Item 1. Business
General
Uniroyal Technology Corporation (the "Company") is a leader in the development, manufacture and sale of a broad range of materials employing plastics and specialty chemicals technologies used in the production of consumer, commercial and industrial products. Its products, many of which are based on proprietary technology, include thermoplastic sheet for use in the manufacture of seating, interior paneling and other applications in the transportation, recreational, agricultural and industrial vehicle and computer manufacturing industries; acrylic sheet for use in the manufacture of aircraft canopies, cabin windows and windshields, tanning beds and bullet resistant enclosures; acrylic rods and tubes used in the manufacture of orthopedic devices and hard contact lenses; a wide selection of plastic vinyl coated fabrics for use in automobile and furniture manufacturing; and liquid adhesives and sealants for use in the commercial roofing industry and in the manufacture of furniture, truck trailers and recreational vehicles. The Company's technologies allow it to incorporate into its specialized materials, such as thermoplastic and acrylic sheets, performance characteristics such as fire retardancy, static dissipation, weatherability, optical clarity, high strength to weight ratio, light filtration capability and others required in the specialty markets on which it focuses. The Company is a leading supplier in such markets due to its ability to provide materials with such performance characteristics, to customize such materials and to provide technical and customer support in connection with the use of its products in manufacturing.
The manufacturing operations of the Company are conducted at eleven sites located in Indiana, Delaware, Iowa, Connecticut, New Jersey, California, Georgia, Ohio and Wisconsin, through three business segments: High Performance Plastics, Coated Fabrics and Specialty Adhesives. The High Performance Plastics Segment of the Company's business consists of two divisions: Royalite Thermoplastics ("Royalite"), which manufactures specialty and general purpose thermoplastic sheet, injection molding resins, color concentrates and extruded profiles and Polycast Technology ("Polycast"), which manufactures acrylic sheet for the aerospace, specialty and general purpose markets as well as acrylic rods and tubes. The Coated Fabrics Segment manufactures the Company's line of vinyl coated fabrics and vinyl laminated composites, and the Specialty Adhesives Segment (formerly, the Specialty Foams and Adhesives Segment), manufactures liquid adhesives and sealants.
The Company's Fiscal 1997 net sales were approximately $208.5 million. Approximate net sales for each of the Company's three business segments during such period were as follows: High Performance Plastics - $118.8 million, Coated Fabrics - $68.8 million, and Specialty Adhesives - $20.9 million. For certain financial information with respect to the Company's business segments, see "Note 17 to Consolidated Financial Statements." The Company is the successor to an affiliated group of reorganized entities from which the Company acquired all of its businesses in 1992 pursuant to a plan of reorganization adopted on September 27, 1992. See "- History of the Company."
Corporate Developments
The following are certain corporate developments which occurred in Fiscal 1997. The descriptions of such developments should be read in conjunction with the other parts of this Form 10-K and with the Consolidated Financial Statements and Notes to Consolidated Financial Statements and other financial information which form a part hereof.
Disposition of Stock of PBGC
On December 16, 1996, the Company redeemed 15 shares of Series B Preferred Stock held by the Pension Benefit Guaranty Corporation (the "PBGC") for $2.3 million. On February 4, 1997, the Company redeemed the remaining 20 shares of Series B Preferred Stock for $3.0 million. Shortly after the end of Fiscal 1997, the Company, directors and officers of the Company and certain other persons acquired all the Company's common stock owned by the PBGC.
Exit from the Mishawaka Plant
On March 31, 1997, the Company vacated the Mishawaka, Indiana plant. Earlier in the year the Company moved its adhesives operations, the Royalite headquarters and certain corporate operations from the Mishawaka plant to the South Bend plant acquired during Fiscal 1996 and renovated during the first half of Fiscal 1997. The Company is realizing substantial cost savings and other efficiencies from this move.
Acquisition of C. Gunther Company
On March 31, 1997, the Company acquired all of the common stock of C. Gunther Company ("Gunther"), a distributor of mirror mastic adhesives, for $1.7 million in cash and 100,000 shares of common stock of the Company. Gunther was subsequently merged into the Company. Much of the production of the Gunther products was moved into the Company's South Bend plant during Fiscal 1997. The results of operations are included in the Specialty Adhesive Segment. See "Note 6 to Consolidated Financial Statements."
Acquisition of Lucite(R) S-A-R Business
On August 29, 1997, the Company acquired the Lucite(R) Super Abrasion Resistant ("S-A-R") business of the Lucite(R) Acrylic Division of ICI Acrylics, Inc. for $3.0 million, consisting of $2.0 million in cash and a promissory note in the amount of $1.0 million bearing an interest rate of eight percent (8%). The acquisition will add an additional level of value-added products to the bullet resistant and transportation industry products of the Polycast Technology Division of the Company's High Performance Plastics Segment. See "Notes 6 and 9 to Consolidated Financial Statements."
Acquisition of Townsend Plastics
On September 5, 1997, the Company acquired substantially all of the assets of the Townsend Plastics Division of Townsend Industries, Inc. near Des Moines, Iowa for a price of $4.5 million in cash and 300,000 shares of common stock of the Company. Townsend Plastics, which produces acrylic rods and tubes, complements and has been consolidated with the Polycast Technology Division of the Company's High Performance Plastics Segment. In connection with this purchase, the Company amended its financing agreement with The CIT Group Business/Credit, Inc. to include a term note of $1.5 million. See "Notes 6 and 9 to Consolidated Financial Statements."
Sale of the Automotive Operation of the Coated Fabrics Segment
On May 15, 1997, the Company agreed to sell certain assets of the automotive interior trim operation of the Coated Fabrics Segment located at the Company's Stoughton, Wisconsin facility for $6.7 million; $4.7 million received in cash and a $2.0 million holdback. On October 17, 1997, the Company agreed to sell certain assets of the automotive operation of the Coated Fabrics Segment located at the Company's Port Clinton, Ohio facility for approximately $5.3 million. The Company should receive $4.3 million in June of 1998 and the remaining amount in December of 1998, both based on obtaining certain customer approvals. As of September 29, 1996, the Company had established reserves for the impairment of assets to be disposed of related to the Port Clinton, Ohio automotive operation of the Coated Fabrics Segment. The Company does not expect to incur any further significant gain or loss relating to the sales. For further description of the sale of the automotive operation of the Coated Fabrics Segment and litigation surrounding the $2.0 million holdback, see "Note 14 to Consolidated Financial Statements."
Settlement of Retiree Medical Claims
On February 13, 1997 the Company settled litigation with Uniroyal Retiree Benefits, Inc. ("URBI"), an organization that is unaffiliated with the Company. URBI administers a medical, prescription drug and life insurance program for certain retired employees of the Predecessor Companies and certain affiliates of the Predecessor Companies. This program is funded by the Company in accordance with the terms of an agreement entered into by the predecessors of URBI and the Company in connection with the Predecessor Companies' Plan. The Company had disputes with URBI concerning the eligibility of certain participants in URBI's medical plan and the level of payments due. The settlement agreement settled all previous claims asserted or assertable and provides a future formula pursuant to which the Company will make payments to URBI in order for URBI to provide medical, drug and life benefits to participants in its programs.
Transaction with Emcore Corporation
Through a technology license dated September 29, 1997, the Company has acquired from Emcore Corporation ("Emcore") certain technology for the manufacture of epitaxial wafers used in high brightness light emitting diodes (LEDs) for lamps and display devices for license fees aggregating up to approximately $5 million during Fiscal 1998. A wholly owned subsidiary of the Company plans to enter into a joint venture agreement with Emcore, whereby a joint venture, to be managed by the subsidiary of the Company, will purchase machines from Emcore and will sell and eventually manufacture epitaxial wafers, lamps and display devices. Thomas J. Russell, the Chairman of the Board of Directors of Emcore, is a director and major stockholder of the Company, and Howard R. Curd, the Chairman of the Board of Directors and Chief Executive Officer of the Company, is a director of Emcore.
Business Segments
High Performance Plastics Segment
The High Performance Plastics Segment of the Company's business accounted for approximately $118.8 million (approximately 57 percent (57%)) of the Company's net sales in Fiscal 1997. It consists of two divisions: the Royalite Thermoplastics Division ("Royalite"), which manufactures thermoplastic products, and the Polycast Technology Division ("Polycast"), which manufactures acrylic products.
Royalite - Thermoplastic Products
General
Royalite is a leading manufacturer of custom thermoplastic products. Thermoplastics are polymers, such as acrylonitrile butadiene styrene and polyvinylchloride, made from the polymerization of monomers, which can be reshaped after they have been formed by the application of heat and are used in the manufacture of a wide assortment of commercial and consumer products. The division's products include thermoplastic sheet, injection molding resins and extruded profiles.
