Item 1. Business.
General Development of Business
Wilson Brothers was incorporated in Illinois in 1898. Reference herein to "the Company" includes collectively Wilson Brothers and its subsidiaries unless the content indicates otherwise. The Company's principal executive offices are located at 902 South Main Street, Point Marion, PA 15474.
During the 1996 fiscal year, the Company had one active, wholly-owned subsidiary - Houze Glass Corporation, a Pennsylvania corporation ("Houze") located in Point Marion, Pennsylvania, which is engaged in the specialty decoration of glass and ceramic items.
At the beginning of fiscal year 1993 approximately 53.7% of the Company's common stock was owned by DWG Corporation ("DWG"). On April 23, 1993, DWG Acquisition Group L.P. acquired 28.6% of DWG's then outstanding shares of common stock. DWG Acquisition Group L.P. subsequently changed its name to Triarc Companies, Inc. ("Triarc").
On September 28, 1993, the Company's Board of Directors authorized the sale or liquidation of all of its operating businesses. On December 28, 1993, Triarc entered into a Securities Purchase Agreement with Bruce Paparella and Warren B. Kanders (the "Purchase Agreement"). Pursuant to the Purchase Agreement, on January 10, 1994, Mr. Paparella acquired from Triarc 1,296,436 shares of the Company's common stock, Mr. Kanders acquired from Triarc 648,217 shares of the Company's common stock, Triarc assigned to Mr. Paparella and Mr. Kanders that certain note made by the Company and owned by Triarc with a remaining principal balance of $1,500,000 which note bears interest at the prime rate and at the time was convertible into 956,937 shares of the Company's common stock (the "Convertible Note"), and Triarc assigned to Mr. Paparella and Mr. Kanders cer tain accounts receivable by Triarc in the amount at September 30, 1993 of $1,230,000 (the "Accounts Receivable"). As a consequence of said transactions, Mr. Paparella owned a 75% interest in the Convertible Note and the Accounts Receivable and Mr. Kanders ob tained a 25% interest in the Convertible Note and the Accounts Receivable and, Mr. Paparella and Mr. Kanders together owned ap proximately 59% of the Company's outstanding common stock and, as a result of such transactions, may be deemed to have controlled the Company. The Company has been informed that, effective December 30, 1994, Mr. Kanders entered into three separate stock purchase agreements pursuant to which Mr. Kanders transferred the aggregate of 648,217 shares of the Company's common stock owned by him to four individuals, including Mr. Paparella who purchased 348,217 shares for $5,000. The remainder of these shares were sold by Mr. Kanders to three individuals who are not related to Mr. Paparella. In addition, the Company has been informed that, on December 22, 1994 Mr. Kanders made a gift of his 25% portion of the Convertible Note, which was convertible into 239,234 shares of Common Stock (representing 6.9% of the Common Stock on a fully diluted basis assuming the Convertible Note was fully converted into such shares of Common Stock), and Mr. Kanders' 25% interest in the Accounts Receivable to a charitable foundation, Choate Rosemary Hall Foundation, Inc., leaving Mr. Kanders with no remaining beneficial interest in the Company's common stock. On April 18, 1995, John Sanford, the Company's then Vice President and Chief Financial Officer, acquired in a private transaction with Mr. Walter Carucci, a $362,500 interest in such convertible note which is convertible into 231,259 shares of the Company's Common Stock and, as such, Mr. Sanford may be deemed to be the beneficial owner of 231,259 shares issuable to him upon his election to convert his interest in the notes. On April 21, 1996, Mr. Bruce Paparella, the Company's President, Chief Executive Officer and a Director died from cancer. On September 6, 1996, in a private transaction, the Estate of Mr. Paparella sold to Mr. Sanford 1) a 37.5% interest in such Note in the principal sum of $562,500, which is convertible into 358,852 shares of the Company's Common Stock, 2) certain accounts receivable in the amount of $461,250 of the Company, and 3) 1,644,653 shares of the Company's common stock, for an aggregate purchase price of $330,000. On November 22, 1996, Mr. Sanford, in a private transaction, made gifts to non-affiliated persons of 1) 100,000 shares of the Company's Common Stock, and 2) $56,250 of the principal amount plus accrued interest of the Convertible Note, which is convertible into 35,886 shares of the Company's Common Stock. As a result of these transactions, as of December 31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the Company's outstanding Common Stock, representing 46.5% of such Common Stock outstanding, and is the beneficial owner of 554,226 shares issuable to him upon his election to convert his interest in the Note, constituting an aggregate beneficial interest in 2,098,879 shares of the Common Stock of the Company representing approximately 54.2% of the Common Stock of the Company and may be deemed to control the Company.
Mr. Sanford is the Company's Chief Executive Officer and a member of the Board of Directors.
From September 28, 1993 through January 9, 1994, the Company's two wholly-owned subsidiaries, Houze and Northern Engineering Corporation, a Delaware corporation ("Northern"), were treated as discontinued operations. As of January 10, 1994, however, the Company's Board of Directors deemed it in the Company's best interest to continue the operations of Houze. Accordingly, the consolidated financial statements for each of the periods presented have been restated to reflect only the operations of Northern as discontinued.
On May 12, 1994, the Company sold all of the outstanding shares of Northern to a corporation controlled by a former director of the Company. In consideration for the sale of the Northern shares, the Company received $10,000, plus a secured promissory note (the "Note") in the principal amount of $750,000 repayable on or before May 1, 1999, which bears interest payable quarterly at 8 percent per annum. Such note is collateralized by certain real property of Northern (the "Mortgaged Property"). The Mortgaged Property was not appraised in connection with the transaction. If the Mortgaged Property is sold, all of the principal and interest is immediately due and payable. Effective October 28, 1994, the Company agreed to reduce the percentage from 50 percent to 30 percent of the amount that the Company shall be entitled to receive if the Mortgaged Property is sold in excess of $750,000. In exchange, the purchaser made a partial prepayment of the principal of the Note in the amount of $150,000 which was paid by November 7, 1994, and agreed to make an additional $150,000 partial prepayment which was paid on January 15, 1995. The purchaser had the option to prepay the remaining principal balance of the Note by June 30, 1995. Such prepayment was not made, and therefore, the purchaser was to additionally compensate the Company $50,000 by July 15, 1995, of which only $10,000 has been paid. As a result, the Company believes that the principal amount of the Note and accrued interest thereon may not be collectible, and therefore as of September 30, 1995 made a full valuation reserve in the financial statements of $450,000 for the principal balance and $6,000 for the accrued interest balance on the note as well as the $40,000 balance on the option fee. The Company intends to pursue all opportunities for collection, including repossession and liquidation of the Mortgaged Property.
On November 16, 1995, the Company received $472,541 representing the net proceeds distributed in connection with the resolution of all litigation claims of Northern, retained by the Company after the sale of Northern, with Pennsylvania Engineering Corporation. These proceeds were applied to interest and principal under the Note. The Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K reflect the stock sale of Northern.
Industry Segments
The Company presently operates in one business segment.
Business
Wilson Brothers is a holding company whose business is conducted through Houze. Through Houze, the Company is engaged in the specialty decoration of glass and ceramic items.
Except as described below, the Company does not anticipate that present environmental regulations will materially affect its capital expenditures, earnings or competitive position. To date, the Company has not been required to make significant capital expenditures in order to meet current environmental standards.
As of December 31, 1996, the Company had approximately 87 employees of which 24 were salaried employees and the remainder were hourly personnel. Workers are represented by the American Flint Glass Workers Union under a contract which expires in March 1999. The Company believes its relations with its employees are satisfactory.
Except as described below, patents, trademarks, licenses, franchises and concessions are not material to the business of the Company. Working capital requirements of the Company are expected to be fulfilled from operating cash flow supplemented by a revolving line of credit facility arranged with a bank on March 4, 1994 and extended on various dates through maturity on December 31, 1997. During the last three years, the Company has not had any material expenditures for Company or customer sponsored research and development activities. No single customer accounted for more than 10% of the Company's consolidated revenues in 1996.
Houze is engaged in the specialty decoration of glass, ceramic and, commencing in 1996, plastic items. Sales are made through sales representatives and are generally for advertising specialties, premiums, souvenirs and the retail trade. Houze's core business, which is highly competitive, consists principally of the decoration of mugs which are sold to advertising specialty distributors. Custom imprinted tumblers or coffee mugs generally lend more exposure per advertising dollar to customers because of their frequency of use in the business atmosphere. From time to time, Houze also obtains special contract orders. Such special contract orders do no necessarily occur each year and there were no significant contract orders in 1994, 1995 or 1996. The decorative glass business is highly competitive, particularly in connection with items such as tumblers, mugs and glasses. The particular markets targeted by the ceramic mug segment are pharmaceutical companies that utilize the "magic" process to demonstrate a change which occurs when a particular medication is prescribed. Houze also targets companies that desire to advertise a particular product or perhaps a change in the company (i.e., name or logo). Houze competes on the basis of price, quality and design. Many of its competitors are much larger companies, with far greater resources. Anchor Hocking Corporation and Libbey Owens Ford Company are dominant in this industry. Using price, quality, service and expertise of design as priorities, the Company believes that it can maintain a competitive edge in the advertising specialty market.
