-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Rhh2yfUr6MCHowz3Qid8taE9JvkPbUHj644WZPe8twQhxdincV55V7yGurxwJOJL 2ciDEMBNUyXr2jQt2yUtoA== 0000891020-94-000054.txt : 19940404 0000891020-94-000054.hdr.sgml : 19940404 ACCESSION NUMBER: 0000891020-94-000054 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOMENTUM DISTRIBUTION INC CENTRAL INDEX KEY: 0000853436 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 911464018 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-18112 FILM NUMBER: 94519685 BUSINESS ADDRESS: STREET 1: KOLL CENTER BELLEVUE STREET 2: 500-108TH AVE NE STE 1900 CITY: BELLEVUE STATE: WA ZIP: 98004 BUSINESS PHONE: 2066466550 10-K 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 - -------------------------------------------------------------------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 - -------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 0-18112 MOMENTUM CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 91-1464018 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) KOLL CENTER BELLEVUE--SUITE 1900 500 108TH AVE. N.E. 98004 - ----------------------------------------------------- ----- BELLEVUE, WA 98004 (Zip Code) ------------------- (Address of Principal Executive Offices)
(206) 450-6550 Registrant's Telephone Number SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered - ------------------- ----------------------------------------- None N/A
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock $1.00 Par Value 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 ( ) --- --- As of March 24, 1993 the aggregate market value of the voting stock held by nonaffiliates was approximately $30.8 million. As of March 24, 1993 there were 3,433,860 shares of common stock issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE The definitive Proxy Statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 (Item 10-Directors Only, and Items 11, 12 and 13 of Part III). 2 PART I. ITEM I. BUSINESS A. FORMATION Momentum Corporation, previously Momentum Distribution Inc., (Momentum/the Company) was incorporated in Delaware on October 26, 1989 as a subsidiary of VWR Corporation, a publicly traded company on the NASDAQ National Market System. It was incorporated for the purpose of carrying out the spin-off of VWR Corporation's non-laboratory distribution businesses, Momentum Graphics Inc. (the Graphics Group) and VWR Textiles & Supplies Inc (the Textiles Group), into a separate, independent, publicly held corporation. This spin-off was accomplished on March 1, 1990, with the VWR Corporation shareholders receiving one share of Momentum common stock for each five shares of VWR Corporation common stock held. Effective September 1, 1993, the Company's name was changed from Momentum Distribution Inc. to Momentum Corporation. B. CURRENT YEAR DEVELOPMENTS In the second quarter of 1993, the Company reorganized the Graphics Group's sales and marketing function. The objective of this reorganization was to replace the traditional sales approach with a team of sales and technical specialists. Due to the rapid technological changes occurring in the printing and publishing industry, this team concept is designed to provide significant added value to the customer. In September, 1993, the Company sold its Textiles Group, composed of VWR Textiles & Supplies Inc. and Momentum Textiles Inc. The gain on the sales was $6.1 million, with net proceeds in excess of $20 million. The objective of these sales was to concentrate the resources and synergies of the Company on the Graphics business and to pursue the opportunities in electronic prepress systems and pressroom consumables. The financial results of the Textiles Group are reported as discontinued operations in the financial statements. C. FUTURE DEVELOPMENTS Momentum Graphics Inc. was merged into Momentum Corporation at the beginning of 1994. In February, 1994, the Company signed an agreement in principle to acquire the assets of T.K. Gray, Inc.(Gray). Gray, based in Minnesota, is a regional distributor of photographic and graphic arts supplies and equipment, with sales in excess of $40 million. The acquisition is subject to the execution of a definitive agreement and satisfactory completion of due diligence investigations. The purchase is expected to close in April, 1994. In March, 1994, the Company signed an agreement in principle to form a new holding company and combine with Phillips & Jacobs, Incorporated (P&J), a national distributor of photographic and graphic arts supplies and equipment, with sales in excess of $160 million. P&J common stock is traded on the NASDAQ National Market System and is headquartered in Pennsauken, N.J. Under the agreement, each share of P&J common stock will be exchanged for one share of the new company. Each share of Momentum common stock will be exchanged for .71 shares of the new company. The combination is subject to the execution of a definitive agreement, the approval of the stockholders of both companies, satisfactory completion of due diligence investigations by both parties, receipt of customary regulatory approvals, and satisfaction of certain other standard conditions. The transaction is anticipated to close during the summer of 1994. D. GENERAL Momentum is a major national distributor of a broad line of photographic and graphic arts supplies and equipment. Products include supply items such as photographic film and papers, paste-up supplies, and printing plates and equipment ranging from traditional processors to advanced electronic prepress systems. Principal customers include commercial and in-plant printers, photographers, color separators, typesetters, and other users of electronic imaging. Page 2 3 Momentum competes with numerous regional and local distributors as well as with manufacturers who sell direct to end-users. On a national basis, Momentum is one of the five largest distributors of such products in the United States. Momentum maintains an outside sales team, including technical specialists, to provide product information and technical support to its customers. Customers generally place orders by telephone, telefax, or through a local computer terminal. Most orders are shipped from available stock in local or central warehouses or directly from the manufacturer via Company trucks or (more frequently) by common carrier. Momentum does not manage or conduct significant research activities relating to the development of new products, although the Company does work with customers and suppliers to improve products. Momentum owns several trademarks and tradenames, none of which are considered material to current operations. No one customer accounts for ten percent or more of the revenues. The Company does not exhibit significant seasonality. Foreign sales or income is not material. Momentum employed 230 employees at December 31, 1993, with less than 1% of the employees represented by unions. EXECUTIVE OFFICERS OF THE REGISTRANT
BUSINESS EXPERIENCE POSITION HELD NAME AGE LAST FIVE YEARS SINCE ---- --- ------------------- ------------- Richard E. Engebrecht 67 Chairman of Registrant December, 1992- Chairman Present Chairman, President 1990-1992 Chief Executive Officer of Registrant President and Chief Executive Officer 1986-1992 VWR Corporation John H. Goddard, Jr. 46 President, Chief Executive Officer December, 1992- President, of Registrant Present Chief Executive Officer President of Registrant 1992 Senior Vice President of Registrant 1990-1992 Vice President of Registrant 1990 President, Momentum Graphics Inc. 1990-1994 President, VWR Graphics 1987-1990 Division of VWR Scientific Inc. Patsy R. Turnipseed 59 Senior Vice President December, 1990- Senior Vice President Chief Financial Officer of Registrant Present Chief Financial Officer Vice President Treasurer and Corporate 1990 Secretary of Registrant Vice President Treasurer and Corporate 1986-1990 Secretary, VWR Corporation Barry C. Maulding 48 Vice President Administration, August, 1993- Vice President, Administration General Counsel, and Corporate Present General Counsel, Secretary of Registrant Corporate Secretary General Counsel, Director of Administration and November, 1992- Corporate Secretary of Registrant 1993 General Counsel and 1991-1992 Corporate Secretary of Registrant Director - Legal Services, Corporate Secretary 1986-1990 Univar Corporation
Page 3 4 ITEM 2. PROPERTIES Momentum's executive offices, which are leased, are located at Koll Center Bellevue, Suite 1900, 500 108th Avenue N.E. Bellevue, Washington 98004. Principal properties are summarized as follows:
Square Lease Location Leased/Owned Footage Expires - -------- ------------ ------- ------- Atlanta, GA (Norcross) Leased 14,400 1/31/95 Boston, MA (Hingham) Leased 11,600 7/31/94 Chicago, IL (Itasca) Leased 49,600 7/31/00 Cincinnati, OH Leased 10,900 10/31/96 Dallas, TX Leased 5,600 3/31/95 Detroit, MI (Troy) Leased 8,000 4/30/96 Kansas City, MO Leased 9,000 12/31/95 Los Angeles, CA (Cerritos) Leased 11,800 8/31/02 Miami, FL Owned 17,600 -- Milwaukee, WI Leased 2,000 4/30/95 New Orleans, LA (Harahan) Owned 14,400 -- Pennsauken, NJ Leased 14,300 5/31/95 Portland, OR Leased 7,800 9/30/95 St. Louis, MO Owned 22,900 -- Seattle, WA (Tukwila) Owned 20,000 -- S. San Francisco CA Leased 10,000 3/15/96
Momentum believes that its facilities are well suited to its business needs and are adequate to accommodate its current business and expected growth for the next two years. It is not anticipated there will be any difficulty in acquiring and/or leasing additional facilities as and when needed. ITEM 3. LEGAL PROCEEDINGS Momentum is involved in various contractual, personal injury and general liability cases and claims which are considered normal to its business. In the opinion of Management, these claims, when finally concluded, will not have a material adverse impact on the consolidated financial position of the Company. ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the year. Page 4 5 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common stock of Momentum is traded on the Over-The-Counter NASDAQ National Market System under the symbol: MMDI. The number of common shareholders of record as of March 24, 1994, was 1,502. The prices below reflect closing prices for Momentum as reported by NASDAQ for the years ended December 31:
1993 1992 ------------------- ------------------ Quarter High Low High Low ------- ---- --- ---- --- First quarter 8.75 6.75 5.88 3.75 Second quarter 9.00 7.88 6.38 5.38 Third quarter 8.50 7.50 8.50 5.75 Fourth quarter 9.00 7.50 7.50 6.00
(Prices have been adjusted to reflect the three-for-one stock split in July, 1992) No cash dividends have been declared since incorporation. ITEM 6. SELECTED FINANCIAL DATA
Ten Months Years ended December 31, Ended --------------------------------------------- December 31, (Thousands of dollars, except per share data) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------------ OPERATIONS Sales of graphic supplies & equipment $116,788 $112,022 $97,339 $94,835 $114,906 Gross margin 22,542 21,903 19,056 19,934 14,170 Gross margin percent 19.3% 19.6% 19.6% 21.0% 12.3% Loss from continuing operations (3,060) (1,286) (2,479) (2,727) (10,533) Percent of sales (2.6)% (1.1)% (2.5)% (2.9)% (9.2)% Income from discontinued operations (1) 7,424 2,238 1,300 1,415 1,316 Net income (loss) 4,364 952 (1,179) (1,312) (9,217) Loss per share from continuing operations (2) (0.84) (0.37) (0.72) (0.82) Net income (loss) per share (2) 1.20 0.27 (0.34) (0.39) BALANCE SHEET Working capital 26,558 26,875 18,861 19,888 23,515 Property and equipment, net 7,140 7,317 7,578 6,706 5,619 Total assets 52,430 51,616 50,311 51,803 58,711 Long-term obligations 1,793 8,066 10,453 9,847 14,024 Shareholders' equity 33,949 29,708 28,576 29,362 30,000 Book value per share (2) 9.62 8.45 8.33 8.62 (1) Income from discontinued operations for 1993 includes the gain on the sales of the discontinued operations of $6,146,000. (2) Per share data is not provided for periods prior to the spin-off from VWR Corporation.
Page 5 6 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL In September 1993, the Company sold its Textiles Group composed of VWR Textiles & Supplies Inc. and Momentum Textiles Inc. The financial statements have been restated to report the Textiles Group as discontinued operations. Accordingly, the following discussion and analysis is for the continuing operations. Two subsequent events, when completed, will have a significant impact on the future of the Company, and accordingly, the applicability of the current results to future periods. As described under Part I, Item I, Business, the Company has signed two agreements in principle, one to buy the assets of T.K. Gray, Inc., a regional distributor of photographic and graphic arts supplies and equipment, with sales in excess of $40 million, and a second to combine with Phillips & Jacobs, Incorporated, a national distributor of photographic and graphic arts supplies and equipment, with sales in excess of $160 million. Due to the significance of these transactions, the analysis of 1993 and applicability of 1993 to subsequent periods may be of limited value. COMPARISON OF 1993 TO 1992 Sales in 1993 were $116.8 million or 4% greater than 1992. Sales were hampered by an 8% decrease in sales on the west coast, which was strongly impacted by the weak California economy and a contraction in demand for reprographic and professional photographic products in the defense industry. Sales excluding the west coast locations increased by almost 9% for the year. This gain is primarily attributable to strong sales growth of electronic-prepress systems. The gross margin percentage decreased from 19.6% to 19.3%, primarily due to competitive price pressure and changes in product mix. Selling and administrative expenses increased 8% between years. This increase, which was higher than the sales growth, was primarily due to increased sales and marketing expenses. During the year, the Company replaced the traditional sales structure with a team of sales and technical specialists, which will better meet customer requirements as the graphics industry goes through the current period of rapid technological changes. This restructuring resulted in increased fixed costs, but with an ongoing decrease in variable costs. Thus, in the future, as the Company's sales volume increases, the incremental sales and marketing expenses should increase at a slower rate. In 1993, the Company incurred $2.4 million in restructure and other charges. One million was incurred for the restructure of the sales and marketing function as discussed above. These costs were primarily for employee severance and relocation costs. In addition, computer equipment of $.8 million was written-off as a result of the Company's decision to replace this equipment with new more efficient and cost effective equipment. The balance of the charge, $.6 million, represents salaries and benefits applicable to positions which have been eliminated as a result of the divestiture of the Textiles Group. Similar charges for 1992 amount to $.6 million for salaries and benefits applicable to positions which have been eliminated as a result of the divestiture of the Textiles Group. The full benefit of the restructure and other charges will not occur until 1994. Interest expense decreased $144,000 or 26% in 1993. This decrease was primarily due to the repayment of the Company's revolving debt with the proceeds from the sales of the Textiles Group. The effective tax rate for both 1993 and 1992 approximated the statutory federal rate of 34%. COMPARISON OF 1992 TO 1991 Sales increased 15% in 1992 to $112 million. This growth was primarily the result of increased penetration in the market. The gross margin percentage remained constant between years at 19.6%. Selling and administrative expenses increased 5%. Due to the significant sales growth and relationship of fixed to variable expenses selling and administrative expenses as a percent of sales decreased from 22.4% to 20.4%. Page 6 7 Interest expense decreased $131,000 or 19% in 1992. This decrease was primarily due to a reduction of interest rates charged under the revolving credit agreements. Restructure and other charges of $.6 million in 1992 and 1991 represent salaries and benefits applicable to positions which have been eliminated as a result of the divestiture of the Textiles Group. The effective tax rate for both years approximated the statutory federal rate of 34%. FINANCIAL CONDITION AND LIQUIDITY The Company had negative cash flow from operations of approximately $1.6 million in 1993 which was primarily due to an increase in income taxes receivable which will be recovered in 1994 as refunds. Investing activities consisted of $17.1 million in cash proceeds from the sale of the discontinued operations offset by additions to property and equipment and other assets of $3.1 million. Financing activities resulted in a net cash outflow of $7 million. This was primarily the result of using funds from the sales of the discontinued operations to pay off the outstanding balances under the Company's revolving credit agreements. The Company's primary source of debt financing is two revolving credit agreements, with a total commitment of $17.5 million, subject to certain covenant restrictions. Both agreements expire in January, 1995. At December 31, 1993, there was no outstanding debt under these agreements. At December 31, 1993, the Company had over $6 million in short-term investments. These funds combined with available bank financing and payments from outstanding notes receivable will be adequate to fund on-going operations and the expansion of these operations both internally and through acquisitions. During inflationary times, the Company's prices generally rise in tandem with costs. Operating results partially provide for the effects of inflation by using LIFO inventory accounting, so that the cost of sales generally reflects the most recent cost of the inventory sold. Asset values are based upon historical costs that do not necessarily represent either replacement costs or result in charges to operations based on replacement costs; however, since the Company is not capital intensive, it is the Company's opinion that charging operations for replacement costs of long-lived assets would not significantly reduce income from operations. Page 7 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MOMENTUM CORPORATION AND SUBSIDIARY Consolidated Statements of Operations
