
positioned as a premium quality window with multiple features and superior
insulating performance. The Company manufactures the all-vinyl Sierra-TM-
window at a facility opened in the summer of 1993 in Indianapolis, Indiana, and
markets it to the entire spectrum of residential housing, from starter homes to
custom homes. The Company is positioning this product as a cost competitive,
better insulating alternative to aluminum windows which are declining in sales
because of poor performance characteristics.
SALES, MARKETING AND DISTRIBUTION. The company's windows, doors and steel-
entry doors are shipped directly to end users, to Company distribution centers
and stores, and to independent distributors and dealers. The company's window
sales force consists of approximately 92 Company-employed salespersons.
COMPETITION. Competition for the company's windows comes from all other
windows produced in the United States and Canada. A number of large integrated
forest products, window, and other companies manufacture competing products.
Three companies are specially significant in the wood window segment of the
industry: Andersen Corporation, Rolscreen Company, and Marvin Windows, each of
which is larger and has greater brand awareness than the company's window
businesses. Competition
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<PAGE>
exists from many small, local concerns as well.
The company's U.S. window business, Norco, incurred significant operating
losses in 1993 and 1994 caused primarily by increases in the cost of raw
materials that Norco was unable to reflect in price increases, reduced sales
volumes in SiteLine[REGISTERED TRADEMARK] window and door products and start-up
expenses incurred in connection with the establishment of its new
Teton[REGISTERED TRADEMARK] wood window manufacturing facility. The Company
combined its Norco operations with historically profitable SealRite and Oldach
and is implementing a plan aimed at reducing these continuing losses. However,
there can be no assurance that Norco's history of operating losses can be
reversed in 1995.
BACKLOG
The company's order backlog at December 31, 1994 was approximately $29.7
million compared to approximately $44.4 million at January 1, 1994. Some
portion of the current order backlog will probably not be filled due to extended
deliveries or cancellations. In addition, lead times of orders can vary
significantly from quarter to quarter and year to year. Accordingly, the
company's backlog on a particular date may not be representative of the level of
future sales.
EMPLOYEES
As of December 31, 1994, the Company employed a total of approximately
4,000 employees, of which 2,400 were in the company's engineered lumber
operations and 1,600 were in the company's window operations. Hourly employees
at Norco's Hawkins, Wisconsin, plant are represented under collective bargaining
agreements. The company's labor agreements covering employees at this site
expire on July 12, 1996. The Company believes that it has good relations with
its employees and their unions.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, provincial, and local
environmental laws and regulations, particularly relating to air and water
quality and the storage, handling, and disposal of various materials and
substances used in the company's plants and processes. Permits are required for
certain of the company's operations, and these permits are subject to
revocation, modification, and renewal by issuing authorities. Governmental
authorities have the power to enforce compliance with their regulations, and
violations may result in the payment of fines or the entry of injunctions, or
both.
The Company believes that it is in material compliance with existing
environmental laws and regulations, and that its expenditures in future years
for environmental compliance will not have a material adverse effect on its
operations.
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<PAGE>
ITEM 1(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES.
The Company operates manufacturing facilities in two countries, the United
States and Canada; and the majority of all sales are made domestically in those
countries. Financial information relating to foreign and domestic operations is
presented in Note 11 to the consolidated financial statements, page 50 of this
Report.
ITEM 2. PROPERTIES
Set forth below are the locations of the company's manufacturing facilities
and the technology and/or products produced at such facilities.
<TABLE>
<CAPTION>
Engineered
Lumber
Technology Products
------------------------- ------------------------------
Structural Products Manufacturing LVL PSL LSL I-Joists Open Web Trusses
--------------------------------- --- --- --- -------- ----------------
<S> <C> <C> <C> <C> <C>
Chino, California X
Claresholm, Alberta X X
Colbert, Georgia X
Deerwood, Minnesota X
Delaware, Ohio X
Eugene, Oregon X X
Hillsboro, Oregon X
Junction City, Oregon X
Natchitoches, Louisiana X X
Quebec City, Quebec X
Stayton, Oregon X X
Valdosta, Georgia X X
Vancouver, British Columbia X
Elma, Washington ** **
Hazard, Kentucky* X
Buckhannon, West Virginia* X X
<CAPTION>
Wood Solid Vinyl
Window and Door Manufacturing Windows Windows Doors
----------------------------- ------- ------- -----
<S> <C> <C> <C>
Hawkins, Wisconsin X
Indianapolis, Indiana X
Marenisco, Michigan X
Twin Falls, Idaho X X
Lincoln, Nebraska X X
Colorado Springs, Colorado X X
<FN>
* Start-up expected in 1995
** Produces veneer for LVL and PSL Lumber productions
</TABLE>
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<PAGE>
The Company owns a Boise, Idaho, property of approximately 32 acres of
unimproved land. The company's, headquarters staff are located in leased
locations in Boise, Idaho.
The properties at Eugene, Oregon; Stayton, Oregon; Natchitoches, Louisiana
and Twin Falls, Idaho; are subject to mortgages aggregating $24.4 million.
Because the costs of these latter properties are financed partially or wholly by
Industrial Development Revenue Bonds, record title to a significant portion of
the land, buildings, and equipment is being held by the bond-issuing authorities
until the bonds are retired.
Additionally, Norco owns a window distribution facility in Grand Rapids,
Michigan; and it leases distribution centers in Indianapolis, Indiana; Bow, New
Hampshire; Sacramento, California; Kansas City, Kansas; Reynoldsburg, Ohio; and
Salt Lake City, Utah.
All properties in use or held for future use are considered suitable for
the company's present and future needs and should have adequate capacity for
those needs.
ITEM 3. LEGAL PROCEEDINGS.
Since the start-up of the plant in 1992, 28 associates have been diagnosed
with varying degrees of respiratory irritation and sensitization. The adhesive
used in the manufacturing process, which is commonly used elsewhere in the
industry, and wood dust are the leading suspected causes despite the lack of
medical technology to confirm this diagnosis. The Company has assembled a team
of internal managers and outside experts to develop and implement a plan to
reduce exposure to the dust and adhesive.
Of these 28 Associates, 19 Associates have either commenced litigation in
the District Court of Minnesota for Crow Wing County or are in the process of
becoming parties to the litigation alledging personal injuries sustained in
connection with exposure to MDI. The named defendants in these cases include
the manufacturer and distributor of MDI, MacMillan Bloedel, Ltd., as well as
various unaffiliated companies which were involved in the design and
construction of the Deerwood plant and its ventilation and manufacturing
equipment. Neither the Company nor Trus Joist MacMillan has been named in the
above-described lawsuits, with one exception. In that lawsuit, the plaintiff
has sued Trus Joist MacMillan alleging personal injuries sustained before the
time he was employed by Trus Joist MacMillan.
No material legal proceedings or claims are pending or known to the Company
other than several claims and suits for damages arising in the ordinary conduct
of business, resulting primarily from construction accidents and often involving
contractors and others as joint defendants.
Based on current facts and knowledge, all material liabilities under any of
the pending claims and suits would be covered under the limits of coverage of
the company's liability insurance policies, or are otherwise provided for on the
company's books.
For several years, the Company has self-insured its risks up to certain
loss amounts and has obtained insurance to cover losses in excess of the
retained amounts. Such risk retention enables the Company to participate more
actively in the management of any claims or lawsuits and to control or better
contain the attendant costs and expenses. Over time, based principally on loss
experience, the amount of such risk retention has been increased. Additionally,
because the cost of
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<PAGE>
available insurance has become exorbitant, beginning in 1986, the Company has
determined it appropriate to accept greater levels of self-insurance and lower
limits for excess coverages. Nevertheless, based on its claims history, the
Company believes its insurance coverages are adequate relative to its potential
exposures.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Following is a schedule of names and certain information regarding all of
the executive officers of the Company, as of December 31, 1994, each of whose
term of office is one year.
<TABLE>
<CAPTION>
Name and Age Office
------------ ------
<S> <C>
Harold E. Thomas, age 68 Chairman of the Board,
TJ International, Inc.
Thomas H. Denig, age 48 President and Chief Executive Officer
TJ International, Inc.
Valerie A. Heusinkveld, age 36 Vice President, Finance
Chief Financial Officer,
TJ International, Inc.
Richard B. Drury, age 45 Secretary and Treasurer,
TJ International, Inc.
Jody B. Olson, age 47 Vice President, Corporate
Development, TJ International, Inc.
Kevin R. Case, age 40 Senior Vice President, Eastern
Operations, Trus Joist MacMillan
Robert J. Dingman, age 53 Senior Vice President, Western
Operations, Trus Joist MacMillan
Randy W. Goruk, age 42 Senior Vice President, Canadian and
Industrial Operations, Trus Joist
MacMillan
Patrick D. Smith, age 48 Senior Vice President, Manufacturing,
Trus Joist MacMillan
</TABLE>
Harold E. Thomas holds a Bachelor of Science Degree in Forestry from the
University of Idaho, and worked in sales for lumber mills prior to 1960, when
Mr. Thomas and Arthur L. Troutner founded the Company. Mr. Thomas was first
elected to the Board of Directors in 1960 and was President of the Company from
1960 to 1971. Mr. Thomas has been Chairman since 1960 and served as Chief
Executive Officer from 1971 to 1975 and from 1979 to 1986.
Thomas H. Denig was elected President and Chief Executive Officer of TJ
International, Inc. on January 4, 1995. Mr. Denig was elected Senior Vice
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President, Structural Operations on January 2, 1990. Mr. Denig was also elected
President and Chief Executive Officer of Trus Joist MacMillan on December 6,
1991, after having served as President of Trus Joist Corporation since January
2, 1990. Mr. Denig joined the Company in 1974 as a salesperson and has
subsequently served as California South Sales Manager, Microllam-TM- Lumber
Industrial Sales Manager, National Sales Manager, Western Division Manager,
Eastern Division Manager and had been elected Vice President, Eastern Operations
on December 17, 1985. Mr. Denig is a graduate of Valparaiso University and
served as a lieutenant in the U.S. Marine Corp. before joining the Company.
Valerie A. Heusinkveld was elected Vice President of Finance and Chief
Financial Officer of TJ International, Inc., on December 1, 1992. Ms.
Heusinkveld is an honors graduate of the University of Idaho and a Certified
Public Accountant. Before being named CFO, Ms. Heusinkveld served as Vice
President of Finance and Treasurer for Trus Joist MacMillan. Ms. Heusinkveld
has also served as controller of Norco Windows Western Operations group and as a
corporate accountant and assistant to the Vice President of Finance. Ms.
Heusinkveld joined TJ International in 1989 after working for Arthur Andersen &
Co.
Richard B. Drury was elected Secretary on May 21, 1985 and was elected to
the additional position of Treasurer on January 4, 1991. Mr. Drury is a
graduate of Boise State University and a Certified Public Accountant. Prior to
joining the Company in 1979, Mr. Drury gained audit and tax experience with
Arthur Andersen & Co.
Jody B. Olson was elected Vice President, Corporate Development on December
17, 1987. On December 6, 1991, Mr. Olson was also elected Secretary of the
Board of Trus Joist MacMillan. Previous positions held by Mr. Olson were
Microllam-TM- Lumber Division Controller; Microllam-TM- Lumber Industrial
Salesperson and Sales Manager; General Manager of the company's former trucking
subsidiary; Manager, Energy Systems; Assistant to the President, Mergers and
Acquisitions; and Manager, Corporate Development. Mr. Olson, who joined the
Company in 1979, is a graduate of the University of Idaho and the Lewis and
Clark Law School.
Kevin R. Case was appointed Sr. Vice President, Eastern Operations for Trus
Joist MacMillan, on May 7, 1992. Mr. Case joined the Company in 1984 as a
Residential Products Salesman and has subsequently served as a Regional Sales
Manager, and General Manager of Northeast Operations. Mr. Case holds a B.A.
degree from Dartmouth College and an MBA from Stanford University.
Robert J. Dingman was appointed Sr. Vice President, Western Operations for
Trus Joist MacMillan, on May 7, 1992. Mr. Dingman joined the Company in 1984 as
the Southwest Division Manager and has subsequently served as Division Manager,
Microllam-TM- Lumber Operations and Vice President, Western Operations. Before
joining the Company, Mr. Dingman, a graduate of St. Lawrence College, had been
for a period of more than three years Vice President and General Manager of the
Architectural Building Products Division of Koppers Company, Inc.
Randy W. Goruk was appointed Sr. Vice President, Canadian and Industrial
Operations for Trus Joist MacMillan, on May 7, 1992. Mr. Goruk joined the
Company in 1974 as a draftsperson and has subsequently served as a salesperson,
British Columbia Regional Sales Manager, Canadian Division Sales Manager and
Canadian Division Manager, Vice President, Canadian Operations, and Vice
President, Eastern Operations. Mr. Goruk is a graduate of the Northern Alberta
Institute of Technology and the University of British Columbia.
Patrick D. Smith was appointed Senior Vice President, Manufacturing for
Trus Joist MacMillan on December 1, 1994. Mr. Smith joined the Company in 1984
as the
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Plant Manager at the Natchitoches, Louisana, plant and has subsequently served
as Plant Manager at the Colbert, Georgia, Plant, General Manager of the Atlantic
Coastal Division, and Vice President of Construction. Before joining the
Company, Mr. Smith, a graduate at Edinboro University, began a 15 year career
with the Koppers Company in their Forest Products Division. He managed three
different manufacturing plants and also worked in the industrial relations
department.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The approximate number of record holders of the company's $1.00 par value
common stock at March 14, 1995, is set forth below:
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $1 par value 1,845
The remainder of this Item 5 is contained in the following sections of the
Report at the pages indicated below:
"Market and Dividend Information," on page 35 of this Report, to the extent
that said section discusses the principal market or markets on which the
company's common stock is being traded; the range of high and low quoted
sales prices (closing) for each quarterly period during the past two years;
the source of such quotations; and the frequency and amount of any
dividends paid during the past two years with respect to such common stock.
"Note 3 to the consolidated financial statements," page 45 of this Report,
to the extent that said Note describes any restriction on the company's
present or future ability to pay such dividends.
ITEMS 6, 7, AND 8.
The information called by Items 6, 7 and 8, inclusive of Part II of this form,
is contained in the following sections of this Report at the pages indicated
below:
CAPTIONS AND PAGES OF THIS REPORT
ITEM 6 Selected Financial Data "Selected Financial Data" ......30
ITEM 7 Management's Discussion "Management's Discussion
and Analysis of Financial and Analysis" ..................31
Conditions and Results of
Operations
ITEM 8 Financial Statements and "Consolidated Financial
Supplementary Data Statements".....................37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Identification of the company's executive officers is included in Item A
(following Item 4) in Part I of this Form 10-K.
The balance of this Item 10 is included in the company's definitive
proxy statement, under the caption "Election of Directors;" and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Item 11 is included in the company's definitive proxy statement, under the
caption "Compensation of Executive Officers," including the sub-caption
"Executive Compensation Tables," and is incorporated herein by reference. The
subcaption "Report of the Executive Compensation Committee on Executive
Compensation," and "Performance Graph," under the caption "Compensation of
Executive Officers" in the company's definitive proxy statement are not
incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Item 12 is included in the company's definitive proxy statement under the
caption "Security Ownership of Certain Beneficial Owners and Management;" and is
incorporated herein by reference.
For purposes of calculating the aggregate market value of the voting stock
held by non-affiliates as set forth on the cover page of this Form 10-K, the
Company has assumed that affiliates are those persons identified in the portion
of the definitive proxy statement identified above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item 13 is included in Note 9 to the consolidated financial
statements, page 50 of this Report.
[REGISTERED TRADEMARK] - Parallam, TJI, The Silent Floor, FrameWorks,
Sierra and Siteline are registered trademarks of the Company.
-TM- - Teton, Ecowood, Microllam and TJL are trademarks of the Company.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
A-1 Financial Statements
A list of the financial statements included herein is set forth
in the Index to Financial Statements, Schedules and Exhibits
submitted as a separate section of this Report.
A-3 Exhibits. The following documents are filed as Exhibits to this
Form 10-K:
(3) Limited Partnership Agreement between TJ International,
Inc. and MacMillan Bloedel of America, Inc. whereby the
Partnership was formed. This document was filed as an
exhibit to the company's Form 8-K dated September 30, 1991
and is incorporated herein by reference.
Bylaws of Trus Joist Corporation (a Delaware corporation).
This document was filed as an exhibit to the company's Form
10-K for the fiscal year ended December 28, 1991 and is
incorporated herein by reference.
Amendment to Limited Partnership Agreement effective the
beginning of the company's fiscal year 1993. This document
was filed as an exhibit to the company's Form 10-Q for the
quarter ended September 26, 1992 and is incorporated herein
by reference.
Certificate of Ownership and Merger of TJ Merger Corporation
with and into Trus Joist Corporation, whereby the Company
changed its name from Trus Joist Corporation to TJ
International, Inc. effective September 16, 1988. This
document was filed as an exhibit to the company's Form 10-K
for the fiscal year ended January 2, 1993 and is
incorporated herein by reference.
Amended Certificate of Incorporation of Trus Joist
Corporation. This document was filed as an exhibit to the
company's Form 10-Q for the quarter ended July 3, 1993 and
is incorporated herein by reference.
Amended Certificate of Incorporation of TJ International
Inc. This document was filed as an exhibit to the company's
Form 10-Q for the quarter ended July 2, 1994 and is
incorporated herein by reference.
Partnership Formation and Contribution, Partnership
Agreement, and Liquidity Transaction Agreement among TJ
International Inc., SealRite Windows, Inc., and Oldach
Window Corp. These documents were filed as an exhibit to
the company's Form 8-K dated October 11, 1994 and are
incorporated herein by reference.
Stock Purchase Agreement between TJ International, Inc. and
Andersen Corporation. Schedules and Exhibits are listed in
the
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Agreement. TJ International will furnish a copy of any
schedule or Exhibit to the Commission on request.
(4) 1992 Stock Option Plan. This document was filed as an
exhibit to the company's Form 10-K for the fiscal year ended
January 2, 1993 and is incorporated herein by reference.
1993 Stock Option Plan. This document was filed as an
exhibit to the company's Form 10-Q for the quarter ended
July 3, 1993 and is incorporated herein by reference.
Amended and Restated Restricted Stock Plan for Non-Employee
Directors. This document was filed as an exhibit to the
company's Form 10-Q for the quarter ended July 3, 1993 and
is incorporated herein by reference.
Rights Agreement, dated as of August 24, 1989, between TJ
International, Inc. and West One Bank.
Nonstatutory Stock Option Plan, as amended.
1982 Incentive Stock Option Plan, as amended.
1985 Incentive Stock Option Plan, as amended.
1988 Stock Option Plan, as amended.
(10) Certificate of Designation, Preferences and Rights of
ESOP Convertible Preferred Stock; Stock Purchase Agreement;
and ESOP Term Note. These documents were filed as an
exhibit to the company's Form 10-Q for the quarter ended
September 29, 1990 and are incorporated herein by reference.
Indenture, Lease and Guaranty pertaining to Eugene, Oregon,
plant. These documents were filed as Exhibits to the
company's Form 10-K for the fiscal year ended December 28,
1991 and are incorporated herein by reference.
Mortgage, Security Interest and Indenture of Trust; Lease
Agreement; Guaranty Agreement; Reimbursement Agreement;
Remarketing and Interest Services Agreement; pertaining to
Stayton, Oregon, plant. These documents were filed as
Exhibits to the company's Form 10-K for the fiscal year
ended December 28, 1991 and are incorporated herein by
reference.
Trust Indenture; Refunding Agreement; Remarketing Agreement;
Reimbursement Agreement; Pledge and Security Agreement;
pertaining to the Natchitoches, Louisiana, plant. These
documents were filed as Exhibits to the company's Form 10-K
for the fiscal year ended January 2, 1993 and are
incorporated by reference.
$75,000,000 Credit Agreement date as of October 12, 1993.
This document was filed as an exhibit to the company's Form
10-Q for the quarter ended October 2, 1993 and is
incorporated herein by reference.
25 of 51
<PAGE>
Amendment to Reimbursement Agreement; Pledge and Security
Agreement; pertaining to the Natchitoches, Louisiana plant.
These documents were filed as exhibit to the company's Form
10-K for the fiscal year ended January 1, 1994 and are
incorporated herein by reference.
Stock Purchase and Resale Agreement. These documents were
filed as an exhibit to the company's Form 10-K for the
fiscal year ended January 1, 1994 and are incorporated
herein by reference.
Loan Agreement, Trust Indenture and Guaranty pertaining to
Hazard, Kentucky, plant. These documents were filed as an
exhibit to the company's Form 10-Q for the quarter ended
July 2, 1994 and are incorporated herein by reference.
Loan Agreement, Trust Indenture and Deed of Trust pertaining
to Twin Falls, Idaho, plant.
(11) Statement regarding computation of per share earnings.
The information required by Exhibit (11) is included under
the caption "Net Income Per Share" in Note 1 to the
consolidated financial statements, page 43 of this Report.
(22) Subsidiaries of the registrant.
(24) Consent of independent public accountants to the
incorporation of their report dated February 2, 1995,
included in this Form 10-K for the year ended December 31,
1994 into TJ International, Inc.'s previously filed Form S-8
Registration Statement for the Trus Joist Corporation
Nonstatutory Stock Option Plan with 1982 Incentive
Amendment, as amended (Registration No. 2-79209), Form S-8
Registration Statement for the Trus Joist Corporation
Employee Stock Ownership Plan (Registration No. 2-96065),
Form S-8 Registration Statement for the Trus Joist
Corporation Associates' Stock Purchase Plan, as amended
(Registration No. 2-96821), Form S-8 Registration Statement
for the Trus Joist Corporation Key Employees' 1982 Incentive
Stock Option Plan with Nonstatutory feature (Registration
No. 2-96964), Form S-8 Registration Statement for the Trus
Joist Corporation Employee Stock Ownership Plan
(Registration No. 33-4704), Form S-8 Registration Statement
for the Trus Joist Corporation Profit Sharing Plan, as
amended (Registration No. 33-21870), Form S-8 Registration
Statement for the Trus Joist Corporation Key Employees' 1985
Incentive Stock Option Plan with Nonstatutory Feature, as
amended (Registration No. 33-22186) and Form S-8
Registration Statement for TJ International, Inc. Key
Employees' 1988 and 1992 Stock Option Plans (Registration
No. 33-54582).
(25) Powers of Attorney.
(27) Financial Data Schedule.
All other Exhibits are omitted since they are not applicable or
not required.
26 of 51
<PAGE>
(b) Reports on Form 8-K.
The Company filed a current report dated January 4, 1995 on Form
8-K. In that report, the Company disclosed, under "Item 6. Other
Events," that Thomas H. Denig would replace current President and
CEO, Walter C. Minnick. See Item 1a of this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TJ INTERNATIONAL, INC., Registrant
By /s/ Thomas H. Denig
------------------------------------------------------------------
Thomas H. Denig - President, Chief Executive Officer,
Director and Attorney-in-Fact for Directors listed below.
By /s/ Valerie A. Heusinkveld
------------------------------------------------------------------
Valerie A. Heusinkveld - Vice President, Finance and Chief
Financial Officer
Each of the above signatures is affixed as of March 25, 1995. Those
Directors of TJ International, Inc. listed below executed powers of attorney
appointing Thomas H. Denig their attorney-in-fact, empowering him to sign this
report on their behalf.