For the last three years the custom decorated ceramic mug product line has been approximately 85% of Houze's overall business.
Management is currently looking to expand Houze's decorative products to include custom imprinted ceramic steins, shot glasses, and travel mugs. Additionally, the Company is decorating beverage coolers, plastic items, and sublimated mugs.
Houze is continuing to use the "magic" process which is a thermal chromatic process whereby ceramic pigment is activated by either high or low temperatures. This allows for a visual change in the product to reveal an advertisement or artistic effect. This process is now available through other manufacturers in United States. Consequently, competition in this market area is increasing to some extent.
Houze purchases much of its raw material supplies of glass and ceramic items from five principal suppliers. However, management believes that such raw materials are readily available from other sources at competitive prices.
Houze enters into licensing agreements with customers which permit Houze to imprint specific logos or designs directly on products.
In recent years, Houze's sales have been greatest during the fall quarter as a result of customers' holiday programs. Backlog or orders believed to be firm as of December 31, 1996 was $223,000 compared to $310,000 at year end 1995. Backlog orders are filled within the current fiscal year.
Because the ceramic mug business is dependent on imported ware, Houze is required to maintain inventories to cover needs for 45 - 60 days at a minimum. If a shortfall occurs, inventory is supplemented with ware purchased from a distributor located in the United States. Houze does not offer extended payment terms to customers.
Houze is not dependent on any single customer because of Houze's method of distribution. Houze is a member of the Advertising Specialty Institute and a supplier to the advertising industry. Houze maintains a nationwide distribution network through over 13,800 distributors offering Houze products.
As an advertising specialty supplier, no material portion of Houze's business is affected by renegotiation of profits or termination of contracts at the election of any governmental agency.
In February 1993, the Company became aware that certain of Houze's products may have concentrations of lead and cadmium at levels which might constitute hazardous waste. While after testing, it was ascertained that products currently being produced are within acceptable levels, certain products, generally those produced prior to 1980, had unacceptable levels of lead and cadmium. These products had been disposed of in a disposal site located on Houze's property. The Pennsylvania Department of Environmental Regulation (PDER) and the Company agreed to a consent order on September 22, 1994, which outlines a plan for Houze to remove and encapsulate all of the hazardous waste and thereby comply with residual waste pile closure requirements. The Company intends to fully comply with the requirements of the consent order. The estimated cost of the Company's original plan of remediation was increased during 1993 by $700,000 from $200,000, based on advice from its consultant, which was provided for in the 1993 consolidated financial statements. At December 31, 1996, the reserve balance was $820,000 reflecting charges of $25,000, $41,000 and $14,000 in actual remediation expenses incurred during 1996, 1995 and 1994, respectively. While the Company believes that the total cost of the plan provided by the PDER in the consent order discussed above will not exceed the amount reserved, the Company is unable at this time to make a final determination of the cost of implementation, and therefore, has not adjusted such reserve beyond that arising from actual remediation expenditures. On February 11, 1997, PDER granted Houze an extension in the consent order until June 30, 1997. The final costs to complete the plan of remediation may be substantial in relation to the consolidated financial position of the Company, which could have a material adverse effect on its results of operations and liquidity.
The Company has no foreign operations or any material export sales.
Subsequent Events
On February 13, 1997, in a private transaction, Choate Rosemary Hall Foundation, Inc. sold to Mr. Sanford pursuant to a Note and Accounts Receivable Purchase Agreement (i) their interest of $375,000 principal amount of the Convertible Note, which is convertible into 239,234 shares of the Company's Common Stock, and (ii) their interest in the Accounts Receivable for an aggregate purchase price of $200,000.
As a result of the above transaction, Mr. Sanford is the beneficial holder of (i) $1,243,750 of the Convertible Note convertible at any time into 793,460 shares of Common Stock, and (ii) 1,544,653 shares of the Company's Common Stock, constituting approximately 56.8 percent of the Company's outstanding Common Stock.
On April 9, 1997, the Company entered into a stock purchase agreement with G&L Consultants, Inc. to purchase 90 percent ownership, represented by 171,000 shares of the outstanding common stock of LM Plastics, Inc., a North Carolina corporation with its principal office in Shelby, North Carolina. The purchase price for the common stock consisted of the payment of $1, plus a personal indemnity by Mr. Sanford to G&L Consultants, Inc. for the payment of a promissory note from the LM Plastics, Inc. to a bank in the original principal amount of $70,000. The Company has the option to purchase at any time, or after 3 years is obliged to purchase at the request of G&L consultants, Inc., the remaining 10 percent outstanding shares for the amount of $10,450, with such price increasing at an annual rate of 20 percent for each month after April 9, 1997.
Item 2.
Item 2. Properties.
Operations of Houze occupy a facility in Point Marion, Pennsylvania which has approximately 175,000 square feet of manufacturing and office space on a 16 acre site. Such facility is substantially utilized.
Item 3.
Item 3. Legal Proceedings.
In December 1993, a civil action was brought in the United States District Court for the Western District of Pennsylvania against the Company, Houze and Triarc Companies, Inc. ("Triarc"), the former parent of the Company, by the former chief operating officer of Houze. The complaint alleged that such officer was owed bonuses in the amount of approximately $116,000 plus interest on said amount. The amount of the claim for bonuses had been recorded in the consolidated financial statements of the Company. The Company and Houze answered the claim and asserted certain counterclaims. By agreement dated January 1, 1995, the Company, Houze and Triarc agreed to settle the claims and counterclaims. The agreement provides that Houze will pay the former officer the aggregate amount of $37,500 in several installments, all of which has been paid as of December 31, 1996. The $116,000 reserve for this claim was reduced accordingly as of December 31, 1994.
While the Company is not currently engaged in litigation, the Company is from time to time involved in routine litigation incidental to its business. The Company does not believe that any of such routine litigation will have a material adverse effect on its consolidated financial position or results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
There is no current established public trading market for the Company's common stock.
Prior to September 14, 1993, the high and low sales prices for the common stock of the Company as listed on the Pacific Stock Exchange were as follows:
Prices Year and Period High Low First Quarter $.75 $.50 Second Quarter .875 .50 Third Quarter .875 .125
From September 14, 1993 through December 31, 1993, the range of high and low bid information for the common stock of the Company was as follows:
Prices Year and Period High Low Fourth Quarter (9/14 to 12/13) $.0625 $.03125
Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
On September 14, 1993, the Company's common stock was delisted from the Pacific Stock Exchange for failure to comply with minimum listing criteria. Since that time the Company's common stock has been traded over the counter through National Quotation Bureau's "pink sheets". Since December 12, 1993, the "pink sheets" has listed no bid for the Company's common stock.
As of December 31, 1996, there were 3,027 record holders of the Company's common stock.
The Company did not declare or pay any cash dividends during the past three years. The applicable provisions of the Business Corporation Act of Illinois, the Company's jurisdiction of incorporation, limit the payment of dividends to an amount equal to the difference between the assets of a corporation and its liabilities. Under such provisions at December 31, 1996, no dividends were permitted to be paid. The Company has no present plans for the payment of any dividends.
On January 10, 1994, pursuant to a Securities Purchase Agreement dated December 28, 1993 among Bruce Paparella, Warren B. Kanders and Triarc Companies, Inc. ("Triarc"), (i) Mr. Paparella acquired from Triarc 1,296,436 shares of the Company's common stock, (ii) Mr. Kanders acquired from Triarc 648,217 shares of the Company's common stock, (iii) Triarc assigned to Mr. Paparella and Mr. Kanders that certain note made by the Company and owned by Triarc with a remaining principal balance of $1,500,000 which note bears interest at the prime rate and at the time was convertible into 956,937 shares of Common Stock (the "Note"), and (iv) Triarc assigned to Mr. Paparella and Mr. Kanders certain accounts receivable held by Triarc in the amount at September 30, 1993 of $1,230,000 (the "Accounts Receivable"). Triarc is the successor to DWG Corporation ("DWG"), the former controlling shareholder of the Company. As a consequence of said transactions, Mr. Paparella obtained a 75% interest in the Note and the Accounts Receivable and Mr. Kanders obtained a 25% interest in the Note and the Accounts Receivable.