Thermoplastic sheet is manufactured by the Company from a variety of polymers and chemical additives and is constructed either of solid plastic, a core of inexpensive plastic covered with a thin layer of high-quality thermoplastic or a base or substrate of plastic foam surrounded by solid thermoplastic. It is sold to equipment manufacturers, who incorporate the sheet into their products; custom fabricators, who cut and form the sheet for specific applications and supply finished components to original equipment manufacturers (OEMs); and distributors, who resell raw sheet to equipment manufacturers or custom fabricators. The Company manufactures two types of thermoplastic sheet: specialized sheet, which is made by varying the polymer and chemical components of the sheet in order to achieve particular performance characteristics; and general purpose sheet, which is used by manufacturers for a variety of products not requiring particular performance characteristics.
Specialty thermoplastic sheet is sold by Royalite into a number of niche markets, depending upon the performance characteristics of the sheet. The following is a chart setting forth the particular performance characteristics and the related applications of the specialized sheet:
Performance Characteristics Principal Uses --------------------------- ------------------ flame and smoke retardancy mass transportation vehicle seating and interior panels, aircraft interior trim and computer and other electronic equipment component housings
static dissipation and conductivity computer chip carriers, hard drive housings and electronic tote boxes
weatherability/temperature resistance marine and recreational vehicle instrument panels, interior trim for agricultural and other off road vehicles and exterior boat trim
buoyant, hydrodynamic and/or strength-to-weight ratio canoes, kayaks, other watersport crafts, amusement park vehicles and large exterior equipment housings
The Company believes it has a substantial share of the markets in which it competes for specialty thermoplastic sheet due to its ability to manufacture sheet with the wide variety of performance characteristics set forth above; the performance characteristics are, in many cases, customized to meet its customers' exact specifications. Net sales of specialty thermoplastic sheet accounted for approximately 66 percent (66%) of total net sales of thermoplastic sheet by Royalite during Fiscal 1997.
The Company maintains a scientific and technical staff and the necessary production capabilities to design specialty thermoplastic sheet with performance characteristics to suit its customers' specifications. See "- Research and Development." In addition, the Company has advanced coloring technology, including a database of up to 2,500 color formulas developed by Royalite, which enables it to color its thermoplastic sheet to match customer specifications precisely and consistently. The Company also has the ability to texturize its sheet with what it believes to be one of the most extensive selections of embossing grains available in the market.
By contrast to specialty thermoplastic sheet, general purpose thermoplastic sheet is used in the manufacture of numerous consumer and industrial products, such as luggage, musical instrument and equipment cases, tote boxes and vehicle mud flaps, which do not require that the thermoplastic material used in their manufacture possess any of the performance characteristics which distinguish specialty sheet. The market for general purpose thermoplastic sheet is significantly broader than the market for specialty thermoplastic sheet due to the almost limitless uses to which such sheet may be put in the manufacture of products. Such market is generally characterized by intense competition, high volume and low margins. The Company does not have a significant share of this market. Sales of general purpose sheet during Fiscal 1997 accounted for approximately 37 percent (37%) of total net sales of Royalite.
In addition to the Company's extensive list of sheet products, it also produces injection molding resins, some of which use the same proprietary formulations as the sheet products, and extruded profile products.
The Company introduced injection molding resin products as part of its "life cycle sourcing" strategy implemented to satisfy each customer's needs for thermoplastic material with respect to a particular product from the product's development stage through maturity, including matching products to the variety of production methods used at different volume levels. When a customer is in the initial stages of developing a product requiring a thermoplastic component, the Company employs its technological capabilities and scientific expertise to design and produce customized thermoplastic sheet, which the customer then generally "thermoforms" through the application of heat into particular applications to be incorporated into its final product. Due to its low cost, "thermoforming" is used in connection with the manufacture of thermoplastic components not required in large volume manufacturing runs. When a customer's unit volume of a product attains levels at which it becomes economical for the customer to manufacture the thermoplastic application by injection molding, a capital intensive but more efficient process than thermoforming, the Company can continue to supply the customer with the polymer resins and color concentrates, achieving the same properties and color as when the application was produced through thermoforming. By using the Company's injection molding resins and color concentrates, which have been customized to meet the customer's particular specifications, the customer avoids any disruption in its production that may result from having to qualify a thermoplastic material from another manufacturer.
Although injection molding resins constitute less than one percent (1%) of net sales of Royalite for Fiscal 1997, the Company believes that significant opportunities for growth exist in this market and that such product lines will enhance the division's specialty sheet lines by assuring customers that the Company will be able to meet their specialized thermoplastic needs throughout every stage of a product's life cycle.
Royalite also produces extruded profile products, including both proprietary and general purpose materials. The products are used for applications requiring flexibility and resilience, such as boat dock bumpers and gaskets which are sold to and used in production of acrylic sheet by Polycast. This product line was implemented to fully utilize the division's available production capacity at its Warsaw, Indiana facility. Even though sales of extruded profile products do not represent a significant part of Royalite's business, the Company believes that significant opportunities for growth exist in this market.
Competition
The market for thermoplastic sheet in the United States is highly competitive, with companies competing primarily on the basis of product specifications, price, customer service and technical support. The Company competes in this market principally by maintaining or increasing its market share in the specialty thermoplastic niche markets described above. See "- Royalite - General." Royalite competes effectively in this market by providing new custom product development, state-of-the-art color technology and strong customer service through technical support. The division maintains highly knowledgeable technical representatives who work directly with customers to ensure that the division's materials used in the manufacture of a customer's product conform to the customer's specifications and work efficiently with the customers' manufacturing processes. In addition, the Company has polymer expertise and custom compounding capabilities to customize the performance characteristics and color of its thermoplastic products, whereas many of its competitors do not have this capability. Its technological capabilities have also permitted the Company to develop successful new products which enhance its competitiveness in this segment. For example, recently, Royalite introduced low smoke, low heat, fire retardant material for aircraft and mass transit interiors and graffiti-resistant seating material, developed for the mass transportation market. The addition of injection molding resins and profile products and implementation of life cycle sourcing have enhanced Royalite's competitiveness by assuring customers that the Company will be able to meet their thermoplastic needs throughout every stage of a product's life.
The Company is also able to compete effectively with respect to price due in part to its low production costs, its ability to produce its own color concentrates and savings resulting from its use of recycled material in the manufacture of thermoplastic sheet. See "- Royalite - Raw Materials." The Company's ability to internally produce and laminate a thin layer of high quality colored thermoplastic film over a less costly substrate allows it to compete favorably with most other specialty thermoplastic sheet manufacturers, which use a single layer of relatively expensive colored plastic sheet to produce the desired end product.
The Company's principal competitors in the flame and smoke retardant thermoplastic product market are Empire, Kleerdex Company and Spartech Corporation. Goodrich and HMS are the Company's principal competitors in the static control thermoplastic product market, and Primex Plastics Corp. and Spartech Corporation are the Company's principal competitors in the general purpose thermoplastic sheet market. The Company's competitors have in the past increased their market shares in the thermoplastic industry generally through acquisitions.
Marketing
Royalite's thermoplastic sheet products are marketed under the ROYALITE(R) and SPECTRUM(R) brand names. Thermoplastic sheet with specialized characteristics is also marketed under individual brand names, such as ROYALSTAT(R) (thermoplastic sheet designed to dissipate or conduct static electric charges), ROYALEX(R) (multilayer thermoplastic sheet with a foam core and highly weather-resistant layer on one or both sides, resulting in a high strength-to-weight ratio, designed for recreational, marine and sporting applications), and ROYALTHOTIC(R) (thermoplastic sheet designed to be thermoformed at low temperatures to permit orthopedic medical practitioners to form individual patient orthopedic devices).
Royalite markets its thermoplastic products primarily through a national sales force of approximately 14 sales representatives, who are employees of the Company, and through wholesale distributors to whom it supplies its products for resale to fabricators and manufacturers. Representative customers of Royalite and representative end users of its products include: American Seating Company, Bombardier, Inc., Caterpillar, Inc., Commercial Plastics and Supplies Corp., Curbell Plastics, a division of Curbell, Inc., General Motors Corporation, Hewlett-Packard Company, Laird Plastics, Inc., McDonnell Douglas Corporation, National Railroad Passenger Corp. (Amtrak), Seagate Technology, Inc., Sensormatic Electronics Corporation and the U.S. Navy. The Company has a broad customer base for its thermoplastic products and it does not believe that it is dependent upon any single customer or group of customers for sale of its thermoplastic products. Pricing and terms offered to customers are generally consistent with those found in the industry.
Manufacturing Facilities
The Company manufactures its thermoplastic products at three wholly owned facilities, the largest of which is located in Warsaw, Indiana. The Company's other thermoplastic sheet manufacturing facilities are located in Rome, Georgia and Redlands, California. See "Item 2.
Item 2. Properties
The following table sets forth the location, size, general character and nature of the Company's facilities:
All of the owned properties are subject to the liens of mortgages securing the Company's 11.75% Senior Secured Notes Due 2003. See "Note 9 to Consolidated Financial Statements."
Item 3.