Robert B. Findlay
Robert V. Hansberger
J. L. Scott
Harold E. Thomas
Arthur L. Troutner
J. Robert Tullis
Steven C. Wheelwright
William J. White
27 of 51
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS TO FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994 Commission File Number 0-7469
TJ INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
The following documents are filed as part of this Report: Pages in this Report
--------------------
(1) FINANCIAL STATEMENTS:
---------------------
Selected Financial Data...........................................30
Management's Discussion and Analysis..............................31
Market and Dividend Information...................................35
Quarterly Financial Data (Unaudited)..............................36
Consolidated Balance Sheets at December 31, 1994, January
1, 1994 and January 2, 1993....................................37
Consolidated Statements of Income for the three
years ended December 31, 1994..................................38
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1994............................39
Consolidated Statements of Cash Flow for the three years
ended December 31, 1994........................................40
Notes to Consolidated Financial Statements........................41
Report of Independent Public Accountants..........................51
28 of 51
<PAGE>
The following documents are filed as part of this Report: Pages in this Report
--------------------
(3) EXHIBITS
--------
(3) Stock Purchase Agreement between TJ
International, Inc. and Andersen
Corporation............................................Document 2
(4) Rights Agreement, dated as of August 24, 1989,
between TJ International, Inc. and West
One Bank............................................... *
(4) Non-statutory Stock Option Plan, as amended............ *
(4) 1982 Incentive Stock Option Plan, as amended........... *
(4) 1985 Incentive Stock Option Plan, as amended........... *
(4) 1988 Stock Option Plan, as amended..................... *
(10) Loan Agreement, Trust Indenture and Deed of
Trust pertaining to Twin Falls, Idaho, plant........... *
(21) Subsidiaries of the Registrant.........................Document 3
(24) Consent of Independent Public Accountants..............Document 4
(25) Powers of Attorney.....................................Document 5
(27) Financial Data Schedule................................Document 6
All other schedules are omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
* Previously filed, hard copy.
29 of 51
<PAGE>
SELECTED FINANCIAL DATA
The following table summarizes selected financial data for the 10 fiscal years
ended December 31, 1994, and should be read in conjunction with the more
detailed Consolidated Financial Statements included herein.
<TABLE>
<CAPTION>
==================================================================================================================================
AMOUNTS IN THOUSANDS EXCEPT PER SHARE FIGURES AND PERCENTAGES
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $618,876 $551,204 $400,480 $283,210 $327,472 $351,137 $315,001 $256,905 $179,860 $132,668
Income (loss) from operations 41,288 32,836 (8,227) (10,725) 21,405 27,436 30,987 25,388 16,205 7,645
Net income (loss) 8,848 12,528 7,311 (3,227) 11,947 15,273 17,834 13,253 8,393 4,719
Net income (loss) per share
Primary .46 .82 .45 (.31) .82 1.06 1.25 .95 .58 .30
Fully diluted .44 .76 .45 (.31) .82 1.06 1.25 .95 .58 .30
Weighted average number
of shares outstanding
Primary 17,354 14,267 13,418 12,942 14,214 14,432 14,216 13,980 14,372 15,524
Fully diluted 18,635 15,603 14,700 14,616 14,214 14,432 14,216 13,980 14,372 15,524
Cash dividends declared
per common share $ .220 $ .215 $ .210 $ .210 $ .210 $ .200 $ .180 $ .155 $ .120 $ .100
Working capital 126,077 125,689 24,110 18,247 34,934 30,940 39,336 33,645 28,243 37,610
Total assets 614,477 454,976 345,489 334,887 167,282 173,102 146,435 125,737 104,264 102,919
Long-term debt, excluding
current portion 102,499 30,877 33,072 26,392 28,949 30,306 23,512 24,719 25,900 28,259
Stockholders' equity 240,558 234,741 129,333 126,894 93,183 92,002 78,648 60,768 49,186 49,698
Net book value per share 14.22 14.02 9.89 9.80 7.08 6.55 5.66 4.43 3.61 3.39
Return on average
stockholders' equity 3.7% 6.9% 5.7% (2.9)% 12.9% 17.9% 25.6% 24.1% 17.0% 9.3%
==================================================================================================================================
</TABLE>
In 1992, net income and net income per share include income of $900 and $.07,
respectively, for the cumulative effect of adopting Statement No. 109,
"Accounting for Income Taxes."
30 of 51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The company's operations are strongly influenced by the cyclicality and
seasonality of residential housing construction. This industry experiences
fluctuations resulting from a number of factors, including the general economy,
consumer confidence, credit availability, and interest rates. The seasonality of
this industry, which is particularly pronounced in the colder climates of Canada
and the northern United States, has an especially significant impact on the
company's window operations. As a result of this seasonal pattern, the company's
sales have historically tended to be lowest in the first and fourth quarters and
highest in the second and third quarters of each year.
The company's engineered lumber products are gaining increased market
acceptance as high-quality substitutes for large-dimension structural lumber.
The reduced availability and increased price of quality, large-dimension
structural lumber have in part driven this conversion. As well, the consistent
quality, superior strength, lighter weight, and ease of installation of
engineered lumber products are causing an increasing number of builders and
other wood users to choose engineered lumber over traditional solid-sawn lumber.
The Company believes this trend should continue through the 1990s.
No other company possesses the range of engineered lumber products, or the
second generation of TimberStrand[REGISTERED TRADEMARK] laminated strand lumber
(LSL) or Parallam[REGISTERED TRADEMARK] parallel strand lumber (PSL)
technologies. However, a number of companies, including several large forest
products companies, now produce look-alike wood I-joist products and laminated
veneer lumber (LVL) products. These are manufactured using processes similar to
the company's oldest generation technologies. The Company believes its system of
manufacturing plants and multiple technologies position it as the low-cost
producer of engineered lumber. While competition helps expand the market for
engineered wood products, including those manufactured by the Company, it may
also make the existing markets more price competitive. It is likely these trends
of increased competition in engineered lumber products will continue for the
foreseeable future.
PARTNERSHIPS
The Company and MacMillan Bloedel, through MBA, established TJM in October
of 1991. The Company has a 51 percent interest in TJM and serves as general
partner, with authority to manage and control the daily operations. TJM's income
and losses are allocated on a formula basis as agreed to by the partners and in
accordance with the TJM Partnership Agreement. These formulas allocated 85
percent in 1992, 66 2/3 percent in 1993, and 51 percent in 1994 of TJM's income
before taxes to the Company. The income or loss allocation to the Company will
remain 51 percent in the future. Also, $7.0 million in 1993 and $13.1 million in
1992 of the losses associated with the start-up of the partnership's Deerwood
LSL plant and Colbert and Vancouver PSL plants were allocated to MacMillan
Bloedel. As a result of these provisions, MacMillan Bloedel was allocated a
total of $11.9 million of losses in 1992, $10.1 million of income in 1993, and
$26.9 million of income in 1994. These allocations are reflected in the
consolidated statements of income under "Minority interest in partnerships" and
also affect the partners' capital accounts in TJM.
The TJM Partnership Agreement also specified a formula allocation for
accelerated tax depreciation through the end of 1993. Tax benefits to the
Company of $1.3 million in 1993 and $4.3 million in 1992 have been included in
income taxes (benefits) in the consolidated statements of income pursuant to
this allocation.
The Company formed the Outlook Window Partnership effective October 3,
1994, combining the company's wholly owned subsidiary Norco with SealRite and
Oldach. The Company is a general partner and shares operational control with its
other general partners. All of the assets and liabilities of Norco were
contributed to Outlook in exchange for a 64 percent interest in Outlook.
SealRite and Oldach contributed all of their respective assets and liabilities
in exchange for a 36 percent interest in Outlook. The Company also agreed to
make an additional cash contribution to Outlook should Norco incur a loss before
taxes for the period October 3, 1994, to December 31, 1995. The amount of this
contribution is based on a formula specified in the Outlook Partnership
Agreement.
31 of 51
<PAGE>
1994 COMPARED TO 1993
Sales for the year ended December 31, 1994, increased by $68 million or
12.3 percent from the corresponding period last year.
Engineered lumber product sales for 1994 were $496 million, a 13.6 percent
increase over the same period in 1993. The company's sales increase continued to
outpace new housing construction, which posted an 11.2 percent increase in North
American housing starts. Growing acceptance of the company's engineered lumber
products as a substitute for commodity sawn lumber was the primary factor behind
the increased sales. The company's three major product groups (industrial, light
commercial, and residential) all participated in the sales growth, with
residential products contributing the largest increase. Sales of residential
products per North American housing start increased to $250 for 1994 from $246
in 1993. This increase was achieved despite declining commodity lumber prices
through most of 1994. Commodity lumber remains engineered lumber's primary
competition.
Window and patio door sales for 1994 were $123 million as compared to $114
million for the same period in 1993. The sales increase was due to the inclusion
of $9 million of SealRite and Oldach sales in the last quarter of 1994. Sales
from the company's Canadian subsidiaries and Norco's SiteLine[REGISTERED
TRADEMARK] products declined from the prior year. Both sales and order file
levels for Norco's Teton wood window and patio door products manufactured at its
new Twin Falls, Idaho, plant were higher for 1994 than in the comparable period
in 1993.
Effective December 31, 1994, the Company sold its eastern Canadian window
subsidiaries, Dashwood Industries Ltd. and Laflamme and Frere, Ltd. to Andersen
Corporation. The agreement specifies a sales price which is approximately book
value. At December 31, 1994, the Company recorded a $19.8 million receivable
related to this sale.
The company's net income for 1994 was materially reduced from levels that
would otherwise have been achieved due to $8.9 million of operating losses
incurred in its window business. The Canadian window businesses, which were sold
to Andersen Corporation, incurred $4.9 million of the 1994 operating losses. The
company's U.S. window business, Norco, incurred significant operating losses in
1993 and 1994 caused primarily by increases in the cost of raw materials that
Norco was unable to reflect in price increases, reduced sales volumes in its
SiteLine[REGISTERED TRADEMARK] window and door products, and start-up expenses
incurred in connection with the establishment of its new Teton wood window
manufacturing facility. The Company combined its Norco operations with
historically profitable SealRite and Oldach and is implementing a plan aimed at
reducing these continuing losses. However, there can be no assurance that
Norco's history of operating losses can be reversed in 1995.
Sales for the fourth quarter of 1994 increased by 2.7 percent over the
comparative quarter of 1993. Engineered lumber product sales decreased 3.6
percent, while window sales increased 31.8 percent. The sales decrease from the
comparable fourth quarter was due in part to reduced product pricing in response
to lower lumber prices. Also, sales in 1993's fourth quarter surged in response
to rapidly rising lumber prices. The window sales increase reflects the
inclusion of sales from SealRite and Oldach in the fourth quarter of 1994. Also
in the fourth quarter of 1994, the Company recorded a charge of $3.2 million
related to plant closures, severance, and other items.
Gross margins for the year ended December 31, 1994, were 23.2 percent
compared to 23.5 percent for 1993. In the early part of 1994, strong pricing in
response to a historically high lumber market improved the company's margins. In
the second half of the year, gross margins were pressured by increases in raw
material prices, particularly for oriented strand board (OSB) used in webs of
the company's I-joist products. A strong plywood market in the South also led to
increased prices for the veneer used in making Microllam-TM- LVL. Further
pressuring margins was a market environment where prices for the company's
products were reduced in response to continuing softness in the lumber market.
During the first and second quarters the company's TimberStrand[REGISTERED
TRADEMARK] LSL plant was profitable at the gross margin line. However, due to
restart and other problems after a dryer fire in late June 1994, the plant was
not profitable at the gross margin line in the third or fourth quarter but made
steady improvement toward regaining operating efficiencies as the year
progressed. In addition, since the start-up of the plant in 1992, 28 associates
have been diagnosed with varying degrees of respiratory irritation and
sensitization. The adhesive used in the manufacturing process -- which is
commonly used elsewhere in the industry -- and wood dust are the leading
suspected causes despite the lack of medical technology to confirm this
diagnosis. The Company has assembled a team of internal managers and outside
experts to develop and implement a plan to reduce exposure to the dust and
adhesive.
32 of 51
<PAGE>
Selling expenses increased in absolute dollar terms but decreased from 10.9
percent to 10.3 percent as a percent of sales. The decrease was primarily a
result of the leverage in the existing sales and distribution network, which has
the capacity to handle significant volume increases with the current
infrastructure, combined with a reduction in window product selling expenses.
Operating income for 1994 was $41.3 million, up 26 percent over 1993, even
after consideration of a fourth quarter 1994 charge of $3.2 million related to
plant closures, severance, and other items. Despite positive gains in operating
income, earnings per share declined from $.76 to $.44. This drop can be
attributed primarily to two dilutive factors. First, in 1994, the Company
received 51 percent of the earnings from TJM as compared to 66 2/3 percent in
1993. Second, an additional 3.5 million shares of common stock were outstanding
during 1994 as compared to most of 1993. The cash proceeds from the stock sales
were primarily invested in construction in progress. The assets are expected to
begin contributing to the Company's results in 1996.
The change in Minority interest in partnerships from $10.1 million during
1993 to $27.0 million in 1994 is reflective of the contractual agreement to
allocate 49 percent of TJM's income to MacMillan Bloedel (MB) in 1994 compared
to the 33 1/8 percent in 1993 combined with the improved operating results of
TJM. In addition, $7.0 million of operating losses incurred at the company's
TimberStrand[REGISTERED TRADEMARK] LSL facility in Deerwood, Minnesota, were
allocated to MB in 1993.
1993 COMPARED TO 1992
Sales for the year ended January 1, 1994, increased by $151 million or 38
percent from the corresponding period in 1992. The company's sales increase
outpaced new housing construction, which posted a 5 percent increase in North
American housing starts. In the combined eastern Canadian provinces of Quebec,
Ontario, and the Maritimes, housing starts decreased 14 percent.
Engineered lumber product sales for 1993 were $437 million, a 51 percent
increase over the same period in 1992. Growing acceptance of the company's
engineered lumber products as a substitute for commodity sawn lumber and rapidly
rising prices for commodity lumber were the primary factors behind the increased
sales. Sales of residential products per North American housing start increased
49 percent to $246 for 1993 from $165 per start in 1992. Unit volume increases
accounted for the majority of this improvement.
Window and patio door sales were $114 million through January 1, 1994, as
compared to $111 million for the same period in 1992. An increasingly
competitive market and continued market weakness in eastern Canada contributed
to a decline in market penetration. Window and patio door sales per North
American housing start were $86 in 1993 as compared to $88 for the same period
in 1992. Both sales and order file levels for the company's Teton wood window
and patio door products manufactured at its new Twin Falls, Idaho, plant were
higher for 1993 than in the comparable period in 1992. Sales from the company's
Canadian subsidiaries were lower than the prior year.
Sales for the fourth quarter of 1993 increased by 45 percent over the
comparative quarter of 1992. Engineered lumber product sales posted a 63 percent
gain, while window sales decreased 4 percent. These engineered lumber product
sales gains in the fourth quarter reflected the improved market conditions and
increased market share for the company's products. The window sales decrease
reflected the continued downturn in the eastern Canadian market.
The company's gross margins for the year ended January 1, 1994, improved to
23.5 percent from 18.1 percent in 1992. Price increases for engineered lumber
products realized in the second, third, and fourth quarters of 1993 more than
offset higher raw material costs. The increased demand for the company's
engineered lumber products resulted in higher production volumes in its
manufacturing facilities, which allowed for more efficient manufacturing
schedules and better absorption of manufacturing overheads. Reduced margins for
the company's window and patio door products offset these gains somewhat.
Also contributing to improved margins was a reduction of start-up losses at
the company's new-technology plants. Although the Parallam[REGISTERED TRADEMARK]
PSL facilities incurred start-up losses during the first part of 1992, they were
profitable for 1993. Losses at the company's TimberStrand[REGISTERED TRADEMARK]
LSL facility in Deerwood, Minnesota, were reduced from the previous year. The
Deerwood plant experienced losses for all quarters in 1993. The strategic
decision to focus the plant on achieving manufacturing efficiencies in
higher-value TimberStrand[REGISTERED TRADEMARK] LSL products contributed to the
losses in the second half of 1993.
33 of 51
<PAGE>
Minority interest in partnerships represents the net effect of the start-up
losses allocated to MacMillan Bloedel offset by the allocation of MacMillan
Bloedel's share of TJM profits, exclusive of the allocated start-up losses. For
1993, MacMillan Bloedel was allocated $10.1 million in net profits as compared
to an allocation of $11.9 million of net losses in 1992. The transition from
allocating losses to profits is primarily the result of lower start-up losses
and improving operating results in 1993 as compared to 1992. In addition, under
the formula allocations specified in the Partnership Agreement, MacMillan
Bloedel was allocated $7.0 million of the TimberStrand[REGISTERED TRADEMARK] LSL
start-up losses in 1993 compared to $13.1 million of the TimberStrand[REGISTERED
TRADEMARK] LSL and Parallam[REGISTERED TRADEMARK] PSL losses for 1992. The
remaining profits were allocated 33 1/8 percent to MacMillan Bloedel in 1993
and 15 percent in 1992.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $400,000 to $126 million at December 31, 1994.
Cash provided from operating activities was $72.9 million in 1994 compared to
$38.9 million in 1993 and $3.7 million in 1992. The improvements in cash from
operations were due primarily to improved operating results of TJM. Capital
expenditures were $152.4 million for 1994, $35.4 million for 1993 and $19.7
million for 1992.
The company's Board of Directors approved a capacity expansion program in
1993 that includes construction of a plant near Hazard, Kentucky, that will
manufacture TimberStrand[REGISTERED TRADEMARK] LSL. Construction commenced in
the fall of 1993, and when the plant is completed, expenditures are expected to
be just over $100 million. In addition, the company's Board of Directors
approved construction of a plant that will manufacture both Microllam-TM- LVL
and Parallam[REGISTERED TRADEMARK] PSL near Buckhannon, West Virginia, at an
expected cost of $85 million. Construction on this plant commenced in the second
quarter of 1994. The Company has spent $110.3 million on these projects to date
and expects to spend the balance during 1995. The Company is evaluating
potential sites for a third TimberStrand[REGISTERED TRADEMARK] LSL plant, or an
additional combination Microllam-TM- LVL and Parallam[REGISTERED TRADEMARK] PSL
plant, but has not determined whether or when to proceed with that plant.
MacMillan Bloedel's Board of Directors authorized a $49 million capital
contribution to the TJM Partnership in light of the capacity expansion program.
The entire amount was contributed by December 1994.
During the second quarter of 1994, the Company issued $43.5 million of
industrial revenue bonds to finance construction of the Hazard, Kentucky,
TimberStrand[REGISTERED TRADEMARK] LSL plant. The bonds are due in a single
maturity in 2024, with interest payable semi-annually at 7 percent. Remaining
proceeds from this bond issue are recorded as unexpended bond funds.
The Company believes that current cash balances, cash generated from
operations, and borrowings under a $75 million Revolving Credit Facility will be
sufficient to meet the company's working capital needs and the capital expansion
program approved by the Board of Directors and to fund anticipated start-up
losses at its Hazard and Buckhannon plants. The Company also believes that
additional or expanded lines of credit or appropriate long-term capital can be
obtained to fund other capital requirements as they arise, or to fund an
acquisition.
Substantially all of the company's operating assets are held, and revenues
generated, by its partnerships. Distributions of cash by the partnerships to the
Company require either a super majority or unanimous consent of the
partnerships' Management Boards, which include members of both the Company and
its partners. Accordingly, there can be no assurance that distributions will be
approved for the payment of dividends, to fund the company's expenses not
incurred by the partnerships other operations, or for other purposes.
34 of 51
<PAGE>
MARKET AND DIVIDEND INFORMATION
The company's stock is traded on the over-the-counter market and is listed
with the National Association of Security Dealers Automated Quotations (NASDAQ)
under the symbol TJCO.
The high and low quoted sales prices (closing) and dividends paid per
common share for each quarterly period during 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
==============================================================================
Sales Price
----------------------
High Low Dividends Paid
----------------------------------------
<S> <C> <C> <C>
1994 First $32 1/8 $23 1/2 $.05 1/2
Second 25 1/2 18 3/4 .05 1/2
Third 21 17 1/2 .05 1/2
Fourth 18 1/2 14 3/4 .05 1/2
<CAPTION>
Sales Price
----------------------
High Low Dividends Paid
----------------------------------------
<S> <C> <C> <C>
1993 First $15 7/8 $ 11 7/16 $.05 1/4
Second 21 1/4 14 7/8 .05 1/4
Third 25 16 5/8 .05 1/4
Fourth 32 3/4 25 1/4 .05 1/2
==============================================================================
</TABLE>
35 of 51
<PAGE>
RESULTS OF QUARTERLY OPERATIONS
Unaudited results of operations by quarter for 1994, 1993, and 1992 are as
follows:
<TABLE>
<CAPTION>
==============================================================================
DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE FIGURES
--------------------------------------------
Quarter
--------------------------------------------
First Second Third Fourth
--------------------------------------------
<S> <C> <C> <C> <C>
1994
Sales $135,048 $163,484 $171,715 $148,629
Gross profit 35,720 40,721 39,743 27,216
Net income (loss) 2,559 5,722 4,205 (3,638)
Net income (loss) per share
Primary .13 .32 .23 (.23)
Fully diluted .13 .30 .22 (.23)
--------------------------------------------
1993
Sales $114,111 $139,639 $152,729 $144,725
Gross profit 18,961 33,304 39,847 37,351
Net income (loss) (573) 4,262 5,832 3,007
Net income (loss) per share
Primary (.06) .30 .41 .17
Fully diluted (.06) .27 .38 .16
--------------------------------------------
1992
Sales $ 75,561 $111,024 $113,512 $100,383
Gross profit 11,412 21,620 22,189 17,216
Net income 94 3,298 3,454 465
Net income (loss) per share
Primary (.02) .22 .23 .01
Fully diluted (.02) .21 .22 .01
==============================================================================
</TABLE>
Per share calculations are based on the average common shares outstanding for
each period presented. Accordingly, the total of the per share figures for the
quarters may not equal the per share figures reported for the year.
In 1992, net income and net income per share have been restated to reflect the
required implementation of Statement No. 109 as of the beginning of the year. As
a result, first quarter net income and net income per share have been increased
from previously reported amounts of ($806,000) and ($.07), respectively. There
was no change in fully diluted net income per share for the second and third
quarters from previously reported amounts. During the year, the Company reversed
$1,575,000 of excess income tax reserves provided in prior years. These
reversals increased net income per share by $.02 in the second quarter, $.03 in
the third quarter, and $.07 in the fourth quarter. In addition, in the fourth
quarter the Company sold a previously closed facility in Boise and recorded a
gain of $.03 per share.
