1
EXHIBIT 13
1994 ANNUAL REPORT
2
EXHIBIT 13
YEAR ENDED DECEMBER 31
(In thousands, except per share and employee data)
1994 1993 1992 1991
Net Sales(A) . . . . . . . . . . . . . . . . . $563,133 $486,139 $463,470 446,533
Cost of Goods Sold(A) . . . . . . . . . . . . . 394,839 339,746 322,402 307,656
Earnings
Before Taxes(A) . . . . . . . . . . . . . . . 33,007 26,643 30,487 26,736
After Taxes(A) . . . . . . . . . . . . . . . 19,528(D) 16,683 19,582(C) 16,488
Per Common Share(A) . . . . . . . . . . . . . 1.83(D) 1.56 1.83(C) 1.55
Dividends Paid
Common Stock . . . . . . . . . . . . . . . . 8,550 8,013 7,487 6,692
Per Common Share . . . . . . . . . . . . . . .80 .750 .700 .627
Interest Expense . . . . . . . . . . . . . . . 8,711 6,604 6,270 5,784
Capital Expenditures--Net . . . . . . . . . . . 13,684 15,981 17,277 14,556
Depreciation and Amortization . . . . . . . . . 17,391 14,661 12,897 12,041
Salaries and Wages . . . . . . . . . . . . . . 139,238 123,747 121,572 116,936
Current Assets . . . . . . . . . . . . . . . . 152,712 141,768 121,938 115,735
Current Liabilities . . . . . . . . . . . . . . 63,419 55,330 44,509 42,809
Working Capital . . . . . . . . . . . . . . . . 89,293 86,438 77,429 72,926
Plant and Equipment . . . . . . . . . . . . . . 92,240 94,448 77,926 73,350
Total Assets . . . . . . . . . . . . . . . . . 312,101 302,192 237,238 218,086
Long-Term Debt . . . . . . . . . . . . . . . . 75,144 85,580 40,005 41,673
Retained Earnings . . . . . . . . . . . . . . . 118,095 107,728 99,117 99,585
Average Number of Common
Shares Outstanding . . . . . . . . . . . . . 10,684 10,683 10,691 10,671
Stockholders' Equity . . . . . . . . . . . . . 137,481 127,093 118,819 119,783
Book Value per Common Share . . . . . . . . . . 12.89 11.90 11.12 11.21
Return on Equity . . . . . . . . . . . . . . . 14.8% 13.6% 16.4% 14.4%
Number of Employees . . . . . . . . . . . . . . 4,152 4,320 3,727 3,894
QUARTERLY DATA 1994
(UNAUDITED)
1ST 2ND 3RD 4TH
Net Sales . . . . . . . . . . . . . . . . . . $140,715 $139,370 $138,186 $144,863
Gross Margin . . . . . . . . . . . . . . . . 41,925 41,538 41,015 43,817
Net Income . . . . . . . . . . . . . . . . . 4,266(D) 4,400 4,463 6,400
Earnings Per Share . . . . . . . . . . . . . .40(D) .41 .42 .60
Dividends Per Share . . . . . . . . . . . . . .2000 .2000 .2000 .2000
Price Range of Common
Stock (High-Low) . . . . . . . . . . . . . 25.75-22.25 24.75-18.75 23.13-19.00 23.00-19.38
Per share figures have been adjusted to reflect a 5-for-4 stock split in 1989
and a 3-for-2 stock split in 1991.
(A) Years from 1984 through 1987 have been restated to eliminate discontinued
operation.
(B) Before extraordinary loss (net of income taxes) of $2,223 or $.21 per
share.
(C) Before change in accounting principles of $12,449 or $1.16 per share.
(D) Before change in accounting principle of $605 or $.06 per share.
-14-
3
1990 1989 1988 1987 1986 1985 1984
$398,794 $387,140 $358,242 $325,768 $311,620 $296,493 $275,242
272,376 265,549 246,555 221,953 209,647 197,001 186,116
22,465 22,101 21,510 19,864 21,589 24,052 20,922
14,268 13,617 13,010 11,156 11,286(B) 12,426 10,813
1.33 1.27 1.21 1.04 1.05(B) 1.16 1.01
6,295 5,608 5,027 4,566 4,333 3,644 3,185
.587 .523 .469 .427 .405 341 2.99
3,313 2,165 1,563 1,435 1,141 1,233 1,005
10,053 12,794 11,787 12,010 13,233 8,720 8,623
9,650 8,806 7,632 6,701 5,930 5,311 4,726
112,778 110,353 101,416 96,718 91,684 85,356 77,070
107,418 95,088 90,987 84,415 81,831 75,168 69,088
39,825 36,451 35,983 32,563 28,947 25,800 25,167
67,593 58,637 55,004 51,852 52,884 49,368 43,921
72,040 62,767 58,197 54,077 50,195 46,349 40,007
207,003 164,140 152,257 141,036 134,394 127,801 113,407
43,339 11,277 8,858 10,088 12,919 15,558 12,608
97,055 89,082 83,532 75,549 70,744 67,142 59,337
10,717 10,728 10,712 10,701 10,692 10,674 10,665
109,875 103,264 95,145 87,117 82,278 78,619 70,773
10.31 9.61 8.88 8.14 7.69 7.36 6.63
13.4% 13.7% 14.3% 13.2% 14.0% 16.6% 16.0%
3,986 4,034 4,007 3,867 3,785 3,795 3,602
QUARTERLY DATA 1993
(UNAUDITED)
1ST 2ND 3RD 4TH
Net Sales . . . . . . . . . . . . . . . $117,749 $115,338 $119,516 $133,537
Gross Margin . . . . . . . . . . . . . 35,996 33,824 35,055 41,788
Net Income . . . . . . . . . . . . . . 4,670 3,638 3,586 4,789
Earnings Per Share . . . . . . . . . . .44 .34 .34 .45
Dividends Per Share . . . . . . . . . . .1875 .1875 .1875 .1875
Price Range of Common
Stock (High-Low) . . . . . . . . . .30.25-27.13 28.38-24.00 28.75-22.00 25.00-21.13
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4
YEAR ENDED DECEMBER 31
(In thousands, except per share amounts)
1994 1993 1992
NET SALES . . . . . . . . . . . . . . . . . . . . . . $563,133 $486,139 $463,470
-------- -------- --------
COST AND EXPENSES
Cost of goods sold . . . . . . . . . . . . . . . . 394,839 339,746 322,402
Selling and administrative expenses . . . . . . . 127,566 114,263 109,858
-------- -------- --------
522,405 454,009 432,260
-------- -------- --------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 40,728 32,130 31,210
OTHER INCOME (EXPENSE)
Sale of assets . . . . . . . . . . . . . . . . . . 158 48 4,619
Interest expense . . . . . . . . . . . . . . . . . (8,711) (6,604) (6,270)
Miscellaneous - net . . . . . . . . . . . . . . . 832 1,069 928
-------- -------- --------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES . . . . 33,007 26,643 30,487
PROVISION FOR INCOME TAXES
Current
Federal . . . . . . . . . . . . . . . . . . . . 11,902 8,992 10,688
State . . . . . . . . . . . . . . . . . . . . . 3,700 2,677 2,899
Deferred . . . . . . . . . . . . . . . . . . . . . (2,123) (1,709) (2,682)
-------- -------- --------
13,479 9,960 10,905
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES . . . . . . . . . 19,528 16,683 19,582
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES . . . . . . . . . . . . . . . (605) (12,449)
