Item 1. - BUSINESS
General
Lamcor Incorporated, formerly Laminations Incorporated was formed in July, 1983 as the successor company to Film Converting Services, Inc. The name was changed in September, 1986 to Lamcor Incorporated.
There are two basic processes that take place in the plant of the company. First the roll of plastic film is laminated with another roll of film to give it strength. The other is to apply a heat seal coating to the basic material to act as a sealant, and is called a coated roll. This resulting roll is either used in the next process, or sold to others as is. The laminated rolls are sold to the meat industry, to other food packagers, and as a generic product. The coated rolls are sold to snack food makers, to specialty food manufacturers, and as a generic product. The product sales mix is about 10% laminated rolls, 20% coated rolls, and 70% pouches, and are sold to wide variety of customers. The company has been able in the past to keep the employees employed full time as a result, since it can sell this basic laminated roll to any number of customers.
The other process takes the laminated roll of plastic film, folds it over, and makes a pouch. This machine seals the pouch on three sides, cuts it to the desired length, and is able to make the folded over roll wide enough to make two pouches at the same time. These are sold in standard sizes, and some to customers specifications.
The pouch that comes from this process is then used for packaging products. The customer takes the pouch, inserts the product, removes the air from the pouch, and seals the fourth side. This removal of air causes the plastic pouch to collapse around the product and the result is the package found in most stores. Some processors do this by machine, but most pack the product in the pouch by hand. The FDA has set standards for this type of plastic film pouch for food products. The company meets these standards. The FDA standards are met by the suppliers of the basic material; the company relies on these written representations and its own testing to ensure that the FDA standards are met.
The company has machinery that will enable it to custom make pouches for various customers in different thicknesses and sizes.
The advent of microwave cooking has brought new demands to the requirements for plastic packaging of food. Microwave cooking requires that the food be packaged in plastic that will also be used in cooking not just in the storage of the food. The cooking of the food has brought more stringent requirements from the FDA for plastic packaging. The company complies with the FDA requirements, and so far has been able to fully comply. Along with the more stringent requirements has come a vastly expanded market.
The convenience of microwave cooking is a market that has barely been tapped at this time. The company feels that the market for microwave cooking will greatly expand in the next few years, and the company wants to be in position to exploit its portion of that market; the plastic packaging of the convenience foods. The pouch that the company makes is in many ways the ideal vehicle to package the microwave foods, and, in fact, the company has several customers that use its pouch at this time in microwave foods, such as entrees and snack foods. About 30% of the production of the products of the company at this time is used for microwave foods.
Major Customers
Reference is made to Note 9 to the financial statements with regard to customers from which the company derived more than 10% of its sales.
Patents and Trademarks
The Company has no patents on any of its products, however there is a patent pending on a vacuum seal for its plastic bags.
Employees
As of September 30, 1995, the Company had 38 full time employees, of which nine are in management and twenty nine are in production.
Item 2.
Item 2. - PROPERTY
Facilities
The Company purchased its manufacturing and office facilities for $340,000 in March, 1991. The Company expanded the plant in 1994, adding an additional 9,500 square feet to bring the size of the plant to 23,000 square feet, at a cost of $210,000. The sales offices were moved from leased space in Edina, Minnesota to expanded space at the plant. The Company added an additional 1,200 square feet at a cost of $100,000 for the new offices.
Item 3.
Item 3. - LEGAL PROCEEDINGS
None
Item 4.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.
Item 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been actively traded principally in the Minneapolis over-the-counter market since March 1, 1987. As of September 30, 1995, the following brokerage firms were making a market in the Company's common stock: R.J. Steichen & Co. Corp., Van Clemons Co.
The following table sets forth for the periods indicated the range of high and low closing bid quotations per share as reported by the local over-the-counter market. These quotations represent inter-dealer prices, without retail markups, markdowns or commissions and may not necessarily represent actual transactions.
Price Per Share High Low
Fiscal year 1995 First Quarter (October 1, 1994 through December 31, 1994) $ 3.50 $ 3.00
Second Quarter (January 1, 1995 through March 31, 1995) $ 2.50 $ 1.75
Third Quarter (April 1, 1995 through June 30, 1995) $ 3.37 $ 3.00
Fourth Quarter (July 1, 1995 through September 30, 1995) $ 3.75 $ 3.00
On September 30, 1995 the high closing bid and low asked prices of the Company's common stock were $3.00 and $3.75 per share, respectively. On September 30, 1995 there were 183 holders of record.
Item 6.
Item 6. - SELECTED FINANCIAL DATA
Item 7.
Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Profitability was achieved for a sixth consecutive year. Net income was double that of 1994, and was aided, in part, by stability in raw material markets. Management feels that this will be a continuing trend with only moderate increases in fixed costs.