36 of 51
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
=========================================================================================================
DOLLAR AMOUNTS IN THOUSANDS
December 31, January 1, January 2,
1994 1994 1993
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 57,627 $ 66,968 $ 652
Marketable securities 16,084 7,004 --
Receivables, less allowances of $1,066, $663, and $785 49,157 45,709 29,540
Inventories 56,612 53,081 44,237
Other 8,967 10,715 6,955
------------------------------------
188,447 183,477 81,384
Property
Land 5,692 5,398 5,112
Buildings and leasehold improvements 74,933 81,182 74,246
Machinery and equipment 408,216 275,372 251,046
Accumulated depreciation (137,384) (120,762) (99,468)
------------------------------------
351,457 241,190 230,936
Goodwill 48,889 23,660 24,700
Unexpended bond funds 11,550 -- 632
Other assets 14,134 6,649 7,837
------------------------------------
$ 614,477 $ 454,976 $345,489
---------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 3,753 $ 4,007 $ 21,466
Current portion of long-term debt 570 1,891 1,228
Accounts payable 29,497 24,335 14,973
Accrued liabilities 28,550 27,555 19,607
------------------------------------
62,370 57,788 57,274
Long-term debt, excluding current portion 102,499 30,877 33,072
Deferred income taxes 8,092 8,429 5,533
Other long-term liabilities 11,777 14,982 14,026
Minority interest in partnerships 189,181 108,159 106,251
Stockholders' equity
ESOP convertible preferred stock, issued 1,249,582,
1,259,308, and 632,059 shares 14,744 14,859 14,932
Guaranteed ESOP benefit (12,100) (12,390) (13,462)
Common stock, issued 16,915,536, 16,738,069, and
7,900,516 shares 16,916 16,738 7,901
Paid-in capital 138,003 135,727 44,181
Retained earnings 86,355 82,139 97,492
Cumulative translation adjustment (3,360) (2,332) (1,586)
Common stock in treasury, 1,359,373 shares, at cost -- -- (20,125)
240,558 234,741 129,333
------------------------------------
$ 614,477 $ 454,976 $345,489
------------------------------------
=========================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37 of 51
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
=========================================================================================================
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE FIGURES
1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $618,876 $551,204 $400,480
------------------------------------
Cost and expenses
Cost of sales 475,476 421,741 328,043
Selling expenses 63,601 59,918 51,292
Administrative expenses 38,511 36,709 29,372
------------------------------------
577,588 518,368 408,707
------------------------------------
Income (loss) from operations 41,288 32,836 (8,227)
Investment income, net 2,291 449 159
Interest expense -- (3,136) (2,924)
Minority interest in partnerships (27,003) (10,149) 11,855
------------------------------------
Income before income taxes 16,576 20,000 863
Income taxes (benefits) 7,728 7,472 (5,548)
------------------------------------
Income before cumulative effect of
change in accounting principle 8,848 12,528 6,411
Cumulative effect of change in accounting principle -- -- 900
------------------------------------
Net income $ 8,848 $ 12,528 $ 7,311
------------------------------------
------------------------------------
Net income per share
Income before cumulative effect of change in
accounting principle
Primary $ .46 $ .82 $ .38
Fully diluted .44 .76 .38
Cumulative effect of change in accounting principle
Primary $ -- $ -- $ .07
Fully diluted -- -- .07
------------------------------------
Net income
Primary $ .46 $ .82 $ .45
Fully diluted .44 .76 .45
=========================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38 of 51
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
==================================================================================================================================
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
DOLLAR AMOUNTS IN THOUSANDS
Guaranteed Cumulative Common
Preferred ESOP Common Paid-in Retained Translation Stock in
Stock Benefit Stock Capital Earnings Adjustment Treasury
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1991 $14,983 $(14,073) $7,909 $44,722 $93,739 $1,410 $(21,796)
Net income -- -- -- -- 7,311 -- --
Cash dividends declared:
Common stock -- -- -- -- (2,737) -- --
Preferred stock, net of tax -- -- -- -- (821) -- --
Stock options exercised, net of tax -- -- -- (591) -- -- 1,629
Other (51) 611 (8) 50 -- (2,996) 42
-----------------------------------------------------------------------------------
Balance, January 2, 1993 14,932 (13,462) 7,901 44,181 97,492 (1,586) (20,125)
Net income -- -- -- -- 12,528 -- --
Cash dividends declared:
Common stock -- -- -- -- (3,029) -- --
Preferred stock, net of tax -- -- -- -- (896) -- --
Stock offering -- -- 3,500 90,950 -- -- --
Treasury stock cancellation -- -- (1,273) -- (17,344) -- 18,617
Stock split -- -- 6,612 -- (6,612) -- --
Stock options exercised, net of tax -- -- -- 297 -- -- 1,481
Other (73) 1,072 (2) 299 -- (746) 27
-----------------------------------------------------------------------------------
Balance, January 1, 1994 14,859 (12,390) 16,738 135,727 82,139 (2,332) 0
Net income -- -- -- -- 8,848 -- --
Cash dividends declared:
Common stock -- -- -- -- (3,712) -- --
Preferred stock, net of tax -- -- -- -- (920) -- --
Stock options exercised, net of tax -- -- -- 2,227 -- -- --
Other (115) 290 178 49 -- (1,028) --
-----------------------------------------------------------------------------------
Balance, December 31, 1994 $14,744 $(12,100) $16,916 $138,003 $86,355 $(3,360) $0
==================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
39 of 51
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
=========================================================================================================
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
DOLLAR AMOUNTS IN THOUSANDS
1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,848 $ 12,528 $ 7,311
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 28,343 24,059 21,897
Deferred income taxes 813 1,744 1,501
Minority interest in partnerships 27,003 10,149 (11,855)
Other, net (89) 911 (663)
Change in working capital items:
Receivables 13,574 (17,567) (6,765)
Inventories (5,086) (8,844) (4,769)
Other current assets 1,542 (864) 1,834
Accounts payable and accrued liabilities 2,674 15,149 (4,207)
Other, net (4,716) 1,626 (602)
------------------------------------
Net cash provided by operating activities $ 72,906 $ 38,891 $ 3,682
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $(152,363) $(35,418) $(19,676)
Purchase of marketable securities (9,080) (7,004) --
Decrease (increase) in unexpended bond funds (11,550) 632 3,731
Other, net 670 9 733
------------------------------------
Net cash used in investing activities $(172,323) $(41,781) $(15,212)
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid on common stock $ (3,702) $ (2,796) $ (2,730)
Cash dividends paid on ESOP preferred stock (1,331) (1,341) (2,697)
Minority partner capital contributions 49,000 2,327 16,673
Minority partner tax distributions (12,042) (4,455) (445)
Proceeds from stock offering, net -- 94,450 --
Payments on note to minority partner -- -- (12,229)
Proceeds from issuance of long-term debt 78,500 -- --
Net (repayments) borrowings under lines-of-credit (254) (17,459) 15,632
Principal payments of long-term debt (18,919) (1,209) (2,844)
Other, net (1,176) (311) 362
------------------------------------
Net cash provided by financing activities $ 90,076 $ 69,206 $ 11,722
---------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash equivalents $ (9,341) $ 66,316 $ 192
Cash and cash equivalents at beginning of year 66,968 652 460
------------------------------------
Cash and cash equivalents at end of year $ 57,627 $ 66,968 $ 652
---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest, net of amounts capitalized $ -- $ 3,135 $ 3,076
Income taxes (refunds), net 6,463 (1,878) (65)
=========================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
40 of 51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and subsidiaries, including the company's 51 percent interest in Trus Joist
MacMillan a Limited Partnership (TJM) and the company's 64 percent interest in
Outlook Window Partnership, L.P. (Outlook). All significant intercompany
balances and transactions have been eliminated.
FISCAL YEAR
The company's 52/53 week fiscal year ends on the Saturday closest to
December 31 of each year. The additional week, which occurs approximately every
fifth year, does not materially affect the comparability of operations between
years.
FOREIGN TRANSLATION
The accounts of the company's Canadian subsidiaries are measured using the
Canadian dollar as functional currency. These financial statements are
translated into U.S. dollars using exchange rates in effect at year-end for
assets and liabilities and the average exchange rate during the period for
results of operations. The resulting translation adjustment is made directly to
the cumulative translation adjustment component of Stockholders' Equity.
CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
The Company considers cash on hand, cash in banks, and all highly liquid
investments with maturities of three months or less when purchased to be cash
equivalents. These assets are recorded at cost, which approximates fair value,
and totaled $57,627,000 at December 31, 1994, $66,968,000 at January 1, 1994,
and $652,000 at January 2, 1993.
Marketable securities include tax-exempt municipal bonds and preferred
stocks. These securities are recorded at cost, which approximates fair value
based on quoted market prices.
INVENTORIES
Inventories are valued at the lower of cost or market and include material,
labor, and production overhead costs. Inventories consisted of the following:
<TABLE>
<CAPTION>
================================================================================
EXPRESSED IN THOUSANDS
DECEMBER 31, January 1, January 2,
1994 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C>
Finished goods $27,512 $23,830 $19,987
Raw materials and work-in-progress 34,363 33,244 26,763
------------------------------------
61,875 57,074 46,750
Reduction to LIFO cost (5,263) (3,993) (2,513)
----------------------------------------------------------------------
$56,612 $53,081 $44,237
================================================================================
</TABLE>
The last-in, first-out (LIFO) method is used for determining the cost of
lumber, veneer, Microllam-TM- lumber, TJI[REGISTERED TRADEMARK] joists, and open
web joists. Approximately 35 percent of total inventories at the end of 1994, 38
percent at the end of 1993, and 32 percent at the end of 1992 were valued using
the LIFO method. The first-in, first-out (FIFO) method is used to determine the
cost of all other inventories.
41 of 51
<PAGE>
PROPERTY
Property and equipment are recorded at cost. Additions, betterments, and
replacements of major units of property are capitalized. Maintenance, repairs,
and minor replacements are expensed as incurred and approximated $20,018,000 in
1994, $15,900,000 in 1993, and $13,928,000 in 1992. The net book value of
property sold or retired is removed from the asset and related depreciation
accounts, and any resulting gain or loss is included in income.
The provision for depreciation on certain Microllam-TM- LVL,
Parallam[REGISTERED TRADEMARK] PSL, and TimberStrand[REGISTERED TRADEMARK] LSL
manufacturing equipment is computed on the units-of-production method. Virtually
all other property and equipment is depreciated on the straight-line method.
Estimated useful lives of the principal items of property and equipment range
from three to 30 years.
CAPITALIZED INTEREST
The Company capitalizes interest on qualifying assets. Interest expense and
income capitalized into property and equipment were as follows:
<TABLE>
<CAPTION>
================================================================================
EXPRESSED IN THOUSANDS
1994 1993 1992
----------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $5,259 $255 $611
Interest income 464 5 232
================================================================================
</TABLE>
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Research and
development costs charged to expense were approximately $3,309,000 in 1994,
$2,758,000 in 1993, and $3,929,000 in 1992.
RECLASSIFICATIONS
Certain reclassifications have been made, none of which affected net
income, to conform prior year's information to the current year's presentation.
GOODWILL
Goodwill is recorded at cost and amortized using the straight-line method
over the period benefits are expected to be realized.
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN ACCOUNTING PRINCIPLE
During the fourth quarter of 1992, the Company adopted the accounting for
income taxes as required by Statement No. 109 of the Financial Accounting
Standards Board (Statement No. 109). As required, the cumulative effect of the
change as of the beginning of 1992 is presented separately in the consolidated
statements of income.
42 of 51
<PAGE>
NET INCOME PER SHARE
Primary net income per common share is based on net income adjusted for
preferred stock dividends and related tax benefits divided by the weighted
average number of common shares outstanding after giving effect to stock options
as common stock equivalents, if dilutive. Fully diluted net income per common
share assumes conversion of the ESOP convertible preferred stock (ESOP preferred
stock) into common stock at the beginning of the year. Primary and fully diluted
net income were calculated as follows:
PRIMARY AND FULLY DILUTED NET INCOME
<TABLE>
<CAPTION>
================================================================================
EXPRESSED IN THOUSANDS
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income as reported before cumulative effect
of change in accounting principle $ 8,848 $12,528 $ 6,411
Preferred stock dividends, net of related
tax benefits (920) (896) (1,306)
---------------------------
Primary net income before cumulative effect
of change in accounting principle 7,928 11,632 5,105
Cumulative effect of change in
accounting principle -- -- 900
---------------------------
Primary net income $ 7,928 $11,632 $ 6,005
---------------------------
---------------------------
Primary shares outstanding 17,354 14,267 13,418
--------------------------------------------------------------------------------
Net income as reported before cumulative
effect of change in accounting principle $ 8,848 $12,528 $ 6,411
Additional ESOP contribution payable upon
assumed conversion of ESOP preferred stock,
net of related tax benefits (720) (721) (672)
---------------------------
Fully diluted net income before cumulative
effect of change in accounting principle 8,128 11,807 5,739
Cumulative effect of change in
accounting principle -- -- 900
---------------------------
Fully diluted net income $ 8,128 $11,807 $ 6,639
---------------------------
---------------------------
Fully diluted shares outstanding 18,635 15,603 14,700
================================================================================
</TABLE>
MINORITY INTEREST IN PARTNERSHIPS
The Company has a 51 percent interest in TJM and a 64 percent interest in
Outlook. Income and losses through December 31, 1994, are allocated on a formula
basis as agreed to by the partners and in accordance with the partnership
agreements. As a result, the minority owners of the partnerships were allocated
$27,003,000 of income in 1994, $10,149,000 of income in 1993, and $11,855,000 of
losses in 1992. These allocations are reflected as adjustments to arrive at
income before income taxes in the consolidated statements of income as Minority
interest in partnerships. The minority partners' interest in the partnerships'
accumulated equity is included in the consolidated balance sheet as Minority
interest in partnerships. In addition, the partnership agreement for TJM called
for a favorable allocation to the Company of the benefits arising from
accelerated tax depreciation through the end of 1993. These benefits of
$1,320,000 in 1993 and $4,317,000 in 1992 have been included in income taxes
(benefits) in the consolidated statements of income.
43 of 51
<PAGE>
2 PARTNERSHIPS
On September 29, 1991, the Company and MacMillan Bloedel of America, Inc.
(MBA), a wholly owned subsidiary of MacMillan Bloedel Limited (MB), formed TJM.
The Company contributed all of its North American engineered lumber
technology, manufacturing facilities, and its sales and marketing organization
for a 51 percent interest in TJM. MBA and MB contributed all of their North
American engineered lumber technology and manufacturing facilities for a 49
percent interest in TJM. The Company, MBA, and MB also contributed all patents
and trademarks relating to their combined engineered lumber business.
Goodwill recognized in the transaction is being amortized using the
straight-line method over 25 years. As of December 31, 1994, a total of
$3,380,000 of this goodwill has been amortized. Goodwill expense was $1,040,000
each year in 1994, 1993, and 1992.
On October 3, 1994, the Company, SealRite Windows Inc. (SealRite), and
Oldach Window Corp. (Oldach) formed Outlook.
The Company contributed all of its Norco Windows, Inc. (Norco) window
operations for a 64 percent ownership in Outlook. SealRite and Oldach each
contributed their window operations for a 36 percent ownership.
The formation of Outlook was accounted for under the purchase method of
accounting. The company's contribution of its Norco window operations has been
reflected at its historical cost and was unadjusted by the formation of Outlook.
The respective assets and liabilities of SealRite and Oldach have been recorded
at their relative market value and are as follows:
<TABLE>
<CAPTION>
================================================================================
EXPRESSED IN THOUSANDS
<S> <C>
Current assets $ 13,960
Property and equipment 2,358
Other assets 141
Goodwill 26,163
Current liabilities (6,984)
Long-term debt (17,638)
--------
$ 18,000
--------
--------
================================================================================
</TABLE>
The accounts of Outlook have been included in the company's consolidated
financial statements since October 3, 1994. Goodwill recognized in the
transaction is being amortized using the straight-line method over 40 years. As
of December 31, 1994, a total of $168,000 of this goodwill has been amortized.
If the formation of Outlook had occurred as of the beginning of 1994, net
sales would have been $650,409,000, net income would have been $10,124,000, and
net income per fully diluted share would have been $.50. If the formation of
Outlook had occurred as of the beginning of 1993, net sales would have been
$586,907,000, net income would have been $13,478,000, and net income per fully
diluted share would have been $.82. These summarized, unaudited, pro forma
results have been prepared for comparative purposes only. They do not purport to
be indicative of the results of operations that would have resulted had the
transaction been consummated at the beginning of 1994 or 1993, or that may occur
in the future.
44 of 51
<PAGE>
3 DEBT
The Company has a $75 million Revolving Credit Facility (the "Credit
Facility") provided by a syndicate of banks. The Credit Facility provides
several interest rate options, none of which exceeds prime, and matures on
October 11, 1997. At December 31, 1994, there was $35,000,000 borrowed under
this facility. The Credit Facility includes various customary financial
covenants. These include a limitation of indebtedness equal to 50 percent of
total capitalization (including minority interest), a limitation on restricted
payments, and requirements to maintain (i) a minimum of net worth, and (ii)
ratios of cash flow compared to indebtedness and debt service. The company's
other long-term debt agreements also include customary financial covenants.
Under the most restrictive of these agreements, retained earnings available for
cash dividends at December 31, 1994, was $11,319,000.
At year-end, the Company also has available unsecured, committed lines of
credit totaling $13,565,000 with foreign and domestic banks. The interest rate
on any loan, determined at the time of the borrowing, would not exceed the
lending bank's prevailing prime rate. Arrangements with the domestic banks
provide for a commitment fee of 1/4%. At December 31, 1994, there was $3,753,000
at 6.54 percent borrowed under these agreements. At January 1, 1994, and January
2, 1993, there was $4,007,000 at 3.58 percent and $21,466,000 at 4.79 percent,
respectively, borrowed under similar arrangements. Long-term debt consisted of
the following:
LONG-TERM DEBT
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
December 31, 1994 January 1, 1994 January 2, 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Borrowings under the Credit Facility, 5.97% weighted
average interest rate at December 31, 1994, payable
no later than October 11, 1997 $ 35,000 $ -- $ --
Industrial revenue bonds, 7.08% weighted average
interest rate during 1994, payable in varying
amounts through 2024 51,450 9,200 9,950
Industrial revenue variable rate demand bonds, interest
rates established weekly, 2.93% weighted average during
1994, payable in varying amounts through 2009 16,400 16,400 16,400
Note payable with a foreign bank, 9.51% weighted average
interest rate at January 1, 1994 -- 7,168 7,950
Other 219 -- --
---------------------------------------------------------
103,069 32,768 34,300
Less current portion (570) (1,891) (1,228)
---------------------------------------------------------
$102,499 $30,877 $33,072
===================================================================================================================
</TABLE>
During 1994, $43,500,000 of industrial revenue bonds were issued to finance
construction of a TimberStrand[REGISTERED TRADEMARK] LSL manufacturing plant
near Hazard, Kentucky. These bonds have a fixed interest rate of 7.00 percent,
provide for semi-annual interest payments beginning December 1, 1994, with the
principal due in 2024 and are unsecured. All of the other industrial revenue
bonds are secured by the property and equipment acquired with the bond proceeds
and any unexpended bond funds. At December 31, 1994, the cost of such property
and equipment was approximately $24,400,000.
Effective December 31, 1994, the Company sold its wholly owned subsidiary,
Dashwood Industries Limited, including all of the shares of R. Laflamme & Frere,
Inc. The note payable with a foreign bank was assumed by the purchaser.
The scheduled payments of long-term debt are $570,000 in 1995, $524,000 in
1996, $35,400,000 in 1997, $395,000 in 1998, $420,000 in 1999, and $65,760,000
thereafter. The company's variable rate demand bonds are supported by
irrevocable letters of credit. These letters of credit, together with the
company's revolving line of credit, allow the Company to borrow for periods in
excess of one year, if drawn upon to repay bondholders.
Debt is recorded at cost, net of any discount or premium, which
approximates fair value base on borrowing rates currently available to the
Company for debt with similar terms and maturities.
45 of 51
<PAGE>
4 ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
DECEMBER 31, January 1, January 2,
1994 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries, wages, and commissions $ 3,515 $ 5,110 $ 4,533
Retirement plans and other associate benefits 13,556 13,761 8,305
Estimated other retained risks 2,458 2,149 728
Other 9,021 6,535 6,041
----------------------------------------------------
$28,550 $27,555 $19,607
===================================================================================================================
</TABLE>
5 INCOME TAXES
Income (loss) before income taxes and income taxes (benefits) include the
following:
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income taxes
U.S. $23,249 $25,587 $ 9,070
Canada (6,673) (5,587) (8,207)
----------------------------------------------------
$16,576 $20,000 $863
----------------------------------------------------
----------------------------------------------------
Income taxes (benefits)
Current income taxes
U.S. federal $ 5,957 $ 5,638 $(5,926)
U.S. state 1,780 (78) --
Canada (822) 168 (1,123)
----------------------------------------------------
6,915 5,728 (7,049)
----------------------------------------------------
Deferred income taxes
U.S. federal 659 1,453 3,701
U.S. state (329) 1,565 (84)
Canada 483 (1,274) (2,116)
----------------------------------------------------
813 1,744 1,501
----------------------------------------------------
$ 7,728 $ 7,472 $(5,548)
----------------------------------------------------
----------------------------------------------------
===================================================================================================================
</TABLE>
The company's effective income tax rate varied from the U.S. federal statutory
income tax rate for the following reasons:
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. federal statutory income tax rate $5,801 35.0% 35.0% 34.0%
TJM tax depreciation allocation -- -- (6.6) (500.2)
Reversal of excess tax reserves provided in prior years (690) (4.2) (2.0) (182.5)
Foreign income (losses) at different rates 1,997 12.0 4.3 (9.3)
State income taxes, net of federal effect 943 5.7 4.8 4.3
Other items (323) (1.9) 1.9 10.8
----------------------------------------------------
Effective income tax rate $7,728 46.6% 37.4% (642.9)%
===================================================================================================================
</TABLE>
46 of 51
<PAGE>
The deferred tax liabilities and assets included in the consolidated balance
sheets, computed under Statement No. 109, are comprised of the following:
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
DECEMBER 31, January 1, January 2,
1994 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax in excess of book depreciation $(13,881) $(15,632) $(11,022)
Other (2,655) (1,154) (697)
------------------------------------------
Total deferred tax liabilities (16,536) (16,786) (11,719)
------------------------------------------
Reserves not yet deductible for tax purposes 6,686 6,538 5,972
Net operating loss carryforwards 2,408 5,220 3,278
Alternative minimum tax credit carryforward 4,106 3,997 1,297
Other 2,249 1,928 796
------------------------------------------
Total deferred tax assets 15,449 17,683 11,343
Less valuation allowances (1,202) (2,045) (1,252)
------------------------------------------
$(2,289) $(1,148) $(1,628)
------------------------------------------
------------------------------------------
Classified as
Other (current assets) $5,803 $7,281 $3,905
Deferred income taxes (long-term liabilities) (8,092) (8,429) (5,533)
------------------------------------------
$(2,289) $(1,148) $(1,628)
------------------------------------------
------------------------------------------
===================================================================================================================
</TABLE>
The company's alternative minimum tax credits of $4,106,000 at December 31,
1994, are available indefinitely.
6 RETIREMENT PLANS AND INCENTIVE BONUS PROGRAMS
Most of the company's employees are covered under defined contribution
retirement plans and are also participants in the company's Employee Stock
Ownership Plan (ESOP). Benefits under these plans are limited to each
individual's fund balances.