Year Ended December 31, --------------------------------- (Thousands of dollars, except per share data) 1993 1992 1991 - --------------------------------------------------------------------------------------- (Restated) (Restated) SALES OF GRAPHICS SUPPLIES & EQUIPMENT $116,788 $112,022 $97,339 Cost of sales 94,246 90,119 78,283 - --------------------------------------------------------------------------------------- GROSS MARGIN 22,542 21,903 19,056 SELLING AND ADMINISTRATIVE EXPENSES Graphics supplies & equipment 22,466 20,700 19,832 Corporate staff 2,124 2,161 2,006 RESTRUCTURE AND OTHER CHARGES 2,382 619 553 - --------------------------------------------------------------------------------------- LOSS FROM OPERATIONS (4,430) (1,577) (3,335) Interest expense (402) (546) (677) Other income-net 208 205 328 - --------------------------------------------------------------------------------------- LOSS BEFORE INCOME TAX BENEFIT (4,624) (1,918) (3,684) Income tax benefit 1,564 632 1,205 - --------------------------------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS (3,060) (1,286) (2,479) DISCONTINUED OPERATIONS: Operating results, net 1,278 2,238 1,300 Gain on sales, net 6,146 - --------------------------------------------------------------------------------------- INCOME FROM DISCONTINUED OPERATIONS 7,424 2,238 1,300 - --------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 4,364 $ 952 $(1,179) ======================================================================================= INCOME (LOSS) PER SHARE: LOSS FROM CONTINUING OPERATIONS $ (0.84) $ (0.37) $ (0.72) DISCONTINUED OPERATIONS: Operating results, net 0.35 0.64 0.38 Gain on sales, net 1.69 - --------------------------------------------------------------------------------------- INCOME FROM DISCONTINUED OPERATIONS 2.04 0.64 0.38 - --------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 1.20 $ 0.27 $ (0.34) =======================================================================================
See Notes to Consolidated Financial Statements Page 8 9 MOMENTUM CORPORATION AND SUBSIDIARY Consolidated Balance Sheets
December 31, -------------------- (Thousands of dollars) 1993 1992 - --------------------------------------------------------------------------- ASSETS (Restated) CURRENT ASSETS Short-term investments $ 6,123 $ --- Trade receivables, less reserves of $374 and $451 12,935 13,165 Current notes receivable 3,529 167 Income taxes receivable 2,537 1,178 Other receivables 1,840 1,653 Inventories 14,179 11,138 Net current assets of discontinued operations 9,457 Other 1,051 2,190 - --------------------------------------------------------------------------- TOTAL CURRENT ASSETS 42,194 38,948 PROPERTY AND EQUIPMENT, NET 7,140 7,317 NET NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS 3,555 OTHER ASSETS 3,096 1,796 - --------------------------------------------------------------------------- $52,430 $51,616 =========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank checks outstanding less cash in bank $ 1,925 $ 1,259 Accounts payable 8,454 7,581 Accrued liabilities 5,083 3,073 Current portion of long-term obligations 174 160 - --------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 15,636 12,073 LONG-TERM OBLIGATIONS 1,793 8,066 DEFERRED ITEMS 1,052 1,769 SHAREHOLDERS' EQUITY Preferred stock, $1 par value 1,000,000 shares authorized, none issued Common stock, $1 par value, 5,000,000 shares authorized, 3,558,903 and 3,434,334 issued 3,559 3,434 Additional paid-in capital 29,274 28,589 Retained earnings (deficit) 2,825 (1,539) Treasury shares, at cost, 101,393 shares (795) Unamortized restricted stock awards (301) (48) Note receivable from ESOP (613) (728) - --------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 33,949 29,708 - --------------------------------------------------------------------------- $52,430 $51,616 ===========================================================================
See Notes to Consolidated Financial Statements Page 9 10 MOMENTUM CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows
Year Ended December 31, -------------------------------------- (Thousands of dollars) 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES (Restated) (Restated) Loss from continuing operations $ (3,060) $ (1,286) $ (2,479) Adjustments to reconcile loss from continuing operations to cash provided (used) by operating activities: Depreciation and amortization 2,460 1,165 932 ESOP shares allocated 115 80 265 Change in assets and liabilities: Receivables (1,316) 922 2,280 Inventories (3,041) (928) 140 Other current assets 1,139 (876) 255 Accounts payable 873 1,714 (1,253) Accrued liabilities 2,010 479 (252) Deferred items (717) 236 334 - ---------------------------------------------------------------------------------------------------------- (1,537) 1,506 222 Income from discontinued operations 7,424 2,238 1,300 Gain on sale of discontinued operations (6,146) Adjustments to reconcile income from discontinued operations to cash provided (used) by operating activities (1,337) (2,035) 873 - ---------------------------------------------------------------------------------------------------------- CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,596) 1,709 2,395 INVESTING ACTIVITIES Additions to property and equipment (1,739) (758) (1,662) Proceeds from sale of discontinued operations, net of notes receivable 17,133 Net (additions) reductions of other assets (1,366) 1,284 (1,249) - ---------------------------------------------------------------------------------------------------------- CASH PROVIDED (USED) BY INVESTING ACTIVITIES 14,028 526 (2,911) FINANCING ACTIVITIES Proceeds from long-term obligations 56,500 72,500 89,353 Repayment of long-term obligations (62,759) (74,955) (88,843) Purchase of treasury shares (802) Proceeds from exercise of stock options 46 46 Proceeds from issuance of stock 40 20 6 - ---------------------------------------------------------------------------------------------------------- CASH PROVIDED (USED) BY FINANCING ACTIVITIES (6,975) (2,435) 562 - ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,457 (200) 46 Cash and cash equivalents at beginning of year (1,259) (1,059) (1,105) - ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 4,198 $ (1,259) $ (1,059) ========================================================================================================== Supplemental disclosures of cash flow information Cash paid (received) during the period for Interest $ 470 $ 791 $ 879 Income taxes 5,296 176 (777) ==========================================================================================================
See Notes to Consolidated Financial Statements Page 10 11 MOMENTUM CORPORATION AND SUBSIDIARY Consolidated Statements of Shareholders' Equity