The Company has been informed that, effective December 30, 1994, Mr. Kanders entered into three separate stock purchase agreements pursuant to which Mr. Kanders transferred the aggregate of 648,217 shares of the Company's Common Stock owned by him to four individuals, including Mr. Paparella who purchased 348,217 shares for $5,000. The remainder of these shares were sold by Mr. Kanders to three individuals who are not related to Mr. Paparella. In addition, the Company has been informed that, on December 22, 1994 Mr. Kanders made a gift of his 25% portion of the Convertible Note which was convertible into 239,234 shares of Common Stock (representing 6.9% of the Common Stock on a fully diluted basis assuming the Convertible Note was fully converted into such shares of Common Stock) and Mr. Kanders 25% interest in the Accounts Receivable to a charitable foundation, Choate Rosemary Hall Foundation, Inc., leaving Mr. Kanders with no remaining beneficial interest in the Company's Common Stock. On April 18, 1995, John Sanford, the Company's then Vice President and Chief Financial Officer, acquired, in a private transaction with Mr. Carucci, a $362,500 interest in such convertible note which is convertible into 231,259 shares of the Company's Common Stock and, as such, Mr. Sanford may be deemed to be the beneficial owner of 231,259 shares issuable to him upon his election to convert his interest in the notes. On April 21, 1996, Mr. Bruce Paparella, the Company's President, Chief Executive Officer and a Director died from cancer. On September 6, 1996, in a private transaction, the Estate of Mr. Paparella sold to Mr. Sanford 1) a 37.5% interest in such Note in the principal sum of $562,500, which is convertible into 358,852 shares of the Company's Common Stock, 2) certain accounts receivable in the amount of $461,250 of the Company, and 3) 1,644,653 shares of the Company's common stock, for an aggregate purchase price of $330,000. November 22, 1996, Mr. Sanford, in a private transaction, made gifts to non-affiliated persons of 1) 100,000 shares of the Company's Common Stock, and 2) $56,250 of the principal amount plus accrued interest of the Convertible Note, which is convertible into 35,886 shares of the Company's Common Stock. As a result of these transactions, as of December 31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the Company's outstanding Common Stock, representing 46.5% of such Common Stock outstanding, and is the beneficial owner of 554,226 shares issuable to him upon his election to convert his interest in the Note, constituting an aggregate beneficial interest in 2,098,879 shares of the Common Stock of the Company representing approximately 54.2% of the Common Stock of the Company and may be deemed to control the Company.
Mr. Sanford is the Company's Chief Executive Officer.
Item 6.
Item 6. Selected Financial Data.(1)
For the Year 1996 1995 1994 1993 1992
Net sales $5,715 $5,041 $5,495 $7,021 $8,280 Operating profit (loss) $ 14 $ (517) $(652) $(2,251) $ (1,082) Loss from continuing operations $ (58)$ (602) $(588) $(3,492) $ (1,376) Loss from discontinued operations, net of tax $ - $ (-) $ (161) $(1,837) $ (976)
Net loss $(58) $(602) $(749) $(5,329) $ (2,352) Loss per common and equivalent share: Continuing operations $(0.02) $(0.18) $(0.18) $(1.05) $ (0.42) Discontinued operations - - (0.05) (0.55) (0.29) Net loss $(0.02) $(0.18) $(0.23) $ (1.60) $ (0.71)
Shares used in computing loss per common and equivalent share 3,321 3,321 3,321 3,321 3,321
Cash dividend per share $ - $ - $ - $ - $ -
At Year-End
Total assets $1,998 $2,095 $2,655 $3,104 $7,290
Long-term debt $ - $ - $ - $ 9 $ 25
Note payable to majority owners and others $ 1,500 $1,500 $1,500 $1,500 $ 1,500
(1) Restated to reflect the operations of Northern Engineering Corporation as discontinued.1
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.
Forward-Looking Statements
The following discussion contains certain forward-looking statements with respect to anticipated results which are subject to a number of risks and uncertainties. From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may effect the operations, performance, development and results of the Company's business include, among other things, the following: business conditions and growth in the Company's industry; general economic conditions; the addition or loss of significant customers; the loss of key personnel; product development; competition; fluctuations in foreign currency exchange rates; rising costs of raw materials and the unavailability of sources of supply; the timing of orders placed by the Company's customers; failure by the Company's subsidiary, Houze, to renegotiate its credit facility beyond the current expiry date of December 31, 1997; and other risk factors listed from time to time in the Company's quarterly reports.
Trends
Due to the continued decline in sales and the negative impact of increased competition, the Company discontinued the operations of Northern, which represented the Company's industrial crane business, effective September 28, 1993, and such operations were subsequently sold as discussed elsewhere herein.
The following discussion and analysis of financial condition pertains primarily to Houze, which represents the remaining business of the Company.
Houze continues to face significant competition, particularly in its core business which consists principally of the decoration of mugs which are sold to advertising specialty distributors. In an effort to gain market share and to compete with its competitors, many of which are larger companies with far greater resources, Houze instituted price reductions for large orders and has increased its marketing efforts to retail distributors and holders of licensed products. Additionally, Houze has made significant improvements to its customer services area in response to the higher level of service demanded by its customers.
Liquidity
The Company's consolidated cash and equivalents, were $170,000 at December 31, 1996 compared to $428,000 at December 31, 1995. During this period, cash and equivalents decreased primarily due to an increase in accounts receivable, reduction of short term debt and operating losses.
From June 1987 through May 1989, the Company made certain secured loans to Pennsylvania Engineering Corporation ("PEC") which may be deemed to have been an affiliate of the Company at such time, and in connection therewith, at December 31, 1994 the Company was owed a principal balance of $1,555,000 on its outstanding loans to PEC and $1,032,000 of accrued interest and $78,000 of fees. Such outstanding loans to PEC were payable on demand, bore interest at the prime rate plus 3% and are collateralized by a mortgage on certain real property owned by PEC's subsidiary, Lectromelt Corporation. On February 4, 1992, PEC and its subsidiaries, Birdsboro Corporation and Lectromelt Corporation, filed petitions for relief under Chapter 7 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the Western District of Pennsylvania. A trustee was appointed in such proceedings on February 7, 1992. In accordance with Chapter 7 of the Code, upon such appointment the trustee assumed jurisdiction over the assets and all powers with respect to the business of PEC and such subsidiary. On December 28, 1994 the Company received $60,000 in satisfaction of the mortgage from the sale of certain real property owned by PEC's subsidiary, Lectromelt Corp. Such proceeds were applied to accrued interest receivable and a comparable amount was charged against the valuation reserve and recorded as other income in the statement of operations. On September 11, 1995, the Company and the Bankruptcy Trustee for PEC entered into a Settlement Agreement pursuant to which the Company's claims against PEC were recognized as an allowed, general unsecured claim in the amount of $1,399,986 and provided for a contingent minimum distribution to the Company in settlement of such claim in an amount equal to at least 33 percent of its allowed claim. The Settlement Agreement permitted the Company to withdraw from the settlement if the Trustee's proposed distribution plan provided for distribution to the Company of less than 33 percent of the recognized claim. On October 16, 1995, the Bankruptcy Court approved the Trustee's settlement with the Company and on November 16, 1995 the Trustee made a distribution to the Company in the amount of $472,541 in full and final settlement of the Company's claim against PEC. Such proceeds were applied to accrued interest receivable, and a comparable amount was charged against the valuation reserve and recorded as other income in the statement of operations. On March 11, 1994, Houze entered into an agreement with a bank for a revolving line of credit facility in an amount not to exceed $400,000. The line of credit has since been increased to $500,000 and extended to December 31, 1997. Advances on such line of credit bear interest at the lending bank's prime rate plus 3.5%. In addition, the bank is entitled to reimbursement of fees for auditing Houze's accounts receivable during the term of the commitment. Advances are collateralized by accounts receivable, inventory and an assignment of a $50,000 Certificate of Deposit from Fay Penn Economic Development Council and $100,000 Certificates of Deposit from the Company, and are guaranteed by the Company and Mr. Sanford. No assurances can be given as to the success of obtaining an extension or refinancing subsequent to December 31, 1997. A failure by Houze to renegotiate such credit facility beyond December 31, 1997 would have a material adverse effect on the Company.
For the year ended December 31, 1996, the Company compensated the Estate of Mr. Paparella $18,750 for management services. The Company compensated Mr. Sanford $67,000 for management services for the year ended December 31, 1996, of which $12,000 has been deferred. Mr. Sanford's annual compensation for 1997 will be $12,000.
