10-K405 1 FORM 10-K405 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NO. 1-4290 ANTHONY INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-2077125 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 4900 SOUTH EASTERN AVENUE LOS ANGELES, CALIFORNIA 90040 (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES) REGISTRANT'S TELEPHONE NUMBER: (213) 724-2800 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED -------------------- Common Stock, par value $1 New York Stock Exchange Pacific Stock Exchange Series A Preferred Stock Purchase Rights New York Stock Exchange Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE INDICATE BY AN "X" WHETHER THE REGISTRANT 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, AND HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X. 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 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 NONAFFILIATES WAS APPROXIMATELY $126,731,000 AS OF MARCH 15, 1995. The computation includes as affiliates Myron P. Anthony, Bernard I. Forester and the Employee Stock Ownership Plan of the registrant, described in the proxy statement referred to below, without prejudice to a determination that such persons are nonaffiliates of the registrant for any other purpose under the Securities Act of 1933 or the Securities Exchange Act of 1934. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF MARCH 15, 1995. Common Stock, par value $1 11,874,128 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the Annual Meeting of Shareholders to be held May 4, 1995 are incorporated by reference in Part III. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FORM 10-K ANNUAL REPORT PART I ITEM 1. BUSINESS: SUMMARY DESCRIPTION AND CHARACTERISTICS Anthony Industries, Inc. ("Anthony" or the "Company") is a diversified manufacturer and distributor of brand name sporting goods, specialty active apparel, and other recreational products. In addition, the Company manufactures and distributes selected industrial products. For financial information and a geographic breakdown regarding the recreational and industrial segments, see Note 11 of Notes to Consolidated Financial Statements, "Segment Data," in Part II, Item 8 of this Form 10K. The Company, headquartered in Los Angeles, California, was founded in 1946 as Anthony Pools, Inc. The Company's common stock was first offered to the public in 1959 and is currently traded on the New York and Pacific Stock Exchanges (symbol: ANT). Set forth below is a description of the recreational and industrial businesses of the Company. RECREATIONAL PRODUCTS Anthony's Recreational Products segment consists of three product classes: outdoor sporting goods, active & sporting apparel and home recreational products. Total sales for the segment were $332.1 million, $285.5 million and $266.6 million for the years 1994, 1993 and 1992, respectively. OUTDOOR SPORTING GOODS. Anthony's outdoor sporting goods are used in a wide variety of sports and sporting activities and are marketed under the following brand names:
BRAND PRODUCT ----- ------- K2(R) alpine skis K2(R) snowboards K2(R) in-line skates Olin(R) alpine skis Shakespeare(R) fishing rods, reels, and fishing kits and combos Stearns(R) personal flotation devices, wetsuits, rainwear and snorkeling equipment ProFlex(R) full-suspension mountain bikes Girvin(R) flex-stems Dana Design(R) backpacks Wilderness Experience(R) backpacks, apparel
Sales of outdoor sporting goods accounted for $224.6 million, $192.7 million and $170.8 million during 1994, 1993 and 1992, respectively. Skis, snowboards and in-line skates. The Company manufactures its alpine skis in the United States and Norway for sale in North America, Europe and Japan under the K2 and Olin names. K2 snowboards, introduced in 1987, are manufactured by the Company in the United States for sale in the United States, Europe and Japan. K2 in-line skates, introduced in 1994, are manufactured to Company specifications by a vendor in Korea, although certain components, such as wheels, are made in the United States. In-line skates are sold by the Company in the United States, Europe and Japan. The Company manufactures cross- country skis under the name Madshus for a retailer/distributor which owns the name and sells the skis principally in Europe. K2 products are sold by independent sales representatives in the United States, and through independent distributors and/or Company-owned distributors in Europe, to specialty retail shops and to sporting goods chains. 1 Fishing Tackle. The Company sells fishing rods, reels, fishing line and fishing kits and combos worldwide through the fishing tackle division of its subsidiary Shakespeare Company ("Shakespeare"). Shakespeare fishing tackle is manufactured principally in the People's Republic of China, although rod components, including blanks for the Ugly Stick fishing rods, are made by the Company in the United States. Certain other products are manufactured to the Company's specifications by vendors in Asia. Shakespeare products are distributed through an in-house marketing staff and through independent sales representatives to mass merchandisers, single-store retailers, and chain stores. Water Safety Products. Stearns manufactures and sells flotation vests, jackets and suits ("personal flotation devices"), cold water immersion products, neoprene wetsuits, rainwear and snorkeling equipment, to the recreational industries, the off-shore oil industry, commercial fishermen and other commercial users, both domestically and internationally. Other than rainwear, neoprene wetsuits and snorkeling equipment, which it purchases from suppliers mainly in Asia, Stearns' products are manufactured by it in the U.S. and distributed throughout the world by an in-house marketing staff and independent sales representatives. The laws of the U.S. and most states require that occupants of boats either wear or have available to them personal flotation devices meeting Coast Guard standards. Stearns' personal flotation devices are manufactured to those standards and are subject to rigorous testing for certification by Underwriters Laboratories. International regulations require merchant marine operators and commercial fishermen to equip their fleets with cold water immersion suits, where appropriate. The Company believes that Stearns is the largest manufacturer of personal flotation devices in the United States. Mountain Bikes. Girvin, acquired in 1993, designs and distributes full- suspension mountain bikes and components under the Girvin(R), Girvin Flexstem(R), Vector(R), and ProFlex(R) brand names in the United States, Western Europe and Asia. Certain components, particularly front forks, are manufactured by Girvin in the U.S. The mountain bikes are assembled to Girvin's specifications by a vendor in Asia. Girvin distributes its products through an in-house marketing staff and through independent sales representatives to independent bicycle dealers in the U.S., and through distributors internationally. Outdoor products. Dana Design and Wilderness Experience ("Wilderness") were acquired by the Company in February 1995 and December 1994, respectively, and their operations have been combined. Dana Design and Wilderness design manufacture and distribute backpacks and specialized outdoor apparel under the Dana Design(R), Wilderness Experience(R) and Wild X(R) brand names domestically. The products are distributed through independent sales representatives to outdoor specialty dealers in the U.S. ACTIVE AND SPORTING APPAREL. The Company's Active and Sporting Apparel product class consists of Hilton active wear and K2 ski apparel. Sales of Active and Sporting Apparel accounted for $40.1 million, $34.9 million and $35.3 million during 1994, 1993 and 1992, respectively. The Hilton Active Apparel division manufactures and distributes jackets, shirts, fleece tops and other activewear, primarily for use in the screen print and advertising specialty markets which supplies imprinted items (including garments) primarily to corporate buyers. These garments are sold under the Hilton(R) and USA(R) trademarks to advertising specialty customers, embroiderers and screen printers throughout the United States. Hilton sales are generated largely from Hilton Active Apparel's catalogs, through a direct sales force and independent sales representatives. K2 ski apparel is manufactured to K2's specifications by various suppliers, located in Europe and Asia. These garments are sold under the K2 trademark mainly to European dealers and distributors. HOME RECREATIONAL PRODUCTS. The Company's Home Recreational Products consist of Anthony pools, pool equipment and Poolsaver swimming pool covers. Sales of Home Recreational Products accounted for $67.4 million, $57.9 million and $60.5 million during 1994, 1993 and 1992, respectively. 2 Anthony Pools constructs and remodels residential gunite swimming pools sold directly to consumers, or indirectly through home builders, in five regions in or near major cities in California, Texas, and the eastern seaboard. The division also distributes swimming pool equipment, such as filters and heaters, which are installed on swimming pools built by Anthony or sold to gunite or concrete pool builders under an authorized dealership program in markets not served by Anthony. Replacement parts and equipment are sold by authorized service centers. The Company believes that Anthony Pools is one of the two largest builders of residential gunite swimming pools in the United States. Poolsaver manufactures and installs motorized and hand-operated swimming pool covers sold directly to consumers and pool builders. Sales are made through branches in or near major cities in California and the eastern seaboard and through distributors and dealers in markets in which Poolsaver does not have offices. Poolsaver additionally provides service on existing pool covers through its service organization. Several of the trademarks used by the Company's recreational products segment are believed to be recognizable by the consumer and therefore important to facilitating the sales of these products. Such trademarks include Ugly Stik(R) fishing rods, K2(R) skis, snowboards and in-line skates, Olin(R) skis, Stearns(R) flotation devices, Anthony Pools(R), Poolsaver(R) pool covers, Girvin Flexstems(R) and Proflex(R) mountain bikes, Hilton(R) active apparel, and Dana Design(R) and Wilderness Experience(R) backpacks and apparel. INDUSTRIAL PRODUCTS The Company's Industrial Products segment consists principally of extruded thermoplastic monofilaments, fiberglass antennas and light poles and laminated and coated paperboard products. Extruded thermoplastic monofilaments are used by the paperweaving industry and for weed trimmer line applications. Paperboard products are used in residential and commercial construction and industrial packaging. Sales of Industrial Products accounted for $170.3 million, $146.1 million and $135.4 million during 1994, 1993 and 1992, respectively. Through the Monofilament division of Shakespeare, the Company manufactures single strand extruded nylon or polymer monofilament in a variety of diameters, tensile strengths and softnesses for use in various applications. Specialized monofilament line is marketed to weavers who manufacture woven "mats" for use by the paper industry in the United States, Europe and South America. The European market is supplied primarily from its manufacturing facility in the U.K. The Monofilament division also supplies weed trimmer line to retailers and original equipment manufacturers in the lawn care market. Fishing line is manufactured by Monofilament and is marketed by Fishing Tackle throughout the United States to retailers and mass merchandisers. The Electronics & Fiberglass division of Shakespeare manufactures fiberglass products primarily for the United States market, consisting mainly of utility and decorative light poles and radio antennas for citizen band, marine and military applications. The Company also distributes marine radios and other marine electronics under the Shakespeare brand which are manufactured in Asia to the Company's specifications. The Simplex Products division manufactures a wide range of laminated, coated and reinforced paperboard products, which include insulative sheathing marketed under the trademark Thermo-ply(R), container components for fibre drums and flexible packaging paperboard products. These products are sold to the residential and manufactured housing, container and industrial packaging industries. Simplex also sells building products, such as Barricade(R) building wrap principally to residential construction and Finestone(R) coatings principally to the commercial construction industries. Simplex also operates a paper recycling mill which produces chip paperboard primarily used in the manufacture of Thermo-ply and secondarily sold to others in nonconstruction related markets. Most Simplex products must meet rigid performance specifications imposed by regulatory agencies and customers. Insulative sheathing additionally requires national and local building code approvals. 