10-K405 1 k59127e10-k405.txt FORM 10-K405 1 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, 2000 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 incorporation (IRS Employer Identification No.) or organization) 46035 GRAND RIVER AVENUE, NOVI, MICHIGAN 48374 (Address of principal executive offices) Registrant's telephone number, including area code: (248) 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. [X] As of December 11, 2000, 999,860 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 SmallCap Market System was approximately $1,423,284. DOCUMENTS INCORPORATED BY REFERENCE None 2 TABLE OF CONTENTS PART I
PAGE Item 1. Business........................................................................................3 Item 2. Properties......................................................................................6 Item 3. Legal Proceedings...............................................................................7 Item 4. Submission of Matters to a Vote of Security Holders.............................................7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.............................................................................7 Item 6. Selected Financial Data.........................................................................8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................9 Item 8. Financial Statements and Supplementary Data....................................................11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................................12 PART III Item 10. Directors and Executive Officers of the Registrant.............................................12 Item 11. Executive Compensation.........................................................................13 Item 12. Security Ownership of Certain Beneficial Owners and Management.....................................................................................17 Item 13. Certain Relationships and Related Transactions.................................................19 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................................................................19
2 3 PART I ITEM 1. BUSINESS. GENERAL Secom General Corporation, a Delaware corporation ("Secom" or the "Company") is a holding company with the following wholly owned subsidiaries: Metal Parts Forming Segment: - Uniflow Corporation ("Uniflow") acquired in 1991 and substantially all of the operating assets were sold in February 2000 Tooling Segment: - Form Flow, Inc. ("Form Flow") acquired in 1987 - L&H Die, Inc. ("L&H") acquired in 1987 - MIC-Shelf, Inc., formerly known as Micanol, Inc. ("Micanol") acquired in 1990 Substantially all of the operating assets of each of the forgoing subsidiaries were sold in June 2000. Production Machining Segment: - MMC Manufacturing Corp., formerly known as Milford Manufacturing Corporation ("Milford") acquired in 1996 and in transactions occurring in March, July and October 1998, the Company sold all of the assets of Milford. In 1998, the Company's Board of Directors engaged an investment banking firm to assist the Company in developing strategic alternatives to maximize shareholder value. Among the alternatives discussed and ultimately pursued was a sale of the Company's operating assets and properties in separate transactions resulting in the liquidation of the Company. On February 9, 2000, the operating assets of the Metal Parts Forming Segment were sold to Alken-Ziegler Livonia, LLC ("Alken-Ziegler") for a purchase price of approximately $2.4 million in cash and Alken-Ziegler agreed to assume certain liabilities of the Metal Parts Forming Segment. On June 30, 2000, the Company sold substantially all of the operating assets of the Tooling Segment to Alken-Ziegler Tool Company (the "Tool Company"), and GL Ziegler Investments, LLC ("GLZ"and the "Tool Company" are collectively referred to as "Purchaser") for a purchase price of approximately $9.6 million. Approximately $8 million was received in cash on June 30, 2000 with the balance paid in cash on August 31, 2000. The Purchaser also agreed to assume certain 3 4 liabilities of the Tooling Segment. The sale of the Tooling Segment was approved by the written consent of more than fifty-one (51%) percent of the outstanding shares of the Company's common stock on May 10, 2000. With the recommendation of Secom's Board of Directors, the Company's shareholders approved a Plan of Liquidation on August 24, 2000. Under its Plan of Liquidation, over approximately a three year period the Company will distribute to its shareholders, on a pro rata basis, all of its remaining property and assets, after payment of or the provision for the payment of claims and obligations. The Company paid an initial liquidating distribution of $11.55 per share on October 31, 2000 from available cash. The Company's corporate mailing address is 46035 Grand River Avenue, Novi, Michigan 48374; its telephone number is (248) 305-9410 and its facsimile number is (248) 347-2829. Except as otherwise indicated by the context, any reference to the "Company" shall mean the Company and its subsidiaries. The Company's fiscal year-end is September 30. EXECUTIVE OFFICERS OF THE COMPANY The executive officers of the Company (who serve as such at the pleasure of the Board of Directors), their ages and the position or office held by each, are as follows: Name Age Positions with the Company Robert A. Clemente........... 47 Chairman of the Board since 1994 and Director since 1993 Paul D. Clemente.............. 37 Vice President since 1997 and Member of the Operating Committee since June 1998 Scott J. Konieczny............ 35 Chief Financial Officer since October 1998,Secretary/Treasurer since June 1998 and Member of the Operating Committee since April 1999 Since June 1998, the Company has operated under a Board appointed operating committee, which fulfills the duties of the Company's president. Currently the operating committee is comprised of Paul Clemente and Scott Konieczny. FORWARD-LOOKING STATEMENTS The Company and its representatives may from time to time make written or oral statements concerning expectations for the future which are forward-looking statements, including statements in the Company's filings with the Securities and Exchange Commission. Whenever possible, the Company has identified these forward-looking statements by words or phrases such as "will likely 4 5 result", "expects", "anticipates", "believes", "forecast", "estimate", "project" or similar expressions within the meaning of the Private Securities Litigation Reform Act of 1995. The Company's forward-looking statements reflect the Company's best judgment based on current information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned that they should not place undue reliance on any forward-looking statements because such statements speak only as of the date they are made. The methods used by the Board of Directors and management in estimating the value of the Company's property and assets do not, with certainty, result in an exact determination of value nor are they intended to indicate the amount, if any, a stockholder may receive in liquidation. The amount of liquidation proceeds depends largely on factors beyond the Company's control, including, without limitation, the price at which the Company will be able to sell its remaining assets and properties, the rate of inflation, changes in interest rates, the condition of the real estate and financial markets, the availability of financing to prospective purchasers, the amount and nature of any unknown contingent liabilities and the ability to collect its receivables. The Company cautions that the foregoing list of important factors may not be all-inclusive, and it specifically declines to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of any anticipated or unanticipated events. METAL PARTS FORMING SEGMENT General The Metal Parts Forming Segment was comprised of Uniflow. The operating assets of the Metal Parts Forming Segment were sold on February 9, 2000 to Alken-Ziegler pursuant to an Asset Purchase Agreement dated as of February 1, 2000 among Alken-Ziegler, as purchaser, and the Company and Uniflow, as sellers. Alken-Ziegler paid a purchase price of approximately $2.4 million in cash and agreed to assume Uniflow's obligations under its collective bargaining agreement with the UAW. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a detailed description of the transaction. Prior to its sale, the Metal Parts Forming Segment primarily manufactured automotive and truck parts from steel bar, coil and tubing using cold forging and forming machines and various types of secondary machining, such as threadrolling and piercing equipment. Employees As of September 30, 2000, Uniflow had no employees compared to 83 full-time employees in the prior year. 5 6 TOOLING SEGMENT General The Company's Tooling Segment was comprised of Form Flow, L&H and Micanol. On March 29, 2000, the Company executed an Asset Purchase Agreement with Alken-Ziegler and GLZ. On May 10, 2000, the sale of the Tooling Group was approved by the written consent of more than fifty-one (51%) percent of the outstanding shares of the Company's Common Stock. The sale was completed on June 30, 2000. In connection with the sale of the operating assets of the Tooling Segment, the Company received a cash purchase price of approximately $8 million on June 30, 2000. On August 31, 2000 the Company received approximately $1.6 million from the sale of the Tooling Segment's real estate. The Purchaser also agreed to assume certain liabilities of the Tooling Segment. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a detailed description of the transaction. Prior to its sale the Tooling Segment manufactured 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 steel coil and moves it through each die station progressively, using tool inserts to form the part. Tool life is dependent on the type of material used to make the part, as well as the size and shape of the part, among other things. Employees As of September 30, 2000, the Tooling Segment had no employees compared with 131 full-time employees in the prior year. PRODUCTION MACHINING SEGMENT The Company's Production Machining Segment was comprised of its wholly owned subsidiary, MMC Manufacturing Corp., f/k/a Milford Manufacturing Corporation ("Milford"), which was acquired in November 1996. Milford manufactured various aluminum brake components and starter motor shafts for the automotive industry. In separate transactions occurring in March, July and October 1998, all of Milford's assets were sold due to its deteriorating operating results. ITEM 2. PROPERTIES. The Company's mailing address is 46035 Grand River Avenue, Novi, Michigan 48374. Secom owns three buildings and approximately six acres of land, which previously housed Uniflow's operations, and which are being held for sale. The buildings are described as follows: (1) 12,400 square feet at 46001 Grand River Avenue, (2) 16,700 square feet at 46035 Grand River Avenue and (3) 32,000 square feet at 46039 Grand River Avenue. 6 7 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 is not expected to have a material adverse effect on the Company's consolidated financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company held its Annual Meeting of Stockholders on August 24, 2000, at which time the following proposals were voted on: 1. To approve and adopt the Plan of Liquidation and Dissolution: Votes: For 622,975 Against 1,944 Broker non-votes 307,689 2. To elect Robert Clemente, Gregory Adamczyk, Rocco Pollifrone and Richard Thompson directors to serve until the next Annual Meeting of Stockholders or until their successors are duly elected: Votes: For 929,049 Against 2,190 Broker non-votes 1,615 3. To ratify and approve the selection of Rehmann Robson, P.C. as independent auditors for the fiscal year ended September 30, 2000: Votes: For 930,664 Against 573 Broker non-votes 0 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock (trading symbol "SECM") traded on NASDAQ from June 1987 and on the NASDAQ National Market System (NMS) from January 1992. In April 1999, trading of the Company's stock was moved to the Nasdaq SmallCap Market System under the symbol SECM due to the Company's failure to meet certain minimum listing requirements of the NMS. 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 and have been adjusted for the one-for-five reverse stock split effective April 14, 1999. 7 8
QUARTER ENDED HIGH TRADE LOW TRADE 12/31/98 4.06 0.31 3/31/99 3.13 1.25 6/30/99 3.75 1.38 9/30/99 5.13 2.50 12/31/99 5.25 2.50 3/31/00 8.38 2.25 6/30/00 9.56 5.06 9/30/00 12.19 9.63
On September 30, 2000 there were approximately 700 nominees/persons of record that held the Company's common stock. Of those listed of record, approximately 497,000 shares were held by brokers and nominees representing an undetermined number of beneficial stockholders. Under its Plan of Liquidation, the Company will distribute to its shareholders, on a pro rata basis, all of its remaining property and assets, after payment of or the provision for the payment of claims and obligations. The first distribution of $11.55 per share was paid on October 31, 2000. The Company believes that if it is successful in liquidating its remaining assets at their estimated current market value, stockholders could receive liquidating distributions of approximately $2.00 to $3.00 per share over the next three to four years, in addition to the first distribution of $11.55 per share paid on October 31, 2000. As a result of the approval of the Plan of Liquidation and payment of the first liquidating distribution, the Company filed its Certificate of Dissolution with the State of Delaware which will be effective December 31, 2000 and the Company requested that Nasdaq delist the Company's securities from its SmallCap Market System at the close of trading on December 29, 2000. The Company has also directed its transfer agent to close Secom's stock transfer books and to restrict all further transfers of its stock as of the close of trading on December 29, 2000. In conjunction with the filing of its Certificate of Dissolution, the Company has also filed a "No Action Letter" with the Securities and Exchange Commission. The "No Action Letter" requests relief from the periodic reports filing requirements under Sections 13A and 15(d) of the Exchange Act. If the Company's request is granted, the Company will continue to report any material developments relating to its winding-up and dissolution on a Current Report Form 8-K, prior to the date the Company distributes the final distribution to its stockholders pursuant to Delaware law. ITEM 6. SELECTED FINANCIAL DATA. The selected Net Assets in Liquidation data as of September 30, 2000, Changes in Net Assets for the Period April 1, 2000 to September 30, 2000 set forth below are derived from Secom's audited consolidated financial statements. (The Company adopted the liquidation basis of accounting effective April 1, 2000 in anticipation of the Company's liquidation.) As discussed in Item 1. "Business," the Company's shareholders approved a Plan of Liquidation; therefore, prior year financial data is not comparable or meaningful and is not presented. The selected financial data should be read in conjunction with Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of Secom General Corporation and Subsidiaries and the related notes thereto included elsewhere herein. The following data is presented in 8 9 thousands, except for per share data: Net Assets in Liquidation Data: Total assets.......................................................$ 16,767 Total liabilities.................................................. 2,928 Net assets in liquidation.......................................... 13,839 Statement of Changes in Net Assets Data: Stockholders equity at March 31, 2000 (going concern historical cost basis)........................................... 10,118 Decrease in net assets due to retirements of stock................. (651) Increase in net assets from revaluing assets to liquidation basis from going concern, historical cost basis as of April 1, 2000.................................................... 361 Gain from sales of assets and activities during the wind down period April 1, 2000 through September 30, 2000 4,011 Net assets in liquidation.......................................... 13,839
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this Form 10-K. LIQUIDITY AND CAPITAL RESOURCES During the fall of 1998, Secom's Board of Directors engaged the investment banking firm of Goldsmith, Agio, Helms Securities, Inc. ("GAHS") to assist it in developing strategic alternatives to increase stockholder value. Secom's Board initially contacted GAHS because it believed that the value of the Company was greater than the aggregate value of the then trading price of the Company's shares of Common Stock. Among the alternatives discussed with GAHS was a possible merger, sale or similar transaction of the entire Company or its subsidiaries. While other parties expressed an interest in engaging in a transaction with the entire Company, the price proposed by such parties was below what the Board believed was fair market value. GAHS also advised the Board that, because of the different industries represented by our two segments, many potential purchasers would not be interested in purchasing both segments. Therefore, the Board believed it was necessary to pursue other alternatives to accomplish its goal of increasing stockholder value, including selling the Company's assets and properties in separate transactions and ultimately liquidating it. In August 1999, the Company entered into a letter of intent with a potential purchaser for the sale of the assets of the Tooling Segment, which was comprised of Form Flow, L&H Die and Micanol. After signing the letter of intent, the potential purchaser asked the Company for certain concessions on the terms which Secom was unwilling to provide. The letter of intent also contained certain contingencies that were not satisfied so the letter of intent terminated. 