-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+6vewkdzWIt3UaTqQ4KSPftYxRM1GX5lh1lAQ/xovRnXxvt1H6WNDiaSGRq6F25 7hhTNtwaepcb1u2oAX/bpQ== 0000898430-96-001049.txt : 19960401 0000898430-96-001049.hdr.sgml : 19960401 ACCESSION NUMBER: 0000898430-96-001049 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTHONY INDUSTRIES INC CENTRAL INDEX KEY: 0000006720 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 952077125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04290 FILM NUMBER: 96540592 BUSINESS ADDRESS: STREET 1: 4900 S EASTERN AVE STREET 2: SUITE 200 CITY: LOS ANGELES STATE: CA ZIP: 90040 BUSINESS PHONE: 2137242800 MAIL ADDRESS: STREET 1: 4900 S EASTERN AVE STREET 2: SUITE 200 CITY: LOS ANGELES STATE: CA ZIP: 90040 FORMER COMPANY: FORMER CONFORMED NAME: ANTHONY POOLS INC DATE OF NAME CHANGE: 19720317 10-K 1 FORM 10-K DATED 12-31-95 =============================================================================== 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, 1995 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 OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 724-2800 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON TILE 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. [_] THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY NONAFFILIATES WAS APPROXIMATELY $324,025,000 AS OF MARCH 15, 1996. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK AS OF MARCH 15, 1996. Common Stock, par value $1 16,594,083 Shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the Annual Meeting of Shareholders to be held May 2, 1996 are incorporated by reference in Part III. =============================================================================== FORM 10-K ANNUAL REPORT PART I ITEM 1. BUSINESS: GENERAL Anthony Industries, Inc. ("Anthony" or the "Company") is a leading designer, manufacturer and marketer of brand name sporting goods and other recreational products. The Company is also a major supplier of selected industrial products. Anthony's sporting goods and other recreational products include several brand name lines such as K2 and Olin alpine skis, K2 snowboards, K2 Exotech in-line skates, Shakespeare fishing rods and reels, Stearns personal flotation devices, rainwear and wet suits, ProFlex full-suspension mountain bikes and Dana Design and Wilderness Experience backpacks and Garuda tents. The Company also produces and markets Hilton active apparel, K2 ski apparel, Charles Bastion golf apparel and NASCAR licensed apparel. Anthony's industrial products consist primarily of Shakespeare monofilament line used in weed trimmers, in paper mills and as fishing line; Shakespeare fiberglass marine antennas, light, transmission and distribution poles and Simplex coated and laminated products. Founded in 1946, Anthony has grown to over $540 million in annual sales through a combination of internal growth and strategic acquisitions. For segment and geographic financial information see Note 12 of Notes to Consolidated Financial Statements. In recent years, the Company has aggressively expanded into several of what are recognized as the faster growing sporting goods markets in the United States, including in-line skates, snowboards and full-suspension mountain bikes. Management believes these newer products have benefited from the market share positions of other Company products, several of which are now the #1 brands in their respective markets. For example, in the United States, K2 has the #1 market position in alpine skis, and management believes that Stearns has the #1 market position in personal flotation devices and Shakespeare's Ugly Stik is the top selling line of fishing rods. In October 1995, the Company signed a letter of intent to sell the assets and business of its swimming pool and motorized pool cover business (the "Division"). As a result, the Company reclassified the Division as discontinued operations, and prior years' operations were similarly reclassified. A loss from discontinued operations of $4.9 million was recorded which included an anticipated loss from disposal. On March 5, 1996, the Company completed the sale of substantially all of the assets of the Division to General Aquatics, Inc., a national pool builder and pool equipment manufacturer (see Note 2 of Notes to Consolidated Financial Statements for further discussion). The discussion which follows focuses on the continuing operations of the Company. 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). On June 1, 1995, the Company completed a secondary public offering of 4.6 million new shares of common stock of the Company, resulting in net proceeds of $67.2 million. For further information regarding the stock offering see Note 11 of Notes to Consolidated Financial Statements. 1 SPORTING GOODS AND OTHER RECREATIONAL PRODUCTS Net sales of sporting goods and other recreational products were $349.4 million in 1995, $264.7 million in 1994 and $227.6 million in 1993. The following table lists the Company's principal sporting goods and other recreational products and the brand names under which they are sold.
PRODUCT BRAND NAME ------- ---------- Alpine Skis K2, Olin Cross-Country Skis Madshus Snowboards K2 In-Line Skates K2 Exotech Fishing Rods and Reels Shakespeare, Ugly Stik Active Water Sports Products Stearns Full-Suspension Mountain Bikes ProFlex, Girvin Backpacks Dana Design, Wilderness Experience Tents Garuda Imprinted Active Apparel Hilton, USA Golf Apparel Charles Bastion Licensed Apparel NASCAR Ski Apparel K2
Alpine Skis. The Company sells its alpine skis under the names K2 and Olin principally in the United States, Europe and Japan. K2 offers skis in a broad range of styles for a variety of conditions and types of skiing at numerous price points. While participation rates for alpine skiing have been relatively flat during the past few years, the market shares of K2 and Olin skis have increased due to their popularity among retail purchasers resulting from their high quality, innovative features, attractive graphics, creative marketing and their domestic production. K2 and Olin skis are manufactured by the Company in the United States and Norway. They are sold to specialty retail shops and sporting goods chains in the U.S. by independent sales representatives and in Europe and Japan through independent and Company-owned distributors. K2 alpine skis are marketed to skiers ranging from beginners to top racers using youthful and often irreverent advertising. Olin skis are marketed toward more mature and affluent purchasers. To assist in its marketing efforts, the Company sponsors amateur and professional skiers including Phil and Steve Mahre and Glen Plake. Cross-Country Skis. The Company's cross-country skis, which are manufactured in the Company's plant in Norway, are sold under the name Madshus by a retailer/distributor which owns the rights to the Madshus name and resells the skis principally in Europe. Snowboards. The Company introduced K2 snowboards and snowboard bindings in 1990. The Company began selling snowboard boots in 1993. While the snowboard market is highly fragmented with over 200 competitors, Anthony is one of the few snowboard companies which manufactures its own snowboards. Most of its competitors source their products from other manufacturers. The Company believes that its manufacturing capability will provide a competitive advantage as the industry begins to consolidate. Like its alpine skis, K2 snowboards are of high quality, have attractive graphics and are creatively marketed. The Company made an important innovation in its snowboard line in early 1995 when it introduced the Clicker, a revolutionary step-in binding system for snowboards jointly developed with Shimano Inc. The Clicker is among the first commercially available step-in binding systems for snowboards. The Clicker will enable snowboarders to release and refasten the binding easily, which among other things, will facilitate entering and exiting ski lifts. 2 K2 snowboards are manufactured by the Company in the United States. They are sold to specialty retail shops and sporting goods chains in the U.S. by independent sales representatives and in Europe and Japan through independent and Company-owned distributors. Like K2 skis, K2 snowboards are marketed using youthful and irreverent advertising, and the Company sponsors professional and amateur snowboarders. In-Line Skates. The Company introduced its K2 Exotech in-line skates in 1994. The in-line skate market has grown dramatically in recent years. Anthony's in-line skates are priced at the mid to upper end of the industry. K2 Exotech skates are attractive and of high quality and have innovative features such as a soft mesh and leather upper designed for improved comfort and a rigid plastic cuff for support. The Company's in-line skates also offer high quality in-line skate components such as Hyper(TM) wheels and TwimCam(TM) bearings, which are manufactured by others. K2 Exotech in-line skates are manufactured to Company specifications primarily by vendors in Korea and China. They are sold to specialty retail shops and sporting goods chains in the U.S. by independent sales representatives and in Europe and Japan through independent and Company-owned distributors. Fishing Rods and Reels. The Company sells fishing rods, reels and fishing line in most of the world. The Company believes that Shakespeare's Ugly Stik models have been the best selling fishing rods in the U.S. over the past 18 years. The success of these fishing rods has allowed the Company to establish a strong position with retailers, thereby increasing sales of new rods, reels and kits and combos. Shakespeare rods and reels are manufactured principally in the People's Republic of China, although blanks for the Ugly Stik fishing rod are made by the Company in the United States. Shakespeare products are sold directly by the Company and through independent sales representatives to mass merchants (two of which in the aggregate purchase more than one-half of the Company's fishing rods and reels), specialty shops and chain stores. Active Water Sports Products. The Company sells Stearns flotation vests, jackets and suits ("personal flotation devices"), cold water immersion products, wet suits and rainwear in the United States and in certain foreign countries. Stearns has recently introduced towables, which are inflatable flotation products towed behind waterski boats. In the United States, occupants of boats are required by law either to wear or have available personal flotation devices meeting Coast Guard standards. Stearns personal flotation devices are manufactured to such standards and are subject to rigorous testing for certification by Underwriters Laboratories. Stearns manufactures its personal flotation devices in the U.S. and its other products are outsourced from Asian manufacturers. Stearns products are sold principally through an in-house marketing staff and independent sales representatives to mass merchandisers, specialty shops and chain stores and to the off-shore oil industry, commercial fishermen and other commercial users. Full-Suspension Mountain Bikes. Girvin, which was acquired by the Company in October 1993, designs and distributes high quality full-suspension mountain bikes and components under the names ProFlex, Girvin and Flexstem in the United States and internationally. The Company believes that full-suspension bikes are a fast growing segment of the mountain bike market. Performance and comfort are provided by these bikes which have shock absorbing elements for both front and rear wheels, thereby improving climbing ability and decreasing rider fatigue and off-road vibration. Girvin is a pioneer of full-suspension, and the Company believes it is the largest wholesale distributor of these bikes in the United States. Girvin manufactures certain components, including front forks, at its facility in the United States. The bikes are assembled to Girvin's specifications by a vendor in Taiwan and are distributed through an in-house marketing staff and by independent sales representatives to independent bicycle dealers in the U.S. and through distributors internationally. To assist in its marketing efforts, Girvin co-sponsors the BMW/ProFlex mountain bike team. Backpacks. Dana Design, which was acquired by the Company in February 1995, manufactures and distributes high-end backpacks in the U.S. Dana Design products are known for their comfort, high quality and innovative features, such as custom fitting. Dana Design backpacks are manufactured by the Company in the United States for sale by independent sales representatives to specialty retailers in the United States. The Wilderness Experience backpacks and other related apparel lines were acquired by the Company in December 3 1994, and offer products at more popular price points. The Company believes that its manufacturing expertise, marketing capabilities and financial support will benefit these businesses. Garuda was acquired by the Company in December 1995 and manufactures high-end tents in the United States for sale by independent sales representatives to specialty retailers in the United States. Active Wear. The Company's Hilton business manufactures and distributes jackets, shirts, fleece tops and other active wear under the Hilton and USA brand names. These products are primarily sold in the United States to advertising specialty customers, embroiderers and screen printers who in turn sell imprinted items, including garments, to corporate buyers, among others. Hilton and USA apparel are manufactured by the Company in the United States and are sold through catalogs, by a direct sales force and by independent sales representatives. The Company has recently introduced a line of Charles Bastion golf shirts and a broad line of NASCAR licensed apparel. Ski Apparel. K2 ski apparel is manufactured to the Company's specifications by various suppliers located in Europe and Asia. K2 apparel is principally sold in Europe and through independent distributors for which the Company receives royalty income, except in Germany where it is sold through a Company- owned distributor. INDUSTRIAL PRODUCTS Net sales of industrial products were $194.9 million in 1995, $170.3 million in 1994 and $146.1 million in 1993. The Company's industrial products segment historically has contributed to operations by providing a base of generally consistent earnings and cash flow. The following table lists certain of the Company's principal industrial products and the brand names under which they are sold.
