-----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, kH3+kveAEiL6o6EzJog6b5n2L/1v5Yd1k/BNyxFaTZNrJK9kWLyTKtlrku+fM7q8 n9eo3b0RiR++TLjxhaD0gQ== 0000912057-95-000998.txt : 19950301 0000912057-95-000998.hdr.sgml : 19950301 ACCESSION NUMBER: 0000912057-95-000998 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950227 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BINKS MANUFACTURING CO CENTRAL INDEX KEY: 0000012180 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 360808480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-01416 FILM NUMBER: 95515479 BUSINESS ADDRESS: STREET 1: 9201 W BELMONT AVE CITY: FRANKLIN PARK STATE: IL ZIP: 60131 BUSINESS PHONE: 7086713000 MAIL ADDRESS: STREET 1: 9201 WEST BELMONT AVENUE CITY: FRANKLIN PARK STATE: IL ZIP: 60131 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1994 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 1--1416 BINKS MANUFACTURING COMPANY (Exact name of registrant as specified in its charter) DELAWARE 36-0808480 (State of incorporation) (I.R.S. Employer Identification No.) 9201 WEST BELMONT AVENUE 60131 FRANKLIN PARK, ILLINOIS (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: ( 708) 671-3000 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Capital Stock, $1.00 American Stock Exchange par value per share Chicago Stock Exchange Capital Stock American Stock Exchange Purchase Rights Chicago Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --------- -------- Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/ -- The aggregate market value of the voting stock of the Registrant held by non-affiliates was approximately $51,866,000 as of February 17, 1995. For purposes of the foregoing statement only, directors and officers of the Registrant have been assumed to be affiliates. As of November 30, 1994, the Registrant had outstanding 3,088,837 shares of Capital Stock. DOCUMENTS INCORPORATED BY REFERENCE Selected portions of the definitive Proxy Incorporated into Part III Statement for the Registrant's Annual Meeting of Stockholders to be held on April 25, 1995. PART I Item 1. BUSINESS The Registrant, a Delaware corporation incorporated on January 2, 1929, and its subsidiaries (hereinafter referred to collectively as the "Company") are engaged in the manufacture and sale of spray finishing and coating application equipment, of which the most important component is the spray gun and nozzle. For marketing purposes the Company divides its products into two general groups: standard equipment and industrial equipment. Standard equipment includes over fifty different models of spray guns, a wide variety of air and fluid nozzles, a complete line of high and low pressure material handling pumps, pressure tanks ranging in capacity from two to sixty gallons, portable and stationary air compressors, replacement parts for these components, and accessories such as siphon cups, pressure cups, oil and water extractors, air and fluid regulators, ball valves, hose connections and fittings, air and fluid hoses, and paint heaters. Industrial equipment includes spray booths, paint circulating systems, air replacement systems, automatic spray coating machines, electrocoating systems, electrostatic rotating atomizers, and spray painting robots. Many industrial equipment installations are custom designed and engineered by the Company to satisfy the specific needs of its customers and include various standard and industrial equipment items as components. The spray finishing and coating application equipment comprises complete systems as well as components for the following seven basic coatings application methods: (1) "Compressed Air Atomization," a conventional method employing compressed air in the spray gun to atomize, disperse and deposit coating materials; (2) "Airless Spraying," a high speed spray method in which hydraulic pressure developed by a material handling pump is used to atomize the coating material by pumping it at high pressure through the nozzle of the airless spray gun; (3) "High Volume Low Pressure (HVLP)," an offshoot of the conventional air spray method, HVLP utilizes larger than normal volumes of air delivered at lower pressures to produce quality finishes while complying with certain environmental regulations governing the amounts of volatile organic compounds emitted to the atmosphere; (4) "Electrostatic Spraying," a method which combines atomization of the coating material by one of the methods described in items (1) and (2) above with delivery of an electrical charge of the coating as it leaves the spray gun, thereby attracting it to a grounded product in much the same way as iron filings are attracted to a magnet; (5) "Powder Spraying," a recently developed method of applying a coating material in powder form, with delivery of an electrical charge to the coating as it leaves the spray gun as with Electrostatic Spraying, and then hardening the coating through the application of heat; (6) "Plural Component Spraying," the method used to apply plural component materials such as polyurethane foams, polyesters, gelcoats, epoxies and elastomers, and requiring special equipment for precise metering, mixing and dispensing of the resins, catalysts and accelerators which create such plural component materials; and (7) "Electrocoating," a process in which the product to be coated is immersed in and conveyed through a tank filled with water-suspended paint which is deposited by an electric current on all exposed surfaces of the product, including surfaces which cannot be reached by other methods. The Company is continually engaged in experimental work on various other coating systems. The Company spent approximately $4,265,000, $4,837,000 and $4,244,000 during the fiscal years ended November 30, 1994, 1993, and 1992, respectively, on research activities relating to the development of existing products or services, none of which was customer sponsored. Such research activities are conducted primarily by a wholly-owned subsidiary, Binks Research & Development Corporation, and by the Company's staff of engineers. Sames S.A., a French based wholly-owned subsidiary of the Company that was acquired on November 4, 1987, independently engages in research activities and spent approximately $2,982,000 on such activities during its last fiscal year. The Company markets its standard equipment in the United States through approximately thirteen branch offices, nine of which have warehouse facilities, and ap- 2 proximately twenty-five sales offices strategically located throughout the coun- try. In addition, the Company distributes its standard equipment through numerous jobbers and dealers serving the industrial finish, refinish, mainte- nance painting, and painting contractor markets throughout the United States and Canada. The Company also manufactures special equipment for applications not requiring a high-quality finish. Although some industrial equipment systems are sold through jobbers, in most instances where the contract is in excess of $500,000 the Company deals directly with customers, usually industrial or manufacturing concerns, in the engineering and erection of major installations, particularly those which require highly specialized knowledge and experience. The following table shows the percent of total revenues of the Registrant and its consolidated subsidiaries for each of the last three fiscal years contributed by its two primary product lines: standard equipment and industrial equipment. None of the other product lines of the Registrant accounted for more than 10% of its total sales and revenues in any of the last three fiscal years. Year Ended Standard Industrial November 30 Equipment Equipment ----------- --------- ---------- 1992 47.0% 53.0% 1993 46.5% 53.5% 1994 43.2% 56.8% The Company's products are sold in Europe, Asia, Africa, Latin America and the Commonwealth Countries by the Registrant and its foreign subsidiaries. Financial information regarding revenue, operating profit and loss and identifiable assets attributable to each of the Registrant's geographic areas and information regarding export sales is contained in the Notes to Consolidated Financial Statements set forth in Part II of this report. The Company believes that it is the largest manufacturer of a broad line of spray finishing and coating application equipment. There are many other manufacturers of coating application equipment who also 3 engage in other lines of business, principally Graco Incorporated, Illinois Tool Works and Nordson Corporation. The Company also competes in the United States with foreign manufactured products which up to this time have been unsuccessful in obtaining a significant share of the available market. As of November 30, 1994, approximately 1,682 persons were employed by the Company in the United States, Canada, England, Australia, Sweden, France, Belgium, Italy, Germany and Japan. The amount of business conducted with particular customers varies significantly from year to year. Sales to the automotive industry as a whole (which includes several different manufacturers as well as different divisions or facilities within some manufacturers) generally have accounted for between 10% and 15% of the Registrant's consolidated net sales in past years. The dollar amount of the Registrant's backlog of orders believed to be firm as of November 30, 1994 was approximately $33,586,000 as compared to approximately $46,249,000 as of November 30, 1993. All of the orders in backlog as of November 30, 1994 are expected to be filled within the current fiscal year. The dollar amount of backlog at any given time is subject to significant variations depending upon the number of orders received and the degree of completion of pending industrial equipment products which, by their nature, are completed over a period of time pursuant to sizeable contracts. The difference in backlog between November 30, 1994 and November 30, 1993 is attributable to these factors. The business of the Registrant is not materially affected by seasonal factors, and the Registrant's backlog is not generally a result of such factors. The Company purchases its requirements of aluminum, brass and steel in the form of bar stock, rolls, tubing and sheeting as well as in the form of castings and forgings which are manufactured by suppliers, for the most part from Company-owned dies and patterns. The Company also purchases certain components which it incorporates into its finished products such as electric motors, gasoline engines, switches and gauges. The materials and components purchased by the Company are readily available from a number of suppliers. 4 The Company owns a number of United States and foreign patents pertaining to spray equipment, components, control and memory devices, pumps and valves, as well as presently pending applications for patents in the United States and foreign countries. The Company does not consider its business to be materially dependent on any single patent or group of patents, or any pending applications for patents. The Company has registered its trademark "Binks" in the United States and thirty-two foreign countries and has registered eleven additional trademarks in the United States. Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not materially affected the Company's capital expenditures, earnings or competitive position. Item 2. PROPERTIES The Company owns its plant and general offices in Franklin Park, Illinois which comprise 614,500 square feet of which 554,500 square feet are used for manufacturing and 60,000 square feet for office space. The Company owns its branch office and warehouse in Franklin Park, Illinois (situated in the premises described above), a branch office and warehouse in Dallas, Texas comprising approximately 25,000 square feet, a branch office and warehouse in Atlanta, Georgia comprising approximately 23,376 square feet and the building and land used by the Company's Poly-Craft Systems Division in Cottage Grove, Oregon comprising approximately 24,000 square feet. The Company's Poly-Craft Systems Division sold an office and warehouse facility in Burbank, California comprising approximately 13,700 square feet in December, 1994 after construction of its facility in Cottage Grove, Oregon was completed. The Company's branch and sales offices operate from 35 other locations in the United States, fifteen of which are leased premises and nine of which include warehousing space. An aggregate of approximately 160,000 square feet is leased at such locations. The Company does not regard any such leased premises to be material. 