9 10 At the same time, the Company was negotiating with Alken-Ziegler Livonia, LLC ("Alken-Ziegler") for the sale of the operating assets of the Metal Parts Forming Segment, which was comprised of Uniflow. The Company ultimately entered into a letter of intent for that sale in October 1999. When the letter of intent with respect to the Tooling Segment terminated, Alken-Ziegler expressed interest in purchasing the assets of the Tooling Segment. In November 1999, Secom's Board authorized execution of a non-binding letter of intent with Alken-Ziegler for the sale of the assets of the Tooling Segment. At that time, however, Secom believed that it was in its best interest to focus on closing the sale of the Metal Parts Forming Segment before entering into a definitive agreement for the sale of the assets of the Tooling Segment. On February 9, 2000, Secom sold the operating assets of its Metal Parts Forming Segment to Alken-Ziegler for a purchase price of approximately $2.4 million in cash. Alken-Ziegler also agreed to assume certain liabilities of the Metal Parts Forming Segment. The Company then began negotiating with Alken-Ziegler and GL Ziegler Investments, LLC ("GLZ") on the terms of a definitive agreement for the sale of the assets of the Tooling Segment. Secom recognized a loss of approximately $187,000 on the sale, net of an applicable income tax benefit of approximately $93,000. On March 29, 2000, the Company's Board authorized the execution of an Asset Purchase Agreement with Alken-Ziegler and GLZ. On May 10, 2000, the sale of the Tooling Segment was approved by the written consent of more than fifty-one (51%) percent of the outstanding shares of Secom's Common Stock. Prior to the closing, Alken-Ziegler assigned its interests under the Asset Purchase Agreement to its affiliate, Alken-Ziegler Tool Company, LLC ("A-Z Tool Company"; A-Z Tool Company and GLZ are collectively referred to as "Purchaser"). The sale was completed on June 30, 2000. In connection with the sale of the operating assets of the Tooling Segment, the Company received a cash purchase price of approximately $8 million on June 30, 2000. The Company received the balance of approximately $1.6 million on August 31, 2000 upon the closing of the sale of the Tooling Segment's real estate to Purchaser. The Purchaser also agreed to assume certain liabilities of the Tooling Segment. The Company recognized a gain from the sale of approximately $3.4 million, net of applicable income taxes of approximately $1.4 million. In a separate transaction in April 2000, the Company sold one of its manufacturing facilities in Novi, Michigan for approximately $1.2 million, resulting in a gain of approximately $121,000, net of applicable income taxes of approximately $30,000. The Company's three remaining manufacturing facilities and related real estate in Novi, Michigan are currently held for sale at an aggregate purchase price of $2.7 million. The Company currently receives rental income with respect to these facilities. During 1998 the Company sold the remaining machinery, equipment and business of Milford for $4.2 million, of which $1.5 million was received in the form of a note to be paid in four annual installments of $375,000 plus interest. During September 2000, the Company received $715,000 in full settlement of the remaining principal balance of $750,000 outstanding on the note receivable. During the "wind down" period, the Company disbursed approximately $651,000 to repurchase approximately 60,000 shares of its common stock, primarily from the Company's 10 11 401(k) Plan. The repurchases of stock were in accordance with the terms of the 401(k) Plan. The 401(k) Plan was terminated due to the adoption, by the Company, of the Plan of Liquidation. Based on the sales of substantially all of the operating assets of Uniflow and the Tooling Segment and Secom's Board of Directors recommendation, the Company's shareholders approved a Plan of Liquidation on August 24, 2000. Under its Plan of Liquidation, the Company will distribute to its shareholders, on a pro rata basis, all of its remaining property and assets, after payment of or the provision for the payment of claims and obligations. The first distribution of $11.55 per share was paid on October 31, 2000. The Company believes that if it is successful in liquidating its remaining assets at their estimated current market value, stockholders could receive liquidating distributions of approximately $2.00 to $3.00 per share over the next three to four years, in addition to the first distribution of $11.55 per share paid on October 31, 2000. ADOPTION OF LIQUIDATION BASIS OF ACCOUNTING As a result of the Company signing an Asset Purchase Agreement on March 29, 2000 to sell substantially all of the operating assets of the Tooling Segment, and the Company's expectation of obtaining from its shareholders formal approval of a plan of liquidation upon the consummation of the sale of the Tooling Segment, the Company adopted the liquidation basis of accounting. Such adoption was effected beginning on April 1, 2000 for administrative convenience coincident with the close of the Company's second fiscal quarter ended March 31, 2000. The Company has presented consolidated statements of operations, stockholders' equity, and cash flows for the period from October 1, 1999 to March 31, 2000, the period of the current fiscal year before the liquidation basis of accounting was adopted. However, as a result of the approval of the Plan of Liquidation, comparative financial information and certain other disclosures are not meaningful and have not been presented. In addition, under the liquidation basis of accounting, gains and losses from dispositions of assets are displayed as net amounts versus gross revenue and expenses under the going concern basis of accounting. The primary financial statements required under the liquidation basis of accounting are a Statement of Net Assets and a Statement of Changes in Net Assets. CORPORATE The Company's Board retained three employees, Robert Clemente, Paul Clemente and Scott Konieczny to facilitate the implementation of the Plan of Liquidation. In addition to payroll and the related benefits expenses for the three employees, the Company will incur interest, professional and general office and administrative expenses. The Company believes much of the implementation will be concluded by March 31, 2001 which will enable it to substantially reduce "wind down" expenses at that time. The Company anticipates that future cash flows from rental and royalty agreements and certificates of deposits are likely to minimize any negative cash flows from the Company during the period up to March 31, 2001 and beyond. 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. 11 12 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following is a listing of the members of the Board of Directors of the Company and includes information regarding the individual's age, principal occupation, other business experience, directorships in other publicly-held companies and term of service with the Company. Directors are elected at each Annual Meeting of Stockholders or until his successor is elected and qualified. Information regarding executive officers is included under Item 1. "Business" pursuant to General Instruction G. NAME AND AGE POSITION AND PRINCIPAL OCCUPATION Robert A. Clemente, 47 Director of the Company since December 1993 and Chairman since December 1994, Mr. Clemente also served as President and Chief Executive Officer of the Company from December 1993 through May 1998. Mr. Clemente is an attorney and certified public accountant and, since September 1999, Of Counsel to the law firm of Hardy, Lewis and Page, PC, Birmingham, Michigan, where he had also been Of Counsel from December 1993 to December 1996. From January 1997 through August 1999, Mr. Clemente was Of Counsel to the firm of Munro & Munro, PC, Troy, Michigan. Mr. Clemente specializes in corporate, commercial and tax law. Gregory Adamczyk, 46 Director of the Company since December 1993. President and owner of Future Planning Corp. since December 1980, Mr. Adamczyk is also Chairman, Director and founder of Forward Planning Corp. Both Future Planning Corp. and Forward Planning Corp. are based in Livonia, Michigan and specialize in manufacturing and engineering, primarily for automotive factories. Rocco Pollifrone, 43 Director of the Company since December 1993. Since August 1999 Mr. Pollifrone is Chief Executive Officer of Trumark Engineering, Detroit, Michigan. Prior to that, Mr. Pollifrone was President and Chief Executive Officer of Forward Planning Corp. and had been employed there or with affiliated companies for over 20 years in various management positions. Richard Thompson, 31 Director of the Company since December 1993. Mr. Thompson has been the President and owner of MST Steel Corp., Warren, Michigan since 1998 and was Vice President of MST Steel Corporation since 1991. MST Steel Corp. is a steel service center that warehouses, processes and sells flat-rolled steel, primarily for the automotive industry. 12 13 Robert Clemente, Director and Chairman of the Board, is the brother of Paul Clemente, who is a Vice President and a member of the Company's Operating Committee. There are no other family relationships among the Directors and officers listed above. ITEM 11. EXECUTIVE COMPENSATION SUMMARY OF COMPENSATION The following summary compensation table sets forth information concerning cash and non-cash compensation for services in all capacities awarded to, earned by or paid during the last three (3) fiscal years to the Company's Chief Executive Officer and officers whose cash compensation exceeded One Hundred Thousand ($100,000) Dollars in any such fiscal year.