PRODUCT BRAND NAME ------- ---------- Monofilament Line Shakespeare Fiberglass Utility and Decorative Light Poles Shakespeare Marine Radio Antennas Shakespeare Coated and Laminated Paperboard Products Thermo-ply, Studio Board Protective Building Wrap Barricade, R-Wrap Synthetic Commercial Building Coatings Finestone
Monofilament Line. Nylon and polyester monofilament line is domestically manufactured by the Company in a variety of diameters, tensile strengths and softness. Monofilament is used in various applications including the manufacture of woven mats for use by paper producers in the United States, Europe and South America and for use as line in weed trimmers in the United States. Monofilament produced for sale in Europe for woven mats is manufactured primarily in the Company's U.K. facility. Fishing line is also manufactured domestically and marketed by Shakespeare's fishing tackle division to retailers and mass merchandisers. Fiberglass Utility and Decorative Light Poles. The Company produces fiberglass products including utility and decorative light poles which are manufactured and sold under the Shakespeare name in the United States principally to utility companies and municipalities. The Company believes that a large majority of major utility companies in the United States have approved the use of fiberglass light and utility poles. Marine Radio Antennas. The Company manufactures in the United States fiberglass radio antennas for marine, citizen band and military application under the Shakespeare name. These products are sold primarily in the United States. The Company also distributes marine radios and other marine electronics under the Shakespeare name which are manufactured in Asia to the Company's specifications. These antennas, radios and other marine electronics are sold by an in-house sales department and independent sales representatives to specialty marine dealers. 4 Coated and Laminated Paperboard Products. Anthony's Simplex business manufactures a wide range of coated and laminated paperboard products, which include insulative sheathing marketed under the trademark Thermo-ply, container components for fiber drums and flexible packaging paperboard products. These products are manufactured in the United States and are sold to a large number of customers in the domestic residential and manufactured housing, container and industrial packaging industries, and in the case of Thermo-ply, to the Japanese residential housing industry. The Company also operates a paper recycling mill which produces chip paperboard primarily used in the manufacture of Thermo-ply insulative sheathing and secondarily sold to others in nonconstruction related markets. The Company has recently introduced Studio Board which is used in set construction for the entertainment industry. Studio Board is made from 85% recycled material and is also recyclable itself. Protective Building Wrap. The Company manufactures and sells protective building wrap in the United States under the names R-Wrap and Barricade to the domestic residential and manufactured housing industries. These products are generally sold through distributors to home builders. Synthetic Commercial Building Coatings. The Company manufactures and sells synthetic commercial building coatings in the United States under the name Finestone to the commercial construction industry. These products are marketed primarily to architects and builders. COMPETITION The Company's competition varies among its business lines. The sporting goods and recreational products markets are generally highly competitive, with competition mainly centering on product innovation, performance and styling, price, marketing and delivery. Competition in these products (other than snowboards and active apparel) consists of a relatively small number of large producers, some of whom have greater financial and other resources than the Company. A large number of companies compete in snowboards and active apparel. While the Company believes that its well-recognized brand names, established distribution networks and reputation for developing and introducing innovative products have been key factors in the successful introduction of its sporting goods products, there are no significant technological or capital barriers to entry into the markets for many sporting goods and recreational products. These markets face competition from other leisure activities, and sales of leisure products are affected by changes in consumer tastes, which are difficult to predict. While the Company believes that in its industrial products segment it competes based on product quality, service and delivery, the Company's industrial products are, in most instances, subject to price competition, ranging from moderate in marine antennas and monofilament line to intense for commodity-type products such as paperboard container components. Insulative sheathing products compete with substitute products. Fiberglass utility and light poles compete with products made of other materials, such as wood and aluminum. Certain industrial competitors have greater financial and other resources than the Company. FOREIGN SOURCING AND RAW MATERIALS The Company has not experienced any substantial difficulty in obtaining raw materials, parts or finished goods inventory for its sporting goods and other recreational products businesses. Certain components and finished products, however, are manufactured or assembled abroad and therefore could be subject to interruption as a result of local unrest, currency exchange fluctuations, increased tariffs, trade difficulties and other factors. A major portion of the Company's fishing rods, including its Ugly Stik models, and reels and certain in-line skate components 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 these products produced in China could be found, maintaining its existing costs of such products will depend on China's continuing to be treated under MFN tariff rates, which the United States from time to time has threatened to rescind. In 1996, the United States has again threatened trade sanctions against certain products made in China, including fishing rods, although no such trade sanctions have been imposed to date. 5 The Company has not experienced any substantial difficulty in obtaining raw materials for its industrial products segment, although recycled corrugated scrap paper, a raw material used in the production of the Company's insulative sheathing, has become more expensive, a trend which the Company believes may continue. This increasing cost has had and could continue to have significant impact on the profitability of the insulative sheathing line. While the Company has been able to raise its insulative sheathing prices to offset the increasing cost of this raw material, no assurances can be given of the Company's continued ability to do so. The Company is currently expanding its recycling capabilities to lessen its reliance on recycled corrugated scrap paper. SEASONALITY AND CYCLICALITY; BACKLOG Sales of the Company's sporting goods are generally highly seasonal and in many instances are dependent on weather conditions. The Company's industrial products are mildly seasonal. This seasonality causes the Company's financial results to vary from quarter to quarter, and the Company's sales are usually weakest in the first quarter. In addition, the nature of the Company's ski and snowboard businesses requires it to make relatively large investments in inventory in anticipation of these products' selling season, which runs from July through December, and relatively large investments in receivables during and shortly after such season. The rapid delivery requirements of the Company's customers for its sporting goods products and active apparel also result in investment in significant amounts of inventory. The Company believes that another factor in its level of inventory investment is the shift by certain of its sporting goods customers from substantial purchases of pre- season inventories to deferral of deliveries until the products' retail seasons. Sales of sporting goods depend to a large extent on general economic conditions including the amount of discretionary income available for leisure activities. Sales of the Company's industrial products are dependent to varying degrees upon economic conditions in the domestic housing, container and paper industries. As a result of the nature of many of the Company's businesses, backlog is generally not significant, and management believes it is not an important indicator of future sales. CUSTOMERS The Company believes that its customer relationships are excellent, and no one customer of the Company accounted for ten percent or more of its consolidated annual net sales in 1994 or 1995. The loss, however, of one of the Company's two largest customers of its sporting goods products could have a significant impact on the Company's results of operations. RESEARCH AND DEVELOPMENT Consistent with the Company's business strategy of continuing to develop innovative brand name products and improving the quality, cost and delivery of products, the Company maintains decentralized research and development departments at several of its manufacturing centers which are engaged in product development and the search for new applications and manufacturing processes. Expenditures for research and development activities totaled approximately $7.1 million in 1995, $6.3 million in 1994 and $4.3 million in 1993 and were expensed as a part of general and administrative expenses in the year incurred. EMPLOYEES The Company had approximately 4,600 and 3,900 employees at December 31, 1995 and 1994, respectively. The Company believes that its relations with employees generally have been good. PATENTS AND INTELLECTUAL PROPERTY RIGHTS While product innovation is a highly important factor in the Company's sporting goods and other recreational products segment and many of the Company's innovations have been patented, the Company does not believe that the loss of any one patent would have a material adverse effect on it. Certain of its brand names, such as K2, K2 Exotech, Olin, Shakespeare, Ugly Stik, Stearns, Girvin, ProFlex, Hilton, Dana Design and Wilderness Experience are believed by the Company to be well recognized by consumers and therefore important in the sales of these products. Registered and other trademarks and tradenames of Company products are italicized in this Form 10-K. 6 ITEM 2. PROPERTIES The table below provides information with respect to the principal production and distribution facilities utilized by the Company for continuing operations as of December 31, 1995.
OWNED FACILITIES LEASED FACILITIES ----------------- ----------------- TYPE OF NO. OF SQUARE NO. OF SQUARE LOCATION FACILITY LOCATIONS FOOTAGE LOCATIONS FOOTAGE -------- -------- --------- ------- --------- ------- SPORTING GOODS AND OTHER RECREATIONAL PRODUCTS Alabama.................... Production 2 156,000 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 9 310,000 === ======= === ======= INDUSTRIAL PRODUCTS Florida.................... Production 1 73,000 Michigan................... Production 2 278,000 South Carolina............. Production 2 484,000 --- ------- 5 835,000 === =======
The corporate headquarters of the Company is located in 15,000 square feet of leased office space in Los Angeles, California. The terms of the Company's leases range from one to eight years, and many are renewable for additional periods. The termination of any lease expiring during 1996 or 1997 would not have a material adverse effect on the Company's continuing operations. The Company believes that, in general, its plants and equipment are adequately maintained, in good operating condition and are adequate for the Company's present needs. The Company regularly upgrades and modernizes its facilities and equipment and expands its facilities to meet production and distribution 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 products. 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. The Company maintains product liability, general liability and excess liability insurance coverages. No assurances can be given that such insurance will continue to be available at an acceptable cost to the Company or that such coverage will be sufficient to cover one or more large claims, or that the insurers will not successfully disclaim coverage as to a pending or future claim. On December 5, 1995, two of the directors of the Company, Robert T. Anthony and Abraham L. Gray, Mr. Anthony's mother, acting as stockholders of the Company filed a complaint in the California Superior Court 7 for Los Angeles County (No. BC 140251) entitled Marilyn Anthony, Robert T. Anthony and Abraham L. Gray vs. John B. Simon, Hugh V. Hunter, Anthony Industries, Inc. and Does 1 through 100. The complaint purports to be a derivative complaint brought on behalf of the Company and arises out of the negotiation and approval of a retirement agreement in November 1995 between the Company and B.I. Forester, then the Company's Chairman of the Board and Chief Executive Officer. Under the agreement, Mr. Forester stepped down as Chief Executive Officer two years prior to the expiration of his employment contract, allowing for an orderly and timely management succession, and agreed to continue as the Company's Chairman of the Board and provide consulting services to the Company. To avert a deadlock on the Board, without the necessity of Mr. Forester voting on his own retirement agreement, the retirement agreement was approved by the Executive Committee, with Mr. Forester abstaining. The two members of the Executive Committee, in addition to Mr. Forester, are Messrs. Hunter and Simon. At a meeting of the full Board of Directors held the same day, the full Board, including Mr. Forester, voted to approve the actions of the Executive Committee, by vote of five to four. Those in favor were Messrs. Forester, Hunter, Offermans, Rodstein and Simon. Those opposed were Messrs. Anthony, Goldberg, Gray and Weiner. The complaint seeks recovery of damages from the two defendant directors of not less than $10 million allegedly suffered by the Company as a result of the Executive Committee's approval of the Forester retirement agreement. The complaint alleges that the agreement is unfair to the Company and that the defendants breached their duties of loyalty; acted in bad faith; engaged in intentional misconduct; and engaged in a knowing violation of law in approving the agreement. In the opinion of management of the Company, the allegations of the complaint are without merit. The Company is among several potentially responsible parties named in an Environmental Protection Agency matter involving discharge of hazardous materials at an old waste site in South Carolina. This action seeks primarily cleanup costs. The ultimate outcome of this matter cannot be predicted with certainty; however, to the extent to which not previously reserved against by the Company, management does not believe this matter will have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE COMPANY
NAME POSITION AGE ---- -------- --- Richard M. Rodstein President and Chief Executive Officer 41 Robert E. Doyle Senior Vice President; President of Simplex Products 49 John J. Rangel Senior Vice President--Finance 42 Tony H. Chow Vice President and Director of Taxes 48 David G. Cook Vice President; President of Stearns 58 Timothy C. Cronin Vice President and Executive Vice President of Hilton 45 Woodrow P. Greene Vice President--Quality and Process Improvement and President of Shakespeare Electronics and Fiberglass 51 David H. Herzberg Vice President; President of Shakespeare Monofilament 53 Marilyn E. Lane Vice President and Treasurer 64 Franklin D. Leibow Vice President; President of Hilton Active Apparel 46 Henry Miller Vice President 37 Susan E. McConnell Secretary 52
Mr. Rodstein has been President of the Company for more than the past five years and Chief Executive Officer since January 1, 1996. Mr. Doyle has been a Senior Vice President of the Company and president of Simplex Products for more than the past five years. 8 Mr. Rangel, a CPA, has been Senior Vice President--Finance of the Company 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. Cronin has been a Vice President of the Company since January 1, 1996 and Executive Vice President of Hilton from October 1992 to December 1995. From February to October 1992 Mr. Cronin was a design and sourcing executive with Odyssey International Ltd., and for more than one year previous to that he was a vice president of Wilson Sporting Goods Company. Mr. Greene has been Vice President--Quality and Process Improvement of the Company since January 1, 1993, president of Shakespeare Electronics and Fiberglass since June 22, 1995 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 a 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. Miller has been a Vice President of the Company since January 1, 1996 and Director of Business Development from June 1992 to December 1995. For more than five years previous to that Mr. Miller was a vice president of Omega Corporation. 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 terms by the directors at their first meeting after the annual meeting of shareholders and hold office until their successors are elected and qualified. 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS PRINCIPAL MARKETS The Company's Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the symbol "ANT." At March 15, 1996 there were 1,839 holders of record of Common Stock of the Company. COMMON STOCK PRICES The following table sets forth, for the quarters indicated, the reported high and low sales prices of the Common Stock, as reported by the New York Stock Exchange during the Company's two most recent fiscal years:
STOCK PRICES DIVIDENDS PER SHARE ---------------------------- ------------------------ HIGH LOW CLOSE CASH STOCK ------ ------ -------- ---------- ---------- 1995 Fourth...................... 23 1/4 16 7/8 23 $ .11 Third....................... 20 5/8 18 1/8 18 15/16 .11 Second...................... 18 1/2 15 1/4 18 1/2 .11 First....................... 16 7/8 15 1/8 16 1/4 .11 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