In accordance with an agreement with the Company's former lender, DWG made a principal payment on December 31, 1982 on the Company's behalf and purchased interest notes which were issued by the Company to such lender in payment of accrued interest. Pursuant to a Conversion Rights Agreement entered into between the Company and DWG, the obligations of the Company arising from the principal payment by DWG and purchase of interest notes were convertible into newly-issued shares of the Company's common stock. In 1983, DWG converted $651,445 principal amount of interest notes into 651,445 shares of the Company's common stock. In November and December 1988, the Company repaid all outstanding interest notes which aggregated $2,132,000, repaid $4.5 million of the $6.0 million note evidencing such principal payment and paid substantially all accrued interest owed to DWG. The remaining principal balance of a $1.5 million note owed to Triarc Companies, Inc., successor to DWG, as of December 31, 1993 bears interest at the prime rate and is convertible into 956,937 shares of the Company's common stock. Effective January 10, 1994, such convertible note was purchased by Mr. Bruce Paparella and Mr. Warren B. Kanders in connection with their acquisition of common stock from Triarc Companies, Inc., as described elsewhere herein. On December 22, 1994, Mr. Kanders donated his 25% rights in such note to a charitable institution. On April 18, 1995, John Sanford, the Company's Vice President and Chief Financial Officer, acquired a $362,500 interest in such convertible note which is convertible into 231,259 shares of the Company's Common Stock and, as such, Mr. Sanford may be deemed to be the beneficial owner of 231,259 shares issuable to him upon his election to convert his interest in the notes. On April 21, 1996, Mr. Bruce Paparella, the Company's President, Chief Executive Officer and a Director died from cancer. On September 6, 1996, in a private transaction, the Estate of Mr. Paparella sold to Mr. Sanford 1) a 37.5% interest in such Note in the principal sum of $562,500, which is convertible into 358,852 shares of the Company's Common Stock, 2) certain accounts receivable in the amount of $461,250 of the Company, and 3) 1,644,653 shares of the Company's common stock, for an aggregate purchase price of $330,000. November 22, 1996, Mr. Sanford, in a private transaction, made gifts to non-affiliated persons of 1) 100,000 shares of the Company's Common Stock, and 2) $56,250 of the principal amount plus accrued interest of the Convertible Note, which is convertible into 35,886 shares of the Company's Common Stock. As a result of these transactions, as of December 31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the Company's outstanding Common Stock, representing 46.5% of such Common Stock outstanding, and is the beneficial owner of 554,226 shares issuable to him upon his election to convert his interest in the Note, constituting an aggregate beneficial interest in 2,098,879 shares of the Common Stock of the Company representing approximately 54.2% of the Common Stock of the Company and may be deemed to control the Company.
The Company has incurred losses from operations and as of December 31, 1996, the Company had a stockholders' deficiency of $4.1 million and a consolidated working capital deficit of $2.3 million.
The Company's ability to meet its cash requirements in the next year is dependent upon substantial improvement in the results of operations and cash flows, maintaining and renewing its financing from its bank or others. If these conditions are not satisfactorily achieved, the Company may be unable to generate sufficient cash flow to meet its requirements, including payments of amounts which may be expended for environmental remediation described elsewhere herein, and therefore, may be unable to continue operations.
The financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence or be required to sell its assets.
Capital Resources
Capital expenditures of Houze, were $12,000, $0 and $16,000 in 1996, 1995 and 1994, respectively. The Company does not anticipate any material capital expenditures in 1997, other than expenditures by Houze for environmental remediation described below.
As described elsewhere herein, the Company became aware that certain of the products of Houze may have concentrations of lead and cadmium at levels which might constitute hazardous waste. While after testing, it was ascertained that products currently being produced are within acceptable levels, certain products, generally those produced prior to 1980, had unacceptable levels of lead and cadmium. These products had been disposed of in a disposal site located on Houze property. The Pennsylvania Department of Environmental Regulation (PDER) and the Company agreed to a consent order on September 22, 1994, which outlines a plan for Houze to remove and encapsulate all of the hazardous waste and thereby comply with residual waste pile closure requirements. The Company intends to fully comply with the requirements of the consent order. The estimated cost of the Company's original plan of remediation was increased during 1993 by $700,000 from $200,000, based on advice from its consultant, which was provided for in the consolidated financial statements. On December 31, 1996, the reserve balance was $820,000 reflecting charges of $25,000, $41,000 and $14,000 in actual remediation expenses incurred during 1996, 1995 and 1994, respectively. While the Company believes that the total cost of the plan provided by the PDER in the consent order discussed above will not exceed the amount reserved, the Company is unable at this time to make a final determination of the cost of implementation, and therefore, has not adjusted such reserve beyond that arising from actual remediation expenditures. On February 11, 1997, PDER granted Houze an extension in the consent order until June 30, 1997. The final costs to complete the plan of remediation may be substantial in relation to the consolidated financial position of the Company, which could have a material adverse effect on its and liquidity.
Inflation and Changing Prices
Management believes that inflation did not have a significant effect on gross margins during the last three years.
Results of Operations
1996 Compared with 1995
Net sales increased to $5.7 million in 1996 from $5.0 million in 1995. The increase in net sales resulted from increased marketing and sales efforts initiated in 1995, as well as special orders related to the 1996 Olympics. During 1996, sales orders related to the 1996 Olympics aggregated $.5 million.
The Company sold 3.1 million units of decorative mugs and glassware at an average price of approximately $1.82 versus 2.6 million units sold at an average price of $1.91 in 1995. In addition, the Company sold .15 and .5 million units of "misprinted mugs at an average price of $.07 and of $.07, for 1996 and 1995, respectively, for which the inventory values were reduced to zero in prior years when such mugs were produced, because they were deemed not salable.
While selling, general and administrative expenses have decreased from $1.4 million in 1995 to $1.3 million in 1996, due to decreased legal fees and salaries, selling, general and administrative expenses of Houze increased by $.1 million due to increased estimated charges for bad debts, and salaries.
1995 Compared with 1994
Net sales decreased to $5.0 million in 1995 from $5.5 million in 1994. The decrease in net sales and cost of sales was primarily due to continued erosion of market share resulting from increased competitive pressures, decreased pricing and the lack of special contract orders which have supported sales volumes of Houze in prior years.
The Company sold 2.6 million units of decorative mugs and glassware at an average price of approximately $1.91 in 1995 versus 3.1 million units sold at an average price of $1.79 in 1994. The .5 million unit decrease in sales volume reduced the Company's sales by approximately $895,000. However, average sales price per unit increased by $.12 which offset such reduced unit volume sales during 1995 by approximately $312,000. In addition, the Company sold .5 million units of "misprinted mugs" at an average price of $.07, for which the inventory value was reduced to zero in 1994 when such mugs were produced, because they were deemed not salable.
The Company's general and administrative expenses were $113,000 higher in 1995 primarily due to increased legal fees in connection with the settlement with PEC and other litigation described elsewhere herein.
Other income included the collection of $472,500 from the final settlement of the Company's claims against PEC, offset by a $457,000 allowance for principal and interest due from the sale of Northern which the Company believes may not be collectible.
Item 8.
Item 8. Financial Statements and Supplementary Data Index.
Report of Independent Public Accountants 15 Consolidated Financial Statements: Consolidated Balance Sheets - December 31, 1996 and 1995 16 Consolidated Statements of Operations and Accumulated Deficit - Three years ended December 31, 1996 17 Consolidated Statements of Cash Flows - Three years ended December 31, 1996 18 Notes to Consolidated Financial Statements 19 Financial Statement Schedules: Schedules included are set forth in Item 14. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wilson Brothers:
We have audited the accompanying consolidated balance sheets of Wilson Brothers (an Illinois corporation) and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of operations and accumulated deficit and cash flows for each of the three years in the period ended December 31, 1996. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wilson Brothers and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 13 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 13. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14.(A) 2. is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. The schedule does not include any adjustments that might result from the outcome of the uncertainty regarding the Company discussed above.