-------- -------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 18,923 $ 16,683 $ 7,133
======== ======== ========
PER COMMON SHARE
Income before cumulative effect of changes
in accounting principles . . . . . . . . . . . . $1.83 $1.56 $1.83
Net income . . . . . . . . . . . . . . . . . . . . $1.77 $1.56 $0.67
See Notes to Consolidated Financial Statements
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DECEMBER 31
(Dollars in Thousands)
1994 1993
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 25,997 $ 30,151
Accounts receivable, less allowances of $2,379 and $2,218 . . . . . . . . 72,536 65,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,929 45,687
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250 930
-------- --------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . 152,712 141,768
PLANT AND EQUIPMENT--AT COST
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,983 5,940
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . 52,011 48,475
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 127,645 121,805
-------- --------
185,639 176,220
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . 93,199 81,772
-------- --------
92,440 94,448
INTANGIBLE ASSETS FROM ACQUISITIONS
Goodwill, less amortization of$2,605 and $1,651 . . . . . . . . . . . . . 31,528 31,634
Other, less amortization of $3,973 and $3,173 . . . . . . . . . . . . . . 2,449 3,274
-------- --------
33,977 34,908
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,495 7,963
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,477 23,105
-------- --------
$312,101 $302,192
======== ========
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,674 $ 36,241
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,771 8,530
Profit sharing contributions . . . . . . . . . . . . . . . . . . . . . . 4,397 4,106
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,340 200
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . 6,237 6,253
-------- --------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . 63,419 55,330
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,144 85,580
SUPPLEMENTAL RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . 13,609 12,880
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS . . . . . . . . . . . . . . . . 22,448 21,309
STOCKHOLDERS' EQUITY
Common stock--$2 par value; authorized 50,000,000
shares, issued 10,784,279 and 10,774,484 shares . . . . . . . . . . . 21,569 21,549
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 118
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,095 107,728
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . 64 (433)
--------- ---------
139,846 128,844
Less 121,478 and 92,391 shares of Common Stock in treasury--at cost . . . 2,365 1,751
--------- ---------
137,481 127,093
--------- ---------
$ 312,101 $ 302,192
========= =========
See Notes to Consolidated Financial Statements
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YEAR ENDED DECEMBER 31
(In Thousands)
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,923 $ 16,683 $ 7,133
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 17,391 14,661 12,897
(Increase) in accounts receivable . . . . . . . . . . . . . (7,536) (7,482) (800)
(Increase) decrease in inventories . . . . . . . . . . . . (6,242) (4,244) 112
(Increase) decrease in other current assets . . . . . . . . (1,320) 255 (745)
(Gain) on disposition of plant and equipment . . . . . . . (129) (48) (4,619)
Decrease (increase) in intangible and other assets . . . . (803) (866) (441)
Increase in accounts payable . . . . . . . . . . . . . . . 5,434 3,408 4,388
Increase (decrease) in other current liabilities . . . . . 2,672 (2,007) (2,824)
Increase in supplemental retirement benefits . . . . . . . 1,752 1,793 2,516
Increase (decrease) in postretirement and
postemployment benefits . . . . . . . . . . . . . . . 1,139 (265) 21,574
(Increase) in deferred income taxes . . . . . . . . . . . . (2,532) (1,709) (11,705)
-------- -------- --------
Total adjustments . . . . . . . . . . . . . . . . . . 9,826 3,496 20,353
-------- -------- --------
Net cash provided by operating activities . . . . . . 28,749 20,179 27,486
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . (35,402)
(Increase) in annuity contracts . . . . . . . . . . . . . . . . . (7,467) (1,223)
(Increase) in cash value of life insurance . . . . . . . . . . . (19) (3,647) (366)
Additions to plant and equipment . . . . . . . . . . . . . . . . (13,684) (15,981) (17,277)
Proceeds from dispositions of plant and equipment . . . . . . . . 285 529 5,511
-------- -------- --------
Net cash used in investing activities . . . . . . . . (13,418) (61,968) (13,355)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt . . . . . . . . . . . . . . . . . . . 51,602
Reductions of long-term debt . . . . . . . . . . . . . . . . . . (10,453) (1,442) (1,533)
Repurchase of common stock . . . . . . . . . . . . . . . . . . . (628) (340) (667)
Sales and exchanges of common stock . . . . . . . . . . . . . . . 146 108 325
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (8,550) (8,013) (7,487)
-------- -------- --------
Net cash (used) provided by financing activities . . . (19,485) 41,915 (9,362)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents . . . . . . (4,154) 126 4,769
Cash and cash equivalents at beginning of year . . . . . . . . . 30,151 30,025 25,256
-------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . . . . . $ 25,997 $ 30,151 $ 30,025
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized) . . . . . . . . . . . . . $ 9,039 $ 6,241 $ 3,313
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 12,988 10,772 16,395
Liabilities assumed in acquisitions . . . . . . . . . . . . . . . 849 6,471
See Notes to Consolidated Financial Statements
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. Intercompany balances and
transactions have heen eliminated.
