1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
Commission file number 0-18797
CHEMI-TROL CHEMICAL CO.
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(Exact name of registrant as specified in its charter)
Ohio 34-4439286
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2776 C.R. 69 Gibsonburg, Ohio 43431
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419)665-2367
-------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities pursuant to Section 12(g) of the Act:
Common stock, without par value
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Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
----- -----
The aggregate market value (based upon the closing price) of the voting
stock held by non-affiliates of the registrant as of Febuary 28, 1997:
Common Stock, without par value - $13,111,482
The number of shares outstanding of the issuer's classes of common stock as of
March 1, 1997:
Common Stock, Without Par Value - 2,004,930 shares
DOCUMENTS INCORPORATED BY REFERENCE: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ].
The Exhibit Index is located at page 50 of this filing. This document
contains 120 pages.
2
PART I
ITEM 1. BUSINESS
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(a) General Development of Business
-------------------------------
Chemi-Trol Chemical Co. ("the Company") was incorporated under the laws
of the State of Ohio in 1952.
(b) Financial Information About Industry Segments
---------------------------------------------
The sales and operating profit of each industry segment and the
identifiable assets attributable to each industry segment for the three years
ended December 31, 1996 are set forth in Note 11 (Information pertaining to
industry segments) of the Notes to Financial Statements, which note is
incorporated herein by reference.
(c) Narrative Description of Business
---------------------------------
Present Organization
- - --------------------
The Company is organized on an operational basis into four divisions:
Tank Division, located in Fremont, Ohio; Cal-Van Tools Division, located in
Fremont, Ohio; Chemical Group, located in Gibsonburg, Ohio; and Cory Orchard &
Turf Division, located in Indianapolis, Indiana and Louisville, Kentucky. Each
division is headed by a General Manager who reports directly to the Company's
executive officers in Gibsonburg, Ohio. In addition the Company has a Leasing
and Finance Division for the purpose of offering to its qualified customers two
alternate methods of financing the purchase of its products. In 1996, consistent
with the Company's prior practice, income and expense of the Leasing and Finance
Division are recorded either in the Tank Division or in unallocated corporate
income and expense. However in 1996, no interest expense has been recorded in
the Tank Division and all interest expense is recorded as corporate expense. All
prior year amounts have been reclassified to conform to the presentation used in
1996.
The Company announced on December 6, 1996 it had retained McDonald &
Company to advise it in connection with the possible sale of two of its non-core
businesses, the Cal-Van Tools and the Cory Orchard & Turf Divisions. After a
strategic review of the Company's business segments Chemi-Trol's Board of
Directors determined that to maximize future growth and profitability it should
concentrate on its Chemical and Tank Segments, which offer the best opportunity
for sustained earnings growth for the Company.
TANK DIVISION
Products
- - --------
Through its Tank Division, the Company manufactures steel pressure
tanks for above ground and underground storage of liquified petroleum gas
("LPG") and anhydrous ammonia ("NH3") at its plant located in Fremont, Ohio. The
steel tanks are manufactured in sizes ranging from 124 gallon water capacity to
1990 gallon water capacity for LPG tanks and from 124 gallon water capacity to
2050 gallon water capacity for NH3 tanks. Approximately 95% of the tanks
manufactured by the Company are for the storage of LPG. The Tank Division
accounted for 48%, 49%, and 50% of the Company's total revenues for 1996, 1995
and 1994, respectively.
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Marketing and Distribution
- - --------------------------
Sales of the Company's tanks are made directly by the Company
to either regional independent dealers or major multi-state marketers within a
marketing radius of approximately 1,000 miles from Fremont, Ohio. The 20 largest
industrial customers of the Company accounted for approximately one third of the
net sales of this division for its fiscal year ended December 31, 1996.
The Company stimulates sales through the efforts of its own sales
personnel, personal telephone calls to existing and potential customers, direct
mail advertising, publication and distribution of catalogues, advertisements in
trade journals and attendance at various trade shows. Sales of the Company's
tanks to major multi-state marketers are made by the Tank Division's sales
manager from its principal office located in Fremont, Ohio. Sales to independent
dealers are made through Company salesmen and independent sales representative
organizations. Each of the independent sales organizations is assigned an
exclusive territory and are compensated by commissions based upon sales in their
respective territory under agreements terminated with notice by either party.
The Company transports its steel tanks to its customers by means of its
own truck fleet.
Financing of Customer Accounts
- - ------------------------------
Sales of this division's products are normally made on a net basis. The
Company does, however, offer to its qualified customers two alternate methods of
financing the purchase of its steel tanks, which are explained under "Leasing
and Finance Division," on page 9.
Raw Materials and Supplies
- - --------------------------
Steel plate is the major raw material used by the Company in the
manufacture of steel pressure tanks. The Company purchases steel plate from a
variety of domestic and foreign sources. Although the Company believes that it
will be able to obtain its steel plate requirements from multiple sources on a
competitive basis, the inability of the Company to obtain a satisfactory supply
of steel plate could have a materially adverse effect on its tank manufacturing
operations.
Backlog
- - -------
The dollar amounts of backlog of the Tank Division believed to be firm
as of March 1, 1997, and 1996 were $4,514,000 and $4,010,000, respectively. All
of the 1997 backlog is expected to be filled during 1997.