3 Sales of industrial products are generally made either directly or through distributors or sales representatives. Except for sales of fibre drum container components and paperweaving monofilaments, sales of industrial products are made to a large number of customers. COMPETITION Anthony believes that it has the leading market share in the United States market for alpine skis, personal flotation devices, paperweaving monofilament, weed trimmer line, fiberglass light poles, laminated and coated paperboard insulative sheathing, marine antennas and full-suspension mountain bikes, motorized pool covers and has one of the two largest market shares for domestic residential gunite swimming pools. The Company also believes that it has one of the leading market shares in fishing tackle in the United Kingdom and Holland and has one of the top five market shares for skis in Germany and Japan. Fewer than ten ski manufacturers and personal flotation device manufacturers account for the majority of shipments worldwide. Six fishing tackle manufacturers account for the majority of the domestic shipments of fishing tackle. A large number of companies compete within the ad specialty market, while five mountain bike manufacturers account for the majority of sales to the independent bike dealers domestically. The sporting goods markets are generally highly competitive, with competition mainly centering on product performance, price and rapid delivery. The ski market is also dependent on weather conditions in various geographic regions in the United States, Europe and Japan and on the amount of discretionary income available in the economy. The Company's swimming pool business competes with many privately owned and small franchised pool building operations. The swimming pool market is dependent to a large extent on the amount of discretionary income available in the economy, the level of consumer confidence, the availability of consumer credit at reasonable interest rates and on the existence of favorable weather during the pool building season. The pool cover business competes with five manufacturers of pool covers and substitute products in competing industries. The Company's industrial products are, in most instances, subject to price competition, ranging from moderate in the marine antenna and monofilament lines to intense for the commodity-type products. Sales growth and stability are dependent to varying degrees upon favorable economic conditions in the domestic housing, container and paper industries. Insulative sheathing products and fiberglass light poles compete with substitute products used for similar purposes. RAW MATERIALS AND FOREIGN SOURCING The recreational products segment has not experienced any substantial difficulty in obtaining raw materials, parts or finished goods inventory. Certain components and finished goods, however, are manufactured or assembled abroad and therefore could be subject to interruption as a result of domestic unrest, local economic changes or other conditions in those countries and as a result of increased tariffs and trade difficulties between those countries and other countries in which Company products are manufactured or sold. A major portion of the Company's fishing rods, including its Ugly Stik line, and reels are currently manufactured in the People's Republic of China which trades with the United States under a Most Favored Nation ("MFN") trade status. While the Company believes that alternative sources for its fishing tackle produced in China could be found, maintaining its existing costs of such fishing tackle will depend on these products continuing to be treated under MFN tariff rates, which the U.S. from time to time has threatened to rescind. Early in 1995, the United States threatened trade sanctions against certain products made in China, including fishing rods. Shortly before such sanctions were to have become effective, however, the U.S. agreed not to impose them based on certain representations made by China relating to its future enforcement of intellectual property laws. 4 The industrial product segment has not experienced any substantial difficulty in obtaining raw materials, although recycled corrugated scrap paper, a raw material used in the production of insulative sheathing, has become materially more expensive, a trend which the Company expects could continue. At some level this increasing cost could have a material impact on the profitability of this line. SEASONALITY The recreational products segment generally sells to highly seasonal markets. Alpine ski and snowboard sales and sales of active apparel to the advertising specialty markets are strongest in the third and fourth quarters. Sales of personal flotation devices occur primarily in the first and second quarters, whereas those of fishing tackle occur primarily in the first, second and fourth quarters. Mountain bike sales occur primarily in the fourth and first quarters and swimming pool sales occur primarily in the second and third quarters. In fishing tackle, skiing, personal flotation devices and active apparel, the rapid delivery requirements of customers and the seasonality of the business require an investment in significant amounts of inventory in anticipation of and through the selling seasons. Progress payments collected from customers during the construction of swimming pools help avoid utilizing substantial amounts of the Company's cash during the pool construction period. Extended payment terms offered in the fishing tackle, ski, snowboard and personal flotation device industries create seasonally large accounts receivable balances. The Company has observed an evolving change in the buying patterns of mass merchant and other sporting goods customers, who are becoming more cautious about pre-season inventories, preferring to accept delivery closer to their retail selling seasons. The Company's industrial products segment is mildly seasonal. Sales to the domestic housing, lawn care and marine antenna markets occur more heavily in the first two quarters of the year. MAJOR CUSTOMERS No one customer of the Company accounts for ten percent or more of its consolidated annual net sales. While the Company believes that its customer relationships are excellent, it has two large customers, and the loss of either could have a material impact on the Company's sporting goods business. RESEARCH AND DEVELOPMENT The Company maintains at several of its manufacturing centers decentralized research and development departments which are engaged in development of new products and processes, new uses of raw materials and improvement of products presently being manufactured. Expenditures for Company-sponsored research and development activities at all locations amounted to approximately $6.3 million in 1994, $4.3 million in 1993 and $3.5 million in 1992. ENVIRONMENTAL FACTORS The Company is among several potentially responsible parties named in certain EPA matters involving discharge of hazardous materials at an old waste disposal site. This action seeks primarily cleanup costs. The potential costs related to such matters are not expected to have a material impact on the capital expenditures, equity, earnings or the competitive position of the Company. EMPLOYEES At December 31, 1994 and 1993 the Company and its subsidiaries had approximately 3,700 employees. 5 ITEM 2. PROPERTIES The corporate headquarters of the Company is located in 15,000 square feet of leased office space in Los Angeles, California. The table below provides information with respect to the principal production and distribution facilities utilized by the Company as of December 31, 1994.
OWNED FACILITIES LEASED FACILITIES ----------------- ----------------- GENERAL NO. OF SQUARE NO. OF SQUARE LOCATION CHARACTER LOCATIONS FOOTAGE LOCATIONS FOOTAGE -------- --------- --------- ------- --------- ------- RECREATIONAL PRODUCTS Alabama.................... Production 2 156,000 California................. Production 1 25,000 Illinois................... Distribution 1 76,000 Minnesota.................. Distribution and production 1 290,000 Rhode Island............... Distribution and production 1 50,000 South Carolina............. Distribution and production 2 140,000 Washington................. Distribution and production 1 160,000 1 37,000 Foreign.................... Distribution and production 3 101,000 6 147,000 --- ------- --- ------- 9 847,000 10 335,000 === ======= === ======= INDUSTRIAL PRODUCTS Florida.................... Production 1 73,000 Michigan................... Production 2 278,000 South Carolina............. Production 2 484,000 --- ------- 5 835,000 === =======
The terms of the leases range from one to eight years, and many are renewable for additional periods. The termination of any of the short-term leases would not have a material adverse effect on the Company's operations. The Company believes that, in general, its plants and equipment are adequately maintained, in good operating condition and adequate for the Company's present needs. The Company regularly upgrades and modernizes its facilities and equipment and expands its facilities to meet customer requirements. ITEM 3. LEGAL PROCEEDINGS Certain of the Company's products are used in relatively high risk recreational settings and from time to time the Company is named as a defendant in lawsuits asserting product liability claims relating to its sporting goods and recreational products and, in particular, its swimming pools. To date none of these lawsuits has had a material effect on the Company, and the Company does not believe that any lawsuit now pending could reasonably be expected to have such an effect. While the Company maintains product libility insurance coverage, no assurances can be given that such insurance will continue to be available at acceptable prices or that a significant product liability judgment would be covered by such insurance or that such judgment would not exceed the policy limits. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 6 EXECUTIVE OFFICERS OF THE COMPANY
NAME POSITION AGE ---- -------- --- Bernard I. Forester Chairman of the Board and Chief Executive Officer 67 Richard M. Rodstein President and Chief Operating Officer 40 Robert E. Doyle Senior Vice President of the Company and president of Simplex Products 48 John J. Rangel Senior Vice President--Finance 41 Tony H. Chow Vice President and Director of Taxes 47 David G. Cook Vice President of the Company and president of Stearns 57 Woodrow P. Greene Vice President--Quality and Process Improvement 50 David H. Herzberg Vice President of the Company and president of Shakespeare Monofilament 52 Marilyn E. Lane Vice President and Treasurer 63 Franklin D. Leibow Vice President of the Company and president of Hilton Active Apparel 45 L. Wayne Shealy Vice President of the Company and president of Shakespeare Electronics & Fiberglass 44 Susan E. McConnell Secretary 51
Mr. Forester has been Chairman of the Board and Chief Executive Officer for more than the past five years. Mr. Rodstein has been President and Chief Operating Officer of the Company for more than the past five years. Mr. Doyle has been a Senior Vice President of the Company and president of Simplex Products for more than the past five years. Mr. Rangel, a CPA, has been Senior Vice President--Finance for more than the past five years. Mr. Chow has been a Vice President of the Company for more than the past five years. Mr. Cook has been a Vice President of the Company and president of Stearns for more than the past five years. Mr. Greene has been Vice President--Quality and Process Improvement of the Company since January 1, 1993 and Director of Quality and Process Improvement of the Company from May 1991 to December 1992. For more than one year previous to that, Mr. Greene was employed by QualPro, Inc., a quality and process improvement consulting firm. Mr. Herzberg has been a Vice President of the Company and president of Shakespeare Monofilament for more than the past five years. Mrs. Lane has been Vice President and Treasurer for more than the past five years. Mr. Leibow has been a Vice President of the Company since January 1, 1993 and president of Hilton Active Apparel since October 1989. Mr. Shealy has been a Vice President of the Company since January 1991 and president of Shakespeare Electronics & Fiberglass since August 1989. Mrs. McConnell, a California attorney, has been Secretary of the Company and administrative assistant to the Chief Executive Officer for more than the past five years. Officers of the Company are elected for one year by the directors at their first meeting after the annual meeting of shareholders and hold office until their successors are elected and qualified. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS PRINCIPAL MARKETS The Common Stock of the Company is traded on the New York and Pacific Stock Exchanges (symbol: ANT). At March 15, 1995 there were 1,893 holders of record of Common Stock of the Company. COMMON STOCK PRICES The following table sets forth the high and low sales prices of the Common Stock during the Company's two most recent fiscal years:
DIVIDENDS PER SHARE --------------------- HIGH LOW CLOSE CASH STOCK ------ ------ ------ ---------- ---------- 1994 Fourth......................... 17 3/8 16 16 $.11 5% Third.......................... 16 7/8 14 3/8 16 1/4 .105 Second......................... 15 1/8 13 7/8 14 1/2 .105 First.......................... 17 1/2 14 15 1/8 .105 1993 Fourth......................... 15 1/4 13 3/8 15 1/4 $.105 5% Third.......................... 14 7/8 11 7/8 13 3/4 .10 Second......................... 13 5/8 11 1/8 12 1/8 .10 First.......................... 12 1/2 10 7/8 12 3/8 .10
-------- Prices and per share figures have been adjusted for stock dividends. DIVIDENDS Quarterly dividends of $.11 were declared on each share of Common Stock during the two most recent years. A 5% stock dividend was declared in the fourth quarter of each of the previous two years and the cash dividend was subsequently paid on the higher number of shares outstanding. The Company is subject to credit agreements which limit its ability to pay cash dividends. As of December 31, 1994, $7.9 million was available for such payments. See Note 5 of Notes to Financial Statements in Part II, item 8 of this Form 10-K for further description of the Company's credit facilities. Trust Agent, Registrar and Dividend Disbursing Agent for Common Stock Harris Trust Company of California 601 South Figueroa Street, Ste. 4900 Los Angeles, California 90017 8 ITEM 6. SELECTED FINANCIAL DATA RELEVANT DATA HAS BEEN RETROACTIVELY ADJUSTED FOR STOCK DIVIDENDS AND STOCK SPLITS
FOR THE YEARS ENDED DECEMBER 31 ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS EXCEPT FOR PER SHARE FIGURES) Net Sales................. $502,444 $431,640 $402,047 $370,256 $376,611 Income before extraordi- nary item................ 13,033 11,121 8,521 6,605 2,723(a) Extraordinary loss on early extinguishment of debt..................... (988)(b) -------- -------- -------- -------- -------- Net Income................ $ 13,033 $ 11,121 $ 8,521 $ 6,605 $ 1,735 -------- -------- -------- -------- -------- Per share: Income before extraordi- nary item.............. $ 1.09 $ .94 $ .73 $ .57 $ .24 Net income.............. 1.09 .94 .73 .57 .15 Dividends Cash--per share......... $ .425 $ .405 $ .385 $ .365 $ .348 Stock................... 5% 5% 5% 5% 5% -------- -------- -------- -------- -------- Average Shares Outstand- ing...................... 11,919 11,798 11,635 11,577 11,369 -------- -------- -------- -------- -------- At December 31............ Assets.................. $304,414 $257,279 $236,200 $221,650 $220,551 Short-term debt......... 21,259 13,012 20,840 33,208 27,606 Long-term debt, net of current instalments.... 109,921 87,271 68,525 43,451 53,750 Shareholders' equity.... 98,996 88,656 83,598 80,663 78,137
-------- (a) Reflects a restructuring charge of $1.8 million. (b) Reflects the write-off of unamortized original issue discount, net of tax benefit, relating to the redemption of convertible subordinated debentures. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REVIEW OF OPERATIONS: COMPARISON OF 1994 TO 1993 Net income for 1994 rose 17% to $13.0 million, or $1.09 per share, from $11.1 million, or $.94 per share, in the prior year. Sales advanced 16% to $502.4 million from $431.6 million in 1993. In the recreational products group, sales rose $46.6 million, or 16%, to $332.1 million. Fifty percent of the improvement was attributable to the successful introduction of K2's brand of Exotech in-line skates, increased demand worldwide for the K2 snowboard line and inclusion for the full year of the rapidly growing Proflex mountain bike business acquired in October 1993. Growth was also achieved from product extensions and higher overall activity in the swimming pool industry. Of particular significance were fifty-four styles of Hilton jackets, activewear and accessories for the advertising specialty market and new models of Stearns rainwear and wetsuits, all introduced within the prior 24 months, along with several new models of Shakespeare fishing reels, kit and combo series, which were introduced within the last 12 months in the U.S. market. Unit sales of Anthony swimming pools in 1994 increased for the first time since 1988, reflecting higher overall activity within the industry. Sales also benefited from increases in swimming pool remodels. Partially offsetting these gains were lower sales of skis to the economically depressed European and Japanese markets. In the industrial products group, sales increased $24.2 million, or 17% to $170.3 million. Over half of the improvement was attributable to the Simplex products business, which benefited from increased sales of Finestone commercial coatings, expanded models of vapor barriers and from improved housing starts and 9 shipments into the Japanese market which drove sales of insulative sheathing to a record level. Improved sales, particularly of fiberglass light poles and composite products and paperweaving monofilaments in the United Kingdom, generated the majority of the sales gains in the other two businesses of the group. Costs of goods sold, as a percent of sales, declined in 1994 as compared with the prior year. The resulting improvement in gross profit margin was driven by product mix and gains in efficiency from further applications of the Anthony Improvement Process, particularly at Stearns, Hilton, Shakespeare Monofilament and Simplex. Overall gross profit in dollars also improved despite the significant cost of completing the conversion to cap skis and subsequent lower margins realized in the sale of these higher-cost skis. Margin and gross profit were also unfavorably impacted by the dramatic increase in the cost of recycled corrugated scrap paper, a raw material used in the manufacture of insulative sheathing by Simplex. Selling expense increased $8.8 million although as a percent of sales it was comparable to the year-ago period. The increase in selling expense resulted primarily from volume-related increases in the pool business, by the inclusion of the mountain bike business for a full year and increased spending in support of new products in the in-line skate, mountain bike, snowboard and apparel businesses. General and administrative expenses increased $7.7 million from the prior year. The increase reflects expenditures for new product development (particularly at K2), a continuation of further investments in systems and personnel to support the growth of the Company, and the inclusion of the mountain bike business for a full year. Interest expense increased $1.7 million in 1994. Domestic interest rates accounted for $532,000 of the increase, and a $17.4 million higher level of average borrowings, incurred to acquire and finance the mountain bike business and support the working capital needs of several product lines which exhibited growth in sales, accounted for the remainder. Combined operating profit (before interest, corporate expenses and taxes) increased $6.5 million over 1993. In the recreation products group, operating profit rose $3.8 million, or 31%, to $16.0 million. The group benefited from Shakespeare Fishing Tackle's introduction of several new fishing rods, reels and kit and combo series in the U.S. which, combined with lower manufacturing costs abroad, helped to produce record worldwide earnings for the fishing tackle business for the second consecutive year. Sales-related earnings gains also contributed to the group's improvement, particularly from the K2 snowboards and successful introduction of the previously described products of Stearns and Hilton. Partially offsetting these profit gains were a loss incurred by the swimming pool business and the impact of costs incurred in converting the ski plant to the manufacture of cap skis, the resulting increased cost to manufacture the cap skis and the impact of declining sales in the European and Japanese ski markets. In the industrial products group, operating profit rose $2.7 million, or 19%, to $16.7 million. The improvement was mainly due to sales-related earnings and efficiency gains at Shakespeare Monofilament and Simplex. Income tax expense in 1994 included $600,000 relating to a reclassification of state tax previously recorded as selling and general and administrative expense (See Note 4 of Notes to Consolidated Financial Statements). REVIEW OF OPERATIONS: COMPARISON OF 1993 TO 1992 Net income for 1993 rose 31%, to $11.1 million, or $.94 per share, from $8.5 million, or $.73 per share, in the prior year. Sales in 1993 increased 7%, to a record $431.6 million, from the $402.0 million reported in 1992. 10 Sales of the recreational products group increased $18.9 million, to $285.5 million for the 1993 year. Favorable weather conditions in the United States and an improvement in the economy in certain regions of the country provided a boost to sales of K2 skis. The popularity of K2 snowboards pushed sales of this product up to nearly double prior years' levels. Sales of Shakespeare fishing tackle in the United States benefited from an increased distribution of Ugly Stik fishing rods, a growing acceptance of the new series of fishing reels introduced and an increase in shipments of fishing line. Several new products introduced by Stearns and Hilton in recent years have gained acceptance by their customers. These include Stearns wetsuits and rainwear and new styles of Hilton jackets and activewear for the ad specialty markets. A focused marketing effort in the pool remodeling business produced attractive gains in this segment of the swimming pool business. The Group also benefited from sales reported by an October 1993 acquisition, Girvin, which distributes and designs full suspension mountain bikes under the ProFlex brand name. Offsetting these gains was the lingering impact of the recession in the Northeast and California, which resulted in lower new pool and pool cover sales, and the European recession and an oversupplied Japanese market, which unfavorably impacted sales of fishing tackle and alpine skis in those markets. Sales of the industrial products group increased to $146.1 million, from $135.4 million in the prior year. Increased housing starts and a wider distribution of building products sales in the United States and Japan produced sales gains in Thermo-ply, Finestone and other building products. Sales of fiberglass light poles and ornamental poles increased over the prior year as a result of new product introductions, broader distribution in the marketplace and improved product quality. Sales of monofilaments also contributed to the Group's sales increase. Gross profits as a percent of sales declined in 1993, from 26.4% to 25.6%, largely because of the impact of significant costs incurred in the conversion of virtually the entire K2 plant in Washington to cap ski production. These costs are expected to continue into early 1994, until manufacturing efficiencies improve and the converted plant is brought up to capacity production levels. The gross profit percentage decline also reflects the development cost of the K2 in-line skate which, along with the cap ski, is scheduled for initial shipments in early 1994. Other factors affecting the gross profit percentage were largely offsetting: significant cost reductions attained through manufacturing process improvements at Simplex, Monofilament and Electronics and Fiberglass, from which continued benefits are expected to be derived, were offset by higher costs at our distribution businesses in Europe, which arose from the devaluation of European currencies in 1993. Selling expense as a percent of sales also declined from the prior year. This resulted largely from the recession-related contraction of sales for fishing tackle and skis in the European market. Partially offsetting this was spending increases at the Hilton activewear business to increase its penetration in new markets and better serve its customers. General and administrative expenses increased $1.3 million from 1992. The increase reflects performance-based compensation and the Company's investments in personnel, training and systems for improving the quality of products and services. Interest expense declined by a net amount of $1.0 million in 1993. Lower worldwide interest rates produced a benefit of $1.7 million, which was partially offset by $700,000 of higher interest incurred domestically on a $12 million increase in average bank debt arising from higher sales of recreational products. Combined operating profit (before interest, corporate expenses and taxes) increased $3.6 million from the prior year. The recreational products group, which reported operating profit of $12.2 million, accounted for a $600,000 increase. Higher domestic sales of fishing tackle and continuing foreign manufacturing cost economies produced record worldwide fishing tackle earnings. Gains were also achieved at Anthony Pools, which significantly narrowed its losses due to a robust aftermarket in remodeling and its ongoing quality and process improvement program, and at Hilton Active Apparel, which benefited from higher overall sales. 