-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SWGMRk8A//UUkfOazQqhKSVPvbPezZ0sOaojPrTX97bP9Bns0ElMsKHAVNq2RLN4 JtPPHQRRxMGdVzxgIYsAPw== 0000950009-95-000460.txt : 19960102 0000950009-95-000460.hdr.sgml : 19960102 ACCESSION NUMBER: 0000950009-95-000460 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951229 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECOM GENERAL CORP CENTRAL INDEX KEY: 0000790375 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 870410875 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14299 FILM NUMBER: 95606230 BUSINESS ADDRESS: STREET 1: 46035 GRAND RIVER AVENUE CITY: NOVI STATE: MI ZIP: 48374 BUSINESS PHONE: 8103059410 MAIL ADDRESS: STREET 1: 46035 GRAND RIVER CITY: NOVI STATE: MI ZIP: 48374 10-K 1 FORM 10-K *WITHOUT* ITEM 405 BOX CHECKED FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1995 Commission file number 0-14299 SECOM GENERAL CORPORATION (exact name of registrant as specified in its charter) DELAWARE 87-0410875 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 46035 GRAND RIVER AVENUE, NOVI, MICHIGAN 48374 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (810) 305-9410 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: None (Title of class and name of exchange on which registered) Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: Common Stock, par value $.10 per share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes__X__ No_____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in a definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [ ] As of December 27, 1995, 4,776,200 shares of the Registrant's Common Stock were outstanding and the aggregate market value of such Common Stock held by non-affiliates (based on the closing price on that date as reported on the NASDAQ National Market System) was approximately $8,229,000. DOCUMENTS INCORPORATED BY REFERENCE Items 11 and 13 - incorporated by reference from the Registrant's Proxy Statement for its Annual Meeting to be held in March 1996. TABLE OF CONTENTS PART I Page ---- Item 1. Business 3 Item 2. Properties 6 Item 3. Legal Proceedings 6 Item 4. Submission of Matters to a Vote of Security Holders 6 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 8. Financial Statements and Supplementary Data 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III Item 10. Directors and Executive Officers of the Registrant 14 Item 11. Executive Compensation 16 Item 12. Security Ownership of Certain Beneficial Owners and Management 16 Item 13. Certain Relationships and Related Transactions 17 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 18 PART I Item 1. Business General Secom General Corporation, a Delaware corporation (the "Company"), is a holding company with the following wholly-owned operating subsidiaries: Metal Parts Forming Segment: * Uniflow Corporation ("Uniflow") acquired in 1991 Tooling Segment: * Form Flow, Inc. ("Form Flow") acquired in 1987 * L & H Die, Inc. ("L & H") acquired in 1987 * Micanol, Inc. ("Micanol") acquired in 1990 * Triple Technologies, Inc. ("Triple" ), formerly known as Triple Tool, acquired in 1991 In May 1995, Triple's operations were downsized and relocated to a Form Flow facility. Triple's continuing business activity was absorbed into Form Flow. Prior to November 1993, the Company operated in another segment, Plastic Molded Products, through its subsidiary, Tri-Tec Plastics Corporation ("Tri-Tec"). Tri-Tec had been acquired in 1991 and its assets were sold in November 1993. For financial information regarding Tri-Tec, reference is made to the section entitled "Discontinued Operations" in Management's Discussion and Analysis set forth in Item 7 as well as Note 2 to the financial statements set forth in Item 8. The Company's corporate address is 46035 Grand River Avenue, Novi, Michigan 48374; its telephone number is (810) 305-9410 and its facsimile number is (810) 305-9599. Except as otherwise indicated by the context, any reference to "the Company" shall mean the Company and its subsidiaries. Principal Customers, Backlog and Seasonality None of the Company's customer accounts exceed 10% of consolidated revenues. Sales of the Company's parts, tooling and services are not considered seasonal. The Company believes that its backlog, due to the nature of its respective businesses, is not necessarily indicative of the level of its present or future sales. - 3 - SEGMENT REVIEW Metal Parts Forming Segment General The Metal Parts Forming Segment is comprised of the Company's Uniflow unit, which primarily manufactures automotive and truck parts from steel bar, coil and tubing using cold forging and forming machines and various types of secondary machining, threadrolling and piercing equipment. Sales and Competition Uniflow's fiscal 1995 sales was comprised as follows: 36% wheel studs for heavy and light duty trucks (original equipment manufacturers or "OEM" and aftermarket); 26% automobile ball joint suspension housings (OEM and aftermarket); 21% transmission gear housings (OEM); and 17% miscellaneous cold headed and cold forged parts (OEM). While Uniflow operates in competitive markets, management believes that Uniflow's extensive tooling inventory gives it a competitive advantage in retaining certain yearly reorders from the same customers. Although Uniflow is aggressively seeking sales of new parts, most of its business base remains reorders of the same customer specific parts. Uniflow's sales backlog usually covers a period of approximately three months of work. As such, the backlog is not necessarily indicative of Uniflow's sales performance beyond that time period. Uniflow's sales are concentrated with a few customers, as five customers comprised 56% of revenue for the fiscal year ended September 30, 1995. If Uniflow were to lose a significant customer, management believes that it could replace that business within an estimated timeframe of 6 to 18 months. Manufacturing and Engineering Uniflow manufactures parts from steel bar, coil and tubing using cut-off machines, cold forging hydraulic presses, cold heading machines, CNC turning centers, threadrollers, broaching and piercing machines. Although part production can involve up to 14 different production steps, primary equipment consists of the cold forging presses and cold forming (header) machines, which form the parts into their general size and shape. The forging presses complete one operation at a time, while the header machines complete up to five operations in succession. After parts are forged or formed, they are routed to various secondary machining operations for finishing, such as CNC turning, threadrolling, piercing and drilling. External steps completed by outside processors typically include specialized machining, heat-treating, annealing and plating. Production order turnaround time can vary from 4 to 12 weeks, depending on engineering requirements, lead times from outside vendors and the production backlog. Uniflow's tooling department makes and repairs some of the perishable tooling used in production, while the Company's Tooling Segment also supplies Uniflow with some of its production tooling. The engineering staff offers tool design and production development services to customers for new or modified parts. Employees As of September 30, 1995, Uniflow employed a total of 153 full-time employees compared to 151 in the prior year, as follows: 132 direct and indirect labor (including factory floor supervision), 6 engineering, 2 sales, 8 office and 5 management. - 4 - Tooling Segment General The Company's Tooling Segment ("Tooling Segment", "Tooling Operations" or "Tooling Units") is comprised of three wholly-owned operating subsidiaries, which are Form Flow, L & H and Micanol. In May 1995, the Company significantly reduced the size of its Triple operation by selling off certain equipment. Triple's remaining operations were transferred to the Company's Form Flow unit, although certain equipment was moved to the other subsidiaries. The continuing Triple business activity has been absorbed into Form Flow. For further discussion about Triple, reference is made to the Management's Discussion and Analysis set forth in Item 7 and Note 2 to the financial statements set forth in Item 8. The Tooling Segment manufactures close tolerance tooling for the hot and cold metal forming industry. Hot and cold metal forming companies typically make metal parts from steel coil that is automatically fed through various stations on a "header forming" machine. A header machine cuts off a piece of steel from automatically fed coil and then moves it through each die station progressively, using tool inserts to form the part. The number of stations, the grade of steel and whether the steel is hot or cold as it goes through the header machine is determined by the attributes of each customer part. As part of its sales and service, the Tooling Unit's design and development staff will advise customers on these and other engineering matters related to the production of hot and cold formed parts. Tool orders typically take 4 to 10 weeks to complete, while design and development orders can span over a period of months. Sales and Competition The Tooling Segment's customers manufacture items such as industrial fasteners, hand tools, electronic components, automotive parts, tubing, aircraft parts, consumer items and munitions as well as a wide array of OEM assembly parts. Tooling Segment customers include OEM and aftermarket suppliers. Continuing customer relations are very important in the tooling business, as a significant amount of revenue is derived from the reorder of tooling. The Tooling Segment operates in fragmented markets with numerous competitors. Management believes that the Company's success is based on its customers ability to differentiate between tooling suppliers on the basis of (1) the quality and durability of the tooling, (2) the ability to fulfill delivery commitments, and (3) price competitiveness. The Tooling Unit's design and engineering services allow it to compete for tool development work; management believes these services provide the Company a significant advantage in attracting new customer business. The Tooling Segment sells principally to customers in the United States. Manufacturing and Engineering All tooling orders are manufactured to customer specifications as indicated on a tool drawing. Tools are made from bar stock steel or carbide blanks and generally are routed through a production sequence that includes cutting, turning (CNC/lathe work), heat treating, grinding, polishing and coating. Form Flow, L & H and Micanol have separate plant facilities. Design and engineering services are located at a Form Flow facility, and are offered by all three of the Tooling Units. - 5 - Employees As of September 30, 1995, the Tooling Segment employed a total of 158 full-time employees compared to 175 in the prior year, as follows: 133 direct and indirect labor (including factory floor supervision), 4 engineering, 4 sales, 11 office and 6 management. Item 2. Properties The Company's corporate offices were relocated from leased space to its present offices that it owns at 46035 Grand River Avenue. Novi, Michigan. The subsidiaries operate in separate facilities, as follows: 1) Form Flow is located in two 12,600 square foot adjacent buildings at 6901 and 6999 Cogswell in Romulus, Michigan 48174. The 6999 Cogswell facility was acquired by the Company in December 1995. Its telephone number is 313-729-3100. The buildings are situated on about three acres of land and are owned by the Company. 2) L & H is located in a 12,600 square foot building at 38200 Ecorse Road, Romulus, Michigan 48174 and its telephone number is 313-722-8011. The building is situated on about two acres of land and is owned by the Company. 3) Micanol is located in a 12,400 square foot building at 46001 Grand River Avenue, Novi, Michigan 48374 and its telephone number is 810-347-1230. The building is owned by the Company. 4) Uniflow is located in three buildings in Novi, Michigan 48374, all owned by the Company: (1) 30,300 square feet at 26600 Heyn Drive, (2) 16,700 square feet at 46035 Grand River Avenue and (3) 32,000 square feet at 46009 Grand River Avenue. Its telephone number is 810-348-9370. Item 3. Legal Proceedings. The Company is involved in various legal proceedings arising in the normal course of business. In the opinion of management (based on the opinion of counsel) the outcome of such litigation will not have a material adverse effect on the Company's consolidated financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. No items were submitted to a vote of the Company's stockholders during its fourth fiscal quarter. - 6 - PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's common stock (trading symbol "SECM") has traded on NASDAQ since June 1987 and the NASDAQ National Market System (NMS) since January 1992. The following table sets forth (for the respective period indicated) the high and low trade for the common stock as reported by NASDAQ. Trade prices do not include retail markups, markdowns or commissions.