In September 1990, the ESOP borrowed $15 million at a 9 percent interest
rate from the Company. This term loan matures on March 31, 2011, and has no
prepayment penalties. Proceeds from the loan were used by the ESOP to purchase
1,269,842 shares of newly issued ESOP preferred stock from the Company. The ESOP
preferred stock is described in Note 7.
In connection with the above transactions, the Company has guaranteed that
over the term of the loan, it will make sufficient contributions to the ESOP to
allow the ESOP to repay the loan to the Company. This guarantee has been
recorded as Guaranteed ESOP benefit in Stockholders' Equity. The company's
annual contributions to the ESOP are based on a formula. The contributions,
together with all dividends on the ESOP preferred shares, will be used by the
ESOP to make the necessary interest payments and any principal prepayments. With
each loan payment, a portion of the ESOP preferred stock is released and
allocated to the employees' accounts in the ESOP. The Guaranteed ESOP benefit is
amortized based on the shares allocated method of calculating expense. The
annual expense associated with the ESOP was approximately $676,000 in 1994,
$995,000 in 1993, $1,334,000 in 1992.
The Company matches certain contributions of participating associates to
its retirement plans. Contributions to these plans were approximately
$11,715,000 in 1994, $8,617,000 in 1993, and $6,436,000 in 1992, of which
approximately 51 percent, 57 percent, and 64 percent, respectively, resulted
from contributions made under the compensation reduction agreement provision of
the plans.
Substantially all of the company's officers and key employees participate
in incentive bonus programs which are based on formulas or are discretionary.
Amounts charged to income under the programs were approximately $2,129,000 in
1994, $2,824,000 in 1993, and $1,748,000 in 1992.
47 of 51
<PAGE>
7 STOCKHOLDERS' EQUITY
At December 31, 1994, there were 200,000,000 shares of common stock ($1.00
par value) and 10,000,000 shares of preferred stock ($1.00 par value)
authorized. In September 1990, the Company issued 1,269,842 shares of $1.00 par
value ESOP preferred stock at $11.8125 per share (liquidation preference) to the
ESOP. Each share of the ESOP preferred stock is convertible into the company's
common stock at the higher of the liquidation preference or the fair market
value of the underlying common stock. The Company has the option to satisfy any
conversion in cash, common stock, or any combination thereof. The ESOP preferred
stock has voting rights equal to one vote per share and is entitled to
preferential dividends of $1.065 per share each year. The ESOP preferred stock
is redeemable at the company's option under certain circumstances.
On August 26, 1993, the company's Board of Directors declared a two-for-one
stock split in the form of a 100 percent stock dividend. On October 1, 1993, one
share of common stock was issued for each share outstanding as of September 7,
1993. The stock split was recorded in accordance with the declaration whereby
retained earnings was charged and common stock was credited with $6,612,094,
representing the aggregate of the par value of the shares issued. All per share
information included in these financial statements and notes is based on the
increased number of shares of common stock after giving retroactive effect to
the stock split.
The company's Board of Directors on August 26, 1993, also authorized the
retirement of 1,272,675 shares of treasury stock. The retirement of treasury
stock was recorded in accordance with the authorization whereby retained
earnings and common stock were charged $17,343,947 and $1,272,675, respectively,
and treasury stock was credited with $18,616,622, representing the aggregate
cost of the treasury stock. In September 1990, the company's Board of Directors
authorized a program to repurchase up to $15,000,000 of its own stock at market
price. At December 31, 1994, $2,935,000 of additional stock could be acquired
under this program.
In November 1993, the Company completed a public offering of 3,500,000
shares of common stock at $28.50 per share. The net proceeds of the stock
offering after deducting applicable issuance costs and expenses were
$94,450,000. The proceeds were used to repay $18,848,000 of short-term debt
under line of credit arrangements. The balance of the proceeds will be used for
other general corporate purposes, including the company's announced capacity
expansion in its engineered lumber business, working capital, and acquisitions
the Company reviews from time to time in the regular course of business.
In 1989, the Company issued common stock purchase rights to each
stockholder. These rights generally become exercisable 10 days following the
public announcement of the acquisition by a person or group of 20 percent or
more of the company's common stock or a tender offer being made for 30 percent
or more of the common stock. With certain exceptions, if the Company is
thereafter involved in a merger or other business combination, or more than 50
percent of the company's assets or earning power is sold, the rights permit each
holder to purchase common stock of the acquiring company at 50 percent of its
market value. If the rights are triggered and the Company is the surviving
corporation in a merger, the rights permit holders, other than the person or
group that triggered exercisability of the rights, to purchase shares of the
company's common stock at a 50 percent discount from the then current market
value. The rights, which expire in September 1999, are non-voting and may be
redeemed by the Company at $.005 per right at any time until 10 days following
the date the rights are triggered. Under certain circumstances, the Board of
Directors may extend the redemption period beyond the 10 days and may amend
certain provisions of the rights plan. In connection with these rights, the
Board of Directors has reserved for issuance the same number of shares as are
outstanding at any point in time.
The Company has five stock option plans in effect for officers and key
associates. At December 31, 1994, 1,279,562 shares were reserved for issuance
under these plans. Under the terms of these plans, which have been approved by
the company's stockholders, incentive stock options may be issued at an exercise
price of not less than the fair market value of the stock on date of grant and
nonstatutory options may be issued at a $1.00 exercise price. The outstanding
options and exercise prices are adjusted to reflect any stock splits and stock
dividends. The incentive stock options become exercisable three years after date
of grant, and, depending upon Board of Director determination at the time of
grant, the nonstatutory options either become exercisable three years after date
of grant or in 20 percent annual installments commencing five years after date
of grant. All unexercised options expire 10 years after date of grant.
48 of 51
<PAGE>
At December 31, 1994, a total of 120,000 incentive stock options and
736,605 nonstatutory options were outstanding under the plans. The ability to
grant options under the existing plans expires at various dates to February
2003.
Stock option transactions are summarized as follows (after giving
retroactive effect to the stock split):
<TABLE>
<CAPTION>
STOCK OPTION TRANSACTIONS
===================================================================================================================
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of Option Shares
Granted 107,900 136,250 212,600
Became exercisable 255,732 79,981 83,858
Exercised 177,406 110,046 127,528
Canceled 124,635 15,412 25,734
Outstanding at end of year 856,605 1,050,746 1,039,954
Exercisable at end of year 227,073 149,547 179,612
Option Price Range (per share)
Granted $ 1.00 $ .50 $ .50
Exercised .25-9.38 .25-9.38 .25-9.38
Outstanding at end of year .25-9.38 .25-9.38 .25-9.38
===================================================================================================================
</TABLE>
For nonstatutory stock options, the excess of the fair market value over
the exercise price on date of grant is accrued ratably as compensation expense
from the date of grant to the exercisable date. No accounting entries are made
for incentive stock options until they are exercised.
8 LEASES
Basic or minimum rental expenses for operating and month-to-month leases
amounted to $6,144,000 in 1994, $5,540,000 in 1993, and $5,511,000 in 1992.
The Company has various operating leases with initial or remaining terms of
more than one year. These leases have minimum lease payment requirements of
$5,854,000 in 1995, $4,505,000 in 1996, $3,654,000 in 1997, $2,877,000 in 1998,
and $1,801,000 in 1999. In addition to minimum rentals, certain lease agreements
provide for usage charges and cost-of-living increases. Lease agreements related
to real property have fixed payment terms based upon the lapse of time.
Certain lease agreements provide the Company with the option to purchase
the leased property at the end of the lease term at approximately fair market
value. Additionally, certain lease agreements contain renewal options of up to
three years with substantially the same terms.
49 of 51
<PAGE>
9 RELATED PARTY TRANSACTIONS
TJM sells to MacMillan Bloedel Building Materials (MBBM), a division of MB,
on terms comparable to other Company distributors. Sales to MBBM were
$116,452,000, $104,376,000, and $52,379,000 in 1994, 1993, and 1992,
respectively. Accounts receivable from MBBM at December 31, 1994, were
$2,188,000, at January 1, 1994, were $8,098,000, and at January 2, 1993, were
$1,859,000. Amounts due from MBBM are included in receivables in the
accompanying consolidated balance sheets.
MB provides certain technological and research assistance and computer
services support to TJM. Amounts incurred under this arrangement with MB were
$1,933,000, $1,223,000, and $2,851,000, for 1994, 1993, and 1992, respectively.
Quarterly, the partnerships make cash distributions to the Partners in lieu
of state and federal income taxes. Payments of $10,471,000, $4,455,000, and
$445,000 were made to MBA in 1994, 1993, and 1992, respectively. There were no
partner distributions made to the Outlook partners.
Certain employees who perform services for TJM at the former MB facilities
remain on the payroll of MB. The Partnership Agreement provides that MB will be
reimbursed for its actual payroll and related benefit costs relating to these
employees. Payroll reimbursements to MB for 1994, 1993, and 1992 were
$4,290,000, $5,164,000, and $4,539,000, respectively. MB also provides patent
administration, computer services support, and engineering designs at the
request of TJM. Amounts incurred under these arrangements were $26,000, $91,000,
and $414,000 for 1994, 1993, and 1992, respectively. Total payables to MB and
MBA for such services and tax distributions at December 31, 1994, January 1,
1994, and January 2, 1993, were $1,649,000, $3,120,000, and $1,519,000,
respectively, and are included in accounts payable in the accompanying
consolidated balance sheets.
10 SALE OF SUBSIDIARIES
Effective December 31, 1994, the Company sold its Canadian windows
subsidiaries, Dashwood Industries Ltd. and Laflamme and Frere, Ltd. to Andersen
Corporation. The agreement specifies a sale price which is approximately book
value. At December 31, 1994, the Company recorded a $19.8 million receivable
related to this sale, of which $2.7 million is recorded in other assets. This
non-cash transaction is not reflected in the company's Consolidated Statements
of Cash Flows.
11 GEOGRAPHIC INFORMATION
The primary business of the Company is the manufacture and marketing of
specialty building products for buildings in the light-construction industry.
More than 90 percent of the company's sales are derived from this activity.
The Company operates primarily in two countries, the United States and
Canada; the majority of all sales are made domestically in those countries.
Geographic information about the company's operations for the three years ended
December 31, 1994, is as follows:
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
United States Canada Consolidated
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 Sales to unaffiliated customers $530,866 $88,010 $618,876
Income (loss) from operations 46,543 (5,255) 41,288
Identifiable assets 578,476 36,001 614,477
-------------------------------------------
1993 Sales to unaffiliated customers $462,738 $88,466 $551,204
Income (loss) from operations 36,113 (3,277) 32,836
Identifiable assets 401,187 53,789 454,976
-------------------------------------------
1992 Sales to unaffiliated customers $323,934 $76,546 $400,480
Income (loss) from operations (2,362) (5,865) (8,227)
Identifiable assets 292,754 52,735 345,489
===================================================================================================================
</TABLE>
Certain products are transferred between the United States and Canada for
further manufacture and marketing; these transfers between geographic areas
totaled approximately $16,243,000 in 1994, $23,344,000 in 1993, and $11,872,000
in 1992. The transfer price is approximately the same price charged to similar
customers.
50 of 51
<PAGE>
12 INDUSTRY SEGMENTS
The Company classifies its manufactured products into two core business
units: engineered lumber products and window operations. Summary financial
information by business unit is as follows:
<TABLE>
<CAPTION>
===================================================================================================================
EXPRESSED IN THOUSANDS
Engineered Window
Lumber Operations Other Consolidated
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 Sales to unaffiliated customers $496,259 $122,617 $ -- $618,876
Income (loss) from operations 53,800 (8,895) (3,617) 41,288
Identifiable assets 464,828 83,987 65,662 614,477
Depreciation and amortization 24,276 4,029 38 28,343
Capital expenditures 148,647 1,997 1,719 152,363
-------------------------------------------------------
1993 Sales to unaffiliated customers $436,874 $114,330 $ -- $551,204
Income (loss) from operations 45,995 (10,840) (2,319) 32,836
Identifiable assets 304,015 66,199 84,762 454,976
Depreciation and amortization 19,947 4,076 36 24,059
Capital expenditures 30,004 5,414 -- 35,418
-------------------------------------------------------
1992 Sales to unaffiliated customers $289,971 $110,509 $ -- $400,480
Income (loss) from operations (3,998) (402) (3,827) (8,227)
Identifiable assets 277,474 63,174 4,841 345,489
Depreciation and amortization 18,295 3,576 26 21,897
Capital expenditures 12,471 7,156 49 19,676
-------------------------------------------------------
===================================================================================================================
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the stockholders of TJ International, Inc.:
We have audited the accompanying consolidated balance sheets of TJ
International, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1994, January 1, 1994, and January 2, 1993, and the related consolidated
statements of income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TJ International, Inc. and
subsidiaries as of December 31, 1994, January 1, 1994, and January 2, 1993, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
as of the beginning of 1992, the Company changed its method of accounting for
income taxes in accordance with Statement No. 109 of the Financial Accounting
Standards Board.
/s/Arthur Andersen LLP
Boise, Idaho
February 2, 1995
51 of 51
<PAGE>
EXHIBIT 3
STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 5, 1995
BETWEEN
TJ INTERNATIONAL, INC.
AND
ANDERSEN CORPORATION
<PAGE>
TABLE OF CONTENTS
PAGE
1. PURCHASE OF STOCK. . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Shares to be Purchased. . . . . . . . . . . . . . . . . . . . 1
(b) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Final Determination, Payments and Allocation of Fixed
Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Contingent Purchase Price and Payment . . . . . . . . . . . . 7
(f) Expenses and Refusal to Continue . . . . . . . . . . . . 8
2. REPRESENTATIONS AND WARRANTIES OF TJI. . . . . . . . . . . . . . . 9
(a) Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . 9
(b) Corporate Organization, Minute Books and Records. . . . . . . 9
(c) Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Authorization . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . 11
(f) Consents and Approvals. . . . . . . . . . . . . . . . . . . . 11
(g) Financial Statements. . . . . . . . . . . . . . . . . . . . . 12
(h) Loss Contingencies; Other Liabilities . . . . . . . . . . . . 12
(i) Absence of Certain Changes. . . . . . . . . . . . . . . . . . 12
(j) Real Properties . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Machinery, Equipment, Vehicles and Personal Property. . . . . 14
(l) Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Receivables and Payables. . . . . . . . . . . . . . . . . . . 14
(n) Intellectual Property . . . . . . . . . . . . . . . . . . . . 15
(o) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 16
(p) Tax and Government Returns. . . . . . . . . . . . . . . . . . 16
(q) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(r) Pension and Retirement Plans. . . . . . . . . . . . . . . . . 17
(s) Bank Accounts; Powers of Attorney . . . . . . . . . . . . . . 19
(t) Contracts and Commitments; No Default . . . . . . . . . . . . 20
(u) Orders, Commitments and Returns . . . . . . . . . . . . . . . 21
(v) Employment Matters. . . . . . . . . . . . . . . . . . . . . . 21
(w) Dealers and Suppliers . . . . . . . . . . . . . . . . . . . . 24
(x) Permits and Other Operating Rights. . . . . . . . . . . . . . 24
(y) Compliance with Law . . . . . . . . . . . . . . . . . . . . . 24
(z) Assets of Business. . . . . . . . . . . . . . . . . . . . . . 24
(aa) Business Generally. . . . . . . . . . . . . . . . . . . . . . 24
(ab) Environmental and Occupational Health and Safety
Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(ac) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(ad) Outlook Representations . . . . . . . . . . . . . . . . . . . 26
(ae) Accuracy of Information . . . . . . . . . . . . . . . . . . . 26
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . . . 26
(a) Corporate Organization. . . . . . . . . . . . . . . . . . . . 26
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . 26
(d) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
(e) Consents and Approvals. . . . . . . . . . . . . . . . . . . . 27
(f) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Agreements as to Specified Matters. . . . . . . . . . . . . . 27
(b) Conduct of Business . . . . . . . . . . . . . . . . . . . . . 29
(c) No Solicitation of Alternate Transaction. . . . . . . . . . . 29
(d) Full Access to Purchaser. . . . . . . . . . . . . . . . . . . 29
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Filings; Consents; Removal of Objections. . . . . . . . . . . 30
(g) Further Assurances; Cooperation; Notification . . . . . . . . 30
(h) Supplements to Disclosure Schedule. . . . . . . . . . . . . . 31
(i) Public Announcements. . . . . . . . . . . . . . . . . . . . . 31
5. CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . 31
(a) Representations and Warranties True . . . . . . . . . . . . . 31
(b) Performance . . . . . . . . . . . . . . . . . . . . . . . . . 32
(c) Required Approvals and Consents . . . . . . . . . . . . . . . 32
(d) Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . 32
(e) No Proceeding or Litigation . . . . . . . . . . . . . . . . . 32
(f) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . 32
(g) Legislation . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Acceptance by Counsel to Purchaser. . . . . . . . . . . . . . 32
(i) Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 32
(j) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) Collective Bargaining Agreement . . . . . . . . . . . . . . . 33
(l) Management Employees. . . . . . . . . . . . . . . . . . . . . 33
(m) Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . 33
(n) Release. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6. CONDITIONS TO TJI'S OBLIGATIONS. . . . . . . . . . . . . . . . . . 33
(a) Representations and Warranties True . . . . . . . . . . . . . 33
(b) Performance . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(d) No Proceeding or Litigation . . . . . . . . . . . . . . . . . 34
(e) Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 34
(f) Opinion of Purchaser's Counsel. . . . . . . . . . . . . . . . 34
(g) Acceptance by Counsel . . . . . . . . . . . . . . . . . . . . 34
(h) Management Employees. . . . . . . . . . . . . . . . . . . . . 34
7. TERMINATION AND ABANDONMENT. . . . . . . . . . . . . . . . . . . . 34
(a) Methods of Termination. . . . . . . . . . . . . . . . . . . . 34
(b) Procedure Upon Termination. . . . . . . . . . . . . . . . . . 34
8. SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 35
(a) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Indemnification by Purchaser -- Untrue Representations
or Breach of Warranties or Covenants. . . . . . . . . . . . . 35
(c) Indemnification by TJI -- Untrue Representation or
Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . 35
(d) Indemnification by and Covenants of TJI -- Employment
Termination . . . . . . . . . . . . . . . . . . . . . . . . . 36
<PAGE>
(e) Indemnification - Indemnities Relating to
Environmental Matters Described in Exhibit 8(e). . . . . . . 36
(f) Indemnification - Indemnities Regarding Litigation
Described in the Disclosure Schedule. . . . . . . . . . . . . 37
(g) Indemnification by TJI -- Other . . . . . . . . . . . . . . . 37
(h) Limitation on and Method for Making Claims for
Indemnification . . . . . . . . . . . . . . . . . . . . . . . 37
(i) Special Procedures Regarding Environmental Matters. . . . . . 38
9. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . 39
(a) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Amendment and Modification. . . . . . . . . . . . . . . . . . 39
(c) Waiver of Compliance; Consents. . . . . . . . . . . . . . . . 39
(d) No Third Party Beneficiaries. . . . . . . . . . . . . . . . . 39
(e) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(f) Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 40
(g) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 41
(h) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 41
(i) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(j) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 41
(k) Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . 41
(l) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 42
(m) Non-Competition . . . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
LIST OF EXHIBITS
NAME OF EXHIBIT NUMBER OF EXHIBIT
--------------- -----------------
Dashwood and Laflamme Pro Forma Balance Sheet. . . . . . Exhibit 1(a)
Disclosure Schedule. . . . . . . . . . . . . . . . . . . Exhibit 2
Purchaser Approvals. . . . . . . . . . . . . . . . . . . Exhibit 3(e)
Certain Environmental Matters. . . . . . . . . . . . . . Exhibit 8(e)
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of January 5, 1995, is by and
between ANDERSEN CORPORATION, a corporation organized under the laws of the
State of Minnesota ("Purchaser") and TJ INTERNATIONAL, INC., a corporation
organized under the laws of the State of Delaware ("TJI").
A. TJI recently transferred to OUTLOOK WINDOW PARTNERSHIP, a partnership
organized under the laws of Delaware ("Outlook") record ownership of all of the
shares of the outstanding capital stock, common and preferred (collectively the
"Stock") of Dashwood Industries Limited, a company organized under the laws of
Ontario, Canada (the "Company"), but retained beneficial ownership thereof,
including a right to require Outlook to divest itself of such record ownership
and take other related action in favor of Purchaser;
B. Purchaser wishes to acquire and TJI wishes Outlook to sell to Purchaser
the Stock on the terms and conditions set forth herein.
C. The parties hereto wish to make certain representations, warranties,
covenants and agreements in connection with such acquisition and sale and
prescribe various conditions to such transaction.
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
ARTICLE 1
1. PURCHASE OF STOCK.
(a) SHARES TO BE PURCHASED. Subject to the terms hereof and upon
satisfaction of all conditions to the obligations of the parties contained
herein (other than such conditions as shall have been waived in accordance with
the terms hereof), TJI agrees to sell, transfer, assign and deliver its
beneficial ownership of, and to cause Outlook to sell, transfer, assign and
deliver its record ownership of, the Stock to Purchaser, and Purchaser agrees to
acquire the same at the Closing (as hereinafter defined), such acquisition to be
effective for financial accounting as of midnight between December 31, 1994 and
January 1, 1995 (the "Effective Time"), but effective for tax purposes at the
start of the day of the Closing (the "Tax Effective Date"), it being agreed that
TJI and Purchaser shall each take all reasonable steps to ensure that the 1994
tax years of Dashwood and R. Laflamme & Frere Inc., a corporation organized
under the laws of Quebec and a wholly-owned subsidiary of the Company
("Laflamme") is extended so as to end on the day preceding the day of Closing.
(b) PURCHASE PRICE. Purchaser will, in full payment for both record and
beneficial ownership of the Stock, pay a purchase price equal to the sum of the
Dashwood Price plus the Laflamme Price plus
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Three Hundred Thousand United States Dollars (U.S. $300,000) (this sum the
"Fixed Purchase Price"), plus the amount, if any, of the Contingent Purchase
Price as defined in Section 1(e) hereof (collectively the "Purchase Price").
The Dashwood Price shall be equal to the sum of Adjusted Net Worth of the
Company plus the Fourth Quarter Loss Adjustment plus the Risk Asset Obligation.