11 Largely offsetting these gains were lower ski earnings resulting from costs incurred in the conversion of the U. S. plant to cap ski production and the development cost of the in-line skate program. The industrial products group reported an improvement of $3.0 million in operating profit to $14.0 million for the current year. Earnings of the building products and light pole businesses improved due to increased volume and cost reductions from improvements made in the manufacturing processes. Paperweaving and cutting line earnings improved largely as a result of increased volume. LIQUIDITY AND SOURCES OF CAPITAL The Company's operating activities used $15.7 million of cash during the current year as compared with cash provided of $10.3 million in the prior year. The decrease in cash was due primarily to financing higher levels of accounts receivable and inventories arising from the growth in sales of in-line skates, snowboards, rainwear, wetsuits, fishing tackle and full suspension mountain bikes. In the industrial products group, cash was also used to purchase additional inventories in anticipation of further raw material cost increases. Net cash used for investment activities in 1994 decreased to $8.7 million from $12.5 million in 1993. No material commitments for capital expenditures existed at yearend. The Company's principal long-term borrowing facility is a $70 million unsecured bank revolving credit line due June 28, 1997. At December 31, 1994, $68.0 million was outstanding under this line. Additionally, the Company had several foreign and domestic short-term lines of credit totaling $40.7 million, of which $18.3 million was outstanding at yearend. Under the long-term facility, the Company is subject to a loan agreement which, among other things, restricts amounts available for payment of cash dividends by the Company. As of December 31, 1994, retained earnings of $7.9 million were free of such restrictions. The Company also has $40 million of 8.39% unsecured senior notes due in 2004, payable in nine equal annual principal payments beginning in 1996. The notes are subject to agreements which are generally less restrictive than the $70 million bank revolving credit line. For information regarding the Company's interest rate swap agreements, see Note 5 of the Notes to Consolidated Financial Statements. The Company anticipates its cash needs in 1995 will be provided from operations, existing credit lines, new borrowings or other public or private market sources. IMPACT OF INFLATION AND CHANGING PRICES The inflation rate, as measured by the Consumer Price Index, has been relatively low in the last few years, and therefore pricing decisions by the Company have largely been influenced by competitive market conditions. The Company uses the LIFO method of inventory pricing for 46% of its inventories, which results in the most recent costs of LIFO-priced inventory being reflected in the income statement. Current costs of the Company's inventories priced on a FIFO basis are also reflected in the income statement because of the relatively high turnover of these inventories. Depreciation expense is based on the historical cost to the Company of its fixed assets and therefore is considerably less than it would be if it were based on current replacement cost. While buildings, machinery and equipment acquired in prior years will ultimately have to be replaced at significantly higher prices, it is expected that this will be a gradual process over many years. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA STATEMENTS OF CONSOLIDATED INCOME
YEARS ENDED DECEMBER 31 -------------------------------------------- 1994 1993 1992 -------------- -------------- -------------- (IN THOUSANDS EXCEPT FOR PER SHARE FIGURES) Net Sales......................... $ 502,444 $ 431,640 $ 402,047 Other Income...................... 1,578 1,305 1,159 -------------- -------------- -------------- 504,022 432,945 403,206 Costs and expenses Cost of products sold........... 370,902 321,366 296,006 Selling expenses................ 61,023 52,254 52,199 General and administrative ex- penses......................... 44,283 36,605 35,313 Interest expense................ 7,481 5,759 6,777 -------------- -------------- -------------- 483,689 415,984 390,295 -------------- -------------- -------------- Income before provision for income taxes............................ 20,333 16,961 12,911 Provision for income taxes........ 7,300 5,840 4,390 -------------- -------------- -------------- Net Income........................ $ 13,033 $ 11,121 $ 8,521 ============== ============== ============== Per Share......................... $ 1.09 $ .94 $ .73 ============== ============== ==============
See notes to consolidated financial statements 13 ANTHONY INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ------------------ 1994 1993 -------- -------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Cash and cash equivalents................................ $ 7,700 $ 5,860 Accounts receivable less allowances of $8,425 in 1994 and $7,262 in 1993.......................................... 111,154 90,056 Inventories, net......................................... 101,742 82,375 Deferred taxes........................................... 7,928 6,392 Prepaid expenses and other current assets................ 4,324 3,073 -------- -------- Total current assets................................... 232,848 187,756 PROPERTY, PLANT AND EQUIPMENT Land and land improvements............................... 1,665 1,617 Buildings and leasehold improvements..................... 26,797 25,367 Machinery and equipment.................................. 99,138 92,356 Construction in progress................................. 3,859 2,745 -------- -------- 131,459 122,085 Less allowance for depreciation.......................... 79,095 71,991 -------- -------- 52,364 50,094 OTHER ASSETS Intangibles, principally goodwill, net................... 15,825 15,829 Other.................................................... 3,377 3,600 -------- -------- Total Assets........................................... $304,414 $257,279 ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Bank loans............................................... $ 18,341 $ 6,288 Accounts payable......................................... 26,858 25,144 Accrued payroll and related.............................. 18,697 17,442 Other accruals........................................... 15,788 14,378 Current portion of long-term debt........................ 2,918 6,724 -------- -------- Total current liabilities.............................. 82,602 69,976 Long-Term Debt............................................. 109,921 87,271 Deferred Taxes............................................. 12,895 11,376 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred Stock, $1 par value, authorized 12,500,000 shares, none issued Common Stock, $1 par value, authorized 40,000,000 shares, issued shares--12,322,851 in 1994 and 11,681,393 in 1993.................................................... 12,323 11,681 Additional paid-in-capital............................... 66,973 56,863 Retained earnings........................................ 28,994 30,895 Employee Stock Ownership Plan and stock option loans..... (3,937) (3,361) Treasury shares at cost, 481,059 shares in 1994 and 469,681 shares in 1993.................................. (4,189) (3,993) Cumulative translation adjustments....................... (1,168) (3,429) -------- -------- Total Shareholders' Equity............................. 98,996 88,656 -------- -------- Total Liabilities and Shareholders' Equity............. $304,414 $257,279 ======== ========
See notes to consolidated financial statements 14 ANTHONY INDUSTRIES, INC. STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31 ------------------------- 1994 1993 1992 ------- ------- ------- (THOUSANDS) OPERATING ACTIVITIES Net income........................................ $13,033 $11,121 $ 8,521 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation.................................... 7,705 8,190 8,687 Amortization.................................... 929 893 966 Deferred taxes.................................. (17) 515 2,179 Changes in operating assets and liabilities: Accounts receivable........................... (21,098) (10,858) (11,087) Inventories................................... (19,367) (4,092) (6,838) Prepaid expenses and other current assets..... (1,251) 884 (1,034) Accounts payable.............................. 1,714 2,584 (800) Payrolls and other accruals................... 2,666 1,093 (923) ------- ------- ------- Net cash provided by (used in) operating activi- ties............................................. (15,686) 10,330 (329) ------- ------- ------- INVESTING ACTIVITIES Property, plant and equipment expenditures........ (11,620) (8,715) (7,131) Disposals of property, plant and equipment........ 1,924 304 310 Purchase of business, net of cash acquired........ (932) Other items, net.................................. 1,068 (3,108) (2,260) ------- ------- ------- Net cash used in investing activities............. (8,628) (12,451) (9,081) ------- ------- ------- FINANCING ACTIVITIES Borrowings under long-term debt................... 22,582 21,500 40,000 Payments of long-term debt........................ (3,738) (6,534) (10,078) Net increase (decrease) in short-term bank loans.. 12,053 (5,004) (17,216) Exercise of stock options......................... 267 629 222 Dividends paid.................................... (5,010) (4,733) (4,464) ------- ------- ------- Net cash provided by financing activities......... 26,154 5,858 8,464 ------- ------- ------- Net increase (decrease) in cash and cash equiva- lents.............................................. 1,840 3,737 (946) Cash and cash equivalents at beginning of year...... 5,860 2,123 3,069 ------- ------- ------- Cash and cash equivalents at end of year............ $ 7,700 $ 5,860 $ 2,123 ======= ======= =======
See notes to consolidated financial statements 15 ANTHONY INDUSTRIES, INC. STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1994 ------------------------------------------------------------------------- EMPLOYEE STOCK ADDITIONAL OWNERSHIP PLAN TREASURY CUMULATIVE COMMON PAID-IN RETAINED AND STOCK SHARES TRANSLATION STOCK CAPITAL EARNINGS OPTION LOANS AT COST ADJUSTMENTS TOTAL ------- ---------- -------- -------------- -------- ----------- ------- (IN THOUSANDS EXCEPT FOR PER SHARE FIGURES) BALANCE AT JANUARY 1, 1992................... $10,466 $41,727 $35,117 $(2,919) $(3,993) $ 265 $80,663 Net income for the year 1992............ 8,521 8,521 Exercise of stock op- tions................ 86 696 (560) 222 Cash dividends, $.385 per share............ (4,464) (4,464) Stock dividends, 5%, plus cash in lieu of fractional shares.... 499 5,554 (6,062) (9) Translation adjust- ments................ (1,662) (1,662) Employee Stock Ownership Plan, amortization and partial loan repayment............ 327 327 ------- ------- ------- ------- ------- ------- ------- BALANCE AT DECEMBER 31, 1992................... 11,051 47,977 33,112 (3,152) (3,993) (1,397) 83,598 Net income for the year 1993............ 11,121 11,121 Exercise of stock op- tions................ 97 828 (296) 629 Cash dividends, $.405 per share............ (4,733) (4,733) Stock dividends, 5% plus cash in lieu of fractional shares.... 533 8,058 (8,605) (14) Translation adjust- ments................ (2,032) (2,032) Employee Stock Owner- ship Plan, amortiza- tion and partial loan repay- ment................. 87 87 ------- ------- ------- ------- ------- ------- ------- BALANCE AT DECEMBER 31, 1993................... 11,681 56,863 30,895 (3,361) (3,993) (3,429) 88,656 Net income for the year 1994............ 13,033 13,033 Exercise of stock op- tions................ 78 764 (575) 267 Cash dividends, $.425 per share............ (5,010) (5,010) Stock dividend, 5%, plus cash in lieu of fractional shares.... 562 9,348 (9,924) (14) Translation adjust- ments................ 2,261 2,261 Repurchase of shares and stock option loan repayments........... 2 (2) 303 (196) 107 Employee Stock Ownership Plan, amortization and partial loan repayment............ (304) (304) ------- ------- ------- ------- ------- ------- ------- BALANCE AT DECEMBER 31, 1994................... $12,323 $66,973 $28,994 $(3,937) $(4,189) $(1,168) $98,996 ======= ======= ======= ======= ======= ======= =======