High Low Quarter Ended Trade Trade ------------- ----- ----- 12/31/92 $5.25 $3.00 3/31/93 4.50 2.50 6/30/93 3.25 2.00 9/30/93 5.25 2.25 12/31/93 3.75 2.25 3/31/94 3.50 2.44 6/30/94 3.38 2.38 9/30/94 3.25 2.50 12/30/94 3.00 2.00 3/31/95 2.62 1.62 6/30/95 2.50 1.62 9/30/95 4.09 2.25
On September 30, 1995 there were approximately 1,000 nominees/persons of record that held the Company's common stock. Of those listed of record, approximately 1.3 million shares were held by brokers and nominees representing an undetermined number of beneficial stockholders. Owners of common stock are entitled to receive dividends declared by the Board of Directors out of funds legally available therefor. The Company has never paid a cash dividend and does not anticipate paying cash dividends in the foreseeable future. Its policy is to retain earnings so it can provide funds for operations and expansion of its business. In addition, the Company's bank loan agreement prohibits the payment of cash dividends without written consent from the lender. In June 1991 and in May 1992, the Company issued 10% common stock dividends to stockholders of record as of May 14, 1991 and May 1, 1992, respectively. Item 6. Selected Financial Data See page 36 for selected financial data as of September 30, 1995, 1994, 1993, 1992 and 1991 and for the years then ended as required by this Item. This information should be read in conjunction with the financial statements and the footnotes thereto referred to in Item 14(a)(1) of this Form 10-K. - 7 - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this Form 10-K. Overview The Company posted net income of $1,204,300 (28 cents per share) on sales of $36,276,200 in 1995 compared to a net income of $1,093,500 (29 cents per share) on sales of $32,570,900 in 1994. In May 1995, the Company downsized the Triple operation and absorbed its continuing business activity into the Form Flow unit. The Company now operates four subsidiaries in two business segments: the Metal Parts Forming Segment (Uniflow) and the Tooling Segment (Form Flow, L & H and Micanol). During the 1995 fiscal year, the Uniflow unit showed marked improvement in augmenting productivity. With this positive trend in place, Uniflow's primary goal is to significantly increase its continuing sales base of cold formed and cold forged metal parts. To meet that objective, Uniflow is pursuing a number of prospects that could add significant sales, including a family of aluminum airbag housings and various OEM cold formed small motor shaft parts. The Tooling Segment recorded another consistent year of profitability. Form Flow completed a significant expansion during 1995 to increase its die repair capacity, as demand for those services remains strong. Micanol, on the other hand, lost sales volume from two key customers and is seeking to replace that business. Results of Operations Metal Parts Forming Segment* Chart of three year comparative operation results (in thousands):
1995 1994 1993 Amount % Amount % Amount % ------ ----- ------ ----- ------ ----- Net sales................. $17,600 100.0 $16,052 100.0 $13,723 100.0 Gross profit.............. 2,226 12.6 1,533 9.6 1,154 8.4 Operating expense......... 1,951 11.1 1,356 8.4 1,356 9.9 Operating profit (loss)... 275 1.6 177 1.1 (202) (1.5)
*Note: The Metal Parts Forming Segment is comprised of the Uniflow unit. Uniflow manufactures metal parts from two types of primary machinery: (1) single operation hydraulic presses, which generally specialize in short run production orders and (2) multiple operation cold forming machines, which specialize in longer production orders. In 1993, Uniflow completed a significant expansion of its multiple operation capability with the addition of three cold forming machines. - 8 - Net sales increased 9.8% in 1995 from 1994, and 17.0% in 1994 from 1993. The sales improvement in 1995 over 1994 was primarily due to increased sales of truck wheel fasteners and various cold formed parts, while the increase in 1994 compared to 1993 was primarily due to higher sales of tubular transmission shaft housings and various cold formed parts. As noted above, Uniflow expanded its cold forming capacity significantly in 1993 with new machinery capable of generating over $8 million of revenue annually. Although sales in this area remain weak with utilized capacity at about 25%, management is optimistic about a few sales prospects that could add substantially to the revenues and profits of the Company. In addition, in June 1995, Uniflow acquired a specialized hydraulic press for the manufacture of aluminum airbag housings. Management anticipates production of airbag housing to begin in June 1996 for delivery to a dedicated customer. For fiscal 1996, Uniflow management projects steady sales, increasing later in the year as the airbag housing and other parts begin production. Gross profit on sales was 12.6% in 1995, 9.6% in 1994 and 8.4% in 1993. The increases in gross profit percentages were primarily the result of lower material and factory overhead costs along with higher sales prices on various parts. Management believes that Uniflow's gross profit percentage will improve significantly as excess machine capacity is utilized through additional sales. Operating expense as a percentage of sales was 11.1%, 8.4% and 9.9% in 1995, 1994 and 1993, respectively. The percentage increase in operating expense in 1995 compared to 1994 reflects increased staffing in management, engineering and quality control areas and the direct allocation of certain personnel expense that were previously classified as corporate expenses. Management believes that the overhead structure in place will handle significant sales increases with minimal additions to overhead. The operating expense percentage decrease in 1994 compared to 1993 was primarily due the elimination of certain sales related expenses, combined with the increase in sales for the segment. Uniflow's profit (loss) from operations was $275,000, $177,000 and ($202,000) in 1995, 1994 and 1993, respectively. The profit increase for 1995 compared to 1994 reflects the improved gross profit, offset by higher selling, general and administrative expense. The increase in operating income in 1994 compared to 1993 was primarily due to the slightly higher gross profit and lower operating costs. Tooling Segment** Chart of three year comparable operating results (in thousands):
1995 1994 1993 Amount % Amount % Amount % ------ ----- ------ ----- ------ ----- Net sales(1) ........ $20,659 100.0 $19,143 100.0 $18,360 100.0 Gross profit ........ 4,902 23.7 4,841 25.2 4,370 23.8 Operating expense ... 2,445 11.8 1,833 9.6 1,868 10.2 Operating profit .... 2,457 11.9 3,008 15.7 2,502 13.6 (1) Before elimination of intercompany sales.
**Note: The Tooling Segment is comprised of the Form Flow, L&H, Micanol and Triple units. (Triple was downsized and its operations were relocated to Form Flow in May 1995.) - 9 - The Tooling Segment sells tools and dies for use in the production of hot and cold formed metal parts. Tooling net sales increased 7.9% in 1995 compared to 1994 and 4.3% in 1994 from 1993. The sales increase in 1995 was the result of the Form Flow, L&H and Micanol units increasing their sales, partially offset by a significant sales decrease at Triple. Form Flow's sales in 1995 increased due to the continuing success of its die repair program for two customers and various one time tooling development projects for an automotive company. L&H and Micanol experienced only minor increases in sales volume, due to lower volumes from certain key accounts. Management's goal is to increase sales in areas that it specializes in, such as carbide tooling, design and development, die repair, punch tooling and tube rolls. Net sales for 1994 increased only 4.3% from 1993, as the Tooling Units approached their productive capacity. Looking forward, Tooling management believes that order volume will remain steady for the next year. Gross profit on sales was 23.7% in 1995, 25.2% in 1994 and 23.8% in 1992. The decrease in gross profit was primarily attributable to lower margins at Triple, L&H and Micanol, offset by a higher gross profit at Form Flow. Triple's margins were negatively impacted by cost overruns on various jobs, while L&H and Micanol margins were affected by lower sales volumes from certain higher margin customer accounts. The slight increase in gross profit in 1994 from 1993 was primarily the result of improved asset utilization due to strong customer demand. Operating expense as a percentage of sales was 11.8% in 1995, 9.6% in 1994 and 10.2% in 1993. The 1995 increase in operating expense as a percentage of sales compared to 1994 is primarily the result of increased personnel costs, which includes higher discretionary incentive compensation, increased health insurance costs and the direct allocation of certain personnel expenses that were previously classified as corporate expense. The 1994 decline from 1993 was due to lower sales-related expenses and an increased sales volume. The Tooling Segment's operating profit was $2,457,000 (11.9% of sales), $3,008,000 (15.7% of sales) and $2,502,000 (13.6% of sales) in 1995, 1994 and 1993, respectively. The decline in 1995 from 1994 is primarily the result of lower operating profits at L&H, Micanol and Triple, partially offset by higher operating profits at Form Flow. L&H and Micanol recorded lower sales volumes from various higher margin accounts in 1995, largely accounting for their decline in profit margin. Triple's operating profit continued to deteriorate due to lower sales volume and cost overruns. Form Flow, on the other hand, continued to improve its margins through a series of successful design and development jobs and an expansion of its die repair program. The improvement of operating profit to 15.7% of sales in 1994 compared to 13.6% of sales in 1993 primarily reflected increased sales at Form Flow, L&H and Micanol of higher margin tooling and services, such as design and development, die repair and tube rolls, among others. - 10 - Corporate Expenses Unallocated corporate overhead was $858,000, $1,620,000 and $1,884,000 for the years ended September 30, 1995, 1994 and 1993, respectively. The decrease in corporate expense in 1995 compared to 1994 reflects (1) the direct allocation of certain expenses attributable to the subsidiaries that were included in corporate expense in 1994, including approximately $450,000 in personnel costs and (2) a reduction in various corporate overhead costs, including the elimination of corporate office lease expense and lower business insurance expenses. The decrease in corporate expense for 1994 compared to 1993 was primarily the result of lower outside professional expenses, primarily consulting expenses. Interest Expense, Miscellaneous Income and Income Tax Benefit Interest expense was $1,138,000, $953,000 and $895,000 for 1995, 1994 and 1993, respectively. Interest expense was higher on a year to year comparative basis due to higher borrowings, primarily to support capital expenditures, and rising interest rates. Miscellaneous income (expense) was ($8,000), $386,000 and $310,000 for 1995, 1994 and 1993, respectively. The 1994 miscellaneous income primarily reflects Tri-Tec debt settlements at less than recorded values, while the 1993 amount reflects the Company's corporate allocation to that discontinued operation. The income tax benefit of $372,700 for the year ended September 30, 1995 is the result of the utilization of net operating loss carryforwards against taxable income and the reversal of portions of the valuation allowance in anticipation of future use of net operating loss carryforwards. Discontinued Operation The Company decided to dispose of Tri-Tec in September 1993 and its assets were sold in November 1993. Accordingly, the Company recorded a loss of $2.44 million as of September 30, 1993, to reduce Tri-Tec's assets to net realizable value and to provide for estimated operating losses until completion of the asset sales. In addition to the loss on the sale of assets, Tri-Tec recorded an operating loss of $1.2 million in 1993. Tri-Tec's losses in 1993 were largely the result of inefficient production and intensified competition in its respective bottle and cap markets. Financial Condition The Company's working capital position continued its improvement during 1995, ending at $1,129,000 as of September 30, 1995 compared to $266,000 at September 30, 1994 and a negative $2,335,000 at September 30, 1993. The successive year-to-year working capital improvements primarily reflect improvements in operating results and the 1994 infusion of $1 million from a subordinated loan, which was converted to 500,000 shares of common stock through the exercise of a stock warrant in November 1994. Subsequent to September 30, 1995, the Company completed the following financing transactions with its primary lender: (1) the $4.5 million working capital line of credit was extended through December 1996, on terms substantially the same as those that were previously in place, (2) a $1 million equipment line of credit was established for the acquisition of machinery, (3) the $320,000 acquisition of land and building that is adjacent to Form Flow and L&H, which was financed by an $800,000 mortgage that covers the newly acquired building and the two adjacent buildings already owned by the Company and (4) the Company extended the due date of Uniflow's real estate loan through December 1996. In addition, the interest rate on the line of credit and all other debt with the primary lender has been reduced to 1/4% and 3/4% over the prime rate, respectively. - 11 - Also subsequent to fiscal year end, the Company received $1 million in exchange for 500,000 shares of common stock from Manubusiness Opportunities, Inc. ("MOI"), a related party, pursuant to stock purchase warrants held by MOI. Scheduled term debt payments are approximately $1.86 million for the forthcoming fiscal year. Management believes that internal operations, bank financing and the $1 million received from the stock warrant exercise will generate sufficient cash flow to cover the scheduled debt payments and fund continuing working capital requirements. Cash flow for 1995, 1994 and 1993 is summarized as follows:
1995 1994 1993 ---- ---- ---- Cash flows from operating activities...... $ 1,772,000 $ 356,000 $ 3,649,000 Cash flows from investing activities...... (494,000) (589,000) (3,520,000) Cash flows from financing activities...... (1,274,000) 93,000 18,000