5 The Registrant's foreign subsidiaries own and occupy manufacturing and office facilities aggregating approximately 250,000 square feet and lease property for such purposes aggregating approximately 130,000 square feet. The Company considers its plants and physical properties to be in good condition. Item 3. LEGAL PROCEEDINGS In a case captioned CONTINENTAL PARTNERS GROUP, INC. V. BINKS MANUFACTURING CO., No. 91 L 17815, filed on November 5, 1991 in the Circuit Court of Cook County, Illinois (the "Action"), Continental Partners Group, Inc. ("Continental") seeks recovery from the Company of $902,700 which Continental alleges is due under the terms of a contract between Continental and the Company dated February 20, 1990. The Action also seeks interest and costs. The Company has filed an answer in the Action, denying any liability to Continental under the contract alleged, and asserting that the contract with Continental was terminated by the Company without further liability to Continental. The claims in the Action are being vigorously contested by the Company and the Company believes that it has meritorious defenses to such claims. On July 2, 1993, a judgment was entered against the Company in a civil action instituted by Graco, Inc., GRACO, INC. V. BINKS MANUFACTURING COMPANY, No. 93-1494, in the United States District Court in Houston, Texas, alleging infringement of a U.S. Patent held by Graco. The judgment provides for a total award of $2.75 million against the Company. This total consists of $433,000 in actual damages, which were trebled to $1,299,000; $525,000 awarded for plaintiff's legal fees, $150,000 awarded for plaintiff's expenses, and pre- judgment interest of approximately $779,000. The Company has appealed the judg- ment and oral arguments were held in April of 1994. No decision has been rendered on the appeal. The amount of any potential liability is uncertain and the Company believes that there are meritorious arguments in its appeal. Thus, no provision for any liability has been made in the financial statements. 6 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the period covered by this report. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Registrant are listed below. BURKE B. ROCHE, age 81, has been an officer of the Registrant since 1947, and since 1949, he has been President and Chief Executive Officer of the Registrant. DORAN J. UNSCHULD, age 71, has been an officer of the Registrant since 1965. He is presently Vice President and Secretary of the Registrant. WILLIAM W. ROCHE, age 69, became an officer of the Registrant in 1952. During 1994, he served as Assistant Secretary and Assistant Treasurer of the Registrant. STEPHEN R. KENNEDY, age 61, has been an officer of the Registrant since 1971 and is presently Assistant Secretary and Assistant Treasurer of the Registrant. ERNEST F. WATTS, age 57, has been an officer of the Registrant since 1980 and is presently Vice President of the Registrant. JEFFREY W. LEMAJEUR, age 33, has been an officer of the Registrant since 1992 and is presently Treasurer of the Registrant. - ------------------------ Notes: 1. All officers' terms expire in 1995. 2. Stephen R. Kennedy is married to the niece of Messrs. Burke B. and William W. Roche. Ernest F. 7 Watts is the nephew of Messrs. Burke B. and William W. Roche. There are no other family relationships among the executive officers of the Registrant. 3. Each of the foregoing officers has been employed by the Registrant for more than five years except for Jeffrey W. Lemajeur, who has been an employee of the Registrant since October of 1991. Prior to his employ- ment with the Registrant, Mr. Lemajeur was employed from March 1990 to October 1991 by Reuters Holdings PLC, of Chicago, Illinois, in the capacity of Finance and Administration Manager. At Reuters, Mr. Lemajeur was in charge of operational accounting and internal financial reporting for Reuters' Midwest Region and supervised twenty employees. From December of 1987 until March of 1990, Mr. Lemajeur served as the Accounting Manager for Lane Industries in Northbrook, Illinois. There, he was responsible for operational accounting and both internal and external financial reporting. 8 PART II Item 5. MARKET FOR THE REGISTRANT'S CAPITAL STOCK AND RELATED SECURITY HOLDER MATTERS The Company's capital stock is traded on the American and Chicago Stock Exchanges. The high and low prices for each quarterly period within the two most recent fiscal years, as reported by such exchanges, and the dividends declared during such periods with respect to the capital stock of the Company are as follows:
Cash (Stock) Dividend Quarter Ending High(1) Low(1) Declared ----------------- ------ -------- Per Share(1) --------- February 28, 1993 25 13/16 21 19/64 .238 May 31, 1993 26 11/64 23 17/32 (3%) August 31, 1993 23 3/4 21 1/8 (2%) November 30, 1993 23 5/8 22 .125 February 28, 1994 23 1/2 21 7/8 .10 May 31, 1994 23 1/4 21 1/4 .10 August 31, 1994 22 1/4 19 1/2 - November 30, 1994 22 5/8 19 3/8 .10
As of November 30, 1994, there were approximately 1371 registered holders of the Company's capital stock, which is the only class of equity securities of the Company outstanding. Effective January 17, 1994, Harris Trust and Savings Bank, Chicago, Illinois replaced NBD Bank, N.A., as the transfer agent and registrar of the Company's capital stock. - ----------------------- (1) All figures are adjusted to reflect the three percent stock dividend paid on June 22, 1993 and the two percent stock dividend paid on August 2, 1993. 9 ITEM 6. SELECTED FINANCIAL DATA BINKS MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES Five years ended November 30, 1994 (not covered by Independent Auditors' Report)
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED NOVEMBER 30 ------------------------------------------------------------------------- 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------- Net sales $ 243,599,000 210,405,000 223,680,000 222,171,000 279,297,000 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Earnings before cumulative effects of changes in accounting principles 3,415,000 1,331,000 1,414,000 1,214,000 5,786,000 Cumulative effect to December 1, 1991 of change in accounting for income taxes - - 195,000(b) - - Cumulative effect to December 1, 1989 of changing overhead recorded in inventory - - - - 930,000(a) - ------------------------------------------------------------------------------------------------------------------------- Net earnings $ 3,415,000 1,331,000 1,609,000 1,214,000 6,716,000 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Earnings per share before cumulative effects of changes in accounting principles 1.11 .44 .48 .41 1.97 Cumulative effect to December 1, 1991 of change in accounting for income taxes - - .07(b) - - Cumulative effect to December 1, 1989 of changing overhead recorded in inventory - - - - .31(a) - ------------------------------------------------------------------------------------------------------------------------- Net earnings per share $ 1.11 .44 .55 .41 2.28 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Cash dividends per share $ .30 .36 1.00 1.10 1.15 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Total assets $ 193,364,000 179,999,000 178,250,000 184,160,000 206,514,000 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Long-term debt $ 38,114,000 34,136,000 33,391,000 30,545,000 11,410,000 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- (a) In 1990, the Company changed its method of applying overhead to inventory by specific product lines. The change resulted in an increase in net earnings of $930,000 after reduction for income taxes, reflecting the cumulative effect of the change on prior periods. (b) In 1992, the Company adopted SFAS 109, "Accounting for Income Taxes," which was issued in February 1992. This change resulted in an increase in net earnings of $195,000, reflecting the cumulative effect of the change on prior periods.
10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Revenues generated from operations constitute the primary source of the Company's liquidity. Short-term funds are provided for current operations through bank loans and the issuance of bankers acceptances. The Company maintains substantial lines of credit for general corporate purposes and to provide support for borrowings and bankers acceptances. The total amount available for borrowing under existing lines of credit in excess of outstanding borrowings and bankers acceptances was approximately $28,278,000 at November 30, 1994. The Company's cash balances decreased $1,600,000 for the year ended November 30, 1994. The net decrease was the result of $4,681,000 used in operating activities principally due to a decrease in accounts payable, $3,872,000 used in investing activities chiefly for purchases of property, plant, and equipment, $6,321,000 provided by financing activities from the issuance of long-term debt and an increase in short-term borrowings offset by the payment of dividends, and a $632,000 increase based on the changes in foreign exchange rates during the year. On November 30, 1993 the Company agreed to issue $15,000,000 of 7.14% senior notes with a final maturity in 2008. Funding of the notes took place on December 6, 1993 and the proceeds were used to repay a portion of the debt outstanding under one of the Company's lines of credit. The Company will repay the principal in 11 annual installments beginning in 1998. On November 2, 1994 the Company agreed to enter into a $5,000,000 line of credit arrangement with the American National Bank and Trust Company of Chicago as a supplement to its existing lines of credit. As of November 30, 1994, $4,200,000 had been borrowed under this agreement. In 1994 and 1993, the Company paid cash dividends on its capital stock in the aggregate amounts of $926,651 and $1,121,437, respectively. RESULTS OF OPERATIONS 1994 COMPARED TO 1993 Net sales increased $33,194,000, or 16%, in 1994 to $243,599,000. Domestic sales increased $18,596,000, or 17%, to $126,453,000 in 1994. The split between domestic and international sales was 52% domestic and 48% international in 1994. In 1993, domestic sales represented 51% of consolidated sales and international sales represented 49% of consolidated sales. International sales increased $14,598,000, or 14%, to $117,146,000 in 1994. The increase was the result of improved domestic economic conditions as well as improving market acceptance of technologies introduced in recent years. Gross profit increased $4,887,000 in 1994 largely because of the increase in sales. The percentage of gross profit to sales decreased to 31% in 1994 from 34% in 1993 primarily because of an increase in lower margin large contracts. Selling, general, and administrative expenses increased $2,118,000, or 3%, from 1993 to 1994. Interest expense increased $146,000, or less than 1%, due to higher U.S. interest rates offset by a reduction in interest-bearing debt of the Company outstanding during 1994 as compared to 1993. Contributions to employee profit sharing funds are based on profitability of the parent company and certain subsidiaries that have profit sharing funds. Annual amounts will vary according to contribution formulas and the related yearly profits. Contributions of $132,000 were made in 1994 compared to $480,000 in 1993. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT. Other income, which increased $603,000 in 1994, includes interest income, exchange gains and losses, and gains on sales of fixed assets. The amount of other income will vary based on cash balances, prevailing interest rates, the number and condition of fixed asset replacements, and the effectiveness of currency hedging programs. In 1994, the Company sold a parcel of undeveloped land at a pretax gain of $960,000 (see note 17 to consolidated financial statements). Income taxes were 39% of pretax income in 1994 as compared to 32% in 1993. The percentage increase related to refunds of income taxes in Germany which were substantially larger in 1993 than in 1994. Equity earnings went from a $50,000 loss in 1993 to a $17,000 loss in 1994. Net earnings increased $2,084,000 to $3,415,000 in 1994 when compared to net earnings of $1,331,000 in 1993. This 157% increase is the result of all of the factors mentioned above. There were no significant adjustments in the fourth quarter of 1994. 1993 COMPARED TO 1992 Net sales decreased $13,275,000, or 6%, in 1993 to $210,405,000. Domestic sales decreased $1,162,000, or 1%, to $107,857,000 in 1993. The split between domestic and international sales was 51% domestic and 49% international in 1993. In 1992, domestic sales represented 49% of consolidated sales and international sales represented 51% of consolidated sales. International sales decreased $12,113,000, or 11%, to $102,548,000 in 1993. The majority of the international sales decrease was attributable to the strengthening of the U.S. dollar against most currencies. 