SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
/ X / Annual Report Pursuant to Section 15(d) of The Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1994
OR
/ / Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____________ to ________
Commission file number 2-68923
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below: DeSoto Stock Ownership Plus Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office: DeSoto, Inc., 16750 South
Vincennes Road, South Holland, IL 60473
PAGE 2
DeSOTO, INC.
THE DeSOTO STOCK OWNERSHIP PLUS PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 1994 AND 1993
EMPLOYER IDENTIFICATION NO. 36-1899490, PLAN NO. 004
TABLE OF CONTENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits - December 31, 1994
and 1993
Statements of Changes in Net Assets Available for Plan Benefits - Years
Ended December 31, 1994 and 1993
NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
SUPPLEMENTAL SCHEDULES
Schedule I: Item 27a - Schedule of Assets Held for
Investment Purposes - December 31, 1994
Schedule II: Item 27d - Schedule of Reportable
Transactions - Year Ended December 31, 1994
PAGE 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of
the DeSoto Stock Ownership Plus Plan:
We have audited the accompanying statements of net assets available for plan
benefits of The DeSoto Stock Ownership Plus Plan as of December 31, 1994 and
1993, and the related statements of changes in net assets available for plan
benefits for the years then ended. These financial statements and schedules
referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
as of December 31, 1994 and 1993, and the changes in net assets available for
plan benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules, as listed
in the accompanying table of contents, are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The fund information in the
statement of net assets available for plan benefits and the statement of
changes in net assets available for plan benefits is presented for purposes
of additional analysis rather than to present the net assets available for
plan benefits and changes in net assets available for plan benefits of each
fund. The supplemental schedules and fund information have been subjected to
the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
June 22, 1995
PAGE 4
THE DeSOTO STOCK OWNERSHIP PLUS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1994 AND 1993
December 31, 1994
-----------------------------------------------------------------------
Participant Directed
---------------------------------------------------
DeSoto, Inc. Money December 31,
Loan Stock Market Equity Bond Balanced 1993
Fund Fund Fund Fund Fund Fund Combined Combined
ASSETS:
DUE FROM DeSOTO, INC. $ - $ 15,894 $ 11,586 $ 40,173 $15,423 $10,847 $ 93,923 $ 78,174
INTEREST RECEIVABLE - 48 2,861 20 9 - 2,938 2,045
LOANS RECEIVABLE 169,274 - - - - - 169,274 206,878
INVESTMENTS, AT MARKET - 140,075 599,244 758,173 100,924 53,567 1,651,983 1,787,314
-------- -------- -------- -------- -------- ------- ---------- ----------
TOTAL ASSETS 169,274 156,017 613,691 798,366 116,356 64,414 1,918,118 2,074,411
TRANSFERS RECEIVABLE
(PAYABLE) - (15,522) 60,474 (65,735) 16,015 4,768 - -
-------- -------- -------- -------- -------- ------- ---------- ----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $169,274 $140,495 $674,165 $732,631 $132,371 $69,182 $1,918,118 $2,074,411
======== ======== ======== ======== ======== ======= ========== ==========
The accompanying notes to financial statements and supplemental schedules are an
integral part of these statements.
PAGE 5
THE DeSOTO STOCK OWNERSHIP PLUS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
YEARS ENDED DECEMBER 31, 1994 AND 1993
Year Ended December 31, 1994
-------------------------------------------------------------------------------
Participant Directed
---------------------------------------------------------- Year Ended
DeSoto, Inc. Money December 31,
Loan Stock Market Equity Bond Balanced 1993
Fund Fund Fund Fund Fund Fund Combined Combined
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, JANUARY 1 $206,878 $ 388,234 $ 716,228 $ 680,924 $ 82,147 $ - $2,074,411 $2,047,236
ADDITIONS:
Participants' net deposits (58,430) 87,483 53,016 193,077 56,173 71,554 402,873 203,207
Company contribution - 10,157 7,833 26,381 11,114 7,075 62,560 43,710
Loan interest income - 1,120 729 4,421 802 998 8,070 11,578
Interest income - 541 29,444 123 32 50 30,190 24,971
Net (depreciation) appreciation
in market value of investments - (217,318) - 655 5,051 (1,248) (212,860) 61,845
-------- --------- --------- --------- -------- -------- ---------- ----------
Total additions (58,430) (118,017) 91,022 224,657 73,172 78,429 290,833 345,311
DEDUCTIONS:
Withdrawals by participants 20,826 (80,996) (192,668) (144,402) (31,079) (18,807) (447,126) (318,136)
-------- --------- --------- --------- -------- -------- ---------- ----------
NET ADDITIONS (DEDUCTIONS) (37,604) (199,013) (101,646) 80,255 42,093 59,622 (156,293) 27,175
-------- --------- --------- --------- -------- -------- ---------- ----------
INTERFUND TRANSFERS - (48,726) 59,583 (28,548) 8,131 9,560 - -
-------- --------- --------- --------- -------- -------- ---------- ----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, DECEMBER 31 $169,274 $ 140,495 $ 674,165 $ 732,631 $132,371 $ 69,182 $1,918,118 $2,074,411
======== ========= ========= ========= ======== ======== ========== ==========
The accompanying notes to financial statements and supplemental schedules are an
integral part of these statements.