Cash flows from operating activities Cash flow provided by operating activities before changes in working capital items was $2,697,000 in 1995 compared to $3,030,000 in 1994 and $2,297,000 in 1993. In 1995, working capital items used $925,000, primarily the result of higher accounts receivables and prepaids and lower accounts payables. Working capital items used $2,674,000 in 1994, which was primarily the result of increased finished tooling inventories required by certain customers and reduced trade payables. Trade payables were reduced to normal operating levels from the prior year, when they were stretched due to the Company's cash flow constraints. In 1993, working capital items provided cash flow of $1,352,000, principally due to increases in accounts payable that were associated with the Company's cash flow problems. Net cash provided (used) by the discontinued operation was ($42,000), $309,000 and ($561,000) in 1995, 1994 and 1993, respectively. Cash flows from investing activities Capital expenditures were $1,359,000 in 1995, $908,000 in 1994 and $3.74 million in 1993. The 1995 total primarily reflects Uniflow's acquisition of a hydraulic press for the production of airbag housings and Form Flow's acquisition of various ID/OD grinders and building improvements for its space expansion. Uniflow's production target date for airbag housings is June 1996. In 1994, capital expenditures were primarily for production tooling at Uniflow, while in 1993, $3.35 million was expended at the Uniflow unit for cold forming machinery and special production tooling. The Company received $863,000, $149,000 and $201,000 in 1995, 1994 and 1993, respectively, from disposals of machinery, principally from the Triple unit. Net cash provided (used) by discontinued operations in investing activities was $149,000 and ($13,000) in 1994 and 1993, respectively. - 12 - Cash flows from financing activities Cash flow provided by (used in) financing activities was ($1,274,000) in 1995, $93,000 in 1994 and $18,000 in 1993. In 1995, cash flow used in financing activities included scheduled payments on long term debt of $1.63 million, partially offset by proceeds from the bank line of credit and other obligations of $484,000. Overall, the Company reduced its long term obligations to $4.6 million in 1995 from $7.1 million in 1994, through scheduled debt payments and repayment of the MOI note by its exercise of a stock warrant. In 1994, cash flow provided by financing activities included long-term debt proceeds of $2.47 million, of which $1 million originated from a subordinated debt placement and $1.14 million was derived from Uniflow's bond fund, offset by scheduled debt payments made during 1994 of $1.07 million. The subordinated debt was converted to common stock in November 1994 through the exercise of a stock purchase warrant. The Company also refunded $700,000 of restricted cash to bondholders during 1994. In 1993, long-term debt proceeds were $2.67 million, of which $1 million was used to refinance Triple's debt and $1.55 million was used from unexpended bond funds to finance a portion of Uniflow's capital expenditures. The 1993 increases in cash flows from financing activities was partially offset by payments on long-term obligations of $2.3 million. Net cash used by the discontinued operation was $483,000 in 1994 and $344,000 in 1993. Item 8. Financial Statements and Supplementary Data. See Item 14(a)(1) for a list of the financial statements included in this Form 10-K. Refer to page 37 of this Form 10-K for the supplementary quarterly financial data required by this Item. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None - 13 - PART III Item 10. Directors and Executive Officers of the Registrant. The following are the current executive officers and directors of the Company: Name and Age Position - ------------ -------- Robert A. Clemente (42) Chairman, President and Director David J. Marczak (35) Chief Financial Officer, Secretary, Director Gregory Adamczyk (39) Director Rocco Pollifrone (37) Director Orville K. Thompson (46) Director Richard Thompson (27) Director Martin J. Eidemiller (39) Vice President - Tooling Subsidiaries The following is a summary of the business experience of the directors and executive officers of the Company. Robert A. Clemente - President, CEO, Chairman and Director. Bob became a Director and President of the Company in December 1993 and its Chairman in December 1994. Bob is an attorney and of counsel to Hardy, Lewis and Page, PC, which is located in Birmingham, Michigan. Prior to joining the Company, Bob practiced law at Hardy Lewis for 14 years, specializing in corporate, commercial and tax law. He holds a BBA degree from the University of Michigan - Dearborn, a JD from Wayne State University and an LLM in taxation from New York University. Bob is also a certified public accountant and certified management accountant. David J. Marczak - Secretary, Treasurer, Chief Financial Officer and Director. Dave started with the Company in 1986 as Corporate Controller, in 1987 added the duties of Corporate Secretary and in 1990 became Treasurer. He has been a Director since April 1994 and was also a Director from 1991 to 1993. Dave is a certified public accountant, previously worked for Touche Ross & Co and has a BBA degree from the University of Michigan. Gregory Adamczyk - Director. Greg became a Director in December 1993. Greg is a majority owner and director of Forward Planning Corp. (Livonia, Michigan), an engineering firm that specializes in manufacturing plant layout, design and related systems. He has over twenty years experience in manufacturing and engineering and holds a Bachelor of Science degree from the University of Michigan - Dearborn. Rocco Pollifrone - Director. Rocco became a Director in December 1993. Rocco is President and Chief Executive Officer of Forward Planning Corp. and has been employed by Forward Planning or affiliated companies for over ten years. He holds a Bachelor of Science degree from the Detroit Engineering Institute. Orville K. (Ken) Thompson - Director. Ken became a Director in February 1994. Ken is the owner and President of MST Steel Corp., a steel service center located in Warren, Michigan. He has been employed there for over 10 years. - 14 - Richard Thompson - Director. Rich became a Director in December 1993. Since 1993, Rich has been President of Star Supply Company of Detroit, Michigan, a company that distributes heating and cooling units and related products. Rich is also a Vice President of MST Steel Corp. and has been employed there since 1991. He received a Bachelor of Arts degree from the University of Michigan. Martin J. Eidemiller. Vice President - Tooling Group. Marty has been employed by the Company and its subsidiaries for over 20 years. He has been Vice President of the Tooling Group since 1994 and President of Form Flow since 1991. Each Director of the Company holds that position until the next annual stockholder's meeting or their death, resignation or removal. Officers hold their respective positions until their successors are appointed or they die, resign or are removed by the Board of Directors. Except for Ken Thompson, who is the father of Richard Thompson, there are no family relationships among the directors and officers listed above. Except as set forth below, there are no arrangements by which any of the directors listed above were or are to be elected as officers or directors. Pursuant to the terms and conditions of the agreements entered into between the Company and Manubusiness Opportunities, Inc. ("MOI") that became effective on December 15, 1993, MOI was given the right to designate four persons to be appointed to the Company's then seven person Board of Directors. On December 15, 1993, the following persons designated by MOI were appointed to the Company's Board: Robert Clemente; Greg Adamczyk; Rocco Pollifrone and Richard Thompson. - 15 - Item 11. Executive Compensation. The information called for by this Item is incorporated by reference from the Registrant's proxy statement for its Annual Meeting to be held in March 1996. The Company's proxy statement will be filed with the Securities and Exchange Commission in January 1996. Item 12. Security Ownership of Certain Beneficial Owners and Management. As of December 28, 1995, the Company had 4,776,200 shares of Common Stock outstanding. The following table sets forth at that date the Common Stock beneficially owned: (i) by each Director; (ii) by all Officers and Directors of the Company as a group; and (iii) by each person known by the Company to beneficially own 5% or more of the outstanding shares of the Common Stock of the Company:
Number of shares Percent Name and address (2) Beneficially Owned (1) Owned (1) - -------------------- ---------------------- --------- Robert A. Clemente 20,194 (2) 0.42% Gregory Adamczyk 458,818 (2)(3) 9.35% Rocco Pollifrone 169,038 (2)(4) 3.50% Orville K. Thompson 1,482,706 (2)(5) 28.48% Richard Thompson 19,000 (2) 0.40% David J. Marczak 21,164 (2)(6) 0.44% Martin Eidemiller 27,798 (11) 0.58% All Directors and Officers as a Group (totaling 9) 1,783,988 (9) 45.55% Manubusiness Opportunities, Inc. 401 S. Woodward Birmingham, Michigan 48009 2,414,831 (7) 44.10% John Cocke 46035 Grand River Avenue Novi, Michigan 48374 514,132 (8) 10.77% Secom General Corporation 401(k) Plan 46035 Grand River Avenue Novi, Michigan 48374 292,084 (10) 6.12% (1) For the purposes of this table, shares indicated as being beneficially owned include shares for which the person has directly or indirectly, the power to vote or to direct the voting of, and/or investment power (being, among other things, the power to dispose or to direct the disposition of) the shares of Common Stock indicated. Unless otherwise indicated, the beneficial owner has sole investment and voting power. Shares indicated as being beneficially owned also include shares which are subject to exercise within 60 days through options, warrants, rights or conversion privileges. For the purpose of computing the percentage of the outstanding shares owned by a stockholder, the shares subject to such exercise by a stockholder are deemed to be outstanding securities of the class owned by the stockholder but are not deemed to be outstanding for the purpose of computing the percentage owned by any other person. - 16 - (2) A director of the Company. The address for all directors is 46035 Grand River Avenue, Novi, Michigan 48374. (3) Represents 19% of the 2,414,831 shares that are beneficially owned by MOI, as Mr. Adamczyk owns 19% of the common stock of MOI. See footnote (7) below. (4) Represents 7% of the 2,414,831 shares that are beneficially owned by MOI, as Mr. Pollifrone owns 7% of the common stock of MOI. See footnote (7) below. (5) Represents 61% of the 2,414,831 shares that are beneficially owned by MOI, as Mr. Thompson owns 61% of the common stock of MOI. See footnote (7) below. (6) Includes 9,000 shares that may be acquired by the exercise of employee stock options at a price of $2.625 per share through January 1998. (7) MOI was formed to make an investment in the Company and three of its principal owners, Greg Adamczyk, Rocco Pollifrone and Ken Thompson, became directors of the Company in conjunction with MOI's investment. MOI's shares include (i) 1,130,428 shares owned directly; (ii) 500,000 shares that may be purchased on or before November 23, 1996 upon the exercise of warrants with an exercise price of $3.00 per share, (iii) 200,000 shares that may be purchased on or before November 23, 1998 upon the exercise of stock options with an exercise price of $2.63 per share and, (iv) 608,339 shares owned by John Cocke and Larry McKnight, as they have each given MOI a proxy to vote their shares for the election of directors that are nominated by the Board for a three year period ending November 23, 1996. Refer to footnotes (3), (4) and (5) above. (8) John Cocke is a Vice President of the Company. The shares that he owns are the subject of a proxy given to MOI and therefore are also deemed to be beneficially owned by MOI and its stockholders. See footnotes (3) - (5) and (7) above. (9) Includes all of the shares for the persons referenced with footnotes (2), (8) and (11). (10) Participant's of the Company's 401(k) Plan can vote their pro rata shares. Shares not voted by participants may be voted by the Plan's trustee, David Marczak, who is also a Director of the Company. Shares owned by the 401(k) Plan for the account of persons who are not officers or directors of the Company are not included in the shares shown as owned by David Marczak or by all directors and officers as a group, because to do so would be misleading. Of the shares owned by the Company's 401(k) Plan, 16,875 are owned for the account of officers and directors and are treated as owned directly by them for purposes of this table. (11) Includes 10,000 shares that may be acquired by the exercise of employees stock options at a price of $2.625 per share through January 1998.