- -------- Prices and per share figures have been adjusted for stock dividends, where applicable. DIVIDENDS The Company has paid a cash dividend on the Common Stock since 1978. The timing, amounts and form of dividends depends on, among other things, the Company's results of operations, financial condition, cash requirements and other factors deemed relevant by the Board of Directors. The Company is subject to credit agreements which limit its ability to pay cash dividends. As of December 31, 1995, retained earnings were free of such restrictions. See Note 5 of Notes to Consolidated Financial Statements 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, Suite 4900 Los Angeles, California 90017 10 ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1995 1994(A) 1993(A) 1992(A) 1991(A) -------- -------- -------- -------- -------- (IN THOUSANDS EXCEPT FOR PER SHARE FIGURES) INCOME STATEMENT DATA: Net Sales.................. $544,268 $434,995 $373,712 $341,545 $309,086 Cost of products sold...... 400,840 319,021 276,759 249,707 227,171 -------- -------- -------- -------- -------- Gross profit............... 143,428 115,974 96,953 91,838 81,915 Selling expenses........... 61,256 49,575 41,519 40,802 34,410 General and administrative expenses.................. 45,086 38,713 31,759 28,428 27,709 -------- -------- -------- -------- -------- Operating income........... 37,086 27,686 23,675 22,608 19,796 Interest expense........... 9,916 7,481 5,759 6,687 6,813 Other income, net.......... (1,449) (1,239) (903) (872) (1,159) -------- -------- -------- -------- -------- Income before provision for income taxes.............. 28,619 21,444 18,819 16,793 14,142 Provision for income taxes. 8,820 7,690 6,455 5,730 5,230 -------- -------- -------- -------- -------- Income from continuing operations................ 19,799 13,754 12,364 11,063 8,912 Discontinued operations, net of taxes.............. (4,920) (721) (1,243) (2,542) (2,307) -------- -------- -------- -------- -------- Net Income................. $ 14,879 $ 13,033 $ 11,121 $ 8,521 $ 6,605 ======== ======== ======== ======== ======== Per share: Continuing operations..... $ 1.37 $ 1.15 $ 1.05 $ .95 $ .77 Discontinued operations... (.34) (.06) (.11) (.22) (.20) -------- -------- -------- -------- -------- Net income................ $ 1.03 $ 1.09 $ .94 $ .73 $ .57 ======== ======== ======== ======== ======== Weighted average shares outstanding............... 14,498 11,919 11,798 11,635 11,577 BALANCE SHEET DATA: Total current assets....... $300,455 $226,474 $181,790 $163,729 $146,642 Total assets............... 384,423 301,536 254,093 232,507 216,312 Total current liabilities.. 120,533 79,724 66,790 69,402 81,859 Long-term debt, net of current portion........... 75,071 109,921 87,271 68,525 43,451 Shareholders' equity....... 175,816 98,996 88,656 83,598 80,663
- -------- (a) Information has been restated to reflect the sale of the Division (for further information see Note 2 of Notes to Consolidated Financial Statements). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company maintains its books using a 52/53-week year ending on the last Sunday of December. The years ending December 31, 1995, 1994 and 1993 consisted of 53, 52 and 52 weeks, respectively. The Company believes that the impact on the financial statements of the additional week on 1995 was not significant. In October 1995, the Company signed a letter of intent to sell the assets and business of its swimming pool and motorized pool cover business (the "Division"). As a result, the Company reclassified the Division as discontinued operations, and prior years' operations were similarly reclassified. A loss from discontinued operations of $4.9 million was recorded which included an anticipated loss from disposal. On March 5, 1996, the Company completed the sale of substantially all of the assets of the Division to General Aquatics, Inc., a national pool builder and pool equipment manufacturer (see Note 2 of Notes to Consolidated Financial Statements). The discussion which follows focuses on the continuing operations of the Company. 11 REVIEW OF OPERATIONS: COMPARISON OF 1995 TO 1994 Net sales from continuing operations increased 25.1% to $544.3 million in 1995 compared to $435.0 in 1994. Net income from continuing operations rose 44.0% to a record $19.8 million from $13.8 million in 1994. Earnings per share from continuing operations, reflecting the completion on June 1, 1995 of the Company's public offering of 4.6 million shares, advanced to $1.37 per share in 1995, as compared with $1.15 per share in 1994. Net income for 1995 was $14.9 million, or $1.03 per share. Net Sales. In the sporting goods and other recreational products group, net sales increased 32.0% to $349.4 million in 1995 compared to $264.7 million in 1994. The increase in sales was widespread and was led by the rapid growth of K2 Exotech in-line skates in both the international and domestic markets, increased demand worldwide for K2 snowboards and step-in bindings and strong shipments of Shakespeare's new Ugly Stik Lite fishing rod, together with other new reels and kits and combos. New models of Stearns wetsuits, towables and flotation vests also contributed significantly to the overall sales growth. Sales of ProFlex full-suspension mountain bikes increased more than 75% due to market demand for the new frame design in the U.S. and Europe and expansion of its domestic dealer and international distributor base. Hilton's new active apparel styles, the growth of its Charles Bastion golf shirt line and the inclusion of the Dana Design business, which was acquired in early 1995, also contributed to the sales growth for the year. In the industrial products group, net sales advanced 14.4% to $194.9 million in 1995 compared to $170.3 million in 1994. The increase in sales was fairly broad based. Half of the sales improvement was attributable to the Simplex products business, which produces coated and laminated paperboard products, protective building wrap and synthetic commercial building coatings. The business benefited from record sales of Thermo-ply insulative sheathing, continued market penetration of Finestone commercial coatings, expanded sales of new laminated paper products and from price increases which partially reduced the impact of some significant cost increases. Improved market penetration of fiberglass light, electric transmission and distribution poles and paperweaving monofilament line in the worldwide markets, generated the majority of the sales gains in the Shakespeare electronics and fiberglass business and the Shakespeare monofilament business, respectively, which are the other two businesses of the industrial products group. Gross profit. Gross profit rose 23.7% to $143.4 million, or 26.3% of net sales, in 1995 as compared to $116.0 million, or 26.7% of net sales in 1994. The decline of gross profit as a percentage of net sales was primarily attributable to the cost of increasing the production capacity of the rapidly growing line of Shakespeare fiberglass light, distribution and transmission poles and from certain raw material cost increases. The gross profit was adversely affected by the dramatic increase in the cost of recycled corrugated scrap paper, which was subsequently offset by corresponding price increases in the latter part of the year. Higher sales of lower margin international shipments, introductory price point flotation vests and active apparel was offset by the profit impact of greater skate, snowboard and mountain bike sales. Costs and Expenses. Selling expenses increased 23.6% to $61.3 million in 1995 compared to $49.6 million in 1994. However, as a percentage of net sales selling expenses were consistent from year to year. The dollar increase was primarily due to new product growth of in-line skates, snowboards, full- suspension mountain bikes and fiberglass light poles and the inclusion of the recently acquired backpack businesses. General and administrative expenses increased 16.5% to $45.1 million in 1995 compared to $38.7 million in 1994, although as a percentage of net sales they were comparable to the prior year. The increase is attributable to spending on new product development, continued investment in the infrastructure of various divisions to support the growth of the Company and the inclusion of the 1995 acquisitions of Dana Design and Wilderness Experience, partially reduced by lower ESOP-related expenses. Operating Income. Operating income improved by 34.0% to $37.1 million, or 6.8% of net sales in 1995 compared to $27.7 million or 6.4% of net sales in 1994. The percentage increase was due to lower selling, general and administrative expenses as a percentage of net sales, which was partially offset by the reduction in gross profit margin percentage. 12 Interest Expense. Interest expense rose $2.4 million in 1995 compared to 1994. Higher average borrowings of $13.9 million, net of proceeds from the Company's secondary public offering, was incurred to support the growth of several product lines and accounted for $1.1 million of additional interest while $1.3 million reflected higher rates. Other income. Other income of $1.4 million includes certain royalty, interest and other miscellaneous income, of which $1.2 million is reported as a component of segment operating profit. Income taxes. The effective income tax rate for 1995 has been reduced as a result of a favorable $0.3 million foreign tax settlement and reduction of the valuation reserve to reflect the impact of foreign net operating losses realized. Segment information. Total segment operating profit (before interest, corporate expenses and taxes) increased 32.8% to $44.9 million in 1995 compared to $33.8 million in 1994. The sporting goods and other recreational products group, reported operating profit of $26.9 million in 1995, up 57.3% from $17.1 million in 1994. Gains from higher sales of snowboards and in-line skates fueled the increase. The continued strength of sales of new rods, reels and kits and combos along with higher sales from Stearns also provided earnings gains. Partially offsetting these gains were lower profitability of the active apparel business. Mountain bike sales contributed to the profit increase as the company's sales growth exceeded the growth of its expenses. The industrial products group's segment operating profit increased 7.8% to $18.0 million in 1995 from $16.7 million in 1994. The increase was attributable to the increased volume and cost efficiencies of the Shakespeare Monofilament and Simplex businesses. For additional segment information see Note 12 of Notes to Consolidated Financial Statements. REVIEW OF OPERATIONS: COMPARISON OF 1994 TO 1993 Net sales from continuing operations increased 16.4% to $435.0 million in 1994 compared to $373.7 million in 1993. Net income from continuing operations increased 11.3% to $13.8 million, or $1.15 per share, in 1994 compared to $12.4 million, or $1.05 per share, in 1993. Net Sales. In the sporting goods and other recreational products group, net sales increased 16.3% to $264.7 million in 1994 compared to $227.6 million in 1993. Approximately one-half of the improvement was attributable to the Company's successful introduction of K2 Exotech in-line skates, increased demand worldwide for K2 snowboards 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 such as the introduction of 54 styles of Hilton and USA active apparel for the advertising specialty market and new models of Stearns raingear, wetsuits and water ski vests, all introduced since January 1, 1993, along with several new models of fishing rods, reels, and kit and combo series. Partially offsetting these gains were lower sales of skis to the economically depressed European and Japanese markets. In the industrial products group, net sales increased 16.6% to $170.3 million in 1994 compared to $146.1 million in 1993. Over one-half of the improvement was attributable to the Simplex products business, which produces coated and laminated paperboard products, protective building wrap and synthetic commercial building coatings. This business benefited from increased penetration of Finestone commercial coatings, expanded models of building wrap and improved housing starts and shipments into the Japanese market which drove sales of insulative sheathing to a record level. Improved market penetration, particularly of fiberglass light poles and paperweaving monofilament line in the United Kingdom, generated the majority of the sales gains in the Shakespeare fiberglass business and the Shakespeare monofilament business, respectively, which are the other two businesses of the industrial products group. Gross Profit. Gross profit increased 19.6% to $116.0 million, or 26.7% of net sales in 1994 compared to $97.0 million, or 25.9% of net sales, in 1993. This improvement in gross profit margin resulted from an improved sales mix and gains in efficiency from ongoing applications of Anthony's improvement process program, particularly at the Stearns, Hilton, Shakespeare Monofilament and Simplex businesses. Overall gross profit in dollars also improved despite the costs of the cap ski conversion. Margin and gross profit were unfavorably impacted by the dramatic increase in the cost of recycled corrugated scrap paper. 13 Costs and Expenses. Selling expenses increased 19.5% to $49.6 million in 1994 compared to $41.5 million in 1993, although as a percentage of net sales they were comparable to the prior year. The increase resulted primarily from 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 21.7% to $38.7 million in 1994 compared to $31.8 million in 1993. The increase reflects the inclusion of the mountain bike business for a full year, significant research and development expenditures primarily at the K2 business, investments in systems and personnel primarily at the Hilton business and the continuation of other expenditures to support the growth of the Company. Operating Income. Operating income increased by 16.9% to $27.7 million in 1994, or 6.4% of net sales, compared to $23.7 million, or 6.3% of net sales, in 1993. The percentage increase is due to the higher gross profit margin partially offset by higher general and administrative expenses. Interest Expense. Interest expense increased by $1.7 million in 1994. Higher domestic interest rates accounted for $0.5 million of the increase, and $17.4 million higher level of average borrowings, incurred to acquire the mountain bike business and support the growth of several product lines, accounted for the remainder. Other Income. Other income of $1.2 million includes certain royalty, interest and other miscellaneous income, $0.9 million of which is reported as a component of segment operating profit. Income Taxes. Income tax expense included a $0.6 million reclassification of state tax previously recorded as selling and general and administrative expenses. Segment Information. Total segment operating profit (before interest, corporate expenses and taxes) increased 20.7% to $33.8 million in 1994 compared to $28.0 million in 1993. In the sporting goods product group, operating profit rose 22.1% to $17.1 million in 1994 compared to $14.0 million in 1993. The group benefited from the Company's introduction of several new fishing rods, reels, and kit and combo series in the United States and from lower manufacturing costs abroad. Sales-related earnings gains also contributed to the group's improvements, particularly from K2 snowboards and the successful introduction of certain Stearns and Hilton products. Partially offsetting these profit gains were the costs of the cap ski conversion and the impact of declining sales in the European and Japanese ski markets. In the industrial products group, operating profits increased 19.3% to $16.7 million in 1994 compared to $14.0 million in 1993. The improvement was mainly due to sales-related earnings and efficiency gains at Shakespeare Monofilament and Simplex. For additional information regarding the segment information, see Note 12 of Notes to Consolidated Financial Statements. LIQUIDITY AND SOURCES OF CAPITAL The Company's continuing operations used $36.3 million of cash during 1995, whereas 1994 continuing operating activities used cash of $15.0 million. The increased use of cash for the current period was mainly due to financing higher levels of accounts receivable and inventories arising from the growth in sales of in-line skates, snowboards, raingear, wetsuits, fishing rods and reels and full-suspension mountain bikes and, to a lesser extent, from the recent acquisitions of Dana Design and Wilderness Experience. The Company believes that another factor in its increased level of inventory investment is the shift by certain of its sporting goods customers from substantial purchases of pre-season inventories to deferral of deliveries until the near arrival of the retail season. The disposition of the Division did not have a significant impact on the liquidity and cash flows of the Company in 1995, 1994 or 1993. Net cash used for investment activities increased to $19.7 million in 1995 from $8.7 million in 1994. The increase in cash used in 1995 is attributable to expenditures to increase manufacturing capacity and improve manufacturing efficiencies, principally in the industrial products group, and the purchases of the Dana Design and Wilderness Experience businesses. No material commitments for capital expenditures existed at yearend. The Company's principal long-term borrowing facility is an $85 million Credit Line ("Credit Line") which becomes due on June 28, 1997. At December 31, 1995, $35.5 million was outstanding under this line. Under the 14 Credit Line, the Company is subject to an agreement which, among other things, restricts amounts available for payment of cash dividends by the Company. As of December 31, 1995, retained earnings were free of such restrictions. The Company also has $40 million of 8.39% unsecured senior notes due through 2004, payable in nine equal principal payments beginning in 1996. The notes are subject to agreements which are generally less restrictive than the Credit Line. The Company has entered into interest rate swap agreements to manage its exposure on the $40 million 8.39% notes payable. For further information regarding the Company's interest rate swap agreements, see Note 5 of Notes to Consolidated Financial Statements. Additionally, the Company had several foreign and domestic short-term lines of credit available totaling $73.3 million, of which $50.2 million is outstanding at December 31, 1995. On June 1, 1995, the Company completed a secondary public offering of 4.6 million shares of its common stock, resulting in net proceeds of $67.2 million. For further information regarding the stock offering see Note 11 of Notes to Consolidated Financial Statements. The Company anticipates its cash needs in 1996 will be provided from operations and from borrowings under its Credit Line and Short-term Facility and other existing credit lines. ENVIRONMENTAL MATTERS The Company is among several potentially responsible parties named in an Environmental Protection Agency matter involving discharge of hazardous materials at an old waste site in South Carolina. This action seeks primarily cleanup costs. The ultimate outcome of this matter cannot be predicted with certainty; however, to the extent to which not previously reserved against by the Company, management does not believe this matter will have a material adverse effect on the Company. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS The Company plans to adopt Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in 1996. SFAS No. 121 requires that impaired assets or assets to be disposed of be accounted for at the lower of the carrying amount or fair value of the assets less costs of disposal. The adoption of the new standard is not expected to have a material effect on the Company's financial statements. In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was issued. Companies will have the option of recognizing compensation expense for virtually all stock-based compensation arrangements based upon the fair value of the option at the grant date, or alternatively, continuing to recognize compensation expense based on the excess of the quoted market price over the option price on the measurement date in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." This statement is required to be adopted in 1996. The Company has not yet adopted SFAS No. 123 and has not yet determined the impact it may have on future financial statement disclosures. 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. During 1995, however, the cost of recycled corrugated scrap paper dramatically increased, particularly in the first half of the year, resulting in price increases of Thermo-ply insulative sheathing. The Company uses the LIFO method of inventory pricing for 45% 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 remaining inventories, priced on a FIFO basis, are also reflected in part 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. 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA STATEMENTS OF CONSOLIDATED INCOME
YEARS ENDED DECEMBER 31 ---------------------------------------------- 1995 1994 1993 -------------- -------------- -------------- (IN THOUSANDS EXCEPT FOR PER SHARE FIGURES) Net Sales...................... $ 544,268 $ 434,995 $ 373,712 Cost of products sold.......... 400,840 319,021 276,759 -------------- -------------- -------------- Gross profit................. 143,428 115,974 96,953 Selling expenses............... 61,256 49,575 41,519 General and administrative expenses...................... 45,086 38,713 31,759 -------------- -------------- -------------- Operating income............. 37,086 27,686 23,675 Interest expense............... 9,916 7,481 5,759 Other income, net.............. (1,449) (1,239) (903) -------------- -------------- -------------- Income before provision for income taxes................ 28,619 21,444 18,819 Provision for income taxes..... 8,820 7,690 6,455 -------------- -------------- -------------- Income from continuing operations.................. 19,799 13,754 12,364 Discontinued operations........ Loss from operations, net of taxes....................... (664) (721) (1,243) Loss on disposal, net of taxes....................... (4,256) -------------- -------------- -------------- (4,920) (721) (1,243) -------------- -------------- -------------- Net Income................... $ 14,879 $ 13,033 $ 11,121 ============== ============== ============== Per share...................... Continuing operations........ $ 1.37 $ 1.15 $ 1.05 Discontinued operations...... (.34) (.06) (.11) -------------- -------------- -------------- Net Income................... $ 1.03 $ 1.09 $ .94 ============== ============== ==============
See notes to consolidated financial statements. 16 ANTHONY INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ------------------ 1995 1994 -------- -------- (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE FIGURES) ASSETS CURRENT ASSETS Cash and cash equivalents................................ $ 7,357 $ 7,700 Accounts receivable less allowances of $8,235 in 1995 and $7,422 in 1994.......................................... 140,202 109,133 Inventories, net......................................... 140,679 97,936 Deferred taxes........................................... 6,683 7,928 Prepaid expenses and other current assets................ 5,534 3,777 -------- -------- Total current assets................................... 300,455 226,474 PROPERTY, PLANT AND EQUIPMENT Land and land improvements............................... 1,704 1,426 Buildings and leasehold improvements..................... 28,963 26,161 Machinery and equipment.................................. 103,434 91,294 Construction in progress................................. 5,605 3,851 -------- -------- 139,706 122,732 Less allowance for depreciation and amortization......... 82,599 73,640 -------- -------- 57,107 49,092 OTHER ASSETS Intangibles, principally goodwill, net................... 14,108 12,197 Net assets of discontinued operations.................... 8,650 10,207 Other.................................................... 4,103 3,566 -------- -------- Total Assets........................................... $384,423 $301,536 ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Bank loans............................................... $ 50,219 $ 18,341 Accounts payable......................................... 27,985 25,828 Accrued payroll and related.............................. 21,443 18,192 Other accruals........................................... 16,031 14,445 Current portion of long-term debt........................ 4,855 2,918 -------- -------- Total current liabilities.............................. 120,533 79,724 Long-Term Debt............................................. 75,071 109,921 Deferred Taxes............................................. 13,003 12,895 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--17,064,065 in 1995 and 12,322,851 in 1994.................................................... 17,064 12,323 Additional paid-in capital............................... 130,995 66,973 Retained earnings........................................ 37,121 28,994 Employee Stock Ownership Plan and stock option loans..... (4,778) (3,937) Treasury shares at cost, 481,059 shares in 1995 and 1994. (4,189) (4,189) Cumulative translation adjustments....................... (397) (1,168) -------- -------- Total Shareholders' Equity............................. 175,816 98,996 -------- -------- Total Liabilities and Shareholders' Equity............. $384,423 $301,536 ======== ========
See notes to consolidated financial statements. 17 ANTHONY INDUSTRIES, INC. STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 -------------------------------------------------------------------------- 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, 1993 $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 options............... 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 adjustments........... (2,032) (2,032) Employee Stock Ownership Plan, amortization and partial loan repayment............. 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 options............... 78 764 (575) 267 Cash dividends, $.425 per share............. (5,010) (5,010) Stock dividends, 5% plus cash in lieu of fractional shares..... 562 9,348 (9,924) (14) Translation adjustments........... 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 Net income for the year 1995.................. 14,879 14,879 Exercise of stock options............... 141 1,388 (1,274) 255 Cash dividends, $.44 per share............. (6,752) (6,752) Translation adjustments........... 771 771 Stock option loan repayments............ 336 336 Stock offering proceeds.............. 4,600 62,634 67,234 Employee Stock Ownership Plan, amortization and partial loan repayment............. 97 97 ------- -------- ------- ------- ------- ------- -------- BALANCE AT DECEMBER 31, 1995 $17,064 $130,995 $37,121 $(4,778) $(4,189) $ (397) $175,816 ======= ======== ======= ======= ======= ======= ========
See notes to consolidated financial statements. 18 ANTHONY INDUSTRIES, INC. STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31, --------------------------- 1995 1994 1993 -------- -------- ------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Income from continuing operations................ $ 19,799 $ 13,754 $12,364 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of property, plant and equipment.................................. 9,510 7,298 7,772 Amortization of intangibles..................... 722 614 558 Deferred taxes.................................. 1,323 (17) 218 Changes in operating assets and liabilities: Accounts receivable............................ (30,569) (20,759) (9,953) Inventories.................................... (41,433) (19,274) (4,252) Prepaid expenses and the current assets........ (1,610) (1,275) 918 Accounts payable............................... 1,446 1,918 2,236 Payrolls and other accruals.................... 4,554 2,770 2,245 -------- -------- ------- Net cash provided by (used in) operating activities...................................... (36,258) (14,971) 12,106 INVESTING ACTIVITIES Property, plant and equipment expenditures....... (17,292) (11,273) (8,537) Disposals of property, plant and equipment....... 101 1,468 159 Purchases of businesses, net of cash acquired.... (2,159) (932) Other items, net................................. (364) 1,059 (2,657) -------- -------- ------- Net cash used in investing activities............ (19,714) (8,746) (11,967) FINANCING ACTIVITIES Borrowings under long-term debt.................. 22,582 21,500 Payments of long-term debt....................... (33,623) (3,738) (6,534) Net increase (decrease) in short-term bank loans. 31,878 12,053 (5,004) Exercise of stock options........................ 255 267 629 Dividends paid................................... (6,752) (5,010) (4,733) Net proceeds from stock offering................. 67,234 -------- -------- ------- Net cash provided by financing activities........ 58,992 26,154 5,858 -------- -------- ------- Net increase in cash and cash equivalents from continuing operations............................ 3,020 2,437 5,997 DISCONTINUED OPERATIONS Loss from discontinued operations................ (4,920) (721) (1,243) Adjustments to reconcile loss to net cash used in discontinued operations: Depreciation and amortization................... 612 722 753 Capital expenditures............................ (575) (347) (178) Other items, net................................ 1,520 (251) (1,592) -------- -------- ------- Cash used in discontinued operations.............. (3,363) (597) (2,260) -------- -------- ------- Net increase (decrease) in cash and cash equivalents...................................... (343) 1,840 3,737 Cash and cash equivalents at beginning of year.... 7,700 5,860 2,123 -------- -------- ------- Cash and cash equivalents at end of year.......... $ 7,357 $ 7,700 $ 5,860 ======== ======== =======
See notes to consolidated financial statements. 19 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 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, K-2 Corporation, Stearns Manufacturing Company, Girvin Inc. and Dana Design, Ltd. All significant intercompany accounts and transactions have been eliminated. Fiscal Periods The Company maintains its books using a 52/53 week year ending on the last Sunday of December. For purposes of the consolidated financial statements, the yearend is stated as December 31. The year ending December 31, 1995 consisted of 53 weeks. Each of the years ended in 1994 and 1993 consisted of 52 weeks. Estimates Used The preparation of financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual amounts could differ from those estimates. 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. 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, 1995, the Company's receivables from the ski, skate and snowboard industries amounted to 50% of total receivables. The Company performs periodic credit evaluations to manage its credit risk. Allowances consist primarily of allowance for bad debts, but also include reserves for volume-related discounts of $2,937,000 and $3,018,000 as of December 31, 1995 and 1994, respectively. Inventories Inventories are stated at the lower of cost or market. Cost is determined on the LIFO method with respect to approximately 45% and 43% of total inventories at December 31, 1995 and 1994, respectively. Cost was determined on the FIFO method for all other inventories. 20 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Property, Plant and Equipment Property, plant and equipment is recorded at cost. Depreciation is provided on the straight-line method based upon the estimated useful lives of the assets. Repairs and maintenance of $7,270,000, $6,020,000 and $5,438,000 in 1995, 1994 and 1993, respectively, were expensed as incurred. 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, 1995 and 1994 amounted to $3,481,000 and $2,843,000, respectively. The Company periodically reviews intangibles for impairment of value. Advertising Costs Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 1995, 1994 and 1993 amounted to $13,006,000, $10,177,000 and $8,507,000, respectively. Research and Development Research and development costs are charged to expense as incurred. Research and development costs for the years ended December 31, 1995, 1994 and 1993 amounted to $7,132,000, $6,255,000 and $4,271,000, respectively. Income Taxes Income taxes are provided for based upon Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires that income taxes be provided for using the liability method. 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. Newly Issued Accounting Standards The Company plans to adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in 1996. SFAS No. 121 requires that impaired assets or assets to be disposed of be accounted for at the lower of the carrying amount or fair value of the assets less costs of disposal. The adoption of the new standard is not expected to have a material effect on the Company's financial statements. In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was issued. Companies will have the option of recognizing compensation expense for virtually all stock-based compensation arrangements based upon the fair value of the option at the grant date, or alternatively, continuing to recognize compensation expense based on the excess of the quoted market price over the option price on the measurement date in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." This statement is required to be adopted in 1996. The Company has not yet adopted SFAS No. 123 and has not yet determined the impact it may have on future financial statement disclosures. 21 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--DISCONTINUED OPERATIONS In October 1995, the Company signed a letter of intent to sell the assets and business of its swimming pool and motorized pool cover business ("Division") to General Aquatics, Inc. ("GAI"). As a result of the sale, the Division has been shown in the accompanying financial statements as a discontinued operation. The Company completed the sale on March 5, 1996. Consideration included a 5.6% subordinated note with a face value of approximately $6.2 million and approximately 9% of the outstanding common stock of GAI, a privately owned company. In addition, the Company received warrants to purchase additional shares upon the occurrence of certain conditions. The exercise of the warrants may be funded through the surrender of the unpaid portion of the note. The note is due at the end of five years. Additionally, GAI has agreed to assume certain liabilities of the Division. As required under GAAP the note receivable was discounted to reflect a market rate and the common stock was valued at an estimated fair market value. The estimated loss on disposal of the discontinued operations, net of tax benefit of $3,218,000, includes a provision for anticipated operating losses of $1,300,000 prior to disposal. The tax benefit is more than the benefit computed using statutory tax rates due to the realization of the benefit of deductions treated as permanent differences in prior years. Net assets of discontinued operations have been segregated in the accompanying Consolidated Balance Sheets and consist primarily of accounts receivable, inventories, fixed assets and goodwill offset by accounts payable, accrued payroll and related items and other accruals (excluding a reserve for estimated losses on disposal and anticipated operating losses prior to disposal). Net sales of $65,349,000, $67,449,000 and $57,928,000 in the years ended December 31, 1995, 1994 and 1993, respectively, were excluded from consolidated net sales in the accompanying Consolidated Statements of Income. NOTE 3--ACQUISITION OF BUSINESSES On October 14, 1993, the Company purchased certain assets of Ocean State International, Inc. ("Girvin"). Girvin is a manufacturer and distributor of ProFlex full-suspension mountain bikes and Girvin accessories for sale in the United States and Europe. On February 4, 1995, the Company purchased Dana Design Ltd., a small manufacturer and distributor of high-end backpacks for sale primarily in the United States. During the year, the Company purchased the assets of two additional small businesses. NOTE 4--INVENTORIES Inventories consisted of the following at December 31:
1995 1994 -------- -------- (THOUSANDS) Finished goods............................................... $ 97,193 $ 61,987 Work in process.............................................. 9,700 8,788 Raw materials................................................ 38,668 32,216 -------- -------- Total inventories at lower of FIFO cost or market (approximates current cost)................................. 145,561 102,991 Less LIFO valuation reserve.................................. 4,882 5,055 -------- -------- $140,679 $ 97,936 ======== ========
NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS The Company has a $40 million 364-day unsecured revolving credit line, all of which was outstanding at December 31, 1995, with the same lenders and providing for substantially the same covenants, interest rate options and commitment fees as under the $85 million credit line discussed below. The Company also has foreign and domestic short-term lines of credit, totaling $33.3 million, of which $10.2 million was outstanding at December 31, 1995. The foreign subsidiaries' lines of credit generally have no termination dates but are reviewed 22 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS--(CONTINUED) annually for renewal and are denominated in the subsidiaries' local currencies. At December 31, 1995, interest rates on short-term lines of credit ranged from 6.1% to 11.2%. The weighted average interest rates on short-term lines of credit as of December 31, 1995 and 1994 were 6.8% and 6.5%, respectively. The principal components of long-term debt at December 31 were:
1995 1994 ------- -------- (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 $85 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...................................... 35,500 68,000 Note payable due in monthly instalments through February 2001 with interest payable monthly at LIBOR plus 1 1/2% (7.47% at December 31, 1995).......................................... 4,325 4,703 Other debt................................................... 101 136 ------- -------- 79,926 112,839 Less--amounts due within one year............................ 4,855 2,918 ------- -------- $75,071 $109,921 ======= ========
The principal amount of long-term debt maturing in each of the five years following 1995 is:
(THOUSANDS) ----------- 1996............................. $ 4,855 1997............................. 40,383 1998............................. 4,916 1999............................. 4,950 2000............................. 4,987
Interest paid on short- and long-term debt for the years ended December 31, 1995, 1994 and 1993 was $9.9 million, $7.5 million and $5.8 million, respectively. Under the $85 million revolving credit line, up to $15 million is available for either standby letters of credit or for borrowings. The 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, 1995, retained earnings were free of such restrictions. Interest rates on the revolving line at December 31, 1995 ranged from 6.5% to 8.5%. The Company had $15.3 million of letters of credit outstanding as of December 31, 1995. 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 $9,000 arising from these transactions 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 23 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 5--BORROWINGS AND OTHER FINANCIAL INSTRUMENTS--(CONTINUED) exposure on the $4.3 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 carrying amounts for the short-term lines of credit and the long-term bank revolving credit line approximates 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 price, is $39.9 million as compared to a carrying amount of $40.0 million, and the fair value of the $4.3 million note payable equals the carrying amount. The Company, including its foreign subsidiaries, enters into forward exchange contracts to hedge certain anticipated and firm sales and purchase commitments which are denominated in U.S. or foreign currencies. The purpose of the foreign currency hedging activities is to reduce the Company's risk to fluctuating exchange rates. At December 31, 1995, the Company had foreign exchange contracts with maturities of generally less than one year in the aggregate amount of $12.4 million, and with net unrealized losses of $44,993. The unrealized losses will be recognized in earnings when realized and when the underlying transaction occurs. At December 31, 1995, the Company had no deferred realized gains or losses from forward exchange contracts. NOTE 6--INCOME TAXES Pretax income from continuing operations for the years ended December 31 was taxed under the following jurisdictions:
1995 1994 1993 ------- ------- ------- (THOUSANDS) Domestic................................................ $22,174 $16,353 $15,489 Foreign................................................. 6,445 5,091 3,330 ------- ------- ------- $28,619 $21,444 $18,819 ======= ======= =======
Components of the income tax provision applicable to continuing operations for the three years ended December 31 are:
1995 1994 1993 ---------------- ---------------- ----------------- CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- (THOUSANDS) Federal...................... $7,625 $(405) $5,835 $(755) $5,685 $(710) State........................ 1,310 (40) 1,915 (85) 1,085 (30) Foreign...................... 310 20 505 275 (5) 430 ------ ----- ------ ----- ------ ----- $9,245 $(425) $8,255 $(565) $6,765 $(310) ====== ===== ====== ===== ====== =====
24 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6--INCOME TAXES--(CONTINUED) 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:
1995 1994 1993 ---- ---- ---- (PERCENT) Statutory federal income tax rate............................. 35.0 35.0 35.0 State income tax effect....................................... 2.9 5.6 3.6 Tax effect of foreign earnings................................ (6.8) (4.8) (4.0) Other......................................................... (0.2) 0.1 (0.3) ---- ---- ---- 30.9 35.9 34.3 ==== ==== ====
No provision for United States income taxes has been made on undistributed earnings of foreign subsidiaries, since these earnings are considered to be permanently reinvested. At December 31, 1995, the foreign subsidiaries had unused operating loss carryforwards of approximately $4.6 million of which approximately $1.6 million expires in 2000 and the remainder carry forward indefinitely. Since the use of these operating loss carryforwards is limited to future taxable earnings of the related foreign subsidiaries, a valuation reserve has been recognized to offset the deferred tax assets arising from such carryforwards. As a result of realizing the benefit of certain foreign operating loss carryforwards, the valuation reserve, which is included in the tax effect of foreign earnings above, was reduced by $1.4 million and $.5 million, in 1995 and 1993, respectively, and none in 1994. Deferred tax assets and liabilities are comprised of the following at December 31:
1995 1994 ------- ------- (THOUSANDS) Deferred tax liabilities: Depreciation and amortization of property, plant and equipment. $ 6,323 $ 7,031 Trademark amortization......................................... 246 207 Other.......................................................... 7,869 6,680 ------- ------- Deferred tax liabilities..................................... 14,438 13,918 Deferred tax assets: Insurance accruals............................................. 2,006 1,967 Tax effect of foreign loss carryforwards....................... 1,863 3,222 Bad debt reserve............................................... 879 1,021 Other.......................................................... 5,233 5,963 ------- ------- 9,981 12,173 Valuation reserve.............................................. 1,863 3,222 ------- ------- Current deferred tax assets.................................. 8,118 8,951 ------- ------- Deferred tax liabilities, net.................................. $ 6,320 $ 4,967 ======= =======
Income taxes paid, net of refunds, in the years ended December 31, 1995, 1994 and 1993 were $6.8 million, $6.7 million and $5.3 million, respectively. 25 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7--COMMITMENTS AND CONTINGENCIES Future minimum payments under noncancelable operating leases as of December 31, 1995, are as follows (in thousands): 1996.............................................. $2,021 1997.............................................. 2,026 1998.............................................. 1,785 1999.............................................. 1,162 2000.............................................. 565 Thereafter........................................ 500 ------ $8,059 ======
Leases are primarily for rental of facilities, and about one-half of these contain 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 $3,105,000, $2,969,000 and $2,767,000 for the years ended December 31 1995, 1994 and 1993, respectively. 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 8--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. The Company also sponsors defined contribution pension plans covering certain domestic employees who are not covered by a defined benefit pension plan. Contributions by the Company for the defined contribution plans are determined as a percent of the amounts contributed by the respective employees. 26 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8--PENSION PLANS AND OTHER BENEFIT PLANS--(CONTINUED) The following table sets forth the defined benefit plans' funded status and amounts recognized in the Company's consolidated balance sheets at December 31:
1995 1994 --------------------------- --------------------------- 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 $35,870 in 1995 and $26,202 in 1994...... $(33,505) $(3,298) $(26,510) $(2,347) ======== ======= ======== ======= Projected benefit obligation for service rendered to date....... $(42,140) $(3,298) $(32,631) $(2,347) Plan assets at fair value, primarily publicly traded stocks, bonds, and other fixed income securities...... 41,067 35,018 -------- ------- -------- ------- Plan assets in excess of (or less than) the projected benefit obligation............. (1,073) (3,298) 2,387 (2,347) Unrecognized net loss... 3,050 869 1,145 93 Unrecognized prior service cost........... 415 328 (73) 385 Unrecognized net transition (asset) obligation at January 1, 1987, net of amortization........... (1,430) 523 (1,706) 589 Adjustment required to recognize minimum liability.............. (1,720) (1,067) -------- ------- -------- ------- Prepaid pension cost (pension liability) recognized in the consolidated balance sheets................. $ 962 $(3,298) $ 1,753 $(2,347) ======== ======= ======== =======
The weighted average discount rates and rates of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.25% and 4.4%, respectively, at December 31, 1995 and 8.25% and 4.6%, respectively, at December 31, 1994. The expected long-term rates of return on plan assets were 9% for each of the three years ended December 31, 1995. As a result of reducing the weighted average discount rate from 8.25% to 7.25%, the accumulated benefit obligation and the projected benefit obligation increased by $4.1 million and $5.8 million, respectively. Net pension cost consisted of the following at December 31:
1995 1994 1993 ------- ------- ------- (THOUSANDS) Service cost-benefits earned during the period...... $ 1,312 $ 1,495 $ 1,108 Interest cost on the projected benefit obligation... 3,018 2,829 2,607 Actual (gains) loss on plan assets.................. (7,369) 360 (2,798) Net amortization and deferral....................... 4,162 (3,802) (525) ------- ------- ------- Total net periodic pension cost of funded defined benefit plans...................................... 1,123 882 392 Defined contribution plans.......................... 465 435 517 ------- ------- ------- Total pension plan cost............................. $ 1,588 $ 1,317 $ 909 ======= ======= =======
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. 27 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9--QUARTERLY OPERATING DATA (UNAUDITED) The following unaudited quarterly results included below have been restated from those originally reported to reflect the results of continuing operations, except for the final net income per share column.
CONTINUING OPERATIONS ------------------------------- NET GROSS NET NET INCOME NET INCOME SALES PROFIT INCOME PER SHARE PER SHARE ------ ------ ------ ---------- ---------- (IN MILLIONS EXCEPT FOR PER SHARE FIGURES) 1995 First quarter........................ $138.0 $ 34.3 $ 3.6 $0.30 $0.17 Second quarter....................... 135.9 36.2 5.4 0.41 0.48 Third quarter........................ 134.7 36.3 6.0 0.36 0.40 Fourth quarter....................... 135.7 36.6 4.8 0.29 (0.01) ------ ------ ----- ----- ----- $544.3 $143.4 $19.8 $1.37 $1.03 ====== ====== ===== ===== ===== 1994 First quarter........................ $102.1 $ 25.2 $ 1.6 $0.13 $0.04 Second quarter....................... 107.5 30.3 4.1 0.35 0.42 Third quarter........................ 104.6 28.9 3.9 0.33 0.38 Fourth quarter....................... 120.8 31.6 4.2 0.35 0.25 ------ ------ ----- ----- ----- $435.0 $116.0 $13.8 $1.15 $1.09 ====== ====== ===== ===== =====
NOTE 10--STOCK OPTIONS Under the Company's 1994 and 1988 Incentive Stock Option Plans ("1994 and 1988 Plans", respectively), 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 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, 1995 and 1994, there was a total of $3,378,000 and $2,440,000, respectively, of loans and accrued interest outstanding which are due on various dates through December 2000. The loan amounts have been deducted from shareholders' equity. 28 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--STOCK OPTIONS--(CONTINUED) Further information regarding the 1994 and 1988 Plan is shown below:
1994 PLAN 1988 PLAN ---------------- --------------- Status at December 31, 1995 Number of shares subject to option.......... 322,500 232,256 Exercise price per share.................... $15.00 to $23.00 $5.66 to $14.52 Number of shares exercisable................ 26,960 178,182 Available for grant......................... 718,600 ---------------- --------------- 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 ---------------- --------------- Information regarding the number of shares subject to options which were exercised during the three years ended December 31, 1995 is shown below: YEAR SHARES PRICE PER SHARE ---- ---------------- --------------- 1995........................................ 141,215 $5.66 to $17.25 1994........................................ 83,774 $5.66 to $14.52 1993........................................ 107,240 $5.66 to $ 8.77 ---------------- ---------------
During 1995, options for 182,500 shares were granted at $16.38 to $23.00 per share, and options for 69,264 shares at $11.75 to $17.25 per share were canceled or expired. At December 31, 1995, 1,273,356 shares of common stock were reserved for issuance under the Plans. NOTE 11--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. Stock Offering On June 1, 1995, the Company completed a secondary public offering of 4.6 million new shares of its common stock. The net proceeds of $67.2 million were used to reduce amounts outstanding under the $85 million credit facility. 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, 1995, the trust was indebted to the Company in the aggregate amount of $861,000 in connection with stock purchases made from 1982 through 1984 of which 228,255 shares with an aggregate market value of $5,250,000 as of December 31, 1995 remained unallocated to participants. These loans are repayable over the next seven to nine years with interest at prime plus 1/2%, not to exceed 18% and the unallocated shares will be released to participants proportionately 29 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 11--SHAREHOLDERS' EQUITY--(CONTINUED) 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 $169,000 and $157,000 in 1995 and 1994, respectively, were used to service these loans. Additionally, the trust was indebted to the Company in the amount of $400,000, at December 31, 1995 and 1994 in connection with distributions made to terminees. The balance outstanding was repaid subsequent to the 1995 year end. Shareholders' equity has been reduced by the amounts of the loans and any payments made by the Company on behalf of the trust. The payments, which at December 31, 1995 totaled $139,000, are being amortized to expense over the lives of the loan. 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 1995, 1994 and 1993 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 $13,000, $1,016,000 and $1,260,000, respectively. ESOP expense, including amortization of the foregoing payments, was $264,000, $1,014,000 and $1,012,000 in 1995, 1994 and 1993, respectively. Allocated shares as of December 31, 1995 totaled 2,036,347. 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. 30 ANTHONY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12--SEGMENT DATA The Company and its subsidiaries are organized into sporting goods and other recreational products and industrial products segments. The sporting goods and other 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, golf shirts, and bowling shirts; manufacture and sale of personal flotation devices, towables and rainwear; manufacture and sale of full-suspension mountain bikes and accessories; manufacture and sale of rods, reels and other fishing tackle items; and manufacture and sale of backpacks and tents. 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, light poles and transmission and distribution poles; and laminated and coated paperboard products. The following segment data is presented for continuing operations for the three years ended December 31, 1995. "Identifiable Assets" are as of December 31.