See notes to consolidated financial statements 16 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Shakespeare Company, K2 Corporation, Stearns Manufacturing Company and Girvin Inc. Cash Equivalents Short-term investments (including any debt securities) that are part of the Company's cash management portfolio are classified as cash equivalents and are carried at amortized costs. These investments are highly liquid, are of limited credit risk and have original maturities of three months or less. The carrying amount of cash equivalents approximates market. Accounts Receivable and Allowances Accounts receivable are the result of the Company's worldwide sales activities. Although the Company's credit risk is spread across a large number of customers within a wide geographic area, periodic concentrations within a specific industry occur due to the seasonality of its businesses. As of December 31, 1994, the Company's receivables from the ski and snowboard industry amounted to 46% of total receivables. The Company performs periodic credit evaluations to manage its credit risk. Allowances include reserves for volume-related discounts of $3,018,000 and $2,712,000 as of December 31, 1994 and 1993, respectively. Inventories Inventories are stated at the lower of cost or market. Cost is determined on the LIFO method with respect to approximately 46% and 49% of total inventories at December 31, 1994 and 1993, respectively, Cost was determined on the FIFO method for all other inventories. Income Taxes Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As permitted by Statement No. 109, the Company has elected not to restate the financial statements of any prior years. The cumulative effect of the change on the Company's financial statements was not material. Income taxes have been provided using the liability method. For years prior to 1993, the Company accounted for income taxes in accordance with Accounting Principles Board Opinion No. 11, "Accounting for Income Taxes," which provided for income taxes using the income statement approach. Property, Plant and Equipment Property, plant and equipment is recorded at costs. Depreciation is provided on the straight-line method based upon the estimated useful lives of the assets. Intangibles Goodwill arising from acquisitions is amortized on a straight-line basis over a period up to 40 years. Other intangibles are amortized on a straight-line basis over 3 to 15 years. Accumulated amortization of intangibles as of December 31, 1994 and 1993 amounted to $6,004,000 and $5,143,000, respectively. The Company periodically reviews intangibles for impairment of value. 17 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Foreign Currency Translation The functional currency for most foreign operations is the local currency. Foreign currency financial statements are converted into United States dollars by translating balance sheet accounts at the current exchange rate at yearend and income statement items at the average exchange rate for the year, with the resulting translation adjustment made to a separate component of shareholders' equity. Transaction gains or losses, other than those related to items deemed to be of a long-term nature, are included in net income in the period in which they occur. Advertising Costs Advertising costs are generally expensed as incurred. Advertising costs for the years ended December 31, 1994, 1993 and 1992 amounted to $12,943,000, $11,050,000 and $11,263,000, respectively. Research and Development Research and development costs are charged to expense as incurred. Research and development costs for the years ended December 31, 1994, 1993 and 1992 amounted to $6,298,000, $4,290,000 and $3,538,000, respectively. Per Share Data Earnings and cash dividends per share data have been retroactively adjusted for stock dividends. Earnings per share were determined by dividing net income by the average outstanding shares, including common stock equivalents and ESOP shares, using the treasury stock method. Common stock equivalents include stock options. Primary earnings per share approximate earnings per share on a fully diluted basis. NOTE 2--ACQUISITION OF BUSINESSES On October 14, 1993, the Company purchased certain assets of Ocean State International, Inc. ("Girvin"). Girvin is a distributor and manufacturer of Proflex full-suspension mountain bikes and Girvin accessories for sale in the U.S. and Europe. On February 4, 1995, the Company purchased Dana Design Ltd., a small manufacturer and distributor of backpacks primarily in the U.S. NOTE 3--INVENTORIES Inventories at December 31 are:
1994 1993 -------- ------- (THOUSANDS) Finished goods................................................ $ 66,900 $55,322 Work in process............................................... 8,788 8,985 Raw materials................................................. 32,216 24,164 -------- ------- Total at lower of FIFO cost or market (approximates current cost)........................................................ 107,904 88,471 Less LIFO valuation reserve................................... 6,162 6,096 -------- ------- $101,742 $82,375 ======== =======
18 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 4--INCOME TAXES Pretax income for the years ended December 31 was taxed under the following jurisdictions:
1994 1993 1992 ------- ------- ------- (THOUSANDS) Domestic................................................ $15,242 $13,631 $11,519 Foreign................................................. 5,091 3,330 1,392 ------- ------- ------- $20,333 $16,961 $12,911 ======= ======= =======
Components of the income tax provision for the three years ended December 31 are:
1994 1993 1992 ---------------- ----------------- ---------------- CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- (THOUSANDS) Federal...................... $5,610 $(760) $5,575 $(1,095) $3,375 $ 95 State........................ 1,755 (85) 1,020 (85) 720 25 Foreign...................... 505 275 (5) 430 195 (20) ------ ----- ------ ------- ------ ---- $7,870 $(570) $6,590 $ (750) $4,290 $100 ====== ===== ====== ======= ====== ====
The principal elements accounting for the difference between the statutory federal income tax rate and the effective tax rates for the three years ended December 31 are:
1994 1993 1992 ---- ---- ---- (PERCENT) Statutory federal income tax rate............................. 35.0 35.0 34.0 State income tax effect....................................... 5.3 3.6 3.8 U.S. tax effects of foreign earnings.......................... (5.0) (4.5) (2.8) Other......................................................... .6 .3 (1.0) ---- ---- ---- 35.9 34.4 34.0 ==== ==== ====
Deferred tax assets and liabilities are comprised of the following at December 31:
1994 1993 ------- ------- (THOUSANDS) Depreciation.................................................... $ 7,031 $ 7,010 Trademark amortization.......................................... 207 167 Other........................................................... 5,657 4,199 ------- ------- Long-term deferred tax liabilities, net....................... $12,895 $11,376 ======= ======= Insurance accruals.............................................. 1,967 2,093 Bad debt reserve................................................ 1,021 922 Other........................................................... 4,940 3,377 ------- ------- Current deferred tax assets, net.............................. $ 7,928 $ 6,392 ======= =======
Income taxes paid, net of refunds, in the years ended December 31, 1994, 1993 and 1992 were $6.7 million, $5.3 million and $2.2 million, respectively. 19 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 4--INCOME TAXES--(CONTINUED) The income tax provision for the year ended December 31, 1994 includes $600,000 relating to a reclassification of the provision for certain state taxes which have historically been included in selling and general and administrative expense. The Company has elected not to restate the financial statements of any prior years, as such amounts were not material. No provision for United States income taxes has been made on undistributed earnings of foreign subsidiaries, since a substantial portion of these earnings has been permanently reinvested. At December 31, 1994, the foreign subsidiaries had unused operating loss carryforwards of approximately $7.5 million, of which approximately $1.8 million expires in 2001 and the remainder carries forward indefinitely. Since the use of these operating loss carryforwards is limited to future taxable earnings of the related foreign subsidiaries, a valuation allowance has been recognized to offset the deferred tax asset arising from such carryforwards. NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS At December 31, 1994, the Company had several foreign and domestic short-term lines of credit totaling up to $40.7 million. The foreign subsidiaries' lines of credit generally have no termination date but are reviewed annually for renewal and are denominated in the subsidiaries' local currencies. At December 31, 1994, amounts outstanding under such short-term lines of credit (bank loans) were $18.3 million at interest rates ranging from 5.75% to 11.2%. The weighted average interest rates on short-term lines of credit as of December 31, 1994 and 1993 were 6.5% and 7.1%, respectively. The principal components of long-term debt at December 31 are:
1994 1993 -------- ------- (THOUSANDS) Notes payable due in nine equal annual principal instalments beginning in 1996 through 2004 with semi-annual interest payable at 8.39%............................................ $ 40,000 $40,000 $70 million three-year bank revolving credit line due June 28, 1997, quarterly interest payments due at LIBOR plus 3/4% and a commitment fee of 3/8% on the unused portion of the line through June 1997...................................... 68,000 50,500 Note payable due in monthly instalments through February 2001 with interest payable monthly at LIBOR plus 1 1/2% (7 1/2% at December 31)............................................. 4,703 Secured note payable to bank in semi-annual instalments of $211,300 including interest at 10% to January 2009--paid in full in 1994................................................ 3,094 Other debt................................................... 136 401 -------- ------- 112,839 93,995 Less--amounts due within one year............................ 2,918 6,724 -------- ------- $109,921 $87,271 ======== =======
The principal amount of long-term debt maturing in each of the four years following 1995 is:
(THOUSANDS) ----------- 1996....................................... $ 4,853 1997....................................... 70,383 1998....................................... 4,916 1999....................................... 4,950
Interest paid on short- and long-term debt for the years ended December 31, 1994, 1993 and 1992 was $7.5 million, $5.8 million and $6.8 million, respectively. 20 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS--(CONTINUED) The $70 million revolving credit line is subject to an agreement which, among other things, restricts amounts available for payment of cash dividends by the Company. As of December 31, 1994, retained earnings of $7.9 million were free of such restrictions. Interest rates on the revolving line at December 31, 1994 ranged from 6.375% to 7.125%. The Company had $14.5 million of letters of credit outstanding as of December 31, 1994. The Company has entered into interest rate swap agreements to manage its interest rate exposure on the $40 million 8.39% notes payable. During 1993, the Company converted the fixed rate to a variable rate by entering into an interest rate swap with a maturity in 1996. The Company subsequently entered into an offsetting swap effectively returning the debt to a fixed rate which also matures in 1996. The remaining gain of $66,000 is being recognized over the remaining life of the interest rate swap agreements. In 1994, the Company also entered into an interest rate swap agreement effectively converting the interest rate exposure on the $4.7 million bank loan described above to a fixed rate of 6.97%. The interest rate swap agreement matures at the time the related loan matures. The Company is exposed to credit loss in the event of nonperformance by the banks, who are parties to these agreements. However, in view of the substantial size and financial strength of these banks, the Company believes that non-performance is remote. The Company enters into forward exchange contracts to hedge certain anticipated and firm sales and purchases commitments which are denominated in foreign currencies. The purpose of the Company's foreign currency hedging activities is to reduce the Company's risk to fluctuating exchange rates. At December 31, 1994, the Company had foreign exchange contracts with maturities of generally less than one year in the aggregate amount of $5.0 million, and with unrealized losses of $205,000. The unrealized losses will be recognized in earnings when realized and when the underlying transaction occurs. At December 31, 1994, the Company had no deferred realized gains or losses from forward exchange contracts. The carrying amounts for the short-term lines of credit and the long-term bank revolving credit line approximate their fair value since floating interest rates are charged which approximate market rates. The fair value of the $40 million 8.39% notes payable, based on quoted market prices, is $37.7 million as compared to a carrying amount of $40.0 million, and the fair value of the $4.7 million note payable is $4.2 million as compared to a carrying amount of $4.7 million. NOTE 6--COMMITMENTS AND CONTINGENCIES Future minimum payments under noncancelable operating leases as of December 31, 1994, are as follows:
DECEMBER 31 (THOUSANDS) ----------- ----------- 1995.......................................................... $2,441 1996.......................................................... 2,058 1997.......................................................... 1,628 1998.......................................................... 1,493 1999.......................................................... 821 2000-2008..................................................... 651 ------ $9,092 ======