Adjusted Net Worth of the Company shall mean the amount of the
shareholders' equity of the Company as of the Effective Time, adjusted as
provided herein and determined under generally accepted accounting principles as
applied in the United States ("GAAP") applied on a basis consistent with the
application thereof in the preparation of the financial statements of the
Company as of September 30, 1994 ("DW 94 GAAP"), all as reflected in the pro
forma balance sheet of the Company as of September 30, 1994 attached hereto as
Exhibit 1(a) (the "Dashwood Pro Forma Balance Sheet"), but in any event applying
materiality standards determined assuming the Company is a stand-alone business;
provided that (I) the warranty reserve shall be determined by reference to
objective criteria such as historic experience, (II) there shall be an
appropriate accrual under GAAP reflecting the tax position of the Company on a
stand-alone basis (without regard to the NOLs or the Tax Receivable as
hereinafter defined) as of the Tax Effective Date and (III) there shall in any
event be excluded from the computation of Adjusted Net Worth of Dashwood any
amounts attributable to:
(i) so much of the deferred tax provision of the Company as reflects
only an inter-company allocation of consolidated tax obligations of TJI and
its subsidiaries, referred to in the balance sheet of the Company as of
September 30, 1994, which is included in the first column of Exhibit
1(a)(the "DW 9/94 Balance Sheet") as the "tax cushion";
(ii) any accrual with respect to the right to receive a refund with
respect to income taxes, whether designated as an asset or a contra-account
liability, including all or any part of the One Million Eight Hundred Two
Thousand Canadian Dollars (Can. $1,802,000.00) claimed immediately prior to
the Tax Effective Time by the Company from the province of Ontario as a
refund of taxes and interest previously paid (such amount so claimed the
"Tax Receivable");
(iii) net operating (non-capital) losses of the Company incurred
prior to the Tax Effective Time and available as a deduction against future
taxable income for Canadian federal and provincial income tax purposes (the
"Dashwood NOLs") or any benefit therefrom (including any "book benefit" of
the type described in the DW 9/94 Balance Sheet);
(iv) other selected assets of the Company which are neither current
assets or fixed operating assets of the Company and which the parties
mutually agree shall be
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transferred to TJI or its affiliates in kind effective as of the Effective
Time;
(v) any inter-company obligations of the Company to TJI, Outlook or
any other of their respective affiliates (including Laflamme), except any
trade payable for value received incurred in the ordinary course of
business; and
(vi) the Company's equity holdings in Laflamme, and to the extent
included in the computation of Adjusted Net Worth of Laflamme, any debt of
the Company to any bank or financial institution, including any debt
associated with the acquisition of Laflamme.
The Fourth Quarter Loss Adjustment shall mean an amount equal to the lesser
of U.S. $300,000 or one third of the net operating losses incurred by the
Company during the fourth quarter of its 1994 fiscal year and which are
available as a deduction against future taxable income for Canadian federal and
provincial income tax purposes.
The Risk Asset Obligation shall mean fifty percent (50%) of the Tax
Receivable, plus an amount equal to the sum of any income taxes together with
interest and penalties thereon assessed against the Company after the Effective
Time but prior to the date that the Fixed Purchase Price is finally determined
in accordance with Section 1(d) hereof, provided that such sum shall be accrued
for and reduce the Fixed Purchase Price as so determined (such sum the "Interim
Assessments"), plus fifty percent (50%) of the tax benefit of the difference
between the Dashwood NOLs less the amount, if any, of any indebtedness forgiven
for Canadian income tax purposes from or in connection with the transactions
contemplated hereby (including those described in Section 1(d) hereof) and not
otherwise taken into account in computing the Dashwood NOLs, the tax benefit of
such difference being forty percent (40%) thereof, net of tax cost associated
with the receipt thereof, minus One Hundred Sixty-Seven Thousand Canadian
Dollars (Can. $167,000).
The Laflamme Price shall be equal to the sum of the Adjusted Net Worth of
Laflamme plus the Applied NOL, in each case computed as of the Effective Time.
Adjusted Net Worth of Laflamme shall mean the amount of the shareholders'
equity of Laflamme as of the Effective Time, adjusted as provided herein and
determined under GAAP applied on a basis consistent with the application thereof
in preparation of the balance sheet of Laflamme as of December 3, 1994 (such
GAAP the "LF 94 GAAP" and such balance sheet the "LF 12/94 Balance Sheet"), but
in any event applying materiality standards determined assuming Laflamme is a
stand-alone business; provided that (1) there shall be an appropriate accrual
under GAAP reflecting the tax position of Laflamme on a stand alone basis
without regard to items described (x) and (y) of this Section as of the Tax
Effective Date, (2) the warranty reserve shall be determined by reference to
objective criteria such as historic experience, and (3) there shall in any
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event be excluded from the computation of Adjusted Net Worth of Laflamme any
amounts attributable to:
(w) other selected assets of Laflamme which are not current assets or fixed
operational assets of Laflamme and which the parties mutually agree shall be
transferred to TJI or its affiliates in kind effective as of the Effective Time;
(x) any tax asset, including any right to a refund or other repayment of
income taxes, whether designated as an asset or a contra-liability account;
(y) net operating (non-capital) losses of Laflamme incurred prior to the
Tax Effective Time and available as a deduction against future taxable income
for Canadian federal and provincial income tax purposes (the "LF NOLs") or any
benefit therefrom (including any "book benefit" thereof); and
(z) any inter-company obligations of Laflamme to TJI, Outlook or any of
their respective affiliates (including Dashwood), except for any trade payables
for value received incurred in the ordinary course of business.
The Applied NOL shall mean an amount equal to the financial accounting balance
sheet "book benefit" of its net operating losses which Laflamme is able to
accrue in accordance with LF 94 GAAP as an offset against its deferred taxes
payable as of the Effective Time.
(c) CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to Section 7
hereof, a closing of the transactions contemplated hereby (the "Closing") will
be held at the offices of Oppenheimer Wolff & Donnelly in St. Paul, Minnesota on
January 5, 1995, or at such other time or place as the parties may agree
provided, however, that if any of the conditions provided for in Sections 5
and 6 hereof shall not have been satisfied or waived by such date, then the
party to this Agreement in whose favor such condition runs shall be entitled to
postpone the Closing to a date not later than the Termination Date, by notice to
the other parties until such condition or conditions shall have been satisfied
or waived unless the parties hereto shall agree in writing to extend the date of
such Closing (the date on which the Closing is to occur in accordance with the
foregoing is herein referred to as the "Closing Date").
At the Closing, TJI shall, and shall cause Outlook to, take all actions
reasonably required by Purchaser to effect the transactions contemplated hereby.
Without limiting the foregoing or the other requirements of this Agreement, the
following shall occur, in a manner in form and substance satisfactory to
Purchaser, in the order set forth below:
(i) TJI shall cause Outlook at the Closing to deliver to Purchaser
certificates representing 100% of the Stock, duly
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endorsed for transfer to Purchaser or as Purchaser shall direct, in
exchange for delivery to TJI at the Closing of a non-interest bearing
promissory note of Purchaser in a principal amount equal to Can.
$3,736,000, the terms and payment schedule of which note shall be
satisfactory to each of TJI and Purchaser (the "Closing Note") and
(ii) Purchaser shall within two business days of the Closing Date loan
money to the Company and/or acquire from the Company Class E, Series A
Preference Shares ("New Preferred") with the effect of infusing into the
Company an aggregate amount of at least U.S. $ 11,800,000.00 and
(iii) Purchaser shall cause the Company to repay within two business
days of the Closing Date then outstanding inter-company indebtedness of the
Company to TJI and/or its affiliates in an amount equal to U.S.
$11,800,000.00 (the initial principal amount of the Closing Note, for such
purpose being deemed to be U.S. $2,680,000, plus the U.S. $11,800,000.00 of
inter-company indebtedness so repaid collectively the "Closing Payment").
The delivery of the Closing Note to TJI by Purchaser shall conclusively be
deemed to satisfy the obligation of Purchaser to pay an amount of the Purchase
Price equal to the original principal amount of the Closing Note.
At the Closing, TJI shall, or shall cause Outlook to, further
(y) deliver or cause Company to deliver to the Purchaser all the
documents and records relating to Company's and Laflamme's businesses
and not in their possession, including all minute books, corporate
records and documents, corporate seals, books of account, accounting
records, past financial statements, tax returns, share certificate
books and share records, title documents and surveys, all contracts,
agreements, licenses, permits, patents, trade marks or other
instruments to which the Company or Laflamme is a party or by which it
is bound, lists of suppliers and customers of the Company or Laflamme
and all other documents, files, records and other data financial or
otherwise of the Company or Laflamme which may be in the possession of
the Company, Laflamme, TJI or Outlook, and
(z) cause such directors of Company and Laflamme as the Purchaser may
specify to resign in favour of nominees of the Purchaser, such
resignations to be effective at the Closing unless otherwise specified
by the Purchaser,
(d) FINAL DETERMINATION, PAYMENTS AND ALLOCATION OF FIXED PURCHASE PRICE.
The Purchaser shall cause the Company and Laflamme to each prepare its draft
financial statements in Canadian dollars as of the Effective Time in the former
case in accordance with DW 94 GAAP and in the latter case in accordance with LF
94 GAAP. The
5
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amount of Adjusted Net Worth of the Company, the Adjusted Net Worth of Laflamme,
the Fourth Quarter Loss Adjustment, and the Applied NOL shall each be determined
based on a full audit, including appropriate footnotes, of each of the Company's
and Laflamme's balance sheets as included in such draft financial statements
applying such standards, and in the case of the Fourth Quarter Loss Adjustment
and the Applied NOL based on the proper application of federal and provincial
tax law (and to the extent not inconsistent therewith the prior practice of the
relevant corporation, including prior practices with respect to taking
discretionary depreciation deductions). The Risk Asset Obligation shall be
determined based on the proper application of federal and provincial tax law
(and to the extent not inconsistent therewith the prior practices of the
relevant corporation). Such determinations shall be conducted and made by
Arthur Andersen & Co., TJI's auditors ("AA"), who shall issue its opinions with
respect to each such balance sheet and who shall be required by the parties to
provide reasonable confirmation of its tax determinations, and be reviewed by
Ernst & Young LLP ("EY"), Purchaser's auditors (such audit and such Fourth
Quarter Loss Adjustment, Risk Asset Obligation and Applied NOL determinations
collectively the "Audit"). EY shall have full access to the working papers of
AA. The Audit shall be completed within 90 days of the Effective Time and
submitted to Purchaser and TJI.
In the event that the Purchaser and TJI shall not have agreed in writing
within ninety (90) days of the Effective Time that the amount of the Adjusted
Net Worth of each of the Company and Laflamme, of the Fourth Quarter Loss
Adjustment, the Risk Asset Obligation and the Applied NOL have been properly
determined through the Audit, and TJI and Purchaser are unable to resolve any
such disagreement to their mutual satisfaction within thirty (30) days
thereafter, such disagreement shall be submitted to KPMG Peat Marwick or such
other firm of certified public accountants as the parties shall jointly
designate in writing (the "Independent Firm"). The Independent Firm shall be
requested to determine as quickly as is reasonably possible the proper
resolution of the subject of disagreement applying the terms of this Agreement
and acting as experts and not as arbitrators. The determination of the
Independent Firm shall be final and binding on the parties absent manifest
error. The cost of the Independent Firm shall be shared by the Purchaser and
TJI equally.
In the event the Fixed Purchase Price as finally determined exceeds the
Closing Payment (the "Shortfall"), Purchaser, within ten (10) days of such
determination, (i) shall first issue to TJI a note (the "Reconciliation Note")
which shall be on the same terms as the Closing Note except that the principal
amount thereof shall be equal to the excess, if any, of (i) the Risk Asset
Obligation over (ii) Three Million Three Hundred Eighteen Thousand Canadian
Dollars (Can. $3,318,000) and except that no principal on the Reconciliation
Note shall be payable unless and until the aggregate Tax Benefits (as defined in
the Closing Note) which have been Realized (as such term is also defined in the
Closing Note) equals Three Million Four Hundred Eighty-Five Thousand Canadian
Dollars
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(Can. $3,485,000) and (ii) shall next cause the Company to repay, if a positive
number, the lesser of an amount equal to the difference between the Shortfall
minus the original principal amount of the Reconciliation Note or an amount
equal to any indebtedness owed by the Company to TJI and its affiliates as set
forth in the balance sheet prepared as a part of the Audit which has not been
repaid by making of the Closing Payment (the "Inter-Co Debt") and (iii) shall
finally if the Shortfall exceeds the original principal amount of the
Reconciliation Note plus the aggregate amount of the Inter-Co Debt repaid in
accordance with clause (ii), pay the excess directly to TJI. The delivery of
the Reconciliation Note to TJI by Purchaser shall conclusively be deemed to
satisfy the obligation of Purchaser to pay an amount of the Purchase Price equal
to the original principal amount of the Reconciliation Note.
In the event that the Closing Payment shall exceed the Fixed Purchase Price
as so determined (such excess the "Excess Payment") (i) the first U.S.$300,000
of the Excess Payment shall be applied to eliminate the first U.S. $300,000.00
installment of principal under the Closing Note, and the balance, if any, of the
Excess Payment shall be paid by TJI to Andersen in cash within such ten (10) day
period.
In the event that after making the payments required to be made by this
section 1(d) there shall be any unpaid indebtedness owed by the Company or
Laflamme to TJI, Outlook, any of their respective affiliates or any person
claiming by or through any of them, TJI hereby agrees to forgive, and cause
Outlook and such affiliates and persons to forgive, such indebtedness.
Notwithstanding anything else contained in this Agreement, Purchaser shall
have no obligation to pay to TJI in any form the amount of any Shortfall unless
and until TJI shall have delivered to Purchaser a certificate issued pursuant to
Section 116 of the INCOME TAX ACT (CANADA) in respect of the sale of the Stock
containing a certificate limit at least equal to the amount of the Fixed
Purchase Price allocated to the Stock in accordance with the foregoing.
(e) CONTINGENT PURCHASE PRICE AND PAYMENT. Contingent Purchase Price shall
be equal to fifty percent (50%) of the difference between (i) the sum of the
amount if any finally recovered from the province of Ontario with respect to the
Tax Receivable together with any interest thereon paid to the Company in
connection with the recovery thereof, plus the amount if any finally recovered
with respect to any Interim Assessments together with any interest thereon paid
to the Company in connection with the recovery thereof, plus the amount if any
of corporate income taxes, federal or provincial actually saved by reason of the
application of Dashwood NOLs (such savings the "NOL Savings") together with any
interest thereon paid to the Company in connection with the recovery of taxes
paid because the Company was improperly denied the right to apply such net
operating (non-capital) losses less (ii) the sum of the Risk Asset Obligation
plus
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Can. $167,000 plus any tax cost incurred by the Company in connection with
recovering any Risk Asset Obligation (for example, because of income taxes
imposed on interest paid by any taxing authority and included in such or by
reason of any increase in the Large Corporations Tax for the year due to the
reduction in the amount of the two percent (2%) federal surtax on account of the
application of the Dashwood NOLs).
The amount of any Contingent Purchase Price attributable to recovery of the
Tax Receivable or any Interim Assessments shall be paid to TJI by the Purchaser
within thirty (30) days following the date the Tax Receivable or such Interim
Assessment, as the case maybe, shall be paid to the Company by the province of
Ontario, or if later following the day after which any right which the province
of Ontario may have to seek to overturn or to otherwise challenge the right of
Dashwood to the Tax Receivable or such Interim Assessment, as the case maybe,
whether by administrative challenge, appeal or otherwise, shall have lapsed.
The amount of any Contingent Purchase Price attributable to NOL Savings shall be
paid to TJI by the Purchaser after the tax return in which the relevant Pre-95
NOLs are so applied is filed (the date of such filing which reflects particular
NOL Savings the "Filing Date") within thirty (30) days following the day on
which any right of the province of Ontario or the Canadian government to seek to
disallow or otherwise challenge such application or otherwise seek to reduce or
eliminate such NOL Savings, whether by administrative challenge, appeal or
otherwise, shall have lapsed (the "Lapse Date"). Contingent Purchase Price
attributable to interest paid to and received by the Company shall be payable at
the same time as the amount of the associated recovery of all or any portion of
the Tax Receivable, Interim Assessments or NOL Savings are payable to TJI in
accordance with the foregoing.
Interest shall be payable on portions of the Contingent Purchase Price
which may be payable to TJI in accordance with the foregoing only as follows:
from and after the Filing Date with respect to an amount of NOL Savings until
the earlier of: (A) the date such NOL Savings shall be lost to the Company by
reason of an assessment, administrative challenge, appeal of a proceeding in
progress or otherwise, and (B) the Lapse Date with respect to such NOL Savings.
Interest shall be payable on such amount on the last business day of each
calendar quarter at BMo LIBOR as in effect from time to time. BMo LIBOR with
respect to interest accruing during a calendar year shall be determined annually
as of the first business day of such year and shall be the interest rate at
which the Bank of Montreal offered or would have offered on such date to place
with first-class banks in the London interbank market deposits in Canadian
dollars in amounts comparable to such NOL Savings for a period of twelve months.
(f) EXPENSES AND REFUSAL TO CONTINUE. The parties agree that TJI shall
reimburse the Purchaser and the Company for fifty percent (50%) of all out-of-
pocket costs and expenses, including attorneys and accountants fees, incurred by
it in any attempt by it to recover all or any portion of the Tax Receivable or
any Interim Assessments or to establish the validity, availability and
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applicability of all or any portion the NOL Savings (whether or not resulting in
the payment of any monies to TJI because such attempt fails, by reason of the
application of clause (ii) of Section 1(e) hereof or otherwise). TJI shall have
right to approve the Company's selection of counsel and accountants to represent
it with respect to such attempted recovery, which approval will not be
unreasonably withheld or delayed. Such reimbursement shall be made by TJI
within thirty (30) days of written demand by Purchaser. In the event that
either party (the "Refusing Party") wishes to cease to seek to recover the Tax
Receivable or any identifiable component of any Interim Assessments or the NOL
Savings, it shall so notify the other party. From and after the delivery of
such notice, such other party may at its option also discontinue seeking such
recovery, or continue to seek such recovery at its sole expense, such expenses
to include payment to the Refusing Party of its cost in providing support
reasonably requested by such other party in continuing to seek such recovery.
In such event if such other party is not already entitled, by virtue of the
Closing Note, the Reconciliation Note or otherwise, to 100% of the recovery of
the tax benefit which the Refusing Party does not wish to seek to recover, such
other party shall thereafter be so entitled.
(g) CONVERSIONS. All payment obligations (including amounts of Inter-Co
Debt) will be initially determined in Canadian dollars but shall be paid in U.S.
dollars at a conversion rate equal to the average of the median of the buyers'
and sellers' rates as of the close of business on the last business day of each
of the four (4) weeks preceding the week during which the payment is made, all
as quoted by the Bank of Canada; provided, however, that the principal amount of
the Closing Note and the Reconciliation Note and interest thereon shall be
denominated and paid in Canadian dollars, and the amount of the Risk Asset
Obligation shall be determined and remain in Canadian dollars.
ARTICLE 2
2. REPRESENTATIONS AND WARRANTIES OF TJI.
TJI hereby represents and warrants to Purchaser as of the date hereof as
follows:
(a) DISCLOSURE SCHEDULE. The disclosure schedule marked as Exhibit 2
hereto (the "Disclosure Schedule") is divided into sections which correspond to
the sections of this Section 2. The Disclosure Schedule comprises an accurate
and complete list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties set
forth below and a disclosure or description made in any section thereof shall
constitute a disclosure for purposes of any other section of this Agreement.
(b) CORPORATE ORGANIZATION, MINUTE BOOKS AND RECORDS. Each of the
Company, Laflamme and TJI is a corporation duly organized and validly existing
under the laws of the jurisdiction in which it is incorporated, has full
corporate power and authority to carry on
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its business as it is now being conducted and to own, lease and operate its
properties and assets. Each of the Company and Laflamme is duly qualified or
licensed to do business in every other jurisdiction in which the character or
location of the properties and assets owned, leased or operated by it or the
conduct of its business requires such qualification or licensing and is in good
standing in each such jurisdiction, except in such jurisdictions in which the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a material adverse effect on it or its current activities; and
has heretofore delivered to Purchaser complete and correct copies of its
certificate and articles of incorporation and bylaws, as amended and presently
in effect. The Disclosure Schedule contains a list for each of the Company and
Laflamme of all jurisdictions in which it is qualified or licensed to do
business. Neither the Company nor Laflamme owns (and has not at any time on or
after March 30, 1992 owned) of record or beneficially more than five percent
(5%) of the outstanding voting securities of any corporation or partnership or
other legal entity, except that during such period the Company has owned
beneficially and of record all of the shares of the outstanding capital stock of
Laflamme, common and preferred.
The corporate records and minute books of each of the Company and Laflamme
contain complete and accurate minutes of all its meetings of and copies of all
its by-laws and resolutions passed by its directors and shareholders since its
incorporation; all such meetings were duly called and held, all such by-laws and
resolutions were duly passed and the share certificate books, registers of
shareholders, registers of transfers, registers of directors, register of debt
holders and other corporate registers of Company and Laflamme are each complete
and accurate in all material respects. There is in existence no shareholders'
agreement nor a unanimous shareholders' agreement governing the affairs of
Company or Laflamme. The Disclosure Schedule sets out the names of the current
officers and directors of each of the Company and Laflamme.
(c) CAPITALIZATION. The authorized capital stock of each of the Company
and Laflamme, is set forth on the Disclosure Schedule. With respect to each of
the Company and Laflamme (i) the number of shares of its capital stock
outstanding as of the date of this Agreement are set forth on the Disclosure
Schedule, (ii) all the issued and outstanding shares of its capital stock are
duly authorized, validly issued, fully paid, nonassessable and are without, and
were not issued in violation of, preemptive rights, (iii) there are no other
shares of its capital stock or other equity securities outstanding or any
securities convertible into or exchangeable for such shares, securities or
rights, (iv) there are no outstanding options, warrants, conversion privileges
or other rights to purchase or acquire any of its capital stock or other equity
securities or any securities convertible into or exchangeable for such shares,
securities or rights, (v) there are no contracts, commitments, understandings,
arrangements or restrictions by which it is bound to issue or acquire any
additional shares of its capital stock or other equity securities or any
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options, warrants, conversion privileges or other rights to purchase or acquire
any of its capital stock or other equity securities or any securities
convertible into or exchangeable for such shares, securities or rights.
(d) AUTHORIZATION. TJI has the legal capacity to enter into this
Agreement and each of TJI and Outlook has the legal capacity to carry out the
transactions contemplated hereby, including without limitation the legal
capacity to execute, deliver and perform the instruments, agreements or
contracts, if any, required by Section 5 to be executed and delivered by either
of them as a condition to Closing. This Agreement has been duly authorized and
has been duly and validly executed by TJI and constitutes its valid and binding
legal obligation, enforceable against it in accordance with its terms.
(e) NON-CONTRAVENTION. Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated herein
will: (i) violate or be in conflict with any provision of the articles,
certificate or certificate and articles of incorporation or bylaws of the
Company. Laflamme or TJI; or (ii) be in conflict with, or constitute a default,
however defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to any right of termination,
cancellation, imposition of fees or penalties under, any debt, note, bond,
lease, mortgage, indenture, license, obligation, contract, commitment,
franchise, permit, instrument or other agreement or obligation to which the
Company, Laflamme, Outlook or TJI is a party or by which any of them or their
respective properties or assets is or may be bound (unless with respect to which
defaults or other rights, requisite waivers or consents shall have been obtained
at or prior to the Closing) or (iii) result in the creation or imposition of any
mortgage, hypothec, pledge, lien, security interest, encumbrance, restriction,
prior claim, adverse claim, easement, servitude, right-of-way, tenancy, lease,
encroachment or charge of any kind, whether or not of record (herein a "Lien")
upon any property or assets of the Company or Laflamme, under any debt,
obligation, contract, agreement or commitment to which any of them is party or
by which any of them or their respective assets or properties is or may be
bound; or (iv) violate or cause a violation of any statute, treaty, law,
judgment, writ, injunction, decision, decree, order, regulation, ordinance or
other similar authoritative matters (sometimes hereinafter separately referred
to as a "Law" and sometimes collectively as "Laws") of any foreign, federal,
provincial, state or local governmental or quasi-governmental, administrative,
regulatory or judicial court, department, commission, agency, board, bureau,
instrumentality or other authority (hereinafter sometimes separately referred to
as an "Authority" and sometimes collectively as "Authorities").