ARTHUR ANDERSEN LLP
Roseland, New Jersey April 2, 1997 (except with respect to the matter discussed in Note 14, as to which the date is April 9, 1997) Item 8. Financial Statements and Supplementary Data. Wilson Brothers and Subsidiaries CONSOLIDATED BALANCE SHEETS As of December 31 1996 1995 Assets (In thousands) Current assets Cash and equivalents $ 170 $ 428 Receivables, less allowance of $160,000 in 1996 and $130,000 in 1995 1,059 785 Inventories 332 436 Other 74 33 Total current assets 1,635 1,682 Properties, at cost 2,285 2,296 Less accumulated depreciation (1,922) (1,883) 363 413 Note receivable, less valuation reserve of $490,000 in 1996 and $450,000 in 1995 - - - - $ 1,998 $2,095 Liabilities and Stockholders' Deficit Current liabilities: Short-term borrowings $ 140 $ 249 Accounts payable 705 621 Accrued salaries and other employee costs 259 Environmental reserve 820 845 Accrued interest due affiliates 415 377 Accrued interest due others 84 - Due to affiliates 1,230 1,230 Other current liabilities 217 206 Total current liabilities 3,870 3,909
Notes payable to affiliates 1,244 1,500 Notes payable to others 256 - Other liabilities 639 727 2,139 2,227 Commitments and Contingencies Stockholders' deficit: Preferred stock, $1 par value; authorized 5,000,000 shares; none issued - - Common stock, $1 par value; authorized 10,000,000 shares; issued and outstanding 3,321,039 shares 3,321 3,321 Capital in excess of par value 7,464 7,464 Minimum pension liability (23) (111) Accumulated deficit (14,773) (14,715) Total stockholders' deficit (4,011) (4,041) $1,998 $2,095
See accompanying notes to consolidated financial statements. Wilson Brothers and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT Three years ended December 31
1996 1995 1994 (In thousands except per share amou nts)
Net sales $5,715 $5,041 $5,495
Cost of sales 4,324 4,109 4,811 Selling, general and administrative expenses 1,377 1,449 1,336 5,701 5,558 6,147
Income (loss) from continuing operations 14 (517) (652)
Other expense (income): Interest expense 57 38 52 Interest expense - affiliates 102 127 105 Interest income (78) (39) (38) Provision for doubtful notes and interest receivable from affiliate 40 457 - Other income (49) (498) (183) 72 85 (64) Loss from continuing operations before provision for income taxes (58) (602) (588)
Provision for income taxes - - - Loss from discontinued operations - - (161)
Net loss (58) (602) (749)
Accumulated deficit - beginning of year (14,715) (14,113) (13,364)
Accumulated deficit - end of year $ (14,773) $(14,715) $ (14,113)
Loss per share: Continuing operations $(0.02) $(.018) $(0.18) Discontinued operations - - (0.05) $(0.02) $(0.18) $(0.23)
See accompanying notes to consolidated financial statements. Wilson Brothers and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Three years ended December 31
1996 1995 1994 (In thousands) Cash flows from operating activities: Net loss from continuing operations $ (58) $ (602)$(58 8) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 62 84 124 Gain on sale of assets (5) - (29) Provision on uncollectible notes receivable from former affiliate - 450 - (Increase) decrease in receivables, net (274) 130 Decrease in inventories 104 61 49 Increase in other current assets (41) (23) (10) (Decrease) increase in accounts payable 84 (73) Increase (decrease) in accrued salaries and other employee costs (122) 109 (140) Increase in accrued interest 122 126 107 Increase in other current liabilities 11 27 (Decrease) in environmental reserve (25) (41) (14) Net cash provided by (used in) operating activities (14 2) 208 (221) Cash flows from investing activities: Capital expenditures (12) - (16) Proceeds from sale of properties 5 - 30 Proceeds from sale of discontinued operations - - Net cash provided by (used in) investing activities (7) - - - 24 Cash flows from financing activities: Repayment of long-term debt (4) (4) (18) Increase (decrease) in short-term borrowings (105) (62) Repayment of note receivable - 150 150 Net cash provided by financing activities (109) 84 Net increase (decrease) in cash and equivalents (258) 292 136 Cash and equivalents at beginning of period 428 136 - - - Cash and equivalents at end of period $ 170 $ 428 $ 136
Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 36 $ 38 $ 29 Income taxes $ - $ - $ -
See accompanying notes to consolidated financial statements. Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1996
(1) Basis of Presentation
Wilson Brothers (the "Company") is a holding company whose business is conducted through its wholly-owned subsidiary Houze Glass Company ("Houze"). Houze operates in the specialty advertising business and engages in the decoration of glass and ceramic items. Houze's products are primarily distributed throughout the United States through sales representatives.
Principles of Consolidation
All significant intercompany items and transactions have been eliminated in consolidation.
On April 23, 1993, DWG Acquisition Group L.P. acquired shares of DWG Corporation ("DWG"), representing 28.6% of DWG's then outstanding shares of common stock. DWG subsequently changed its name to Triarc Companies, Inc. ("Triarc"). DWG owned at the time approximately 53.7% of the Company's outstanding common stock.
On January 10, 1994, pursuant to a Securities Purchase Agreement dated December 28, 1993 among Bruce Paparella, Warren B. Kanders and Triarc, Mr. Paparella acquired from Triarc 1,296,436 shares of the Company's common stock, and Mr. Kanders acquired from Triarc 648,217 shares of the Company's common stock, collectively replacing Triarc as 59 percent ownership of the Company's outstanding common stock. In addition, Triarc assigned to Mr. Paparella (75 percent) and Mr. Kanders (25 percent) the $l,500,000 outstanding balance of note payable to parent ("Convertible Note") and certain accounts receivable ("Accounts Receivable") held by Triarc in the amount at September 30, 1993 of $l,230,000.
Effective December 30, 1994, Mr. Kanders entered into three separate stock purchase agreements pursuant to which Mr. Kanders transferred the aggregate of 648,217 shares of the Company's Common Stock owned by him to four individuals, including Mr. Paparella who purchased 348,217 shares for $5,000. The remainder of these shares were sold by Mr. Kanders to three individuals who are not related to Mr. Paparella. In addition, the Company has been informed that, on December 22, 1994 Mr. Kanders made a gift of his 25% portion of the Convertible Note which was convertible into 239,234 shares of Common Stock (representing 6.9% of the Common Stock on a fully diluted basis assuming the Convertible Note was fully converted into such shares of Common Stock) and Mr. Kanders' 25% interest in the Accounts Receivable to a charitable foundation, leaving Mr. Kanders with no remaining beneficial interest in the Company's Common Stock. On April 18, 1995, John Sanford, the Company's Vice President and Chief Financial Officer, acquired a $362,500 interest in such convertible note which is convertible into 231,259 shares of the Company's Common Stock and, as such, Mr. Sanford may be deemed to be the beneficial owner of 231,259 shares issuable to him upon his election to convert his interest in the notes. On April 21, 1996, Mr. Bruce Paparella, the Company's President, Chief Executive Officer and a Director died from cancer. On September 6, 1996, in a private transaction, the Estate of Mr. Paparella sold to Mr. Sanford 1) a 37.5% interest in such Note in the principal sum of $562,500, which is convertible into 358,852 shares of the Company's Common Stock, 2) certain accounts receivable in the amount of $461,250 of the Company, and 3) 1,644,653 shares of the Company's common stock, for an aggregate purchase price of $330,000. On November 22, 1996, Mr. Sanford, in a private transaction, made gifts to non-affiliated persons of 1) 100,000 shares of the Company's Common Stock, and 2) $56,250 of the principal amount plus accrued interest of the Convertible Note, which is convertible into 35,886 shares of the Company's Common Stock. As a result of these transactions, as of December 31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the Company's outstanding Common Stock, representing 46.5% of such Common Stock outstanding, and is the beneficial owner of 554,226 shares issuable to him upon his election to convert his
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
interest in the Note, constituting an aggregate beneficial interest in 2,098,879 shares of the Common Stock of the Company representing approximately 54.2% of the Common Stock of the Company and may be deemed to control the Company.
(2) Summary of Significant Accounting Policies
Use of Estimates
The preparation of the 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 the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Properties
Properties are carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from four to forty years.
Assets which have been fully depreciated are retained in the accounts for as long as they are useful to operations. Upon disposition, it is the Company's policy to eliminate from the accounts the carrying value of the asset and the related accumulated depreciation or amortization and to credit or charge the resulting profit or loss to operations.
The Company adopted SFAS No. 121 - "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", which has no material effect on the Company's reported financial position or results of operations.
Loss per Share
Loss per share has been computed using only the weighted average number of outstanding shares of common stock (3,321,039 shares in each year), since the inclusion of common stock equivalents (shares issuable upon conversion of the note referred to in Note 9) would be antidilutive.
The Financial Accounting Standards Board has issued a new standard, "Earnings per Share" (SFAS 128"). SFAS 128 provides for revisions to the current method of calculating earnings per share and for the disclosure of certain information about the capital structure of the reporting entity. SFAS 128 will become effective on December 15, 1997; early adoption is not permitted. The Company does not believe that the new pronouncement will impact its present calculation of earnings per share.
Concentration of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and accounts and notes receivable. The Company places its cash with high quality financial institutions.
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash and Equivalents
The Company classifies as cash and equivalents all highly liquid investments with a maturity of three months or less when purchased.
(3) Discontinued Operations
On September 28, 1993, the Company's Board of Directors authorized the sale or liquidation of its wholly-owned subsidiary Northern Engineering Corporation ("Northern"), the Company's crane business segment. Accordingly, the consolidated financial statements for each of the periods presented have been restated to reflect such business segment as discontinued. On May 12, 1994, the Company sold all of the outstanding shares of Northern to a corporation controlled by a former director of the Company.
In consideration for the sale of the Northern shares, the Company received $10,000, plus a secured promissory note (the "Note") in the principal amount of $750,000 repayable on or before May 1, 1999, which bears interest payable quarterly at 8 percent per annum. Such note is collateralized by certain real property of Northern (the "Mortgaged Property"). The Mortgaged Property was not appraised in connection with the transaction. If the Mortgaged Property is sold, all of the principal and interest is immediately due and payable.