Item 13. Certain Relationships and Related Transactions The information called for by this Item is incorporated by reference from the Registrant's proxy statement for its Annual Meeting to be held in March 1996. The Company's proxy statement will be filed with the Securities and Exchange Commission in January 1996. - 17 - PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. Financial Statements and Financial Statement Schedule. Page ---- Independent Auditors' Report............................... 23 Consolidated Balance Sheets as of September 30, 1995 and 1994................................................ 24 Consolidated Statements of Operations for the Years Ended September 30, 1995, 1994 and 1993....................... 25 Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 1995, 1994 and 1993........... 26 Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1994 and 1993....................... 27 Notes to Consolidated Financial Statements................. 28-35 Schedule II - Valuation and Qualifying Accounts............ 38 Schedules other than those listed above are omitted because of the absence of the conditions under which they are required or because the information called for is included in the consolidated financial statements or the notes thereto. (b) Reports filed on Form 8-K. The Company filed a report on Form 8-K dated November 23, 1995 to report the exercise of a stock purchase warrant by Manubusiness Opportunities, Inc. ("MOI") to acquire 500,000 shares of common stock for $1 million. (c) Exhibits. See the Exhibit Index on the following page. - 18 - Exhibit Description Page* - ------- ----------- ----- 3.1 Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on August 25, 1987. 3.1* 3.2 Amendment to Articles of Incorporation filed on August 31, 1990. 3.2* 3.3 Certificate of Merger between the Company and Secom General Corporation, a Utah corporation filed with the Secretary of State of Delaware in December 1987. 3.2* 3.4 Certificate of Designation of Rights of the Class A Preferred Stock filed with the Secretary of State of Delaware in December 1987. 3.3* 3.5 Amendment to Articles of Incorporation filed on December 17, 1991. 3.5* 3.6 Bylaws of the Company. 3.4* 4.1 List of instruments defining the right of security holders. 4.1* 4.2 Common Stock Purchase Warrant granted to Manubusiness Opportunities, Inc. and exercisable for 500,000 shares of common stock at $2.00 per share on or before November 23, 1994 (this same form was used for an additional 500,000 warrants exercisable at $2.00 per share on or before November 23, 1995 and an additional 500,000 warrants exercisable at $3.00 per share on or before November 23, 1996). 4.1* 4.3 Nonqualified Stock Option Agreement dated November 23, 1993 between Secom General Corporation as grantor and Manubusiness Opportunities, Inc. as grantee. 4.2* 4.4 Proxy Agreement dated November 23, 1993 between Roy A. McKnight, Larry McKnight, John Cocke and Manubusiness Opportunities, Inc. 4.3* 10.1 Installment Business Loan Note dated September 13, 1991 in the principal amount of $1,920,000 from the Company and Uniflow to NBD Bank. 10.3* 10.2 Master Demand Business Loan Note dated September 13, 1991 in the principal amount of $1,500,000 from Uniflow to NBD Bank. 10.4* 10.3 Mortgage dated September 13, 1991 from the Company to NBD Bank. 10.5* 10.4 Installment Business Loan Note dated October 15, 1991 in the principal amount of $300,000 from Uniflow Corporation to NBD Bank, N.A. 10.14* 10.5 1991 Nonqualified Stock Option Plan 10.27* 10.6 Form of Stock Option Agreement for Options granted under the 1991 Non-qualified Stock Option Plan 10.28* 10.7 Option Cancellation Agreement dated November 23, 1993 between the Company, Roy McKnight, Larry McKnight and John Cocke. E-4* 10.8 Loan Agreement, dated as of June 1, 1992, between the Michigan Strategic Fund as lender and Uniflow Corporation as borrower. 10.28* 10.9 Promissory Note dated June 1, 1992 in the principal amount of $4,000,000 from Uniflow Corporation to the Michigan Strategic Fund. 10.29* - 19 - 10.10 Reimbursement Agreement, dated as of June 1, 1992, between Uniflow Corporation and NBD Bank, N.A. 10.30* 10.11 Pledge and Security Agreement, dated as of June 1, 1992, among Uniflow Corporation, NBD Bank, N.A. and Manufacturers National Bank, N.A. 10.31* 10.12 Mortgage, Security Agreement and Assignment of Rents, dated as of June 1, 1992, from Uniflow Corporation to NBD Bank, N.A. 10.32* 10.13 Security Agreement, dated as of June 1, 1992, from Uniflow Corporation to NBD Bank, N.A. 10.33* 10.14 Irrevocable Guaranty, dated as of June 1, 1992, from Secom General Corporation, Tri-Tec Plastics Corporation, Form Flow, Inc., L & H Die, Inc., Micanol Incorporated and Triple Tool, Inc. to NBD Bank, N.A. 10.34* 10.15 Amended and Restated Security Agreement dated December 15, 1993 between The Company as debtor and NBD Bank, N.A. as Secured Party. (Each Subsidiary also entered into a similar security agreement). 10.11* 10.16 Third Amendment to Reimbursement Agreement dated December 15, 1993 between Uniflow Corporation and NBD Bank, N.A. 10.12* 10.17 First Amendment to Mortgage dated December 15, 1993 between The Company as mortgagor and NBD Bank, N.A. as mortgagee. 10.13* 10.18 First Amendment to Mortgage dated December 15, 1993 between The Company and Uniflow as mortgagors and NBD Bank, N.A. as mortgagee. 10.14* 10.19 Amended and Restated Continuing Guaranty dated December 15, 1993 by the Subsidiaries of the Company to NBD Bank, N.A. (the Company and all of the Subsidiaries executed similar Amended and Restated Guarantees with respect to the obligations of each corporation to NBD). 10.15* 10.20 Subordination Agreement dated December 15, 1993 between Larry McKnight as junior lender and NBD Bank, N.A. as senior lender. 10.17* 10.21 Fifth Amendment to Amended and Restated Credit Agreement dated December 1, 1995 between the Company and NBD Bank. 10.22 Sixth Amendment to Amended and Restated Credit Agreement dated December 27, 1995 between the Company and NBD Bank. 22. Subsidiaries of the Registrant 3 23. Consent of Deloitte & Touche LLP 27. Financial Data Schedule - ------------ * See the footnotes on page 21 to locate these exhibits. - 20 - All exhibits that have page numbers followed by an * are incorporated by reference from the filings set forth below. The numbers set forth as page numbers for those exhibits are the exhibit numbers those documents were given in those other filings. All other exhibits are included in this Form 10-K at the page numbers shown. * Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1987. * Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1990. * Incorporated by reference from the Company's Current Report on Form 8-K dated September 13, 1991. * Incorporated by reference from the Company's Registration Statement on Form S-4 (File No. 33-40865) that was declared effective on November 20, 1991. * Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1991. * Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1992. * Incorporated by reference from the Company's Current Report on Form 8-K dated December 15, 1993. * Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1993. - 21 - SIGNATURES Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SECOM GENERAL CORPORATION Dated: December 28, 1995 By: /s/ Robert A. Clemente ------------------------------- Robert A. Clemente Chairman, President and CEO Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- Principal Executive Officer: /s/ Robert A. Clemente - ------------------------------ Chairman, President December 28, 1995 Robert A. Clemente CEO and Director Principal Financial and Accounting Officer: /s/ David J. Marczak - ------------------------------ Chief Financial Officer, December 28, 1995 David J. Marczak Secretary, Treasurer and Director /s/ Gregory Adamczyk - ------------------------------ Director December 28, 1995 Gregory Adamczyk /s/ Rocco Pollifrone - ------------------------------ Director December 28, 1995 Rocco Pollifrone /s/ Orville K. Thompson - ------------------------------ Director December 28, 1995 Orville K. Thompson /s/ Richard Thompson - ------------------------------ Director December 28, 1995 Richard Thompson - 22 - INDEPENDENT AUDITORS' REPORT Stockholders and Board of Directors Secom General Corporation Novi, Michigan We have audited the accompanying consolidated balance sheets of Secom General Corporation and subsidiaries as of September 30, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(1) of Form 10-K. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Secom General Corporation and subsidiaries at September 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP /s/ Deloitte & Touche LLP December 27, 1995 Detroit, Michigan - 23 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 AND 1994 - --------------------------------------------------------------------------------------- ASSETS 1995 1994 ---- ---- CURRENT ASSETS: Cash $ 13,700 $ 9,300 Receivables: Trade (net of allowances of $93,500 and $78,800) 4,484,800 4,277,200 Other 320,600 386,000 Inventories (Note 3) 3,935,700 4,070,000 Prepaids and other 727,800 366,200 Deferred tax assets (Note 11) 542,700 280,000 ------------ ------------ Total current assets 10,025,300 9,388,700 PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) 14,583,600 15,728,800 INTANGIBLE ASSETS (Note 1) 2,071,300 2,527,700 OTHER ASSETS 266,900 181,200 ------------ ------------ TOTAL ASSETS $ 26,947,100 $ 27,826,400 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term obligations (Note 5) $ 5,633,400 $ 5,256,700 Trade accounts payable 2,065,500 2,628,400 Accrued liabilities 1,197,100 1,237,200 ------------ ------------ Total current liabilities 8,896,000 9,122,300 LONG-TERM OBLIGATIONS (Note 5) 4,621,700 7,089,300 DEFERRED TAX LIABILITIES (Note 11) 1,518,900 1,778,100 ------------ ------------ Total liabilities 15,036,600 17,989,700 STOCKHOLDERS' EQUITY (Notes 6, 8 and 9): Common stock, $.10 par value, 10,000,000 shares authorized; outstanding: 1995, 4,276,200 shares; 1994, 3,700,500 shares 427,600 370,100 Additional paid-in capital 16,478,900 15,666,900 Accumulated deficit (4,996,000) (6,200,300) ------------ ------------ Total stockholders' equity 11,910,500 9,836,700 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,947,100 $ 27,826,400 ============ ============ See notes to consolidated financial statements.
- 24 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 - ---------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- NET SALES $ 36,276,200 $ 32,570,900 $ 29,356,000 COST OF SALES 29,016,100 26,048,200 23,712,700 ------------ ------------ ------------ GROSS PROFIT 7,260,100 6,522,700 5,643,300 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,282,300 4,801,500 5,071,500 ------------ ------------ ------------ INCOME FROM OPERATIONS 1,977,800 1,721,200 571,800 OTHER INCOME (EXPENSE): Interest (1,137,800) (952,500) (894,700) Other, net (8,400) 385,600 310,200 ------------ ------------ ------------ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 831,600 1,154,300 (12,700) INCOME TAX BENEFIT (EXPENSE) (Note 11) 372,700 (60,800) ------------ ------------ -------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 1,204,300 1,093,500 (12,700) DISCONTINUED OPERATIONS (Note 2): Loss from operations of discontinued subsidiary (1,198,800) Loss on disposal of subsidiary, including provision of $249,000 for operating losses during phase-out period (less applicable income tax benefit of $125,300) (2,441,000) ------------ ------------ ------------ NET INCOME (LOSS) $ 1,204,300 $ 1,093,500 $ (3,652,500) ============ ============ ============ EARNINGS (LOSS) PER COMMON SHARE (Note 1): Income from continuing operations $ 0.28 $ 0.29 Loss from operations of discontinued subsidiary $ (0.42) Loss on disposal of discontinued subsidiary (0.85) ------------ ------------ ------------ NET INCOME (LOSS) PER COMMON SHARE $ 0.28 $ 0.29 $ (1.27) ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING (Note 1) 4,284,200 3,795,200 2,863,200 ============ ============ ============ See notes to consolidated financial statements.
- 25 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 - --------------------------------------------------------------------------------------------------------------------------------- Common Stock Additional ------------------------ Paid-in Accumulated Shares Amount Capital Deficit Total ------ ------ ---------- ----------- ----- BALANCE, SEPTEMBER 30, 1992 2,821,300 $ 282,100 $ 15,370,200 $ (3,641,300) $ 12,011,000 Exercise of options 1,000 100 4,900 5,000 Issuances to 401(k) plan (employer match and employee elections) 103,600 10,400 325,400 335,800 Stock retirement (25,000) (2,500) (122,500) (125,000) Net loss (3,652,500) (3,652,500) --------- ------------ ------------ ------------ ------------ BALANCE, SEPTEMBER 30, 1993 2,900,900 290,100 15,578,000 (7,293,800) 8,574,300 Issuances for settlement of stock guarantees 711,900 71,200 (85,500) (14,300) Issuances to 401(k) plan (employer match and employee elections) 37,700 3,800 79,400 83,200 Private placements 50,000 5,000 95,000 100,000 Net income 1,093,500 1,093,500 --------- ------------ ------------ ------------ ------------ BALANCE, SEPTEMBER 30, 1994 3,700,500 370,100 15,666,900 (6,200,300) 9,836,700 Exercise of stock warrant 500,000 50,000 950,000 1,000,000 Issuances to 401(k) plan (employer match and employee elections) 42,300 4,200 79,900 84,100 Issuances for compensation 41,800 4,100 79,500 83,600 Stock retirements, net (8,400) (800) (31,000) (31,800) Note issued for settlement of stock guarantee (266,400) (266,400) Net income 1,204,300 1,204,300 --------- ------------ ------------ ------------ ------------ BALANCE, SEPTEMBER 30, 1995 4,276,200 $ 427,600 $ 16,478,900 $ (4,996,000) $ 11,910,500 ========= ============ ============ ============ ============ See notes to consolidated financial statements.
- 26 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 - ----------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Income (loss) from continuing operations $ 1,204,300 $ 1,093,500 $ (12,700) Adjustments to reconcile income (loss) from continuing operations to net cash provided by operations: Depreciation and amortization 1,858,600 1,983,700 1,878,700 Provision for (benefit from) deferred taxes (521,900) 60,800 Increase (decrease) in allowance for doubtful accounts 17,000 (228,800) 277,000 (Gain) loss on sales of assets (319,500) 14,100 24,500 Stock issuances to 401(k) plan (employer match) 64,700 107,000 129,600 Write-off of Triple Tool goodwill 309,700 Stock issuances for compensation 83,600 Changes in assets and liabilities that provided (used) cash, net of discontinued operations: Trade and other receivables (298,400) (105,300) (396,200) Inventories 134,300 (1,412,200) 314,300 Prepaids and other (193,700) 30,300 (67,400) Other assets 78,300 (18,000) 44,800 Trade accounts payable (491,400) (984,400) 1,461,200 Accrued liabilities (111,300) (196,900) 229,300 Other liabilities (297,200) 327,000 Net cash (used in) provided by discontinued operations (42,300) 309,400 (560,800) ----------- ----------- ----------- Net cash provided by operating activities 1,772,000 356,000 3,649,300 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of property, plant and equipment 863,000 149,300 201,200 Collections on notes receivable 2,300 20,600 32,700 Capital expenditures (1,359,200) (907,900) (3,741,000) Net cash provided by (used in) discontinued operations 149,200 (13,400) ----------- ----------- ----------- Net cash used in investing activities (493,900) (588,800) (3,520,500) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in bank line of credit 210,600 44,900 (92,500) Proceeds from long-term obligations and use of restricted cash 273,100 2,469,400 2,673,000 Proceeds from issuances of stock 61,700 222,300 Retirements of common stock (12,500) (125,000) Payments on long-term obligations (1,634,000) (1,065,000) (1,989,800) Refund of restricted cash to bondholders (700,000) Payments on capital lease obligations (110,900) (234,400) (326,800) Net cash used in discontinued operations (483,400) (343,600) ----------- ----------- ----------- Net cash (used in) provided by financing activities (1,273,700) 93,200 17,600 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH 4,400 (139,600) 146,400 CASH, BEGINNING OF PERIOD 9,300 148,900 2,500 ----------- ----------- ----------- CASH, END OF PERIOD $ 13,700 $ 9,300 $ 148,900 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 1,104,800 $ 965,200 $ 886,500 =========== =========== =========== Cash paid during the year for income taxes $ 120,000 =========== See notes to consolidated financial statements.