Net sales for 1995 were $7,158,636, up from $4,817,411 in 1994, $3,682,870 in 1993. This reflected an increase of 49% in one year and almost double in the last 4 years. Net income was $358,795, compared to $176,918 in 1994, an increase of 103%. Per share income was $.22 per share, as opposed to $.12 in 1994. All income was from operations.
Cost of goods sold for 1995 was $5,194,981, compared to $3,542,411 in 1994 and $2,762,358 in 1993. Gross profit was $1,963,655 in 1995 compared to $1,275,000 in 1994 and $920,512 in 1993. Selling and administrative expense for 1995, 1994 and 1993 were $1,244,694, $936,587 and $693,781 respectively. During the course of the year financing was procured to provide capital for building expansion and for new machinery for production. Assets increased from $3,527,547 in 1994 to $4,164,080 in 1995. Long term debt increased from $837,761 in 1994 to $1,277,799, primarily due to building expansion and capital lease obligation.
Capital expenditures this year included the delivery of a new P.D.I. pouch machine capable of making large recloseable pouches. Full utilization was only recent, and there are orders employing its capabilities.
Ten new offices were completed in the second quarter of 1995. For the past several years the Company has maintained a sales office in Edina, Minnesota, and the lease term ended in 1995. Management determined that the sales operations would be enhanced by a move to the manufacturing headquarters in LeSuer. This put all operations under one roof, at a lower cost, and enhanced communications between sales and production
The company funded $15,200 in 1994 and $18,000 in 1995 to the 401(k) plan. Nearly all of the employees contributed to the plan, and management feels that it adds stability to the work force.
The company is planning another major expansion to the plant to double its size for manufacturing and warehouse space and to purchase a six color impression printing press in 1996. All printing of the plastic bags has been done by others to this time. The increased volume of sales, and the added space with the new addition to the plant will enable the company to do the printing in its own facility. Management feels that the printing will enable the company to control the timing of the printing, its quality, and enhance profits.
Inflation has not had a significant effect on the company, and the company has budgeted 1996 based on moderate economic growth. The only significant variable has been the volatile price of the film purchased as a raw material.
Item 8.
Item 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are attached following Item 14.
Item 9.
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers and directors of the Company, with a brief description, are as follows:
Name Age Position
Leo Lund 64 Chairman of the Board
Toby Jensen 43 President
David Stewart 55 Director
Sue Jones 41 Director
Christopher Elliott 38 Director
The directors of the company are elected annually by the shareholders for a term of one year or until their successors are elected and qualified. The officers serve at the pleasure of the Board of Directors.
LEO LUND, Chairman of the Board and Secretary, age 64. Mr. Lund is an accountant, and was a partner in the firm of Lund & Associates, P.A. from 1955 to 1992, which provided accounting services. Mr. Lund sold his interest in the accounting firm in 1992, and is now semi retired. He serves as a board member of several corporations, which are not registered corporations. Mr. Lund devotes less than 5% of his time to the company.
TOBY JENSEN, President, age 43. Mr. Jensen has a degree from the University of Minnesota, and has been in management and sales with 2 flexible packaging companies for the past 17 years. He has been the President of the Company since 1988.
DAVID STEWART, Director, age 55. Mr. Stewart is the President of Paragon Enterprises, Inc. a real estate development company.
SUE JONES, Director, age 41. Ms Jones was the Vice President and General Manager of Strout Plastics, Inc., for 13 years until 1994. She is now an independent sales representative in the flexible packaging industry.
CHRISTOPHER ELLIOTT, Director, age 38. Mr. Elliott is an attorney and has practiced with the firm Christoffel, Elliott and Albrecht since 1989.
Item 11.
Item 11. - EXECUTIVE COMPENSATION.
The following table sets forth the cash compensation for services rendered in all capacities to the company during the company's fiscal year ended September 30, 1995, as paid by the company to each executive officer whose cash compensation exceeded $60,000 and to all executive officers as a group:
Name Capacity Cash Compensation
Toby Jensen President $ 93,799
All executive officers as a group $121,499
Item 12.
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
There are presently 1,341,542 shares of the company's common shares outstanding. The following table sets forth the information as to the ownership of each person who, as of the date of this report, owns of record, or is known by the company to own beneficially, more than five percent of the company's common stock, and the officers and directors of the company.
Number Of Percent Of Name of Beneficial Owner Shares Shares
Leo Lund 145,075 10.8%
Tanana, Inc. 122,300 9.1%
Kathy Young 103,230 7.6%
Christopher Elliott 156,000 11.6%
Toby Jensen 45,000 3.3%
Sue Jones 5,000 0.3%
David Stewart 11,300 0.8%
All executive officers and directors as a group (5 individuals) 362,375 27.0%
Does not take into account any unexecuted warrants or options.