(f) CONSENTS AND APPROVALS. With respect to Company, Laflamme, Outlook
and TJI, no consent, approval, order or authorization of or from, or
registration, notification,
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declaration or filing with (hereinafter sometimes separately referred to as a
"Consent" and sometimes collectively as "Consents") any individual or entity,
including without limitation any Authority, is required in connection with the
execution, delivery or performance of this Agreement by TJI or the consummation
by any of them of the transactions contemplated herein.
(g) FINANCIAL STATEMENTS. TJI has furnished to Purchaser with respect to
each of the Company and Laflamme its balance sheets and statements of operations
described on the Disclosure Schedule, which financial statements in any event
includes the DW 9/94 Balance Sheet and the LF 12/94 Balance Sheet. The most
recent balance sheet so described with respect to each of the Company and
Laflamme will be referred to herein as its "Latest Balance Sheet" or other words
indicating which corporations balance sheet is being described. All such
financial statements of each of the Company and Laflamme (i) are in accordance
with its books and records and have been, prepared in conformity with GAAP
consistently applied, and (ii) fairly present its financial position as of the
respective dates thereof and the results of operations for the periods then
ended, all in accordance with GAAP consistently applied for all periods.
(h) LOSS CONTINGENCIES; OTHER LIABILITIES. Except as reflected in its
Latest Balance Sheet or the footnotes thereto, and except for other liabilities
and obligations arising in the ordinary course since the date of its Latest
Balance Sheet which are consistent in type and amount with those reflected in
its Latest Balance Sheet, neither the Company nor Laflamme has (i) any loss
contingencies which for any reason are not required by GAAP to be accrued;
(ii) any other categories of liabilities or obligations, known or unknown, fixed
or contingent, liquidated or unliquidated which are not required by GAAP to be
accrued. For purposes of this Agreement, "Loss Contingency" shall have the
meaning accorded to it by GAAP.
(i) ABSENCE OF CERTAIN CHANGES. Since the date of its Latest Balance
Sheet, the Company and Laflamme have each owned and operated its assets,
properties and businesses in the ordinary course of business consistent with
past practice. Without limiting the generality of the foregoing, neither the
Company nor Laflamme has:
(i) suffered any adverse change in its condition (financial or
otherwise), assets, business and properties or experienced any event or
failed to take any action which reasonably could be expected to result in
such an adverse change;
(ii) suffered any loss, damage, destruction or other casualty
(whether or not covered by insurance) or suffered any loss of officers,
employees, dealers, distributors, independent contractors, customers, or
suppliers or other favorable business relationships;
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(iii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock; or purchased or redeemed any
shares of its capital stock;
(iv) agreed to lend any money or incurred any indebtedness for
borrowed money, or lent any money which is outstanding on the date hereof;
(v) subjected to any Lien, any of its properties or assets, tangible
or intangible;
(vi) acquired or disposed of any assets or properties except in the
ordinary course of business consistent with past practice;
(vii) forgiven or cancelled any debts or claims, or waived any rights
except in the ordinary course of business consistent with past practice;
(viii) entered into any transaction except in the ordinary course of
business consistent with past practice;
(ix) granted to any officer or salaried employee or any other
employee any increase in compensation in any form or paid any severance or
termination pay;
(x) entered into any commitment for capital expenditures for
additions to plant, property or equipment in excess of Can.$ 25,000; or
(xi) agreed, whether in writing or otherwise, to take any action
described in this section.
(j) REAL PROPERTIES. Each of the Company and Laflamme has good and
marketable title in fee simple in and to, or a leasehold interest in and to, all
of real property and fixtures thereon owned or occupied by it or otherwise
reflected in its Latest Balance Sheet (except for real property assets and
fixtures sold in the ordinary course of business since the date of its Latest
Balance Sheet), all of which property, and the respective interest of the
Company and Laflamme therein, is described in the Disclosure Schedule. Such
leasehold interests are valid and in full force and effect and enforceable in
accordance with their terms and there does not exist any violation, breach or
default thereof or thereunder. None of the real property assets or fixtures
owned by Company or Laflamme is subject to any Lien, except the following
(herein called "Permitted Liens"): (i) Liens securing specified liabilities or
obligations shown on the Latest Balance Sheet of the debtor corporation with
respect to which no breach, violation or default exists; (ii) minor
imperfections of title which do not impair the value, existing use or
transferability of such real property assets or fixtures; and (iii) Liens for
current taxes not yet due and payable or being contested in good faith by
appropriate
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proceedings. With respect to each of the Company and Laflamme, all real
properties owned by and leased to it are free from structural defects, in good
operating condition and repair (ordinary wear and tear excepted), with no
material maintenance, repair or replacement having been deferred or neglected,
and suitable for the intended use and free from other material defects. Each
such real property and its present use conform in all respects to all
occupational, safety or health, zoning, planning, subdivision, platting and
similar Laws, and there is, to the knowledge of TJI, the Company or Laflamme, no
such Law contemplated that would affect adversely the ownership or lease and
operation and use such real properties. Except as set forth in the Disclosure
Schedule, all public utilities necessary for the use and operation of any
facilities on the aforesaid real properties are available for use or access at
such properties and there is no legal or physical impairment to free ingress or
egress from any of such facilities or real properties.
(k) MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY. With respect to
each of the Company and Laflamme, it has good and marketable right, title and
interest in and to, or a leasehold interest in and to, all machinery, equipment,
vehicles and other personal property, tangible or intangible (including
inventories and receivables) owned or primarily utilized by it or otherwise
reflected in its Latest Balance Sheet (except for such items sold or otherwise
disposed of in the ordinary course of business since the date of its Latest
Balance Sheet), any such personal property under lease being separately
described in the Disclosure Schedule. All of such leasehold interests relating
to machinery, equipment, vehicles and other personal property are valid and in
full force and effect and enforceable in accordance with their terms and there
does not exist any violation, breach or default thereof or thereunder. None of
such machinery, equipment, vehicles or other personal property owned by Company
is subject to any Lien except Permitted Liens of the type described in
clause(j)(i). The machinery, equipment, vehicles and other personal property of
Company which are necessary to the conduct of its business are in good operating
condition and repair, ordinary wear and tear excepted, and fit for the intended
purposes thereof and no material maintenance, replacement or repair has been
deferred or neglected.
(l) INVENTORIES. All inventory of the Company or Laflamme the value of
which is included in the determination of its Adjusted Net Worth, consists of a
quality and quantity usable and salable in the ordinary course of business, and
the respective present quantities of all inventory of Company and Laflamme are
reasonable in the present circumstances of the businesses as currently conducted
or as proposed to be conducted.
(m) RECEIVABLES AND PAYABLES.
(i) With respect to each of the Company and Laflamme, it has good
right, title and interest in and to all its accounts and notes receivable
and trade notes and trade accounts reflected in its Latest Balance Sheet
and those acquired and
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generated since the date of its Latest Balance Sheet (except for those paid
since the date of its Latest Balance Sheet). None of such accounts and
notes receivable and trade notes and trade accounts is subject to any Lien.
Except to the extent of applicable reserves shown in its Latest Balance
Sheet, all of the accounts and notes receivable, trade notes and trade
accounts owing to Company constitute valid and enforceable claims arising
from bona fide transactions in the ordinary course of business, and there
are no claims, refusals to pay or other rights of set-off against any
thereof. No account or note debtor whose account or note balance exceeds
the amount set forth in the Disclosure Schedule at the date set forth
therein was delinquent in payment by more than ninety days. The aging
schedule of the accounts and notes receivable and trade notes and trade
accounts of Company previously furnished to Purchaser is complete and
accurate. All account or note receivable or trade note or trade account
are collectible in accordance with their terms, other than for such
accounts and notes which are not in excess of the reserves established
therefor in the Latest Balance Sheet in which it is reflected.
(ii) With respect to each of the Company and Laflamme, all accounts
payable and notes payable by it arose in bona fide transactions in the
ordinary course of business and no such account payable or note payable is
delinquent.
(n) INTELLECTUAL PROPERTY. The Company and Laflamme each owns or has
valid rights to use exclusively and perpetually, free of any Lien and without
the obligation to pay royalties or other compensation to any third party with
respect thereto, all Canadian, United States and other foreign patents,
trademarks, trade names, industrial designs or registrations therefor, utility
models or similar petty patents, servicemarks, copyrights, and any applications
therefor, schematics, technology, know-how, trade secrets, software code,
computer software programs or applications and tangible or intangible
proprietary information or material that are used or currently proposed to be
used in its business as heretofore conducted; provided that rights to any
software code, programs of applications which are generally commercially
available, and the copyrights associated therewith need not be exclusive or
perpetual (collectively the "Intellectual Property Rights"). The Disclosure
Schedule sets forth a full, complete and true list of all Canadian, United
States and other patents, trademarks, registered copyrights, tradenames,
industrial designs and registrations therefor and servicemarks, and any
applications therefor included in the Intellectual Property Rights, and
specifies the jurisdictions in which each such Intellectual Property Right has
been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. All patents,
trademarks, copyrights, service marks, trade names, industrial design and
registrations held by the Company or Laflamme are valid and subsisting. The
Company and Laflamme each owns or has valid rights
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to use exclusively and perpetually, free of any Lien and without obligation to
pay royalties or other compensation to any third party with respect thereto, all
advertising and promotional materials used by it, including any name or likeness
of any person or entity used or any words or symbols which may have acquired
secondary meaning to those exposed to such materials ("Promotional Materials").
No claims with respect to the Intellectual Property Rights or Promotional
Materials have been asserted or, to the knowledge of the TJI, the Company or
Laflamme, are threatened by any person, against the Company or Laflamme, nor do
any of them know of any valid grounds for any bona fide claims. There is no
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights by any third party. The conduct by each of the Company and
Laflamme of its business does not infringe upon the patents, industrial designs,
topographies, trade-marks, trade names, brand names, service marks, logos or
copyrights, whether or not registered and whether domestic or foreign, or the
trade secrets, know-how or confidential or proprietary information of any other
person.
(o) LITIGATION. There is no legal, administrative, arbitration, or other
proceeding, suit, claim or action of any nature or investigation, review or
audit of any kind (including without limitation a proceeding, suit, claim or
action, or an investigation, review or audit, involving any environmental Law or
matter), judgment, decree, decision, injunction, writ or order pending, noticed,
scheduled or, to the knowledge of TJI, the Company or Laflamme, threatened or
contemplated by or against or involving (i) the Company or Laflamme, or their
respective assets, properties or businesses (including the Intellectual Property
Rights or Promotional Materials) or their respective directors, officers, agents
or employees (but only in their capacity as such), whether at law or in equity,
before or by any person or entity or Authority, or (ii) TJI, Outlook, the
Company or Laflamme which questions or challenges the validity of this Agreement
or any action taken or to be taken by the parties hereto pursuant to this
Agreement or in connection with the transactions contemplated herein.
(p) TAX AND GOVERNMENT RETURNS. With respect to each of the Company and
Laflamme: (i) it has duly filed in a timely manner all tax returns required to
be filed by it (including any and all tax elections available to it in relation
to such tax returns) and all information returns as to which the non-filing or
late filing could result in interest or penalties, has made complete and
accurate disclosure in such returns and has paid all taxes shown on such returns
as being due and payable and has also paid all assessments and reassessments and
all other taxes, governmental charges, penalties, interest and fines due and
payable by it up to the date hereof and (ii) no federal or provincial taxes or
interest or penalties thereon are or will become due with respect to any period
which period includes any date prior to the Tax Effective Date
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except those which have been previously paid by it or for which an adequate
provision has been made in its Latest Balance Sheet . With respect to Laflamme
only, all non-capital losses which are claimed to have been incurred prior to
the Tax Effective Date, including any taken into account in computing Applied
NOL, are valid and available for application against the future income of
Laflamme or against deferred tax charges of LaFlamme as and when the tax accrued
for becomes payable. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment or
reassessment of income tax or the filing of any tax return by, or payment of any
tax by, or levying of any governmental charge against, the Company or Laflamme.
There are no actions, audits, assessments, reassessments, suits, proceedings,
investigations or claims now threatened or pending against the Company or
Laflamme in respect of taxes or governmental charges or any matters under
discussion with any governmental authority relating to taxes or governmental
charges asserted by any such authority. Both the Company and Laflamme have
withheld from each payment made by it the amount of all taxes and other
deductions required to be withheld therefrom and has paid the same to the proper
taxing or other authority within the time prescribed under any applicable
legislation or regulation. The relevant federal and provincial limitation
periods for reassessment of taxes have expired in respect of the Company and
Laflamme for the years respectively set out in the Disclosure Schedule. The paid
up capital of the Stock for purposes of the INCOME TAX ACT (CANADA) is in excess
of 24,000,000 Canadian dollars (Can.$24,000,000). TJI's adjusted cost base in
the Stock is in excess of Can.$10,000,000.
(q) INSURANCE. The Disclosure Schedule contains an accurate and complete
list of all policies of fire and other casualty, general liability, theft, life,
workers' compensation, health, directors and officers, business interruption and
other forms of insurance owned or held by Company or Laflamme, specifying the
insured, the insurer, the policy number, the term of the coverage and, in the
case of any "claims made" coverage, the same information as to predecessor
policies for the previous five years. All present policies are in full force
and effect, will remain in full force and effect following Closing and all
premiums with respect thereto have been paid. During the preceding five (5)
years, neither the Company nor Laflamme have been denied any form of insurance
and no policy of insurance has been revoked or rescinded during the past two
years.
(r) PENSION AND RETIREMENT PLANS.
(i) Company is not party to, or bound by, any oral or written
retirement or pension plan or other similar arrangements other than
the Group Registered Retirement Savings Plan for Hourly Employees of
Dashwood Industries Limited (the "Group RRSP") and the Registered
Pension Plan for Employees of Dashwood Industries Limited (the
"Registered Pension Plan"). Laflamme is not party to nor
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bound by any oral or written retirement or pension plan or other
similar arrangements.
(ii) The text of the Group RRSP, the agreement with the issuer of
the Group RRSP, the employee application form or forms relating to the
Group RRSP and all relevant employee communications with respect to
the Group RRSP have been delivered to the Purchaser. Such documents
contain all terms of the Group RRSP and are enforceable in accordance
with applicable laws.
(iii) Company has properly administered the Group RRSP, and the
Group RRSP is in good standing, in accordance with its terms, the
terms of the agreement with the issuer of the Group RRSP, and
applicable laws. In particular, without limiting the generality of
the foregoing, Company has made all withholdings and remittances with
respect to the Group RRSP required by its terms and applicable laws.
(iv) To the best of the knowledge of Company, the issuer of the
Group RRSP has complied with all of its obligations to Company and to
employees of Company under applicable law and terms of the Group RRSP.
(v) The Registered Pension Plan is a money-purchase plan funded
pursuant to a Group Annuity Policy issued by The Mutual Life Assurance
Company of Canada. Policy GA 7554-2-RPP, dated July 1, 1992 contains
all terms of the Registered Pension Plan and is enforceable in
accordance with its terms and applicable laws and regulatory policies.
(vi) The Registered Pension Plan is duly registered and in good
standing under all applicable legislation including without limitation
the PENSION BENEFITS ACT (Ontario) and the INCOME TAX ACT (Canada),
and no events have occurred which could jeopardize such status.
(vii) All material reports and disclosures relating to the
Registered Pension Plan required by applicable laws and regulatory
policies have been filed, distributed or made.
(viii) All material obligations (including without limitation
fiduciary and funding obligations and payment of any taxes, penalties
or fees payable under applicable legislation) required to be performed
in connection with the Registered Pension Plan pursuant to its terms,
applicable laws and regulatory policies have been performed. Without
limiting the foregoing, there are no outstanding liabilities under the
Registered Pension Plan for taxes, penalties or fees under any
applicable legislation including without limitation the
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PENSION BENEFITS ACT (Ontario) and the INCOME TAX ACT (Canada).
(ix) No withdrawals of assets, including cash, have been made
from the assets from time to time held in connection with the
Registered Pension Plan or any prior registered pension plan offered
by Company, except for the purpose of paying or arranging for the
payment of benefits or proper expenses of the Registered Pension Plan
in accordance with its terms and applicable laws.
(x) The Registered Pension Plan is fully funded on both a going
concern and solvency basis.
(xi) The Registered Pension Plan was established effective
July 1, 1988. Prior to that date Company offered a defined benefit
registered pension plan to eligible employees. Company has complied
with the terms of such prior registered pension plan, all applicable
laws and all applicable regulatory policies with respect to the prior
administration, including the conversion or termination, of such prior
registered pension plan.
(xii) The data with respect to the Registered Pension Plan
provided to the Purchaser is complete and accurate in all material
respects.
(xiii) No representations have been made to employees or
former employees or Company who may become eligible to receive
benefits from the Registered Pension Plan to the effect that the
Registered Pension Plan will be amended, except as required by
applicable law or by the appropriate regulatory authorities to
preserve the registered status of the Registered Pension Plan
therewith.
(xiv) No actions, suits or claims are pending or threatened
in respect of the Group RRSP and the Registered Pension Plan other
than routine uncontested claims for benefits.
(s) BANK ACCOUNTS; POWERS OF ATTORNEY. The Disclosure Schedule sets forth
with respect to each of the Company and Laflamme: (i) the names and locations
of all financial institutions, investment banking and brokerage houses, and
other similar institutions at which it maintains accounts, deposits, safe
deposit boxes of any nature, and the names of all persons authorized to draw
thereon or make withdrawals therefrom; (ii) the terms and conditions thereof and
any limitations or restrictions as to use, withdrawal or otherwise; and
(iii) the names of all persons or entities holding general or special powers of
attorney from it and a summary of the terms thereof.
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(t) CONTRACTS AND COMMITMENTS; NO DEFAULT.
(i) The Disclosure Schedule sets forth with respect to each of the
Company and Laflamme:
A. all its contracts, commitments, agreements or arrangements
with any person which (1) requires payments individually in excess of
$5,000 annually or in excess of $25,000 over its term (including
without limitation periods covered by any option to extend or renew by
either party) and (2) is not terminable on thirty (30) days' or less
notice without cost or other liability;
B. all its obligations to pay any person or entity cash
remuneration at the annual rate (including without limitation
guaranteed bonuses) of more than $50,000 for services rendered;
C. any agreement which restricts it from carrying on its
businesses or any part thereof anywhere in the world or from competing
in any line of business with any person or entity;
D. any obligation or requirement to which it is subject to
provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
E. any agreement, contract, commitment or loan (i) between it
and any director, officer or consultant of TJI, Outlook, the Company
or Laflamme, or (ii) under which any Intellectual Property Rights or
Promotional Materials are licensed to the Company or Laflamme;
F. any of its outstanding sales or purchase contracts,
commitments or proposals which may result in any loss upon completion
or performance thereof;
G. any purchase or sale contract or agreement to which it is
party that calls for aggregate purchases or sales in excess over the
course of such contract or agreement of $25,000 or which continues for
a period of more than twelve months (including without limitation
periods covered by any option to renew or extend by either party)
which is not terminable on sixty (60) days' or less notice without
cost or other liability at or any time after the Closing;
H. all distributorship, dealer, manufacturer's representative,
franchise or similar sales contracts to which it is party.
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(ii) True and complete copies (or summaries, in the case of oral
items) of all items disclosed pursuant to subsection 2(t)(i) have been made
available to Purchaser for review. All such items are valid and
enforceable by and against Company or Laflamme, which ever is party
thereto, in accordance with their respective terms; neither the Company nor
Laflamme is in breach, violation or default, however defined, in the
performance of any of its obligations thereunder, and no facts and
circumstances exist which, whether with the giving of due notice, lapse of
time, or both, would constitute such a breach, violation or default
thereunder or thereof; and, to the knowledge of TJI, the Company and
Laflamme, no other parties thereto are in a breach, violation or default,
however defined, thereunder or thereof, and no facts or circumstances exist
which, whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof.
(u) ORDERS, COMMITMENTS AND RETURNS. With respect to each of the Company
and Laflamme (i) all accepted and unfulfilled orders for the sale of products
and the performance of services entered into by it and all outstanding contracts
or commitments for the purchase of supplies, materials and services were made in
bona fide transactions in the ordinary course of business, (ii) there are no
claims, or facts which might give rise to a claim, against it to return products
by reason of alleged over-shipments, defective products or otherwise, or of
products in the hands of customers, retailers or distributors under an
understanding that such products would be returnable, (iii) it is not required
to provide any bonding or other financial security arrangements in connection
with transactions with any of its customers or suppliers in the ordinary course
of its business or otherwise.
(v) EMPLOYMENT MATTERS.