Item 3. Legal Proceedings
The Company is involved in certain proceedings in the ordinary course of its business which, if determined adversely to the Company would, in the opinion of management, not have a material adverse effect on the Company or its operations.
In connection with its reorganization, the Company entered into a number of settlement agreements, including certain agreements relating to environmental matters. See "Item 1. Business - History of the Company - Reorganization."
In Fiscal 1997, the Company settled litigation with the provider of medical, prescription drug and life insurance benefits to certain retired employees of the predecessor Companies and their affiliates. See "Item 1. Business - Corporate Developments - Settlement of Retiree Medical Claims."
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of Fiscal 1997 to a vote of security holders, through the solicitation of proxies or otherwise.
Part II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Prior to the effective date of the Plan of Reorganization, none of the Company's common stock, par value $.01 per share (the "Common Stock"), was issued, and consequently there was no public market for the Common Stock. The Common Stock was admitted to trading on the Nasdaq National Market System ("Nasdaq") on September 28, 1992 and trades under the symbol "UTCI." At the close of trading on November 28, 1997, the price per share of Common Stock was $5.5625. The Plan of Reorganization provides for the issuance of a maximum of 10,000,000 shares of Common Stock in settlement of claims and other matters in connection with the Bankruptcy Proceedings. As of November 28, 1997, approximately 9,666,000 of such shares of Common Stock had been issued pursuant to the Plan of Reorganization (including shares transferred to the Company's treasury as a result of the election by certain claim holders, as provided under the Plan of Reorganization, to receive cash in lieu of Common Stock). The remaining shares are being held pending resolution of certain retiree medical claims.
As of November 28, 1997, there were 897 holders of record of shares of Common Stock.
The following table sets forth the high and low sales price per share of the Company's Common Stock as reported by Nasdaq for the indicated dates:
The holders of record of shares of Common Stock are entitled to receive dividends when and as declared by the Board of Directors of the Company, provided that the Company has funds legally available for the payment of such dividends and is not otherwise contractually restricted from making payment thereof. The Company has not paid any cash dividends on the common stock in the last three fiscal years. The Company's ability to pay cash dividends on Common Stock currently is restricted by the indenture in connection with the Company's Senior Secured Notes. See "Note 9 to Consolidated Financial Statements."
Item 6.
Item 6. Selected Financial Data
The following historical financial data as of September 28, 1997 and September 29, 1996 and for each of the three years in the period ended September 28, 1997 have been derived from consolidated financial statements of the Company audited by Deloitte & Touche LLP and contained elsewhere in this Form 10-K. The selected historical financial data presented below as of October 1, 1995, October 2, 1994 and September 26, 1993 and for the fiscal years ended October 2, 1994 and September 26, 1993 have been derived from audited financial statements of the Company. All of the financial data set forth below should be read in conjunction with the Consolidated Financial Statements and related notes and other financial information contained in this Form 10-K.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis by the Company's management should be read in conjunction with "Item 6. Selected Financial Data" and "Item 8.
Item 8. Consolidated Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements on Page.
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
Information with respect to the directors and executive officers of the Company is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which statement will be filed not later than 120 days after the end of the fiscal year covered by this Report.
Item 11.
Item 11. Executive Compensation
Information with respect to executive compensation is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which statement will be filed not later than 120 days after the end of the fiscal year covered by this Report.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to the security ownership of directors and executive officers and substantial stockholders of the Company is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which statement will be filed not later than 120 days after the end of the fiscal year covered by this Report.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and transactions between directors, executive officers and substantial stockholders of the Company with the Company is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which statement will be filed not later than 120 days after the end of the fiscal year covered by this Report.
Part IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
Item 8. Consolidated Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders Uniroyal Technology Corporation Sarasota, Florida
We have audited the accompanying consolidated balance sheets of Uniroyal Technology Corporation and subsidiary (the "Company") as of September 28, 1997 and September 29, 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended September 28, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 28, 1997 and September 29, 1996 and the results of its operations and its cash flows for each of the three years in the period ended September 28, 1997, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, during the year ended September 29, 1996.
/S/ DELOITTE & TOUCHE LLP - ------------------------- DELOITTE & TOUCHE LLP Tampa, Florida December 12, 1997
The amounts shown as payment of debt is the net activity for the Company's revolving loan and term loan facilities which includes draws and payments on the revolving loan facilities during the periods shown. The following summarizes the activity of these facilities (in thousands):
The purchases of property, plant and equipment and the other increase (decrease) in debt, net for the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995 do not include $77,000, $846,000 and $1,404,000 related to property held under capitalized leases (Note 13).
Net cash used in financing activities for the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995 do not include the dividends declared on the Series B Preferred Stock since they were paid with the issuance of 73,448, 115,657 and 125,588 shares, respectively, of the Company's common stock (see Note 11). Net cash used in financing activities for the fiscal years ended September 28, 1997 and October 1, 1995 do not include 25,000 and 36,409 options purchased pursuant to the 1992 Non-Qualified Stock Option Plan, respectively. No such options were purchased during the fiscal year ended September 29, 1996.
See notes to consolidated financial statements.
UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Fiscal Years Ended September 28, 1997, September 29, 1996, and October 1, 1995
1. THE COMPANY
Uniroyal Technology Corporation, a Delaware corporation, through its operating divisions, Royalite Thermoplastics ("Royalite"), Polycast Technology ("Polycast"), Uniroyal Engineered Products ("UEP") and Uniroyal Adhesives and Sealants ("UAS") and its wholly owned subsidiary ULC Corporation (collectively, the "Company"), is engaged in the manufacture and sale of high performance plastics, coated fabrics and specialty adhesives. During Fiscal 1997 the Company sold certain assets of the Stoughton, Wisconsin automotive division and agreed to sell certain assets of the Port Clinton, Ohio automotive division of its Coated Fabrics Segment (Note 14). During Fiscal 1996 the Company sold substantially all the assets, net of certain liabilities, of its Ensolite closed cell foam division (Note 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany transactions and balances have been eliminated.
Fiscal Year End
The Company's fiscal year ends on the Sunday following the last Friday in September. The dates on which the fiscal year ended for the past three fiscal years were September 28, 1997, September 29, 1996 and October 1, 1995.
Use of Estimates
The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents includes all highly liquid investments purchased with an original maturity of three months or less. Restricted cash and cash equivalents are the net proceeds from the sale of the Ensolite Division placed in escrow in accordance with the terms of the indenture agreement for the Company's Senior Secured Notes (Note 9).
Fair Value of Financial Instruments
The estimated fair value of amounts reported in the consolidated financial statements have been determined using available market information and valuation methodologies, as applicable. The carrying value of all current assets and liabilities approximates the fair value because of their short-term nature. The fair values of non-current assets and liabilities approximate their carrying value.
Trade Accounts Receivable
The Company grants credit to its customers generally in the form of short-term trade accounts receivable. The creditworthiness of customers is evaluated prior to the sale of inventory. There are no significant concentrations of credit risk to the Company.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using a monthly average basis or standard costs (which approximates actual costs) for raw materials and supplies and the first-in, first-out ("FIFO") basis of accounting or standard costs (which approximates actual costs) for work in process and finished goods.
Property. Plant and Equipment
Property, plant and equipment are stated at cost. The cost of property, plant and equipment held under capital leases is equal to the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Depreciation is computed under the straight-line method based on the cost and estimated useful lives of the related assets including assets held under capital leases.
During March 1995 the Financial Accounting Standards Board ("FASB") adopted Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. In accordance with SFAS No. 121, during the fiscal year ended September 29, 1996, the Company established reserves totaling approximately $8,900,000 related to its decision to exit the Port Clinton, Ohio automotive operation of the Coated Fabrics Segment (Note 14). Other than the establishment of these reserves, the adoption of SFAS No. 121 did not have a significant effect on the Company's consolidated financial statements.
Property, Plant and Equipment Held for Sale
Property, plant and equipment held for sale is stated at the lower of cost or fair value less cost to sell.
Amortization
Debt discount and debt issuance costs are amortized using the interest method over the life of the related debt. Patents and trademarks are being amortized using the straight-line method over periods ranging from 7 to 20 years. Reorganization value in excess of amounts allocable to identifiable assets is amortized on a straight-line basis over 15 years. Reorganization value in excess of amounts allocable to identifiable assets is reported net of accumulated amortization of $3,947,000 and $3,193,000 at September 28, 1997 and September 29, 1996, respectively. Goodwill is amortized on a straight-line basis over 25 years. Goodwill is reported net of accumulated amortization of $48,000 at September 28, 1997.
Research and Development Expenses
Research and development expenditures are expensed as incurred. Research and development expenditures were $3,674,000, $4,918,000 and $4,689,000 for the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995 respectively.
Employee Compensation
The cost of post-retirement benefits other than pensions are recognized in the consolidated financial statements over an employee's term of service with the Company.
Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company has recorded a deferred tax asset of approximately $8,346,000. Realization is dependent on generating sufficient taxable income prior to expiration of loss carryforwards available to the Company. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
Stock-Based Compensation
In October 1995 FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, which is effective for fiscal years beginning after December 15, 1995. Under SFAS No. 123, the Company may elect to recognize stock-based compensation expense based on the fair value of the awards or continue to account for stock-based compensation under Accounting Principles Board ("APB) Opinion No. 25, Accounting for Stock Issued to Employees, and disclose in the consolidated financial statements the effects of SFAS No. 123 as if the recognition provisions were adopted. The Company has not adopted the recognition provisions of SFAS No. 123.
Net Income (Loss) Per Common Share
The computations of primary and fully diluted income per common share for the fiscal years ended September 28, 1997 and October 1, 1995 are based on the weighted average number of common shares issued and outstanding (or to be issued pursuant to the Plan, as defined in Note 13) less the average number of shares held in treasury for the period and also include the assumed conversion of the then outstanding Series B Preferred Stock, if any, and the exercise of all stock options and warrants having exercise prices less than the average market price of the common stock using the treasury stock method. The convertible preferred stock issued to the Pension Benefit Guaranty Corporation ("PBGC"), the warrants and stock options were considered to be common stock equivalents. Primary and fully diluted loss per common share for the fiscal year ended September 29, 1996 do not include the assumed conversion of the Series B Preferred Stock nor the exercise of the warrants and the employee stock options since their inclusion would have been anti-dilutive. (See Note 11 for information regarding the redemption of the Series B Preferred Stock.)
New Accounting Pronouncements
FASB has issued SFAS No. 128, Earnings Per Share, which is required to be adopted for financial statement periods ending after December 15, 1997. SFAS No. 128 requires that the primary and fully diluted earnings per share be replaced by "basic" and "diluted" earnings per share, respectively. The basic calculation computes earnings per share based only on the weighted average number of shares outstanding as compared to primary earnings per share which included common stock equivalents. The diluted earnings per share calculation is computed similarly to fully diluted earnings per share. Management does not anticipate that SFAS No. 128 will have a significant impact on earnings per share.
In February 1997, FASB issued SFAS No. 129, Disclosure of Information about Capital Structure. SFAS No. 129 requires a company to explain the privileges and rights of its various outstanding securities, the number of shares issued upon conversion, exercise or satisfaction of required conditions during the most recent annual fiscal period, liquidation preferences of preferred stock and other matters with respect to preferred stock. The Company has adopted SFAS No. 129 in these consolidated financial statements.
In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 established standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as the change in equity of a business during a period from transactions and circumstances related to non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 130 is not expected to have a material effect on the Company's consolidated financial statements.
In June 1997, FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 requires public entities to report certain information about operating segments, their products and services, the geographic areas in which they operate and their major customers, in complete financial statements and in condensed interim financial statements issued to shareholders. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 131 is not expected to have a material effect on the Company's consolidated financial statements.
Reclassifications
Certain prior years' amounts have been reclassified to conform with the current year's presentation.
3. INVENTORIES
Inventories consisted of the following (in thousands):
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
On July 17, 1996, the Company acquired a manufacturing facility in South Bend, Indiana for cash of approximately $1,800,000. Renovation of the facility was completed in Fiscal 1997. The Company moved its adhesives and sealants division and the thermoplastic products division's headquarters as well as certain other Company operations from their leased facility in Mishawaka, Indiana to the South Bend facility during the second quarter of Fiscal 1997.
In prior years, the Company had established reserves for the estimated costs for asset write-offs, property clean-up costs and relocation costs associated with the Company's move of its adhesives and sealants division totaling $1,658,000 as of September 29,1996. Such amounts were classified as current and were included in other accrued expenses in the accompanying consolidated financial statements as of September 29, 1996. No material amounts were outstanding as of September 28, 1997.
5. SALE OF ENSOLITE DIVISION
Pursuant to an asset purchase agreement, the Company sold on June 10, 1996 substantially all the assets net of certain liabilities of its Ensolite closed-cell foam division to Rubatex Corporation ("Rubatex") for $25,000,000 consisting of cash in the amount of $20,000,000 and a promissory note of the parent of Rubatex in the amount of $5,000,000 (the "Ensolite Sale"). Interest on the promissory note is payable semi-annually at 11.75% per annum. The promissory note matures on May 1, 2006. Cash proceeds from the sale were used to pay off the Company's borrowings under its revolving credit agreement. The remaining cash proceeds, net of amounts placed in escrow in accordance with the Company's indenture agreement for the Senior Secured Notes, were invested in short-term highly liquid investments. The Company recognized a pre-tax gain on the sale of approximately $2,102,000 net of transaction costs, the write-down of certain fixed assets not acquired by Rubatex and after consideration of reserves for severance and incentive packages for Ensolite employees, facility clean-up costs and the recognition of Ensolite's pro rata share of the Company's transition obligation net of a curtailment gain of approximately $664,000 in accordance with SFAS No. 106, Employer's Accounting for Postretirement Benefits Other Than Pensions. In connection with the Ensolite sale, Rubatex received an option to purchase certain additional equipment housed at the Company's Mishawaka, Indiana manufacturing facility for $250,000 which it exercised in November, 1996. The purchase price was adjusted for changes in working capital, as defined in the asset purchase agreement, between October 1, 1995 and June 10, 1996. The change in working capital resulted in additional proceeds and select assets paid to the Company by Rubatex of approximately $700,000. Such amount has been included in the pre-tax gain on sale. The Company and Rubatex also entered into an earn-out agreement whereby the Company could earn between $.15 and $.20 per board foot of Ensolite products produced by Rubatex in excess of the base volume as defined in such agreement during each of the four year periods following the closing of the Ensolite Sale. In no event will the total amount earned by the Company under the earn-out agreement during the forty-eight month period following the closing of the sale exceed $3,000,000. The Company earned approximately $353,000 net of expenses under the earn-out agreement during Fiscal 1997.
In conjunction with the Ensolite Sale, the Company entered into a toll manufacturing agreement with Rubatex. The Company produced Ensolite products for the benefit of Rubatex at its Mishawaka, Indiana manufacturing facility through March 17, 1997. The Company was reimbursed by Rubatex for the variable costs incurred in the production of Ensolite products and was paid a fixed amount for manufacturing period costs based on actual costs incurred by the Company during Fiscal 1995 and adjusted for inflation. In addition the Company provided certain support services to Rubatex and was reimbursed by Rubatex for the costs of certain of such services.
6. BUSINESS ACQUISITIONS
On March 31, 1997 the Company acquired 100% of the common stock of C. Gunther Company, a manufacturer of mirror mastic adhesive, for $1,650,000 in cash and 100,000 shares of common stock of the Company. The purchase price was adjusted for changes in working capital between January 31, 1997 and March 31, 1997, as defined in the purchase agreement. This resulted in an increase in the purchase price of $86,500 which was paid in cash. C. Gunther Company was subsequently merged into the Company in September of 1997.
On August 29, 1997 the Company acquired the Lucite(R) Super Abrasion Resistant ("S-A-R") acrylic coating business of the Lucite(R) Acrylic Division of ICI Acrylics, Inc. for $3,000,000, consisting of $2,000,000 in cash and an unsecured promissory note for $1,000,000 bearing an interest rate of 8% (Note 9). The purchase price was adjusted for inventory changes and the pro-ration of prepaid expenses as defined in the purchase agreement. This resulted in an increase in the purchase price of $122,000 which was paid in cash.
On September 5, 1997 the Company acquired substantially all of the assets of the Townsend Plastics Division of Townsend Industries, Inc., a manufacturer of acrylic rods and tubes, for $4,485,000 in cash and 300,000 shares of common stock of the Company. In connection with this purchase, the Company amended its financing agreement with The CIT Group/Business Credit, Inc. to include a term note of $1,500,000 (Note 9).
The above business combinations were accounted for by the purchase method in accordance with APB Opinion No. 16. The results of operations of the above named businesses are included in the consolidated financial statements from their respective purchase dates in Fiscal 1997.
The Company acquired the following assets and liabilities (net of cash received) in the above transactions (in thousands):
The acquired goodwill will be amortized over the estimated useful life of the assets of 25 years.
The acquisitions were completed during the latter part of the fiscal year. Management has made its best estimate of the purchase price at this time; however, certain estimates may change during the course of Fiscal 1998.
The pro forma effect of these acquisitions on the Company's net sales, income before extraordinary item, net income and earnings per share, had the acquisitions occurred on September 30, 1996, is not considered material.
7. OTHER ASSETS
Other assets consisted of the following (in thousands):
Patents and trademarks are reported net of accumulated amortization of $2,492,000 and $2,142,000 at September 28, 1997 and September 29, 1996, respectively. During the fiscal year ended September 28, 1997 the Company wrote off $13,000 of debt issuance costs in connection with the $250,000 acquisition of face value of the Company's Senior Secured Notes. During the fiscal year ended October 1, 1995 the Company wrote off $466,000 of debt issuance costs in connection with the acquisition of $7,497,000 of face value of the Company's Senior Secured Notes (Note 9). Debt issuance costs are shown net of accumulated amortization of $1,933,000 and $1,502,000 at September 28, 1997 and September 29, 1996, respectively.