Cash and Cash Equivalents: The Company invests cash in excess of daily
operating requirements in income producing investments. Such amounts, invested
in short-term instruments stated at cost which approximates market, were
$16,175,000 in 1994 and $18,891,000 in 1993. All such investments have an
original maturity of three months or less and for purposes of the statement of
cash flows are considered to be cash equivalents.
Amounts due banks upon the clearance of certain checks under the Company's
cash management program have been included in accounts payable. At December 31,
1994 and 1993 such amounts were $6,904,000 and $4,723,000.
Inventories: Inventories are valued at the lower of cost (first-in,
first-out) or market.
Intangible Assets: The excess of cost over amounts assigned to tangible
assets of purchased subsidiaries is being amortized on the straight-line basis
over periods of 5 to 40 years. The Company evaluates the net carrying value of
such assets based on expectations of nondiscounted cash flows and net income of
each subsidiary for whom such assets are recorded. The Company believes no
material impairment of such assets exists.
Plant and Equipment: Plant and equipment is stated at cost. Depreciation is
computed using the straight-line method for financial reporting purposes.
Accelerated depreciation methods are used for income tax purposes.
Long-Term Debt: The fair value of the Company's long-term debt is based on
management's estimate of current market prices for the same issues. Fair value
is estimated to be $72,500,000 at December 31, 1994 and $87,000,000 at December
31, 1993.
Environmental Costs: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Remediation costs of
existing conditions caused by past operations are accrued when it is probable
that a liability has been incurred and the cost can be reasonably estimated.
Revenue Recognition: Sales and related costs are recorded by the Company upon
shipment of products to its customers.
Net Income per Common Share: Net income per common share is based upon the
weighted average number of shares outstanding, 10,683,797 in 1994, 10,682,504
in 1993 and 10,690,937 in 1992. The dilutive effect of outstanding stock
options is not significant.
Foreign Currency Translation: The Company's investment in a 50%-owned foreign
joint venture is translated at the rate in effect at the balance sheet date.
The Company's share of net income of the joint venture is translated at average
exchange rates prevailing during the year. Resulting translation adjustments
are reported separately as a component of stockholder's equity.
INVENTORIES
1994 1993
INVENTORIES (000'S)
Products finished or in process . . . . . . . . . . . . . $25,685 $24,510
Raw materials . . . . . . . . . . . . . . . . . . . . . . 25,560 20,771
Supplies . . . . . . . . . . . . . . . . . . . . . . . . 684 406
------- -------
$51,929 $45,687
======= =======
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LONG-TERM DEBT
1994 1993
LONG-TERM DEBT AND LEASES (000's)
Senior notes, 9.92%, due 1994 to 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,229 525,714
Senior notes, 5.77%, due 1997 to 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000 48,000
Note payable to bank, 9.375%, principal due to 1996 . . . . . . . . . . . . . . . . . . . . 2,700 3,100
Note payable to bank, variable at LIBOR plus 1.15%, principal due to 2000 . . . . . . . . . 990 1,219
Mortgage note, variable at 56% of bank's base rate plus .25% not to exceed
15%, principal due to 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 2,500
Mortgage note 6.75%, principal due to 2003 . . . . . . . . . . . . . . . . . . . . . . . . 1,875 2,125
Mortgage note, variable at 75.8% of prime rate not to exceed 11%,
principal due to 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,590 1,908
Mortgage note, variable at 79.4% of prime rate not to exceed 11.75%,
principal due to 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658 878
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 136
------- -------
$75,144 $85,580
======= =======
The net carrying amount of plant, equipment and other assets assigned as
collateral to the above obligations was approximately $24,955,000 in 1994 and
$25,923,000 in 1993. The Company has agreed to certain restrictive covenants
during the terms of some of these agreements. Under the most restrictive of the
covenants, the Company must maintain tangible net worth not less than
approximately $95,000,000 plus 25% of net income earned after 1992 and must
limit the amount of Senior Funded Debt to not more than 40% of total
capitalization. The aggregate amounts of long-term debt maturing during the
next five years are approximately: 1995-$6,237,000; 1996-$8,559,000;
1997-$12,615,000; 1998-$12,615,000; 1999-$12,571,000. Loans from life insurance
companies aggregating approximately $41,095,000 are secured by the cash values
of the underlying life insurance policies and such loans have been netted
against the cash values. Interest is payable annually at rates ranging from
11.5% to 13%.