- 27 - SECOM GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 - ----------------------------------------------------------------------------- 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Business - Secom General Corporation (the "Company") is a publicly-traded holding company with four wholly-owned subsidiaries supplying the automotive, truck, construction and consumer markets. The Company operates in the following two business segments: Tooling: Form Flow, Inc. ("Form Flow") L&H Die, Inc. ("L&H Die") Micanol, Inc. ("Micanol") Triple Technologies, Inc. ("Triple"), formerly known as Triple Tool (refer to Note 2) Metal Parts Forming - Uniflow Corporation ("Uniflow") Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated. Inventories are stated at the lower of cost or market, as determined under the first-in, first-out method. Property, Plant and Equipment are recorded at cost. The Company capitalizes, as additions, expenditures which extend the useful life or increase the value of related assets. Maintenance and repairs are charged to operating expense as incurred. Expenditures for repairs and maintenance for the three years ended September 30, 1995 were $408,400, $535,900 and $119,000, respectively. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Intangible Assets consisting of goodwill (cost in excess of net assets acquired) are generally amortized on a straight-line basis over 40 years. The carrying value of goodwill is evaluated periodically in relation to the operating performance of the underlying business and assets. Management has evaluated the carrying value of the goodwill, has made adjustments to such values as described in Note 2, and has determined at September 30, 1995 that remaining amounts are not impaired. Accumulated amortization was $664,000 and $208,000 as of September 30, 1995 and 1994, respectively. Income Taxes - Deferred income tax assets and liabilities are computed annually for differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Earnings (Loss) per Common Share is computed by dividing net income by the weighted average number of common and common equivalent shares (warrants and options to purchase common stock outstanding during the periods presented). New Accounting Standards - Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was issued in March 1995. The Statement is effective for fiscal years beginning after December 15, 1995, and requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Statement is not expected to have a material effect on the Company's consolidated financial position or results of operations. - 28 - SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in October 1995. This Statement, which is effective for fiscal years beginning after December 15, 1995, establishes financial accounting and reporting standards for stock-based employee compensation plans and is not expected to have a material effect on the Company's consolidated financial position or results of operations. Noncash Transactions - The Company entered into the following noncash investing and financing transactions for the following years ended September 30 (in thousands):
1995 1994 1993 ------ ------ ------ Cancellation of note in exchange for exercise of stock warrant $1,000 Notes receivable issued for sale of Triple equipment 249 Note payable issued for settlement of stock guarantee 266 Common stock issued for services or for reduction of other obligations 148 $ 107 $ 130 Note receivable and assumption of obligations from sale of Tri-Tec subsidiary 1,191 Capital lease obligations incurred 98 Note payable issued for repurchase of common stock and noncompete agreement 175
Reclassifications - Certain amounts in the 1994 consolidated financial statements have been reclassified to conform with the presentation for 1995. 2. DISCONTINUED AND DOWNSIZED OPERATIONS In the quarter ended September 30, 1993, the Company adopted a formal plan to discontinue operations of its Plastic Molded Products Segment, Tri-Tec. In the first quarter of 1994, Tri-Tec's inventories and machinery and equipment were sold for cash and notes receivable of $1,200,000 and the assumption of $838,000 of capital lease obligations. A loss of $2.4 million was recorded to writedown Tri-Tec's assets to net realizable value at September 30, 1993, which included a provision for losses during the period prior to sale. Tri-Tec's sales for the year ended September 30, 1993 was $6,686,000. At September 30, 1995 the Company was no longer an obligor or guarantor on leases assumed by the buyer of Tri-Tec. In the quarter ended June 30, 1995, the Company completed its downsizing of Triple by the sale of $725,800 (net book value) of equipment and the leasing of $342,000 (net book value) of equipment. The Company recorded a net gain of $2,500 on this transaction after writing down goodwill in the amount of $310,000 in connection with the downsizing. In June 1995, Triple's remaining operations, primarily electro-diode machining (EDM), contracts and the related equipment (net book value $341,000) were transferred to Form Flow. For the three years ended September 30, 1995, sales from Triple were $1,559,000, $2,500,000 and $2,323,000, respectively, and operating losses were $399,000, $50,200 and $626,000, respectively. - 29 - 3. INVENTORIES Inventories at September 30 consist of (in thousands):
1995 1994 ---- ---- Raw materials $ 372 $ 639 Work-in-process 1,797 2,203 Finished goods 1,767 1,228 ------ ------ Total $3,936 $4,070 ====== ======
4. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment at September 30 consist of (in thousands):
1995 1994 Life ---- ---- ---- Machinery and equipment $ 14,581 $ 15,393 2 to 20 years Building and improvements 4,714 4,459 3 to 30 years Land and improvements 540 540 N/A Furniture and fixtures 478 475 5 to 7 years Vehicles 263 185 3 to 10 years Construction-in-progress 236 41 N/A -------- -------- Total 20,812 21,093 Less accumulated depreciation (6,228) (5,364) -------- -------- Total $ 14,584 $ 15,729 ======== ========
5. LONG-TERM OBLIGATIONS Long-term obligations at September 30 consist of (in thousands):
1995 1994 ---- ---- Bank line of credit (a) $ 3,776 $ 3,566 Real estate mortgage notes with bank (b) 1,888 2,056 Michigan Strategic Fund Limited Obligation Revenue Bonds (c) 2,500 2,900 Equipment term notes with bank (d) 1,176 1,767 Equipment capital leases (e) 104 215 Other notes payable (f) 811 1,842 -------- -------- Total 10,255 12,346 Less current obligations (5,633) (5,257) -------- -------- Long-term obligations $ 4,622 $ 7,089 ======== ======== (a) The bank line of credit, due on demand, permits borrowings of $4.5 million at September 30, 1995. The line of credit is collateralized by accounts receivable and inventory and borrowings are limited to stated percentages of accounts receivable and inventory. Interest rate is prime rate plus 1.5%. The line of credit agreement prohibits the payment of cash dividends and requires the Company to maintain specific financial covenants including minimum tangible equity, working capital, and cash flow. The Company was in compliance with all financial covenants at September 30, 1995. - 30 - (b) Real estate mortgage notes with bank are collateralized by land and buildings with a net book value of $2,771,600. Interest is prime rate plus 2%. Notes mature in 1997 and 2001. Payments due are as follows: 1996, $175,000; 1997, $1,373,000; 1998, $29,000; 1999, $29,000; 2000, $29,000; thereafter, $253,000. (c) In June 1992, the Michigan Strategic Fund sold $4,000,000 of its Limited Obligation Revenue Bonds and loaned the proceeds to Uniflow for the purchase of equipment and the construction of a manufacturing facility. The bonds require monthly interest payments and annual principal installments through June 1, 2002. Under the terms of the Company's bank credit agreement, $700,000 of unexpended bond proceeds was returned to the bondholders in 1994. The bonds bear interest at the rate of approximately 2% below the prime rate and are collateralized by buildings and equipment with a net book value of $3,962,300. Payments due are as follows: 1996, $400,000; 1997, $400,000; 1998, $400,000; 1999, $500,000; 2000, $500,000; thereafter, $300,000. (d) Equipment term notes with bank are collateralized by equipment with a net book value of $6,768,100. Interest is prime rate plus 2%. Maturity dates range from 1996 to 1998. Payments due are as follows: 1996, $759,000; 1997, $396,000; 1998, $21,000. (e) Interest rates on equipment capital leases range from 6.6% to 10.6%. The leases expire in 1996 and 1997. Payments due are as follows: 1996, $72,000; 1997, $32,000. (f) Interest rates on other notes payable range from 4.9% to 12%. At September 30, 1995, amount includes $336,200 in trade installment notes collateralized by specific equipment and at September 30, 1994 amount includes a related party note payable of $1,000,000 (refer to Note 6). Maturity dates range from 1996 to 2000. Payments due are as follows: 1996, $451,000; 1997, $248,000; 1998, $33,000; 1999, $18,000; 2000, $61,000.
The prime rate at September 30, 1995 and 1994 was 8.75% and 7.75%, respectively. The weighted average interest rate on short-term obligations at September 30, 1995 was approximately 10.3% Payments on long-term obligations for the next five years are as follows (in thousands): 1996 $5,633 1997 2,449 1998 483 1999 547 2000 590 Thereafter 553
Subsequent to September 30, 1995, the Company and its primary lender (1) extended its $4.5 million bank line of credit agreement through December 1996, with terms substantially the same as the previous terms, (2) established a $1 million equipment line of credit, (3) extended Uniflow's $1.4 million real estate note through December 1996 and (4) financed a land and building purchase for $320,000 by establishing an $800,000 mortgage note covering the new property and two adjacent buildings already owned by the Company. In addition, the interest rate on the line of credit and other debt with the primary lender was reduced to 1/4% and 3/4% over the prime rate, respectively. - 31 - 6. RELATED PARTY TRANSACTIONS In December 1993, the Company issued a $1,000,000 subordinated note payable, maturing December 1, 1995 and requiring payment of interest only, at the prime rate plus 3%, to Manubusiness Opportunities, Inc. ("MOI"), an entity controlled by three directors of the Company. MOI also received warrants and options to purchase 1.7 million shares of common stock, as follows: 500,000 shares that expire in one year with an exercise price of $2 per share, 500,000 shares that expire in two years with an exercise price of $2 per share, and 500,000 shares that expire in three years with an exercise price of $3 per share and 200,000 options that expire in five years with an exercise price of $2.63 per share. In November 1994, MOI exercised its first warrant to acquire 500,000 shares of common stock in exchange for the cancellation of the $1,000,000 note. In November 1995, MOI exercised its second warrant to acquire 500,000 shares of common stock in exchange for a payment of $1,000,000. Included in accrued liabilities at September 30, 1995 and 1994, is $125,000 and $95,000, respectively, of interest on the above note payable. In connection with the 1991 acquisition of Uniflow, an officer of the Company received 135,600 shares of common stock for his 15.8% Uniflow ownership. His consideration was determined on the same basis as that paid to all other Uniflow stockholders. The shares he received were subject to a certain guarantee provision. This guarantee right to realize $7.17 per share on his 135,600 shares was exchanged for 168,000 additional shares of common stock in 1993. The shares of common stock received for extinguishment of his guarantee right were calculated on the same basis as offered to all other stockholders who had guarantee rights. In October 1993, a former director loaned $100,000 to the Company due on demand. The loan, subject to a bank subordination agreement, bears interest at the prime rate plus 2%. 7. LEASES The Company leased certain manufacturing facilities under noncancelable operating leases. Rental expense for continuing operations was $36,000, $106,000 and $104,000 for the years ended September 30, 1995, 1994 and 1993, respectively. As of September 30, 1995, the Company was not obligated under any material noncancelable operating leases. Machinery and equipment includes assets under capital leases having a total cost of $438,700 and $635,500 and accumulated amortization of $156,700 and $150,300, respectively, at September 30, 1995 and 1994. Annual payments due on the capital leases are as follows (in thousands): 1996 $ 79 1997 32 ----- Total 111 Less imputed interest (7) ----- Total $ 104 =====
- 32 - 8. STOCK OPTIONS In 1991, the Board of Directors (the "Board") adopted a nonqualified stock option plan (the "1991 Plan"). The 1991 Plan authorizes the Board to grant options to purchase a maximum of 400,000 shares of common stock to employees. Transactions under the 1991 Plan are summarized as follows:
Shares Price ------ ----- Options outstanding September 30, 1993 32,000 3.00 - 5.00 Options granted 182,500 2.62 - 2.75 Options terminated (35,750) 2.62 - 5.00 Options outstanding September 30, 1994 178,750 2.62 - 3.00 Options terminated (16,250) 2.62 Options outstanding September 30, 1995 162,500 2.62 - 3.00
During the year ended September 30, 1995, 5,500 options that had been issued in 1992, outside of the 1991 Plan, were terminated and none of those options remain outstanding. 9. COMMON STOCK PRICE GUARANTEES The Company is contingently liable under stock price guarantees issued in connection with 1991 private stock placements. Under the agreements, the holder is entitled to the shortfall between the amount realized from sale of the shares during the guarantee period and the guaranteed price of the share. The Company agreed to payment terms with a holder of a stock price guarantee in the first quarter of 1995 with the issuance of a note payable of $266,000 to be paid over 30 months. At September 30, 1995, the Company has approximately 30,000 shares remaining that are subject to guarantees with a maximum guarantee amount of approximately $216,000. 10. EMPLOYEE BENEFIT PLAN The Company maintains a defined contribution 401(k) plan to which it contributes stock on a discretionary basis. The cost of the stock contributed to the Plan resulted in a charge to expense of $116,000, $107,000, and $129,000 for the years ended September 30, 1995, 1994 and 1993, respectively. 11. INCOME TAXES The provision for income taxes consists of the following for the years ended September 30:
1995 1994 1993 ---- ---- ---- Current (expense) $(149,200) Deferred benefit (expense) 521,900 $ (60,800) $ 125,000 --------- --------- --------- Income tax benefit (expense) $ 372,700 $ (60,800) $ 125,000 ========= ========= =========
- 33 - Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows:
September 30 --------------------------- 1995 1994 ---- ---- Deferred tax assets: Alternative minimum tax carryforwards $ 137,200 $ 43,300 Tax credit carryforwards 108,400 108,400 Secom net operating loss carryforward 45,200 532,100 Net operating loss carryforwards of acquired companies 544,500 717,300 Reserves 159,100 41,600 Other 17,000 72,300 ----------- ----------- Total deferred tax assets 1,011,400 1,515,000 Less valuation allowance (468,700) (1,235,000) ----------- ----------- Net deferred tax assets 542,700 280,000 Current portion 542,700 280,000 ----------- ----------- Long-term portion None None =========== =========== Deferred tax liabilities: Depreciation $ 488,100 $ 373,400 Book and tax basis differences from business combinations 988,200 1,404,700 Other 42,600 ----------- ----------- Total deferred tax liabilities 1,518,900 1,778,100 Current portion None None ----------- ----------- Long-term portion $ 1,518,900 $ 1,778,100 =========== ===========
During 1995 and 1994, certain tax benefits from net operating losses and temporary differences creating deferred tax assets have been reserved with a valuation allowance due to their uncertainty of realization. Remaining net operating loss carryforwards as of September 30, 1995 are available for offset against future taxable earnings through the year 2007, subject to annual limitations as set forth in the Internal Revenue Code. A reconciliation of the Company's statutory income tax liability computed on pre-tax income to the recorded income tax provision for the year ended September 30 is as follows:
1995 1994 ---- ---- Statutory income tax liability $(283,300) $(430,000) Change in valuation allowance 766,000 30,000 Nondeductible goodwill amortization (128,000) (23,000) Book and tax basis differences from business combinations 40,000 383,000 Nondeductible other expenses (22,000) (20,800) --------- --------- Income tax benefit (expense) $ 372,700 $ (60,800) ========= =========
- 34 - 12. CONTINGENCIES The Company is involved in certain legal proceedings arising in the normal course of business. In the opinion of management, based on the opinion of counsel, the outcome of such litigation will not have a material adverse effect on the Company's consolidated financial position or results of operations. 13. SEGMENT INFORMATION The following business segment information is applicable to continuing operations (in thousands):
Metal Eliminations Parts and Forming Tooling Corporate Consolidated ------- ------- ------------ ------------ September 30, 1995: Net sales $ 17,630 $ 20,659 $ (2,013) $ 36,276 Income from operations 275 2,457 (754) 1,978 Identifiable assets 14,444 8,852 3,651 26,947 Depreciation and amortization 1,151 671 37 1,859 Capital expenditures 592 751 16 1,359 September 30, 1994: Net sales $ 16,052 $ 19,143 $ (2,624) $ 32,571 Income from operations 177 3,008 (1,464) 1,721 Identifiable assets 15,856 8,119 3,851 27,826 Depreciation and amortization 1,273 598 113 1,984 Capital expenditures 570 330 8 908 September 30, 1993: Net sales $ 13,723 $ 18,360 $ (2,727) $ 29,356 Income from operations (202) 2,502 (1,728) 572 Identifiable assets 16,937 7,656 6,698 31,291 Depreciation and amortization 1,121 592 166 1,879 Capital expenditures 3,348 368 25 3,741
- 35 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED) - ------------------------------------------------------------------------------------------------------------- Year Ended September 30 -------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (In thousands; except per share amounts) INCOME STATEMENT DATA NET SALES $ 36,276 $ 32,571 $ 29,356 $ 27,574 $ 14,359 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 831 1,154 (13) 295 1,095 INCOME TAX BENEFIT (EXPENSE) 373 (61) (80) (375) -------- -------- -------- -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS 1,204 1,093 (13) 215 720 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES (1) (3,640) 38 8 -------- -------- -------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,204 1,093 (3,653) 253 728 EXTRAORDINARY ITEM, UTILIZATION OF NET OPERATING LOSS CARRYFORWARD 375 CUMULATIVE EFFECT OF CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES (2) 379 -------- -------- -------- -------- -------- NET INCOME (LOSS) $ 1,204 $ 1,093 $ (3,653) $ 632 $ 1,103 ======== ======== ======== ======== ======== BALANCE SHEET DATA TOTAL ASSETS $ 26,947 $ 27,826 $ 31,291 $ 33,924 $ 24,435 LONG-TERM OBLIGATIONS 4,622 7,089 7,123 10,519 7,117 STOCKHOLDERS' EQUITY 11,910 9,837 8,574 12,011 9,626 COMMON STOCK SHARES OUTSTANDING (3) 4,276 3,701 2,901 2,821 2,192 EARNINGS (LOSS) PER COMMON SHARE (3): Continuing operations $ 0.28 $ 0.29 $ 0.08 $ 0.43 Discontinued operations $ (1.27) 0.01 0.01 Extraordinary item 0.23 Change in method of accounting for income taxes 0.14 -------- -------- -------- -------- -------- NET INCOME (LOSS) PER COMMON SHARE $ 0.28 $ 0.29 $ (1.27) $ 0.23 $ 0.67 ======== ======== ======== ======== ======== EQUITY PER COMMON SHARE 2.79 2.66 2.96 4.26 4.39 CURRENT RATIO 1.13 1.03 0.82 0.96 1.26 LONG-TERM OBLIGATIONS TO STOCKHOLDERS' EQUITY 0.39 0.72 0.83 0.88 0.74 RETURN ON ASSETS 4 % 4 % 2 % 5 % RETURN ON STOCKHOLDERS' EQUITY 10 % 11 % 5 % 11 % (1) See note 2 to the consolidated financial statements regarding discontinued operations. (2) Adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," effective October 1, 1991. (3) Restated for the 10% stock dividends distributed in 1991 and 1992.
- 36 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED) - ------------------------------------------------------------------------------------------------------- Quarter Ended --------------------------------------------------------------------------------- 1995 1994 --------------------------------------- --------------------------------------- September June March December September June March December 1995 1995 1995 1994 1994 1994 1994 1993 --------- ---- ----- -------- --------- ---- ----- -------- (In thousands; except per share amounts) NET SALES $ 8,200 $ 9,915 $ 9,863 $ 8,298 $ 8,515 $ 8,245 $ 8,242 $ 7,569 GROSS PROFIT 1,566 2,338 2,193 1,163 1,374 1,754 1,771 1,624 INCOME (LOSS) BEFORE INCOME TAXES 171 545 424 (308) 105 351 437 261 INCOME TAX BENEFIT (EXPENSE) 255 80 (48) 85 161 42 (160) (104) ------- ------- ------- ------- ------- ------- ------- ------- NET INCOME (LOSS) $ 426 $ 625 $ 376 $ (223) $ 266 $ 393 $ 277 $ 157 ======= ======= ======= ======= ======= ======= ======= ======= EARNINGS (LOSS) PER COMMON SHARE - Net income (loss) $ 0.10 $ 0.14 $ 0.09 $ (0.05) $ 0.07 $ 0.10 $ 0.07 $ 0.05 ======= ======= ======= ======= ======= ======= ======= ======= PRICE RANGE OF COMMON STOCK: High bid $ 4.09 $ 2.50 $ 2.62 $ 3.00 $ 3.25 $ 3.38 $ 3.50 $ 3.75 Low bid 2.25 1.62 1.62 2.00 2.50 2.38 2.44 2.25
- 37 -
SECOM GENERAL CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS - ----------------------------------------------------------------------------------------------------------------------- Column A Column B Column C - Additions Column D Column E Balance at Charged to Charged to Balance at Beginning Cost and Other Deductions - End of Description of Year Expenses Accounts Write Offs Year ---------- ---------- ---------- ----------- ---------- Allowance for doubtful accounts: Year ended September 30, 1993 $ 30,600 $ 297,100 $ 20,100 $ 307,600 Year ended September 30, 1994 307,600 9,400 238,200 78,800 Year ended September 30, 1995 78,800 127,500 112,800 93,500 Inventory reserve: Year ended September 30, 1993 59,000 120,500 179,500 Year ended September 30, 1994 179,500 7,500 126,000 61,000 Year ended September 30, 1995 61,000 15,000 76,000 Deferred tax asset valuation allowance: Year ended September 30, 1993 227,000 1,038,000 1,265,000 Year ended September 30, 1994 1,265,000 30,000 1,235,000 Year ended September 30, 1995 1,235,000 766,300 468,700
- 38 - EX-10.21 2 FIFTH AMENDMENT TO...CREDIT AGR EXHIBIT 10.21 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This Fifth Amendment to Amended and Restated Credit Agreement ("Fifth Amendment") is dated effective December 1, 1995 among NBD BANK, formerly NBD Bank N.A., successor by merger to National Bank of Detroit ("NBD" or "Bank"), as lender, with its main offices at 611 Woodward Avenue, Detroit, Michigan 48226, and Secom General Corporation, a Delaware corporation ("Secom"), whose address is 46035 Grand River Ave., Novi, Michigan 48374; Uniflow Corporation, a Michigan corporation ("Uniflow"), whose address is 26600 Heyn Drive, Novi, Michigan 48450; Triple Tool, Inc., a Michigan corporation ("Triple Tool") whose address is 1445 Allen Drive, Troy, Michigan 48083; Micanol, Inc., a Michigan corporation ("Micanol") whose address is P.O. Box 881, 46001 Grand River, Novi, Michigan 48376; L&H Die, Inc., a Michigan corporation ("L&H"), whose address is 38200 Ecorse Road, Romulus, Michigan 48174; Form Flow, Inc., a Michigan corporation ("Form Flow"), whose address is 6901 Cogswell, Romulus, Michigan 48174; and Tri-Tec Plastics Corporation, a Michigan corporation ("Tri-Tec"), whose address is 46035 Grand River Ave., Novi, Michigan 48374 (such corporations being sometimes collectively referred to as the "Borrowers" and individually as a "Borrower"), as borrowers. This Fifth Amendment amends the Amended and Restated Credit Agreement dated December 15, 1993, among NBD and the Borrowers, as amended by (i) the First Amendment to Amended and Restated Credit Agreement dated July 19, 1994, (ii) the letter dated August 19, 1994 from NBD to Secom, (iii) the Third Amendment to Amended and Restated Loan Agreement dated December 28, 1994 and (iv) the Fourth Amendment to Amended and Restated Loan Agreement dated February 17, 1995 (as so amended, the "Credit Agreement" or "Agreement"). Capitalized terms not otherwise defined herein shall have the meanings given to them in the Credit Agreement. Recitals A. NBD has made available to the Borrowers revolving credit loans and term loans as more fully described in the Credit Agreement. B. The Borrowers have requested that NBD provide a new term loan to Secom in the original principal amount of $800,000, a portion of which will be used to fund the purchase price of certain real estate currently being leased by Secom and a portion of which will be used to refinance the obligations of Secom to NBD under the $500,582.78 Secom Note and the $109,322.08 Triple Tool Note. C. The Borrowers have also requested that NBD provide them with up to $1,000,000 in term loans to allow the various Borrowers to purchase equipment. D. NBD is willing to provide such financing on the terms and conditions set forth in this Fifth Amendment. E. The Borrowers have determined that it is in their best interest to guaranty the new term loan to Secom and Uniflow and the loans under the proposed equipment line in order to induce NBD to provide such financing, since Secom provides many services to the other Borrowers, the current obligations will be extended, a portion of the financing will reduce the outstandings under the Line of Credit and the equipment to be purchased will help increase the revenues and profitability of the respective Borrowers. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. Amended Term Loans. A new Section 1.2C is hereby added to the Credit Agreement to read as follows: 1.2C Amended Term Loans. Prior to December 31, 1995 and subject to meeting all conditions for funding, NBD will provide a term loan to Secom in the original principal amount of $800,000, a portion of which will refinance (but not repay) the $500,582.78 Secom Note and the $109,322.08 Triple Tool Note and also to purchase the real property commonly known as 6999 Cogswell, Romulus, Michigan, and more fully described on Exhibit 1.2C(i) ("Purchased Property"). Such loan will be evidenced by an Installment Business Loan Note substantially in the form of Exhibit 1.2C(ii) attached to the Fifth Amendment (together with any amendments, extensions, renewals or restatements, the "$800,000 Secom Note"). In addition to the existing Secom Mortgages and the other collateral granted to NBD to secure the Obligations, Secom will deliver a mortgage on the Purchased Property to secure the $800,000 Secom Note and the other Obligations. 2. New Equipment Line. A new Section 1.2D is hereby added to the Credit Agreement to read as follows: 1.2D $1,000,000 Equipment Line. NBD agrees to consider from time to time prior to December 31, 1995 ("Equipment Line Expiration Date"), granting term loans to any Borrower (jointly and severally with Secom) not to exceed $1,000,000 in the aggregate original principal amounts (the "Equipment Line"), the proceeds of which must be used by the requesting Borrower to finance no more than 80% of the purchase price of the equipment being acquired for use in such Borrower's business. Each loan will be made at NBD's discretion and will be subject to the conditions set forth in Section 9 of the Fifth Amendment. Such loans shall be evidenced by Installment Business Loan Notes in the forms provided 2 by NBD (all such notes, together with any amendments, extensions, renewals or restatements, are referred to as the "1995 Equipment Line Notes"). 3. Revised Covenants. Sections 5.1B and 5.1C of the Credit Agreement are hereby amended in their entirety to read as follows: B. Tangible Capital Funds. Maintain Tangible Capital Funds as follows: from June 30, 1995 and thereafter of at least $9,000,000. C. Total Liabilities to Tangible Capital Funds. Maintain the following ratios of total liabilities minus deferred tax liabilities as shown on the consolidated balance sheet of Borrowers as determined and prepared in accordance with generally accepted accounting principles consistently applied ("Total Liabilities") to Tangible Capital Funds of no more than 2.2 to 1.0 from June 30, 1995 and thereafter. 4. Definitions. All references in the Credit Agreement to the "Notes" and the "Term Notes" shall hereafter include the $800,000 Secom Note and the 1995 Equipment Line Notes. All references to the "Obligations" in the Credit Agreement shall hereafter include the liabilities and obligations under the $800,000 Secom Note and the 1995 Equipment Line Notes. All references to the $500,582.78 Secom Note and the $109,322.08 Triple Tool Note shall hereafter refer to the $800,000 Secom Note. All references in the Credit Agreement to the "Loan Documents" shall include the documents and instruments executed pursuant to this Fifth Amendment. 5. Interest Rate on Line of Credit Note and Term Notes. Borrowers and the Bank agree that notwithstanding anything to the contrary contained in the Credit Agreement, the Line of Credit Note or any of the Term Notes, beginning on and after December 1, 1995, interest shall accrue and be payable on the Line of Credit Note and each of the Term Notes (except any 1995 Equipment Line Note which specifically references a fixed interest rate, if any) at a per annum rate equal to the Applicable Margin (defined below) for the type of note plus the rate announced from time to time by the Bank as its "prime rate" (the "Note Rate"), which prime rate may not be the lowest rate charged by the Bank to any of its customers. Each change in the prime rate will immediately result in a change of the Note Rate. After maturity, or from and after an Event of Default as defined in the Credit Agreement, the outstanding principal balance under the Line of Credit Note and the Term Notes shall bear additional interest from and after such maturity date or the occurrence of the Event of Default, at a rate of three (3%) percentage points per annum above the applicable Note Rate until such note is fully paid or the Event of Default is fully cured (the "Default Rate"). Interest shall be computed on the basis of actual days elapsed over a period of a 360-day year. 3 The "Applicable Margin" will be determined according to the following table:
Total Liabilities to Tangible Capital Funds (determined under Applicable Margin Applicable Margin Section 5.1C) is: for Term Notes for Line of Credit Note - ----------------- -------------- ----------------------- Greater than or equal to 1.75% 1.25% 2.0 to 1.0 from 1.75 to 1.0 up to and 1.50% 1.00% including 1.99 to 1.0 from 1.50 to 1.0 up to and 1.25% .75% including 1.74 to 1.0 from 1.25 to 1.0 up to and 1.00% .50% including 1.49 to 1.0 less than 1.25 to 1.0 .75% .25%
The Applicable Margin will be adjusted effective on the first day of the next fiscal quarter after receipt of the quarterly financial statements delivered to the Bank pursuant to Section 5.4. If such quarterly financial statements are not delivered by the end of the quarter in which they are due, the ratio of Total Liabilities to Tangible Capital Funds will be deemed to be greater than 2.0 to 1.0 until quarterly financial statements are delivered to the Bank. Any appropriate adjustments to the Applicable Margin will be effective upon the date of receipt by the Bank of the overdue financial statements. 6. SWAP Transactions. NBD may from time to time enter into interest rate or currency swap agreements or future rate agreements or forward exchange contracts or interest rate protection or cap agreements with one or more of the Borrowers ("Swap Transactions"). Any telex, telecopy or other document evidencing any Swap Transaction and any agreement entered into by any Borrower and NBD pursuant to or in connection with a Swap Transaction will be considered part of the "Loan Documents" under the Credit Agreement. Any obligations of any Borrower to NBD under or in connection with a Swap Transaction will be considered part of the "Obligations" under the Credit Agreement. 7. Conditions Precedent. NBD shall not be required to make the loan described in Sections 1.2C and 1.2D of the Credit Agreement unless and until all of the terms and conditions of Article II of the Credit Agreement have been and continue to be met, and, in addition: (a) NBD shall have received this Fifth Amendment, executed and delivered by each of the Borrowers; 4 (b) NBD shall have received a commitment for title insurance in the amount of $800,000, covering the 1995 Mortgage of the Purchased Property and the property commonly known as 6901 Cogswell and 38200 Ecorse, Romulus, Michigan, and subject only to encumbrances and exceptions consented to by NBD; (c) NBD shall have received an officers certificate from each Borrower in form and substance satisfactory to NBD; and (d) NBD shall have received simultaneously with the execution of this Fifth Amendment a closing fee of 1% of the principal amount of the loans extended under Section 1.2C from the Borrowers. 8. Additional Conditions For Mortgage Loan. NBD shall not be required to make the loan described in Section 1.2C of the Credit Agreement unless and until all of the terms and conditions of Section 7 of this Fifth Amendment and in Article II of the Credit Agreement have been and continue to be met, and, in addition: (a) NBD shall have received the $800,000 Secom Note, and an environmental certification in the form provided by NBD, executed and delivered by Secom; (b) NBD shall have received frown Secom executed copies of the Amended and Restated Mortgage ("1995 Mortgage") in the form of Exhibit 7 attached to this Fifth Amendment, which amends and restates the existing Mortgage dated June 1, 1990 covering the real property commonly known as 6901 Cogswell and 38200 Ecorse, Romulus, Michigan, and grants a mortgage on the Purchased Property; (c) On or before December 31, 1995, Secom shall deliver to NBD a mortgage survey of the Purchased Property and the property commonly known as 6901 Cogswell and 38200 Ecorse, Romulus, Michigan, certified to NBD; and (d) The Borrowers will take all reasonable steps necessary to insure that the title policy issued from the commitment required above is issued without standard exceptions, at the Borrower's expense. 9. Conditions to Equipment Line. NBD shall not consider making any loan described in Section 1.2D of the Credit Agreement unless and until all of the conditions in Section 7 of this Fifth Amendment and in Article II of the Credit Agreement have been and continue to be met, and, in addition, NBD shall have received: (a) A 1995 Equipment Line Note, appropriately completed to represent the advance and the agreed upon repayment terms; 5 (b) Appropriate evidence of the purchase and delivery of the equipment which is being financed (or binding contracts for such purchase and delivery); (c) UCC financing statements executed by the requesting Borrower and filed in the appropriate jurisdictions and evidencing NBD's purchase money security interest in such equipment; (d) A fee of 1% of the requested advance under the Equipment Line; and (e) Such other information or documents as NBD shall request in connection with such loan. 10. Additional Defaults. NBD may fund any loan without waiving any of the conditions set forth in Sections 7, 8 or 9 of this Fifth Amendment. Unless otherwise agreed to in writing by NBD, if the Borrowers fail to comply with any condition in this Fifth Amendment within 15 days after a written request for compliance is sent by NBD to Secom, NBD may consider such failure an Event of Default under the Credit Agreement. 11. Expenses. Borrowers acknowledge and agree that the Borrowers will pay reasonable attorneys' fees and out of pocket costs of NBD in connection with or with respect to this Fifth Amendment and the loans funded pursuant hereto. 12. Ratification. The parties hereto acknowledge and agree that the terms and provisions of this Fifth Amendment amend, add to and constitute a part of the Credit Agreement. Except as expressly modified and amended by the terms of this Fifth Amendment, all of the other terms and conditions of the Credit Agreement and all of the documents executed in connection therewith or referred to or incorporated therein (including, without limitation, the Restated Guaranties), remain in full force and effect and are hereby ratified, confirmed and approved. 13. Express Conflicts. If there is an express conflict between the terms of this Fifth Amendment and the terms of the Credit Agreement, or any of the other agreements or documents executed in connection therewith or referred to or incorporated therein, the terms of this Fifth Amendment shall govern and control. IN WITNESS WHEREOF, the parties have executed this Fifth Amendment to Amended and Restated Credit Agreement effective as of the date noted above. SECOM GENERAL CORPORATION By: /s/ Dave Marczak -------------------------------- Its: Chief Financial Officer -------------------------------- (Signatures continue on next page) 6 UNIFLOW CORPORATION By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- TRI-TEC PLASTICS CORPORATION By: /s/ Dave Marczak -------------------------------- Its: President -------------------------------- TRIPLE TOOL, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- MICANOL, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- L&H DIE, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- FORM FLOW, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- (Signatures continue on next page) 7 NBD BANK By: /s/ Timothy O'Rourke -------------------------------- Its: Vice President -------------------------------- EXHIBITS Exhibit 1.2C(i) Legal Description Exhibit 1.2C(ii) $800,000 Secom Note Exhibit 7 Amendment and Restated Mortgage 8 EX-10.22 3 SIXTH AMENDMENT TO...CREDIT AGR EXHIBIT 10.22 SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This Sixth Amendment to Amended and Restated Credit Agreement ("Sixth Amendment") is dated effective December 27, 1995 among NBD BANK, formerly NBD Bank N.A., successor by merger to National Bank of Detroit ("NBD" or "Bank"), as lender, with its main offices at 611 Woodward Avenue, Detroit, Michigan 48226, and Secom General Corporation, a Delaware corporation ("Secom"), whose address is 46035 Grand River Ave., Novi, Michigan 48374; Uniflow Corporation, a Michigan corporation ("Uniflow"), whose address is 26600 Heyn Drive, Novi, Michigan 48450; Triple Technologies, Inc. (formerly known as Triple Tool, Inc.), a Michigan corporation ("Triple Tech.") whose address is 46035 Grand River Ave., Novi, Michigan 48374; Micanol, Inc., a Michigan corporation ("Micanol") whose address is P.O. Box 881, 46001 Grand River, Novi, Michigan 48376; L&H Die, Inc., a Michigan corporation ("L&H"), whose address is 38200 Ecorse Road, Romulus, Michigan 48174; Form Flow, Inc., a Michigan corporation ("Form Flow"), whose address is 6901 Cogswell, Romulus, Michigan 48174; and Tri-Tec Plastics Corporation, a Michigan corporation ("Tri-Tec"), whose address is 46035 Grand River Ave., Novi, Michigan 48374 (such corporations being sometimes collectively referred to as the "Borrowers" and individually as a "Borrower"), as borrowers. This Sixth Amendment amends the Amended and Restated Credit Agreement dated December 15, 1993, among NBD and the Borrowers, as amended by (i) the First Amendment to Amended and Restated Credit Agreement dated July 19, 1994, (ii) the letter dated August 19, 1994 from NBD to Secom, (iii) the Third Amendment to Amended and Restated Loan Agreement dated December 28, 1994, (iv) the Fourth Amendment to Amended and Restated Loan Agreement dated February 17, 1995 and (v) the Fifth Amendment to Amended and Restated Loan Agreement dated December 1, 1995 (as so amended, the "Credit Agreement" or "Agreement"). Capitalized terms not otherwise defined herein shall have the meanings given to them in the Credit Agreement. Recitals A. NBD has made available to the Borrowers revolving credit loans and term loans as more fully described in the Credit Agreement. B. The Borrowers have requested, among other things, that NBD extend the maturity of certain loans, including the Line of Credit, Equipment Line of Credit and the $1,738,649.61 Joint Note. C. NBD is willing to provide such financing on the terms and conditions set forth in this Sixth Amendment. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. Line of Credit. The first three paragraphs of Section 1.1 of the Credit Agreement are hereby amended in its entirety to read as follows: 1.1 Line of Credit. From time to time prior to December 31, 1996 (the "Expiration Date"), NBD agrees to consider, subject to the terms and conditions set forth in this Agreement and in the sole discretion of NBD, lending and relending to Borrowers at any time and from time to time from the date of this Sixth Amendment such amounts as Borrowers (or Secom on behalf of Borrowers) may request (the "Line of Credit" or the "Credit"), provided that the outstanding aggregate credit shall not exceed an amount equal to the lesser of (a) the principal amount of $4,500,000 or (b) the sum of (i) 80% of Net Qualified Accounts, (ii) 50% of Qualified Inventory consisting of raw materials, and (ii) 25% of Qualified Inventory consisting of work in process and finished goods; provided, however, that in no event shall the amount advanced against all Qualified Inventory, at any one time outstanding, exceed the principal sum of $500,000. This Line of Credit is in replacement, but not repayment of the Joint Line of Credit described in Recital B. NOTWITHSTANDING ANYTHING SET FORTH IN THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS ON THE CONTRARY, NBD SHALL NOT BE OBLIGATED TO LEND OR RELEND TO BORROWERS AT ANY TIME; EACH BORROWING OR REBORROWING WHICH IS MADE UNDER THIS AGREEMENT WILL BE MADE AT THE OPTION, AND IN THE SOLE DISCRETION, OF NBD. All such loans will be evidenced by a single Fourth Amended and Restated Master Demand Business Loan Note of the Borrowers (together with any modifications, replacements or renewals thereof, the "Line of Credit Note"), payable to the order of NBD and dated as of the date of the Sixth Amendment, in substantially the form of Exhibit 1.1 (1995) attached to the Sixth Amendment. Interest on the outstanding loans under the Line of Credit shall accrue at the rate and be payable at the time set forth in the Line of Credit Note. The Line of Credit Note shall be executed by Borrowers and delivered to NBD prior to or simultaneously with the execution of the Sixth Amendment. In addition to any other payments of principal or interest due NBD under the Line of Credit Note and this Agreement, at any time the Line of Credit Note bears interest at the prime rate, then Borrowers shall pay to NBD an inventory reliance fee of one quarter percent (1/4%) per annum, charged monthly in arrears, based on the monthly average outstanding balance under the Line of Credit supported by Qualified Inventory. For purposes of computing such inventory reliance fee, the principal outstanding under the Line of Credit Note shall first be attributed to Qualified Receivables. 2 2. Extended Equipment Line. Section 1.2D of the Credit Agreement is hereby amended by deleting the date "December 31, 1995" and inserting in lieu thereof the date "December 31, 1996". 3. Amended Term Loan. A new Section 1.2E is hereby added to the Credit Agreement to read as follows: 1.2E Simultaneously with the Sixth Amendment to Amended and Restated Credit Agreement, NBD will extend a term loan to Secom and Uniflow in the original principal amount of $1,400,000.00 to mature on December 31, 1996, all of which will be used to refinance (but not repay) the $1,738,649.61 Joint Note. Such loan will be evidenced by an Amended and Restated Installment Business Loan Note substantially in the form of Exhibit 1.2E attached to the Sixth Amendment (together with any amendments, extensions, renewals or restatements, the "Joint Novi Mortgage Note"). 4. Definitions. All references in the Credit Agreement to the "Notes" and the "Term Notes" shall hereafter include the Joint Novi Mortgage Note. All references to the "Obligations" in the Credit Agreement shall hereafter include the liabilities and obligations under the Joint Novi Mortgage Note. All references to the $1,738,649.61 Joint Note shall hereafter refer to the Joint Novi Mortgage Note. All references in the Credit Agreement to the "Loan Documents" shall include the documents and instruments executed pursuant to this Sixth Amendment. 5. Interest Rate on Line of Credit Note and Term Note. The table for the Applicable Margin as set forth by the Fifth Amendment to Amended and Restated Loan Agreement is hereby amended in its entirety to read as follows:
Total Liabilities to Tangible Capital Funds (determined under Applicable Margin Applicable Margin Section 5.1C) is: for Term Notes for Line of Credit Note - ----------------- -------------- ----------------------- Greater than or equal to 1.75% 1.25% 2.0 to 1.0 from 1.75 to 1.0 up to and 1.50% 1.00% including 1.99 to 1.0 from 1.50 to 1.0 up to and 1.25% .75% including 1.74 to 1.0 from 1.25 to 1.0 up to and 1.00% .50% including 1.49 to 1.0 from 1.01 to 1.0 up to and .75% .25% including 1.24 to 1.0 less than 1.0 to 1.0 .50% .00%
3 6. Conditions Precedent. NBD shall not be required to extend the Line of Credit described in Section 1.1 of the Credit Agreement, extend the Equipment Line as described in Section 1.2D of the Credit Agreement or make the loan described in Section 1.2E of the Credit Agreement unless and until all of the terms and conditions of Article II of the Credit Agreement have been and continue to be met, and, in addition: (a) NBD shall have received the Line of Credit Note, executed and delivered on each of the Borrowers, (b) NBD shall have received the Joint Novi Mortgage Note, executed and delivered on Secom and Uniflow; (c) NBD shall have received this Sixth Amendment, executed and delivered by each of the Borrowers; (d) NBD shall have received an officers certificate from each Borrower in form and substance satisfactory to NBD; and (e) NBD shall have received simultaneously with the execution of this Sixth Amendment a closing fee of $750 from the Borrowers. 7. Additional Defaults. NBD may fund any loan without waiving any of the conditions set forth in Section 6 of this Sixth Amendment. Unless otherwise agreed to in writing by NBD, if the Borrowers fail to comply with any condition in this Sixth Amendment within 15 days after a written request for compliance is sent by NBD to Secom, NBD may consider such failure an Event of Default under the Credit Agreement. 8. Expenses. Borrowers acknowledge and agree that the Borrowers will pay reasonable attorneys' fees and out of pocket costs of NBD in connection with or with respect to this Sixth Amendment and the loans funded pursuant hereto. 9. Ratification. The parties hereto acknowledge and agree that the terms and provisions of this Sixth Amendment amend, add to and constitute a part of the Credit Agreement. Except as expressly modified and amended by the terms of this Sixth Amendment, all of the other terms and conditions of the Credit Agreement and all of the documents executed in connection therewith or referred to or incorporated therein (including, without limitation, the Restated Guaranties), remain in full force and effect and are hereby ratified, confirmed and approved. 4 10. Express Conflicts. If there is an express conflict between the terms of this Sixth Amendment and the terms of the Credit Agreement, or any of the other agreements or documents executed in connection therewith or referred to or incorporated therein, the terms of this Sixth Amendment shall govern and control. IN WITNESS WHEREOF, the parties have executed this Sixth Amendment to Amended and Restated Credit Agreement effective as of the date noted above. SECOM GENERAL CORPORATION By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- UNIFLOW CORPORATION By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- TRI-TEC PLASTICS CORPORATION By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- TRIPLE TECHNOLOGIES, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- MICANOL, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- (Signatures continue on next page) 5 L&H DIE, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- FORM FLOW, INC. By: /s/ Dave Marczak -------------------------------- Its: Vice President -------------------------------- NBD BANK By: /s/ Timothy O'Rourke -------------------------------- Its: Vice President -------------------------------- EXHIBITS Exhibit 1.1 Line of Credit Note Exhibit 1.2E Joint Novi Mortgage Note 6 EXHIBIT 1.1(1995) FOURTH AMENDED AND RESTATED MASTER DEMAND BUSINESS LOAN NOTE Amount: $4,500,000.00 Dated: as of December 1, 1995 Made at Detroit, Michigan. FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to pay a the earlier of (i) December 31, 1996, or (ii) ON DEMAND to the order of NBD BANK ("Bank"), at its offices in Detroit, Michigan or at such other place as the holder of this note may from time to time designate in writing, the principal sum of Four Million Five Hundred Thousand and 00/100 Dollars ($4,500,000.00), plus interest, payable as follows: monthly interest payments in the amount set forth below commencing on January 1, 1996, and continuing on the 1st day of each consecutive month thereafter, and a final payment, of the outstanding principal balance plus all accrued but unpaid interest on December 31, 1996. The indebtedness under this Note outstanding from time to time prior to maturity (whether by acceleration or otherwise) or the occurrence of an Event of Default shall bear interest on the basis of a year of 360 days for the actual number of days elapsed in each month, at a per annum rate equal to the Applicable Margin (defined below) plus the rate announced from time to time by the Bank as its "prime rate" (the "Note Rate"), which prime rate may not be the lowest rate charged by the Bank to any of its customers. Each change in the prime rate will immediately result in a change of the Note Rate. After maturity, or from and after an Event of Default as defined in the Credit Agreement, described below the outstanding principal balance under this Note shall bear additional interest from and after such maturity date or the occurrence of the Event of Default, at a rate of three (3%) percentage points per annum above the Note Rate until the Note is fully paid or the Event of Default is fully cured (the "Default Rate"). The "Applicable Margin" will be determined according to the following table:
Total Liabilities to Tangible Tangible Capital Funds (determined under Section 5.1C Applicable Margin of the Credit Agreement) is: for the Note ---------------------------- ------------ Greater than or equal to 2.0 to 1.0 1.25% from 1.75 to 1.0 up to and including 1.99 to 1.0 1.00% from 1.50 to 1.0 up to and including 1.74 to 1.0 .75% from 1.25 to 1.0 up to and including 1.49 to 1.0 .50% from 1.01 to 1.0 up to and including 1.24 to 1.0 .25% less than 1.0 to 1.0 .00%
The Applicable Margin will be adjusted effective on the first day of the next fiscal quarter after receipt of the quarterly financial statements delivered to the Bank pursuant to Section 5.4 of the Credit Agreement. If such quarterly financial statements are not delivered by the end of the quarter in which they are due, the ratio of Total Liabilities to Tangible Capital Funds will be deemed to be greater than 2.0 to 1.0 until quarterly financial statements are delivered to the Bank. Any appropriate adjustments to the Applicable Margin will be effective upon the date of receipt by the Bank of the overdue financial statements. Principal of and interest on this Note shall be payable in lawful money of the United States of America. The undersigned agrees to pay all costs of collection and enforcement of this Note, including reasonable attorneys' fees and court costs. The indebtedness under this Note may be prepaid in whole or in part at any time. In addition to the principal payments described above, additional payments on this Note may be due and payable pursuant to the terms of the Amended and Restated Credit Agreement dated as of December 15, 1993, as amended by (i) the First Amendment to Amended and Restated Credit Agreement dated July 19, 1994, (ii) the letter dated August 19, 1994 from NBD to Secom, (iii) the Third Amendment to Amended and Restated Loan Agreement dated December 28, 1994, (iv) the Fourth Amendment to Amended and Restated Loan Agreement dated February 17, 1995 and (v) the Fifth Amendment to Amended and Restated Loan Agreement dated December 1, 1995 (as so amended, the "Credit Agreement" or "Agreement"). Capitalized terms not otherwise defined herein shall have the meanings given them in the Credit Agreement. This Fourth Amended and Restated Master Demand Business Loan Note, among other things, amends, restates and consolidates (but does not discharge) the indebtedness outstanding under that certain Third Amended and Restated Master Demand Business Loan Note dated December 28, 1994, in the original amount of $4,500,000, that certain Second Amended and Restated Master Demand Business Loan Note dated December 13, 1994, in the original principal amount of $4,200,000, that certain Amended and Restated Master Demand Business Loan Note dated September 1, 1993, in the original principal amount of $4,200,000, that certain Master Demand Business Loan Note dated April 29, 1993, in the original principal amount of $4,200,000, that certain Master Demand Business Loan Note, dated March 23, 1993, in the original principal amount of $4,000,000, and that certain Master Demand Business Loan Note dated as of December 19, 1991, in the original principal amount of $4,000,000. Any reference in any other document or instrument to the foregoing notes shall constitute a reference to this Fourth Amended and Restated Master Demand Note. This Note is given pursuant to the terms and conditions of the Credit Agreement. This Note is secured by, among other collateral, the collateral granted to Lender under the terms of the Credit Agreement and the Loan Documents. The occurrence of any default under the Credit Agreement or any of the Loan Documents (as such documents may have been amended by the Credit Agreement), or any document or instrument referred to or incorporated into any of the foregoing shall be deemed a default under this Note and shall entitle the holder of this Note to accelerate the maturity of the debt evidenced by this Note and to have all rights and remedies afforded by law or available under the Credit Agreement, the Loan Documents and under all other agreements referred to or executed in connection with any of the foregoing. 2 The undersigned, and all endorsers and guarantors, hereby severally waive valuation and appraisement, presentment, protest and demand, notice of protest, demand and dishonor and nonpayment of this Note, and expressly agree that the maturity of this Note, or any payment due under this Note, may be extended from time to time without in any way affecting the liability of the undersigned or such endorsers or guarantors. This Note, made and executed in the State of Michigan, shall be governed and construed according to the internal laws of the State of Michigan. SECOM GENERAL CORPORATION, a Delaware corporation By: /s/ Dave Marczak ------------------------------------- Name: Dave Marczak ------------------------------- Title: Vice President -------------------------- 46035 Grand River Ave. Novi, Michigan 48374 UNIFLOW CORPORATION By: /s/ Dave Marczak ------------------------------------- Its: Vice President -------------------------------- 26600 Heyn Drive Novi, Michigan 48450 (Signatures continue) 3 MICANOL, INC. By: /s/ Dave Marczak ------------------------------------- Its: Vice President -------------------------------- P.O. Box 881 46001 Grand River Novi, Michigan 48376 TRIPLE TECHNOLOGIES, INC. By: /s/ Dave Marczak ------------------------------------- Its: Vice President -------------------------------- 1445 Allen Drive Troy, Michigan 48083 L&H DIE, INC. By: /s/ Dave Marczak ------------------------------------- Its: Vice President -------------------------------- 38200 Ecorse Road Romulus, Michigan 48174 FORM FLOW, INC. By: /s/ Dave Marczak ------------------------------------- Its: Vice President -------------------------------- 6901 Cogswell Romulus, Michigan 48174 TRI-TEC PLASTICS CORPORATION By: /s/ Dave Marczak ------------------------------------- Its: Vice President -------------------------------- 46035 Grand River Ave. Novi, Michigan 48374 4 EX-23 4 DELOITTE & TOUCHE CONSENT Exhibit 23 INDEPENDENT AUDITORS' CONSENT Secom General Corporation: We consent to the incorporation by reference in Registration Statements No. 33-45177 and 33-43557 of Secom General Corporation on Form S-8 of our report dated December 27, 1995, appearing in this Annual Report on Form 10-K of Secom General Corporation for the year ended September 30, 1995. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Detroit, Michigan December 27, 1995 EX-27 5 ARTICLE 5 FDS FOR 09/30/95 SECOM 10-K
5 YEAR SEP-30-1995 SEP-30-1995 $ 13,700 0 4,578,300 (93,500) 3,935,700 10,025,300 20,811,500 (6,227,900) 26,942,100 8,896,000 0 427,600 0 0 11,482,900 26,947,100 36,276,200 36,276,200 29,016,100 34,298,400 8,400 0 1,137,800 831,600 (372,700) 0 0 0 0 1,204,300 0 0.28
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