8. OTHER LIABILITIES
Other liabilities consisted of the following (in thousands):
9. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
Debt amounts become due during subsequent fiscal years ending in September as follows (in thousands):
On June 7, 1993, the Company consummated a public offering of 80,000 units, consisting of $80,000,000 aggregate principal amount of its 11.75% Senior Secured Notes Due 2003 ("Senior Secured Notes") and warrants to purchase an aggregate of 800,000 shares of its common stock. The warrants issued with the Senior Secured Notes are detachable and therefore were allocated a portion of the proceeds in the amount of approximately $1,566,000 which was an estimate of their market value at the time they were issued. The proceeds allocated to the notes were approximately $78,434,000 resulting in a note discount of $1,566,000, which is being amortized using the interest method. The effective rate of interest on the notes based on the allocated proceeds was calculated to be approximately 12.09%. The notes will mature on June 1, 2003. Interest is payable on June 1 and December 1 of each year at 11.75%. The notes are collateralized by a lien on substantially all of the non-cash assets of the Company (other than trade accounts receivable) and net cash proceeds of the sale of collateral. The notes are redeemable at the option of the Company, in whole or in part, on or after June 1, 1998, at 104.41 % of the principal amount, declining to par on and after June 1, 2001. The indenture contains certain covenants which limit, among other things, the Company's ability to incur additional debt, pay cash dividends, make certain other payments, sell its assets and redeem its capital stock. The Company was in compliance with these covenants at September 28, 1997 and September 29, 1996.
During the fiscal year ended September 28, 1997 the Company acquired $250,000 of face value of the Senior Secured Notes through open market purchases, the effect of which was not material to the consolidated financial statements. During the fiscal year ended October 1, 1995 the Company acquired $7,497,000 of face value of the Senior Secured Notes through open market purchases. These purchases resulted in an extraordinary gain of approximately $363,000 (net of the write-off of applicable debt issuance costs, unamortized debt discount and other transaction costs totaling $601,000 and net of applicable income taxes of $310,000). The Company did not acquire any such notes during the fiscal year ended September 29, 1996.
On June 5, 1996, the Company entered into a revolving credit agreement with The CIT Group/Business Credit Inc. ("CIT"), pursuant to which, subject to the satisfaction of certain borrowing conditions, the Company may borrow the lesser of $25,000,000 or 85% of eligible accounts receivable but in no event at any time more than 75% of the Company's Accounts, as defined in the agreement, determined in accordance with generally accepted accounting principles. Interest is payable monthly at prime plus .5% per annum or at the LIBOR rate plus 2.75% if the Company elects to borrow funds under a LIBOR Loan as defined in the agreement. The loan matures on June 5, 2001. All of the Company's trade accounts receivable are pledged as collateral for this loan. The agreement restricts the creation of certain additional indebtedness. The Company was in compliance with the covenants under this agreement at September 28, 1997. At September 28, 1997 the Company had approximately $7,237,000 available under the revolving credit agreement. The Company had $15,169,000 of outstanding borrowings under this agreement at September 28, 1997. The Company had no outstanding borrowings under this agreement at September 29, 1996.
On September 5, 1997, in connection with the purchase of Townsend Plastics (Note 6), the Company amended the financing agreement with CIT to include a term note of $1,500,000 ("Term Note"). The Term Note is payable in twelve equal quarterly installments beginning December 31, 1997. Interest on the Term Note is payable monthly at prime plus .25% per annum or at the LIBOR rate plus 2.75% if the Company elects to borrow funds under a LIBOR loan as defined in the agreement.
In connection with the purchase of the Lucite(R) S-A-R business on August 29, 1997 (Note 6), the Company issued an unsecured promissory note in the principal amount of $1,000,000 payable to ICI Acrylics, Inc. The principal amount of the note, together with interest at the rate of 8% per annum, is payable in three installments on the first, second and third anniversary date of the note.
The Company leases certain machinery and equipment under non-cancelable capital leases which extend for varying periods up to 5 years. Other obligations include remaining capitalized lease obligations of $737,000 and $1,402,000 as of September 28, 1997 and September 29, 1996, respectively (Note 13).
10. INCOME TAXES
The effective tax rate differs from the statutory federal income tax rate for the following reasons (in thousands):
Income tax expense (benefit) consisted of the following components (in thousands):
The total income tax expense of $121,000 for the fiscal year ended October 1, 1995 includes an expense in the amount of $310,000 applicable to the extraordinary item (Note 9).
The components of the deferred tax assets and liabilities consisted of the following (in thousands):
The ultimate realization of the acquired tax loss carryforward benefits is uncertain and subject to interpretation of the tax law as it applies to the Company's bankruptcy reorganization.
The net operating and acquired tax loss carryforward benefits expire in various years ending in 2010. The acquired tax loss carryforward benefits consist of tax net operating loss carryforwards and pension contribution deductions. The acquired net operating loss carryforwards are subject to an annual limitation arising from the Company's September 27, 1992 bankruptcy reorganization. The annual limitation on utilization of the acquired net operating loss carryforward for tax purposes is approximately $1,600,000 per year. Utilization of the acquired tax loss carryforward benefits in future periods will be applied to reduce reorganization value in excess of amounts allocable to identifiable assets.
11. STOCKHOLDERS' EQUITY
The Company's certificate of incorporation provides that the authorized capital stock of the Company consists of 35,000,000 shares of common stock and 1,000 shares of preferred stock, each having a par value of $0.01 per share. At September 28, 1997, approximately 13,373,000 shares of common stock had been issued. Approximately 334,000 shares of common stock are reserved for issuance pending resolution of disputed claims in the bankruptcy proceedings (Note 13).
The holder of the Series B Preferred Stock was entitled to vote as a separate class of shareholders for the purpose of electing certain directors to the Board of Directors of the Company. A holder of Series B Preferred Stock had no preemptive or preferential rights to purchase or subscribe to any additional shares of capital stock except for the conversion rights described below.
The Company had the right to redeem all or any portion of the Series B Preferred Stock at any time following 30 days' notice to the holder of such Preferred Stock by (a) paying $150,000 per share for each share of Series B Preferred Stock that the Company, in its sole discretion, elected to redeem; and (b) issuing all common stock dividends then accrued but unpaid on the Preferred Stock to be redeemed. The Company had the right, but no obligation, to redeem, at its option, any or all whole or fractional shares of Preferred Stock. In the event of a liquidation of the Company, the holder of the Preferred Stock would be entitled to receive, following all distributions to creditors of the Company required under Delaware law, a liquidation payment of $150,000 per share plus all accrued but unpaid dividends prior to any distributions to common stockholders.
On December 16, 1996 the Company redeemed 15 shares of Series B Preferred Stock for $2,250,000. On February 4, 1997 the Company redeemed the remaining 20 shares of Series B Preferred Stock for $3,000,000.
The holders of record of shares of common stock are entitled to receive dividends when and as declared by the Board of Directors of the Company, provided that the Company has funds legally available for the payment of dividends and is not otherwise contractually restricted from the payment of dividends. The Company's ability to pay cash dividends on common stock currently is restricted by the indenture in connection with the Senior Secured Notes.
From September 1, 1992, the holder of shares of Series B Preferred Stock was entitled to receive an annual dividend equal to 8% of the redemption price for outstanding shares of Series B Preferred Stock, as applicable, payable only in shares of common stock which number of shares is based on the average of the last reported bid prices for the 30 calendar days preceding the declaration date. The Company declared such dividends, on a quarterly basis through February 1997.
During the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995, the Company declared stock dividends of $220,000, $420,000 and $420,000, respectively, resulting in the issuance of 73,448, 115,657 and 125,588 shares of common stock, respectively, at an average price per common share of $3.00, $3.63 and $3.34, respectively. The $220,000 and $420,000 of dividends declared during the fiscal years ended September 28, 1997 and September 29, 1996 were charged to additional paid-in capital. Of the $420,000 of dividends declared during the fiscal year ended October 1, 1995, $72,000 was charged to retained earnings and the remaining $348,000 was charged to additional paid-in capital.
On December 18, 1996, the Board designated a new series of preferred stock of the Company termed Series C Junior Participating Preferred Stock, $.01 par value ("Series C Preferred") and reserved 450 shares of the Series C Preferred for issuance. At the same time, the Board declared a dividend of a right to acquire 1/100,000 of a share of Series C Preferred to the holder of each share of common stock (the "Rights") under a Shareholder Rights Plan. The Rights will trade with the common stock and be detachable from the common stock and exercisable only in the event of an acquisition of or grant of the right to acquire 15% or more of the common stock by one party or common group or a tender offer to acquire 15% or more of the common stock.