STOCK OPTIONS
The Company's 1981 Stock Option Plan expired in 1991. Under the Plan, the
Company had granted both nonqualified and incentive stock options.
During 1994 and 1993 incentive stock options were exercised for 9,008
shares and 10,019 shares at prices ranging from $9.26 a share to $16.80 a
share. Options were canceled in 1994 and 1993 for 3,563 shares and 1,255
shares.
At December 31,1994 incentive stock options for 42,721 shares were
outstanding, all of which were exercisable at prices ranging from $9.26 to
$24.88 a share. The Company has reserved 42,721 shares of Common Stock for
issuance under the Plan.
During 1991 the Company adopted a nonqualified Stock Option Plan under
which options could be granted at fair market value to employees and has
reserved a total of 450,000 shares of Common Stock for issuance. The Plan
allows the Board of Directors to grant options which include a stock
appreciation right (SAR) feature under which employees may elect to receive
cash in lieu of Common Stock for up to 25% of the options exercised.
Twenty-five percent of each grant becomes exercisable in each succeeding year.
The Company granted incentive stock options (without SAR) for 40,400 shares at
$19.75 in 1994 and for 35,600 shares at $24.25 and 1,500 shares at $27.75 in
1993. Options for 2,100 shares were canceled in 1994. Options for 135,175
shares were outstanding at December 31,1994 of which 46,286 shares were
exercisable at prices ranging from $16.75 to $29.25 a share.
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INCOME TAXES
Deferred income taxes have been established for the effects of
differences in the bases of assets and liabilities for financial reporting and
income tax purposes. In 1992 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This change in
accounting principle resulted in a decrease in deferred income taxes of
$850,000 in 1992.
The provision for income taxes is reconciled with the Federal
statutory rate as follows (000's):
1994 1993 1992
Income tax at Federal statutory rate . . . . . . . . . . . . . . . . . . . . . . $11,552 $9,325 $ 10,366
State income taxes net of Federal income tax benefit . . . . . . . . . . . . . . 2,093 1,702 1,689
Non-taxable life insurance proceeds and increase in cash value . . . . . . . . . (957) (1,054) (1,190)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 (13) 40
-------- ------- --------
$ 13,479 $9,960 $ 10,905
======== ====== ========
The preceding summary does not include in 1992 the deferred tax benefit of
$850,000 described above nor deferred tax benefits of $8,173,000 related to the
cumulative effect of the change in accounting for postretirement benefits
adopted in 1992. It also does not include the deferred tax benefit related to
the cumulative effect of the change in accounting for postemployment benefits
in 1994.
Components of the net deferred income tax asset at December 31, 1994 and
1993 are as follows (000's):
1994 1993
DEFERRED INCOME TAX ASSETS:
Postretirement and postemployment benefits . . . . . . . . . . $ 14,154 $ 13,249
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 3,482 2,913
-------- --------
17,636 16,162
-------- --------
DEFERRED INCOME TAX LIABILITIES:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 7,141 8,199
-------- --------
Net Deferred Income Tax Asset . . . . . . . . . . . . . . . . . $ 10,495 $ 7,963
======== ========
EMPLOYEE RETIREMENT PLANS
The Company and its principal subsidiaries have profit sharing and other
retirement plans covering their employees. The Company's contributions, which
are principally discretionary, were approximately $4,530,000 in 1994,
$4,430,000 in 1993 and $4,675,000 in 1992.
During 1978 the Company entered into agreements with key officers of the
Company and its subsidiaries which provide for nonvested supplemental
retirement benefits. In 1985 the Company entered into similar additional
agreements with directors and key officers. The Company has made current
provisions for future payments due under these agreements. The amounts charged
to operations in 1994, 1993 and 1992 were approximately $3,457,000, $3,340,000
and $3,140,000, respectively.
COMMITMENTS AND CONTINGENCIES
Rental expense under operating leases was approximately $4,889,000 in
1994, $3,888,000 in 1993 and $3,952,000 in 1992. Minimum rental commitments
under noncancelable leases other than capital leases are approximately:
1995-$4,268,000; 1996-$3,807,000; 1997-$2,678,000; 1998-$2,438,000;
1999-$2,063,000; and $7,645,000 thereafter.
In the opinion of management, no litigation or claims are pending against
the Company which will have an adverse material effect on its financial
statements.
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STOCKHOLDERS' EQUITY
The Company has authorized 500,000 shares of Preferred Stock without par
value. No shares have been issued.
Following is a summary of transactions in stockholder's equity for the
three years ended December 31, 1994. Dollars are in thousands except per share
amounts.