SUMMARY COMPENSATION TABLE LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS ------------------- ------ OTHER SECURITIES ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION BONUS OPTIONS (#) --------------------------- ---- ------ ------ ------------ ----- ----------- Robert A. Clemente Chairman of the Board 2000 $ 82,000 - - - - 1999 150,000 - - - - 1998 150,000 - - - - Paul D. Clemente Vice President 2000 $ 102,000 $17,500 - - - and Member of the 1999 100,000 5,800 - - - Operating Committee Scott J. Konieczny 2000 $102,000 $17,500 - - - Chief Financial 1999 90,000 12,800 - - - Officer, Secretary, Treasurer and Member of the Operating Committee
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table provides information on option exercises in fiscal 2000 by the Named Executive Officers and the value of such officers' unexercised options at September 30, 2000. 13 14
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN THE MONEY OPTIONS OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($) --------------------------------- --------------------- SHARES ACQUIRED VALUE NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- -------- ----------- ------------- ----------- ------------- Robert A. Clemente - - 36,000 9,000 $ 88,000 $ 22,000 Paul D. Clemente - - 1,600 2,400 $ 5,000 $ 8,000 Scott J. Konieczny - - 1,200 800 $ 3,000 $ 500
COMPENSATION PURSUANT TO STOCK OPTIONS During fiscal 2000, no options were awarded to any of the Company's Named Executive Officers. As of December 11, 2000, no options were outstanding to the Company's Named Executive Officers outside of the 1991 Non-qualified Stock Option Plan. 1991 NON-QUALIFIED STOCK OPTION PLAN On August 1, 1991, Secom's Board adopted a non-qualified stock option plan (the "1991 Plan"). The 1991 Plan authorizes the Board to grant stock options for a maximum total of 80,000 shares of Common Stock to those employees of Secom and its subsidiaries, including officers and directors, who have performed well in their capacities and who have potential for assuming higher levels of responsibility with Secom. The 1991 Plan is administered by the Board, which determines the persons who are to receive options and the terms of the options granted under the 1991 Plan. The option price of all options granted under the 1991 Plan shall not be less than the fair market value of the Common Stock at the date of grant. Under the 1991 Plan, options may be granted only during the recipient's employment, and must be exercised within a period fixed by the Board, which may not exceed ten (10) years from the date of grant unless earlier terminated as a result of the termination of the recipient's employment. However, if the recipient's employment is terminated as a result of death, total and permanent disability, retirement after age 65 or other reasons approved by the Board, those options may be exercised for specified periods up to twelve (12) months after that termination. Options granted under the 1991 Plan may not be transferred except by reason of death. The 1991 Plan provides that the Board may establish a vesting schedule with respect to any options granted under the 1991 Plan which would limit the exercisability of those options and/or the sale or transfer of any shares purchased upon exercise of those options. As of December 11, 2000, no stock options were outstanding to any of the Company's Named Executive Officers, pursuant to the 1991 Plan. During fiscal 2000, no options to purchase shares of Common Stock were awarded to any of the Company's Named Executive Officers. COMPENSATION OF DIRECTORS The Company's directors do not receive compensation for attending Board Meetings or for being Board Members. 14 15 BOARD COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The Compensation Committee (the "Committee") was established as a standing committee of the Board in August 1992. Its purpose is to annually fix the salaries of the Chief Executive Officer and other Executive Officers of the Company, determine periodic bonuses and stock options for such executives, and administers other programs that would provide compensation to such executives. Rocco Pollifrone and Rich Thompson were appointed to the Compensation Committee in April 1999. GENERAL It is the philosophy of the Committee to ensure that executive compensation is directly linked to continuous improvement in the Company's financial performance and stockholder value. The following objectives represent the underlying principles that support all compensation decisions: - Allow the Company to attract and retain quality professional talent among its executive officer group by establishing executive compensation that is competitive within its industry peer group. - Integrate compensation practices that promote the successful execution of the Company's long-term plans and goals. - Encourage Company stock ownership by its executive officers and enhance stockholder value through periodic stock option awards or other stock-based compensation arrangements. Executive compensation is reviewed on an annual basis by the Committee in conjunction with an analysis of each individual's performance. In addition, corporate performance is evaluated in a manner to ensure that compensation levels support the continued focus on increasing profitability and stockholder value. Conversely, in periods when corporate performance goals are not achieved, the Committee may decrease the level of overall individual compensation. The Committee also reviews independent compensation survey information from national and regional organizations that report compensation practices and salary levels for various executive positions at comparably sized companies that operate similar lines of business as the Company. SALARIES AND BONUSES The Committee's policy is to determine salaries and to award discretionary bonuses to key employees each year based on their individual performance and the overall performance of the Company during the immediately preceding year. The Committee's review of individual performance of an executive is largely a subjective test; the Committee considers the potential of the individual executive and the executive's performance in his or her position. In addition, the Committee consults with financial and other professionals who have experience with respect to the compensation levels of various executives at comparably sized companies that operate in similar lines of business as the Company. These professionals also utilize relevant independent compensation surveys for executive positions at comparably sized companies. Salaries for the Company's executives generally fall near the mean of salaries for similarly-situated companies. 15 16 The Compensation Committee generally uses different criteria in determining each of the three components of an executive's compensation: base salary, options and bonuses. To determine the base salary, the Compensation Committee reviews the executive's past performance and prospects for future performance and establishes a fair and equitable base salary. The Compensation Committee rewards long-term performance through the granting of stock options. The Committee believes that the issuance of stock options provides an incentive to executives to increase the overall long-term financial performance of the Company. Cash bonuses are used to reward the short-term accomplishments of specific executives for favorable performance of the business units under their management. In granting bonuses, the Compensation Committee reviews recommendations from management, the executive's current base salary and the overall financial condition of the Company. STOCK OPTIONS The Committee utilizes the 1991 Plan as a long-term stock incentive plan to compensate executives based on the Company's long term growth. Since the option price on options granted under the 1991 Plan can not be less than the fair market value on the date of the grant, the Committee believes that this provides the Company's executives with the incentive to increase the Company's earnings and increase stockholder value. FISCAL 2000 COMPENSATION CONCERNING CHIEF EXECUTIVE OFFICER Since June 1998, the Company has operated under a Board appointed Operating Committee, which fulfills the duties of the Company's president. Currently, the Operating Committee is comprised of Paul Clemente and Scott Konieczny. The Compensation Committee considers the performance of each individual member of the Operating Committee as well as the performance of the Company as a whole in determining the compensation of each member of the Operating Committee. Since each member of the Operating Committee is also an officer of the Company, the Board awarded each member nominal additional compensation commensurate with the additional responsibilities of the Operating Committee. In addition, during fiscal 2000, Robert Clemente performed several special projects for the Company as well as the duties of Chairman of the Board. In consideration of Mr. Clemente performing the various special projects, the Compensation Committee set Mr. Clemente's annual salary at $75,000 in November 1999. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Both members of the Compensation Committee are Directors. There were no interlocks of executive officers or Board Members of the Compensation or equivalent Committee of another entity, which has any executive officers serving on the Compensation Committee of the Company. No executive officer of the Company serves as a director of another entity, one of whose executive officers served on the Compensation Committee of the Company. No executive officer of the Company served as a member of the Compensation Committee of another entity, one of whose executive officers served as a director of the Company. See also Item 13. "Certain Relationships and Related Transactions" herein. 16 17 COMPANY PERFORMANCE The following graph depicts a five (5) year comparison of cumulative total returns, assuming $100 was invested on September 30, 1995 in (a) Secom's Common Stock; (b) the NASDAQ Stock Market - U.S. (as a broad equity market index) and (c) the NASDAQ non-financial index (as a peer group index utilizing a published industry index). COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* AMONG SECOM GENERAL CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE NASDAQ NON-FINANCIAL INDEX [LINE GRAPH]
Cumulative Total Return ------------------------------------------------------------------ 9/95 9/96 9/97 9/98 9/99 9/00 ---- ---- ---- ---- ---- ---- Secom General Corporation............... 100 88 75 13 21 78 NASDAQ Stock Market (U.S.).............. 100 119 163 165 270 359 NASDAQ Non-financial.................... 100 117 157 157 268 365
* $100 INVESTED ON 9/30/95 IN STOCK OR INDEX- INCLUDING REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30. OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 12. SECURITY PRINCIPAL STOCKHOLDERS The following table sets forth certain information with respect to those persons who are known by management of the Company to have been a beneficial owner of more than five (5%) percent of the Company's outstanding Common stock as of the December 11, 2000.