Warrants
The Company has 800,000 warrants outstanding to purchase an aggregate of 800,000 shares of its Common Stock at a price equal to $4.375 per share subject to adjustments under certain circumstances. All outstanding warrants are exercisable at any time on or prior to June 1, 2003, at which time they will terminate and become void. The warrants are detachable from the Senior Secured Notes and, therefore, were allocated a portion of the proceeds in the amount of approximately $1,566,000, which was their market value at the time they were issued. This amount was added to additional paid-in capital. As of September 28,1997 no warrants had been exercised.
Stock Compensation Plans
At September 28, 1997, the Company has four stock-based compensation plans, which are described below. The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for these plans. Had compensation cost been determined based on the fair value at the grant dates for awards under those plans consistent with the method of FASB Statement No. 123, the Company's net income (loss) and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except earnings per share information):
The Company has reserved 1,363,636 shares of common stock to be issued and sold pursuant to the 1992 Stock Option Plan that was adopted by the Company on September 27, 1992. Generally, of the options under this plan granted, 60% vested on May 1, 1994 and the remainder vested on November 1, 1995. Vesting provisions for any additional options will be determined by the Board of Directors of the Company at the time of the grant of such options. The stock options are exercisable over a period determined by the Board of Directors or its Compensation Committee, but no longer than ten years after the date granted.
During the fiscal year ended September 26, 1993, the Company adopted the 1992 Non-Qualified Stock Option Plan available for non-officer directors. This plan provides that directors who are not officers of the Company are entitled to forego up to 100% of their annual retainer in exchange for options to purchase the Company's common stock at an option price of 50% of the market price of the underlying common stock at the date of grant. The options are exercisable for a period of 10 years starting with the date of the grant of each option.
During the fiscal year ended October 2, 1994, the Company adopted the 1994 Stock Option Plan available for certain key employees of the Company. The Company has reserved approximately 812,000 shares of common stock to be issued under this plan, provided that the aggregate number of options that may be granted under the 1994 Stock Option Plan and all other stock option plans of the Company for employees may not at any time exceed in the aggregate 15% of the then currently authorized common stock outstanding, on a fully diluted basis. Stock options granted under this plan are exercisable until not later than January 1, 2004.
During the fiscal year ended September 29, 1996, the Company adopted the 1995 Non-Qualified Stock Option Plan available for directors. Each director is granted an option to purchase 10,000 shares of the Company's common stock in the case of the initial grant and 5,000 shares for any subsequent grant. The initial grant occurred upon the adoption of this plan or, in the case of new directors, 30 days after becoming an eligible director of the Company. Options granted under this plan have a term of three years and may be exercised nine months after the date of the grant. This plan terminates on February 14, 2006. No director who is not an officer of the Company may receive options to purchase more than an aggregate of 10,000 shares of Common Stock in any calendar year under all of the Company's Stock Option Plans.
The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in fiscal years 1996 and 1997, respectively: expected volatility of 45.89% and dividend yield of 0% for both years, risk-free interest rates of 5.656% and 6.042% and expected life of 10 years except for the 1995 Plan options which have an expected life of 3 years.
The following table summarizes all stock option transactions for the Fiscal years ended September 28, 1997 and September 29, 1996:
The following table summarizes information about stock options at September 28, 1997:
Employee Stock Ownership Plan
The Company has established the Uniroyal Technology Corporation Employee Stock Ownership Plan (the "ESOP"). The ESOP is a stock bonus plan intended to encourage eligible employees to save for their retirement and to increase their proprietary interest in the Company by accumulating the Company's common stock. Employees eligible for the initial distribution generally were all employees employed by the Company on or after January 1, 1993, excluding executive officers of the Company.
The Company made an initial contribution to the ESOP of 425,000 shares of common stock. Future contributions by the Company are discretionary. The initial contribution has been allocated to eligible employees of the Company ratably based upon the respective compensation levels of the eligible employees. Shares allocated to each participant account under the ESOP will become vested upon the participant's completion of three years of cumulative service with the Company. The Company did not make any contributions to the ESOP during the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995. The Company did not have any ESOP expense during the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995.
12. EMPLOYEE COMPENSATION
Post-retirement Health Care and Life Insurance Benefits
Certain retired employees are currently provided with specified health care and life insurance benefits. Generally, the plan provides for reimbursement of approved medical and prescription drug costs not fully covered by Medicare. The plan also provides for certain deductibles and co-payments. The life insurance benefits provide for amounts based upon the retirees' compensation at the time of their retirement. Eligibility requirements for such benefits vary by division, but generally provide that benefits are available to employees who retire after a certain age with specified years of service or a combined total of age and years of service. The Company has the right to modify or terminate certain of these benefits. The Company's policy is to pay the actual expenses incurred by the retirees; the Company does not intend to fund any amounts in excess of those obligations. The Company is also obligated to provide benefits to certain salaried retirees of Uniroyal Plastics Company, Inc. ("UPC") which is currently in liquidation proceedings under Chapter 7 of the U.S. Bankruptcy Code and is an affiliate of the Predecessor Companies (defined in Note 13) or Uniroyal, Inc. ("Uniroyal") (not affiliated with the Company) who are class members under a federal district court order. The Company and Uniroyal agreed to share on a 35%-65% basis, respectively, the costs of providing medical, prescription drug and life insurance benefits to these retirees. The Company is further obligated to make payments to a Voluntary Employee Benefits Association ("VEBA") established to provide benefits to certain retirees of the Predecessor Companies and UPC.
The Company adopted SFAS No. 106 as of September 27, 1992, which requires that the cost of the foregoing benefits be recognized in the Company's consolidated financial statements over an employee's service period with the Company. The Company determined that the accumulated post-retirement benefit obligation ("Transition Obligation") of these plans upon adoption of SFAS No. 106 was $28,085,000. The Company elected to defer the recognition of the Transition Obligation and amortize it over the greater of the average remaining service period or life expectancy period of the participants, which is expected to be approximately 16 years. In connection with the Ensolite Sale (Note 5) the Company recognized approximately $4,500,000 of the Transition Obligation relating to this employee group as reduction to the gain on the sale. In connection with the sale of the automotive division of the Coated Fabrics Segment (Note 14), the Company recognized approximately $3,600,000 in Fiscal 1996 of the Transition Obligation and other expenses relating to this employee group.
The following table summarizes the accumulated post-retirement and benefit obligation included in the Company's balance sheets (in thousands):
The net periodic post-retirement benefit cost contains the following components (in thousands):
All post-retirement benefits are based on actual costs incurred except for a certain group of retirees which is covered under an agreement providing payments based on the number of beneficiaries. For measurement purposes, an approximate 6.1% annual rate of increase in the cost of covered health care benefits was assumed for years one through two, approximately 5.9% for years three through five and approximately 4.9% thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the health care trend rate by one percentage point in each year would increase the accumulated post-retirement benefit obligation as of September 28, 1997 by $2,263,000 and the net periodic post-retirement benefit cost by $179,000.
The weighted average discount rate used in determining the accumulated post-retirement benefit obligation for the fiscal years ended September 28, 1997 and September 29, 1996 was 7.0% and 7.75%, respectively. The weighted average discount rate used in determining the net periodic post-retirement benefit cost for the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995 was 7.75%, 7.0% and 7.0%, respectively.
Other Benefit Plans
The Royalite, UEP and UAS divisions provide additional retirement benefits to substantially all of their employees and the Polycast Division provides such benefits to certain of its employees through two defined contribution savings plans. The plans provide for employee contributions and employer matching contributions to employee savings. Employer contributions are generally either 2% of salaried and certain non-union hourly participants' gross earnings or rates per hour ranging generally from $.05 to $.51 based on years of service. The expenses pertaining to these plans amounted to approximately $649,000, $699,000 and $670,000 for the fiscal years ended in 1997, 1996 and 1995, respectively.
In addition, the Company provides a savings plan under Section 401(k) of the Internal Revenue Code. The savings plan covers all eligible salaried and non-union wage employees of the Company. The savings plan allows all eligible employees to defer up to 15% of their income on a pre-tax basis through contributions to the savings plan. For every dollar an employee contributes, the Company may contribute an amount equal to 25% of each participant's before-tax obligation up to 6% of the participant's compensation. Such employer contribution may be made in cash or in Company common stock. The expenses pertaining to this savings plan were approximately $141,000, $228,000 and $174,000 for the fiscal years ended 1997, 1996 and 1995. During Fiscal 1996 the Company contributed 60,648 shares of its common stock with a market value of approximately $212,000 to the savings plan. The Company did not make any such contributions during the fiscal years ended 1997 and 1995.
13. COMMITMENTS AND CONTINGENCIES
Bankruptcy Proceedings
On September 27, 1992 the company acquired the businesses of certain direct and indirect subsidiaries of The Jesup Group, Inc. ("Jesup") for $54,400,000 of the Company's common and preferred stocks. These subsidiaries (collectively, the "Predecessor Companies") are the current operating divisions of the Company. The Predecessor Companies previously filed petitions with the United States Bankruptcy Court for the Northern District of Indiana, South Bend Division (the "Bankruptcy Court") seeking protection from their creditors under Chapter 11 of the United States Bankruptcy Code. On August 20, 1992 the Bankruptcy Court approved the Third Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code for Polycast Technology Corporation and its Affiliated Debtors (the "Plan"). The Plan was substantially consummated at the close of business on September 27, 1992 (the "Effective Date").