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TREASURY STOCK TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT ADJUSTMENTS
Balance December 31,1991 . . . . . . . 10,774,109 $21,548 $ 0 $ 99,585 (91,083) ($1,350) $ 0
Net income . . . . . . . . . . . . 7,133
Dividends paid, $.70 per share . . (7,487)
Exercise of stock options . . . . . 375 1 19 (114) 27,287 419
Repurchase of Common Stock . . . . (25,214) (667)
Foreign currency translation . . . (268)
----------- ------- -------- -------- -------- ------- -----
Balance December 31,1992 . . . . . . . 10,774,484 21,549 19 99,117 (89,010) (1,598) (268)
Net income . . . . . . . . . . . . 16,683
Dividends paid, $.75 per share . . (8,013)
Exercise of stock options . . . . . (19) (59) 10,019 186
Repurchase of Common Stock . . . . (13,400) (339)
Foreign currency translation . . . (165)
----------- ------- -------- -------- -------- ------- -----
Balance December 31, 1993 . . . . . . . 10,774,484 21,549 0 107,728 (92,391) (1,751) (433)
Net income . . . . . . . . . . . . 18,923
Dividends paid, $.80 per share . . (8,550)
Exercise of stock options . . . . . 7,995 16 82 (6) 1,013 14
Repurchase of Common Stock . . . . (30,100) (628)
Restricted stock awards . . . . . . 1,800 4 36
Foreign currency translation . . . 497
----------- ------- -------- -------- -------- ------- -----
Balance December 31,1994 . . . . . . . 10,784,279 $21,569 $ 118 $118,095 $(121,478) ($2,365) $ 64
=========== ======= ======== ======== ======== ======= =====
On October 25, 1989 the Board of Directors adopted a Share Rights Plan and
declared a dividend of one Right for each outstanding share of Common Stock on
November 6, 1989. Such Rights become exercisable, or transferable apart from
the Common Stock, twenty days after a person or group (Acquiring Person) has
acquired beneficial ownership of 20% of the Common Stock or after a person or
group has acquired beneficial ownership of 10% of the Common Stock and, after
reasonable inquiry and investigation, has been declared by the Board of
Directors to be an "Adverse Person." Each Right then may be exercised to acquire
a number of shares of Common Stock equal to one share of Common Stock
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock outstanding on the date that an Acquiring Person or an Adverse
Person was first determined to be such (Stock Acquisition Date) and the
denominator of which is the number of Rights outstanding on the Stock
Acquisition Date that are not owned by the Acquiring Person or Adverse Person.
The price to be paid for each share of Common Stock acquired by exercise of
Rights is 20% of market value on the Stock Acquisition Date. In general, the
Rights may be redeemed by the Company at a price of $.01 at any time until
twenty days following the Stock Acquisition Date The Rights will expire on
November 6, 1999.
ACQUISITIONS
On September 1, 1993 the Company acquired all of the stock of Home Safety
Equipment Co., Inc., d/b/a Discount Labels (DL) for $26,745,000. DL is located
in New Albany, Indiana and is engaged in the manufacture and sale of
custom-printed labels. The acquisition has been recorded under the purchase
method of accounting and the results of operations of DL have been included in
the Company's consolidated financial statements since acquisition. The excess
of the purchase price over the estimated fair market value of the assets
acquired was approximately $17,550,000.
On October 28, 1993 the Company acquired certain assets of International
Envelope Company (IE) for $12,875,000. IE is located principally in Exton,
Pennsylvania and is engaged in the manufacture of envelopes. The acquisition
has been recorded under the purchase method of accounting and the results of
operations of IE have been included in the Company's consolidated financial
statements since acquisition. The excess of the purchase price over the fair
value of the assets acquired was approximately $2,026,000.
Summarized below are the unaudited consolidated results of the Company, DL
and IE on a pro forma basis as though DL and IE had been acquired on January 1,
1992. This summary is presented
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for comparative purposes only and is not necessarily indicative of the results
of operations which actually would have occurred or which may occur in the
future.
Year ended December 31
(In thousands except per share amounts)
1994 1993
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $538,000 $527,000
======== ========
Income before cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,000 $ 19,000
======== ========
Income per share before cumulative effect of changes
in accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.68 $ 1.82
======== ========
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits for
eligible retired employees. Substantially all of the Company's employees may
become eligible for these benefits if they reach normal retirement age while
working for the Company. The health care plan is contributory and is adjusted
periodically based on actual experience while the life insurance plan is
noncontributory. Neither plan is funded.
Prior to 1992 the Company recorded retiree health care and life insurance
expenses in the year the benefits were paid. During 1992, the Company adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," retroactive to January 1, 1992.
This statement requires the accrual of the cost of providing postretirement
benefits for medical and life insurance coverage over the active service
periods of its employees. The Company elected to immediately recognize the
accumulated liability at January 1, 1992 of $19,377,000 for health care and
life insurance benefits and $2,095,000 for other postretirement income
benefits. The cumulative effect of this change in accounting principle was a
reduction in net income of $13,299,000 or $1.24 per share.
As of January 1, 1993 the Company made modifications to the above plans
which reduced its obligations under the above plans by approximately
$13,900,000. Such amount is being amortized over the remaining active service
periods of its employees.
The following table presents a reconciliation of the plan's funded status
at December 31 (000's):
1994 1993 1992
ACCUMULATED POST RETIREMENT BENEFIT OBLIGATION:
Retired employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,447 $ 5,172
Fully eligible active employees . . . . . . . . . . . . . . . . . . . . . . 608 453
Other active employees . . . . . . . . . . . . . . . . . . . . . . . . . . 4,604 4,998
-------- --------
10,659 10,623
-------- --------
Unrecognized prior service cost reduction . . . . . . . . . . . . . . . . . . . . 12,231 13,068
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,671) (2,382)
-------- --------
Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,219 $ 21,309
======== ========
NET PERIODIC BENEFIT COST:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 332 $ 244 $ 1,083
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 791 1,743
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (744) (819)
-------- -------- --------
$ 388 $ 216 $ 2,826
======== ======== ========
The assumed health care cost trend rate for 1995 is 11% decreasing by 1/2%
each year to 1998 and thereafter decreasing annually by 1% to a rate of 6.5% in
2001 and beyond. The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 8.5% at December 31, 1994, 7.5% at
December 31, 1993 and 9% at December 31, 1992.