NET SALES TO UNAFFILIATED CUSTOMERS PRETAX INCOME ----------------------- ---------------- 1995 1994 1993 1995 1994 1993 ------- ------- ------- ---- ---- ---- (MILLIONS OF DOLLARS) Sporting goods and other recreational products............................ 349.4 264.7 227.6 26.9 17.1 14.0 Industrial products.................. 194.9 170.3 146.1 18.0 16.7 14.0 ------- ------- ------- ---- ---- ---- Net sales and operating profits...... 544.3 435.0 373.7 44.9 33.8 28.0 ======= ======= ======= Corporate Interest and other income.................................. 0.3 0.4 0.9 Interest expense........................................... (9.9) (7.5) (5.8) General expense............................................ (6.7) (5.3) (4.3) ---- ---- ---- Pretax income................................................ 28.6 21.4 18.8 ==== ==== ====
IDENTIFIABLE CAPITAL ASSETS EXPENDITURES DEPRECIATION AMORTIZATION ----------------- -------------- -------------- -------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ----- ----- ----- ---- ---- ---- ---- ---- ---- ---- ---- ---- (MILLIONS OF DOLLARS) Sporting goods and other recreational products.. 269.9 203.6 163.4 7.7 6.7 5.8 4.9 3.0 3.3 0.6 0.5 0.5 Industrial products..... 91.3 74.8 66.3 9.6 4.6 2.7 4.5 4.2 4.4 ----- ----- ----- ---- ---- --- --- --- --- --- --- --- Total segment data.... 361.2 278.4 229.7 17.3 11.3 8.5 9.4 7.2 7.7 0.6 0.5 0.5 Corporate............... 14.5 12.9 14.1 0.1 0.1 0.1 0.1 0.1 0.1 ----- ----- ----- ---- ---- --- --- --- --- --- --- --- 375.7 291.3 243.8 17.3 11.3 8.5 9.5 7.3 7.8 0.7 0.6 0.6 ===== ===== ===== ==== ==== === === === === === === ===
TOTAL SEGMENT UNITED STATES FOREIGN ELIMINATIONS DATA ----------------- --------------- ------------------- ----------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ----- ----- ----- ----- ---- ---- ----- ----- ----- ----- ----- ----- (MILLIONS OF DOLLARS) Net Sales............... 444.8 354.0 305.2 122.0 99.8 87.1 (22.5) (18.8) (18.6) 544.3 435.0 373.7 Less-intergeographic sales.................. 7.1 8.5 7.3 15.4 10.3 11.3 (22.5) (18.8) (18.6) ----- ----- ----- ----- ---- ---- ----- ----- ----- ----- ----- ----- Net sales to unaffiliated customers. 437.7 345.5 297.9 106.6 89.5 75.8 544.3 435.0 373.7 ----- ----- ----- ----- ---- ---- ----- ----- ----- Operating profit........ 37.9 27.2 23.6 7.0 6.6 4.4 44.9 33.8 28.0 ----- ----- ----- ----- ---- ---- ----- ----- ----- Identifiable assets..... 294.4 228.4 195.3 66.8 50.0 34.4 361.2 278.4 229.7 ----- ----- ----- ----- ---- ---- ----- ----- ----- Capital expenditures.... 12.4 9.4 7.1 4.9 1.9 1.4 17.3 11.3 8.5 ----- ----- ----- ----- ---- ---- ----- ----- ----- Depreciation............ 7.4 6.0 6.5 2.0 1.2 1.2 9.4 7.2 7.7 ----- ----- ----- ----- ---- ---- ----- ----- ----- Amortization............ 0.6 0.5 0.5 0.6 0.5 0.5 ===== ===== ===== ===== ===== =====
31 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, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results of their operation and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Los Angeles, California February 16, 1996, except for the first paragraph of Note 2, as to which the date is March 5, 1996 32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 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, 1996, 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, 1995 unless otherwise stated):
PAGE REFERENCE FORM 10-K -------------- Statements of consolidated income............................ 16 Consolidated balance sheets at December 31, 1995 and 1994.... 17 Statements of consolidated shareholders' equity.............. 18 Statements of consolidated cash flows........................ 19 Notes to consolidated financial statements................... 20-31 Report of Independent Auditors............................... 32 (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)(i) 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. (a)(ii) Certificate of Amendment of Restated Certificate of Incorporation dated May 31, 1995. (b) By-Laws of Anthony Industries, Inc., as amended, filed as Item 7(c), Exhibit 3.1 to Form 8-K dated November 20, 1995 and incorporated herein by reference. 33 (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. (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. (1) 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. (2) Second Amendment to Credit Agreement, dated April 21, 1995, filed as Item 6(a), Exhibit 10.01 to Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference. (3) Third Amendment to Credit Agreement, dated April 27, 1995, filed as Item 6(a), Exhibit 10.02 to Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference. (b) Note Agreement Re: $40,000,000 8.39% Senior Notes due November 20, 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) Credit Agreement (364-Day Facility), dated April 27, 1995, filed as Exhibit 10.03 to Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference. (d) Executive compensation plans and arrangements (1) (i) Retirement agreement dated November 20, 1995 between the Company and B. I. Forester. (ii) Trust for Anthony Industries, Inc. Supplemental Employee Retirement Plan for the Benefit of B. I. Forester between the Company and Wells Fargo Bank N.A., as Trustee, dated November 20, 1995. (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 endedDecember 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, 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 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. 34 (e)(1) Asset Purchase Agreement dated February 16, 1996 among General Aquatics, Inc., KDI Sylvan Pools, Inc., as Buyer, and Anthony Industries, Inc., as Seller, filed as Item 7 Exhibit 99(A) to Form 8-K filed March 21, 1996 and incorporated herein by reference. (2) 5.61% Subordinated Note Due March 4, 2001, filed as Item 7 Exhibit 99(B) to Form 8-K filed March 21, 1996 and incorporated herein by reference. (3) General Aquatics, Inc. Warrant to Purchase Common Stock, filed as Item 7 Exhibit 99(C) to Form 8-K filed March 21, 1996 and incorporated herein by reference. (11) Computation of earnings per share for three years ended December 31, 1995. (21) Subsidiaries (23) Consent of Independent Auditors (27) Financial Data Schedule (a) 1995 Financial Data Schedule. (b) 1994 Restated Financial Data Schedule. (B) REPORTS ON FORM 8-K FILED IN THE FOURTH QUARTER OF 1995: Form 8-K dated November 20, 1995 Item 5. Bylaws of the Company, as Amended. 35 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/ Richard M. Rodstein _____________________________________ (Richard M. Rodstein) President and Chief Executive Officer Date March 27, 1996 _____________________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Richard M. Rodstein Director, President and March 27, 1996 ____________________________________ Chief Executive Officer (Richard M. Rodstein) (Principal Executive Officer)* /s/ John J. Rangel Senior Vice President-- March 27, 1996 ____________________________________ Finance (Principal Financial (John J. Rangel) and Accounting Officer) /s/ B. I. Forester Director, Chairman of the March 27, 1996 ____________________________________ Board* (B. I. Forester) /s/ Hugh V. Hunter Director* March 27, 1996 ____________________________________ (Hugh V. Hunter) /s/ John H. Offermans Director* March 27, 1996 ____________________________________ (John H. Offermans) /s/ John B. Simon Director* March 27, 1996 ____________________________________ (John B. Simon)
*A majority of the directors of the registrant 36 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, 1995 Allowance for doubtful items................ $4,404 $2,093 $1,199 $5,298 Other (primarily sales discounts)........... 3,018 $4,194 4,275 2,937 ------ ------ ------ ------ ------ $7,422 $2,093 $4,194 $5,474 $8,235 ====== ====== ====== ====== ====== Year ended December 31, 1994(a) Allowance for doubtful items................ $3,677 $1,509 $ 782 $4,404 Other (primarily sales discounts)........... 2,712 5,430 5,124 3,018 ------ ------ ------ ------ ------ $6,389 $1,509 $5,430 $5,906 $7,422 ====== ====== ====== ====== ====== Year ended December 31, 1993(a) Allowance for doubtful items................ $2,879 $1,760 $ 962 $3,677 Other (primarily sales discounts)........... 2,618 4,563 4,469 2,712 ------ ------ ------ ------ ------ $5,497 $1,760 $4,563 $5,431 $6,389 ====== ====== ====== ====== ======
- -------- (a) Information has been restated to reflect the sale of the Division (for further information see Note 2 of Notes to Consolidated Financial Statements). F-1 EX-3.(A)(II) 2 CERTIFICATE OF AMENDMENT EXHIBIT (3)(a)(ii) CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF ANTHONY INDUSTRIES, INC. It is hereby certified that: 1. The name of the corporation (hereinafter called the "Company") is ANTHONY INDUSTRIES, INC. 2. The name under which the Company was originally incorporated is ANTHONY POOLS, INC., and the date of filing of the original certificate of incorporation of the Company with the Secretary of State of the State of Delaware is September 15, 1959. 3. The provisions of the certificate of incorporation as amended and/or supplemented were restated and integrated into a single instrument entitled "Restated Certificate of Incorporation of Anthony Industries, Inc.", filed with the Secretary of State of the State of Delaware on May 12, 1989. 4. The Restated Certificate of Incorporation of the Company is hereby amended by striking out Article THIRTEENTH thereof and by substituting in lieu of said Article the following new Article: "THIRTEENTH: The Board of Directors shall be divided into three classes. Directors in each class shall be elected to hold office until the third annual meeting of stockholders following their election. The Board of Directors shall consist of from six to nine directors, with the actual number constituting the whole Board, and the number of directors in each class, being set from time to time by action of the Board of Directors; provided, however, that no decrease in the number of directors constituting the whole Board or the number of directors in any class may shorten the term of any incumbent director." -1- 5. The amendment of the Restated Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. Signed and attested to on May 31, 1995. /s/ M. E. Lane ___________________________________ M. E. Lane Vice President ATTEST: /s/ Susan E. McConnell _________________________________ Susan E. McConnell Secretary -2- EX-10.(D)(1)(I) 3 RETIREMENT AGREEMENT DATED 11/20/95 EXHIBIT 10(d)(1)(i) AGREEMENT AGREEMENT dated as of November 20, 1995 between Anthony Industries, Inc. (the "Company") and B. I. Forester ("Forester"). Forester has been President and/or Chief Executive Officer of the Company for over 25 years and presently serves the Company as Chairman of the Board and Chief Executive Officer. The Company and Forester desire to provide for Forester's retirement as an employee of the Company and his continued service to the Company as a consultant, all as of January 1, 1996 (the "Effective Date"). Forester is currently employed pursuant to an amended and restated Employment Agreement dated as of December 31, 1991 and as amended on October 20, 1994 (the "1991 Amended Agreement"). Accordingly, provided that the Employment Period (as defined in the 1991 Amended Agreement) shall not have been terminated prior to January 1, 1996 by reason of Forester's death or pursuant to Section 5(a) thereof, the Company and Forester hereby amend and restate the 1991 Amended Agreement, effective as of the Effective Date, to read in its entirety as follows (the "1995 Agreement"). 1. (a) The Company hereby engages Forester, for the period (hereinafter referred to as the "Consulting Period") commencing on the Effective Date and terminating on December 31, 1998 or Forester's earlier death, as a consultant to the Company on such matters as the Chief Executive Officer of the Company may from time to time request, provided such matters are consistent with Forester's former activities at the Company. Forester shall not be required to devote more than fifty hours to such consultancy in any calendar month during the Consulting Period. (b) The Company shall pay to Forester, bi-weekly during the Consulting Period, consulting fees at an annual rate of $200,000. During the Consulting Period: (i) Forester shall be entitled to receive group medical, hospital, dental, life and long-term disability insurance substantially the same as that provided to him immediately prior to the Effective Date and be eligible for reimbursement under the Company's Officers' or Directors' Medical Expense Reimbursement Plans, and (ii) the Company shall continue the Commonwealth Life Insurance Company policy in the amount of $250,000 insuring Forester's life and payable to the beneficiary designated by Forester ("Commonwealth"). The existing insurance agreement relating to a split-dollar life insurance policy insuring Forester's life shall continue in effect in accordance with its terms. With respect to Commonwealth, the Company shall pay all premiums required to obtain a fully paid up policy prior to expiration of the Consulting Period. During the Consulting Period, Forester shall continue to receive the perquisites provided to him prior to the Effective Date (all material perquisites having been acknowledged by Forester and the Company in writing), shall be provided an office and secretarial assistance as required and shall be reimbursed for business expenses reasonably incurred by him for the benefit of the Company. 2. (a) Forester hereby waives all rights to receive, and agrees to forego the payment of, any incentive compensation under the Company's Executive Officers' Incentive Compensation Plan (the "Plan") with respect to 1995. In lieu of the foregoing incentive compensation, the Company shall pay to Forester the amount of $431,200 (the "Target Payment") pursuant to the terms of this 1995 Agreement, subject to the following adjustments: 2 (i) If Incentive Compensation Income (as defined below) for 1995 (the "1995 ICI") is less than $27,984,000 (the "Target ICI") but not less than $25,507,000, then Forester shall be entitled to receive an amount equal to the Target Payment reduced by $4.74 for each $100 by which the 1995 ICI is less than the Target ICI. For purposes of this 1995 Agreement, Incentive Compensation Income means the consolidated net income of the Company as shown in the annual report but before (1) extraordinary items (as that term is used in generally accepted accounting principles), (2) incentive compensation awarded under the Plan and (3) provision for state and federal income taxes. (ii) If the 1995 ICI is less than $25,507,000 but not less than $18,421,000, then Forester shall be entitled to receive an amount equal to the Target Payment reduced by (y) the amount of $117,410, plus (z) $4.43 for each $100 by which the 1995 ICI was less than $25,507,000. (b) The definitive amount that Forester is entitled to receive under this Section 2 is hereafter referred to as the "Final Payment" and is payable in its entirety on March 15, 1996. (c) Forester's right to receive payment of the Final Payment is hereby vested and subject to no forfeiture contingency. 3 (d) Forester hereby waives all right to receive, and agrees to forego all presently unpaid installments of, awards under the Plan with respect to prior years. In lieu of such unpaid installments, the Company shall pay to Forester, pursuant to the terms of this 1995 Agreement, the amount of $432,268, such amount to be paid to Forester in installments of $259,360 on March 15, 1996 and $172,908 on March 15, 1997. The foregoing payments are hereby vested and subject to no forfeiture contingency. 3. (a) Upon Forester's death, whether during the Consulting Period or thereafter, the Company shall pay $50,000 per year, for a period of ten years, as follows: (i) $25,000 per year to Eunice Forester, or if she is not living at the time any such payment is due, such payment shall be made in equal shares to Donald A. Forester and Kenneth C. Forester or, if Donald or Kenneth is not then living, his share shall be paid to his then living issue per stirpes or, if none, to the survivor of Donald and Kenneth; and (ii) $25,000 per year to Forester's beneficiaries to be designated from time to time by a notice from him in writing to the Secretary of the Company; the first such payments to be made within thirty days after Forester's death and subsequent payments to be made on the nine succeeding anniversaries of the date of his death. 4 (b) The obligations of the Company set forth in this Section 3 shall survive the expiration or termination of the other provisions of this 1995 Agreement. Those obligations set forth in Section 3(a)(i) hereof may not be modified without the written consent of Eunice Forester, and those set forth in Section 3(a)(ii) hereof are subject to Section 14 hereof. 