As a result of the bankruptcy and the consummation of the Plan at September 27 1992, the Company recorded certain adjustments to present its consolidated financial statements at September 27, 1992 in conformity with Statement of Position 90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), of the American Institute of Certified Public Accountants. Under the provisions of SOP 90-7, the Company was required to adopt fresh start reporting as of September 27, 1992 because (i) the reorganization value of the Company (approximate fair value on the Effective Date) was less than the total of all post-petition liabilities and pre-petition allowed claims and (ii) holders of the voting shares of the Predecessor Companies before the Effective Date received less than 50 percent (50%) of the voting shares of the Company.
Notwithstanding the confirmation and effectiveness of the Predecessor Companies' Plan, the Bankruptcy Court continues to have jurisdiction to, among other things, resolve disputed pre-petition claims and to resolve other matters that may arise in connection with or relate to the Predecessor Companies' Plan. The Company has resolved, through negotiation or through dismissal by the Bankruptcy Court, approximately $38,000,000 in disputed claims. Approximately 9,666,000 shares have been issued to the holders of unsecured claims against the Predecessor Companies in settlement of the allowed unsecured claims against the estates of the Predecessor Companies and to the Company's ESOP. The Company retained approximately 86,000 shares of common stock which are included in treasury stock. The remaining approximate 334,000 shares of the original 10,000,000 shares allocated for the disposition of bankruptcy claims are being held pending resolution of certain miscellaneous claims.
Litigation
Approximately 130 hourly employees at the Company's acrylic sheet manufacturing facility in Stamford, Connecticut are represented by Teamsters Local 191, which is affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (the "Teamsters"). The Teamsters declared a strike on July 11,1994 and called off the strike December 10,1994. The Company and Teamsters settled their dispute in June 1996. The Company agreed to settle the claim of the striking employees for back pay following the receipt of release of claims from such employees. The Company settled its obligation to the employees in August 1996 with a payment of approximately $808,000, inclusive of employment taxes of $58,000.
The Company is also engaged in litigation arising from the ordinary course of business. Management believes the ultimate outcome of such litigation will not have a material adverse effect upon the Company's results of operations, cash flows or financial position.
Environmental Factors
The Company is subject to a wide range of federal, state and local laws and regulations designed to protect the environment and worker health and safety. The Company's management emphasizes compliance with these laws and regulations. The Company has instituted programs to provide guidance and training and to audit compliance with environmental laws and regulations at Company owned or leased facilities. The Company's policy is to accrue environmental and cleanup-related costs of a non-capital nature when it is probable both that a liability has been incurred and that the amount can be reasonably estimated.
The Company may become subject to claims relating to certain environmental matters. The operations of the Predecessor Companies and certain of their affiliates produced waste materials that, prior to 1980, were disposed of at some 36 known unregulated sites throughout the United States. After 1980, waste disposal was limited to sites permitted under federal and state environmental laws and regulations. If any of the disposal sites (unregulated or regulated) are found to be releasing hazardous substances into the environment, under current federal and state environmental laws, the appropriate company might be subject to liability for cleanup and containment costs.
Prior to the effective date of the Predecessor Companies' Plan, several sites were identified where there were potential liabilities for the cost of environmental cleanup. In most instances, this potential liability resulted from the alleged arrangement for the off-site disposal of hazardous substances by Uniroyal, Inc.
Pursuant to a settlement agreement with the United States Environmental Protection Agency ("EPA"), the United States Department of the Interior and the States of Wisconsin and Indiana (the "EPA Settlement Agreement"), entered into in connection with the Plan, the Predecessor Companies compromised and settled (in exchange for common stock of the Company) substantially all of the pre-petition liabilities of the Predecessor Companies and the Company relating to disposal activities under Sections 106 and 107 of the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), Section 3008 of the Resource Conservation and Recovery Act ("RCRA") and similar state laws for cleanup of the remaining unsettled 20 designated sites not owned by any of the Predecessor Companies (the "Known Sites") and for natural resource damages at 15 of the 20 Known Sites. Pursuant to the EPA Settlement Agreement, the Predecessor Companies and the Company received from the United States and the States of Indiana and Wisconsin a covenant not to sue for response costs and, with the exception of five Known Sites, natural resource damages at each of the Known Sites. In addition, pursuant to Section 113(f)(2) of CERCLA, and as provided under the EPA Settlement Agreement, the Predecessor Companies and the Company will be protected against contribution claims filed by private parties for any Known Site for matters covered by the EPA Settlement Agreement. The EPA Settlement Agreement established a mechanism for the Company to resolve its liability for any other sites, except for those owned by the Company (the "Additional Sites"), arising from pre-petition disposal activity. The Company also agreed to share with such parties the proceeds of claims relating to the known sites made against certain insurers of the Predecessor Companies and their affiliates.
In the event that the United States, or the State of Wisconsin or the State of Indiana asserts a claim against any of the Predecessor Companies or the Company for response costs associated with pre-petition disposal activities at any Additional Site, the governmental party will be entitled to pursue its claim in the ordinary course, and the Company and the Predecessor Companies will be entitled to assert all of their defenses. However, if and when the Company or any of the Predecessor Companies is held liable, and if the liability is determined to arise from pre-petition disposal activities, the Company or such Predecessor Company may pay the claims in discounted "plan dollars" (i.e., the value of the consideration that the party asserting such claim would have received if the liability were treated as a general unsecured claim under the Plan). Such payment may be made in cash or securities, or a combination thereof, at the Company's or such Predecessor Company's option. The Company is not aware of any such claims related to Additional Sites.
Claims arising from real property owned by the Company are not affected by the EPA Settlement Agreement. In connection with the acquisition of a manufacturing facility in South Bend, Indiana, the Company assumed costs of remediation of soil and ground water contamination which the Company estimates will cost not more than $1,000,000 over a five-to-seven year period. The Company has placed $1,000,000 in an escrow account to be used for such clean-up in accordance with the terms of the purchase agreement. As of September 28, 1997, the Company had incurred approximately $235,000 of related remediation costs.
The Company's acquisition of assets of Townsend Plastics in September 1997 (Note 6) included the building in which the business operates in Pleasant Hill, Iowa. The seller retained the underlying real property, which is leased to the Company for a term of ten years. The Company also has an option to acquire such real property until September 30, 2007. The real property is subject to a RCRA Facility Investigation/Corrective Measures Study with Interim Measurers ordered by the EPA pursuant to RCRA. Two former lessees of the property are performing corrective measures on the real property to remediate soil and ground water contamination. The Company does not anticipate that such corrective measures will interfere with the Company's use of the property. The Company does not anticipate any liability to the Company in connection with such contamination or corrective measures as long as the Company remains a lessee of the property.
Based on information available as of September 28, 1997, the Company believes that the costs of known environmental matters either have been adequately provided for or are unlikely to have a material adverse effect on the Company's operations, cash flows or financial position.
Leases
The Company is a party to non-cancelable lease agreements involving equipment. The leases extend for varying periods up to 5 years and generally provide for the payment of taxes, insurance and maintenance by the lessee. Generally these leases have options to purchase at varying dates.
The Company's property held under capitalized leases, included in property, plant and equipment (Note 4) consists of the following (in thousands):
The approximate minimum future lease obligations on long-term non-cancelable capital lease obligations included in long-term debt (Note 9) during subsequent fiscal years ending in September are as follows (in thousands):
Interest is imputed using the rate that would equate the present value of the minimum lease payments to the fair value of the leased equipment.
The Company leases equipment, vehicles and warehouse and office space under various lease agreements, certain of which are subject to escalations based upon increases in specified operating expenses or increases in the Consumer Price Index. The approximate future minimum rentals under non-cancelable operating leases during subsequent fiscal years ending in September are as follows (in thousands):
Rent expense was approximately $1,264,000, $1,592,000 and $1,643,000 for the years ended September 28, 1997, September 29, 1996 and October 1, 1995 respectively.
Officers' Compensation
On August 1, 1995 the Company implemented a Deferred Compensation Plan providing certain key employees the opportunity to participate in an unfunded deferred compensation program. Under the program, participants may defer a portion of their base compensation and bonuses earned each year. Amounts deferred will earn interest at 12% per annum. The program is not qualified under Section 401 of the Internal Revenue Code. At September 28, 1997 and September 29, 1996 participant deferrals which are included in accrued liabilities were $334,000 and $173,000 respectively. The expense during the fiscal year ended September 28, 1997, September 29, 1996 and October 1, 1995 was $161,000, $156,000 and $17,000, respectively.