PAGE 6
THE DeSOTO STOCK OWNERSHIP PLUS PLAN
NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
YEARS ENDED DECEMBER 31, 1994 AND 1993
1. PLAN DESCRIPTION
The following description of the DeSoto Stock Ownership Plus Plan and
the related amendments ("the Plan") is provided for general purposes
only. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
The DeSoto Stock Ownership Plus Plan was established January 1, 1972 to
provide eligible employees of DeSoto, Inc. (the "Company") the
opportunity to make regular investments through payroll deductions and
acquire a proprietary interest in the Company. In general, any full-
time employee of the Company may participate in the Plan except for
certain hourly rated employees. Prior to January 1, 1985, funds from
employee deposits and Company contributions were used to purchase stock
of the Company through private sales or in the open market.
Effective January 1, 1985, the DeSoto Stock Ownership Plan was amended,
in part, to (i) increase employer contributions to the Plan, (ii) enable
the participants to determine in which of the several investment funds
described below their deposits will be invested, and (iii) comply with
the requirements of Section 401(k) of the Internal Revenue Code. As
part of the amendments, the name of the Plan was changed to The DeSoto
Stock Ownership Plus Plan (the "Plan").
Effective January 1, 1987, the Plan was amended, in part, to (i) permit
Plan participants who are at least 55 years of age to transfer all or a
portion of their account balance which is invested in the DeSoto Stock
Fund to the Interest Income Fund, and (ii) liberalize the provisions
under which participants may borrow money from the Plan.
Effective January 1, 1989, the Plan was amended, in part, to (i) split
the Interest Income Fund between a Money Market Fund and Bond Fund;
participants were required to allocate the balance in their Interest
Income Fund account between the two funds (ii) ease restrictions on
transfers between investment funds, (iii) change the definition of
valuation date for purposes of valuing a participant's account, and (iv)
conform to certain changes in the Internal Revenue Code.
The plan was amended, effective January 1, 1990, to permit participants
who terminated employment with the Company during 1990 either (i) due to
the Company's sale of a division or location, or (ii) under
circumstances which permitted the participant to receive severance
benefits under the Company's severance program, to be credited with a
Company matching contribution determined as
PAGE 7
if the participant was employed by the Company on December 31, 1990.
Effective June 1, 1990, the plan was amended (i) to require that Common
Stock be distributed in kind to all participants and beneficiaries who
receive distributions from the plan, and (ii) to modify the method in
which Common Stock is valued within a participant's account.
Effective January 1, 1991, the plan was amended to permit participants
who terminated employment with the Company during 1991 either (i) due to
the Company's sale of a division or location, or (ii) under
circumstances which permitted the participant to receive severance
benefits under the Company's severance program, to be credited with a
Company matching contribution determined as if the participant was
employed by the Company on December 31, 1991.
Effective October 1, 1993, the Plan was amended to permit participation
by any full-time employee as of the first day of the month coincident
with or immediately following their date of hire. Company contributions
allocated to a participants account, however, do not vest until the
employee completes one year of continuous service. Effective January 1,
1994, the Plan was amended to permit participation by any full-time
employee as of the first day of the calendar quarter coincident with or
immediately following their date of hire. The Plan was further amended
as of January 1, 1994 to add a Balanced Fund which may be invested in
stocks, bonds, money markets and other investment vehicles. In
addition, the Plan was amended to permit participants to invest the
Company contribution according to their direction; previously, Company
contributions were deposited in the DeSoto, Inc. Stock Fund.