NAME AND ADDRESS AMOUNT AND NATURE OF OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OWNED (1) ------------------- -------------------- ----------------- Manubusiness Opportunities, Inc. c/o 24417 Groesbeck Highway Warren, Michigan 48089............... 326,085(1) 32.61% John Cocke 46657 Arboretum Plymouth, Michigan 48170............. 53,146 5.31%
------------------------- (1) Three Stockholders of Manubusiness Opportunities, Inc. ("MOI"), Gregory Adamczyk, Rocco Pollifrone and Richard Thompson, are Directors of Secom. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth information with respect to the beneficial ownership of shares of the Company's Common stock by the present Directors and Named Executive Officers of the Company. 17 18
NUMBER OF SHARES BENEFICIALLY NAME OWNED AS OF DECEMBER 11, 2000(1) PERCENT OWNED (2) ---- -------------------------------- ----------------- Robert A. Clemente.................... 81,847(3)(5) 8.19% Gregory Adamczyk...................... 64,238(3)(6) 6.42% Rocco Pollifrone...................... 22,826(3)(7) 2.28% Richard Thompson...................... 110,570(3)(8) 11.06% Paul D. Clemente...................... 4,101(4) * Scott J. Konieczny.................... 3,043(4) * Current Directors and Officers as a Group (totaling 6)............... 286,625(9) 28.67%
------------------------- * Less than 1% of the outstanding shares. (1) To the best of the Company's knowledge based on information reported by the Directors or executive officers or contained in the Company's shareholder records. Each of the named persons is presumed to have sole voting and sole investment power with respect to all shares shown, except as otherwise indicated by additional information included in the footnotes to this table. (2) For the purposes of this table, shares indicated as being beneficially owned include shares for which the person has the direct or indirect: (i) voting power, which includes the power to vote or to direct the voting, and/or (ii) investment power, which includes 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. (3) A director of the Company. The address for all directors is c/o Secom General Corporation, 46035 Grand River Avenue, Novi, Michigan 48374. (4) A Named Executive Officer of the Company. The address for all officers is c/o Secom General Corporation, 46035 Grand River Avenue, Novi, Michigan 48374. (5) Includes 9,708 shares which represents 47.9% of the 20,268 shares beneficially owned by Career Opportunities, a partnership of which Mr. Clemente is a general partner. (6) Represents 19.7% of the 326,085 shares that are beneficially owned by MOI, as Mr. Adamczyk owns 19.7% of the Common Stock of MOI. See "Principal Stockholders - Manubusiness Opportunities, Inc." (7) Represents 7% of the 326,085 shares that are beneficially owned by MOI, as Mr. Pollifrone owns 7% of the Common Stock of MOI. See "Principal Stockholders - Manubusiness Opportunities, Inc." (8) Includes (a) 100,010 shares which represents 30.67% of the 326,085 shares that are beneficially owned by MOI, as Mr. Thompson owns 30.67% of the Common Stock of MOI, and (b) 10,560 shares which represents 52.1% of the 20,268 shares beneficially owned by Career Opportunities, a partnership of which the Orville K. Thompson Living Trust (the 18 19 "Trust") is a partner and Mr. Thompson is a beneficiary of the Trust. Does not include 3,311 shares of Common Stock which are owned by Mr. Thompson's sister under the Michigan Uniform Gifts to Minors Act. Although Mr. Thompson is the custodian pursuant to such gift, he does not exercise the power to vote such shares and disclaims beneficial ownership of such shares. See "Principal Stockholders - Manubusiness Opportunities, Inc." (9) Shares shown as beneficially owned by more than one Director or officer are included only once in the total. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During fiscal year 2000, Mr. Clemente provided legal services to MST Steel Corp., which is owned by Director Richard Thompson, and to Forward Planning Corp., whose principal owner and officer is Director Gregory Adamczyk. 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:
PAGE ---- Consolidated Financial Statements............................................................ F Independent Auditors' Report................................................................. F-1 Consolidated Statement of Net Assets in Liquidation as of September 30, 2000................. F-2 Consolidated Statement of Changes in Net Assets in Liquidation for the Period from April 1, 2000 to September 30, 2000......................................... F-3 Consolidated Statement of Operations for the Period from October 1, 1999 to March 31, 2000........................................................................... F-4 Consolidated Statement of Stockholders' Equity for the Period from October 1, 1999 to March 31, 2000...................................................................... F-5 Consolidated Statement of Cash Flows for the Period from October 1, 1999 to March 31, 2000........................................................................... F-6 Notes to Consolidated Financial Statements................................................... F-7
(b) Reports filed on Form 8-K. Form 8-K dated October 2, 2000 regarding the record date and payment amount of the first liquidating distribution. (c) Exhibits. See the Exhibit Index on the next page. 19 20 EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE* ------- ----------- ----- 2.1 Asset Purchase Agreement dated February 1, 2000 among Alken-Ziegler, LLC, Uniflow Corporation and Secom General Corporation..................................................................2.1*(1) 2.2 Asset Purchase Agreement dated March 29, 2000 among Alken-Ziegler Livonia, LLC, GL Ziegler Investments, LLC, Form Flow, Inc., L&H Die, Inc. and Secom General Corporation............................................................................2.2*(2) 3.1 Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on August 25, 1987..........................................3.1*(3) 3.2 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) 3.3 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) 3.4 Amendment to Certificate of Incorporation filed on August 31, 1990................................................................................3.2*(4) 3.5 Amendment to Certificate of Incorporation filed on December 17, 1991..............................................................................3.5*(5) 3.6 Amendment to Certificate of Incorporation filed on April 14, 1999.................................................................................3.1*(7) 3.7 Bylaws of the Company..........................................................................3.4*(2) 3.8 Certificate of Dissolution filed on December 8, 2000 and effective December 31, 2000................................................................E-1 4.1 List of instruments defining the right of security holders.....................................4.1*(6) 10.1 Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing between Secom General Corporation and Metlife Capital Financial Corporation.....................................................10.4*(8)
------------ * See the footnotes on the next page to locate these Exhibits. 20 21 EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE* ------- ----------- ---- 10.2 1991 Nonqualified Stock Option Plan............................................10.27*(9) 10.3 Form of Stock Option Agreement for Options granted under the 1991 Non-qualified Stock Option Plan.................................10.28*(9) 22. Subsidiaries of the Registrant.................................................22 *(10) 23.1 Consent of Rehmann Robson, PC..................................................E-2 27. Financial Data Schedule