Item 13.
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See notes 6, 8, 9 & 11 to Financial Statement.
PART IV
Item 14.
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Attached are the Financial Statements and Independent Auditor's Report on Examination of Financial Statements for the year ended September 30, 1994, 1993 and 1992.
(b) Attached are the following Financial Statement Schedules and Auditors Report on Schedules,
Independent Auditors Report on Schedules Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment Schedule IX - Short-term borrowings
All other schedules are omitted because they are not required or not applicable or the information is shown in the consolidated financial statements or notes thereto.
(c) No report was filed on Form 8-K.
(d) There are no exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated December 22,1995
LAMCOR, INC.
by____________________________ Leo W. Lund
LAMCOR, INCORPORATED
FINANCIAL REPORT
SEPTEMBER 30, 1995, 1994 AND 1993
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders Lamcor, Incorporated LeSueur, Minnesota
We have audited the accompanying balance sheets of Lamcor, Incorporated as of September 30, 1995 and 1994, and the related statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended September 30, 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 financial position of Lamcor, Incorporated as of September 30, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles.
/s/ HOUSE, NEZERKA & FROELICH, P.A.
November 20, 1995
See Notes to Financial Statements.
See Notes to Financial Statements.
See Notes to Financial Statements.
See Notes to Financial Statements.
LAMCOR, INCORPORATED
NOTES TO FINANCIAL STATEMENTS Years Ended September 30, 1995, 1994 and 1993
Note 1. Nature of Business and Significant Accounting Policies:
Nature of business:
The Company is engaged in the business of laminating plastic and manufacturing of plastic pouches used in the food and medical industries with sales throughout the United States.
A summary of the Company's significant accounting policies follows:
Inventories:
Inventories are stated at the lower of cost (using standard costs for work in progress and finished goods) or market, computed on a basis which approximates the first-in, first-out (FIFO) method.
Property, equipment and improvements:
Property, equipment and improvements are stated at cost. For financial reporting purposes, depreciation is computed using the straight-line method over the following estimated useful lives:
Years Building and improvements 3-40 Manufacturing equipment 5-15 Office equipment and other 3-5
Depreciation on property, equipment and improvements was $175,715, $124,805 and $103,556 for the years ended September 30, 1995, 1994 and 1993, respectively.
For income tax reporting purposes, other lives and methods are used; deferred income taxes are provided for these differences.
Income taxes:
Effective October 1, 1993, the Company began accounting for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes" (see Note 10). Deferred tax assets and liabilities are recognized for the future consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases.
Earnings per share:
Earnings per share has been determined by dividing net income by the weighted average common shares outstanding during each period plus the effect of common shares contingently issuable, primarily from stock options as computed using the modified treasury stock method.
Estimates and assumptions:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Note 2. Inventories:
The components of inventory are as follows:
1995 1994 -------- -------- Raw materials $246,576 $ 480,394 Work in progress 416,504 355,094 Finished goods 323,358 229,199 -------- -------- $986,438 $1,064,687 ======== ========
Note 3. Other Assets:
1995 1994 -------- -------- Building lease deposit $ -- $ 844 Equipment deposits 277 291,673 Refinancing costs, less accumulated amortization 1995 $928; 1994 $464 2,381 2,845 Land deposit 1,500 -- -------- -------- $ 4,158 $295,362 ======== ========
Note 4. Bank Line of Credit:
The Company has two revolving lines of credit with a bank in the maximum amount of $300,000 and $90,000 which expire September 26, 1998 and October 10, 1995, respectively. Interest is payable at 1.5% over the bank's reference rate which was 8.75% at September 30, 1995. The notes are payable on demand and are collateralized by receivables, inventory and equipment.
Note 5. Long-Term Debt:
Maturities for the next five years on long-term debt outstanding at September 30, 1995 are as follows:
Year Ending September 30 1996 $ 97,000 1997 94,883 1998 102,389 1999 103,781 2000 169,057 After 381,983 -------- $949,093
Note 6. Leases:
On August 11, 1994, the Company entered into a capital lease agreement with a financing company to acquire $489,920 of equipment. The financing company advanced the manufacturer $157,030 for which the Company was directly obligated as of September 30, 1994. Payments totaling $332,890 were made by the financing company during the 1995 year. The lease began on May 1, 1995 and calls for 84 monthly payments of $8,147 including interest at 10.33%.
On January 17, 1995, the Company entered into a capital lease agreement to purchase a truck for $18,884. The lease requires 48 monthly payments of $400 including interest at 9.75%.