If the health care cost trend rate were increased by one percent for all
future years, the impact on the accumulated postretirement benefit obligation
as of December 31, 1994 and the aggregate of service and interest costs for
1994 would have been insignificant.
POSTEMPLOYMENT BENEFITS
The Company provides postemployment benefits to certain former and
inactive employees. Prior to 1994 postemployment benefit expenses were expensed
when paid. As of the beginning of 1994, the Company adopted SFAS No. 112,
"Employer's Accounting for Postemployment Benefits" and recorded a cumulative
net adjustment of $605,000 which has been recorded as a change in accounting
principle. The incremental costs of adopting this statement were insignificant
in the current year
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BUSINESS SEGMENT INFORMATION (000's)
DEPRECIATION & CAPITAL IDENTIFIABLE OPERATING
SALES AMORTIZATION EXPENDITURES ASSETS PROFIT
YEAR ENDED DECEMBER 31,1994
Business supplies printing . . . . . . $429,342 $11,204 $ 7,242 $191,635 $32,290
Book manufacturing . . . . . . . . . . 49,464 1,860 2,187 25,539 5,653
Extrusion coating & laminating . . . . 84,327 2,760 1,376 46,609 8,778
Corporate . . . . . . . . . . . . . . . 1,567 2,879 48,318 (5,993)
-------- ------- ------- -------- -------
$563,133 $17,391 $13,684 $312,101 $40,728
======== ======= ======= ======== =======
YEAR ENDED DECEMBER 31,1993
Business supplies printing . . . . . . $357,910 $8,928 $9,849 $184,736 $21,856
Book manufacturing . . . . . . . . . . 44,031 1,803 1,493 19,607 5,935
Extrusion coating & laminating . . . . 84,198 2,628 3,171 45,354 10,003
Corporate . . . . . . . . . . . . . . . 1,302 1,468 52,495 (5,664)
-------- ------- ------- -------- -------
$486,139 $14,661 $15,981 $302,192 $32,130
======== ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1992
Business supplies printing . . . . . . $341,141 $7,838 $7,718 $133,578 $17,937
Book manufacturing . . . . . . . . . . 43,393 1,723 1,320 18,763 6,576
Extrusion coating & laminating . . . . 78,936 2,181 6,691 44,440 11,440
Corporate . . . . . . . . . . . . . . . 1,155 1,548 40,457 (4,743)
-------- ------- ------- -------- -------
$463,470 $12,897 $17,277 $237,238 $31,210
======== ======= ======= ======== =======
The Company's three operating business segments are: business supplies
printing, consisting principally of business forms and envelope products, the
manufacture of books and the extrusion of polyethylene onto lightweight papers
and non-wovens.
Operating profit for each segment is sales less operating expenses. In
computing operating profit for each segment, the following items have not been
added or deducted: general corporate expenses, interest expense, income from
investments and income taxes.
Identifiable assets are those assets used in each segment's operation.
Corporate assets consist of cash and cash equivalents and other noncurrent
assets not used in the operation of a segment.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Business Products Inc:
We have audited the accompanying consolidated balance sheets of American
Business Products, Inc. and subsidiaries as of December 31, 1994 and 1993 and
the related consolidated statements of income and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of American Business Products,
Inc. and subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in the Notes to the consolidated financial statements, in
1994 the company changed its method of accounting for postemployment benefits
and in 1992 the company changed its methods of accounting for postretirement
benefits other than pensions and for income taxes.
DELOITTE & TOUCHE LLP
Atlanta Georgia
February 24, 1995
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LINES OF BUSINESS
American Business Products, Inc. manufactures and markets envelope
products, business forms, labels, and other supplies for business and industry;
manufactures and distributes hardcover and softcover books for the publishing
industry; and produces and markets extrusion coating and laminating of papers,
films, and nonwoven fabrics for use in medical, industrial, and consumer
packaging.
RESULTS OF OPERATIONS
The Company's 1994 sales were a record $563,133,000, increasing
$76,994,000, or 16% over 1993. The major portion of the sales increase resulted
from acquisitions made in 1993 which expanded and strengthened the Company's
largest business segment, business supplies printing.
Business supplies segment sales increased 20% for the year. Unit
growth in business supplies was moderate as the segment experienced inflation
in raw material costs, which were largely passed on to our customers.
Management believes the Company should continue to increase sales and improve
its profit margins in 1995 due to the following factors: (1) it appears the
Company will have the ability to increase prices to more than cover higher raw
material costs as the result of limited supply and high demand; (2) the Company
has the ability to enter new markets and offer new products; and (3) the
Company's long-standing relationships as a good customer of suppliers of raw
materials are expected to assure adequate and uninterrupted supplies of raw
materials.
The book manufacturing segment increased sales 12.4% with substantial
growth of units, but a combination of higher raw material costs, price
competition and start-up costs of a new production line resulted in essentially
flat net profits for this operation. In 1994 the operation added capacity,
broadened its product line and increased customer order fulfillment
capabilities. As a result, the book manufacturing business is expected to
increase its share of the market and to improve prices and profit margins in
1995.