----------- 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. *(1) Incorporated by reference from the Company's Current Report on Form 8-K dated February 9, 2000. *(2) Incorporated by reference from Exhibit A to the Company's Information Statement on Schedule 14C dated May 23, 2000. *(3) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1987. *(4) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1990. *(5) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1991. *(6) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1993. *(7) Incorporated by reference from the Company's Quarterly Report on Form 10-K for the year ended September 30, 1999. *(8) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1996. *(9) 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. *(10) Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended September 30, 1998. 21 22 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 By: /s/ Paul D. Clemente ---------------------- Dated: December 21, 2000 Paul D. Clemente Its: Vice President 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 Officers: /s/ Paul D. Clemente Vice President December 21, 2000 ------------------------- Paul D. Clemente /s/ Scott J. Konieczny Chief Financial Officer, December 21, 2000 ------------------------- Secretary & Treasurer Scott J. Konieczny Principal Financial and Accounting Officer: /s/ Scott J. Konieczny Chief Financial Officer, December 21, 2000 ------------------------ Secretary and Treasurer Scott J. Konieczny Directors: /s/ Gregory Adamczyk Director December 21, 2000 ------------------------- Gregory Adamczyk /s/ Robert A. Clemente Director December 21, 2000 ------------------------- Robert A. Clemente /s/ Rocco Pollifrone Director December 21, 2000 ------------------------- Rocco Pollifrone /s/ Richard Thompson Director December 21, 2000 ------------------------- Richard Thompson 22 23 SECOM GENERAL CORPORATION NOVI, MICHIGAN (IN PROCESS OF LIQUIDATION) CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000 AND THE PERIOD IN LIQUIDATION FROM APRIL 1, 2000 TO SEPTEMBER 30, 2000 24 SECOM GENERAL CORPORATION NOVI, MICHIGAN (IN PROCESS OF LIQUIDATION) CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000 AND THE PERIOD IN LIQUIDATION FROM APRIL 1, 2000 TO SEPTEMBER 30, 2000 25 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) TABLE OF CONTENTS --------------------------------------------------------------------------------
PAGE ---- INDEPENDENT AUDITORS' REPORT F-1 CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000 AND THE PERIOD IN LIQUIDATION FROM APRIL 1, 2000 TO SEPTEMBER 30, 2000 Consolidated Statement of Net Assets in Liquidation as of September 30, 2000 F-2 Consolidated Statement of Changes in Net Assets in Liquidation for the Period from April, 1, 2000 to September 30, 2000 F-3 For the Period from October 1, 1999 to March 31, 2000 Consolidated Statement of Operations F-4 Consolidated Statement of Stockholders' Equity F-5 Consolidated Statement of Cash Flows F-6 Notes to Consolidated Financial Statements F-7
26 INDEPENDENT AUDITORS' REPORT December 8, 2000 Stockholders and Board of Directors Secom General Corporation Novi, Michigan We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Secom General Corporation for the period from October 1, 1999 to March 31, 2000. In addition, we have audited the consolidated statement of net assets in liquidation as of September 30, 2000, and the related statement of changes in net assets in liquidation for the period from April 1, 2000 to September 30, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit 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 consolidated 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 audit provides a reasonable basis for our opinion. As described in Note 1 to the consolidated financial statements, the Company entered into an agreement to sell its last remaining operating unit on March 29, 2000, and the Company commenced liquidation proceedings thereafter. As a result, the Company changed its basis of accounting for periods subsequent to March 31, 2000, from the going-concern basis to a liquidation basis. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, Secom General Corporation's results of operations and its cash flows for the period from October 1, 1999 to March 31, 2000, its net assets in liquidation as of September 30, 2000, and the changes in its net assets in liquidation for the period from April 1, 2000 to September 30, 2000, in conformity with generally accepted accounting principles applied on the bases of accounting described in the preceding paragraph. REHMANN ROBSON, P.C. Farmington Hills, Michigan December 8, 2000 F-1 27 SECOM GENERAL CORPORATION AND SUBSIDIARIES (in process of liquidation) CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION --------------------------------------------------------------------------------
SEPTEMBER 30 2 0 0 0 ------------------- ASSETS Cash and cash equivalents $ 13,397,600 Accounts receivable Trade 251,100 Other, principally notes 350,000 Buildings and real estate held for sale 2,351,000 Other assets 417,600 ------------------- TOTAL ASSETS $ 16,767,300 =================== LIABILITIES Accounts payable $ 113,100 Accrued wages and benefits 194,700 Federal income and Michigan Single Business tax 136,400 Debt secured by computer equipment 55,100 Debt secured by buildings and real estate held for sale 1,602,000 Other liabilities 827,300 ------------------- Total liabilities 2,928,600 ------------------- NET ASSETS IN LIQUIDATION $ 13,838,700 =================== Number of common shares outstanding 977,900 =================== NET ASSETS IN LIQUIDATION PER COMMON SHARE $ $ 14.15 ===================
The accompanying notes are an integral part of these consolidated financial statements. F-2 28 SECOM GENERAL CORPORATION AND SUBSIDIARIES (in process of liquidation) CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE PERIOD FROM APRIL 1, 2000 TO SEPTEMBER 30, 2000 -------------------------------------------------------------------------------- Stockholders equity at March 31, 2000 (going concern, historical cost basis of accounting) $ 10,118,300 Decrease in net assets due to retirements of 60,300 shares of common stock, principally occasioned by termination of defined contribution pension plan (650,900) Increase in net assets resulting from revaluing assets to liquidation basis from going concern, historical cost basis of accounting as of April 1, 2000 361,000 Gain from the sale of the Tooling Segment's assets, net of applicable income taxes of $1,453,000 (Note 2) 3,400,200 Gain from the sale of a manufacturing facility, net of applicable income taxes of $30,000 120,700 Gain from activities during the "wind down" period from April 1, 2000 through September 30, 2000 489,400 ------------- NET ASSETS IN LIQUIDATION AS OF SEPTEMBER 30, 2000 $ 13,838,700 =============
The accompanying notes are an integral part of these consolidated financial statements. F-3 29 SECOM GENERAL CORPORATION AND SUBSIDIARIES (in process of liquidation) CONSOLIDATED STATEMENT OF OPERATIONS --------------------------------------------------------------------------------
PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000 ---------------------- Revenues $ 668,200 Costs and expenses: ---------------- Depreciation and interest 308,800 Salaries and benefits 186,800 Professional services 59,200 Other 90,300 ---------------- Total costs and expenses 645,100 Income from continuing operations before income taxes 23,100 Income taxes (16,800) ---------------- Income from continuing operations 6,300 Discontinued operations Income from operations of discontinued subsidiaries 597,700 Loss on disposal of subsidiary, net of applicable income tax benefit $93,200 (186,600) ---------------- NET INCOME $ 417,400 ================ Income per common share (basic and diluted): Continuing operations $ 0.01 Discontinued operations 0.39 ---------------- NET INCOME PER COMMON SHARE $ 0.40 ================
The accompanying notes are an integral part of these consolidated financial statements. F-4 30 SECOM GENERAL CORPORATION AND SUBSIDIARIES (in process of liquidation) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY --------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL --------------------------------- PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL --------------- -------------- ------------------ ----------------- ------------------ Balance at October 1, 1999 1,044,300 $ 104,400 $ 18,757,700 $ (9,139,600) $ 9,722,500 Stock repurchases, net (6,100) (600) (21,000) - (21,600) Net income - - - 417,400 417,400 --------------- -------------- ------------------ ----------------- ------------------ BALANCE AT MARCH 31, 2000, IMMEDIATELY PRIOR TO ADOPTION OF LIQUIDATION BASIS OF ACCOUNTING 1,038,200 $ 103,800 $ 18,736,700 $ (8,722,200) $ 10,118,300 =============== ============== ================== ================= ==================
The accompanying notes are an integral part of these consolidated financial statements. F-5 31 SECOM GENERAL CORPORATION AND SUBSIDIARIES (in process of liquidation) CONSOLIDATED STATEMENT OF CASH FLOWS --------------------------------------------------------------------------------