Leases are primarily for rental of facilities, and about one-half of these contain renewal rights to extend the terms from one to ten years. Net rental expense, including those rents payable under noncancelable leases and month-to-month tenancies, amounted to $3,837,000, $3,609,000 and $3,770,000 for the years ended December 31, 1994, 1993 and 1992, respectively. 21 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6--COMMITMENTS AND CONTINGENCIES--(CONTINUED) The Company is subject to various legal actions and proceedings in the normal course of business. While the ultimate outcome of these matters cannot be predicted with certainty, and to the extent not previously provided, management does not believe these matters will have a material adverse effect on the Company's financial statements. The Company is among several potentially responsible parties named in a cleanup of a chemical waste disposal site in South Carolina under the Comprehensive Environmental Response, Compensation and Liability Act. The ultimate outcome of this matter cannot be predicted with certainty, however, to the extent to which not previously provided, management does not believe this matter will have a material adverse effect on the Company's financial statements. NOTE 7--PENSION PLANS AND OTHER BENEFIT PLANS The Company sponsors several trusteed noncontributory defined benefit pension plans covering most of its employees. Benefits are generally based on years of service and the employee's highest compensation for five consecutive years during the years of credited service. Contributions are intended to provide for benefits attributable to service to date and service expected to be provided in the future. The Company funds these plans in accordance with the Employee Retirement Income Security Act of 1974 (ERISA). The Company also sponsors defined contribution pension plans covering certain domestic employees who are not covered by a defined benefit pension plan and substantially all Stearns employees. Contributions by the Company are determined as a percent of the amounts contributed by the respective employees. The following table sets forth the defined benefit plans' funded status and amounts recognized in the Company's consolidated balance sheet at December 31:
1994 1993 --------------------------- --------------------------- ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS ------------- ------------- ------------- ------------- (THOUSANDS) Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $26,202 in 1994 and $28,994 in 1993...... $(26,510) $(2,347) $(28,469) $(2,216) ======== ======= ======== ======= Projected benefit obligation for service rendered to date....... $(32,631) $(2,347) $(36,200) $(2,216) Plan assets at fair value, primarily publicly traded stocks, bonds, and other fixed income securities...... 35,018 37,278 -------- ------- -------- ------- Plan assets in excess of (or less than) the projected benefit obligation............. 2,387 (2,347) 1,078 (2,216) Unrecognized net loss... 1,145 93 3,167 292 Unrecognized prior serv- ice cost............... (73) 385 55 312 Unrecognized net transition (asset) obligation at January 1, 1987, net of amortization........... (1,706) 589 (1,981) 654 Adjustment required to recognize minimum liability.............. (1,067) (1,258) -------- ------- -------- ------- Prepaid pension cost (pension liability) recognized in the con- solidated balance sheet.................. $ 1,753 $(2,347) $ 2,319 $(2,216) ======== ======= ======== =======
22 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7--PENSION PLANS AND OTHER BENEFIT PLANS--(CONTINUED) Net pension cost consisted of the following at December 31:
1994 1993 1992 ------ ------ ------ (THOUSANDS) Service cost-benefits earned during the period......... $1,495 $1,108 $1,038 Interest cost on the projected benefit obligation...... 2,829 2,607 2,326 Actual (gains) loss on plan assets..................... 360 (2,798) (2,028) Net amortization and deferral.......................... (3,802) (525) (1,419) ------ ------ ------ Total net periodic pension cost (benefit) of funded de- fined benefit plans................................... 882 392 (83) Defined contribution plans............................. 435 517 505 ------ ------ ------ Total pension plan cost................................ $1,317 $ 909 $ 422 ====== ====== ======
On January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pension." The adoption of Statement No. 106 had an immaterial effect on the Company's financial statements. In November 1992, the FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits," that requires accrual accounting for postemployment benefits instead of recognizing an expense for those benefits when paid. The Company has complied with the new rules beginning in 1994. The adoption of the new standard has not had a material effect on the Company's financial statements. NOTE 8--QUARTERLY OPERATING DATA (UNAUDITED)
NET GROSS NET NET INCOME SALES PROFIT INCOME PER SHARE ------ ------ ------ ---------- (IN MILLIONS EXCEPT FOR PER SHARE FIGURES) 1994 First quarter................................... $109.7 $ 26.7 $ .5 $ .04 Second quarter.................................. 131.8 36.4 5.0 .42 Third quarter................................... 127.9 34.5 4.5 .38 Fourth quarter.................................. 133.0 33.9 3.0 .25 ------ ------ ----- ----- $502.4 $131.5 $13.0 $1.09 ====== ====== ===== ===== 1993 First quarter................................... $ 98.0 $ 24.7 $ .9 $ .08 Second quarter.................................. 112.9 30.0 4.0 .34 Third quarter................................... 113.9 30.4 3.8 .32 Fourth quarter.................................. 106.8 25.2 2.4 .20 ------ ------ ----- ----- $431.6 $110.3 $11.1 $ .94 ====== ====== ===== =====
23 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9--STOCK OPTIONS Under the Company's 1994 Incentive Stock Option Plan ("1994 Plan"), options may be granted to eligible directors and key employees of the Company and its subsidiaries at not less than 100% of the market value of the shares on the dates of grant. No further options may be granted under the Company's 1988 Incentive Stock Option Plan ("1988 Plan"). The 1994 Plan permits the granting of options for terms not to exceed ten years from date of grant. The options are exercisable on such terms as may be established by the Compensation Committee of the Board of Directors at the dates of grant. The Company is authorized, at the discretion of the Compensation Committee, to provide loans to key employees in connection with the exercise of stock options under both the 1994 Plan and the 1988 Plan. The loans are collateralized by the underlying shares of stock issued and bear interest at the applicable rates published by the IRS. At December 31, 1994 and 1993, there was a total of $2,440,000 and $2,167,000, respectively, of loans and accrued interest outstanding which are due on various dates through December 1999. The loan amounts have been deducted from shareholders' equity. Further information regarding the Plans is shown below. The data has been adjusted to reflect the 5% stock dividend in December 1994.
1994 PLAN 1988 PLAN ---------------- --------------- Status at December 31, 1994 Number of shares subject to options.......... 182,800 399,935 Exercise price per share..................... $15.00 to $17.25 $5.66 to $14.52 Number of shares exercisable................. 184,071 Available for grant.......................... 867,200 ---------------- --------------- Status at December 31, 1993 Number of shares subject to options.......... 504,995 Exercise price per share..................... $5.66 to $14.52 Number of shares exercisable................. 168,111 Available for grant.......................... 69,663 --------------- Information regarding the number of shares subject to options which were exercised during the three years ended December 31, 1994 is shown below. YEAR SHARES PRICE PER SHARE ---- ---------------- --------------- 1994......................................... 83,774 $5.66 to $14.52 1993......................................... 107,240 $5.66 to $ 8.77 1992......................................... 95,368 $5.66 to $ 8.86 ---------------- ---------------
During 1994, options for 182,800 shares were granted at $15.00 to $17.25 per share, and options for 21,286 shares at $8.85 to $14.52 per share were cancelled or expired. At December 31, 1994, 1,449,935 shares of common stock were reserved for issuance under the Plans. 24 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--SHAREHOLDERS' EQUITY Preferred Stock Shares are issuable in one or more series, and the Board of Directors has authority to fix the terms and conditions of each series. Employee Stock Ownership Plan The Company has an Employee Stock Ownership Plan (ESOP) which covers substantially all of its domestic non-union employees with at least one year of service. As of December 31, 1994, the trust was indebted to the Company in the aggregate amount of $944,000 in connection with stock purchases made from 1982 through 1984 of which 260,415 shares with an aggregate market value of $4,167,000 as of December 31, 1994 remained unallocated to participants. These loans are repayable over the next eight to ten years with interest at prime plus 1/2 %, not to exceed 18% and the unallocated shares will be released to participants proportionately as these loans are repaid. Of the total dividends received by the ESOP on its investment in the Company's common stock, dividends on unallocated shares in the amount of $157,000 and $147,000 in 1994 and 1993, respectively, were used to service these loans. Additionally, the trust was indebted to the Company in the amount of $400,000 in connection with distributions made to terminees. The loan carries no interest and is due June 30, 1995. It is anticipated the loan will be repaid through the sale of unallocated shares. Shareholders' equity has been reduced by the amount of the loans and any payments made by the Company on behalf of the trust. The payments, which at December 31, 1994 totaled $153,000, are being amortized to expense over the lives of the loans. The amount of the Company's annual contribution to the ESOP is at the discretion of the Company's Board of Directors. For the three years 1994, 1993 and 1992 contributions were limited to amounts in excess of annual dividends, net of debt service, of the ESOP necessary to fund obligations arising in each of those years to retired and terminated employees. These amounts were $1,016,000, $1,260,000 and $1,150,000, respectively. ESOP expense, including amortization of the foregoing payments, was $1,014,000, $1,012,000 and $1,321,000 in 1994, 1993 and 1992, respectively. Allocated shares as of December 31, 1994 totaled 2,109,907 shares. Preferred Stock Rights Rights are outstanding which entitle the holder of each share of Common Stock of the Company to buy one one-hundredth of a share of Series A preferred stock at an exercise price of $51.712 per one one-hundredth of a share, subject to adjustment. The rights are not separately tradable or exercisable until a party either acquires, or makes a tender offer that would result in ownership of, at least 20% of the Company's common shares. If a person becomes the owner of at least 20% of the Company's outstanding common shares (an "Acquiring Person"), each holder of a right other than such Acquiring Person and its affiliates is entitled, upon payment of the then current exercise price per right (the "Exercise Price"), to receive shares of Common Stock (or Common Stock equivalents) having a market value of twice the Exercise Price. If the Company subsequently engages in certain mergers, business combinations or asset sales with the Acquiring Person, each holder of a right other than the Acquiring Person and its affiliates is thereafter entitled, upon payment of the Exercise Price, to receive stock of the Acquiring Person having a market value of twice the Exercise Price. At any time after any party becomes an Acquiring Person, the Board of Directors may exchange the rights (except those held by the Acquiring Person) at an exchange ratio of one common share per right. Prior to a person becoming an Acquiring Person, the rights may be redeemed at a redemption price of one cent per right, subject to adjustment. The rights are subject to amendment by the Board. 25 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 11--SEGMENT DATA The Company and its subsidiaries are organized into the recreational products and industrial products segments. The recreational products segment is composed of the following lines of business: manufacture and sale of skis and snowboards; sale of in-line skates; manufacture and sale of athletic jackets, imprintable shirts and bowling shirts; manufacture and sale of personal flotation devices; construction of residential concrete swimming pools; manufacture and installation of swimming pool covers; manufacture and sale of full-suspension mountain bikes and accessories; and manufacture and sale of rods, reels and other fishing tackle items. The industrial products segment consists of the manufacture and sale of extruded monofilament used by the paperweaving industry and for cutting line, fishing line and sewing thread; fiberglass marine antennas, communication and navigation equipment and light poles; and laminated and coated paperboard products. The following segment data is presented for the three years ended December 31, 1994. "Identifiable Assets" are as of December 31.