The extrusion coating segment increased sales .2% and showed moderate
unit growth but margins were held down due to rising costs of raw materials,
price competition and change in product mix. While selling price pressures are
expected to continue, this business should be able to increase prices to
customers and improve profit margins in 1995.
In 1993 sales were a record $486,139,000, up 4.9% over 1992, led by
the extrusion coating segment which advanced 6.7% to a record. The business
supplies printing segment gained 4.9%, and the book manufacturing segment
increased 1.4% to a sales record. Core business lines felt the effects of a
slow-growth economy, strong price competition and overcapacity in the forms
industry. Unit sales of business supplies increased modestly as did book
manufacturing unit sales, while extrusion coating and laminating achieved
strong unit growth.
In 1992 ABP sales were a record $463,470,000, up 3.8% over 1991, as
extrusion coating and laminating registered strong growth of 26.1% in sales,
with book manufacturing gaining 4.2% in sales. The business supplies segment
sales increased only .1% due to the same combination of factors influencing
1993 results.
In 1994 the Company derived 76.2% of sales from envelope products,
business forms, labels, and related business supplies printing operations; 8.8%
from book manufacturing and order fulfillment operations; and 15% from
extrusion coating and laminating operations. Sales by business segments in 1993
were: 73.6% from business supplies products; 9.1% from book manufacturing and
order fulfillment operations; and 17.3% from extrusion coating and laminating.
In 1992 the same segments had sales, respectively, of 73.6%, 9.4%, and 17.0%.
The Company's gross profit margin (the difference between net sales
and cost of products sold, expressed as a percentage of net sales) was 29.9% in
1994 compared to 30.1% in 1993 and 30.4% in 1992.
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Selling, general and administrative expenses (as a percentage of net sales)
were 22.7% in 1994 compared to 23.5% in 1993 and 23.7% in 1992. The decrease
for 1994 resulted primarily from a reduction of 3.9% in employees and was in
large measure consequent to the consolidation of some facilities of the major
operating companies.
The Company's income tax rate increased significantly It was 40.8%
compared to 37.4% in 1993 and was principally due to the non-deductibility of
goodwill associated with the 1993 acquisitions; also a factor was a non-taxable
loss from the European joint venture which was affected by escalating raw
material costs, selling price pressures, and the costs of moving into new
facilities. With these expenses behind it, the joint venture operation is
expected to gain efficiencies through consolidation and new capacity, aided by
economic improvement. The 1993 tax rate increased from 35.8% in 1992
principally as the result of changes in Federal income tax law.
The effect of inflation on sales and operating income in 1994, as
already indicated, was increased raw material costs which negatively affected
profit margins for much of the year. By comparison, inflation was minimal in
1993 and 1992 as the result of the slow economy and generally stable costs.
In 1992 the Company adopted the Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Implementation was required by 1993, and the Company elected earlier
adoption of the standard. This required the Company to record retroactively to
the first quarter of 1992 a one-time, after-tax charge to net income of
approximately $13,299,000. The charge did not affect cash flow and was
accounted for as a change in accounting method. Expenses for 1992, net of the
income tax benefit, increased by approximately $1,360,000 as a result of
adopting this standard. In early 1993 the Company implemented measures to
reduce future costs.
The Company also elected early adoption of Statement of Financial
Accounting Standards No. 109, which provides for changes in the method of
determining deferred income taxes. Adoption of the standard resulted in an
increase in net income of $850,000 and was accounted for as a change in
accounting method.
Net income for 1992 included a gain of $2.9 million or $.27 per share
from the sale of land at the Company's headquarters location. This sale
resulted from the renegotiation of the Company's space lease which was
contingent on the sale of the property.
In November, 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Post-employment Benefits," which was implemented in the first quarter of 1994.
The adoption of this standard resulted in a decrease in net income of $605,000
or $.06 per share of Common Stock.
FINANCIAL POSITION
The Company's total cash and cash equivalents at December 31, 1994,
amounted to $25,997,000, a decrease of $4,154,000 over a year earlier. The
primary sources of cash were funds provided by operating activities
($28,749,000) and the principal uses of cash were investing activities
($13,418,000) and financing activities ($19,485,000) which included $10,453,000
for reduction of long term debt.
At December 31, 1993, cash and cash equivalents amounted to
$30,151,000, an increase of $126,000 over a year earlier. The primary sources
of cash were funds provided by operating activities ($20,179,000) and financing
activities ($41,915,000), and the primary use of cash was for investing
activities ($61,968,000).
At December 31, 1992, cash and cash equivalents amounted to
$30,025,000, an increase of $4,769,000 over a year earlier. The primary source
of cash was funds provided by operating activities ($27,486,000), and the
primary uses of cash were for investing activities ($13,355,000) and financing
activities ($9,362,000).
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The principal components of cash provided by operating activities in
1994 were net income ($18,923,000) and depreciation and amortization
($17,391,000). In 1993 the principal sources of cash from operating activities
were net income ($16,683,000) and depreciation and amortization ($14,661,000).
In 1992 the principal sources of cash from operating activities were net income
before accounting changes ($19,582,000) and depreciation and amortization
($12,897,000).