The Company has established the DeSoto Stock Ownership Plus Trust to
implement and carry out the purposes of the Plan. This Trust has been
designated by the Company as part of the Plan. The custodian of the
Plan assets is Bank of America Illinois. The Company pays substantially
all of the Plan's administrative costs.
Under the amended Plan, in general, each eligible participant may elect
to make before-tax deposits to the Plan, equal to any whole percentage,
from 2% to 10%, of compensation. In addition, each participant may make
deposits to the Plan, in after-tax dollars, equal to any whole
percentage, from 1% to 10%, of compensation. Participants' deposits are
100% vested. The Company contributes to the Plan, in cash or Company
common stock, for the account of each employee who was a participant on
the last day of the year and of each employee (other than one employed
pursuant to a collective bargaining agreement) whose participation
terminated during the year on account of death, disability or
retirement, an amount equal to 30% of such participant's before-tax
deposits for such year of up to 5% of compensation. Participants vest
in their share of the Company's contributions upon completion of one
year of continuous service. A participant may discontinue deposits at
any time without terminating participation in the Plan, and may resume
deposits as of any subsequent January 1. Participant deposits and
Company contributions may be invested, at the election of each
participant, in one or more of the following investment funds maintained
under the amended DeSoto Stock Ownership Plus Trust.
I. The DeSoto, Inc. Stock Fund which is invested in common stock
of the Company to the extent reasonably practical and in short-term
income investments.
II. The Money Market Fund which is invested in certificates of
deposit, short-term income investments, and money market mutual
funds and other common or collective investment vehicles.
PAGE 8
III. The Equity Fund which is invested in common and preferred stock of
corporations other than the Company and its affiliates, short-term
income investments, and mutual funds and other common or
collective investment vehicles which invest primarily in equity
securities.
IV. The Bond Fund which is invested in obligations issued by the
United States of America or an agency or instrumentality thereof,
bonds, debentures, and other debt instruments of corporations
other than the Company and its affiliates, certificates of
deposit, short-term income investments, so-called guaranteed
interest and principal insurance contracts, and mutual funds and
other common or collective investment vehicles which invest
primarily in debt instruments. In 1993 and 1994 this fund was
invested solely in guaranteed investment contracts.
V. The Balanced Fund is invested in stocks, bonds, money markets
and other investment vehicles. The investments include a blend of
common and preferred stock of domestic and foreign corporations,
obligations issued by the United States of America or an agency or
instrumentality thereof, bonds, debentures, other debt instruments
of corporations, certificates of deposit, so-called guaranteed
interest and principal insurance contracts, securities issued by
the U.S. Government, U.S. dollar denominated obligations issued by
U.S. banks, U.S. dollar denominated commercial paper and short-
term corporate obligations, repurchase agreements and other common
or collective investment vehicles which make such investments.
A Participant's eligibility to make contributions to the Plan or receive
an allocation of the Company contribution ceases upon (i) termination of
employment for any reason, including resignation, retirement, dismissal
or death, and (ii) complete withdrawal due to hardship or in
anticipation of retirement, as determined under the terms of the Plan.
After termination of participation, the former participant will receive
payment of the number of full shares of Company stock credited to the
participant's account and an amount equal to the value of the remaining
portion of the account not previously withdrawn, as of the date of
termination. In the case of a participant who terminates employment on
account of death, disability, or retirement, a share of the Company
contribution for the year of termination will also be granted.
Under certain circumstances, at the complete discretion of the Trustees
of the DeSoto Stock Ownership Plus Trust, participants may withdraw all
or a portion of the value of their account in the Plan prior to
termination of employment. In addition, under certain circumstances,
the Trustees may permit the Plan to make loans to participants. The
maximum amount of the loans, plus interest due thereon over the term of
the indebtedness, cannot be less than $1,000 nor more than the lesser of
$50,000 or one-half of the participant's account balance at the time of
the loan. For purposes of the financial statements, a loan to a
participant is treated as an asset of the Loan Fund.
Loans to participants typically range from one to five years in length.
Loans to be used by the participant for the purchase of a dwelling may
be repaid over a maximum of ten years. The rate of interest charged on
a loan is equivalent to the prime rate charged by Bank of America
Illinois on the rirst day of the calendar quarter during which the loan
application is approved. Loan repayments are made by payroll deduction
on a semi-monthly or weekly basis.