NET SALES TO UNAFFILIATED CUSTOMERS PRETAX INCOME ------------------------- ------------------- 1994 1993 1992 1994 1993 1992 ------- ------- ------- ----- ----- ----- (MILLIONS OF DOLLARS) Recreational products.......................................... 332.1 285.5 266.6 16.0 12.2 11.6 Industrial products............................................ 170.3 146.1 135.4 16.7 14.0 11.0 ------- ------- ------- ----- ----- ----- Net sales and operating profits................................ 502.4 431.6 402.0 32.7 26.2 22.6 ======= ======= ======= Corporate Interest and other income............................................................ .4 .9 1.0 Interest expense..................................................................... (7.5) (5.8) (6.8) General expense...................................................................... (5.3) (4.3) (3.9) ----- ----- ----- Pretax income.......................................................................... 20.3 17.0 12.9 ===== ===== ===== IDENTIFIABLE ASSETS CAPITAL EXPENDITURES DEPRECIATION AMORTIZATION ----------------- -------------------- ------------------------- ------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992 ----- ----- ----- ------ ------ ------ ------- ------- ------- ----- ----- ----- (MILLIONS OF DOLLARS) Recreational products... 216.6 177.0 162.3 7.0 6.0 3.7 3.4 3.7 4.3 .8 .8 .8 Industrial products..... 74.8 66.3 64.5 4.6 2.7 3.4 4.2 4.4 4.3 .1 ----- ----- ----- ------ ------ ------ ------- ------- ------- ----- ----- ----- Total segment data.... 291.4 243.3 226.8 11.6 8.7 7.1 7.6 8.1 8.6 .8 .8 .9 Corporate............... 13.0 14.0 9.4 .1 .1 .1 .1 .1 .1 ----- ----- ----- ------ ------ ------ ------- ------- ------- ----- ----- ----- Total Company........... 304.4 257.3 236.2 11.6 8.7 7.1 7.7 8.2 8.7 .9 .9 1.0 ===== ===== ===== ====== ====== ====== ======= ======= ======= ===== ===== ===== TOTAL SEGMENT UNITED STATES FOREIGN ELIMINATIONS DATA ----------------- -------------------- ------------------------- ------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992 ----- ----- ----- ------ ------ ------ ------- ------- ------- ----- ----- ----- (MILLIONS OF DOLLARS) Net Sales............... 421.4 363.1 336.8 99.8 87.1 86.0 (18.8) (18.6) (20.8) 502.4 431.6 402.0 Less--intergeographic sales.................. 8.5 7.3 5.8 10.3 11.3 15.0 (18.8) (18.6) (20.8) ----- ----- ----- ------ ------ ------ ------- ------- ------- ----- ----- ----- Net sales to unaffili- ated customers.............. 412.9 355.8 331.0 89.5 75.8 71.0 502.4 431.6 402.0 ----- ----- ----- ------ ------ ------ ----- ----- ----- Operating profit........ 25.9 21.7 18.7 6.8 4.5 3.9 32.7 26.2 22.6 ----- ----- ----- ------ ------ ------ ----- ----- ----- Identifiable assets..... 241.4 208.9 189.8 50.0 34.4 37.0 291.4 243.3 226.8 ----- ----- ----- ------ ------ ------ ----- ----- ----- Capital expenditures.... 9.7 7.3 5.3 1.9 1.4 1.8 11.6 8.7 7.1 ----- ----- ----- ------ ------ ------ ----- ----- ----- Depreciation............ 6.4 6.9 7.3 1.2 1.2 1.3 7.6 8.1 8.6 ----- ----- ----- ------ ------ ------ ----- ----- ----- Amortization............ .8 .8 .9 .8 .8 .9 ===== ===== ===== ===== ===== =====
26 ANTHONY INDUSTRIES, INC. REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders Anthony Industries, Inc. We have audited the accompanying consolidated balance sheets of Anthony Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related statements of consolidated income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Anthony Industries, Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Ernst & Young LLP Los Angeles, California February 14, 1995 27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Except as noted in the following paragraph the information called for by Items 10, 11, 12 and 13 have been omitted because on or before April 29, 1995, Registrant will file with the Commission pursuant to Regulation 14A a definitive proxy statement. The information called for by these items set forth in that proxy statement is incorporated herein by reference. The information called for by Item 10 with respect to executive officers of the Registrant appears following Item 4 under Part I of this Report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following documents are filed as part of this report: (a-1) Financial Statements (for the three years ended December 31, 1994 unless otherwise stated):
PAGE REFERENCE FORM 10-K -------------- Statements of consolidated income.................................. 13 Consolidated balance sheets at December 31, 1994 and 1993.......... 14 Statements of consolidated cash flows.............................. 15 Statements of consolidated shareholders' equity.................... 16 Notes to consolidated financial statements........................ 17-26 Report of Ernst & Young LLP, Independent Auditors.................. 27 (a-2) Consolidated financial statement schedule II--Valuation and qualifying accounts............................. F-1
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes. (a-3)Exhibits (3) (a) Restated Certificate of Incorporation dated May 4, 1989, filed as Exhibit (3)(a) to Form 10-K for the year ended December 31, 1989 and incorporated herein by reference (b) By-Laws of Anthony Industries, Inc., as amended (4) (a) Rights Agreement dated August 10, 1989 between the Company and Harris Trust Company, filed as Item 6, Exhibit (a) to Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference 28 (10)Material contracts (a) Credit Agreement dated as of June 28, 1993 among Anthony Industries, Inc., the Banks party thereto and Bank of America National Trust and Savings Association, as agent filed as Item 6, Exhibit (a)(10)(i) to Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference (i) First Amendment to the Credit Agreement dated as of June 28, 1993 between Anthony Industries, Inc., the Banks, and Bank of America National Trust and Savings Association as a Bank and as Agent for the banks filed as Item 6, Exhibit (a)10(i) to Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference (b) Note Agreement Re: $40,000,000 8.39% Senior Notes due November 30, 2004 dated as of October 15, 1992, filed as Exhibit (10)(b) to Form 10-K for the year ended December 31, 1992 and incorporated herein by reference (c) Executive compensation plans and arrangements (1)(i) Amended and restated employment agreement dated as of December 31, 1991 between the Company and B. I. Forester, filed as Exhibit (10)(a) to Form 10-K for the year ended December 31, 1991 and incorporated herein by reference (ii) Amendment dated October 20, 1994 to amended and related employment agreement dated as of December 1991 between the Company and B.I. Forester, filed as Item 6, Exhibit (a)10(i) to Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference (2)(i) Special Supplemental Benefit Agreement between the Company and Bernard I. Forester dated December 9, 1986, filed as Exhibit (10)(g) to Form 10-K for the year ended December 31, 1986 and incorporated herein by reference (ii) Amendment dated July 27, 1990 to Special Supplemental Benefit Agreement between the Company and Bernard I. Forester dated December 9, 1986, filed as Exhibit (10)(f)(2) to Form 10-K for the year ended December 31, 1990 and incorporated herein by reference (3) 1988 Incentive Stock Option Plan, filed as Exhibit A to the Proxy Statement for the Annual Meeting of Shareholders held on May 5, 1988 and incorporated herein by reference (4) Anthony Industries, Inc. Non-Employee Directors' Benefit Plan effective May 1, 1992, filed as Item 6, Exhibit (a)(28) of Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference (5) Anthony Industries, Inc. Corporate Officers' Medical Expense Reimbursement Plan, as amended through October 22, 1993, effective August 15, 1974, filed as Exhibit (10)(c)(5) to Form 10-K for the year ended December 31, 1993 and incorporated herein by reference (6) Anthony Industries, Inc. Directors' Medical Expense Reimbursement Plan, as amended through October 22, 1993, effective January 1, 1983, filed as Exhibit (10)(c)(6) to Form 10-K for the year ended December 31, 1993 and incorporated herein by reference (7) Anthony Industries, Inc. Executive Officers' Incentive Compensation Plan adopted August 5, 1993 filed as Item 6, Exhibit (a)10(ii) to Form 10-Q for the the quarter ended June 30, 1993 and incorporated herein by reference (8) 1994 Incentive Stock Option Plan, filed as Exhibit A to the Proxy Statement for the Annual Meeting of Shareholders held on May 5, 1994 and incorporated herein by reference (11)Computation of earnings per share for three years ended December 31, 1994 (21)Subsidiaries (23)Consent of Independent Auditors (27)Financial Data Schedule (b)REPORTS ON FORM 8-K Not applicable 29 SIGNATURES Pursuant to the requirements of Section 13 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. ANTHONY INDUSTRIES, INC. (Registrant) By /s/ B. I. Forester _____________________________________ (B. I. Forester) Chairman and Chief Executive Officer Date March 29, 1995 _____________________________________ 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 --------- ----- ---- Director, Chairman of the Board and Chief Executive Officer /s/ B. I. Forester (principal executive --------------------------------------------- officer)* March 29, 1995 (B. I. Forester) Senior Vice President-- Finance (principal financial /s/ John J. Rangel and accounting --------------------------------------------- officer) March 29, 1995 (John J. Rangel) /s/ Richard L. Goldberg Director* March 29, 1995 --------------------------------------------- (Richard L. Goldberg) /s/ Hugh V. Hunter Director* March 29, 1995 --------------------------------------------- (Hugh V. Hunter) /s/ John H. Offermans Director* March 29, 1995 --------------------------------------------- (John H. Offermans) /s/ Sol S. Weiner Director* March 29, 1995 --------------------------------------------- (Sol S. Weiner)
-------- *A majority of the directors of the registrant. 30 ANTHONY INDUSTRIES, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (THOUSANDS)
ADDITIONS DEDUCTIONS --------------------- ---------- CHARGED AMOUNTS CHARGED TO OTHER CHARGED BALANCE AT TO COSTS ACCOUNTS TO RESERVE BALANCE BEGINNING AND (PRIMARILY NET OF AT END DESCRIPTION OF PERIOD EXPENSES GROSS SALES) REINSTATEMENTS OF PERIOD ----------- ---------- -------- ------------ -------------- --------- Year ended December 31, 1994 Allowance for doubtful items................ $4,550 $1,929 $1,072 $5,407 Other (primarily sales discounts)........... 2,712 $5,430 5,124 3,018 ------ ------ ------ ------ ------ $7,262 $1,929 $5,430 $6,196 $8,425 ====== ====== ====== ====== ====== Year ended December 31, 1993 Allowance for doubtful items................ $3,492 $2,327 $1,269 $4,550 Other (primarily sales discounts)........... 2,618 $4,563 4,469 2,712 ------ ------ ------ ------ ------ $6,110 $2,327 $4,563 $5,738 $7,262 ====== ====== ====== ====== ====== Year ended December 31, 1992 Allowance for doubtful items................ $4,081 $2,018 $2,607 $3,492 Other (primarily sales discounts)........... 1,338 $3,686 2,406 2,618 ------ ------ ------ ------ ------ $5,419 $2,018 $3,686 $5,013 $6,110 ====== ====== ====== ====== ======
F-1 EX-11 2 COMPUTATION OF EARNINGS EXHIBIT (11) ANTHONY INDUSTRIES, INC. COMPUTATION OF EARNINGS PER SHARE (A) FOR THE THREE YEARS ENDED DECEMBER 31, 1994 (THOUSANDS EXCEPT FOR DOLLARS PER SHARE)
1994 1993 1992 ------- -------- ------- Net income............................................ $13,033 $ 11,121 $ 8,521 ======= ======== ======= Primary: Average shares outstanding.......................... 11,800 11,703 11,575 Net effect of dilutive stock options under the trea- sury stock method using average market price....... 119 95 60 ------- -------- ------- Total............................................. 11,919 11,798 11,635 ======= ======== ======= Per share amounts: Net income........................................ $ 1.09 $ .94 $ .73 Fully Diluted: Average shares outstanding.......................... 11,800 11,703 11,575 Net effect of dilutive stock options under the trea- sury stock method using year end market price, if higher than average market price................... 130 152 84 ------- -------- ------- Total............................................. 11,930 11,855 11,659 ======= ======== ======= Per share amounts: Net income........................................ $ 1.09 $ .94 $ .73