Effective October 28, 1994, the Company agreed to reduce the percentage from 50 percent to 30 percent of the amount that the Company shall be entitled to receive if the Mortgaged Property is sold in excess of $750,000. In exchange, the purchaser made a partial prepayment of the principal of the Note in the amount of $150,000 which was paid by November 7, 1994, and has made an additional $150,000 partial prepayment on January 15, 1995. The purchaser had the option to prepay the remaining principal balance of the Note by June 30, 1995. Such prepayment was not made, and therefore, the purchaser was to additionally compensate the Company $50,000 by July 15, 1995, of which $10,000 has been paid. As a result, the Company believes that the principal amount of the Note and accrued interest thereon may not be collectible, and therefore has made a full valuation reserve in the December 31, 1996 financial statements in the amount of $490,000 for principal, plus $6,000 for accrued interest. The Company intends to pursue all opportunities for collection, including repossession and liquidation of the Mortgaged Property.
Sales of Northern were $662,000 for the year ended December 31, 1994.
(4) Inventories
Inventories, stated at the lower of cost (first-in, first- out basis) or market, consisting of materials, labor and overhead, are as follows: December 31, 1996 1995
Raw materials $313,000 $365,000 Work in process - 1,000 Finished goods 19,000 70,000 $332,000 $436,000
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) Properties The following is a summary of the major classifications of properties: December 31 1996 1995 Classification Land $18,000 $18,000 Buildings and improvements 667,000 678,000 Machinery and equipment 1,600,000 1,600,000 2,285,000 2,296,000 Less: accumulated depreciation 1,922,000 1,883,000 $363,000 $413,000
(6) Notes Receivable from Affiliates
From June 1987 through May 1989, the Company made certain secured loans to Pennsylvania Engineering Corp. ("PEC"), which may be deemed to have been an affiliate of the Company. In connection therewith, as of December 31, 1994, the Company was owed a principal balance of $1,555,000 on its outstanding loans to PEC and $1,032,000 of accrued interest and $78,000 of fees. PEC filed for bankruptcy. On December 28, 1994, the Company received $60,000 in satisfaction of the mortgage from the sale of certain real property owned by PEC's subsidiary, Lectromelt Corporation. Such proceeds were applied to accrued interest receivable, and a comparable amount was charged against the valuation reserve and recorded as other income in the statement of operations. On September 11, 1995, the Company and the Bankruptcy Trustee for PEC entered into a Settlement Agreement pursuant to which the Company's claims against PEC were recognized as an allowed, general unsecured claim in the amount of $1,399,986. On October 16, 1995, the Bankruptcy Court approved the Trustee's settlement with the Company and on November 16, 1995 the Trustee made a distribution to the Company in the amount of $472,541 in full and final settlement of the Company's claim against PEC. Such proceeds were applied to accrued interest receivable, and a comparable amount was charged against the valuation reserve and recorded as other income in the statement of operations.
(7) Income Taxes and Other Liabilities
As a result of the change in ownership effective January 10, 1994 as described in Note 1, substantially all of the Company's pre-acquisition Federal income tax loss carryforwards and tax credit carryforwards have been eliminated. As of December 31, 1996 and 1995, the Company provided a full valuation allowance for the net deferred tax assets of $1,024,000 and $1,005,000, respectively. The deferred tax assets primarily result from the 1996 and 1995 net losses and certain differences in the tax basis and book basis of inventories, receivables and liabilities.
The reported tax provision and a computed tax benefit based on the loss from continuing operations before income taxes are reconciled as follows:
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year ended December 31, 1996 1995 1994 (In thousands) Loss from continuing operations before income taxes $(58) $(602) $(588) Statutory rate 35% 35% 35% Computed tax benefit from continuing operations (20) (211) (206) Computed tax benefit from discontinued operations - - (56) Total computed tax benefit (20) (211) (262) Increase in taxes resulting from: Effect of net operating losses for which no tax benefit is available 20 211 262 $ - $ - $ -
(8) Short-term Borrowings
On March 4, 1994, Houze entered into an agreement with a bank for a revolving line of credit facility in an amount not to exceed $400,000. Advances on such line of credit bear interest at the lending bank's prime rate plus 3.5%. In addition, the bank is entitled to reimbursement of fees for auditing Houze's accounts receivable during the term of the commitment. Advances are collateralized by accounts receivable, inventory and an assignment of a $50,000 Certificate of Deposit from Fay Penn Economic Development Council and $100,000 Certificates of Deposit from the Company, and are guaranteed by the Company and Mr. Sanford, the Company's Chief Executive Officer. On March 11, 1994, Houze was advanced $160,000 of the revolving line of credit and used the proceeds to repay the then outstanding borrowings under the previous accounts receivable financing arrangement. The revolving line of credit facility maturity was extended from December 31, 1995 to December 31, 1997 with a limit of $500,000. No assurances can be given as to the success of obtaining an extension or refinancing subsequent to December 31, 1997. A failure by Houze to renegotiate such credit facility would have a material adverse effect on the Company.
The short-term borrowings of Houze as of and for the years ended December 31 are as follows:
1996 1995 1994 End of year balance $140,0 $245, $307,0 00 000 00 Maximum amount outstanding during the $419,0 $380, $349,0 year 00 000 00 Average balance $280, $171,0 outstanding during the $259,0 000 00 year 00 Weighted average 11.5% 11.8% 15.9% interest rate during the year Interest rate at year 11.3% 11.5% 11.5% end
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(9) Notes Payable to Affiliates and Others
Notes payable to majority owners as of December 31, 1996 and December 31, 1995 in the aggregate amount of $1,500,000 bears interest at the prime rate and is convertible to 956,937 shares of the Company's common stock. As of December 31, 1995, Mr. Paparella was the owner of a 37.5% interest in such Note and, as such, was the beneficial owner of 358,852 shares of the Company's Common Stock issuable to Mr. Paparella upon his election to convert his interest in the Note. In December 1994, Mr. Kanders made a gift of his 25% interest in the Note to a charitable foundation and such charitable foundation is the beneficial owner of 239,234 shares of the Company's Common Stock issuable upon conversion of its interest in the Note. On April 18, 1995, John Sanford, the Company's then Vice President and Chief Financial Officer, acquired a $362,500 interest in such convertible note. As a result, Mr. Sanford may be deemed the beneficial owner of 231,259 shares issuable to him upon his election to convert his interest in the notes. Conversion by the majority owners would be dilutive of their individual percentage ownership of the Company's aggregate outstanding common stock. On April 21, 1996, Mr. Bruce Paparella, the Company's President, Chief Executive Officer and a Director died from cancer. On September 6, 1996, in a private transaction, the Estate of Mr. Paparella sold to Mr. Sanford a 37.5% interest in such Note in the principal sum of $562,500, which is convertible into 358,852 shares of the Company's Common Stock. On November 22, 1996, in a private transaction, Mr. Sanford made gifts to a non-affiliated person of $56,250 principal amount and accrued interest of the Convertible note which is convertible into 35,886 shares of the Company's Common Stock. As a result of this transaction, as of December 31, 1996, Mr. Sanford is the beneficial owner of 554,226 shares issuable to him upon his election to convert his interest in the Note, constituting an aggregate beneficial interest in 2,098,879 shares of the Common Stock of the Company representing approximately 54.2% of the Common Stock of the Company and may be deemed to control the Company.
(10) Pension Plan
Houze has a defined benefit plan covering hourly-paid employees. Contributions are computed using the projected unit credit method of funding, the objective of which is to fund each participant's benefits under the plan as they accrue. Houze's funding policy is to contribute the minimum amount required by the Employee Retirement Income Security Act of 1974. During 1996, 1995 and 1994, no contributions were required to be made under the plan.
The net periodic pension cost for the plan in 1996, 1995 and 1994 was $42,000, $45,000 and $42,000, respectively. The components of the net periodic pension cost are as follows:
Year ended December 31, 1996 1995 1994 (In thousands) Current service cost $ 41 $ 52 $ 55 Interest cost on projected benefit obligation 43 43 43 Actual return on assets 96 (3) (10) Unrealized (gain) loss on plan experience (129) (38) (37) Amortization of unrecognized net asset at transition (9) (9) (9) Net periodic pension cost $ 42 $ 45 $ 42
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the plans' projected funded status:
December 31, 1996 1995 (In thousands) Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of $647,000 in 1996 and $657,000 in 1995 $ 658$ 676
Reconciliation of funded status:
Plan assets at fair value $ 635 $565 Projected benefit obligation 658 676 Plan assets in excess (short) of projected benefit obligation (23) (111) Unrecognized net (gain) loss from plan experience (17) 53 Unrecognized prior service cost 37 37 Unrecognized net asset at January 1, 1987, amortized over 13 to 17 years (72) (72) Additional minimum liability $(75) $(93)
An assumed discount rate of 7% for 1996 and 1995, and long-term rate of return on assets of 8% for 1996 and 1995, were used in developing this data. Plan assets are invested in a managed portfolio, consisting primarily of corporate bonds and common stock.