1993 international sales would have been $8,331,000 higher if average 1992 exchange rates were still prevailing. Gross profit decreased $2,569,000 in 1993 largely because of the decrease in sales. The percentage of gross profit to sales increased slightly to 34% in 1993 from 33% in 1992 because of the product mix and price increases. Selling, general, and administrative expenses decreased $1,823,000, or 3%, from 1992 to 1993. The decrease is the result of cost cutting efforts and the impact of foreign exchange rate fluctuations. Interest expense decreased $872,000, or 25%, due to the lower interest rates prevailing throughout much of the world and a reduction in interest-bearing debt of the Company outstanding during 1993. Contributions to employee profit sharing funds are based on profitability of the parent company and certain subsidiaries that have profit sharing funds. Annual amounts will vary according to contribution formulas and the related yearly profits. Contributions of $480,000 were made in 1993 compared to $160,000 in 1992. Other income, which decreased $984,000, or 85%, in 1993, includes interest income, exchange gains and losses, and gains on sales of fixed assets. The amount of other income will vary based on cash balances, prevailing interest rates which were lower in 1993 than 1992, the number and condition of fixed asset replacements, and the effectiveness of currency hedging programs. Income taxes were 32% of pretax income in 1993 as compared to 49% in 1992. The large percentage decrease related to refunds of income taxes in Germany and reductions in valuation allowances relating to deferred tax assets in France and Italy. Equity earnings went from a $217,000 loss in 1992 to a $50,000 loss in 1993. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT. As described in notes 1 and 9, the Company adopted SFAS 109, "Accounting for Income Taxes" in 1992. The cumulative effect of the adoption of SFAS 109 resulted in 1992 income of $195,000. No comparable item had an income impact in 1993. Net earnings decreased $278,000 to $1,331,000 in 1993 when compared to net earnings of $1,609,000 in 1992. This 17% decrease is the result of all of the factors mentioned above. Earnings for the fourth quarter of 1993 were adversely affected by adjustments due to the difference between estimated and actual year-end inventories of $757,000 and asset valuation adjustments of $110,000. The Company is in the process of implementing a perpetual inventory system for its domestic operations to improve the accounting for inventories at interim dates. The Company believes the new system will be fully operational in 1995. The Company also recorded adjustments relating to income tax refunds in Germany and a reduction of the deferred tax asset valuation allowance in Italy in the fourth quarter of 1993. These adjustments increased net earnings by $755,000. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA BINKS MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES Franklin Park, Illinois Form 10-K Consolidated Financial Statements Submitted in Response to Item 8 Fiscal years ended November 30, 1994, 1993, and 1992 (With Independent Auditors' Report Thereon) 14 BINKS MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES TABLE OF CONTENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page(s) ------- Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 16 Financial Statements: Consolidated Balance Sheets, November 30, 1994 and 1993. . . . . . 17-18 Consolidated Statements of Earnings, years ended November 30, 1994, 1993, and 1992. . . . . . . . . . . . . . . . 19 Consolidated Statements of Stockholders' Equity, years ended November 30, 1994, 1993, and 1992. . . . . . . . . . . . . 20 Consolidated Statements of Cash Flows, years ended November 30, 1994, 1993, and 1992. . . . . . . . . . . . . . . . 21-22 Notes to Consolidated Financial Statements . . . . . . . . . . . . 23-39 Schedule -------- Schedule: Valuation and Qualifying Accounts. . . . . . . . II 40 All other schedules are omitted as the required information is not applicable or the information is presented in the accompanying consolidated financial statements and related notes. 15 [PEAT MARWICK LOGO] [PEAT MARWICK LETTERHEAD] INDEPENDENT AUDITORS' REPORT The Board of Directors Binks Manufacturing Company: We have audited the consolidated financial statements of Binks Manufacturing Company (the Company) and consolidated subsidiaries as listed in the accompanying table of contents. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying table of contents. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial position of Binks Manufacturing Company and consolidated subsidiaries as of November 30, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended November 30, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in note 13 to the consolidated financial statements, a judgment of $2.75 million was awarded against the Company in a civil action alleging infringement of a patent. The Company is appealing the decision; accordingly, the outcome of this litigation and the amount of damages, if any, that may ultimately be incurred cannot be determined and no provision for any liability has been made in the accompanying consolidated financial statements. As discussed in notes 1 and 9 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1992 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." /s/ KPMG PEAT MARWICK LLP Chicago, Illinois February 10, 1995 16 BINKS MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets November 30, 1994 and 1993
- ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- Assets 1994 1993 - ------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 8,563,975 10,164,037 Receivables, net 68,213,783 61,689,199 Inventories 74,910,746 70,898,201 Other current assets 4,308,213 2,786,142 - ------------------------------------------------------------------------------------------- Total current assets 155,996,717 145,537,579 - ------------------------------------------------------------------------------------------- Investments and other assets: Investments in and advances to unconsolidated subsidiaries 1,090,926 1,107,741 Goodwill 2,779,257 2,863,485 Deferred income taxes 642,550 885,476 Patents and trademarks 581,352 549,915 Other investments and assets 4,889,211 2,876,426 - ------------------------------------------------------------------------------------------- Total investments and other assets 9,983,296 8,283,043 - ------------------------------------------------------------------------------------------- Property, plant, and equipment, at cost: Land 2,148,550 2,176,662 Buildings 20,768,675 19,005,121 Machinery and equipment 36,247,047 33,607,062 - ------------------------------------------------------------------------------------------- 59,164,272 54,788,845 Less accumulated depreciation 31,780,447 28,610,479 - ------------------------------------------------------------------------------------------- Net property, plant, and equipment 27,383,825 26,178,366 - ------------------------------------------------------------------------------------------- $ 193,363,838 179,998,988 - ------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 17 Consolidated Balance Sheets November 30, 1994 and 1993
- ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 - ------------------------------------------------------------------------------------------------------ Current liabilities: Notes payable to banks $ 3,744,188 330,000 Bank overdrafts 1,913,398 1,284,888 Current maturities of long-term debt 766,733 759,052 Accounts payable 35,285,881 38,208,858 Accrued employees' profit sharing contributions 307,148 317,537 Accrued expenses: Payrolls, commissions, etc. 6,631,078 5,808,864 Taxes, other than income taxes 1,429,858 1,216,828 Other 5,442,583 3,862,055 Income taxes 1,236,725 1,546,470 - ------------------------------------------------------------------------------------------------------ Total current liabilities 56,757,592 53,334,552 Deferred compensation 7,833,384 7,379,826 Deferred income taxes 430,845 380,559 Long-term debt, less current maturities 38,114,463 34,136,500 - ------------------------------------------------------------------------------------------------------ Total liabilities 103,136,284 95,231,437 - ------------------------------------------------------------------------------------------------------ Stockholders' equity: Capital stock, $1 par value. Authorized 12,000,000 shares; issued 3,088,837 shares in 1994 and 1993 3,088,837 3,088,837 Additional paid-in capital 24,504,446 24,504,446 Retained earnings 63,908,974 61,420,211 Foreign currency translation adjustments (1,274,703) (4,245,943) - ------------------------------------------------------------------------------------------------------ Total stockholders' equity 90,227,554 84,767,551 Commitments and contingencies (notes 12, 13, and 15) - ------------------------------------------------------------------------------------------------------ $ 193,363,838 179,998,988 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
18 Consolidated Statements of Earnings Years ended November 30, 1994, 1993, and 1992
- --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------- Net sales $ 243,598,662 210,404,590 223,680,409 Cost of goods sold 167,261,002 138,953,746 149,660,854 - --------------------------------------------------------------------------------------------------------------------- Gross profit 76,337,660 71,450,844 74,019,555 Selling, general, and administrative expenses 68,624,007 66,506,027 68,328,605 - --------------------------------------------------------------------------------------------------------------------- Operating income 7,713,653 4,944,817 5,690,950 - --------------------------------------------------------------------------------------------------------------------- Other expenses (income): Interest expense 2,767,138 2,621,137 3,493,503 Contributions to employees' profit sharing funds 132,349 479,944 160,168 Other income, net (781,141) (178,354) (1,162,692) - --------------------------------------------------------------------------------------------------------------------- 2,118,346 2,922,727 2,490,979 - --------------------------------------------------------------------------------------------------------------------- Earnings before income taxes, equity in earnings (loss) of unconsolidated subsidiaries, and cumulative effect of change in accounting principle 5,595,307 2,022,090 3,199,971 Income taxes 2,163,078 641,226 1,569,038 - --------------------------------------------------------------------------------------------------------------------- Earnings before equity in earnings (loss) of unconsolidated subsidiaries and cumulative effect of change in accounting principle 3,432,229 1,380,864 1,630,933 Equity in earnings (loss) of unconsolidated subsidiaries (16,815) (50,000) (217,005) - --------------------------------------------------------------------------------------------------------------------- Earnings before cumulative effect of change in accounting principle 3,415,414 1,330,864 1,413,928 Cumulative effect to December 1, 1991 of change in accounting for income taxes (note 9) - - 194,956 - --------------------------------------------------------------------------------------------------------------------- Net earnings $ 3,415,414 1,330,864 1,608,884 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Earnings per share before cumulative effect of change in accounting principle 1.11 .44 .48 Cumulative effect per share to December 1, 1991 of change in accounting for income taxes (note 9) - - .07 - --------------------------------------------------------------------------------------------------------------------- Net earnings per share $ 1.11 .44 .55 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 19 Consolidated Statements of Stockholders' Equity Years ended November 30, 1994, 1993, and 1992