The principal investing activity in 1994 was capital expenditures for
upgrading and improving equipment and plants, including major expansions of the
label company plant and a book manufacturing facility. The principal investing
activity in 1993 was the acquisition of Discount Labels, Inc. and International
Envelope Company, and in addition, capital expenditures for upgrading and
improving equipment and plants. The principal investing activity in 1992 was
capital expenditures for upgrading and improving plants and equipment.
The Company's ratio of long term debt to total capitalization was
35.3% at December 31, 1994, compared with ratios of 40.2% at December 31, 1993,
and 25.1% at December 31, 1992. The Company believes its internal cash flows
should be sufficient to generate cash for normal operations.
Under the Company's plan to repurchase up to 1,125,000 shares of its
Common Stock in varying amounts over an indefinite period, the Company acquired
30,100 shares at prevailing market prices with a total cost of $628,247 in
1994. The Company acquired 13,400 shares at the prevailing market prices
totaling approximately $339,000 in 1993, and 18,400 shares at the prevailing
market prices totaling approximately $497,000 in 1992.
ENVIRONMENTAL PROTECTION POLICY
American Business Products, Inc. is committed to the protection and
preservation of the environment and our natural resources within the Company's
overall commitment to corporate responsibility and good citizenship. ABP seeks
not only to comply with all applicable laws and regulations but also to monitor
the effects of products and their manufacture upon the environment and to
increase awareness and concern for protecting and preserving the environment
and the world's natural resources. The Company knows of no significant
environmental liabilities involving its operations. The Company's accounting
policy relating to the environment is set forth in the Summary of Significant
Accounting Policies contained in Notes to Consolidated Financial Statements.
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optional cash investment your check should be made
STOCK EXCHANGE LISTING payable and mailed to Wachovia Bank of North
American Business Products, Inc.'s Common Stock is Carolina, N.A., P.O. Box 3001, Winston-Salem, NC
listed on the New York Stock Exchange. Ticker 27102-3001 and must be accompanied by a Stock
Symbol: ABP. Purchase Form. Funds are invested on a monthly
basis on or about the 15th.
ANNUAL MEETING A booklet describing the Plan and
The Annual Meeting of Shareholders will be held enrollment procedures is available upon request
April 26, 1995 at 11:00 a m. at the Cobb Galleria from Wachovia Bank of North Carolina, N.A. at the
Centre, Two Galleria Parkway, Atlanta, Georgia address above.
30339.
DIVIDENDS
FORM 10-K ANNUAL REPORT Cash dividends on ABP Common Stock have been paid
The Form 10-K filed with the Securities and without interruption for 57 years and have been
Exchange Commission is available to shareholders increased for the last 37 years through 1994.
and may be obtained without change upon written Since ABP's initial public offering in 1969,
request to the Secretary of the Company. dividends per share have been increased by more
than 50 times. Dividends are generally declared
SHAREHOLDERS OF RECORD on a quarterly basis, with recordholders of date
On March 1, 1995 there were approximately 2,200 entitled to receive the cash dividend on the
shareholders of record of the Company's Common payable date. Anticipated record and payable
Stock. dates for the year 1995 are listed below:
AUDITORS Record Date Payable Date
Deloitte & Touche LLP March 1, 1995 March 15, 1995
Atlanta June 1, 1995 June 15, 1995
September 1, 1995 September 15, 1995
GENERAL COUNSEL December 1, 1995 December 15, 1995
Long, Aldridge & Norman
Atlanta LOST OR STOLEN CERTIFICATES
If you should lose a stock certificate,
TRANSFER AGENT & REGISTRAR notification should be sent immediately to
Wachovia Bank of North Carolina, N.A. Wachovia Bank of North Carolina, N.A., our
Winston-Salem transfer agent. This notification should contain
1 800 633-4236 Shareholder Services the exact name in which the certificate was
registered, and if you have it, the certificate
EQUAL OPPORTUNITY EMPLOYER number and date of the certificate. You will also
American Business Products, Inc. and its be asked to pay the cost of an indemnity bond
subsidiaries are equal opportunity employers. based on the current market value of the lost or
stolen stock. Even though a certificate is lost
NAIC LOW COST INVESTMENT PLAN or stolen, you will continue to receive your
dividends.
[LOGO]
STOCK TRANSFERS AND CHANGES
ABP is a Corporate Member The transfer of stock is required when the shares
of the National Association of Investors are sold or when there is any change in name or
Corporation and a participant in the NAIC Low Cost ownership of the stock.
Investment program. For information contact the A transfer of stock can be initiated by
NAIC, 313 543-0612. completing the assignment form on the back of the
stock certificate and forwarding the certificate
DIVIDEND REINVESTMENT/STOCK PURCHASE PLAN to the transfer agent. To be accepted for
Registered shareholders of at least one share of transfer, signatures(s) must be guaranteed by a
ABP Common Stock may participate in the financial institution or brokerage firm, having
Company's Dividend Reinvestment/Stock Purchase membership in good standing, in a recognized
Plan to acquire additional shares. The Company guarantee program (Securities Transfer Agent
pays commission charges on purchases. Medallion Program, New York Stock Exchange
Please remember that even though your dividends Medallion Signature Program or Stock Exchanges
are automatically reinvested, they continue to be Medallion Program) before being submitted to the
taxable to you for income tax purposes as having transfer agent. Certificates submitted for
been received on the dividend payment date. transfer should be sent registered mail and a
Under the Dividend Reinvestment/Stock Purchase return receipt requested. Pertinent names,
Plan, you have the option of investing any amount addresses and social security or tax
from $10 to $1,000 per month. When making an identification numbers should be included in a
letter of instruction.
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