(11) Related Party Transactions
There were no charges from affiliates for the years ended December 31, 1996 and 1995. The Company was charged $19,000 during 1994 for consulting services provided by a firm of which a former officer of the Company is a partner.
For information concerning certain other transactions between the Company and other corporations which may be deemed to be affiliates of the Company, see other Notes included elsewhere herein.
(12) Business Segments
Continuing operations comprise one business segment: the decorative glass segment. No single customer accounted for 10% or more of consolidated net sales in 1996, 1995 or 1994.
(13) Commitments and Contingencies
The Company has incurred losses from operations and as of December 31, 1996, the Company had a stockholders' deficiency of $4.1 million and a consolidated working capital deficit of $2.3 million.
The Company's ability to meet its cash requirements in the next year is dependent upon substantial improvement in the results of operations and cash flows, maintaining and renewing its financing from its bank or others. If these conditions are not satisfactorily achieved, the Company may be unable to generate sufficient cash flow to meet its requirements, including payments of amounts which may be expended for environmental remediation described below, and therefore, may be unable to continue operations.
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence or be required to sell its assets.
The Company has become aware that certain of the products of Houze may have concentrations of lead and cadmium at levels which might constitute hazardous waste. While after testing, it was ascertained that products currently being produced are within acceptable levels, certain products, generally those produced prior to 1980, had unacceptable levels of lead and cadmium. These products had been disposed of in a disposal site located on the property of the decorative glass segment. The Pennsylvania Department of Environmental Regulation ("PDER") and the Company agreed to a consent order on September 22, 1994, which outlines a plan for Houze to remove and encapsulate all of the hazardous waste and thereby comply with residual waste pile closure requirements. The Company intends to fully comply with the requirements of the consent order. On February 11, 1997, PDER granted Houze an extension in the consent order until June 30, 1997. The estimated cost of the Company's original plan of remediation was increased during 1993 by $700,000 from $200,000, based on advice from its outside consultant. The additional costs were provided for in the 1993 consolidated financial statements. At December 31, 1996 the reserve balance was $820,000.
While the Company believes that the total cost of the plan agreed to by the PDER in the consent order discussed above will not exceed the amount reserved, the Company is unable at this time to make a final determination of the cost of implementation, and therefore, has not adjusted such reserve. During the years ended December 31, 1996, 1995 and 1994, $25,000, $41,000 and $14,000, respectively, was charged to the reserve for costs incurred in connection with the Company's compliance with the PDER's plan to encapsulate all of the hazardous waste.
By agreement dated January 1, 1995, the Company, Houze and Triarc agreed to settle an outstanding claim by a former officer of Houze for bonuses owed. The agreement provided that Houze pay to the former officer the aggregate amount of $37,500 in several installments by December 31, 1996 of which $31,350 was paid in 1995, and $6,150 was paid in 1996. The original amount of such claim previously recorded in the financial statements of approximately $116,000 plus interest was reduced accordingly.
In addition to the litigation noted above, and as discussed under Item 3 Legal Proceedings, the Company is from time to time involved in other routine litigation incidental to its business, the outcome of which in the opinion of management will not have a material adverse effect on the Company's consolidated financial position or results of operations.
(14) Subsequent Events
On February 13, 1997, in a private transaction, Choate Rosemary Hall Foundation, Inc. sold to Mr. Sanford pursuant to a Note and Accounts Receivable Purchase Agreement (i) their interest of $375,000 principal amount of the Convertible Note, which is convertible into 239,234 shares of the Company's Common Stock, and (ii) their interest in the Accounts Receivable for an aggregate purchase price of $200,000.
As a result of the above transaction, Mr. Sanford is the beneficial holder of (i) $1,243,750 of the Convertible Note convertible at any time into 793,460 shares of Common Stock, and (ii) 1,544,653
Wilson Brothers and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
shares of the Company's Common Stock, constituting approximately 56.8 percent of the Company's outstanding Common Stock.
On April 9, 1997, the Company entered into a stock purchase agreement with G&L Consultants, Inc. to purchase 90 percent ownership, represented by 171,000 shares of the outstanding common stock of LM Plastics, Inc., a North Carolina corporation with its principal office in Shelby, North Carolina. The purchase price for the common stock consisted of the payment of $1, plus a personal indemnity by Mr. Sanford to G&L Consultants, Inc. for the payment of a promissory note from the LM Plastics, Inc. to a bank in the original principal amount of $70,000. The acquisition will be accounted for using the purchase method. The Company has the option to purchase at any time, or after 3 years is obliged to purchase at the request of G&L Consultants, Inc., the remaining 10 percent outstanding shares for the amount of $10,450, with such price increasing at an annual rate of 20 percent for each month after April 9, 1997.
The results of operations of LM Plastics, Inc. for the year ended December 31, 1996 were not material in relation to the financial statements of the Company.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
The table below sets forth the names, ages and positions of the Company's directors and executive officers:
Name Age Position
John Sanford 31 President, Chief Financial Officer, Treasurer, Secretary and Director
Brett R. Smith 31 Director
Frank Zanin 30 Director
The Board of Directors currently consist of three directors. Mr. Arthur Williams, Vice President and Secretary resigned as a director and officer on April 4, 1995. Mr. Nicholson resigned on May 12, 1994, which was concurrent with the purchase of Northern by a company under his control. Mr. Nicholson was paid $10,000 during the period he was a director. Mr. Sanford was appointed to the Board of Directors in April 1995 filling the vacancy of Mr. Nicholson. Directors are elected at the annual meeting of shareholders, and hold office until the next succeeding annual meeting of shareholders or until their successors are elected and qualified. Mr. Paparella who was appointed to the Board of Directors on January 10, 1994 to fill vacancies created by the resignation of members of the Board of Directors who were elected by the former controlling shareholder of the Company, died on April 21, 1996. Mr. Brett R. Smith and Mr. Frank Zanin were appointed to the Board of Directors on April 17, 1997 and April 24, 1997, respectively, to fill the vacancies created by the death of Mr. Paprella and resignation of Mr. Williams. Directors who are employees of the Company do not receive an annual retainer or meeting attendance fees.
The Company's officers are elected by the Board of Directors and hold office at the discretion of the Board.
John Sanford has been President since , 1996 and previously served as Vice President, Treasurer and Chief Financial Officer of the Company since March 7, 1994. He also became Secretary and Director in April 1995. Since September 1993, Mr. Sanford has been an equity trader for Carr Securities Corp., a New York brokerage firm. From August 1991 through September 1993, Mr. Sanford was earning his M.B.A. degree at the University of North Carolina at Chapel Hill. Mr. Sanford was the President of Fortress Marine Construction from August 1990 through August 1991.
Brett R. Smith has been a director since April 17, 1997, and since 1993 co-founded and has been a principal of Counter Culture Coffee in Durham, North Carolina. From Fall 1991 to Spring 1993 earned his M.B.A. at the University of North Carolina at Chapel Hill.
Frank Zanin has been a director since April 24, 1997, and since Fall 1993 has served as a Financial Analyst for Roper Health Systems Inc. Previously, he was earning his M.B.A. degree at William and Mary through 1991.
Item 11.
Item 11. Executive Compensation.
During the year ended December 31, 1996, the Company compensated the Estate of Bruce Paparella $18,750 and John Sanford $67,000 for management services, respectively, of which $12,000 of Mr. Sanford's compensation has been deferred. Mr. Sanford's annual compensation for 1997 will be $12,000.
All of the Company's executive officers hold positions with non-affiliated companies (see Item 10) that pay compensation to such officers. Each such officer devotes the time necessary to the Company and to his non-affiliated employer as is necessary for the effective discharge of his duties. The Company is unable to estimate the approximate amount of time spent by the officers listed in Item 10 on the affairs of the Company and its subsidiaries. No minimum amount of time is required to be devoted to such affairs by any such officers.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the beneficial ownership of shares of the Company's Common Stock, as of March 1, 1997, by each person who beneficially owns more than five percent of such shares, by each director of the Company, by each executive officer named in Item 10 and by all directors and executive officers of the Company as a group. Each person named in the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by him or it, except as otherwise set forth in the notes to the table.
Name and Address Amount of of Beneficial Owner Beneficial Percent Ownership
John Sanford 17 Battery Place New York, NY 2,098,879(1) 54.2%
All Directors and Executive 2,098,879 54.2% Officers (1 person)
(1) Includes 1,544,653 shares as to which Mr. Sanford has sole voting and dispositive power and 554,226 shares issuable upon conversion of that certain promissory note made by the Company in the principal amount of $1,500,000 as to which Mr. Sanford has a 57.9 percent interest.
Item 13.
Item 13. Certain Relationships and Transactions.