Unamortized Note Common Additional Retained Restricted Receivable Stock Paid-in Earnings Treasury Stock From (Thousands of dollars) ($1 Par value) Capital (Deficit) Shares Awards ESOP Total - ------------------------------------------------------------------------------------------------------------------- Balance January 1, 1991 (1,135,771 shares) $ 1,136 $ 30,764 $ (1,312) $ ---- $(153) $(1,073) $29,362 Net loss (1,179) (1,179) Restricted stock awards (3,000 shares) 3 48 25 76 ESOP activity 265 265 Exercise of stock options (3,817 shares) 4 42 46 Issuance of stock (424 shares) 6 6 - ------------------------------------------------------------------------------------------------------------------- Balance December 31, 1991 (1,143,012 shares) 1,143 30,860 (2,491) (128) (808) 28,576 Net income 952 952 Restricted stock awards 80 80 ESOP activity 80 80 Issuance of stock (1,766 shares) 2 18 20 Additional shares issued in three-for-one stock split (2,289,556 shares) 2,289 (2,289) - ------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1992 (3,434,334 SHARES) 3,434 28,589 (1,539) (48) (728) 29,708 NET INCOME 4,364 4,364 PURCHASE TREASURY SHARES (802) (802) RESTRICTED STOCK AWARDS (107,190 SHARES) 107 617 7 (253) 478 ESOP ACTIVITY 115 115 EXERCISE OF STOCK OPTIONS (11,951 SHARES) 12 34 46 ISSUANCE OF STOCK (5,428 SHARES) 6 34 40 - ------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1993 (3,558,903 SHARES) $ 3,559 $29,274 $ 2,825 $(795) $(301) $ (613) $33,949 ===================================================================================================================
See Notes to Consolidated Financial Statements Page 11 12 MOMENTUM CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The accompanying consolidated financial statements include the accounts of Momentum Corporation (the Company/Momentum) and its wholly owned subsidiary, Momentum Graphics Inc. Material intercompany balances and transactions have been eliminated. DISCONTINUED OPERATIONS The consolidated financial statements for 1992 and prior have been restated to show the Textiles Group, VWR Textiles & Supplies Inc. and Momentum Textiles Inc., as discontinued operations. As further described in the following Notes to Consolidated Financial Statements, this group was sold in September, 1993. CASH AND CASH EQUIVALENTS For purposes of the cash flow statement, the Company considers investments which have an original maturity of three months or less to be cash equivalents. In addition, the Company's cash management system operates so that a cash overdraft for uncleared checks exists in the disbursing account. To the extent the outstanding balance for uncleared checks exceeds the cash balances, the net balance is reported as a current liability on the balance sheet and is included as cash and cash equivalents on the cash flow statement. SHORT-TERM INVESTMENTS The Company invests idle funds in short-term investments, with maturities of three months or less. The Company records these investments at cost which approximates market. All investments are in investment grade commercial paper. CAPITALIZATION, DEPRECIATION AND AMORTIZATION Property and equipment are recorded at cost. Expenditures for maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method for financial reporting purposes and, generally, using accelerated methods for income tax purposes. Capital leases are included under property and equipment with the corresponding amortization included in depreciation. The related financial obligations under the capital leases are included in long-term obligations. INCOME (LOSS) PER SHARE Income (loss) per share is based on the weighted average number of shares and dilutive common share equivalents outstanding during the year. Common stock equivalents related to stock options have not been considered in computing the loss per share for 1991 as the effect is antidilutive. The weighted average number of shares outstanding were 3,629,089, 3,492,568, and 3,422,310 for the years ended December 31, 1993, 1992 and 1991, respectively. Shares outstanding include shares held by the Momentum Employee Stock Ownership Plan. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk, as defined by Financial Accounting Standards Board Statement No. 105, are primarily accounts receivable. Concentrations of credit risk with respect to the receivables are limited due to the large number of customers in the Company's customer base, and their dispersion across different industries and geographic areas. The Company maintains an allowance for losses based upon the expected collectibility of all accounts receivable. RECLASSIFICATION Certain prior year amounts have been reclassified to conform with current year presentation. Page 12 13 INVENTORIES Inventories consist primarily of purchased goods for sale. Substantially all of the Company's inventories are valued at lower of cost or market using the last-in, first-out (LIFO) method of accounting. Inventories at current costs exceed those reported under the LIFO method by approximately $2.2 million at December 31, 1993 and $2.4 million at December 31, 1992. PROPERTY AND EQUIPMENT Net property and equipment at December 31 consisted of:
(Thousands of dollars) 1993 1992 - ----------------------------------------------------------------------------- (Restated) Land $ 243 $ 243 Buildings and equipment 7,676 6,452 Leased property under capital lease 2,750 2,750 Computer system software 3,788 3,788 - ----------------------------------------------------------------------------- 14,457 13,233 Less accumulated depreciation and amortization (7,317) (5,916) - ----------------------------------------------------------------------------- Net property and equipment $ 7,140 $ 7,317 =============================================================================
Page 13 14 LONG-TERM OBLIGATIONS AND REVOLVING CREDIT AGREEMENTS The long-term obligations of the Company at December 31 consisted of:
(Thousands of dollars) 1993 1992 - ------------------------------------------------------------------------------ (Restated) Revolving credit agreements $ --- $6,100 Capitalized lease obligation, 8.38% payable in installments through 2002 1,866 2,011 Other miscellaneous notes 101 115 - ------------------------------------------------------------------------------ 1,967 8,226 Less current portion (174) (160) - ------------------------------------------------------------------------------ Net long-term obligations $1,793 $8,066 ==============================================================================
Maturities of long-term obligations for each of the five years beginning January 1, 1994 are as follows:
Capitalized Other Lease Long-term (Thousands of dollars) Obligations Obligations - ------------------------------------------------------------------------------ 1994 $ 308 $ 17 1995 308 18 1996 308 20 1997 308 22 1998 308 24 Thereafter 1,076 - ------------------------------------------------------------------------------ 2,616 101 Less imputed interest on capitalized lease (750) - ------------------------------------------------------------------------------ $1,866 $ 101 ==============================================================================
The Company has two unsecured revolving credit agreements, with a total commitment of $17.5 million. Under the terms of these agreements, the Company can borrow under several options including rates tied to prime, certificate of deposit, and LIBOR. The approximate weighted average interest rates were 5.0%, 5.8% and 7.3% for 1993, 1992, and 1991, respectively. One of the revolving credit agreements provides for conversion of up to $5 million of the line into term loans with a maximum term period extending to March, 1997. Among other provisions, the revolving credit agreements include various limitations on working capital, tangible net worth, current ratio, debt to equity and cash flow to interest expense. Under the most restrictive of these terms, none of the Company's shareholders' equity would have been available for cash dividends in 1993. Under the terms of a March, 1990 agreement with the Company's former parent company, VWR Corporation (VWR), VWR is obligated through February, 1995 to make available to the Company an unsecured subordinated revolving line of credit of approximately $5 million. At December 31, 1993, the Company had no outstanding debt under this agreement. Under terms of its insurance policies and claims handling agreements, the Company is required to maintain certain standby letters of credit. At December 31, 1993 these totaled approximately $1,500,000. Page 14 15 INCOME TAXES Income tax benefit for the years ended December 31 consisted of:
(Thousands of dollars) 1993 1992 1991 - ------------------------------------------------------------------------------- Current: (Restated) (Restated) Federal $(1,421) $(645) $(1,420) State (60) (40) (30) - ------------------------------------------------------------------------------- (1,481) (685) (1,450) Deferred: Federal (79) 43 195 State (4) 10 50 - ------------------------------------------------------------------------------- (83) 53 245 - -------------------------------------------------------------------------------- Total income tax benefit $(1,564) $(632) $(1,205) ================================================================================