- -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Foreign Additional currency Capital paid-in Retained translation Treasury stock capital earnings adjustments shares Total - -------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1991 $ 3,061,929 24,367,869 66,105,298 (841,264) (3,367,758) 89,326,074 Net earnings - - 1,608,884 - - 1,608,884 Foreign currency translation adjustments - - - (291,293) - (291,293) Cash dividends ($1.00 per share) - - (2,941,317) - - (2,941,317) - -------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1992 3,061,929 24,367,869 64,772,865 (1,132,557) (3,367,758) 87,702,348 Net earnings - - 1,330,864 - - 1,330,864 Foreign currency translation adjustments - - - (3,113,386) - (3,113,386) Stock dividends 26,908 136,577 (3,562,081) - 3,367,758 (30,838) Cash dividends (36-1/3 cents per share) - - (1,121,437) - - (1,121,437) - -------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1993 3,088,837 24,504,446 61,420,211 (4,245,943) - 84,767,551 Net earnings - - 3,415,414 - - 3,415,414 Foreign currency translation adjustments - - - 2,971,240 - 2,971,240 Cash dividends (30 cents per share) - - (926,651) - - (926,651) - -------------------------------------------------------------------------------------------------------------------------- Balance at November 30, 1994 $ 3,088,837 24,504,446 63,908,974 (1,274,703) - 90,227,554 - -------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 20 Consolidated Statements of Cash Flows Years ended November 30, 1994, 1993, and 1992
- --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 3,415,414 1,330,864 1,608,884 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Cumulative effect to December 1, 1991 of change in accounting for income taxes - - (194,956) Depreciation and amortization: Property, plant, and equipment 3,270,696 3,210,826 3,442,773 Goodwill and other 200,812 154,520 225,227 Equity in (earnings) loss of unconsolidated subsidiaries 16,815 50,000 217,005 Deferred compensation, net of payments 465,281 456,381 261,399 Deferred income taxes (121,917) (52,209) 290,762 Other, net (618,390) 162,818 (633,740) Cash provided by (used in) changes in: Receivables (3,098,842) (2,610,239) (108,093) Inventories (2,077,136) (3,421,581) 6,116,989 Other current assets (1,333,348) 1,402,201 (625,916) Accounts payable (6,601,393) 9,227,181 (496,487) Accrued employees' profit sharing contributions (349,861) 422,077 83,601 Accrued expenses 3,250,586 497,402 (2,783,655) Income taxes (1,099,569) 206,822 (1,122,785) - --------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (4,680,852) 11,037,063 6,281,008 - --------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchase of property, plant, and equipment (4,184,878) (3,881,031) (4,971,695) Proceeds from sale of property, plant, and equipment 1,614,888 44,292 1,585,426 Purchase of other investments and assets - - (396,600) Decrease in advances to an affiliate and an unconsolidated subsidiary - - 480,900 Increase in other assets (1,301,923) (1,278,962) (662,436) - --------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities $ (3,871,913) (5,115,701) (3,964,405) - ---------------------------------------------------------------------------------------------------------------------
21 Consolidated Statements of Cash Flows, Continued
- --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Cash dividends paid $ (926,651) (1,121,437) (2,941,317) Payments for fractional shares relating to stock dividends - (30,838) - Proceeds from long-term borrowings 4,381,897 1,247,400 4,092,587 Net increase (decrease) in short-term borrowings 3,809,812 (2,574,854) (5,478,938) Principal payments on long-term debt (944,452) (657,518) (959,088) - --------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 6,320,606 (3,137,247) (5,286,756) - --------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 632,097 (271,771) 173,198 - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (1,600,062) 2,512,344 (2,796,955) Cash and cash equivalents at beginning of year 10,164,037 7,651,693 10,448,648 - --------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 8,563,975 10,164,037 7,651,693 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Supplemental cash flow disclosures -- cash paid for: Interest $ 2,559,000 2,441,000 3,530,000 Income taxes 4,012,000 3,104,000 3,662,000 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 22 Notes to Consolidated Financial Statements November 30, 1994, 1993, and 1992 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES (A) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and consolidated subsidiaries in the United States, United Kingdom, Canada, Belgium, Italy, Germany, Japan, and France (see note 6 for information relating to the unconsolidated subsidiaries). The subsidiary in the United Kingdom is included on the basis of its September 30 fiscal year end. All material intercompany balances and transactions have been eliminated in consolidation. (B) TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Foreign currency financial statements have been translated in accordance with Statement of Financial Accounting Standards No. 52. Under this standard, assets and liabilities are translated at current exchange rates and income and expenses are translated at average rates of exchange for the year. Adjustments resulting from the translation process are reported in a separate component of equity and are not included in the determination of net earnings. (C) INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). (D) INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES Investments in unconsolidated subsidiaries are reflected in the consolidated financial statements at cost plus equity in undistributed net earnings or losses and foreign currency translation adjustments. (E) LONG-TERM EQUIPMENT INSTALLATION CONTRACTS Profits on long-term equipment installation contracts are recorded on the basis of the estimated percentage of completion of individual contracts determined under the cost-to-cost method. Estimated losses on long-term contracts are charged to earnings in the year a loss becomes apparent. (F) PROPERTY, PLANT, AND EQUIPMENT Depreciation of property, plant, and equipment is computed primarily by the straight-line method using the following useful lives: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Classification Years - -------------------------------------------------------------------------------- Buildings 25-50 Machinery and equipment 4-12 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 23 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The charge to income from amortization of assets under capital leases is included in depreciation expense. Amortization of capitalized leases is computed by the straight-line method over 99 years for the related land and buildings. (G) INCOME TAXES In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective December 1, 1991, the Company adopted Statement 109 and it has reported the cumulative effect of that change in the method of accounting for income taxes in the 1992 consolidated statement of earnings. (H) RESEARCH AND DEVELOPMENT EXPENSES Research and development costs are charged to expense when incurred. Total research and development costs charged to expense were $4,265,000, $4,837,000, and $4,244,000 in 1994, 1993, and 1992, respectively. (I) NET EARNINGS PER SHARE Net earnings per share are based on the weighted average number of shares of capital stock outstanding (3,088,837 shares in 1994, 3,010,999 shares in 1993 and 2,941,317 shares in 1992). (J) CASH AND CASH EQUIVALENTS For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks with original maturities of three months or less. 24 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (K) GOODWILL Goodwill represents excess costs of acquired companies over the fair value of their net tangible assets. These excess costs related to subsidiaries acquired are being amortized on a straight-line basis over 40 years. (L) FOREIGN EXCHANGE CONTRACTS Certain domestic and foreign subsidiaries enter into foreign exchange contracts as a hedge against accounts receivable and accounts payable denominated in currencies other than the currency used in the subsidiaries' country of incorporation. Market value gains and losses on the foreign exchange contracts are recognized and offset the foreign exchange gains or losses on the related accounts receivable and accounts payable. (M) RECLASSIFICATIONS Certain amounts in the 1993 and 1992 financial statements, as previously reported, have been reclassified to conform to 1994 presentation. (N) FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value approximates the carrying value for all financial instruments, with the exception of long-term debt, for which the fair value is less than the carrying value by an amount which is immaterial to the consolidated financial statements. (2) RECEIVABLES Net receivables are comprised of the following at November 30:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1994 1993 - -------------------------------------------------------------------------------- Trade $ 66,554,643 59,074,941 Unconsolidated subsidiaries 1,267,945 1,185,004 Costs and estimated earnings in excess of billings on uncompleted contracts 636,468 272,225 Other 2,249,566 3,129,161 - -------------------------------------------------------------------------------- 70,708,622 63,661,331 Less allowance for doubtful receivables 2,494,839 1,972,132 - -------------------------------------------------------------------------------- $ 68,213,783 61,689,199 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
25 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Comparative information with respect to uncompleted long-term equipment installation contracts at November 30 follows:
- -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- 1994 1993 - -------------------------------------------------------------------------------------------- Expenditures and estimated earnings on uncompleted contracts $ 9,248,871 7,991,136 Less applicable billings 10,872,917 7,726,797 - -------------------------------------------------------------------------------------------- $ (1,624,046) 264,339 - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- Included in the accompanying balance sheets: Costs and estimated earnings in excess of billings on uncompleted contracts included in receivables 636,468 272,225 Billings in excess of costs and estimated earnings on uncompleted contracts included in accounts payable (2,260,514) (7,886) - -------------------------------------------------------------------------------------------- $ (1,624,046) 264,339 - -------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------
(3) INVENTORIES Inventories at November 30 are summarized as follows:
- -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- 1994 1993 - -------------------------------------------------------------------------------------------- Finished goods and service parts $ 38,945,906 34,626,615 Work in process 33,275,077 33,425,901 Raw material 2,689,763 2,845,685 - -------------------------------------------------------------------------------------------- $ 74,910,746 70,898,201 - -------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------
26 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (4) CONSOLIDATED FOREIGN SUBSIDIARIES Financial data relating to the consolidated foreign subsidiaries is summarized as follows:
- --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- 1994 1993 1992 - --------------------------------------------------------------------------------------- Total assets $ 90,888,000 85,501,000 84,807,000 Total liabilities 52,003,000 49,210,000 47,020,000 - --------------------------------------------------------------------------------------- Equity $ 38,885,000 36,291,000 37,787,000 - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- Net sales $117,146,000 102,548,000 114,659,000 - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- Net earnings $ 856,000 2,318,000 2,572,000 - --------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------
(5) INTANGIBLE ASSETS The cost and accumulated amortization of intangible assets are summarized as follows:
- --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- 1994 1993 ---------------------------- ---------------------------- Patents and Patents and Goodwill trademarks Goodwill trademarks - --------------------------------------------------------------------------------------------- Cost $3,368,533 991,358 3,368,533 903,095 Accumulated amortization (589,276) (410,006) (505,048) (353,180) - --------------------------------------------------------------------------------------------- $2,779,257 581,352 2,863,485 549,915 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
(Continued) 27 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (6) UNCONSOLIDATED SUBSIDIARIES Financial data relating to an unconsolidated domestic and two foreign subsidiaries are summarized below. All intercompany transactions have been eliminated.
- ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- 1994 1993 1992 - ---------------------------------------------------------------------------------- Total assets $ 5,429,000 5,433,000 5,389,000 Total liabilities 6,520,000 5,395,000 4,881,000 - ---------------------------------------------------------------------------------- Equity $(1,091,000) 38,000 508,000 - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- Net sales $ 2,668,000 5,293,000 4,541,000 - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- Net loss $(1,117,000) (452,000) (638,000) - ---------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------- Equity in earnings (loss) $ (17,000) (50,000) (217,000) - ---------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------
(7) LINES OF CREDIT The Company had unused lines of credit, in excess of the support for domestic borrowings and other obligations, of $28,278,000, at November 30, 1994: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Foreign $15,878,000 Domestic 12,400,000 - -------------------------------------------------------------------------------- $28,278,000 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(Continued) 28 - -------------------------------------------------------------------------------- (8) LONG-TERM DEBT Consolidated long-term debt consists of the following at November 30:
- ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- 1994 1993 - ------------------------------------------------------------------------------------------------- 6.12% to 6.85% in 1994 and 4.18% to 6.00% in 1993 note payable and bankers acceptances due in various maturities through February 21, 1995 under lines of credit expiring in 1997 $19,800,000 31,832,000 7.14% senior notes maturing through 2008 15,000,000 - Obligations under capital leases 1,008,149 917,747 Secured loans: Interest free maturing through 1998 334,076 270,681 10.25% maturing through 1995 53,124 230,320 Interest free maturing in 2003 510,977 - 10.10% maturing in 1994 - 309,918 7.35% in 1994 and 11.00% in 1993 maturing through 2000 433,481 443,208 9.75% to 10.20% maturing in 1994 - 89,789 7.20% maturing through 2001 877,320 - 9.75% maturing through 1995 54,734 142,744 6.00% maturing through 1996 303,354 294,720 9.75% maturing through 2000 187,973 195,249 10.40% maturing in 1996 318,008 169,176 - ------------------------------------------------------------------------------------------------- 38,881,196 34,895,552 Less current maturities 766,733 759,052 - ------------------------------------------------------------------------------------------------- Long-term debt, less current maturities $38,114,463 34,136,500 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
The aggregate maturities of long-term debt due in each of the years 1995 through 1999 are $766,733, $1,126,050, $20,291,679, $282,614 and $1,536,790, respectively. (Continued) 29 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (9) INCOME TAXES The Company files a consolidated Federal income tax return which includes all U.S. subsidiaries. Federal income taxes for each U.S. subsidiary are computed separately and are payable to the Parent company. No provision is made for U.S. Federal income taxes which would be payable if undistributed earnings of foreign subsidiaries were paid as dividends to the Company. If such earnings, which aggregate $33,231,000 at November 30, 1994, were to be distributed, the resulting U.S. Federal income taxes would be largely offset by available foreign tax credits. The 1994 taxable income of the U.S. parent company includes $1,234,000 in dividends from its foreign subsidiaries and $1,091,000 in foreign taxes deemed paid on the dividends. Available foreign tax credits at November 30, 1994 totaled $1,433,000 arising from the payment of dividends from foreign subsidiaries. As discussed in note 1, the Company adopted Statement 109 as of December 1, 1991. The cumulative effect of this change in accounting for income taxes of $194,956 is determined as of December 1, 1991 and is reported separately in the consolidated statement of earnings for the year ended November 30, 1992. Prior years' financial statements have not been restated to apply the provisions of Statement 109. Income tax expense (benefit) is comprised as follows:
- --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- State U.S. and Federal Foreign local Total - --------------------------------------------------------------------------------------------- 1994: Current $ 1,707,915 592,479 202,678 2,503,072 Deferred (212,452) (127,542) - (339,994) - --------------------------------------------------------------------------------------------- $ 1,495,463 464,937 202,678 2,163,078 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- 1993: Current 16,152 1,683,988 (25,016) 1,675,124 Deferred (440,924) (592,974) - (1,033,898) - --------------------------------------------------------------------------------------------- $ (424,772) 1,091,014 (25,016) 641,226 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- 1992: Current (1,105,533) 1,387,842 (80,000) 202,309 Deferred 728,316 558,413 80,000 1,366,729 - --------------------------------------------------------------------------------------------- $ (377,217) 1,946,255 - 1,569,038 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
(Continued) 30 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Actual income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to pretax income as a result of the following:
- ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------ Computed "expected" tax expense (34% in 1994, 1993, and 1992) $1,903,000 688,000 1,088,000 Difference between U.S. and foreign tax rates 132,000 424,000 662,000 Nondeductible expenses 319,000 326,000 279,000 State and local income taxes, net of Federal income tax benefit 134,000 (17,000) - Research tax credit (60,000) (149,000) (327,000) Foreign local (other than income) taxes (47,000) (155,000) (110,000) Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense 869,000 (198,000) 42,000 Refund of foreign taxes resulting from distribution of prior years' earnings (256,000) (665,000) - Benefit not recorded for foreign net operating loss 195,000 385,000 - Foreign tax credits in excess of domestic taxes on dividends from foreign subsidiaries (858,000) - - Other items (167,922) 2,226 (64,962) - ------------------------------------------------------------------------------------------------------------ Provision for income taxes $2,163,078 641,226 1,569,038 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
The significant components of deferred income tax expense (benefit) attributable to pretax income for the year ended November 30, 1994 and 1993 are as follows:
- ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ 1994 1993 - ------------------------------------------------------------------------------------------------------------ Deferred tax expense (benefit) (exclusive of the effect of the other component listed below) $(1,208,994) (835,898) Increase (decrease) in beginning-of-the-year balance of the valuation allowance for deferred tax assets 869,000 (198,000) - ------------------------------------------------------------------------------------------------------------ $ (339,994) (1,033,898) - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
(Continued) 31
- ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------ Earnings (loss) before income taxes, equity in earnings or loss of unconsolidated subsidiaries, and cumulative effect of change in accounting principle: Domestic $4,408,000 (1,485,000) (1,247,000) Foreign 1,187,000 3,507,000 4,447,000 - ------------------------------------------------------------------------------------------------------------ $5,595,000 2,022,000 3,200,000 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at November 30, 1994 and 1993 are presented below.
- ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- 1994 1993 - ----------------------------------------------------------------------------------------------------------- Deferred tax assets: Deferred compensation $2,325,000 2,122,000 Inventories 462,000 326,000 Allowance for doubtful receivables 336,000 160,000 Foreign tax credit carryforward 1,433,000 - Investment in limited partnership 255,000 257,000 Accrued expenses 606,000 625,000 Other, net - 162,000 - ----------------------------------------------------------------------------------------------------------- Total gross deferred tax assets 5,417,000 3,652,000 Less valuation allowance 869,000 - - ----------------------------------------------------------------------------------------------------------- Total deferred tax assets 4,548,000 3,652,000 - ----------------------------------------------------------------------------------------------------------- Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation and capitalized interest 2,180,000 2,195,000 Long-term contracts 216,000 70,000 Other, net 413,000 - - ----------------------------------------------------------------------------------------------------------- Total gross deferred liabilities 2,809,000 2,265,000 - ----------------------------------------------------------------------------------------------------------- Net deferred tax assets $1,739,000 1,387,000 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
The valuation allowance for deferred tax assets as of December 1, 1991 was $156,000. The net change in the total valuation allowance for the years ended November 30, 1994, 1993, and 1992 was an increase of $869,000, a decrease of $198,000, and an increase of $42,000, respectively. (Continued) 32 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The U.S. Federal income tax returns of the Company have been examined through November 30, 1986. An examination of the years ended November 30, 1988, November 30, 1989, November 30, 1991, and November 30, 1992 is currently in progress. (10) EMPLOYEE BENEFITS The Company and certain subsidiaries maintain profit sharing plans covering most of their employees. Additionally, the Company maintains a deferred compensation plan for officers and key employees. The total expense related to these plans was $781,000 in 1994, $1,078,000 in 1993, and $640,000 in 1992. (11) QUARTERLY FINANCIAL DATA (UNAUDITED) A summary of quarterly financial data for the years ended November 30, 1994 and 1993 follows:
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- QUARTER ENDED ------------------------------------------------------------------------ Feb.28,1994 May 31,1994 Aug.31,1994 Nov.30,1994 - ----------------------------------------------------------------------------------------------------------- Net sales $53,240,000 59,347,000 55,543,000 75,469,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Gross profit $17,142,000 19,545,000 20,377,000 19,274,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Net earnings $ 727,000 1,180,000 645,000 863,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Net earnings per share $ .24 .38 .21 .28 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- QUARTER ENDED ------------------------------------------------------------------------ Feb.28,1993 May 31,1993 Aug.31,1993 Nov.30,1993 - ----------------------------------------------------------------------------------------------------------- Net sales $47,140,000 53,775,000 53,871,000 55,619,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Gross profit $16,968,000 18,966,000 18,065,000 17,452,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Net earnings $ 615,000 445,000 255,000 16,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Net earnings per share $ .20 .15 .08 .01 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