PAGE 9
Payments to a participant or beneficiary attributable to a participant's
sub-account in the Equity Fund, the Money Market Fund, the Bond Fund and
the Balanced Fund are made in cash. Payments to a participant or
beneficiary attributable to a participant's sub-account in the DeSoto
Stock, Inc. Fund may be made, at the discretion of the Trustees, in
whole or in part in Company stock or in cash prior to June 1, 1990 and
in Company stock thereafter pursuant to the June 1, 1990 Plan amendment.
2. ACCOUNTING POLICIES
. The financial statements are presented on the accrual basis
of accounting.
. Investments are valued at the closing market price on the
last day of the year. Investments in the Bank of America GIC
Fund are valued at contract value. In September 1994, the
American Institute of Certified Public Accountants (AICPA) issued
Statement of Position (SOP) 94-4, "Reporting of Investment
Contracts Held by Health and Welfare Benefit Plans and Defined-
Contribution Pension Plans." The Plan will be required to adopt
this standard in 1995, and does not expect it to have a material
impact on the Plan's financial statements.
. Net realized and unrealized gains and losses for the period
are reflected in the Statement of Changes in Net Assets Available
for Plan Benefits (see Note 5 of Notes to Financial Statements
and Supplemental Schedules). The net realized gain or loss is
calculated as the difference between proceeds received and the
fair value of investments on the first day of the Plan year or
the acquisition date if purchased during the Plan year.
Unrealized gain or loss is calculated as the difference between
fair value at the end of the Plan year and the fair value of
investments at the beginning of the Plan year or the acquisition
date if purchased during the Plan year.
. Investment purchases and sales are recorded on the accrual
basis.
. Interest and dividend income are recorded on the accrual
basis.
3. PRIORITIES UPON TERMINATION OF THE PLAN
Although the Company expects to continue the Plan permanently,
the Company may, at any time, terminate the Plan. Upon
termination, any unallocated income and appreciation or
depreciation in the current value of the investments shall be
allocated among the individual accounts of the Plan participants.
All participant account balances will be distributed to
participants within a reasonable time after the date of
termination.
PAGE 10
4. INVESTMENTS
Bank of America Illinois, custodian of the Plan assets, held the Plan's
investments and executed transactions therein. The fair market values of
individual assets that represent 5% or more of the Plan's net assets as of
December 31, 1994 and 1993 are as follows:
December 31
-----------------------------------------------
1994 1993
----------------------- -----------------------
Cost Market Value Cost Market Value
DeSoto, Inc. Stock Fund:
DeSoto, Inc. Common Stock $ 279,378 $ 140,075 $ 350,722 $ 333,599
Bank of America, Short-Term
Investment Fund - - 15 15
---------- ---------- ---------- ----------
Total DeSoto, Inc. Stock Fund 279,378 140,075 350,737 333,614
Money Market Fund:
Bank of America, Short-Term
Investment Fund 599,244 599,244 709,027 709,027
Equity Fund:
Bank of America, Equity Fund 778,684 758,173 606,705 668,001
Bond Fund:
Bank of America, Guaranteed
Investment Contract/GIC Fund 98,461 100,924 75,673 76,672
Balanced Fund:
Bank of America, Balanced Fund 54,424 53,556 - -
Bank of America, Short-Term
Investment Fund 11 11 - -
---------- ---------- --------- ----------
Total Balanced Fund 54,435 53,567 - -
---------- ---------- ---------- ----------
Total $1,810,202 $1,651,983 $1,742,142 $1,787,314
========== ========== ========== ==========
PAGE 11
5. UNREALIZED AND REALIZED MARKET ACTIVITY
Year Ended December 31
1994 1993
DeSoto, Inc. Stock Fund:
Unrealized net (depreciation) appreciation
in fair market value of investments $(139,303) $(17,123)
Net realized (loss) gain on sale of
investments (78,015) (3,113)
--------- --------
Total (217,318) (20,236)
Equity Fund:
Unrealized net (depreciation) appreciation
in fair market value of investments (20,511) 61,296
Net realized (loss) gain on sale of
investments 21,166 16,942
--------- --------
Total 655 78,238
Bond Fund:
Unrealized net (depreciation) appreciation
in fair market value of investments 2,463 999
Net realized (loss) gain on sale
of investments 2,588 2,844
--------- --------
Total 5,051 3,843
--------- --------
Balanced Fund:
Unrealized net (depreciation) appreciation
in fair market value of investments (868) -
Net realized (loss) gain on sale
of investments (380) -
--------- -------
Total (1,248) -
--------- -------
Total $(212,860) $61,845
========= =======
Year Ended December 31
1994 1993
Total:
Unrealized market (depreciation) appreciation $(158,219) $45,172
Realized market (depreciation) appreciation (54,641) 16,673
--------- -------
Total $(212,860) $61,845
========= =======
PAGE 12
6. RECONCILIATION TO FORM 5500
As of December 31, 1994 and 1993, the Plan had $119,141 and $0,
respectively, of pending distributions to participants who elected to
withdraw from the operations and earnings of the Plan. These amounts are
recorded as a liability in the Plan's Form 5500; however, these amounts
are not recorded as a liability in the financial statements in accordance
with generally accepted accounting principles.