-------- (a) Retroactively adjusted for the 5% stock dividend paid in December 1994. EX-21 3 SUBSIDIARIES EXHIBIT (21) SUBSIDIARIES
PERCENTAGE OF VOTING SECURITIES OWNED OR SUBJECT TO VOTING CONTROL BY --------------------------------- COMPANY OTHER ---------------- --------------- Shakespeare Company, a Delaware corporation... 100% Subsidiaries of Shakespeare Company: Shakespeare (Hong Kong) Ltd., a Hong Kong corporation................................ 100% Shakespeare (Aust) Pty. Ltd., an Australian corporation................................ 100% Shakespeare Hengelsport, B.V., a Dutch cor- poration................................... 100% Shakespeare International Ltd., a British corporation................................ 100% Subsidiaries of Shakespeare International Ltd.: Shakespeare Company (UK) Ltd., a British corporation.............................. 100% Shakespeare Monofilament U.K. Ltd., a British corporation...................... 100% Sitca Corporation, a Washington corporation... 100% Subsidiaries of Sitca Corporation: K2 Corporation, an Indiana corporation...... 100% Subsidiary of K2 Corporation: Madshus A.S., a Norwegian corporation..... 100% K2 Ski Sport, und Mode, GmbH, a German corporation.............................. 100% SMCA, Inc., a Minnesota corporation........... 100% Subsidiary of SMCA, Inc.: Stearns Manufacturing Company, a Minnesota corporation.............................. 100% Girvin Inc., a Delaware corporation........... 100% Dana Design Ltd., a Montana corporation....... 100%
EX-23 4 CONSENT OF IND. AUDITORS EXHIBIT (23) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 dated October 14, 1988 and Form S-8 dated December 28, 1994) pertaining to the 1988 Incentive Stock Option Plan and the 1994 Incentive Stock Option Plan of Anthony Industries, Inc. of our report dated February 14, 1995, with respect to the consolidated financial statements of Anthony Industries, Inc. included in the Annual Report on Form 10-K for the year ended December 31, 1994. Our audits also included the financial statement schedule of Anthony Industries, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Ernst & Young LLP Los Angeles, California March 24, 1995 EX-3.(A-3)(3)(B) 5 BYLAWS EXHIBIT (A-3)(3)(B) BY-LAWS OF ANTHONY INDUSTRIES, INC. ARTICLE I OFFICES The Corporation shall maintain a registered office in the State of Delaware as required by law. The Corporation may also have offices at other places, within and without the State of Delaware. ARTICLE II STOCKHOLDERS SECTION 1. Annual meetings of stockholders shall be held during the month of May in each year, at such times and such places, within or without the State of Delaware, as may be fixed from time to time by the Board of Directors. SECTION 2. Except as otherwise required by statute or the Corporation's Certificate of Incorporation, special meetings of stockholders may be called by the Board of Directors or the Chairman of the Board. Special meetings of stockholders shall be held on such dates and at such times and such places, within or without the State of Delaware, as shall be stated in the notices of such meetings. Notice of any special meeting shall state the purpose or purposes for which the meeting is to be held and no other business shall be transacted except as stated in such notice. SECTION 3. The holders of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders. SECTION 4. Except as otherwise required by statute, the Corporation's Certificate of Incorporation or these By-Laws, all matters coming before any meeting of stockholders shall be decided by the vote of the holders of a majority of the shares of capital stock of the Corporation present in person or represented by proxy at such meeting and voting thereon, a quorum being present. SECTION 5. The Board of Directors, or, if the Board shall not have made the appointment, the chairman presiding at any meeting of stockholders, shall have power to appoint two or more persons to act as inspectors, to receive, canvass and report the votes cast by the stockholders at such meeting. SECTION 6. The Chairman of the Board shall preside at all meetings of stockholders; and in his absence, the Board of Directors may appoint a person to act as chairman of the meeting. SECTION 7. The Secretary or an Assistant Secretary shall act as secretary at all meetings of stockholders; and in their absence, the chairman of the meeting shall appoint a person to act as secretary of the meeting. ARTICLE III BOARD OF DIRECTORS SECTION 1. The business and affairs of the Corporation shall be managed by or under direction of the Board of Directors. The directors shall elect one of their members to be Chairman of the Board, who shall perform such duties as are provided in these By-Laws or are from time to time assigned by the Board. The Chairman of the Board may, but need not be, an officer of the Corporation. 1 SECTION 2. Regular meetings of the Board of Directors shall be held on such dates and at such times and such places, within or without the State of Delaware, as shall be fixed from time to time by the Board. SECTION 3. Special meetings of the Board of Directors may be called by the Chairman of the Board and shall be called by the Chairman of the Board or the Secretary upon a request in writing by any four directors. Notice shall be given of the date, time and place of each special meeting by mailing the same at least three days before the meeting or by telephoning, telegraphing or delivering personally the same before the meeting to each director. Except as otherwise specified in the notice thereof, or as required by statute, any and all business may be transacted at any special meeting of the Board of Directors. SECTION 4. The Chairman of the Board shall preside at all meetings of the Board of Directors; and in his absence, the Board of Directors may appoint any other person to act as chairman of the meeting. Less than a quorum of the Board may adjourn any meeting from time to time until a quorum shall be present, whereupon the meeting may be held, as adjourned, without further notice. ARTICLE IV COMMITTEES SECTION 1. The Corporation shall have an Executive Committee and an Audit Committee, which shall have such powers of the Board of Directors, not prohibited by statute, as the Board shall from time to time authorize. The Executive and Audit Committees shall consist of two or more directors. SECTION 2. The Board of Directors may, by resolution passed by a majority of the whole Board, designate from among its own members such other committees as the Board may determine. Each such committee shall have such powers of the Board of Directors, not prohibited by statute, as the Board shall from time to time authorize. SECTION 3. A majority of a committee shall constitute a quorum for the transaction of business. Each committee shall keep regular minutes of its meetings and shall report the same to the Board of Directors when requested. The Board of Directors may discharge any committee or any member thereof either with or without cause at any time. SECTION 4. In the case of the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member. ARTICLE V OFFICERS SECTION 1. The Board of Directors shall elect the following officers: Chief Executive Officer, President, one or more Vice Presidents, Treasurer and Secretary and such other officers as it may from time to time determine. SECTION 2. The term of office of all officers shall be for one year and until their respective successors are elected and qualified. The Board of Directors may remove any officer either with or without cause at any time. SECTION 3. The Chief Executive shall be the chief executive officer of the Corporation and shall have such powers and duties as generally pertain to the responsibilities of chief executive officer, including the management of the business and affairs of the Corporation, subject only to the Board of Directors. The 2 President, subject and reporting to the Chief Executive Officer, shall be the chief operating officer of the Corporation, and shall have such powers and duties as generally pertain to the responsibilities of chief operating officer as may be determined from time to time by the Chief Executive Officer. The other officers of the Corporation, subject and reporting to the Chief Executive Officer and/or the President, as determined from time to time by the Chief Executive Officer, shall each have such powers and duties as generally pertain to their respective offices. Any officer of the Corporation shall in addition have such powers and duties as may be conferred by the Board of Directors. SECTION 4. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer shall have full power and authority on behalf of the Corporation to attend and to vote at any meetings of stockholders of any corporation in which this Corporation may hold stock, and may exercise on behalf of this Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, and shall have power and authority to execute and deliver proxies, waivers and consents on behalf of the Corporation in connection with the exercise by the Corporation of the rights and powers incident to the ownership of such stock. The Board of Directors may from time to time confer like powers upon any other person or persons. ARTICLE VI CAPITAL STOCK SECTION 1. Certificates for stock of the Corporation shall be in such form as the Board of Directors may from time to time prescribe. SECTION 2. The Board of Directors shall have power to appoint one or more transfer agents and/or registrars for the transfer and/or registration of certificates for shares of stock of any class or series and may require that stock certificates shall be countersigned and/or registered by one or more of such transfer agents and/or registrars. SECTION 3. Shares of capital stock of the Corporation shall be transferable on the books of the Corporation only by the holder of record thereof in person or by his duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, and with such proof of the authenticity of the signature and of authority to transfer, and of payment of transfer taxes, as the Corporation or its agents may require. SECTION 4. In case any certificate for the capital stock of the Corporation shall be lost, stolen or destroyed, the Corporation may require such proof of the fact and such indemnity to be given to it and/or to its transfer agent and/or registrar, if any, as it shall deem necessary or advisable. SECTION 5. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof in fact, and shall not be bound to recognize any equitable to other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. ARTICLE VII MISCELLANEOUS SECTION 1. The seal of the Corporation shall be circular in form and shall contain the name of the Corporation and the year and state of incorporation. SECTION 2. The Board of Directors shall have the power to fix, and from time to time to change, the fiscal year of the Corporation. 3 ARTICLE VIII AMENDMENT The Board of Directors shall have the power to adopt, alter and repeal By- Laws of the Corporation at any regular or special meeting of the Board, subject to the power of the stockholders to alter or repeal any By-Law adopted or altered by the Board of Directors. By-Laws may be adopted, altered or repealed by the stockholders by the vote of the holders of a majority of the outstanding shares entitled to vote thereon provided that notice of the proposed adoption, alteration or repeal shall have been given in the notice of such meeting of stockholders. 4 EX-27 6 FINANCIAL DATA SCHEDULE ARTICLE 5
5 1,000 12-MOS DEC-31-1994 DEC-31-1994 7,700 0 119,579 (8,425) 101,742 232,848 131,459 79,095 304,414 82,602 0 12,323 0 0 86,673 304,414 502,444 504,022 370,902 370,902 103,210 2,096 7,481 20,333 7,300 13,033 0 0 0 13,033 1.09 1.09