(i) except for unwritten and normal contracts of employment for
indefinite hire, all written or oral employment, service, union or other
similar agreement to which the Company or Laflamme is party are described
in the Disclosure Schedule; the Company and Laflamme are each in compliance
with all such agreements to which it is a party and is not in arrears in
the payment of any obligations required to be made under any such
agreements, contingent or otherwise; and none of such agreements contain
any specific agreement as to notice of termination or severance pay in lieu
thereof;
(ii) neither the Company nor Laflamme has made any agreements with any
labour union or employee association or made commitments to or conducted
negotiations with any labour union or employee association with respect to
any future agreements except as set forth and described in the Disclosure
Schedule and except with respect to those which have expired in accordance
with their terms and are not being renegotiated, and each is in compliance
with the terms of all such
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agreements to which it is a party set forth in the Disclosure Schedule;
there are no grievances currently outstanding or anticipated against either
the Company or Laflamme with respect to any labour union or employee
association, there are no letters of agreement between either of them and
any labour union or employee association and there are no minutes of
settlement which contain outstanding obligations of either of them, except
as set forth and described in the Disclosure Schedule; neither the Company
nor Laflamme is aware of any current attempts to organize or establish any
other labour union or employee association with respect to it;
(iii) the Company employs a total of 248 full-time persons, 88 of who
are on layoff subject to recall, and 3 part-time persons and Laflamme
employs a total of 239 full-time persons, 130 of who are on layoff subject
to recall, and 2 part-time persons; the names of such individuals, their
positions, their years of service and their present salaries and benefits
are set out in Disclosure Schedule; TJI has no reason to believe that any
employee of the Company or Laflamme would terminate his employment due to
the transactions contemplated by this Agreement; and general relations
between the Company and Laflamme and their respective employees are good
and there is no labour strike, dispute, slowdown or stoppage pending or
threatened;
(iv) neither the Company nor Laflamme is liable for any damages to any
employee or former employee resulting from the violation of any applicable
employment law or employment agreement;
(v) there have been no claims of wrongful dismissal, no human rights
complaints or inquiries made and no EMPLOYMENT STANDARDS ACT (ONTARIO) OR
LABOUR STANDARDS ACT (QUEBEC) complaints, inquiries or claims made against
the Company during the six (6) years preceding the Closing Date or against
Laflamme during the two (2) years preceding the Closing Date;
(vi) there are no outstanding inspection orders against the Company or
Laflamme under the OCCUPATIONAL HEALTH AND SAFETY ACT (ONTARIO) or
regulations thereto or the ACT RESPECTING OCCUPATIONAL HEALTH AND SAFETY
(QUEBEC) or regulations thereto (collectively "OHSA"). There are no
outstanding prosecution orders against the Company or Laflamme under the
PROVINCIAL OFFENCES ACT (ONTARIO) or the LABOUR CODE (QUEBEC) or the CODE
OF PENAL PROCEDURE (QUEBEC) for violations of OHSA nor are TJI, the Company
or Laflamme aware of any threatened prosecutions or grounds upon which any
prosecution may be commenced. The Company and Laflamme have each fully
complied with applicable provisions of OHSA and the regulations thereunder,
and there have been no serious accidents or incidents affecting worker
health or safety;
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(vii) all assessments against the Company and Laflamme pursuant to
the WORKERS COMPENSATION ACT (ONTARIO) (the "WCA") and the ACT RESPECTING
INDUSTRIAL ACCIDENTS AND OCCUPATIONAL DISEASES (QUEBEC) (the "IAOD") have
been paid and any deficiencies in payments have been properly accrued and
are recorded on their respective books. There are no existing or potential
claims of which TJI, the Company or Laflamme have knowledge or notice for
compensation or pensions under the WCA or the IAOD. There have not been
any nor are there any penalty assessments or warnings in respect of penalty
assessments nor any workwell audit outstanding or scheduled against the
Company or Laflamme;
(viii) the Company and Laflamme have each complied with applicable
requirements of the PAY EQUITY ACT (ONTARIO), and the Company and Laflamme
have each complied with applicable requirements of the ACT RESPECTING THE
PROTECTION OF PERSONAL INFORMATION IN THE PRIVATE SECTOR (QUEBEC);
(ix) neither the Company nor Laflamme is an 'employer' under the
EMPLOYMENT EQUITY ACT (CANADA) and there has been no requirement under such
Act to file a report;
(x) all vacation pay, bonuses, commissions and other employee benefit
payments payable to employees of the Company or Laflamme through the date
thereof are reflected and have been accrued in its Latest Balance Sheet;
(xi) neither the Company nor Laflamme has made any representations or
commitments to its employees with respect to future increases in wage or
other compensation; and
(xii) the only profit sharing plans, deferred compensation or
incentive plans, health, dental, welfare and employee benefit plans, bonus
plans, stock option plans, stock purchase plans, unemployment compensation
plans, insurance plans, severance plans, sick leave, vacation plans or
similar benefit plans that are maintained by the Company or Laflamme with
respect to their respective employees are those described in the Disclosure
Schedule (which are collectively referred to as the "Benefit Plans"). Each
Benefit Plan has been duly registered where required by, and is in good
standing under, all applicable legislation, rules or orders including,
without limitation, the INCOME TAX ACT (CANADA) and parallel provincial
law, and all required employer contributions under each Benefit Plan have
been made and the applicable funds have been funded in accordance with the
terms of the Benefit Plans and any applicable legislation, rule or order
and no past service funding liabilities exist thereunder. All required
employee's and employer's contributions payable under applicable federal
and provincial legislation, regulations, rules, decrees or orders have been
made and there have not been any, nor are there notices of any, assessments
or penalty
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assessments, letters of demand or warnings against the Company or Laflamme.
(w) DEALERS AND SUPPLIERS. There has not been in the twelve month period
prior to the date hereof any adverse change in the business relationship of the
Company or Laflamme and any of their respective dealers or suppliers.
(x) PERMITS AND OTHER OPERATING RIGHTS. Neither the Company nor Laflamme
requires, in connection with the ownership or possession of its assets or
properties or the conduct of its business as previously, presently or as
presently anticipated to be conducted, the Consent of any Authority, except
those Consents previously obtained. All such required Consents are in full force
and effect and listed in the Disclosure Schedule, and neither TJI, the Company
nor Laflamme have received any notice of termination or cancellation of, nor
know of any facts permitting the termination od cancellation of, any such
Consents.
(y) COMPLIANCE WITH LAW. The assets, properties, businesses and
operations of both the Company and Laflamme are and have been conducted in
compliance with all Laws applicable to the ownership and conduct of their
assets, properties, businesses and operations. There are no outstanding and
unsatisfied deficiency reports, plans of correction, notices of noncompliance or
work orders relating to any such Authorities, and no such discussions with any
such Authorities are scheduled, pending or anticipated.
(z) ASSETS OF BUSINESS. With respect to each of the company and Laflamme,
the assets owned or leased by it constitute all of the assets held for use or
used primarily in connection with its businesses and are adequate to carry on
such businesses as presently conducted and as contemplated by it to be
conducted.
(aa) BUSINESS GENERALLY. There has been no event, transaction or
information which has come to the attention of TJI, the Company or Laflamme
which, as it relates directly to the businesses of the Company or Laflamme,
could, individually or in the aggregate, reasonably be expected to have a
material adverse effect on either of their respective businesses.
(ab) ENVIRONMENTAL AND OCCUPATIONAL HEALTH AND SAFETY MATTERS. Except as
set forth in the Disclosure Schedule:
(i) the real property owned, leased or occupied by the Company
or Laflamme and its existing and prior uses comply and have at all
times complied with, and neither the Company nor Laflamme is in
violation of, nor has it violated, in connection with the ownership,
use, maintenance or operation of its assets including such real
property or the conduct of its business, any applicable federal,
provincial, municipal or local laws, regulations, orders or approvals
of any governmental
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authorities relating to environmental and occupational health and
safety matters;
(ii) without limiting the generality of this Section 2(ab), the
Company and Laflamme have each operated all real property owned,
leased or occupied or otherwise used by it in its business and has at
all times received, handled, used, stored, treated, shipped and
disposed of all environmental contaminants in the conduct of its
business in compliance with all applicable environmental, health or
safety laws, regulations, orders or approvals;
(iii) there are no orders or directions relating to
environmental or occupational health and safety matters requiring any
work, repairs, construction or capital expenditures with respect to
the assets of the Company or Laflamme or the conduct of their
respective businesses, nor has TJI, the Company or Laflamme received
any notice of any of the same;
(iv) except to the extent in compliance with all applicable
federal, provincial, municipal or local laws, regulations, orders or
approvals of any governmental authorities related to environmental and
occupational health and safety matters (A) no hazardous or toxic
materials, substances, pollutants, contaminants or wastes have been
released into the environment, or deposited, discharged, placed,
stored or disposed of at, on or near real property owned, leased or
occupied by the Company or Laflamme, (B) no such real property been
used at any time by any person as a landfill or waste disposal site,
and (C) no aboveground or underground treatment and storage tanks,
sumps, water, gas or oil wells, or related piping, conduits or other
structures are or have been located on or under such real property;
and
(v) no notice of any violation of any of the matters referred to
in Section (ab)(i) through (iv) relating to the business or the assets
of the Company or Laflamme or their use have been received by TJI, the
Company or Laflamme, and there are no writs, injunctions, orders or
judgments outstanding, no lawsuits, claims, proceedings or
investigations pending or threatened, relating to the ownership, use,
maintenance or operation of the assets of the Company or Laflamme or
their respective businesses nor is there any basis for such lawsuits,
claims, proceedings or investigations being instituted or filed and
the Company or Laflamme possess as of Closing all required
certificates, licenses, permits or consents from any Authority with
respect to matters relating to the environment or occupational health
and safety, including any regulatory restrictions on the use of phenyl
mercury oleate ("PMO") or the export
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to the United States of windows or components thereof coated with PMO;
(ac) BROKERS. Neither TJI, Outlook, the Company or Laflamme nor any of
their respective directors, officers or employees have employed any broker,
finder, or financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to TJI, the
Company or Laflamme for any such fee or commission to be claimed by any person
or entity.
(ad) OUTLOOK REPRESENTATIONS. Outlook has the full legal right, power and
authority to sell, transfer, assign and deliver record ownership to the Stock to
Purchaser at Closing and delivery of the Stock at Closing will transfer to
Purchaser valid legal and beneficial ownership thereto free and clear of all
Liens.
(ae) ACCURACY OF INFORMATION. No representation or warranty by TJI in this
Agreement contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading as of the date of the representation or warranty.
ARTICLE 3
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to TJI as of the date hereof as follows:
(a) CORPORATE ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the law of the State of Minnesota.
(b) AUTHORIZATION. Purchaser has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated herein.
The Board of Directors of Purchaser has taken all action required by law, its
articles of incorporation and bylaws or otherwise to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein. This Agreement is the valid and binding legal
obligation of Purchaser enforceable against it in accordance with its terms.
(c) NON-CONTRAVENTION. Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated herein will
violate any provision of the articles of incorporation or bylaws of Purchaser or
any subsidiary of Purchaser.
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(d) DISCLOSURE. No representation or warranty by Purchaser in this
Agreement contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which made,
not misleading as of the date of the representation or warranty.
(e) CONSENTS AND APPROVALS. Except for the Consents identified on
Exhibit 3(e) hereto, no Consent is required by any person or entity, including
without limitation any Authority, in connection with the execution, delivery and
performance by Purchaser of this Agreement, or the consummation of the
transactions contemplated herein, other than any Consent which, if not made or
obtained, will not, individually or in the aggregate, have a material adverse
effect on the business of Purchaser and its subsidiaries taken as a whole.
(f) BROKERS. Neither Purchaser nor any of its directors, officers or key
employees have employed any broker, finder or financial advisor, or incurred any
liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the transactions contemplated hereby, nor is
there any basis known to Purchaser for any such fee or commission to be claimed
by any person or entity.
ARTICLE 4
4. COVENANTS.
(a) AGREEMENTS AS TO SPECIFIED MATTERS. Except as consented to in advance
by Purchaser, from the date hereof until the Closing, TJI shall not permit the
Company or Laflamme to:
(i) Except as required by Section 4(j), hereof, amend its certificate
and articles of incorporation or bylaws;
(ii) Borrow or agree to borrow, or lend or agree to lend, any funds;
(iii) Incur, assume, suffer or become subject to, whether directly or
by way of guarantee or otherwise, any claims, obligations, liabilities or
loss contingencies except those which are not material in amount and were
incurred in the ordinary course of business consistent with past practices;
(iv) Pay, discharge or satisfy any claims, liabilities or obligations
prior to maturity;
(v) Permit or allow any of its properties or assets material to the
operation of its businesses to be subjected to any Lien except (i) as set
forth in the Disclosure Schedule and (ii) for Permitted Liens;
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(vi) Cancel or amend any debts, waive any claims or rights or sell,
transfer or otherwise dispose of any properties or assets, other than for
such debts, claims, rights, properties or assets which, individually or in
the aggregate, are not material to the conduct of its businesses;
(vii) License, sell, transfer, pledge, modify, disclose, dispose of
or permit to lapse any right to the use of any intellectual property rights
other than for such intellectual property rights which, individually or in
the aggregate, are not material to the conduct of its businesses;
(viii) (A) Terminate, enter into, adopt, institute or otherwise
become subject to or amend in any material respect any collective
bargaining agreement or employment or similar agreement or arrangement with
any of its directors, officers or employees; (B) terminate, enter into,
adopt, institute or otherwise become subject to or amend in any material
respect any employee compensation plan; (C) contribute, set aside for
contribution or authorize the contribution of any amounts for any such
employee compensation plan except as required (and not discretionary) by
the terms of such employee compensation plan; or (D) grant or become
obligated to grant any general increase in the compensation of any
directors, officers or employees (including without limitation any such
increase pursuant to any employee compensation plan);
(ix) Make or enter into any commitment for capital expenditures for
additions to property, plant or equipment individually in excess of
$25,000.00;
(x) (A) Declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or other securities (including
without limitation distributions in redemption or liquidation) or redeem,
purchase or otherwise acquire any shares of its capital stock or other
securities; (B) issue, grant or sell any shares of its capital stock or
equity securities of any class, or any options, warrants, conversion or
other rights to purchase or acquire any such shares or equity securities or
any securities convertible into or exchangeable for such shares or equity
securities, except issuance of Company Common Stock pursuant to the
exercise of stock options outstanding on the date hereof; (C) become a
party to any merger, exchange, reorganization, recapitalization,
liquidation, dissolution or other similar corporate transaction; or
(D) organize any new subsidiary, acquire any capital stock or other equity
securities or other ownership interest in, or assets of, any person or
entity or otherwise make any investment by purchase of stock or securities,
contributions to capital, property transfer or purchase of any properties
or assets of any person or entity;
(xi) Pay, lend or advance any amounts to, or sell, transfer or lease
any properties or assets to, or enter into
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any agreement or arrangement with TJI, Outlook any affiliate of either such
person or any of its or their respective directors, officers, or employees;
(xii) Terminate, enter into or amend in any material respect any item
identified in Section 2(t) of the Disclosure Schedule, or take any action
or omit to take any action which will cause a breach, violation or default
(however defined) under any such item; or
(xiii) Agree, whether in writing or otherwise, to take any action
described in this section.
(b) CONDUCT OF BUSINESS. TJI shall cause each of the Company and Laflamme
to maintain its assets and properties and carry on its businesses and operations
only in the ordinary course in substantially the same manner as previously
operated and to use its best efforts to preserve intact its business
organizations, existing business relationships (including without limitation its
relationships with officers, employees, dealers, distributors, independent
contractors, customers and suppliers), good will and going concern value.
(c) NO SOLICITATION OF ALTERNATE TRANSACTION. TJI shall not, nor shall it
permit Outlook, the Company or Laflamme or any of their respective directors,
officers, representative, agents and employees to, directly or indirectly,
participate in discussions regarding or conclude or become bound by any
arrangement involving the issuance, purchase or sale of the capital stock of, or
merger, consolidation, sale of substantial assets or of a significant amount of
assets with or by the Company or Laflamme, or any liquidation, dissolution or
similar transactions involving the Company or Laflamme.
(d) FULL ACCESS TO PURCHASER. TJI shall cause Company and Laflamme to
afford to Purchaser and its directors, officers, employees, counsel, accountants
and other representatives free and full access during normal business hours to
their respective facilities, properties, books and records in order that
Purchaser may have full opportunity to make such investigations as it shall
desire to make of their respective affairs; PROVIDED, HOWEVER, that any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with their respective business operations; and TJI shall cause the
Company and Laflamme to furnish such additional financial and operating data and
other information as Purchaser shall, from time to time, reasonably request,
including without limitation access to the working papers of their independent
certified public accountants; and, PROVIDED, FURTHER, that any such
investigation shall not affect or otherwise diminish or obviate in any respect
any of the representations and warranties of TJI herein.
(e) CONFIDENTIALITY. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information
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relating to any other party hereto furnished to it in connection with the
transactions contemplated herein ("Information") in a manner or for a purpose
detrimental to such other party or otherwise than in connection with the
transaction, and that they will use, and cause their respective directors,
officers, employees, accountants, counsel and other representatives, all
commercially reasonable efforts to maintain the confidentiality of all of the
Information except as may be required by judicial or administrative process or,
in the opinion of such party's regular counsel, by other requirements of Law;
PROVIDED, HOWEVER, that prior to any disclosure of any Information permitted
hereunder, the disclosing party shall first obtain the recipients' undertaking
to comply with the provisions of this section with respect to such information.
The term "Information" as used herein shall not include any information relating
to a party which the party disclosing such information can show: (i) to have
been in its possession prior to its receipt from another party hereto; (ii) to
be now or to later become generally available to the public through no fault of
the disclosing party; (iii) to have been available to the public at the time of
its receipt by the disclosing party; (iv) to have been received separately by
the disclosing party in an unrestricted manner from a person entitled to
disclose such information; or (v) to have been developed independently by the
disclosing party without regard to any information received in connection with
this transaction. Each party hereto also agrees to promptly return to the party
from whom originally received all original and duplicate copies of written
materials containing Information should the transactions contemplated herein not
occur.
(f) FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms and
conditions herein provided, the parties hereto shall, and TJI shall cause
Outlook, the Company and Laflamme to, use their best efforts to take or cause to
be taken all actions and do or cause to be done all things necessary, proper or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable, the transactions contemplated hereby, including without
limitation obtaining all Consents of any person or entity, whether private or
governmental, required in connection with the consummation of the transactions
contemplated herein.
(g) FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(i) Each party hereto shall, before, at and after Closing, execute
and deliver such instruments and take such other actions as the other party
or parties, as the case may be, may reasonably require in order to carry
out the intent of this Agreement.
(ii) TJI shall cause the Company and Laflamme to cooperate with
Purchaser to promptly develop plans for the management of the businesses
after the Closing, including without limitation plans relating to
productivity, marketing, operations and improvements, and to further
cooperate with Purchaser to provide for the implementation of such plans as
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soon as practicable after the Closing. Subject to applicable Law, TJI
shall cause the Company and Laflamme to confer on a regular and reasonable
basis with one or more representatives of Purchaser to report on material
operational matters and the general status of ongoing operations.
(iii) At all times from the date hereof until the Closing, each party
shall promptly notify the other in writing of the occurrence of any event
which it reasonably believes will or may result in a failure by such party
to satisfy the conditions specified in Article 5 and Article 6 hereof.
(h) SUPPLEMENTS TO DISCLOSURE SCHEDULE. Prior to the Closing, TJI will
supplement or amend the Disclosure Schedule with respect to any event or
development which, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule or which is necessary to correct any information in the
Disclosure Schedule or in any representation and warranty of TJI which has been
rendered inaccurate by reason of such event or development. For purposes of
determining the accuracy as of the date hereof of the representations and
warranties of TJI contained in Section 2 hereof in order to determine the
fulfillment of the conditions set forth in section 5(a), the Disclosure Schedule
shall be deemed to exclude any information contained in any supplement or
amendment hereto delivered after the delivery of the Disclosure Schedule.
(i) PUBLIC ANNOUNCEMENTS. Neither of the parties hereto shall make any
public announcement with respect to the transactions contemplated herein without
the prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed; PROVIDED, HOWEVER, that either of the parties
hereto may at any time make any announcements which are required by applicable
Law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement and
discusses with the other parties in good faith the exact proposed wording of any
such announcement.
ARTICLE 5
5. CONDITIONS TO OBLIGATIONS OF PURCHASER.
Notwithstanding any other provision of this Agreement to the contrary, the
obligation of Purchaser to effect the transactions contemplated herein shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of TJI contained in this Agreement, including without limitation in
the Disclosure Schedule initially delivered to Purchaser as Exhibit 2 (and not
including any changes or additions delivered to Purchaser pursuant to
section 4(h)), shall be true, complete and accurate in all material respects as
of the
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<PAGE>
date when made and at and as of the Closing as though such representations and
warranties were made at and as of such time.
(b) PERFORMANCE. TJI shall have performed and complied in all material
respects with all agreements, covenants, and obligations required by this
Agreement to be performed or complied with by it on or prior to the Closing.
(c) REQUIRED APPROVALS AND CONSENTS.
(i) All action required by law and otherwise to be taken by the TJI,
the Company and Laflamme to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(ii) All Consents of or from all Authorities required hereunder to
consummate the transactions contemplated herein, and all Consents of from
all other persons and entities, shall have been delivered, made or
obtained, and Purchaser shall have received copies thereof.
(d) ADVERSE CHANGES. No material adverse changes shall have occurred in
the assets, business, properties or condition (financial or otherwise) of the
Company or Laflamme.
(e) NO PROCEEDING OR LITIGATION. No suit, action, investigation, inquiry
or other proceeding by any Authority or other person or entity shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby or which, if successfully asserted, would
individually or in the aggregate, otherwise have a material adverse effect on
the assets, business, properties or condition (financial or otherwise) of the
Company or Laflamme.
(f) OPINION OF COUNSEL. Purchaser shall have received an opinion of TJI's
American and Canadian counsel, dated the Closing Date, in form and substance
satisfactory to Purchaser.
(g) LEGISLATION. No Law shall have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
(h) ACCEPTANCE BY COUNSEL TO PURCHASER. The form and substance of all
legal matters contemplated hereby and of all papers delivered hereunder shall be
reasonably acceptable to Oppenheimer Wolff & Donnelly, counsel to Purchaser.
(i) CERTIFICATES. Purchaser shall have received such certificates of TJI,
in a form and substance reasonably satisfactory to Purchaser, dated the Closing
Date, to evidence compliance with the conditions set forth in this Section 5 and
such other matters as may be reasonably requested by Purchaser.
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(j) DUE DILIGENCE. Purchaser shall have received and been satisfied with
all information requested by it pursuant to section 4(d).
(k) COLLECTIVE BARGAINING AGREEMENT. There shall be in force a collective
bargaining agreement between the Company and its unionized employees
satisfactory to Purchaser as of the Closing.
(l) MANAGEMENT EMPLOYEES. A Canadian affiliate of TJI (the "TJI
Affiliate") and each of the Company and Laflamme shall have executed and
delivered concurrently with Closing a letter (an "Offer Letter") in form
satisfactory to Purchaser offering to each employee of the Company or Laflamme
who immediately prior to Closing held any unvested options to acquire shares of
the common stock of TJI (such employees "Management Employees" and such options
whether or not vested "Options") a second job with the TJI Affiliate for the
purpose of permitting them to continue to enjoy the benefit of such Options for
a further two year period, and Purchaser shall have no reason to believe that
any Management Employee intends to initiate litigation with the Company or TJI
in connection therewith.
(m) TAX REFUNDS. The Company shall have no basis upon which to reflect on
its financial statements any right to receive a refund or other repayment of
income taxes other than the Tax Receivable.
(n) RELEASE. TJI shall have delivered to Purchaser a release in form
satisfactory to Purchaser of the Company and Laflamme from TJI, Outlook and all
of their respective affiliates.
ARTICLE 6
6. CONDITIONS TO TJI'S OBLIGATIONS.
Notwithstanding anything in this Agreement to the contrary, the obligation
of TJI to effect the transactions contemplated herein shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Purchaser contained in this Agreement shall be true, complete and
accurate in all material respects as of the date when made and at and as of the
Closing, as though such representations and warranties were made at and as of
such time.
(b) PERFORMANCE. Purchaser shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Purchaser at or
prior to the Closing.
(c) APPROVALS. All Consents listed on Exhibit 3(e) hereto shall have
been delivered, made or obtained. All action required to be taken by Purchaser
to authorize the execution, delivery and
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performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby shall have been duly and validly taken.
(d) NO PROCEEDING OR LITIGATION. No suit, action, investigation, inquiry
or other proceeding by any Authority or other person or entity shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby.
(e) CERTIFICATES. Purchaser shall have furnished TJI with such
certificates of Purchaser's officers, in a form and substance reasonably
acceptable to TJI, dated the Closing Date, to evidence compliance with the
conditions set forth in this Section 6 and such other matters as may be
reasonably requested by TJI.
(f) OPINION OF PURCHASER'S COUNSEL. Purchaser shall have delivered to TJI
an opinion from Oppenheimer Wolff & Donnelly, counsel to Purchaser, dated the
Closing Date, in form and substance satisfactory to TJI.
(g) ACCEPTANCE BY COUNSEL. The form and substance of all legal matters
contemplated hereby and of all papers delivered hereunder shall be reasonably
acceptable to Tory Tory DesLauriers & Binnington, counsel to TJI.
(h) MANAGEMENT EMPLOYEES. The condition precedent of Purchaser set forth
in section 5(l) shall have been satisfied.