The Company also entered into a capital lease agreement to purchase a computer for $4,304 which began on April 30, 1995 and requires 36 monthly payments of $130.
The following is a schedule by year of the future minimum lease payments due under capital leases together with the present value of the net minimum lease payments:
Year Ended September 30: 1996 $104,125 1997 104,125 1998 103,345 1999 99,360 2000 97,763 After 2000 154,791 -------- Total minimum lease payments 663,509 Less amount representing interest 180,700 -------- Present value of minimum lease payments 482,809 Less current obligation under capital lease 57,103 -------- Non-current obligation under capital lease $425,706 ========
Cost and accumulated amortization of leased assets are as follows:
1995 1994 -------------- ---------- Cost $ 513,108 $ - Accumulated amortization 23,290 - -------------- ---------- $ 489,818 $ - ============== ==========
Amortization of assets under capital leases is included in depreciation expense and was $23,290 for the year ended September 30, 1995.
The Company rented space for a Minneapolis sales office under an operating lease which commenced June 1, 1990 and expired May 31, 1995. Rent expense under all operating leases was $16,488, $14,810 and $12,962 for the years ended September 30, 1995, 1994 and 1993, respectively.
Note 7. Stock Options:
The Company has reserved shares of common stock for issuance to key employees and stockholders under incentive stock option and purchase plans. Options are exercisable on a graduated scale and/or expire based on the individual terms of the option agreements. The options are exercisable at prices ranging from $ .50 to $2.00 per share. Other pertinent information related to the plan is as follows:
The options exercised during the years ended September 30, 1995, 1994 and 1993 were at an average price of $.81, $.66 and $1.25 per share, respectively.
Note 8. Notes Receivable Arising From the Sale of Common Stock:
Issued shares are being held by the Company as collateral for the above notes pending payment of the amounts due.
Note 9. Major Customers:
The Company derived more than 10% of its net sales from the following unaffiliated customers and had receivable balances from those customers in the amounts of:
* The net sales to customers A and B were less than 10% of the total net sales for the period indicated.
Note 10. Income Taxes:
Effective October 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." The adoption of Statement 109 changes the Company's method of accounting for income taxes from the deferred method to a liability method. Under the deferred method, the Company recorded the tax effects of timing differences between financial reporting and taxable income. As explained in Note 1, the liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the reported amounts of assets and liabilities and their tax bases. The cumulative effect relating to the adoption of Statement No. 109 was not significant.
The income tax components are as follows:
Net deferred tax liabilities consist of the following:
Differences between income tax expense and the amount computed by applying the statutory federal income tax rates to earnings before income taxes are as follows:
Note 11. Other Accrued Expenses:
Other accrued expenses consist of the following:
Note 12. Profit Sharing Plan:
During the year ended September 30, 1993, the Company implemented a profit sharing plan under Section 401(k) of the Internal Revenue Code for all eligible employees. The Plan provides that Company contributions are at the discretion of the Board of Directors. In addition, participants may elect to enter into salary reduction agreements with the Company for a portion of their compensation. Company contributions for the years ended September 30, 1995, 1994 and 1993 were $18,000, $15,300 and $0, respectively.
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
Board of Directors and Shareholders Lamcor, Incorporated LeSueur, Minnesota
Our audits of the financial statements of Lamcor, Incorporated included schedules V, VI and IX contained herein, for the years ended September 30, 1995, 1994 and 1993.
In our opinion, such schedules present fairly the information required to be set forth therein in conformity with generally accepted accounting principles.
HOUSE, NEZERKA & FROELICH, P.A.
Bloomington, Minnesota November 20, 1995
Depreciation and amortization of building, equipment and improvements are provided on the straight-line method over the following estimated useful lives of the assets:
Years Building and improvements 3-40 Manufacturing equipment 5-15 Office equipment and other 3-5
LAMCOR, INCORPORATED
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
LAMCOR, INCORPORATED
SCHEDULE IX - SHORT-TERM BORROWINGS
(1) Note payable to bank under a revolving line of credit borrowing arrangement which expires September 26, 1998. Collateralized by receivables, inventory and equipment.
(2) Note payable to bank under a revolving line of credit borrowing arrangement which expires October 10, 1995. Collateralized by receivables, inventory and equipment.
(3) Note payable to bank under a revolving line of credit borrowing arrangement which expires November 3, 1994. Collateralized by receivables, inventory and equipment.
(4) Note payable to bank dated September 28, 1993 under a revolving line of credit borrowing arrangement which expires December 28, 1998. Collateralized by receivables, inventory and equipment.
(5) Total of daily outstanding principal balances divided by days in the year.
(6) Actual interest divided by the average amount outstanding.