The following table reconciles net assets available for Plan benefits per
the financial statements to the Form 5500 as filed by the Company for the
year ended December 31, 1994.
Net Assets
Benefits Available
Payable to for Plan
Participants Benefits
Per financial statements $ - $1,918,118
Accrued benefit payments 119,478 119,478
-------- ----------
Per Form 5500 $119,478 $1,798,640
======== ==========
The following table reconciles withdrawals by participants per the
financial statements to the Form 5500 as filed by the Company for the
year ended December 31, 1994:
Withdrawals by participants per the financial statements $447,126
Amounts allocated to withdrawing participants
at December 31, 1994 119,478
--------
$566,604
========
7. INTERNAL REVENUE SERVICE TAX STATUS
The plan obtained its latest determination letter on June 12, 1986, in
which the Internal Revenue Service stated that the plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The plan has been amended since receiving the
determination letter. However, the plan administrator and the plan's tax
counsel believe that the plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue Code.
Therefore, they believe that the plan was qualified and the related trust
was tax-exempt as of the financial statement date. An application for
determination was submitted to the Internal Revenue Service on March 29,
1995.
* * * * * *
PAGE 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DeSOTO STOCK OWNERSHIP PLUS PLAN
(Name of Plan)
William Spier
William Spier, Trustee
June 22, 1995
Date
SCHEDULE I
DeSOTO, INC.
DeSOTO STOCK OWNERSHIP PLUS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1994
EMPLOYER IDENTIFICATION NO. 36-1899490, PLAN NO. 004
Identity of Issuer Description of Investment Cost Market Value
*Bank of America Short-Term
Investment Fund Cash Equivalents $ 599,255 $ 599,255
*Bank of America Equity Fund Common Stock Fund 778,684 758,173
*DeSoto, Inc. Common Stock 279,378 140,075
*Participant Loans Loans to Participants at
Prime Rate (lowest rate: 6.0%,
highest rate: 10.5%) - 169,274
*Bank of America Guaranteed
Investment Contract/
GIC Fund GIC Fund 98,461 100,924
*Bank of America
Balanced Fund Stocks, Bonds and
Money Market Instruments 54,424 53,556
---------- ----------
$1,810,202 $1,821,257
========== ==========
*Represents a party in interest transaction for the year ended December 31,
1994.
The accompanying notes to financial statements and supplemental schedules are
an integral part of this schedule.
SCHEDULE II
DeSOTO, INC.
DeSOTO STOCK OWNERSHIP PLUS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
EMPLOYER IDENTIFICATION NO. 36-1899490, PLAN NO. 004
Purchases Sales
---------------------- --------------------------------------------
Number of Purchase Number of Selling Cost of Net Gain
Identity of Party Involved Description of Assets Transactions Price Transactions Price Assets (Loss)
*Bank of America Equity Fund Common Stock 16 $244,058 11 $154,541 $133,375 $21,166
*Bank of America Short-Term
Investment Fund Cash Equivalents 161 773,764 94 883,550 883,550 -
*DeSoto, Inc. Common Stock 10 163,378 11 84,235 130,023 (45,788)
*Represents a party in interest transaction for the year ended December 31,
1994.
The accompanying notes to financial statements and supplemental schedules are an
integral part of this schedule.
DeSOTO, INC. AND SUBSIDIARIES
EXHIBIT INDEX
1 - Consent of Arthur Andersen LLP
EXHIBIT 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 11-K, into the DeSoto, Inc. previously filed
Registration Statement No. 2-68923.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
June 30, 1995