Reconciliation of the statutory Federal tax benefit to the actual tax benefit for the years ended December 31 consisted of:
(Thousands of dollars) 1993 1992 1991 - -------------------------------------------------------------------------------- (Restated) (Restated) Statutory rate 34% 34% 34% Statutory expense (benefit) $(1,572) $(652) $(1,253) State tax expense and other 8 20 48 - -------------------------------------------------------------------------------- Total income tax benefit $(1,564) $(632) $(1,205) ================================================================================
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets and liability at December 31, consisted of: (Thousands of dollars) 1993 1992 - -------------------------------------------------------------------------------- (Restated) Deferred tax assets Inventory adjustments $ 273 $ 241 Bad debt reserve 135 175 Insurance reserve accruals 87 134 Federal alternative minimum tax credit carryforward 255 Federal net operating loss carryforward 159 State net operating loss carryforward 87 Other 359 432 - -------------------------------------------------------------------------------- Total deferred tax assets 854 1,483 - -------------------------------------------------------------------------------- Deferred tax liability Tax depreciation in excess of financial 617 854 - -------------------------------------------------------------------------------- Net deferred tax assets $ 237 $ 629 ================================================================================
Page 15 16 PENSION AND OTHER EMPLOYEE BENEFITS PENSION PLANS The Company has a defined benefit pension plan (the Plan/pension plan) covering substantially all employees. Pension benefits are based on years of credited service and highest five consecutive years average compensation. Contributions to the Plan are based on funding standards established by the Employee Retirement Income Security Act of 1974 (ERISA). The Plan's funded status and the amounts recognized in the Company's consolidated balance sheet at December 31 were:
(Thousands of dollars) 1993 1993 - ------------------------------------------------------------------------------ Actuarial present value of plan benefit obligations Vested $13,945 $11,001 Non-vested 111 115 - ------------------------------------------------------------------------------ Accumulated benefit obligation 14,056 11,116 Effect of future salary increases 1,360 1,617 - ------------------------------------------------------------------------------ Projected benefit obligation 15,416 12,733 Plan assets at fair value 14,280 12,216 - ------------------------------------------------------------------------------ Projected benefit obligation in excess of plan assets (1,136) (517) Unrecognized net transition obligation 85 201 Unrecognized prior service cost (72) (170) Unrecognized actuarial loss 2,664 1,206 - ------------------------------------------------------------------------------ Net pension asset $ 1,541 $ 720 ==============================================================================
The assets of the Plan consist predominantly of undivided interests in several funds structured to duplicate the performance of various stock and bond indexes. The net pension asset is included in other current assets and other assets. The assumptions used for computing the net pension asset were: Discount rate 7.5% 8.75% Rate of increase in compensation levels 5.0% 5.0 %
Net pension expense for the years ended December 31 included the following components:
(Thousands of dollars) 1993 1992 1991 - ------------------------------------------------------------------------------ Service cost of benefits earned during the year $ 485 $ 476 $ 426 Interest cost on projected benefit obligation 1,119 1,013 961 Actual return on plan assets (1,490) (753) (1,970) Net amortization and deferral 308 (385) 1,096 - ------------------------------------------------------------------------------ Net Pension expense $ 422 $ 351 $ 513 ==============================================================================
Net pension expense includes pension expense applicable to discontinued operations of approximately $123,000, $88,000, and $117,000 for 1993, 1992, and 1991, respectively. In calculating the net pension expense, an expected long-term rate of return on plan assets of 10% was used for 1993, 1992, and 1991. The Company maintains a supplemental pension plan for certain senior officers. Expenses for this plan were $34,000, none, and $18,000 for 1993, 1992, and 1991, respectively. Page 16 17 RESTRICTED STOCK AWARDS Under the Company's 1989 Long-term Incentive Stock Plan, the Company provides for grants of restricted Company common stock to directors, officers and managers. The vesting periods on the stock range from two to four years. The fair market value of the stock at the date of grant establishes the compensation amount which is amortized to operations over the restricted period. During 1993, 107,190 shares were granted at a fair market value of $731,000. At December 31, 1993, the unamortized balance of the restricted stock awards was approximately $301,000, as shown in the shareholders' equity section of the consolidated balance sheets. STOCK OPTIONS Under stock option plans (vesting over one to ten years), options have been granted to certain officers and managers to purchase common stock of the Company at its fair market value at the date of grant. Changes in options outstanding for the three years ended December 31, 1993 are:
Shares Average Price - ------------------------------------------------------------------------------- Outstanding at January 1, 1991 153,222 $4.75 Exercised (11,451) 4.03 Cancelled (2,775) 4.67 - ------------------------------------------------------------------------------- Outstanding at December 31, 1991 138,996 4.81 - ------------------------------------------------------------------------------- Granted 108,000 4.50 - ------------------------------------------------------------------------------- Outstanding at December 31, 1992 246,996 4.68 - ------------------------------------------------------------------------------- Granted 47,073 6.75 Exercised (11,951) 3.84 Cancelled (86,913) 4.47 - ------------------------------------------------------------------------------- Outstanding at December 31, 1993 195,205 $5.32 ===============================================================================
Options exercisable at December 31, 1993, were 74,302. Under the Company's 1989 Long-term Incentive Stock Plan, approximately 223,000 shares of the Company's common stock has been reserved for issuance under various stock option and award plans. MOMENTUM MONEY-MAKER 401(K) RETIREMENT PLAN The Momentum Money-Maker 401(k) Retirement Plan (Money-Maker) is a voluntary savings plan available to all employees covered under the Company pension plan. Company matching contributions, if any, are determined by the Board of Directors based on the historical performance of the Company. The Company's expense for the Money-Maker was approximately $35,000, $56,000 and $122,000 for 1993, 1992, and 1991, respectively. MOMENTUM EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The ESOP was established in 1990 as a means to provide employees with increased ownership in the Company. All full time employees with one year of service are eligible to participate. Total shares to be allocated to the employees for each year is determined by the Board of Directors based on the performance of the Company, with a minimum contribution each year of 30 shares to each employee. The Company's expense for the ESOP, based on the shares allocated or to be allocated to the employees' accounts, was approximately $40,000, $37,000 and $47,000 in 1993, 1992, and 1991 respectively. The ESOP held 103,591 unallocated shares of the Company's common stock at December 31, 1993, including 6,770 shares earned in 1993 but not allocated until 1994. The ESOP acquired the Company's common stock by issuing a note to the Company. The balance of the note is shown as a reduction of shareholders' equity on the consolidated balance sheets. The repayment of the note and the accompanying interest is made by a contribution in the form of a forgiveness of the debt by the Company as the shares are allocated to the employees' accounts. Page 17 18 LEASES The Company leases various facilities and equipment under non-cancellable lease arrangements. The major leases are for terms of three to ten years. Renewal and purchase options are available on certain of these leases. Future minimum lease payments as of December 31, 1993 under non-cancellable operating leases, having initial lease terms of more than one year are:
Years Ending December 31, (Thousands of dollars) - ------------------------- 1994 $ 934 1995 720 1996 485 1997 268 1998 164 Thereafter 277 ------ 2,848 Less sublease income (128) ------ Total minimum lease payments $2,720 ======
Rent expense, net of non-cancellable sublease rentals, was approximately $1.1, $1.6 and $1.6 million for 1993, 1992, and 1991, respectively. RESTRUCTURE AND OTHER CHARGES The Company incurred restructure and other charges of $2,382,000, $619,000 and $553,000 for 1993, 1992 and 1991, respectively. For 1993, the expense includes (a) $1 million for the restructuring of the sales and marketing function, which is composed predominantly of employee severance and relocation costs; (b) $800,000 for the write-off of computer hardware; and (c) $582,000 for employee salaries and benefits applicable to positions which have been eliminated as a result of the divestiture of the Textiles Group. For 1992 and 1991, the expense represents the portion of the salaries and benefits applicable to positions which have been eliminated as a result of the divestiture of the Textiles Group. DISCONTINUED OPERATIONS In September 1993, the Company sold its Textiles Group composed of VWR Textiles & Supplies Inc. and Momentum Textiles Inc. The net proceeds on the sales were $20.5 million, including $3.4 million in short-term notes receivable. The consolidated financial statements show the Textiles Group as discontinued operations. Net sales of the Textiles Group were $60,511,000 for the period ended September 30, 1993 and $82,300,000 and $68,102,000 for the years 1992 and 1991, respectively. Interest expense, which included interest on debt assumed by the buyers and an allocation of interest on other debt based on the average net assets of the discontinued operations to the consolidated net assets, was $238,000, $356,000, and $198,000 for 1993, 1992, and 1991, respectively. Income tax expense for discontinued operations was $841,000 for the period ended September 30, 1993 and $1,439,000 and $799,000 for the years 1992 and 1991, respectively. Income tax expense on the gain on the sales was $3,913,000. Page 18 19 SUBSEQUENT EVENTS ACQUISITION On February 17, 1994, the Company signed an agreement in principle to acquire the assets of T.K. Gray, Inc. (Gray), a regional distributor of photographic and graphic arts supplies and equipment, for a purchase price in excess of $14 million, predominantly in cash. The acquisition, which is expected to be accounted for as a purchase, is subject to the execution of a definitive agreement, receipt of customary regulatory approval, and satisfactory completion of due diligence investigations. Completion of the acquisition is anticipated in April, 1994. COMBINATION On March 17, 1994, the Company signed an agreement in principle to form a new holding company and combine, in a tax-free reorganization, with Phillips & Jacobs, Incorporated (P&J), a national distributor of photographic and graphic arts supplies and equipment. P&J common stock is traded on the NASDAQ National Market System and is headquartered in Pennsauken, N.J. Under the agreement, each share of outstanding P & J common stock will be exchanged for one share of the new company. Each share of Momentum common stock will be exchanged for .71 shares of the new company. The combination is subject to the execution of a definitive agreement, the approval of the stockholders of both Momentum and P&J, satisfactory completion of due diligence investigations by both parties, receipt of customary regulatory approvals, and satisfaction of certain other standard conditions. QUARTERLY FINANCIAL DATA (UNAUDITED)
(Thousands of dollars First Second Third Fourth except per share data) Quarter Quarter Quarter Quarter Total ---------------------- --------- -------- -------- -------- -------- YEAR ENDED DECEMBER 31, 1993 Sales $ 30,003 $ 30,142 $ 28,256 $ 28,387 $116,788 Gross margin 5,713 5,938 5,533 5,358 22,542 Loss from continuing operations (450) (1,009) (937) (664) (3,060) Income from discontinued operations (1) 628 584 6,212 7,424 Net income (loss) 178 (425) 5,275 (664) 4,364 Income (loss) per share: Continuing operations (2) (0.12) (0.28) (0.26) (0.19) (0.84) Discontinued operations (1) 0.17 0.16 1.71 2.04 Net income (loss) (2) $ 0.05 $ (0.12) $ 1.45 $ (0.19) $ 1.20 YEAR ENDED DECEMBER 31, 1992 (RESTATED) Sales $ 26,879 $ 28,072 $ 28,489 $ 28,582 $112,022 Gross margin 5,358 5,504 5,369 5,672 21,903 Loss from continuing operations (362) (297) (289) (338) (1,286) Income from discontinued operations 451 451 671 665 2,238 Net income 89 154 382 327 952 Income (loss) per share: Continuing operations (0.10) (0.09) (0.08) (0.10) (0.37) Discontinued operations 0.13 0.13 0.19 0.19 .64 Net income (loss) $ 0.03 $ 0.04 $ 0.11 $ 0.09 $ 0.27
(1) Income from discontinued operations for the third quarter of 1993 includes the gain on the sales of the discontinued operations of $6,146,000 ($1.69 per share). (2) Due to changes in the outstanding shares during the year, the sum of the quarterly income (losses) per share for 1993 will not equal the loss per share for the year. Page 19 20 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Momentum Corporation We have audited the accompanying consolidated balance sheets of Momentum Corporation and subsidiary as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Momentum Corporation and subsidiary at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. BY (SIGNATURE) ERNST & YOUNG Seattle, Washington March 8, 1994 (except for the subsequent event note regarding combination, as to which the date is March 17, 1994) Page 20 21 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 Incorporated by reference from the definitive proxy statement to be filed with the Securities and Exchange Commission by April 30, 1994, except information regarding executive officers which appears under Part I. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from the Registrants' definitive proxy statement to be filed with the Securities and Exchange Commission by April 30, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference from the Registrants' definitive proxy statement to be filed with the Securities and Exchange Commission by April 30, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the Registrants' definitive proxy statement to be filed with the Securities and Exchange Commission by April 30, 1994. Page 21 22 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (a)(1) Financial Statements The following financial statements have been included as part of this report: Form 10-K Page ---- Consolidated Statements of Operations 8 Consolidated Balance Sheets 9 Consodated Statements of Cash Flows 10 Consolidated Statements of Shareholders' Equity 11 Notes to Consolidated Financial Statements 12 Report of Independent Auditors 20 (2) Financial Statement Schedule (a) The following financial statement schedules are submitted herewith: -Schedule I Marketable Securities - Other Investments -Schedule VIII Valuation of Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) Reports on Form 8-K No Forms 8-K were filed for the Registrant during the fourth quarter covered by this report. (c) Exhibits The required exhibits are included at the back of this Form 10-K and are described in the Exhibit Index immediately preceding the first exhibit. Page 22 23 MOMENTUM CORPORATION AND SUBSIDIARY SCHEDULE I -- MARKETABLE SECURITIES
Carried on Market Consolidated Description (Thousands of dollars) Par Cost Value Balance Sheet - -------------------------------------------------------------------------------------------------------------------- Fred Meyer Inc. Commercial Paper (maturity 1/3/94) $ 704 $ 702 $ 702 $ 702 Fred Meyer Inc. Commercial Paper (maturity 1/10/94) $5,442 $5,421 $5,421 5,421
SCHEDULE VIII -- VALUATION OF QUALIFYING ACCOUNTS
Balance Charged Balance at to Costs at Beginning and end Description (Thousands of dollars) of Year Expenses Deductions (1) Year - -------------------------------------------------------------------------------------------------------------------- Allowances for Losses (Deducted from Trade Receivables) for: YEAR ENDED DECEMBER 31, 1993 $ 451 $ 195 $ 272 374 ====== ====== ====== ====== Year Ended December 31, 1992 361 300 210 451 ====== ====== ====== ====== Year Ended December 31, 1991 730 401 770 361 ====== ====== ====== ======