4. The Company will provide Forester with a "supplemental employee retirement plan" (herein "SERP") as follows: (a) Commencing on January 1, 1997 and continuing monthly thereafter during Forester's lifetime, the Company shall pay to Forester an amount equal to (i) 4.6% of Average Accounting Base Compensation (as defined herein), reduced by (ii) the monthly amount received by Forester under the Pension Plan of Anthony Industries, Inc. (the "Pension Plan"). At Forester's death, the Company shall pay to Forester's widow a monthly benefit in an amount equal to (i) 4.6% of Average Accounting Base Compensation reduced by (ii) any monthly amount received by Forester's widow under the Pension Plan, commencing on the first day of the month following the month in which Forester dies and ending on the earlier of (x) the date of Forester's widow's death or (y) the completion of a five-year period. For purposes of this SERP, Average Accounting Base Compensation shall mean the average of the highest three calendar years of Accounting Base Compensation during Forester's employment with the Company, and Accounting Base Compensation for a calendar year shall mean 5 the sum of Forester's Basic Compensation (as defined in the 1991 Amended Agreement) and incentive compensation awarded in respect of such calendar year. The Company shall promptly deliver to Forester, or Forester's widow, as the case may be, a copy of the schedule of payments required to be made by this provision and which is to be furnished to the Trustee pursuant to Section 2.1 of the Trust. (b) If the Company or the Trustee fails to make any payment to Forester or Forester's widow (hereinafter referred to as "The Foresters") provided for in Section 4(a) hereof when due and such failure continues until the 30th day after demand by The Foresters therefor, The Foresters shall have the right to declare a breach at any time thereafter (the "Date of Breach") and require the Company to pay to Forester or his widow, as the case may be, within seven days after the Date of Breach, in lieu of all payments otherwise due under Section 4(a) hereof, an amount equal to the Lump Sum Equivalent (as defined herein). The Lump Sum Equivalent shall mean an amount equal to the actuarial present value of all remaining payments computed using a 7.5% discount rate and the average of male and female mortality factors in the 1983 GAM table. For illustrative purposes, such factor for a 65 year old male with a 46 year old spouse is 129.872. (c) Simultaneously with the execution and delivery of this 1995 Agreement, the Company is funding this SERP by promptly establishing a "rabbi trust" (the "Trust") with Wells Fargo Bank as trustee (Wells Fargo Bank or its successor, as 6 provided in the Trust, is hereinafter referred to as the "Trustee") in the form attached hereto as Exhibit A, and is depositing into the Trust cash in an amount equal to the Accumulated Benefits Obligation ("ABO") of the Company to Forester and Forester's widow under this SERP calculated as of December 31, 1995. The ABO has been calculated in accordance with SFAS 87 (i) using a discount rate of 7.75% and (ii) in respect to the next to the last sentence of Section 4(a) hereof, including in the calculation the Target Payment as defined in Section 2(a) hereof. Simultaneously with the deposit of such funds into the Trust, the Company is delivering to Forester a certificate, in form and substance reasonably satisfactory to Forester, of TPF&C or another nationally recognized actuarial firm (hereinafter "Actuary") certifying that the amount deposited is not less than the Company's ABO as of December 31, 1995 with respect to the required payments to Forester and Forester's widow under this SERP calculated on the basis of the discount rate and Target Payment set forth, or referred to, in this Section 4(c). (d) Within 30 days after releasing the audited net income of the Company for the year 1995 over the wire service, the Company shall deliver to Forester a supplementary certificate from the Actuary showing the Company's audited ABO to Forester and Forester's widow at December 31, 1995 calculated on the basis of substituting the Final Payment defined in Section 2(b) hereof for the assumed Target Payment used in Section 4(c) and utilizing a discount rate of 7.75%. The difference, if any, between the amount deposited pursuant to Section 4(c) and the amount of the ABO 7 calculated in accordance with this Section 4(d) shall be withdrawn from the Trust by the Company within seven days thereafter. (e) Commencing with the year 1998, the Company shall deliver to Forester within 90 days after the end of that year and each subsequent year (i) a statement of assets and liabilities of the Trust as of the end of the respective year showing the individual assets at cost and at fair market value (the "Trust Statement") and (ii) a certificate of the Actuary setting forth the amount required as of the last day of each year to fully fund the benefit payable under this SERP utilizing a discount rate of 7.75% (the "Full Funding Amount"). Such certificate shall set forth all actuarial assumptions used. To the extent that the Full Funding Amount exceeds the fair market value of the net assets shown on the Trust Statement as of the last day of each such year, the difference shall be deposited by the Company in the Trust in five substantially equal annual payments commencing seven days after delivery of the Actuary's certificate for the respective year. To the extent that the fair market value of the net assets shown on the Trust Statement exceeds the Full Funding Amount, such excess may be used as an offset against any current and future payments due from prior years' calculations. To the extent such fair market value of the net assets exceed 110% of the Full Funding Amount, such excess may be withdrawn by the Company. The Company shall promptly notify The Foresters of its decision to withdraw Trust assets in accordance with this Section 4(e). 8 (f) The Company shall pay the fees and expenses of the Actuary. The performance by the Company of its obligations under Sections 4(c), 4(d) and 4(e) hereof shall not relieve the Company of the obligation to make the payments to Forester and Forester's widow set forth in Section 4(a) hereof. 5. If the Company breaches this 1995 Agreement and such breach continues uncured for more than 30 days after notice of such breach is given by Forester ("Notice of Breach") the Company shall, in addition to any other amounts payable hereunder, pay to Forester within 30 days after the period for curing such breach has expired the then unpaid amount of consulting fees for the full unexpired term of the 1995 Agreement and the then unpaid balance of any payments referenced in Section 2(c) or (d) hereof. The Company shall also pay in full within 30 days after the period for curing such breach has expired all future premiums necessary to obtain a fully paid up life insurance policy with Commonwealth for the insurance coverage described in Section 1(b)(ii) hereof. For the full unexpired term of the 1995 Agreement commencing with the event of breach, the Company shall also continue Forester's participation in all group insurance and medical expense reimbursement plans set forth in Section 1(b)(i) hereof and shall continue to provide him with, or reimburse him for the cost of, all perquisites provided to him prior to the event of breach. 6. If a Change in Control (as defined in Section 7 hereof) shall occur after the Effective Date, the Company shall satisfy all obligations set forth in Section 5 hereof, except that 9 all payments required thereunder shall be made promptly after the Change in Control has occurred. 7. Except as provided below, for purposes of this 1995 Agreement a Change in Control shall be deemed to have occurred if: (a) an event that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the 1934 Act, as in effect on the date hereof, occurs; or (b) any person (other than any person who as of the date hereof is the beneficial owner of 10% or more of the Company's voting securities) or group of persons acting in concert becomes the beneficial owner of 20% or more of the Company's outstanding voting securities or securities convertible into such amount of voting securities; or (c) within two years after a tender offer or exchange offer, or as the result of a merger, consolidation, sale of substantially all of the Company's assets or a contested election of the Board of Directors, or any combination of such transactions, the persons who were directors of the Company prior to the transaction do not constitute a majority of the Board of Directors of the Company or its successor; provided, however, that no such event shall be deemed to constitute a Change in Control if, but only if, two- 10 thirds of the Prior Directors of the Company and the Successor Directors, if any, voting together, within five days after such Prior Directors receive notice of such event, adopt a resolution stating that such event, for purposes of this 1995 Agreement, shall not be deemed to constitute a Change in Control. For purposes of this 1995 Agreement, Prior Directors are those directors of the Company in office immediately prior to such event, and Successor Directors are successors to Prior Directors who were recommended to succeed Prior Directors by a majority of the Prior Directors then in office. 8. The Company hereby represents to Forester that, subject to the 1995 Agreement becoming effective: (a) Forester hereby surrenders to the Company all stock options which are not exercisable prior to December 30, 1995 (the "Surrendered Options"). The Company hereby agrees to pay to Forester on January 2, 1996 an amount equal to (i) the difference between the weighted average exercise price of the Surrendered Options and the per share fair market value of the Company's common stock on the date hereof multiplied by the number of shares of Company common stock subject to the Surrendered Options, minus (ii) the amount of $200,000. The per share fair market value of the Company's common stock, for purposes of this provision, shall be the higher of (a) the closing sale price of the common stock as reported on the consolidated reporting system established pursuant to Section 11(a) of the Securities Exchange Act of 1934, as 11 amended, or, if the common stock is not so reported, the closing sale price of the common stock on the principal exchange market for the common stock. (b) The principal balance of and all accrued interest on any loans from the Company to Forester arising from the exercise of stock options by Forester prior to the Effective Date (the "Terminated Loans") shall be repaid in full on January 2, 1996 pursuant to the following sentence. Concurrently with the repayment of the Terminated Loans, the Company shall lend to Forester an amount equal to the principal balance of and accrued interest on the Terminated Loans (which amount shall be used to repay such obligations) pursuant to replacement loan agreements which shall have the identical terms and conditions as the loan agreements relating to the Terminated Loans, except that the third paragraph of each replacement loan agreement shall read in its entirety as follows: (i) For all loans which contain a six-year maturity provision: "The principal amount of the Loan will become due and payable on the first to occur of (i) the sixth anniversary of the date hereof and (ii) one year after the date of my death." (ii) For that loan which contains a five-year maturity provision: "The principal amount of the Loan will become due and payable on the first to occur of (i) the fifth anniversary of the date hereof and (ii) one year after the date of my death." (iii) For that loan which contains a four-year maturity provision: 12 "The principal amount of the Loan will become due and payable on the first to occur of (i) the fourth anniversary of the date hereof and (ii) one year after the date of my death." (iv) For all loans which contain a three-year maturity provision: "The principal amount of the Loan will become due and payable on the first to occur of (i) the third anniversary of the date hereof and (ii) one year after the date of my death." Forester hereby consents and agrees to the actions referred to in this Section 8, and acknowledges that the Company is making no representation with respect to, and shall not in any way be responsible for, the tax consequences, if any, to Forester of such actions. 9. (a) Forester shall not at any time, either during or after the Consulting Period, directly or indirectly, disclose, publish or divulge to any person (except in furtherance of the Company's business), or appropriate, use or cause, permit or induce any person to appropriate or use, any proprietary, secret or confidential information of the Company. If so requested by the Company, Forester shall, following termination of the Consulting Period, promptly deliver or return to the Company all materials of a proprietary, secret or confidential nature relating to the Company and any other property of the Company which may have theretofore been delivered to, or may then be in the possession or control of, Forester. 13 (a) Forester shall not, at any time during the Consulting Period or for a period of one year thereafter, in any manner or capacity engage or have any interest in any business directly competitive with any business in which the Company is engaged in the United States or any foreign country; provided, however, that Forester's ownership of one percent or less interest in any company whose common stock is publicly traded shall not constitute prohibited competition for the purposes of this Section 9(b). 10. The Company shall reimburse Forester on demand for all expenses, including, without limitation, attorneys', accountants', actuaries' and other experts' fees and expenses, reasonably incurred by Forester at any time in connection with this 1995 Agreement, including, without limitation, in connection with defending the validity of, enforcing his rights under, or recovering amounts due or damages under this 1995 Agreement. 11. Any offer, notice, request or other communication hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or mailed by registered or certified mail, return receipt requested, addressed to the respective address of each party hereinafter set forth, or to such other address as each party may designate by a notice pursuant hereto, which change of address shall be effective upon receipt thereof: If to the Company: Anthony Industries, Inc. 4900 South Eastern Avenue Los Angeles, CA 90040 Attention: Chief Executive Officer If to Forester: Mr. Bernard I. Forester 14 121 Fremont Place Los Angeles, CA 90005 12. Subject to the terms of the following sentence, if any provision of this 1995 Agreement shall be held for any reason to be unenforceable, the remainder of this 1995 Agreement shall nevertheless remain in full force and effect. In the event that this 1995 Agreement is held to be void or voidable, or substantially all of its terms are otherwise held to be unenforceable, then (i) this 1995 Agreement shall be deemed voided, (ii) the 1991 Amended Agreement shall be deemed to remain in full force and effect, except that each reference in Section 4 thereof to 114.696 shall be deemed to be a reference to 129.872 (which the parties acknowledge was uncorrected error therein), (iii) the employment of Forester as Chief Executive Officer of the Company shall be deemed terminated by the Company in material breach of the terms of the 1991 Amended Agreement and (iv) the provisions of Section 6 of the 1991 Amended Agreement shall be deemed to apply to such termination and breach, except that with respect to Section 6(a) of the 1991 Amended Agreement, (A) the Basic Compensation payable to Forester pursuant to clause 6(a)(i)(x) shall be deemed to be $200,000 per year, (B) no incentive compensation shall be paid to Forester pursuant to clause 6(a)(i)(y) with respect to the 1996 and 1997 calendar years (but Forester shall be entitled to any unpaid incentive compensation with respect to prior years, plus the payment of incentive compensation for the 1995 calendar year in an amount equal to the amount of the highest incentive compensation award granted to Forester in respect of any year during the five calendar years immediately preceding the breach), and (C) no payments shall be made to Forester pursuant to clause 6(a)(ii). The waiver by The Foresters 15 or the Company of a breach by the Company or Forester, as the case may be, of any provision of this 1995 Agreement shall not be deemed to be a waiver of any future breach of such provision or of any other provision, no matter how many such waivers The Foresters or the Company may grant. 13. This 1995 Agreement, including, without limitation, the provisions of this Section 13, shall be binding upon and inure to the benefit of, and shall be deemed to refer with equal force and effect to, any corporation or other successor to the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets of the Company. This 1995 Agreement shall not be assignable by the Company or any such successor, except to the corporate or other successor referred to in the preceding sentence. Forester may not assign, pledge or encumber his interest in this 1995 Agreement without the written consent of the Company. At Forester's death, his widow shall become a third party beneficiary of Section 4 hereof with powers to enforce her benefits and rights thereunder or recover damages for the breach thereof. 14. Forester shall perform all services required under this 1995 Agreement personally and as an independent contractor to the Company. Forester shall not, while rendering such services, engage in any conduct inconsistent with his status as an independent contractor. Except as otherwise provided in this 1995 Agreement, Forester shall not enter into any commitments on behalf of the Company. Forester or Forester's beneficiaries, as the case may be, shall be solely responsible for the payment of any and all local, state and federal taxes due in 16 respect of amounts paid by the Company pursuant to this 1995 Agreement; provided, however, that the Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligation it may have to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to this 1995 Agreement. Forester's status as a consultant under this 1995 Agreement shall not disqualify him from receiving benefits provided to non-employee directors of the Company generally to which he would otherwise be entitled, excluding benefits provided under the Directors' SERP. 15. This 1995 Agreement contains the entire agreement and understanding between the Company and Forester with respect to the subject matter hereof and may not be changed, amended or terminated orally, but only by an agreement in writing, nor may any of the provisions hereof be waived orally, but only by an instrument in writing, in any such case signed by the party against whom enforcement of any change, amendment, termination or waiver is sought. ANTHONY INDUSTRIES, INC. By: /s/ John J. Rangel ----------------------- Authorized Signatory /s/ B. I. Forester ------------------------ B. I. FORESTER 17 November 17, 1995 18 EX-10.