Also during the fiscal year ended October 1, 1995, split dollar life insurance contracts were purchased on the lives of the five executive officers. Insurance premiums of $186,000 were paid during each of the fiscal years ended September 28, 1997 and September 29, 1996, of which $531,000 and $356,000, respectively, has been capitalized to reflect the cash surrender value of these contracts net of loan balances.
As of September 28, 1997, the Company had employment contracts with four officers of the Company, providing for total annual payments of approximately $1,453,000 plus bonuses through September 1, 1998.
14. AGREEMENT TO SELL CERTAIN ASSETS OF THE AUTOMOTIVE DIVISION OF THE COATED FABRICS SEGMENT
During the fourth quarter of Fiscal 1996 Management of the Company concluded that, based not only on its decision to sell, but also on discussions with interested buyers, a sale of the automotive operation of the Coated Fabrics Segment was probable. Further, on December 11, 1996, the Board of Directors approved the closure of the Port Clinton, Ohio operation ("Port Clinton") of the Coated Fabrics Segment during the fiscal year ending September 28, 1997 in the event a sale did not occur. Port Clinton incurred operating losses of approximately $7,640,000 and $5,540,000 during the fiscal years ended September 29, 1996 and October 1, 1995.
In accordance with SFAS No. 121, the Company recorded a write-down of long-lived assets of the facility totaling approximately $8,900,000 during the fiscal year ended September 29, 1996. The carrying value of the long-lived assets to be disposed of was $9,346,000 as of September 28, 1997 and $10,832,000 as of September 29, 1996.
In connection with the probable sale of the automotive operation of the Coated Fabrics Segment in Fiscal 1996, Management believed that a curtailment would result from the associated expected reduction in the plan participants. In accordance with SFAS No. 106, the Company recognized approximately $3,600,000 of a curtailment loss in connection with the probable sale of the Coated Fabrics Segment's automotive operation during the fiscal year ended September 29, 1996.
On May 15, 1997 the Company agreed to sell certain assets of the automotive division of the Coated Fabrics Segment located at the Company's Stoughton, Wisconsin, facility ("Stoughton") to Textileather Corporation, a subsidiary of Canadian General-Tower, Limited ("CGT") for $6,657,500. The Company received $4,657,500 in cash and a holdback of $2,000,000 to be paid pursuant to the terms of a supply agreement and to bear interest at the rate of 9% per annum. Under the terms of the supply agreement, the Company has agreed to continue to manufacture and supply Stoughton automotive products to its customers until Textileather Corporation can transfer production of the Stoughton automotive products to its own facility. The $2,000,000 plus accrued interest is payable in stages and contingent upon the successful transfer of certain automotive programs to Textileather Corporation. The first installment was due September 30, 1997. The Company requested payment and was denied payment by CGT. On October 10, 1997, the Company filed suit against CGT and Textileather Corporation in the Dane County, Wisconsin Circuit Court. The Company is seeking damages for non-payment of the holdback and declaratory and injunctive relief. On October 30, 1997, the defendants filed their answer, basically denying the claims. Discovery has begun in this matter. Due to its contingent nature and associated litigation, the Company has not recorded the $2,000,000 holdback receivable as of September 28, 1997. The Company can also earn up to an additional $1,198,000 under this agreement upon realization of certain sales (as outlined in the agreement) by Textileather Corporation during Fiscal 1998.
On October 17, 1997 the Company further agreed to sell certain assets at Port Clinton to CGT for $5,325,000 plus the value of purchased inventories and plus or minus adjustments contingent upon the transfer of certain automotive programs to CGT as defined in the agreement. Under the agreement with CGT the Company should receive $4,270,000 in June of 1998 upon obtaining certain customer approvals and resulting transfer to CGT of purchased assets that relate to the Company's door panel programs. The Company should receive $1,055,000 in December of 1998 upon obtaining certain customer approvals and resulting transfer to CGT of purchased assets that relate to the Company's instrument panel programs.
Management believes that the write-down to long-lived assets, the curtailment loss and other reserves recorded relating to this agreement for sale remain appropriate at September 28, 1997, the net effect of which resulted in no significant gain or loss during the fiscal year ended September 28, 1997. Other than the potential contingent payments that the Company may receive, Management believes that the Company will not have any further significant gain or loss upon the ultimate completion of the sale.
15. RELATED PARTY TRANSACTIONS
The Company has an agreement with an investment banking firm that employs a relative of one of the Company's executive officers. The agreement retains the investment banking firm to provide financial advisory services to the Company for the period January 1, 1997 through December 31, 2000. The Company incurred expenses related to this agreement of approximately $274,000 during the fiscal year ended September 28, 1997 and $258,000 related to a similar agreement during the fiscal year ended September 29, 1996. In addition, see Note 16 regarding a related party transaction that occurred subsequent to September 28, 1997.
16. SUBSEQUENT EVENT
Through a technology license dated September 29, 1997, the Company has acquired from Emcore Corporation ("Emcore") certain technology for the manufacture of epitaxial wafers used in high brightness light emitting diodes (LEDs) for lamps and display devices for license fees aggregating up to approximately $5 million during Fiscal 1998. A wholly owned subsidiary of the Company plans to enter into a joint venture agreement with Emcore, whereby a joint venture, to be managed by the subsidiary of the Company, will purchase machines from Emcore and will sell and eventually manufacture epitaxial wafers, lamps and display devices. Thomas J. Russell, the Chairman of the Board of Directors of Emcore, is a director and major stockholder of the Company, and Howard R. Curd, the Chairman of the Board of Directors and Chief Executive Officer of the Company, is a director of Emcore.
17. SEGMENT INFORMATION
Identifiable assets by segment are those assets that are used solely in the Company's operations in each segment. The Company did not derive 10% or more of its sales from any single customer during the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995.
Segment data for the fiscal years ended September 28, 1997, September 29, 1996 and October 1, 1995 are as follows (in millions):
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders Uniroyal Technology Corporation Sarasota, Florida
We have audited the consolidated balance sheets of Uniroyal Technology Corporation and subsidiary (the "Company") as of September 28, 1997 and September 29, 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended September 28, 1997, September 29, 1996, and October 1, 1995 and have issued our report thereon dated December 12, 1997 (included in this Form 10-K). Our audits also included the accompanying consolidated financial statement schedule listed in Item 14 of this Form 10-K. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/S/ DELOITTE & TOUCHE LLP - ------------------------- DELOITTE & TOUCHE LLP Tampa, Florida December 12, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNIROYAL TECHNOLOGY CORPORATION
Date: December 19, 1997 By: /S/ Howard R. Curd ------------------ Howard R. Curd, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/S/ Robert L. Soran /S/ Curtis L. Mack - ------------------------------- -------------------------------------- Robert L. Soran, Director, President Curtis L. Mack, Director and Chief Operating Officer Date: December 19, 1997 Date: December 19, 1997
/S/ George J. Zulanas /S/ Roland H. Meyer - ----------------------- ------------------------------------- George J. Zulanas, Jr., Executive Roland H. Meyer, Director Vice President and Chief Date: December 19, 1997 Financial Officer Date: December 19, 1997
/S/ Howard R. Curd /S/ John A. Porter - ----------------------- ------------------------------------- Howard R. Curd, Director, Chairman John A. Porter, Director of the Board and Chief Date: December 19, 1997 Executive Officer Date: December 19, 1997
/S/ Peter C. B. Bynoe /S/ Thomas J. Russell - ----------------------- --------------------------------------- Peter C. B. Bynoe, Director Thomas J. Russell, Director Date: December 19, 1997 Date: December 19, 1997
/S/ Richard D. Kimbel - ----------------------- Richard D. Kimbel, Director Date: December 19, 1997
POWER OF ATTORNEY
Each person whose signature to this report appears below hereby appoints Howard R. Curd, Robert L. Soran and Oliver J. Janney, and each individually, any one of whom may act without the joinder of the others, as his agent and attorney-in-fact to sign on his behalf individually and in the capacity stated below and to file all amendments to this report, which amendments make such changes and additions to this report as such agent and attorney-in-fact may deem necessary and appropriate.
/S/ Howard R. Curd /S/ Peter C. B. Bynoe - ------------------------- --------------------------------- Howard R. Curd, Director, Chairman Peter C.B. Bynoe, Director of the Board and Chief Date: December 19, 1997 Executive Officer Date: December 19, 1997
/S/ Robert L. Soran /S/ Richard D. Kimbel - ------------------------- --------------------------------- Robert L. Soran, Director, President Richard D. Kimbel, Director and Chief Operating Officer Date: December 19, 1997 Date: December 19, 1997
/S/ Curtis L. Mack --------------------------------- Curtis L. Mack, Director Date: December 19, 1997
/S/ Roland H. Meyer --------------------------------- Roland H. Meyer, Director Date: December 19, 1997
/S/ John A. Porter --------------------------------- John A. Porter, Director Date: December 19, 1997
/S/ Thomas J. Russell --------------------------------- Thomas J. Russell, Director Date: December 19, 1997