ARTICLE 7
7. TERMINATION AND ABANDONMENT.
(a) METHODS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time, but not later
than the Closing:
(i) By mutual written consent of Purchaser and TJI; or
(ii) By Purchaser or TJI if the Closing shall not have occurred on or
before March 31, 1995 or such later date as shall be agreed to by them (the
"Termination Date"); or
(iii) By TJI on or after the Termination Date, if any of the
conditions provided for in Section 6 of this Agreement shall not have been
satisfied or waived in writing by TJI prior to such date; or
(iv) By the Purchaser on or after the Termination Date, if any of the
conditions provided for in Section 5 of this Agreement shall not have been
satisfied or waived in writing by Purchaser prior to such date.
(b) PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to section 7(a), written notice thereof
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shall forthwith be given to the other party or parties, and the provisions of
this Agreement (except to the extent provided in section 9(a)) shall terminate,
and the transactions contemplated herein shall be abandoned, without further
action by any party hereto. If this Agreement is terminated as provided herein:
(i) each party will, upon request, redeliver all documents, work papers and
other material of any other party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or after the
execution hereof, to the party furnishing the same; and (ii) the confidentiality
obligations of section 4(e) shall continue to be applicable but no such
termination shall have the effect of releasing any party hereto from liability
for damages arising from breach of any representation, warranty, agreement,
covenant or other provision of this Agreement occurring prior to such
termination.
ARTICLE 8
8. SURVIVAL AND INDEMNIFICATION.
(a) SURVIVAL AND LIMITATIONS. The representations and warranties of each
of the parties hereto shall survive the Closing. Except as any of the following
Sections of this Article 8 may contain specific limitations, any claims for
indemnity pursuant to any Section of this Article may be made indefinitely and
for any amount.
(b) INDEMNIFICATION BY PURCHASER -- UNTRUE REPRESENTATIONS OR BREACH OF
WARRANTIES OR COVENANTS. Purchaser agrees to indemnify TJI from and against any
and all claims, loss, liability, damage, cost and expense (collectively "Loss")
suffered or incurred by it by reason of or in relation to (i) the inaccuracy or
other breach of any representation and/or warranty by Purchaser in any part of
this Agreement, PROVIDED, HOWEVER, that no claim for indemnity may be made
pursuant to this section after the third anniversary of the Closing Date; and
(ii) any nonfulfillment of any covenant, agreement or undertaking of Purchaser
in any part of this Agreement.
(c) INDEMNIFICATION BY TJI -- UNTRUE REPRESENTATION OR BREACH OF WARRANTY.
TJI agrees to indemnify Purchaser from and against any and all Loss suffered or
incurred by Purchaser, the Company or Laflamme by reason of or in relation to
the inaccuracy or other breach of any representation and/or warranty by it in
this Agreement, PROVIDED, HOWEVER, that (i) no claim for indemnity may be made
pursuant to this Section in connection with the representations and warranties
contained in Sections 2(g) to 2(i) inclusive, Sections 2(k) to 2(o) inclusive,
Section 2(q), Sections 2(s) to 2(aa) inclusive and Sections 2(ac) to 2(ae)
inclusive more than three (3) years following the Closing, and (ii) Purchaser
shall not be entitled to receive any indemnity with respect to any single
inaccuracy or other breach if the Loss arising therefrom is less than Can.$
5,000.
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(d) INDEMNIFICATION BY AND COVENANTS OF TJI -- EMPLOYMENT TERMINATION.
TJI agrees to indemnify Purchaser from and against any and all Loss suffered or
incurred by Purchaser, the Company or Laflamme, by reason of (A) any claims of
termination, constructive or otherwise, and any rights to notice, pay in lieu of
notice, severance or damages associated therewith, made by any Management
Employee (i) based on the loss by any Management Employee for any reason of the
right to fully exercise any Option granted to such Employee on or prior to
December 31, 1994 with respect to the shares subject thereto the rights to which
were vested on or before such date or which were scheduled to vest anytime on or
before the end of the two year employment period contemplated by the Offer
Letter, except to the extent such loss arises from such Employee voluntarily
leaving the employ of the TJI Affiliate after having accepted such employment,
or on any alteration of the terms of such employment from those set forth in the
Offer Letter unless such alteration was taken with the written consent of
Purchaser, (ii) based on the fact that the Company and Laflamme will cease as of
the Closing to honor old or grant any new Options, (B) any claim to the extent
it relates to the value of the rights under the Option Plan or any part thereof
and which is made by a Management Employee who accepts employment offered to it
by a TJI Affiliate in respect of such employment, whether at the end of a fixed
term of employment or otherwise; provided that no such indemnity obligation
shall arise with respect to any action taken by the TJI Affiliate with respect
to such employee at the written direction of Purchaser.
(e) INDEMNIFICATION - INDEMNITIES RELATING TO ENVIRONMENTAL MATTERS
DESCRIBED IN EXHIBIT 8(E). TJI agrees, to indemnify and hold the Purchaser
harmless from and against all Loss suffered or incurred by the Purchaser, the
Company or Laflamme in any manner relating to or arising from (i) any of the
events, circumstances or conditions described in any of the points in Exhibit
8(e) other than those points specifically addressed in clause (ii) of this
Section 8(e); provided that Purchaser shall not be entitled to receive any
indemnity with respect to the matters described in any single such point in the
Disclosure Schedule unless, and then only to the extent that, the Loss arising
therefrom exceeds Can.$50,000 or (ii) any of the events, circumstances or
conditions described in Clause 12 of Exhibit 8(e) with respect to the Company
and its "sump" or in Clauses 8 and 9 of Exhibit 8(e) with respect to the St.
Apollinaire facility of LaFlamme and its dump site and a dip tank respectively.
All actions and decision taken by Purchaser, the Company or Laflamme in respect
of such a indemnifiable matter shall be commercially reasonable. Purchaser
shall cause TJI to be kept fully informed of Purchaser's, the Company's or
Laflamme's actions in respect thereto, including reasonable advance written
notice of any material pending meeting, deadline or the like. TJI shall be
entitled to participate in material meetings, phone calls and the like regarding
such a matter, and Purchaser, the Company and Laflamme shall not take any
material action with respect to such a matter, including any selection of
counsel, any compromise or settlement of such Claim or agreement with respect
thereto or the
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initiation of any litigation or other proceeding with respect thereto, without
the prior consent of the TJI, such consent not to be unreasonably withheld or
delayed.
(f) INDEMNIFICATION - INDEMNITIES REGARDING LITIGATION DESCRIBED IN THE
DISCLOSURE SCHEDULE. TJI agrees, notwithstanding any description, disclosure or
exception set forth in the Disclosure Schedule or in a supplement or amendment
thereto pursuant to Section 4(h) or the actual or deemed knowledge otherwise
derived of the Purchaser, the Company or Laflamme that an indemnity is or might
be payable hereunder (collectively "Prior Knowledge"), to indemnify and hold the
Purchaser harmless from and against all Loss suffered or incurred by the
Purchaser, the Company or Laflamme arising from any of the matters described in
Section 2(o) in the Disclosure Schedule (or in a supplement or amendment thereto
pursuant to Section 4(h)).
(g) INDEMNIFICATION BY TJI -- OTHER. TJI agrees to indemnify Purchaser
from and against: (i) any and all loss, liability or damage suffered or
incurred by it by reason of any nonfulfillment of any covenant, agreement or
undertaking of TJI in this Agreement; and (ii) any and all costs and expenses,
including without limitation legal fees and expenses, in connection with
enforcing the indemnification rights of Purchaser pursuant to Sections 8(c),
8(d), 8(e), 8(f) and 8(g).
(h) LIMITATION ON AND METHOD FOR MAKING CLAIMS FOR INDEMNIFICATION.
Notwithstanding any other provision of this Agreement, TJI shall not be liable
for any claim made under this Section 8 unless and until the aggregate of such
claims exceeds Can. $250,000, whereupon TJI shall be liable for the full amount
of such claims. The parties further agree that they intend that all
indemnification claims hereunder be made as promptly as is reasonably
practicable by the party seeking indemnification (the "Indemnified Party").
Whenever any claim shall arise for indemnification hereunder, the Indemnified
Party shall promptly following the time its senior management become aware of
the same notify the party from whom indemnification is sought (the "Indemnifying
Party") of the claim and, when known, the facts constituting the basis for such
claim. In the case of any such claim for indemnification hereunder resulting
from or in connection with any claim or legal proceedings of a third party, the
notice to the Indemnifying Party shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. In cases not
governed by Sections 8(e) or 8(i), the Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party, which shall not be unreasonably withheld. If the Indemnifying Party is
of the opinion that the Indemnified Party is not entitled to indemnification, or
is not entitled to indemnification in the amount claimed in such notice, it
shall deliver, within thirty (30) days after the receipt of such notice, a
written objection to such claim and written specifications in reasonable detail
of the aspects or details
37
<PAGE>
objected to, and the grounds for such objection. If the Indemnifying Party
shall file timely written notice of objection to any claim for indemnification,
the validity and amount of such claim shall be determined by arbitration
pursuant to section 9(l) hereof. If timely notice of objection is not delivered
or if a claim by an Indemnified Party is admitted in writing by an Indemnifying
Party or if an arbitration award is made in favor of an Indemnified Party, the
Indemnified Party, as a non-exclusive remedy, shall have the right to set-off
the amount of such claim or award against any amount yet owed, whether due or to
become due, by the Indemnified Party or any subsidiary thereof to any
Indemnifying Party by reason of this Agreement or any agreement or arrangement
or contract to be entered into at the Closing.
(i) SPECIAL PROCEDURES REGARDING ENVIRONMENTAL MATTERS. TJI shall be
entitled to be reimbursed if TJI has already paid an indemnity under Sections
8(c) in respect of an inaccuracy or breach of the representation contained in
Section 2(ab) or under 8(e) in respect of Loss arising from an environmental or
occupational health and safety matter (such a matter giving rise to a Loss
herein an "Environmental Claim"), or a credit to the extent it has not effected
payment with respect to an Environmental Claim, in the event and to the extent
that Laflamme and/or Dashwood shall have actually received compensation with
respect to such Environmental Claim pursuant to a policy of insurance naming
Laflamme as the insured or renewals thereof, the premiums on which are paid by
prior owners of Laflamme and which provides coverage against any Environmental
Claims, or pursuant to the Share Subscription and Purchase Agreement made
between Les Placemats Armand Laflamme Inc., Gestion Rosaire Laflamme Inc.,
Lucien Laflamme, Richard Laflamme and Armand Laflamme, Rosaire Laflamme and
Dashwood Industries Limited dated February 7, 1992 (the right to such
compensation under such insurance an "Insurance Claim" and under such Agreement
a "LF Claim").
For purposes of this Section 8(i), the sum of Can.$70,000 shall be deemed to
have been paid by TJI with respect to an Environmental Claim concerning emission
from the boiler at St. Apollinaire of Laflamme.
TJI shall have the right to assume control of the prosecution, compromise or
settlement of any Insurance Claim or LF Claim provided that:
(i) such assumption shall, by its terms, be without cost to the
Purchaser, Dashwood or Laflamme;
(ii) all actions and decision taken by TJI in respect of such a Claim
shall be commercially reasonable;
(iii) TJI shall keep Purchaser fully informed of its actions in
respect thereto, including reasonable advance written notice of any
material pending meeting, deadline or the like. Purchaser shall be entitled
to participate in
38
<PAGE>
meetings, phone calls and the like regarding such a Claim, and TJI shall
not take any material action with respect to such a Claim, including any
selection of counsel, any compromise or settlement of such Claim or
agreement with respect thereto or the initiation of any litigation or other
proceeding with respect to such Claim, without the prior consent of the
Purchaser, such consent not to be unreasonably withheld or delayed; and
(iv) in the event TJI desires to initiate any litigation or other
proceeding with respect to such a Claim, Purchaser shall first be given a
reasonable opportunity to cause the assignment or other transfer of such
Claim to TJI for initiation and prosecution to the maximum extent such an
assignment or transfer may be lawfully consummated.
ARTICLE 9
9. MISCELLANEOUS PROVISIONS.
(a) EXPENSES. Each of the parties hereto shall bear its own costs, fees
and expenses in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including professional fees, whether or not
the transactions contemplated herein is consummated.
(b) AMENDMENT AND MODIFICATION. Subject to applicable Law, this Agreement
may be amended or modified by the parties hereto at any time prior to the
Closing with respect to any of the terms contained herein; PROVIDED, HOWEVER,
that all such amendments and modifications must be in writing duly executed by
all of the parties hereto; and PROVIDED, FURTHER, that after any approval of the
transactions contemplated herein by the sellers of Company, no such amendment or
modification without the further approval of such sellers shall reduce the
amount or form of the consideration or in any way materially adversely affect
the rights of Company sellers with respect hereto.
(c) WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply with
any obligation, covenant, agreement or condition herein may be expressly waived
only in writing by the party entitled hereby to such compliance, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. No single or partial exercise of a
right or remedy shall preclude any other or further exercise thereof or of any
other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent shall be given in writing
in the same manner as for waivers of compliance.
(d) NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall entitle
any person or entity (other than a party hereto and
39
<PAGE>
his, her or its respective successors and assigns permitted hereby) to any
claim, cause of action, remedy or right of any kind.
(e) NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be made in writing and shall be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or other similar
telegraphic communications equipment:
If to Purchaser:
To: Andersen Corporation
100 4th Avenue No.
Bayport, MN 55003-1096
Attn: Michael Johnson
Fax: (612) 430-5107
With a copy to:
Oppenheimer Wolff & Donnelly
1700 First National Bank Building
St. Paul, MN 55101
Attn: Dennis P. Whelpley
Fax: (612) 223-2596
or to such other person or address as Purchaser shall furnish to the other
parties hereto in writing in accordance with this section.
40
<PAGE>
If to TJI:
To: TJ International
380 E. ParkCenter Blvd.
Suite 300
P. O. Box 65
Boise, ID 83707
Attn: Jody Olson
Fax: (208) 345-3431
With a copy to:
Gabor G. S. Takach
Tory Tory DesLauriers & Binnington
Suite 3000 Aetna Tower
Toronto Dominion Centre
Toronto, Ontario, Canada M5K 1N2
Fax: (416) 865-7380
(f) ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned (whether
voluntarily, involuntarily, by operation of law or otherwise) by any of the
parties hereto without the prior written consent of the other parties, PROVIDED,
HOWEVER, that Purchaser may assign this Agreement, in whole or in any part, and
from time to time, to a wholly-owned, direct or indirect, subsidiary of
Purchaser, if Purchaser remains bound hereby).
(g) GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal substantive laws of the State of Minnesota (without regard to the laws
of conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
(h) COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) HEADINGS. The table of contents and the headings of the sections and
sections of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
(j) ENTIRE AGREEMENT. The Disclosure Schedule and the exhibits and other
writings referred to in this Agreement or in the Disclosure Schedule or any such
exhibit or other writing are part of this Agreement, together they embody the
entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement and together they are referred to
41
<PAGE>
as "this Agreement" or the "Agreement". There are no restrictions, promises,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transaction or transactions contemplated by this Agreement (including without
limitation the letter of intent dated October 26,1994, between Purchaser and TJI
and all amendments and extensions thereof. Provisions of this Agreement shall
be interpreted to be valid and enforceable under applicable Law to the extent
that such interpretation does not materially alter this Agreement; PROVIDED,
HOWEVER, that if any such provision shall become invalid or unenforceable under
applicable Law such provision shall be stricken to the extent necessary and the
remainder of such provisions and the remainder of this Agreement shall continue
in full force and effect.
(k) INJUNCTIVE RELIEF. It is expressly agreed among the parties hereto
that monetary damages would be inadequate to compensate a party hereto for any
breach by any other party of its covenants and agreements in sections 4(c), 4(e)
and 9(m) hereof. Accordingly, the parties agree and acknowledge that any such
violation or threatened violation will cause irreparable injury to the other and
that, in addition to any other remedies which may be available, such party shall
be entitled to injunctive relief against the threatened breach of sections 4(c)
and 4(e) hereof or the continuation of any such breach without the necessity or
proving actual damages and may seek to specifically enforce the terms thereof.
(l) ARBITRATION. With the sole exception of the injunctive relief
contemplated by section 9(k), any controversy or claim arising out of or
relating to this Agreement, or the making, performance or interpretation
thereof, including without limitation alleged fraudulent inducement thereof,
shall be settled by binding arbitration in St. Paul, Minnesota by a panel of
three arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon any arbitration award may be
entered in any court having jurisdiction thereof and the parties consent to the
jurisdiction of the courts of the State of Minnesota for this purpose.
(m) NON-COMPETITION. For a period of three years following the Closing
Date, TJI shall not, nor shall it permit any affiliate (including Outlook) to,
be engaged, concerned or interested in any capacity (whether as a partner or
shareholder, agent, consultant or otherwise), or permit its name or any part
thereof is used or employed in connection with, or otherwise be involved in any
capacity with, any business which manufactures, markets or sells doors or
windows in Canada, or any similar business in Canada.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TJ INTERNATIONAL, INC. ANDERSEN CORPORATION
By: /S/ Jody B. Olson By: /s/ J.W. Wulf
--------------------- ---------------------------
Its Vice President, Its President and Chief
--------------------- --------------------------
Corporate Development Executive Officer
--------------------- --------------------------
Z9747\ANDERSEN\TJ-INTL\ACQ.321\3-21-95\DPW:cad
43
<PAGE>
EXHIBIT 21
TJ INTERNATIONAL, INC.
SUBSIDIARIES OF THE REGISTRANT
The significant subsidiaries of the Company are as follows:
<TABLE>
<CAPTION>
State or Other Percentage
Jurisdiction of Voting
of Incorporation Securities
or Organization Owned
----------------- ------------
<S> <C> <C>
Trus Joist MacMillan, A Limited
Partnership Delaware 51% (1)
Trus-Joist (Western), Ltd. New Brunswick 100%
Norco Windows, Inc. Wisconsin 100%
Outlook Window Partnership, LP. Delaware 64% (2)
<FN>
(1) The Company has a 51% interest in this partnership.
(2) Norco Windows, Inc. has a 64% interest in this partnership.
</TABLE>
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 2, 1995, included in this Form 10-K for the year ended
December 31, 1994, into TJ International, Inc.'s previously filed Form S-8
Registration Statement for the Trus Joist Corporation Nonstatutory Stock Option
Plan with 1982 Incentive Amendment, as amended (Registration No. 2-79209), Form
S-8 Registration Statement for the Trus Joist Corporation Employee Stock
Ownership Plan (Registration No. 2-96065), Form S-8 Registration Statement for
the Trus Joist Corporation Associates' Stock Purchase Plan, as amended
(Registration No. 2-96821), Form S-8 Registration Statement for the Trus Joist
Corporation Key Employees' 1982 Incentive Stock Option Plan with Nonstatutory
Feature (Registration No. 2-96964), Form S-8 Registration Statement for the Trus
Joist Corporation Employee Stock Ownership Plan (Registration No. 33-4704), Form
S-8 Registration Statement for the Trus Joist Corporation Profit Sharing Plan,
as amended (Registration No. 33-21870), Form S-8 Registration Statement for the
Trus Joist Corporation Key Employees' 1985 Incentive Stock Option Plan with
Nonstatutory Feature, as amended (Registration No. 33-22186) and Form S-8
Registration Statement for TJ International, Inc. Key Employees 1988 and 1992
Stock Option Plans (Registration No. 33-54582). It should be noted that we have
not audited any financial statements of the Company subsequent to December 31,
1994 or performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Boise, Idaho
March 28, 1995
<PAGE>
EXHIBIT 25
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, R.B. FINDLAY, have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ R. B. Findlay
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16TH day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared ROBERT B. FINDLAY, known to me
to be the person whose name is subscribed to the foregoing and acknowledged to
me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, ROBERT V. HANSBERGER,
have made, constituted and appointed, and by these presents do make, constitute
and appoint either the Chairman of the Board or the President of TJ
International, Inc., a Delaware corporation, my true and lawful attorney in my
name, place and stead, and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ R. V. Hansberger
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16TH day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared ROBERT V. HANSBERGER,
known to me to be the person whose name is subscribed to the foregoing and
acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, J. L. SCOTT, have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ J. L. Scott
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16TH day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared J. L. SCOTT, known to me to be
the person whose name is subscribed to the foregoing and acknowledged to me that
he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, HAROLD E. THOMAS, have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ Harold E. Thomas
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16TH day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared HAROLD E. THOMAS, known to me
to be the person whose name is subscribed to the foregoing and acknowledged to
me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, ARTHUR L. TROUTNER, have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ Arthur L. Troutner
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16th day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared ARTHUR L. TROUTNER known to me
to be the person whose name is subscribed to the foregoing and acknowledged to
me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, J. ROBERT TULLIS , have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ J. Robert Tullis
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16th day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared J. ROBERT TULLIS, known to
me to be the person whose name is subscribed to the foregoing and
acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, STEVEN C. WHEELWRIGHT , have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ Steven C. Wheelwright
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16th day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared STEVEN C. WHEELWRIGHT, known
to me to be the person whose name is subscribed to the foregoing and
acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
------------------------------------
Notary Public for the State of Idaho
Residing at Boise , Idaho
--------------
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That I, WILLIAM J. WHITE, have made,
constituted and appointed, and by these presents do make, constitute and appoint
either the Chairman of the Board or the President of TJ International, Inc., a
Delaware corporation, my true and lawful attorney in my name, place and stead,
and for my use and benefit as follows:
o For the special purpose of signing the Company's Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities
and Exchange Commission on or before March 31, 1995, and
o For the special purpose of signing all such Forms S-8 as the Company
may be required to file pursuant to SEC regulations.
and to sign, seal, execute, deliver and acknowledge such instruments in writing
of whatever kind and nature as may be necessary or proper in the premises.
I HEREBY give and grant unto said attorney full power and authority to do
and perform all and every act and thing whatsoever requisite and necessary to be
done, as fully to all intents and purposes as I might or could do if personally
present, and hereby ratify and confirm all that said attorney shall lawfully do
or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16 day of
February, 1995.
/s/ William J. White
--------------------------------------------
STATE OF Idaho
County of Ada
On this 16th day of February, 1995, before me, the undersigned, a Notary
Public in and for said State, personally appeared WILLIAM J. WHITE, known to me
to be the person whose name is subscribed to the foregoing and acknowledged to
me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Stiburek
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Notary Public for the State of Idaho
Residing at Boise , Idaho
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS DATA SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM TJ
INTERNATIONAL, INC. BALANCE SHEET AT DECEMBER 31, 1994 AND FROM ITS STATEMENT OF
INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994. THE INFORMATION PRESENTED
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-02-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> $57,627
<SECURITIES> 16,084
<RECEIVABLES> 50,163
<ALLOWANCES> 1,006
<INVENTORY> 56,612
<CURRENT-ASSETS> 188,447
<PP&E> 488,841
<DEPRECIATION> 137,384
<TOTAL-ASSETS> 614,477
<CURRENT-LIABILITIES> 62,370
<BONDS> 102,499
<COMMON> 16,916
0
14,744
<OTHER-SE> 208,898
<TOTAL-LIABILITY-AND-EQUITY> 614,477
<SALES> 618,876
<TOTAL-REVENUES> 618,876
<CGS> 475,476
<TOTAL-COSTS> 475,476
<OTHER-EXPENSES> 102,112
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,576
<INCOME-TAX> 7,728
<INCOME-CONTINUING> 8,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,848
<EPS-PRIMARY> $.46
<EPS-DILUTED> $.44
</TABLE>