(1) Uncollectible accounts written-off, net of recoveries Page 23 24 MOMENTUM CORPORATION AND SUBSIDIARY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MOMENTUM CORPORATION AND SUBSIDIARY Date March 29, 1994 BY (SIGNATURE) John H. Goddard, Jr. President Chief Executive Officer (principal executive officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the behalf of the registrant and in the capacities and on the dates indicated. Date March 29, 1994 BY (SIGNATURE) Patsy R. Turnipseed Senior Vice President Chief Financial Officer (principal financial and accounting officer) DIRECTORS Richard E. Engebrecht } John C. Dimmer } John H. Goddard } Jerrold B. Harris } Gary MacLeod } BY (SIGNATURE} Andrew V. Smith } Patsy R. Turnipseed William K. Street } Attorney in fact James H. Wiborg } Power of Attorney dated February 22, 1994 Date: March 29, 1994 Page 24 25 EXHIBIT INDEX EXHIBIT NUMBER AND DESCRIPTION Exhibits identified in parenthesis below, on file with the Securities and Exchange Commission, are incorporated herein by reference as exhibits hereto. (2.1) Form of Agreement and Plan of Distribution executed by and between Registrant and VWR Corporation (filed with General Form for Registration of Securities on Form 10 filed November 13, 1989 and including Amendment #1 on Form 8 filed December 6, 1989; Amendment #2 on Form 8 filed January 19, 1990; Amendment #3 on Form 8 filed February 9, 1990; and Amendment #4 on Form 8 filed March 2, 1990) (2.2) Asset Purchase Agreement, dated April 1, 1992, for the purchase of substantially all of the assets of Petco Inc. (filed as exhibit 2(i) to Form 8-K dated April 15, 1992, File No. 0-18112) (2.3) Stock Purchase Agreement, dated September 1, 1993, for the sale of the stock of VWR Textiles & Supplies Inc., a wholly-owned subsidiary, to Hanes Companies (filed as exhibit 2 to Form 8-K dated September 15, 1993, File No. 0-18112) (2.4) Stock Acquisition Agreement, dated September 30, 1993, for the sale of the stock of Momentum Textiles Inc., a wholly-owned subsidiary, to Textile Acquisition Inc.(filed as exhibit 2 to Form 8-K dated October 15, 1993, File No. 0-18112) (3.2) Bylaws as amended June 4, 1991 (filed as exhibit 3.2 to Form 10-K, File No. 0-18112, dated March 29, 1992) (3.3) Restated Certificate of Incorporation (filed as exhibit 3.3 to Form 10-K, File No. 0-18112, dated March 28, 1991) (3.4) Amendment of Articles of Incorporation For Change in Registrants Name (filed as exhibit 3 to Form 10-Q, File No. 0-18112, dated November 15, 1993) (10.1) Agreement and Plan of Distribution (see Exhibit 2.1) (10.2) Momentum Distribution Inc. Money-Maker Investment and Stock Ownership Plan as amended through March 1, 1992 (filed as exhibit 10.2 to Form 10-K, File No. 0-18112, dated March 29, 1992) * (10.3) Momentum Distribution Inc. 1989 Employees' Stock Purchase Plan (filed with Registration Statement on Form S-8, File No. 33-34392)* (10.4) Momentum Distribution Inc. 1989 Long-term Incentive Stock Plan as amended June 4, 1991 (filed with Registration Statement on Form S-8, File No. 33-43920)* (10.5) Momentum Distribution Inc. Retirement Plan as amended through March 1, 1992 (filed as exhibit 10.5 to Form 10-K, File No. 0-18112, dated March 29, 1992)* (10.6) Momentum Distribution Inc. Supplemental Benefits Plan effective January 1, 1990 (filed as exhibit 10.6 to Form 10-K, File No. 0-18112, dated March 28, 1991)* (10.7) Momentum Distribution Inc. Executive Bonus Plan, dated March 1, 1990 (filed as exhibit 10.7 to Form 10-K, File No. 0-18112, dated March 28, 1991)* (10.8) Consulting Services Agreement between Momentum Distribution Inc. and Mr. James H. Wiborg dated January 1, 1990 (filed as exhibit 10.8 to Form 10-K, File No. 0-18112, dated March 28, 1991)* (10.9) Amended and Restated Agreement relating to compensation in the event of a change in control of Momentum Distribution Inc. between Momentum Distribution Inc. and Richard E. Engebrecht, Patsy R. Turnipseed, John H.Goddard, Jr., Sanford L. Van Dyke and John B. Wilkinson, effective February 26, 1990 (filed as exhibit 10.9 to Form 10-K, File No. 0-18112, dated March 28, 1991)* (10.10) Amendment to Exhibit 10.8, Consulting Services Agreement (filed as exhibit 10.10 to Form 10-K, File No. 0-18112, dated March 29, 1992)* (10.12) Momentum Distribution Inc. Revised and Restated Employee Stock Ownership Plan and Trust effective January 1, 1992 (filed as exhibit 10.12 to Form 10-K, File No. 0-18112, dated March 30, 1993)* (10.13) Restated Momentum Distribution Inc. Supplemental Benefits Plan, effective April 22, 1991 (filed as exhibit 10.13 to Form 10-K, File No. 0-18112, dated March 30, 1993)* (10.14) Amendment to Exhibit 10.9, Amended and Restated Agreement relating to compensation in the event of a change in control of Momentum Distribution Inc. between Momentum Distribution Inc. and John H.Goddard, Jr., Sanford L. Van Dyke, Patsy R. Turnipseed, and John B. Wilkinson, executed December 11, 1992 (filed as exhibit 10.14 to Form 10-K, File No. 0-18112, dated March 30, 1993)* (10.15) Amendment to Exhibit 10.5, Momentum Distribution Inc. Retirement Plan, effective January 1, 1992 (filed as exhibit 10.15 to Form 10-K, File No. 0-18112, dated March 30, 1993)* (10.16) Momentum Money-Maker 401(k) Retirement Plan and Trust as Amended and Restated January 1, 1992 (filed as exhibit 10.16 to Form 10-K, File No. 0-18112, dated March 30, 1993)* (10.17) Momentum Graphics Bonus Plan, effective January 1, 1992 (filed as exhibit 10.17 to Form 10-K, File No. 0-18112, dated March 30, 1993)* Page 25
26 (10.18) Momentum Textiles Profit Sharing Plan, effective January 1, 1992 (filed as exhibit 10.18 to Form 10-K, File No. 0-18112, dated March 30, 1993)* (10.19) Employment Agreement between Momentum Distribution Inc. and Mr. Richard E. Engebrecht dated December 9, 1992 (filed as exhibit 10.19 to Form 10-K, File No. 0-18112, dated March 30, 1993)* 10.20 1993 Momentum Corporation 1993 Executive Incentive Plan* 11 Computation of Per Share Income (Loss) 21 Parents and Subsidiary of the Registrant 23 Consent of Independent Auditors 24 Power of Attorney 99 Undertakings
* Management contracts and/or compensatory plans, contracts or arrangements in which a director and/or an executive officer participates. Page 26 EX-10.20 2 EXHIBIT 10.20 1 EXHIBIT 10.20 MOMENTUM CORPORATION 1993 EXECUTIVE INCENTIVE PLAN 1. EFFECTIVE DATE. The effective date of the Momentum Corporation Executive Incentive Plan ("Plan") is January 1, 1993. 2. PURPOSES. The purposes of this Plan are (a) to attract and retain in the employ of Momentum Corporation (the "Company") persons of outstanding competence who are or will be primarily responsible for the management, growth and success of the business; (b) to provide greater incentive for such persons to exert their best efforts on behalf of the Company; and (c) to further the identity of interests of such persons with those of the Company's stockholders generally by encouraging them to acquire stock ownership in the Company. 3. PARTICIPANTS. The participants in this Plan shall be selected officers and key employees of the Company as designated from time-to-time by the Compensation Committee of the Board of Directors of the Company (the "Compensation Committee"). 4. ADMINISTRATION. The Plan shall be administered by the Vice President, Administration or such other officer of the Company as the CEO of the Company shall designate. Questions of interpretation shall be decided by a committee consisting of the Company's CEO, CFO and General Counsel. Any question that they choose not to answer due to a substantial conflict of interest or for any other reason shall be referred to the Compensation Committee. Any decision by the Compensation Committee shall be final and binding. 5. STRUCTURE OF PLAN. The Plan shall consist of a cash short-term incentive component and an equity-based long-term incentive component, the latter with 3-year performance periods and based on stock options to create equity ownership. All stock options shall be granted under the Company's 1989 Long-Term Incentive Stock Plan or its successor. The performance targets shall be set by the Compensation Committee and shall be linked to strategic business goals and key milestones which benefit all stockholders of the Company. 6. SHORT-TERM INCENTIVE OPPORTUNITY. Participants designated by the Board shall have an annual short-term incentive target equal to a designated percentage of the midpoint of their individual salary grade. Target percentages in the Executive Bonus Plan are no longer applicable and specific percentage targets shall be set by the Compensation Committee for each individual participant. This short-term incentive opportunity shall be made pursuant to the Company's existing Executive Bonus Plan but with the folllowing modifications: 2