PERIOD FROM OCTOBER 1, 1999 TO MARCH 31, 2000 ---------------------- Cash from operating activities: Net income $ 417,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 200,200 Deferred income taxes 16,800 Changes in operating assets and liabilities which provided (used) cash: Prepaids (138,200) Trade accounts payable (6,300) Accrued liabilities (183,400) Net cash used in discontinued operations (40,400) ---------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 266,100 ---------------------- Cash flows from investing activities: Net cash provided by discontinued operations 3,609,400 ---------------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 3,609,400 ---------------------- Cash flows from financing activities: Retirements of common stock (21,600) Payments on long-term obligations (203,200) Net cash used in discontinued operations (1,700,100) ---------------------- NET CASH USED IN FINANCING ACTIVITIES (1,924,900) ---------------------- Net increase in cash 1,950,600 Cash and cash equivalents, beginning of period 497,200 ---------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,447,800 ======================
The accompanying notes are an integral part of these consolidated financial statements. F-6 32 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The accompanying consolidated financial statements include the accounts of Secom General Corporation and its wholly-owned subsidiaries: Form Flow, Inc.; L&H Die, Inc.; MIC-Shelf, Inc. f/k/a Micanol, Inc. ("Micanol"); Uniflow Corporation; and MMC Manufacturing Corp. f/k/a Milford Manufacturing Corporation ("Milford"). All significant intercompany accounts and transactions have been eliminated. Nature of Business Secom General Corporation (the "Company") is a publicly-traded holding company with five wholly-owned subsidiaries. Prior to the consummation of asset sales on February 9, 2000 and June 30, 2000 the Company operated in two business segments: Metal Parts Forming (comprised of Uniflow) and Tooling (comprised of Form Flow, L&H Die and Micanol). Background and Reasons for the Plan of Liquidation During the fall of 1998, Secom's Board of Directors engaged the investment banking firm of Goldsmith, Agio, Helms Securities, Inc. ("GAHS") to assist it in developing strategic alternatives to increase stockholder value. Secom's Board initially contacted GAHS because it believed that the value of the Company was greater than the aggregate value of the then trading price of the Company's shares of Common Stock. Among the alternatives discussed with GAHS was a possible merger, sale or similar transaction of the entire Company or its subsidiaries. While other parties expressed an interest in engaging in a transaction with the entire Company, the price proposed by such parties was below what the Board believed was fair market value. GAHS also advised the Board that, because of the different industries represented by our two segments, many potential purchasers would not be interested in purchasing both segments. Therefore, the Board believed it was necessary to pursue other alternatives to accomplish its goal of increasing stockholder value, including selling the Company's assets and properties in separate transactions and ultimately liquidating it. In August 1999, the Company entered into a letter of intent with a potential purchaser for the sale of the assets of the Tooling Segment, which was comprised of Form Flow, L&H Die and Micanol. After signing the letter of intent, the potential purchaser asked the Company for certain concessions on the terms which Secom was unwilling to provide. The letter of intent also contained certain contingencies that were not satisfied so the letter of intent terminated. At the same time, the Company was negotiating with Alken-Ziegler Livonia, LLC ("Alken-Ziegler") for the sale of the operating assets of the Metal Parts Forming Segment, which was comprised of Uniflow. The Company ultimately entered into a letter of intent for that sale in October 1999. When the letter of intent with respect to the Tooling Segment terminated, Alken-Ziegler expressed interest in purchasing the assets of the Tooling Segment. In November 1999, F-7 33 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Secom's Board authorized execution of a non-binding letter of intent with Alken-Ziegler for the sale of the assets of the Tooling Segment. At that time, however, Secom believed that it was in its best interest to focus on closing the sale of the Metal Parts Forming Segment before entering into a definitive agreement for the sale of the assets of the Tooling Segment. On February 9, 2000, Secom sold the operating assets of its Metal Parts Forming Segment to Alken-Ziegler for a purchase price of approximately $2.4 million in cash. Alken-Ziegler also agreed to assume certain liabilities of the Metal Parts Forming Segment. The Company then continued negotiating with Alken-Ziegler and GL Ziegler Investments, LLC ("GLZ") on the terms of a definitive agreement for the sale of the assets of the Tooling Segment. On March 29, 2000, the Company's Board of Directors authorized the execution of an Asset Purchase Agreement with Alken-Ziegler and GLZ. On May 10, 2000, the sale of the Tooling Group was approved by the written consent of more than fifty-one (51%) percent of the outstanding shares of Secom's Common Stock. Prior to the closing, Alken-Ziegler assigned its interests under the Asset Purchase Agreement to its affiliate, Alken-Ziegler Tool Company, LLC ("A-Z Tool Company"; A-Z Tool Company and GLZ are collectively referred to as "Purchaser"). The sale was completed on June 30, 2000. In connection with the sale of the operating assets of the Tooling Segment, the Company received a cash purchase price of approximately $8 million on June 30, 2000. The Company received the balance of approximately $1.6 million on August 31, 2000 upon the closing of the sale of the Tooling Segment's real estate to Purchaser. The Purchaser also agreed to assume certain liabilities of the Tooling Segment. Based on the above asset sales and Secom's Board of Directors recommendation, the Company's stockholders approved a Plan of Liquidation on August 24, 2000. Under its Plan of Liquidation, the Company expects to distribute to its stockholders, on a pro rata basis, all of its remaining property and assets, after payment of or the provision for the payment of claims and obligations. Liquidation Basis of Accounting As a result of the Company signing the Asset Purchase Agreement on March 29, 2000 to sell substantially all of the operating assets of the Tooling Segment, and the Company's expectation of obtaining from its stockholders formal approval of a plan of liquidation upon the consummation of the sale of the Tooling Segment, the Company adopted the liquidation basis of accounting. Such adoption was effected beginning on April 1, 2000 for administrative convenience coincident with the close of the Company's second fiscal quarter ended March 31, 2000. The Company has presented consolidated statements of operations, stockholders' equity, and cash flows for the period from October 1, 2000 to March 31, 2000, the period of the current fiscal year before the liquidation basis of accounting was adopted. However, as a result of the approval of the Plan of Liquidation, comparative financial information from previous years and certain other disclosures are not meaningful and have not been presented in the consolidated financial statements. F-8 34 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The liquidation basis of accounting requires that assets be valued at their estimated liquidation values and that liabilities be valued at their estimated settlement values. Assets and liabilities that have not been revalued to liquidation value are disclosed as such on the face of the financial statements. In addition, under the liquidation basis of accounting, gains and losses from dispositions of assets are displayed as net amounts versus gross revenue and expenses as under the going concern basis of accounting. The primary financial statements required under the liquidation basis of accounting are a Statement of Net Assets in Liquidation as of September 30, 2000 and a Statement of Changes in Net Assets in Liquidation for the period from April 1, 2000 to September 30, 2000. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles, including those applicable to the liquidation basis of accounting, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements, and the accompanying notes. Significant estimates include the fair values of assets held for sale, collectibility of accounts and notes receivables, future rental and royalty receipts and future liability settlement amounts. Such estimates have been developed pursuant to the Plan of Liquidation. Actual results may differ from amounts estimated. Revenue Recognition Revenues for the six months ended March 31, 2000 primarily represent management and rental fees charged to the discontinued operations as well as royalty and interest income. The discontinued operations recognized revenues upon shipment of customer products. Buildings and Real Estate Held for Sale The estimated value of real estate and buildings held for sale represents an expected selling price of $2.7 million, less estimated taxes and costs to sell. Other Liabilities Other liabilities primarily represents estimated payroll and benefits, professional, interest and other costs expected to be incurred after September 30, 2000 in connection with the implementation and execution of the Plan of Liquidation. Income Taxes Deferred income tax assets and liabilities are computed for differences between the financial statement and federal income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred income taxes arise from F-9 35 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS temporary basis differences principally related to tax carryforwards, various accruals and allowances, certain assets acquired in business combinations and property, plant and equipment. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the year plus or minus the change during the year in deferred tax assets and liabilities. Earnings (Loss) Per Common Share Earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period. The diluted amount reflects the potential dilution of all common stock equivalents. At March 31, 2000 options to purchase 68,200 shares were excluded from the computation of earnings per share because the options' exercise prices were greater than the average market price of the common shares. As of March 31, 2000 there were 1,043,600 weighted average shares of common stock outstanding. 2. SALE OF TOOLING SEGMENT'S ASSETS On March 29, 2000, the Company's Board of Directors authorized the execution of an Asset Purchase Agreement with Alken-Ziegler and GLZ. On May 10, 2000, the sale of the Tooling Group was approved by the written consent of more than fifty-one (51%) percent of the outstanding shares of Secom's Common Stock. The sale was completed on June 30, 2000. In connection with the sale of the operating assets of the Tooling Segment, the Company received a cash purchase price of approximately $8 million on June 30, 2000. The Company received the balance of approximately $1.6 million on August 31, 2000 upon the closing of the sale of the Tooling Segments real estate to GLZ. Alken Ziegler also agreed to assume certain liabilities of the Tooling Segment. The Company recognized a gain from the sale of approximately $3.4 million, net of applicable income taxes of approximately $1.4 million. 3. SALE OF METAL PARTS FROMING SEGMENT'S ASSETS On February 9, 2000, the Company sold the operating assets of its Metal Parts Forming Segment to Alken-Ziegler for a purchase price of approximately $2.4 million in cash. Alken-Ziegler also agreed to assume certain liabilities of the Metal Parts Forming Segment. The Company recognized a loss of approximately $187,000 on the sale, net of an applicable income tax benefit of approximately $93,000. F-10 36 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. DEBT Debt secured by buildings and real estate consists of an approximately $1.6 million mortgage note that requires monthly principal and interest payments totaling approximately $28,000. Interest on the note, which is collateralized by land and buildings currently held for sale at $2.7 million, is charged at 8.25% per annum. The note matures in fiscal 2011, but is expected to be settled upon sale of the related real estate. Debt secured by computer equipment consists of an approximately $55,000 equipment term note that requires monthly principal and interest payments totaling approximately $8,000. Interest on the note, which is collateralized by various computer equipment, is charged at 9.62% per annum. The note matures in fiscal 2001. 5. COMMON STOCK OPTIONS In 1991, the Board of Directors (the "Board") adopted a nonqualified common stock option plan (the "1991 Plan"). The 1991 Plan authorizes the Board to grant options to employees to purchase a maximum of 80,000 shares of common stock, at not less than the fair market value at the date of grant. The options vest at various dates as described in the related option agreement and expire up to 10 years from the date of grant. The Company accounts for stock option grants and awards under its stock-based compensation plan in accordance with APB Opinion No. 25. Accordingly, no compensation cost has been recognized for stock option grants since the options have exercise prices of not less than the market value of the Company's common stock at the date of grant. A summary of the status of stock option grants under the Company's 1991 Plan as of September 30, 2000 and changes during the year then ended are presented below:
Weighted Average Exercise Shares Price ---------- ------------ Outstanding at the beginning of the year 33,200 $ 9.55 Granted - - Exercised - - Terminated (17,200) 9.69 --------- ------------ Outstanding at the end of the year 16,000 $ 9.39 ========= ============ Options exercisable at end of the year 10,800 $ 9.51 ========= ============
F-11 37 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about stock options outstanding under the Company's 1991 Plan at September 30,2000:
REMAINING CONTRACTUAL EXERCISE OPTIONS OPTIONS LIFE PRICE OUTSTANDING EXERCISABLE (YEARS) ------------ --------------- -------------- -------------- $ 8.75 5,000 2,000 2.7 9.69 11,000 8,800 .5 --------------- -------------- 16,000 10,800 =============== ==============
During the year ended September 30, 1996, 35,000 options exercisable at $9.69 were issued to an officer of the Company outside of the 1991 Plan. At September 30, 2000, 28,000 of these options were exercisable and the remaining options vest ratably over a five year period. Subsequent to September 30, 2000, the Company's Board of Directors approved the vesting of any and all unvested options outstanding under the 1991 Plan and those outside of the 1991 Plan. Accordingly, all 16,000 options outstanding under the 1991 Plan and all 35,000 options outstanding outside of the 1991 Plan were exercised. 6. COMMITMENTS AND CONTINGENCIES Litigation The Company is involved in certain legal proceedings arising in the normal course of business. In the opinion of management, based on the advice of counsel, the outcome of such litigation will not have a material adverse effect on the reported amount of the Company's net assets in liquidation or changes in net assets in liquidation. Royalty Agreement Receipts As a result of certain asset sales, the Company has the right to receive royalty payments from the separate purchasers. The royalty payments are for stated percentages of the net selling price of parts to certain customers, for either a period of up to five years or the service life of the part. 7. SUPPLEMENTAL CASH FLOWS INFORMATION Cash payments for interest and income taxes during fiscal year 2000 were $243,000 and $2,248,000, respectively. F-12 38 SECOM GENERAL CORPORATION (IN PROCESS OF LIQUIDATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. SUBSEQUENT EVENTS Payment of Liquidating Distribution On October 31, 2000 the Company paid a cash liquidating distribution to stockholders in the amount of $11.55 per share. The Company believes that if it is successful in liquidating its remaining assets at their estimated current market value, stockholders could receive liquidating distributions totaling approximately $2 to $3 per share over the next three to four years, in addition to the first distribution of $11.55 per share paid on October 31, 2000. Trading of Common Stock In December 2000 the Company filed its Certificate of Dissolution with the Delaware Secretary of State with an effective date of December 31, 2000. The Company also filed a "No Action Letter" with the Securities and Exchange Commission requesting relief from the periodic reporting requirements of sections 13(a) and 15(d) of the Securities Exchange Act of 1934. In conjunction with the filing of its Certificate of Dissolution, the Company requested that NASDAQ delist and cease trading in the Company's common stock at the close of business on December 29, 2000. * * * * * F-13