The Company made adjustments during the fourth quarter of 1993 which decreased net earnings by $867,000, or $0.29 per share. The adjustments were attributable to asset valuation adjustments of $110,000 and the differences between estimated interim inventory and actual year-end inventory of $757,000. The Company also made adjustments which increased fourth quarter net earnings by $755,000, or $0.25 per share. The adjustments related to deferred tax asset valuation allowances and income tax refunds. (Continued) 33 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (12) LEASES The following is an analysis of the leased property under capital leases included in property, plant, and equipment at November 30:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1994 1993 - -------------------------------------------------------------------------------- Land $ 33,496 31,800 Buildings 512,915 486,945 Machinery and equipment 796,618 657,449 - -------------------------------------------------------------------------------- 1,343,029 1,176,194 Less accumulated depreciation 418,488 408,829 - -------------------------------------------------------------------------------- $ 924,541 767,365 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of November 30, 1994:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year ending November 30: 1995 $ 297,824 1996 178,143 1997 156,119 1998 89,189 1999 45,973 Later years (through 2063) 2,942,131 - -------------------------------------------------------------------------------- Total 3,709,379 Less amount representing interest 2,701,230 - -------------------------------------------------------------------------------- Present value of net minimum lease payments $1,008,149 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
The Company occupies certain offices and uses certain equipment under operating lease arrangements. A summary of rent expense under such arrangements follows:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year ended Total November 30 expense - -------------------------------------------------------------------------------- 1994 $2,707,000 1993 2,476,000 1992 2,463,000 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(Continued) 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of November 30, 1994:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year ending November 30 - -------------------------------------------------------------------------------- 1995 $1,445,000 1996 1,212,000 1997 883,000 1998 528,000 1999 315,000 - -------------------------------------------------------------------------------- Total $4,383,000 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
It is expected that in the normal course of business most leases that expire will be renewed or replaced by leases on other properties; thus, it is anticipated that future annual rent expense will not be materially less than the amount shown for 1994. (13) CONTINGENCIES On July 2, 1993, a judgment was entered against the Company in a civil action instituted by Graco, Inc. in the United States District in Houston, Texas, alleging infringement of a U.S. patent held by Graco. The judgment provides for a total award of $2.75 million against the Company. The Company is appealing the judgment and has furnished an appeal bond in an amount equal to the judgment which has been secured by a letter of credit. After consulting with counsel, the Company has determined that it is not possible at this time to estimate the amount of damages, if any, that may ultimately be incurred. Accordingly, no provision has been made in the accompanying consolidated financial statements. The Company is the defendant in a lawsuit filed by former financial advisors seeking approximately $900,000 under terms of a contract. Management believes that all required payments have been made and no further amounts have been provided for. The Company has certain contingent liabilities resulting from litigation and claims incident to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the financial position or results of operations of the Company. (Continued) 35 Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (14) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ United Other States France England Canada areas Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ Year ended November 30, 1994: Net sales $ 126,453,000 50,417,000 28,948,000 7,215,000 30,566,000 243,599,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Operating income (loss) $ 5,754,000 554,000 624,000 (270,000) 1,051,000 7,713,000 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Interest expense (2,767,000) Contributions to employees' profit sharing funds (132,000) Other income, net 781,000 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before income taxes and equity in loss of unconsolidated subsidiaries $ 5,595,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Identifiable assets at November 30, 1994 $ 103,074,000 33,449,000 21,816,000 5,585,000 25,570,000 189,494,000 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Investments in and advances to unconsolidated subsidiaries 1,091,000 Goodwill 2,779,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets at November 30, 1994 $ 193,364,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
(Continued) 36 Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ United Other States France England Canada areas Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ Year ended November 30, 1993: Net sales $ 107,857,000 45,831,000 16,065,000 6,060,000 34,592,000 210,405,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Operating income (loss) $ 264,000 3,133,000 482,000 (1,090,000) 2,156,000 4,945,000 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Interest expense (2,621,000) Contributions to employees' profit sharing funds (480,000) Other income, net 178,000 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before income taxes and equity in loss of unconsolidated subsidiaries $ 2,022,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Identifiable assets at November 30, 1993 $ 93,531,000 35,661,000 17,646,000 6,023,000 23,167,000 176,028,000 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Investments in and advances to unconsolidated subsidiaries 1,108,000 Goodwill 2,863,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets at November 30, 1993 $ 179,999,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
(Continued) 37 Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ United Other States France England Canada areas Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ Year ended November 30, 1992: Net sales $ 109,019,000 44,820,000 29,259,000 6,790,000 33,792,000 223,680,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Operating income (loss) $ 512,000 2,401,000 490,000 (1,370,000) 3,658,000 5,691,000 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Interest expense (3,494,000) Contributions to employees' profit sharing funds (160,000) Other income, net 1,163,000 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings before income taxes, equity in loss of unconsolidated subsidiaries, and cumulative effect of change in accounting principle $ 3,200,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Identifiable assets at November 30, 1992 $ 91,632,000 30,226,000 18,619,000 7,669,000 25,998,000 174,144,000 - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Investments in and advances to unconsolidated subsidiaries 1,158,000 Goodwill 2,948,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets at November 30, 1992 $ 178,250,000 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
The Company and its subsidiaries are engaged in one major line of business, the manufacture and sale of spray finishing and coating application equipment. The Company and its subsidiaries grant credit to customers, with the automotive industry generally accounting for between 10% and 15% of annual consolidated net sales. In 1994, 1993, and 1992, no single customer accounted for more than 10% of sales. (Continued) 38 Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (15) STOCKHOLDER RIGHTS PLAN On February 2, 1990, the Company declared a dividend distribution of one Right for each outstanding share of Capital Stock of the Company to the stockholders of record on February 13, 1990. Certain terms of the Rights were amended on January 21, 1991. Each Right, when exercisable, entitles the registered holder to purchase from the Company one share of Capital Stock, at a price of $100 per share, subject to adjustment. The Rights become exercisable ten days after the earliest to occur of (i) public announcement that a person or group of associated or affiliated persons acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Capital Stock of the Company (the Stock Acquisition Date), (ii) the commencement of, or an announcement of an intention to make, a tender offer or exchange offer if, upon consummation thereof, any person or group of associated or affiliated persons would be the beneficial owner of 15% or more of the outstanding Capital Stock of the Company, or (iii) the Board of Directors declares any person owning 10% or more of the outstanding Capital Stock of the Company to be an "Adverse Person" pursuant to the criteria set forth in the Rights Agreement. If a person or group of associated or affiliated persons becomes the beneficial owner of 15% or more of the outstanding Capital Stock of the Company, the Company is the surviving corporation in a merger and the Capital Stock remains outstanding, an acquiring person engages in certain self-dealing transactions, or the Board of Directors declares any person to be an "Adverse Person," subject to certain adjustments and other conditions, each Right not owned or transferred by the acquiring person or Adverse Person will entitle the holder to purchase one share of Capital Stock of the Company at a purchase price of 20% of its then market value. In addition, if the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power is sold, subject to certain adjustments and other conditions, each Right will entitle the holder to purchase capital stock of the acquiring company having a market value of $200 for a purchase price of $100. The Rights are redeemable by the Company at any time prior to 20 days after the Stock Acquisition Date, at $0.01 per Right, at the Company's option. After the Stock Acquisition Date, the Rights may not be exercised until the Company's right of redemption has expired. The Rights expire on February 2, 2000. Until a Right is exercised, the holder of a Right, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or receive dividends. (16) FOREIGN EXCHANGE CONTRACTS At November 30, 1994, the Company had contracts maturing from December 7, 1994 to May 31, 1996 to purchase $5,726,000 in foreign currency ($1,250,000 of British pounds sterling and $4,476,000 of French francs) and $663,000 in U.S. dollars. (17) GAIN ON SALE OF LAND In May of 1994, the Company sold a parcel of undeveloped land adjacent to one of its facilities that was not being utilized. The pretax gain on this sale amounted to $960,000 and is included in other income in the consolidated statement of earnings. The after tax gain on this sale was $575,000. 39 SCHEDULE II Valuation and Qualifying Accounts Years ended November 30, 1994, 1993, 1992
- ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions ------------------------- Charged to Balance at Charged to other Balance at beginning costs and accounts- Deductions- end Description of period expenses describe(a) describe of period - ----------------------------------------------------------------------------------------------------------- 1994: Allowance for doubtful receivables $ 1,972,132 935,386 79,012 491,691(b) 2,494,839 Deferred tax asset valuation allowance - 869,000 - - 869,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- 1993: Allowance for doubtful receivables $ 2,293,525 654,444 (185,079) 790,758(b) 1,972,132 Deferred tax asset valuation allowance 198,000 - - 198,000(c) - - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- 1992: Allowance for doubtful receivables $ 2,198,853 768,026 29,835 703,189(b) 2,293,525 Deferred tax asset valuation allowance 156,000 42,000 - - 198,000 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- (a) Effect of fluctuation in foreign currency translation rates. (b) Uncollectible accounts charged off, net of recoveries. (c) Reduction of deferred tax asset valuation allowance.