% of Success % of Salary Grade Ratio Achieved Paid Out -------------- -------- Maximum Payout 130% 150% Target Payout 100% 100% Threshold Payout 60% 25%
All payouts will be in cash only. 7. LONG-TERM INCENTIVE OPPORTUNITY. Designated participants shall have 3-year targets established equal to a percentage of the midpoint of their salary grade multiplied by three. Seventy-five percent (75%) of the target payout for this long-term incentive shall be based on to the projected gain on the stock options granted or to be granted hereunder and twenty-five percent (25%) shall be payable in cash from the performance unit plan. The primary function of the cash component (performance unit plan) is to help pay the income tax on any option gains. The performance unit plan is based upon achieving at least 6% annual, internal growth in revenues with a target payout at 10% annual growth. The affect of any acquisition on revenue growth shall be disregarded. The performance unit plan is described in MCG pages numbered 19-21 attached as Exhibit A and the payout formula is the same as the short-term incentive formula in paragraph 6 above unless set otherwise by the Compensation Committee. The terms of the stock options will be set by the Compensation Committee, but generally they will be nonqualified options with a 10-year duration and which will vest (become exercisable) at the end of the applicable 3-year period (i.e. January 1, 1996 in the case of the first grants). For each 3-year period, forty percent (40%) of the stock options to be potentially granted (at target) shall be granted at the beginning of the 3-year period, with additional options to be granted at the end of the first, second and third years. The granting of additional options at year end shall be dependent on the book value of the Company's stock increasing 13.3% or more from the beginning of the year to the end of the year. This methodology is set out on MCG pages numbered 15-18 attached as Exhibit B. 8. MISCELLANEOUS. No participation or award hereunder will be construed to be a contract for continued employment and each officer of the Company serves at the pleasure of the Board of Directors. 9. AMENDMENTS. The Board of Directors reserves the right to modify this Plan from time to time or to repeal the Plan entirely, or to direct the discontinuance of granting awards either temporarily or permanently; provided, however, that no modification of this Plan shall operate to annul, without the consent of the optionee, a stock option already granted hereunder. Dated as of the 26th day of August, 1993. MOMENTUM CORPORATION By ________________________________ President Attest: ___________________________________ Corporate Secretary EX-11 3 EXHIBIT 11 1 EXHIBIT 11 COMPUTATION OF PER SHARE INCOME (LOSS)
Year Ended December 31, ----------------------------------- (Thousands of dollars, except per share data) 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------- PRIMARY Average shares outstanding 3,540 3,433 3,422 Net effect of dilutive stock options- based on the treasury stock method using average market price 89 60 ----------------------------------- Total 3,629 3,493 3,422 ----------------------------------- Loss from continuing operations $ (3,060) $ (1,286) $ (2,479) ----------------------------------- Per share amount $ (0.84) $ (0.37) $ (0.72) =================================== Income from operating results of discontinued operations $ 1,278 $ 2,238 $1,300 ----------------------------------- Per share amount $ 0.35 $ 0.64 $ 0.38 =================================== Gain on sale of discontinued operations $ 6,146 $ -- $ -- ----------------------------------- Per share amount $ 1.69 $ -- $ -- =================================== Net income (loss) $ 4,364 $ 952 $ (1,179) ----------------------------------- Per share amount $ 1.20 $ 0.27 $ 0.34 ===================================
Page 27 EX-21 4 EXHIBIT 21 1 EXHIBIT 21 PARENTS & SUBSIDIARIES OF THE REGISTRANT There is no parent of the registrant. Wholly owned subsidiaries are: Momentum Graphics Inc. VWR Textiles & Supplies Inc. (Through date of sale, September 1, 1993) Momentum Textiles Inc. (Through date of sale, September 30, 1993) Page 28 EX-23 5 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF ERNST & YOUNG INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-34391) pertaining to the Momentum Corporation Money-Maker Investment and Stock Ownership Plan dated April 13, 1990, (Form S-8 No. 33-34392) pertaining to the Momentum Distribution Inc. 1989 Employees' Stock Purchase Plan dated April 16, 1990, and (Forms S-8 No.'s 33-34393 and 33-43920) pertaining to the Momentum Distribution Inc. 1989 Long-term Incentive Stock Plan dated April 16, 1992 and June 4, 1991 of our report dated March 8, 1994 (Except for the subsequent event note regarding combination, as to which the date is March 17, 1994), with respect to the consolidated financial statements and schedules of Momentum Corporation included in the Annual Report (Form 10-K) for the year ended December 31, 1993. BY (SIGNATURE) ERNST & YOUNG Seattle, Washington March 25 1994 Page 29 EX-24 6 EXHIBIT 24 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Patsy R. Turnipseed their attorney-in-fact, for them in any and all capacities, to sign the Annual Report on Form 10-K of Momentum Corporation for the year ended December 31, 1993, and to file same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or her substitute or substitutes, may do or cause to be done by virtue hereof.
Signature Title Date ----------------------------------------------------------------------- BY (SIGNATURE) Richard E. Engebrecht Director February 22, 1994 BY (SIGNATURE) John C. Dimmer Director February 22, 1994 BY (SIGNATURE) John H. Goddard, Jr. Director February 22, 1994 BY (SIGNATURE) Jerrold B. Harris Director February 22, 1994 BY (SIGNATURE) Gary MacLeod Director February 22, 1994 BY (SIGNATURE) Andrew V. Smith Director February 22, 1994 BY (SIGNATURE) William K. Street Director February 22, 1994 BY (SIGNATURE) James H. Wiborg Director February 22, 1994
Page 30 EX-99 7 EXHIBIT 99 1 EXHIBIT 99 TO BE INCORPORATED BY REFERENCE INTO FORM S-8 REGISTRATION STATEMENTS NO. 33-34391, 33-34392, 33-34393 AND 33-43920. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represents a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Filings incorporating subsequent Exchange Act documents by reference. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (f) Employee plans on Form S-8. (1) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus to each employee to whom the prospectus is sent or given a copy of the registrant's annual report to stockholders for its last fiscal year, unless such employee otherwise has received a copy of such report, in which case the registrant shall state in the prospectus that it will promptly furnish, without charge, a copy of such report on written request of the employee. If the last fiscal year of the registrant has ended within 120 days prior to the use of the prospectus, the annual report of the registrant for the preceding fiscal year may be so delivered, but within such 120 days period the annual report for the last fiscal year will be furnished to each such employee. (2) The undersigned registrant hereby undertakes to transmit or cause to be transmitted to all employees participating in the plan who do not otherwise receive such material as stockholders of the registrant, at the time and in the manner such material is sent to its stockholders, copies of all reports, proxy statements and other communications distributed to its stockholders generally. (3) Where interests in a plan are registered herewith, the undersigned registrant and plan hereby undertake to transmit or cause to be transmitted promptly, without charge, to any participant in the plan who makes a written request, a copy of the then latest annual report of the plan filed pursuant to section 15(d) of the Securities Exchange Act of 1934 (Form 11-K). If such report is filed as part of the registrant's annual report on Form 10-K, that entire report (excluding exhibits) shall be delivered upon written request. If such report is filed as part of the registrant's annual report to stockholders delivered pursuant to paragraph (1) or (2) of this undertaking, additional delivery shall not be required. Page 31 2 (i) Acceleration of effectiveness. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other that the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Page 32 -----END PRIVACY-ENHANCED MESSAGE-----