(D)(1)(II) 4 SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN EXHIBIT 10(d)(1)(ii) TRUST FOR ANTHONY INDUSTRIES, INC. SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN FOR THE BENEFIT OF B. I. FORESTER This Agreement made this 20 day of November, 1995, by and between ANTHONY INDUSTRIES, INC. ("the Company") and WELLS FARGO BANK N.A. ("Trustee"). WHEREAS, pursuant to that certain agreement between the Company and B. I. Forester ("Forester") dated November 20, 1995 (the "November 20 Agreement"), the Company has adopted a "Supplemental Employee Retirement Plan" for the benefit of B. I. Forester ("SERP"); WHEREAS, the Company will incur liability under the terms of such SERP with respect to benefits payable to Forester and his spouse (hereinafter the "Foresters"); WHEREAS, the Company wishes to establish a trust (hereinafter called "Trust") and to contribute assets to the Trust that shall be held therein, subject only to the claims of the Company's creditors in the event of the Company's Insolvency, as herein defined, until paid to the Foresters in such manner and at such times as specified in the SERP; 1 WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the SERP as an unfunded plan maintained for the purpose of providing deferred compensation for a "select group of management or highly compensated employees" for purposes of Title I of the Employee Retirement Income Security Act of 1974; WHEREAS, it is the intention of the Company to make contributions to the Trust to provide it with a source of funds to assist it in the meeting of its liabilities under the SERP; NOW, THEREFORE, Anthony Industries, Inc. and Wells Fargo Bank N.A. do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: ARTICLE 1 ESTABLISHMENT OF TRUST 1.1 The Company hereby deposits with Trustee in trust not less than One Dollar ($1.00), which shall be the initial principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement and the SERP. This Trust Agreement and the SERP are intended to be administered together by the Company. 1.2 The Trust hereby established shall be irrevocable by the Company. 2 1.3 The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. 1.4 The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of the Foresters and general creditors as herein set forth. The Foresters shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the SERP and this Trust Agreement shall be mere unsecured contractual rights of the Foresters against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3.1 herein. 1.5 The Company may, from time to time, make additional deposits of cash in Trust with the Trustee as required by the terms of the SERP, to augment the principal to be held, administered and disposed of by the Trustee as provided in the SERP and the Trust. 3 ARTICLE 2 PAYMENTS TO THE FORESTERS 2.1 At such time as the Foresters become entitled to receive distributions, the Company shall deliver to the Trustee a schedule (the "Payment Schedule") that indicates the monthly amounts payable in respect of Forester, and the monthly due date for payment of such monthly amounts. Upon the death of Forester, and if Forester's spouse shall have survived him, the Company shall deliver a new Payment Schedule to the Trustee indicating the monthly amount payable to Forester's surviving spouse. Except as otherwise provided herein, Trustee shall make payments to the Foresters in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the SERP and shall pay amounts withheld to the appropriate taxing authorities unless the Trustee determines that such amounts have already been reported, withheld and paid by the Company. 2.2 The entitlement of the Foresters to benefits under the SERP shall be determined solely by the Company under the terms of the SERP. 2.3 The Company may make payment of benefits directly to the Foresters as they become due under the terms of the SERP. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time each payment is payable to the 4 Foresters. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the SERP, the Company shall make the balance of each such payment as it falls due. The Trustee shall notify the Company when principal and earnings are not sufficient. ARTICLE 3 TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO THE FORESTERS WHEN THE COMPANY IS INSOLVENT 3.1 The Trustee shall cease payment of benefits to the Foresters if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust if (a) the Company is unable to pay its debts as they become due, or (b) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 3.2 At all times during the continuance of this Trust, as provided in Section 1.4 hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. (a) The Board of Directors and Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the 5 Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to the Foresters. (b) Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. (c) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to the Foresters and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of the Foresters to pursue their rights as general creditors of the Company with respect to benefits due under the SERP or otherwise. (d) The Trustee shall resume the payment of benefits to the Foresters in accordance with Article 2 of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). 6 3.3 Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3.2 hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to the Foresters under the terms of the SERP for the period of such discontinuance, less the aggregate amount of any payments made to the Foresters by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. ARTICLE 4 PAYMENTS TO THE COMPANY Except as permitted under the terms of the SERP or in the case of Insolvency, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payments of benefits have been made to the Foresters pursuant to the terms of the SERP. In accordance with Section 4(e) of the SERP, the Company shall have the right and power to direct the Trustee to return Trust assets (including income that is accumulated and reinvested) to the Company to the extent that the fair market value of the net assets of the Trust on the last day of the year exceeds 110% of the Full Funding Amount for such year. 7 ARTICLE 5 INVESTMENT OF SERP ASSETS 5.1 Except as provided in Article 4, during the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. The Company or an investment manager retained by the Company, shall direct the Trustee as to the investment of Trust assets. All investments shall be made at the sole discretion of the Company or such investment manager, except that in no event may the Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by the Company, other than a de minimis amount held in common investment vehicles. Subject to the Company's obligation to fund the Trust in accordance with the SERP, the Company shall have no responsibility to make the Trust whole for any losses resulting from such investments. All rights associated with assets of the Trust, other than the investment decisions retained by the Company, shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercised by or rest with the Foresters. 5.2 Except as provided below, the Company shall have all power and responsibility for the management, disposition, and investment of the Trust assets, and the Trustee shall comply with proper written directions of the Company concerning the Trust assets. The Company shall not issue directions in violation of the terms of this Agreement. The Trustee shall have no duty or responsibility to review, initiate action, or make recommendations 8 regarding the Trust assets and shall retain such assets until directed in writing by the Company to dispose of them. 5.3 The Company may appoint an Investment Manager or Managers to direct, control or manage the investment of all or a portion of the Trust assets. The Company shall notify the Trustee in writing of the appointment of each Investment Manager and the portion of the Trust assets subject to the Investment Manager's direction. If the foregoing conditions are met, the Investment Manager shall have the power to manage, acquire, retain or dispose of such portion of the Trust assets and the Trustee shall not be liable for the acts or omissions of the Investment Manager or be under an obligation to invest or otherwise manage the portion of the Trust assets which is subject to the direction of such Investment Manager. 5.4 Except as provided in Section 5.1 above, the Trust may hold assets of any kind, including shares of any registered investment company, whether or not the Trustee or any of its affiliates is an advisor to, or other service provided to, such company and received compensation from such company for the services provided. ARTICLE 6 ACCOUNTING BY TRUSTEE The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as 9 shall be agreed upon in writing between the Company and the Trustee. Within sixty (60) days following the close of each calendar year and within sixty (60) days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be, valued separately at cost and at market value. ARTICLE 7 RESPONSIBILITY OF TRUSTEE 7.1 The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the SERP or this Trust and is given in writing by the Company. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. 10 7.2 If the Trustee undertakes or defends any litigation arising in connection with this Trust, the Company agrees to indemnify the Trustee against the Trustee's reasonable costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust, provided, however, that the Company shall have the right to assume the defense of any such litigation with counsel reasonably acceptable to the Trustee and to settle any such litigation with the consent of the Trustee, which consent will not be unreasonably withheld. 7.3 The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder. 7.4 The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. 7.5 Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust 11 the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. ARTICLE 8 COMPENSATION AND EXPENSES OF TRUSTEE The Company shall pay all reasonable administrative expenses of the Trustee and such fees of the Trustee on which the Company and the Trustee may agree. If not so paid, the fees and expenses shall be paid from the Trust. ARTICLE 9 REMOVAL OF TRUSTEE 9.1 The Trustee may resign at any time by written notice to the Company, which shall be effective sixty (60) days after receipt of such notice unless the Trustee agrees otherwise. 9.2 The Trustee may be removed by the Company on sixty (60) days notice or upon shorter notice accepted by the Trustee. 12 9.3 Upon resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within sixty (60) days after receipt of notice of resignation, removal or transfer, unless the Company extends the time limit. 9.4 If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Article 10 hereof, by the effective date of resignation or removal under Sections 9.1 or 9.2. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. ARTICLE 10 APPOINTMENT OF SUCCESSOR 10.1 If the Trustee resigns, or is removed, in accordance with Section 9.1 or 9.2 hereof, the Company may appoint any bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal, except that such bank trust department or other party may not be a lender or an affiliate of a lender to the Company. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument 13 necessary or reasonably requested by the Company or the successor Trustee to evidence the transfer. 10.2 The successor Trustee need not examine the records and acts of any prior Trustee. The successor Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes the successor Trustee. ARTICLE 11 AMENDMENT OR TERMINATION 11.1 This Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the SERP or shall make the Trust revocable. 11.2 The Trust shall not terminate until the date on which the Foresters are no longer entitled to benefits pursuant to the terms of the SERP. Upon termination of the Trust any assets remaining in the Trust shall be returned to the Company. 14 11.3 Upon written approval of the Foresters, the Company may terminate this Trust prior to the time all benefit payments under the SERP have been made. All assets in the Trust at termination shall be returned to the Company. ARTICLE 12 MISCELLANEOUS 12.1 Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. 12.2 Benefits payable to the Foresters under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. 12.3 This Trust Agreement shall be governed by and construed in accordance with the laws of the State of California. ARTICLE 13 EFFECTIVE DATE The effective date of this Trust Agreement shall be November 20, 1995. 15 ARTICLE 14 ACCEPTANCE BY THE TRUSTEE This Trust has been accepted by the Trustee which agrees to hold in trust and administer the Fund hereunder, subject to all of the terms and conditions hereof. IN WITNESS WHEREOF, ANTHONY INDUSTRIES, INC. and WELLS FARGO BANK N.A. have executed this Agreement this 20 day of November, 1995. -- THE COMPANY: ANTHONY INDUSTRIES, INC. By: /s/ John J. Rangel --------------------------- THE TRUSTEE: WELLS FARGO BANK N.A. By: /s/ M. J. Cowen --------------------------- By: /s/ Pamela Howard --------------------------- 16 November 17, 1995 17 EX-11 5 COMPUTATION OF EARNINGS PER SHARE EXHIBIT (11) ANTHONY INDUSTRIES, INC. COMPUTATION OF EARNINGS PER SHARE FOR THE THREE YEARS ENDED DECEMBER 31, 1995 (THOUSANDS EXCEPT FOR DOLLARS PER SHARE)
1995 1994(A)(B) 1993(A)(B) ------- ---------- ---------- Income from continuing operations............... $19,799 $13,754 $12,364 Loss from discontinued operations............... (4,920) (721) (1,243) ------- ------- ------- Net income...................................... $14,879 $13,033 $11,121 ======= ======= ======= Primary: Average shares outstanding..................... 14,367 11,800 11,703 Net effect of dilutive stock options under the treasury stock method using average price..... 131 119 95 ------- ------- ------- Total....................................... 14,498 11,919 11,798 ======= ======= ======= Per share amounts: Continuing operations......................... $ 1.37 $ 1.15 $ 1.05 Net income.................................... $ 1.03 $ 1.09 $ .94 Fully Diluted: Average shares outstanding..................... 14,367 11,800 11,703 Net effect of dilutive stock options under the treasury stock method using year end market price, if higher than average market price.... 212 130 152 ------- ------- ------- Total....................................... 14,579 11,930 11,855 ======= ======= ======= Per share amounts: Continuing operations......................... $ 1.36 $ 1.15 $ 1.04 Net income.................................... $ 1.02 $ 1.09 $ .94
- -------- (a) Retroactively adjusted for stock dividends (b) Information has been restated to reflect the sale of the Division (for further information see Note 2 of Notes to Consolidated Financial Statements). EX-21 6 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% Pacific Rim Metallic Products Ltd., a Hong Kong corporation.................. 100% Shakespeare (Aust) Pty. Ltd., an Austra- lian corporation....................... 100% Shakespeare Hengelsport, B.V., a Dutch corporation............................ 100% Shakespeare International Ltd., a Brit- ish corporation........................ 100% Subsidiaries of Shakespeare Interna- tional Ltd.: Shakespeare Company (UK) Ltd., a Brit- ish corporation...................... 100% Shakespeare Monofilament U.K. Ltd., a British corporation.................. 100% Sitca Corporation, a Washington corpora- tion..................................... 100% Subsidiaries of Sitca Corporation: K-2 Corporation, an Indiana corporation. 100% Subsidiaries of K-2 Corporation: Madshus A.S., a Norwegian corporation. 100% K-2 Ski Sport, und Mode, GmbH, a Ger- man corporation...................... 100% SMCA, Inc., a Minnesota corporation....... 100% Subsidiary of SMCA, Inc.: Stearns Manufacturing Company, a Minne- sota corporation....................... 100% Girvin Inc., a Delaware corporation....... 100% Dana Design Ltd., a Montana corporation... 100%
EX-23 7 CONSENT OF INDEPENDENT AUDITORS EXHIBIT (23) CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (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 16, 1996, except for the first paragraph of Note 2, as to which the date is March 5, 1996, 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, 1995. 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 27, 1996 EX-27.(A) 8 ARTICLE 5, FDS - 1995
5 1,000 12-MOS DEC-31-1995 DEC-31-1995 7,357 0 148,437 (8,235) 140,679 300,455 139,706 82,599 384,423 120,533 0 0 0 17,064 158,752 384,423 544,268 545,717 400,840 400,840 104,249 2,093 9,916 28,619 8,820 19,799 (4,920) 0 0 14,879 1.03 1.02
EX-27.(B) 9 ARTICLE 5, FDS - 1994
5 1,000 12-MOS DEC-31-1994 DEC-31-1994 7,700 0 116,555 (7,422) 97,936 226,474 122,732 73,640 301,536 79,724 0 0 0 12,323 86,673 301,536 434,995 436,234 319,021 319,021 86,779 1,509 7,481 21,444 7,690 13,754 (721) 0 0 13,033 1.09 1.09
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