40 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINAN- CIAL DISCLOSURE Not applicable PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Directors. The information required in response to this item regarding directors of the Registrant will be contained in the Registrant's definitive Proxy Statement (the "Proxy Statement") for its Annual Meeting of Stockholders to be held on April 25, 1995 under the caption "Election of Directors" and is incorporated herein by reference. (b) Executive Officers of the Registrant. The information required in response to this item regarding executive officers of the Registrant is contained in Part I of this report and is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION The information required in response to this item will be contained in the Proxy Statement under the captions "Executive Compensation" and "Information Regarding Directors" and is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this item will be contained in the Proxy Statement under the captions "Election of Directors" and "Voting Securities" and is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required in response to this item will be contained in the Proxy Statement under the 41 caption "Election of Directors" and is incorporated herein by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1. Financial Statements - see Item 8 (pages 14-39) 2. Financial Statement Schedules: II. Valuation and Qualifying Accounts (page 40) All other schedules are omitted as the required information is not applicable or the information is presented in the accompanying consolidated financial statements and related notes. Exhibits 3.1 Amended and Restated Certificate of Incorporation was filed as Exhibit 3.1 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 3.2 Amended and Restated By-laws, as of January 21, 1991, was filed as Exhibit 3.2 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 4.1 Revolving Credit Agreement, dated as of February 24, 1992, between the Registrant and NBD Bank, N.A., as amended April 1, 1993, 42 was filed as Exhibit 4.1 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 4.2 Amendment, dated August 25, 1994, to the Revolving Credit Agreement, dated as of February 24, 1992 between the Registrant and NBD Bank, N.A., is filed as Exhibit 4.2 to this Form 10-K. 4.3 Note Purchase Agreement, dated as of November 30, 1993 among Binks Manufacturing Company and the Purchasers named therein, was filed as Exhibit 4.2 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 4.4 Amended and Restated Rights Agreement, dated as of February 2, 1990 and amended and restated as of January 21, 1991, between Binks Manufacturing Company and Conti- nental Bank, N.A., was filed as Exhibit 4.3 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 9.1 Voting Trust Agreement, dated December 15, 1948, and an Amendment thereto, dated as of December 15, 1992 by and between the holders of voting trust certificates issued under the original Voting Trust Agreement, were filed as Exhibit 9.1 to the Registrant's Form 10-K for its fiscal year ended November 30, 43 1993 and is incorporated herein by reference thereto. *10.1(a) Form of Executive Retirement Income Contracts between the Registrant and Burke B. Roche, William W. Roche, Doran J. Unschuld, Stephen R. Kennedy and Ernest F. Watts was filed as Exhibit 10.1(a) to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. *10.1(b) Form of Amendment to Executive Retirement Income Contract (for the individuals named in Item 10.1(a) other than Burke B. Roche) was filed as Exhibit 10.1(b) to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. *10.2 Form of Employment Security Agreement between the Registrant and Burke B. Roche, William W. Roche, Doran J. Unschuld, Stephen R. Kennedy and Ernest F. Watts was filed as Exhibit 10.2 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. * These Exhibits are management contracts or compensatory plans or arrangements required to be filed as Exhibits to this Form 10-K. 44 *10.3 Forms of Employment Security Agreements between the Registrant and certain key employees were filed as Exhibit 10.3 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. *10.4 Form of Insurance Maintenance Agreement between the Registrant and each of its directors and officers was filed as Exhibit 10.4 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorpo- rated herein by reference thereto. *10.5 Binks Death Benefit Plan for Executive Personnel between the Registrant and certain key employees was filed as Exhibit 10.5 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 10.6 Loan Agreement, dated November 27, 1992 between the Registrant and Comerica Bank, relating to a $5,000,000 line of credit was filed as Exhibit 10.6 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. * These Exhibits are management contracts or compensatory plans or arrangements required to be filed as Exhibits to this Form 10-K. 45 10.7 Amendment No. 1, dated November 26, 1993, to Loan Agreement dated November 27, 1992, between the Registrant and Comerica Bank is filed as Exhibit 10.7 to this Form 10-K. 10.8 Loan Agreement, dated November 1, 1994, between the Registrant and The American National Bank and Trust Company of Chicago, relating to a $5,000,000 line of credit, is filed as Exhibit 10.8 to this Form 10-K. 21.1 List of subsidiaries was filed as Exhibit 22.1 to the Registrant's Form 10-K for its fiscal year ended November 30, 1993 and is incorporated herein by reference thereto. 27.1 Financial Data Schedule is filed as Exhibit 27.1 to this Form 10-K. (b) Reports on Form 8-K: None. 46 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. Binks Manufacturing Company By:/s/ Burke B. Roche --------------------------- Burke B. Roche President and Chairman of the Board 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 - --------- ----- ---- /s/ Burke B. Roche Chairman of the Board February 25, 1995 - ----------------------- Chief Executive Officer, Burke B. Roche President and Director (Principal Executive Officer and Principal Financial Officer) /s/ Jeffrey W. Lemajeur Treasurer February 25, 1995 - ----------------------- Jeffrey W. Lemajeur (Principal Accounting Officer) /s/ Donald G. Meyer Director February 25, 1995 - ----------------------- Donald G. Meyer /s/ William W. Roche Director February 25, 1995 - ----------------------- William W. Roche /s/ John J. Schornack Director February 25, 1995 - ----------------------- John J. Schornack /s/ Doran J. Unschuld Director February 25, 1995 - ----------------------- Doran J. Unschuld 47 EXHIBIT INDEX Binks Manufacturing Company Form 10-K for fiscal year ended November 30, 1993 Page Number ----------- 3.1 Amended and Restated Certificate of ** Incorporation 3.2 Amended and Restated By-laws ** 4.1 Revolving Credit Agreement, dated as ** of February 24, 1992, between the Registrant and NBD Bank, N.A. 4.2 Amendment, dated August 25, 1994, to the Revolving Credit Agreement, dated as of February 24, 1992 between the Registrant and NBD Bank, N.A. 4.3 Note Purchase Agreement, dated as of November 30, 1993, among the Regis- ** trant and the Purchasers named there- in 4.4 Amended and Restated Rights Agreement ** 9.1 Voting Trust Agreement, as amended ** *10.1(a) Form of Executive Retirement Income ** Contracts *10.1(b) Form of Amendment to Executive Re- ** tirement Income Contract *10.2 Form of Employment Security Agreement ** with certain executive officers *10.3 Forms of Employment Security Agree- ** ments with certain key employees *10.4 Form of Insurance Maintenance Agree- ** ment between the Registrant and each of its directors and officers. * These Exhibits are management contracts or compensatory plans or arrangements required to be filed as Exhibits to this Form 10-K. ** Incorporated by reference. 48 *10.5 Binks Death Benefit Plan for Execu- ** tive Personnel 10.6 Loan Agreement, dated November 27, ** 1992, between the Registrant and Comerica Bank 10.7 Amendment No. 1, dated November 26, 1993, to Loan Agreement dated Novem- ber 27, 1992, between the Registrant and Comercia Bank 10.8 Loan Agreement, dated November 1, 1994, between the Registrant and The American National Bank and Trust Com- pany of Chicago 21.1 List of subsidiaries ** 27.1 Financial Data Schedule * These Exhibits are management contracts or compensatory plans or arrangements required to be filed as Exhibits to this Form 10-K. ** Incorporated by reference. 49 EX-4.2 2 EXHIBIT 4.2 - THIRD AMENDMENT TO CREDIT AGREEMENT THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT is dated August 25, 1994 (the "Third Amendment"), to that certain Revolving Credit Agreement, dated as of February 24, 1992 (the "Agreement") as amended by the First Amendment to the Revolving Credit Agreement, dated as of April 1, 1993 (the "First Amendment"), and by the Second Amendment to Revolving Credit Agreement, dated as of November 22, 1993 (the "Second Amendment"), by and between BINKS MANUFACTURING COMPANY, a Delaware corporation (the "Company"), and NBD BANK, N.A., a national banking association ("NBD"). The Agreement as amended by the First Amendment, the Second Amendment and the Third Amendment is referred to as the "Credit Agreement." Except as the context may otherwise require, capitalized terms used in this Third Amendment shall have the meanings ascribed to such terms in the Credit Agreement. RECITALS A. Under the Agreement, NBD offered the Company Revolving Loans and other credit accommodations in the aggregate principal amount of up to $33,000,000. B. In December, 1993, the Company received $15,000,000 as proceeds of its 7.14% Senior Notes Due 2008, as issued by the Company ("7.14% Senior Notes"). C. Pursuant to Sections 2.8(a) and 2.16(b) of the Credit Agreement, 66-2/3% of the proceeds of the 7.14% Senior Notes (which equals $10,000,000) were applied to the Outstanding Advances and as a permanent reduction in the Total Commitment, and, therefore, the maximum amount of the Total Commitment is now $23,000,000 under the Credit Agreement. D. The Company has requested that NBD extend the Termination Date and that NBD agree to certain other revisions to the Agreement, and NBD has agreed to such extension and to such revisions on the terms and conditions provided in this Third Amendment. NOW, THEREFORE, in consideration of the foregoing, and all advances heretofore and hereafter made by NBD to the Company, under the terms of the Credit Agreement (as revised hereby) or otherwise, the parties hereby agree to amend the Credit Agreement as follows: 1. The chart set forth under the definition of "Applicable Margin" in Section 1.1 of the Credit Agreement is hereby amended to read as follows:
Consolidated Fixed Applicable Margin for Charge Coverage Floating LIBOR Ratio Rate Loans Rate Loans ------------------ ---------- ---------- Less than 1.60:1 . 5% 1.25% From 1.60:1 to 2.49:1 .25% 1.00% From 2.50:1 to 3.74:1 0% .75% And 3.75:1 or greater 0% .50%
2. Simultaneously with the execution of this Third Amendment, the Company agrees to execute and deliver to NBD an Amended and Restated Revolving Note, in substantially the form of Exhibit A attached hereto ("Restated Note"), and all references to the "Revolving Note" in the Credit Agreement and other Loan Documents shall hereafter refer to the Restated Note. 3. The definition of "Termination Date" in Section 1.1 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: "TERMINATION DATE" means the earlier to occur of (a) the third anniversary of the date of the Third Amendment to Revolving Credit Agreement, and (b) the date on which the Revolving Commitment shall be terminated pursuant to the provisions of this Agreement. 4. Section 6.3(e) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (e) TANGIBLE NET WORTH. Tangible Net Worth of the Company, excluding from such calculation, solely for the purposes of this Section 6.3(e), any Investments by the Company in its Subsidiaries or other Affiliates, and including in such calculation, solely for the purposes of this Section 6.3(e), the amount of any foreign currency translation adjustment account shown as a capital account of the Company, to be less than the Minimum Amount. The "Minimum Amount" will be $33,000,000 beginning with the fiscal year ending November 30, 1993; and shall thereafter increase annually as of the end of each of the Company's fiscal years to be equal to $33,000,000 plus 40% of positive net income (with no offset for losses, if any) of the Company (on an unconsolidated basis) for each fiscal year of the Company thereafter commencing November 30, 1993, computed in accordance with GAAP. 5. Clause (iii) of Section 6.3(d) of the Agreement is hereby deleted in its entirety and replaced with the following, "(iii) 1.25 to 1 for each measurement date which occurs after November 30, 1993, and before February 28, 1996, and (iv) 1.50 to 1 for each measurement date which occurs on and after February 28, 1996." 6. The Company agrees it will promptly deliver to NBD copies of all reports, certifications and notices that it is required to send to the holders (or their agents) of the 7.14% Senior Notes under any agreements relating to or evidencing such 7.14% Senior Notes. 7. The Company acknowledges that Indebtedness of the Company issued under the 7.14% Senior Notes will constitute "Indebtedness" under the terms of Section 7.1(e) of the Credit Agreement. -2- 8. In addition to all other interest, costs and fees due under the Credit Agreement, the Company agrees to pay an extension fee to NBD on or before execution of this Third Amendment, equal to $17,250. 