In connection with the sale of control of the Company pursuant to a Securities Purchase Agreement dated December 28, 1993, Triarc Companies, Inc. ("Triarc"), the former controlling shareholder of the Company, assigned to Bruce Paparella, President and Chief Executive Officer of the Company and Warren B. Kanders, a beneficial owner of more than 5% of the Company's common stock, the $1,500,000 outstanding balance of a note (the "Note") by the Company and certain accounts receivable (the "Accounts Receivable") of the Company held by Triarc in the amount, at September 30, 1993, of $1,230,000.
Effective December 30, 1994, Mr. Kanders entered into three separate stock purchase agreements, whereby Mr. Kanders transferred all of his shares of the Company's common stock to four individuals, including Mr. Paparella who purchased 348,217 shares for $5,000. In addition, on December 22, 1994, Mr. Kanders made a gift of his portion of the Note and Accounts Receivable to a charitable foundation, leaving him with no remaining beneficial interest in the Company's common stock. On April 18, 1995, John Sanford, the Company's Vice President and Chief Financial Officer, acquired a $362,500 interest in such convertible note which is convertible into 231,259 shares of the Company's Common Stock and, as such, Mr. Sanford may be deemed to be the beneficial owner of 231,259 shares issuable to him upon his election to convert his interest in the notes. On April 21, 1996, Mr. Bruce Paparella, the Company's President, Chief Executive Officer and a Director died from cancer. On September 6, 1996, in a private transaction, the Estate of Mr. Paparella sold to Mr. Sanford 1) a 37.5% interest in such Note in the principal sum of $562,500, which is convertible into 358,852 shares of the Company's Common Stock, 2) certain accounts receivable in the amount of $461,250 of the Company, and 3) 1,644,653 shares of the Company's common stock, for an aggregate purchase price of $330,000. November 22, 1996, Mr. Sanford, in a private transaction, made gifts to non-affiliated persons of 1) 100,000 shares of the Company's Common Stock, and 2) $56,250 of the principal amount plus accrued interest of the Convertible Note, which is convertible into 35, 886 shares of the Company's Common Stock. As a result of these transactions, as of December 31, 1996, Mr. Sanford beneficially owns 1,544,653 shares of the Company's outstanding Common Stock, representing 46.5% of such Common Stock outstanding, and is the beneficial owner of 554,226 shares issuable to him upon his election to convert his interest in the Note, constituting an aggregate beneficial interest in 2,098,879 shares of the Common Stock of the Company representing approximately 54.2% of the Common Stock of the Company and may be deemed to control the Company.
PART IV
Item 14.
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
(A) 1. Financial Statements:
See Index to Financial Statements (Item 8)
2. Financial Statement Schedule:
II. Valuation and Qualifying Accounts - Three years ended December 31, 1996.
All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or the notes thereto.
3. Exhibits:
Copies of the following exhibits are available at a charge of $.25 per page upon written request to the Secretary of the Company at 902 South Main Street, Point Marion, PA 15474.
3.1 Articles of Incorporation (including all amendments thereto) of Wilson Brothers, incorporated herein by reference to Wilson Brothers Form 10-K for the year ended December 31, 1980, Exhibit 3.1.
3.2 By-Laws of Wilson Brothers, incorporated herein by reference to Wilson Brothers Form 10-K for the year ended December 31, 1980, Exhibit 3.2.
4.1 Conversion Rights Agreement dated as of April 1, 1982 by and between Wilson Brothers and DWG Corporation, incorporated herein by reference to Wilson Brothers Form 10-Q for the quarter ended June 30, 1982, Exhibit 4.2.
4.2 Amendment to Conversion Rights Agreement dated April 1, 1982, incorporated herein by reference to Wilson Brothers Form 10-K for the year ended December 31, 1984, Exhibit 4.1.
10.1 Loan Agreement dated March 11, 1994 by and between Houze Glass Corporation and Integra Bank/South, incorporated by reference to Wilson Brothers Form 10-K for the year ended December 31, 1993, Exhibit 10.1.
10.2 Security Agreement dated March 11, 1994, by and between Houze Glass Corporation and Integra Bank/South, incorporated by reference to Wilson Brothers Form 10-K for the year ended December 31, 1993, Exhibit 10.2.
10.3 Revolving Credit Note dated September 14, 1994 between Houze Glass Corporation and Integra Bank/South, incorporated by reference to Wilson Brothers Form 10-K for the year ended December 31, 1994, Exhibit 10.3.
10.4 First Amendment to Loan Agreement and Note Modification Agreement dated September 14, 1994 between Houze Glass Corporation and Integra Bank/South, incorporated by reference to Wilson Brothers Form 10-K for the year ended December 31, 1994, Exhibit 10.4. 10.5 Amended and Restated Security Agreement dated December 30, 1994 between Houze Glass Corporation and Integra/Bank Pittsburgh, incorporated by reference to Wilson Brothers Form 10- K for the year ended December 31, 1994, Exhibit 10.5. 10.6 Third Amendment to Loan Agreement and Note Modification Agreement between Houze Glass Corporation and Integra Bank/South dated July 21, 1995, incorporated by reference to Wilson Brothers Form 10-K for the year ended December 31, 1995, Exhibit 10.7. 10.7 Fourth Amendment to Loan Agreement and Note Modification Agreement between Houze Glass Corporation and Integra Bank/South dated July 21, 1995, incorporated by reference to Wilson Brothers Form 10-K for the year ended December 31, 1995, Exhibit 10.8. 11.1 Computation of Earnings (Loss) per Common and Equivalent Share - Five Years Ended December 31, 1996.*
__________________ * being filed herewith.
(B) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the three months ended December 31, 1996.
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.
WILSON BROTHERS
Dated: April 30, 1997 By: /s/ John Sanford John Sanford President
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 indicated and on the dates indicated.
Date Signature Titles
April 30, /s/ John Sanford President, Chief Executive 1997 John Sanford Officer and Director (Principal Executive Officer)
April 30, /s/ Brett R. Smith Director 1997 Brett R. Smith
April 30, /s/ Frank Zanin Director 1997 Frank Zanin
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
II. Valuation and Qualifying Accounts - Three 34 years ended December 31, 1996
Schedule II
WILSON BROTHERS AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three years ended December 31, 1996
Additions Balance charged Deduction Balance at to s at Description beginnin costs and from end g expenses reserves of year of year
Year ended December 31, 1996:
Receivables - allowance for doubtful $130,000 $86,000 $56,000 $160,000 accounts Note receivable - $450,000 $40,000 $ $490,000 valuation reserve -- Accrued interest - $6,000 $ $ $6,000 valuation reserve - --
Year ended December 31, 1995:
Receivables - allowance $243,000 $96,000 $210,000 $130,000 for doubtful accounts Notes receivable from affiliate- $2,665,0 $ $2,665,00 $ - valuation 00 -- 0 - reserve Note receivable - $ $450,000 $ $450,000 valuation reserve -- -- Accrued interest - $ $6,000 $ $6,000 valuation reserve -- -- Year ended December 31, 1994:
Receivables - allowance for $220,000 $58,000 $35,000 $243,000 doubtful accounts
Notes receivable from $2,725,0 $ $60,000 $2,665,00 affiliate - 00 -- 0 valuation reserve
EXHIBIT INDEX Pa ge 10.9 Fifth Amendment to Loan 36 Agreement and Note Modification Agreement between Houze Glass Corporation and National City Bank of Pennsylvania June 18, 1996 10.8 Sixth Amendment to Loan 45 Agreement and Note Modification Agreement between Houze Glass Corporation and National City Bank of Pennsylvania December 20, 1996 11.1 Computation of Earnings 53 (Loss) per Common and Equivalent Share - five years ended December 31,
Exhibit 11.1
WILSON BROTHERS AND SUBSIDIARIES Computation of Earnings (Loss) per Common and Equivalent Share Five Years Ended December 31, 1996 (In thousands, except per share amounts)
1996 1995 1994 1993 1992
Loss from continuing operations $ (58) $ (602) $ (588) $(3,492) $ (1,376)
Loss from discontinued operations, net of tax - - (161) (1,837)(976)
Add: Interest on note payable to majority owner * * * * * (58) (602) (749)(2,352) (968) - - - - - - - Adjusted net loss $(58) $ (602) $(749)$(2,352) $ (968) Average common stock and common equivalents:
Common stock 3,321 3,321 3,321 3,321 3,321 Note payable to majority owner, including interest thereon * * * * * 3,321 3,321 3,321 3,321 3,321
Loss per common and equivalent share:
Continuing operations $(0.02)$(0.18) $(0.18)$(1.05)$( 0.42) Discontinuing operations - - (0.05) (0.55) (0.29) Net loss $(0.02)$(0.18) $(0.23)$(1.60)$( 0.71)
*Antidilutive
_______________________________