9. Except as amended hereby, the terms of the Credit Agreement and all other Loan Documents are hereby ratified, approved and confirmed in all respects. 10. On and after the date of this Third Amendment: (a) each reference in the Credit Agreement or any Loan Document to "this Agreement" shall be deemed a reference to the Credit Agreement as amended by this Third Amendment; and (b) this Third Amendment and the Restated Note shall each be considered a Loan Document under the Credit Agreement. 11. This Third Amendment may be signed in any number of counterparts, with the same effect as if the signatures thereto and hereto were on the same instrument. IN WITNESS WHEREOF, the Company and NBD have executed this Third Amendment as of the date first above written. BINKS MANUFACTURING COMPANY By: /s/ Burke B. Roche -------------------------------- Its: President -------------------------- NBD BANK, N.A. By: /s/ Timothy M. Monahan -------------------------------- Timothy M. Monahan Its: Second Vice President -3- EX-10.7 3 EXHIBIT 10.7 - AMENDMENT NO. 1 AMENDMENT NO. 1 TO LETTER AGREEMENT AND PROMISSORY NOTE THIS AMENDMENT, dated as of the 26th day of November, 1993, by and between BINKS MANUFACTURING COMPANY, a Delaware corporation, of Franklin Park, Illinois (herein called "Company"), and COMERICA BANK, a Michigan banking corporation, of Detroit, Michigan (herein called "Bank"); WITNESSETH: WHEREAS, said parties desire to amend that certain Letter Agreement dated November 27, 1992, as amended, entered into by and between Company and Bank (herein called "Agreement"); WHEREAS, said parties further desire to amend that certain Promissory Note dated November 27, 1992, executed by Company to Bank in the original amount of Five Million Dollars ($5,000,000.00) (herein called "Note"). NOW THEREFORE, it is agreed that Section 1(v) of the Agreement shall be amended in its entirety as follows: "(v) 'Termination Date' means February 28, 1995." NOW, THEREFORE, it is further agreed that the Note is amended as follows: The maturity date of the Note shall be February 28, 1995, in lieu of November 26, 1993. Bank hereby notifies Company that, for the purposes of the Agreement, the Note, and all other payments, notices and communications by Company to Bank, Bank's address shall be as follows: Global Banking Department 9th Floor, One Detroit Center 500 Woodward Avenue Detroit, Michigan 48226 or at such other office of Bank as Bank may notify Company in writing from time to time. Company hereby acknowledges that Bank has extended to Binks de Mexico, S.A. de C.V. (herein called "Binks de Mexico"), a Subsidiary (as defined in the Agreement) of Company, a line of credit in the principal amount of One Hundred Fifty Thousand Dollars $150,000.00, as evidenced by a Promissory Note dated November 26, 1993 (herein called the "Binks de Mexico Note"), which note constitutes an extension and renewal of a Promissory Note previously executed and delivered by Binks de Mexico to Bank. Company previously executed and delivered unto Bank a Guaranty dated January 19, 1993, wherein Company unconditionally guaranteed the repayment of all indebtedness of Binks de Mexico to Bank, and Company hereby acknowledges, ratifies and affirms its liabilities and obligations under said Guaranty. Company further acknowledges and agrees that, to the extent of the principal amount outstanding at any time under the Binks de Mexico Note, the maximum amount available for borrowing under and pursuant to the terms and conditions of the Agreement, whether Loans or Acceptances, shall be reduced by a like amount. Company hereby represents and warrants that, after giving effect to the amendments contained herein, (a) execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment or the Agreement are within Company's corporate powers, have been duly authorized, are not in contravention of law or the terms of Company's Articles of Incorporation or Bylaws, and do not require the consent or approval of any governmental body, agency, or authority; and this Amendment and any other documents and instruments required under this Amendment or the Agreement, will be valid and binding in accordance with their terms; (b) the continuing representations and warranties of Company set forth in Sections 15(a) through 15(f) of the Agreement are true and correct on and as of the date hereof with the same force and effect as if made on and as of the date hereof; (c) the continuing representations and warranties of Company set forth in Section 15(g) of the Agreement are true and correct as of the date hereof with respect to the most recent financial statements furnished to the Bank by Company in accordance with Section 16(a) of the Agreement; and (d) no Default or Event of Default has occurred and is continuing as of the date hereof. This Amendment shall be effective as of the date hereof. Except as modified hereby, all of the terms and conditions of the Agreement shall remain in full force and effect. Capitalized terms used but not otherwise expressly defined herein shall have the meanings ascribed to them in the Agreement. WITNESS the due execution hereof on the day and year first above written. COMERICA BANK BINKS MANUFACTURING COMPANY By: /s/ Theresa M. Owen By: /s/ Burke B. Roche ---------------------------------- -------------------------------- Its: Assistant Vice President Its: President -------------------------------- ------------------------------ By: -------------------------------- Its: ------------------------------ 2 EX-10.8 4 EXHIBIT 10.8 - LETTER FROM AMERICAN NAT'L BANK [AMERICAN NATIONAL BANK LETTERHEAD] November 1, 1994 Mr. Burke B. Roche President Binks Manufacturing Company 9201 W. Belmont Avenue Franklin Park, IL 60131-2887 Dear Mr. Roche: The American National Bank and Trust Company of Chicago (the "Bank") is pleased to establish a line of credit in favor of Binks Manufacturing Company (the "Borrower") in the amount of $5,000,000 which shall continue from November 1, 1994 through August 31, 1995 (the "Maturity Date") unless the line of credit is terminated on an earlier date as set forth below. (a) Loans under this line of credit will be evidenced and governed by the Bank's standard form of master note (the "Note"), a copy of which is attached hereto, and will bear interest, at Borrower's option, at: (i) a rate equal to the sum of the Bank's corporate base rate of interest announced by the Bank from time to time, changing when and as the corporate base rate changes, with interest payable on the last business day of each month, on the Maturity Date, and on demand thereafter (computed on the basis of a 365 day year and actual days elapsed); or (ii) subject to availability and for a maturity not to exceed 180 days, at a fixed rate equal to the sum of 100 basis points plus the Eurodollar rate, where the Eurodollar rate is the rate at which deposits in U.S. dollars in the amount and for a maturity corresponding to that of the loan are offered by the Bank in the offshore interbank market at approximately 10:00 a.m. (Chicago time) two business days prior to the date on which such loan is made, adjusted for maximum statutory reserve requirements; or (iii) banker's acceptance financing in 30 day increments, up to 180 days, will be available to the Borrower. American National Bank Mr. Burke B. Roche November 1, 1994 Page 2 (b) No interest period for or maturity of a loan hereunder shall extend beyond the Maturity Date. Interest and fees will be computed on the basis of actual days elapsed on a 360-day year basis, except for interest on loans under option (a) (i) which will be computed on the basis of actual days elapsed on a 365 day year basis. (c) The Borrower will use the proceeds of the loans hereunder for working capital purposes. (d) The Bank shall have no obligation to make a loan hereunder (and all outstanding loans and accrued and unpaid interest, at the option of the Bank, may be declared immediately due and payable without notice) if, (i) there is any failure by the Borrower to pay principal, interest, fees, or other obligations when due under this letter, the Note, or any other agreement or arrangement with the Bank, (ii) there exists, and is continuing, any default under the Note, or any violation or failure to comply with any provision of the Note, (iii) any litigation is pending or threatened against the Borrower which would be reasonably likely to have a material adverse effect on its financial condition or results of operation, (iv) there is a material default, beyond the period of grace provided with respect thereto, under any agreement governing indebtedness of the Borrower, with respect to which there is an aggregate outstanding principal amount in excess of $500,000, (v) any petition is filed by or against the Borrower under the Federal Bankruptcy Code or similar state law and such petition remains undismissed or unstayed for a period of 30 days. The Bank may require a certificate of compliance with these conditions from the Borrower's Chief Financial Officer or Treasurer as a condition to making any loan hereunder. (e) The bank has a valid copy of the Revolving Credit Agreement executed between the Borrower and NBD Bank, N.A. dated February 24, 1992 and all amendments, additions, or renewals thereto to and including the date hereof (the most recent amendment being dated August 25, 1994). Borrower will deliver to bank within 45 days of execution, copies of all future amendments, additions, or renewals of said Revolving Credit Agreement. As soon as available and in any event within 45 days after the end of each fiscal quarter of the Company, the unaudited consolidated and consolidating balance sheet as of the end of such fiscal quarter and the related consolidated and consolidating statements of earnings, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding fiscal year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer of the applicable person as having been prepared in accordance with GAAP, together with a certificate of the chief financial officer of American National Bank Mr. Burke B. Roche November 1, 1994 Page 3 the Company stating that (A) no Default or Event of Default has occurred and is continuing or, if any Default or Event of default has occurred and is continuing, a statement setting forth the details thereof and the action which the applicable person has taken and proposes to take with respect thereto. As soon as available and in any event within 90 days after the end of each fiscal year of the Company a copy of the audited consolidated balance sheet of the Company and its consolidated Subsidiaries and the related consolidated statements of earnings, stockholders' equity and cash flow for such fiscal year, with a customary audit report of KPMG Peat Marwick, or other independent certified public accountants selected by the Company and reasonably acceptable to Bank, without qualifications unacceptable to Bank, together with a copy of the certificate of such accountants, annually presented to NBD Bank, N.A., stating that they have reviewed the Credit Agreement currently in existence between Borrower and NBD Bank, N.A. and stating further whether, in the course of their review of such financial statements, they have become aware of any Default or Event of Default and, if such a Default or Event of Default then exists and is continuing, a statement setting forth the nature and status thereof. Promptly upon the filing or making thereof, copies of each annual report, proxy or financial statement or other communication sent to the Company's stockholders generally and copies of all annual, regular, periodic and special reports and registration statements which the Company may file or be required to file with the Securities and Exchange Commission or with any securities exchange or the National Association of Securities Dealers, Inc. Borrower shall make available all documents reasonably requested by Bank, including any and all agreements with third parties, and a copy of the compliance certificate required pursuant to section 6.1 d(ii) of the NBD revolving credit agreement. (f) THIS LETTER AND NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. BOTH PARTIES HERETO WAIVE THE TRIAL BY JURY IN THE EVENT THIS LETTER OR THE NOTE BECOMES THE SUBJECT OF A DISPUTE. Mr. Roche, we are pleased to provide this financing arrangement to Binks Manufacturing Company, and look forward to establishing a long and mutually beneficial banking relationship. We are convinced that the fit between the two organizations is a good one, and it will be imperative for us to prove this over the months ahead. American National Bank Mr. Burke B. Roche November 1, 1994 Page 4 Should you have any questions or concerns regarding this matter, please do not hesitate to contact me. Sincerely, /s/ Patrick J. Hickey PJH/wlw Accepted this 2nd day of November, 1994. Binks Manufacturing Company By: /s/ Burke B. Roche ------------------------------ Burke B. Roche President Date: 11/2/94 ------------------------------- EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS NOV-30-1994 DEC-01-1993 NOV-30-1994 8,564 0 68,214 0 74,911 155,997 59,164 31,780 193,364 56,758 38,114 3,089 0 0 87,139 193,364 243,599 243,599 167,261 167,261 0 0 2,767 5,595 2,163 3,432 0 0 0 3,415 1.11 1.11
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