-3-
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Competition
- - -----------
The markets for the Company's steel tanks are highly competitive and
the Company competes with other companies having a higher total sales volume and
greater financial resources than the Company. The competition in these markets
is based primarily on service and price. Two of the Company's largest
competitors are Trinity Industries, Inc. of Dallas, Texas and American Welding
and Tank Co. of Harrisburg, Pennsylvania.
Regulations
- - -----------
The manufacture of steel pressure tanks by the Company is subject to
close regulation. The American Society of Mechanical Engineers ("ASME")
prescribes minimum standards and specifications relating to (i) the size and
chemical properties of steel plate, (ii) the manufacturing process (including
welding procedures and testing) and (iii) the pressure capacity of steel tanks
and valves. These standards are enforced by the National Board of Boiler and
Pressure Vessels Inspectors, which commissions inspectors who perform
independent inspection through insurance companies. These inspectors inspect all
phases of the manufacturing process as well as the finished product. Steel tanks
manufactured by the Company must be certified by these inspectors to be in
compliance with the regulations prescribed by the ASME, and all propane vessels
are registered with the National Board of Boiler and Pressure Vessels Inspectors
prior to their sales to the customers of the Company. Although the manufacture
of steel pressure tanks is subject to close regulation, the Company may be held
liable, by warranty or otherwise, for damages resulting from tank failure,
including damages to the environment.
CAL-VAN TOOLS DIVISION
Products
- - --------
The Company, through its Cal-Van Tools Division, located in Fremont,
Ohio, is engaged in the manufacture and sale of specialty automotive hand tools
used primarily in repairing and servicing cars and trucks. Cal-Van presently
manufactures approximately 35% of its total annual sales volume and
approximately 65% thereof is purchased from other domestic tool manufacturers on
an open-account basis and resold under the Cal-Van trade name, co-logoed or
private labeled. Tools presently manufactured or sold by this division include
wrenches, pliers, drivers, testers, gauges, engine service tools and other
specialty automotive hand tools.
In addition to the manufacture and sale of specialty automotive hand
tools, Cal-Van also manufactures and sells bronze and aluminum grave markers.
The Cal-Van Tools Division accounted for 25%, 22%, and 21% of the Company's
revenues for 1996, 1995, and 1994, respectively.
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Marketing and Distribution
- - --------------------------
Sales of specialty automotive hand tools are made by the Company
throughout the United States, Canada and many other foreign countries directly
to (i) warehouse distributors, (ii) automotive retail chains, and (iii) other
tool manufacturers. The Division's two largest customers accounted for
approximately 37% and 14% of net sales, respectively. No other single customer
accounts for more than 10% of the annual net sales of this division.
The Company generates sales through the publication and distribution of
catalogues, the sale and distribution of tool rental and display boards, and the
efforts of its sales personnel. In addition, this division's products are sold
by independent sales representatives.
The Company transports the products manufactured by this division by
the use of common carriers and package delivery services.
Raw Materials and Supplies
- - --------------------------
The principal raw materials used by the Company in the manufacture of
specialty automotive hand tools are steel, aluminum, brass, bronze and plastic.
The Company purchases its requirements of these materials from a variety of
sources and it is not dependent upon any single supplier. The Company does not
believe that the loss of any one supplier would have an adverse effect upon the
Company.
The Company's products in this division which are manufactured by other
companies and resold by the Company are purchased from many independent
manufacturers. The Company believes that such suppliers will be able to meet the
needs of this division for the foreseeable future.
Trademark
- - ---------
This division markets a large portion of its products under the
federally registered Cal-Van Tools trademark.
Backlog
- - -------
The dollar amounts of backlog of the Cal-Van Tools Division believed to
be firm as of March 1, 1997 and 1996 were approximately $356,000 and $247,000,
respectively. All of the 1997 backlog is expected to be filled during 1997.
There is no significant seasonal aspect to the business of this division.
Competition
- - -----------
The market for Cal-Van's products is highly competitive and the Company
competes on the basis of service, quality and price. There are five major
manufacturers competing in the specialty automotive hand tool market, together
with approximately ten manufacturers of general hand tools who manufacture
and/or supply certain specialty tools as an adjunct to their regular tool line.
Based upon total annual sales volume, the Comany believes that Cal-Van ranks
third among manufacturers of specialty automotive hand tools located in the
United States, having approximately one-third of the total sales volume of the
largest manufacturer.
-5-
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An additional competitive element in the specialty tool market is the
increased interest in this market of mass merchandising chains.
CHEMICAL GROUP
Products and Services
- - ---------------------
The Chemical Group's operations are divided into two divisions: the
Contracting Division and CADCO, the material distribution division.
The Contracting Division is comprised of the pavement marking and the
vegetation management departments. The pavement marking department provides
under contract various forms of pavement marking. These services include fast
dry alkyd, fast dry water-borne, and polyester paint striping, the installation
of preformed plastic and the measurement, determination and marking of
"no-passing" zones on highways. The vegetation management department applies
under contract various types of vegetation control materials including
selective herbicides for weed, brush and grass control, as well as nonselective
herbicides for total vegetation control.
The CADCO division sells herbicides, adjuvants, plant growth
regulators, sprayers, pavement marking products and other related equipment and
products.
The Chemical Group accounted for 19%, 20% and 21% of the Company's
revenues for 1996, 1995 and 1994, respectively.
Marketing and Distribution
- - --------------------------
Sales of the products and services offered by the Chemical Group are
made throughout 21 states in the midwestern, eastern and southern parts of the
United States. Approximately 95% of the total net sales of the Chemical Group
are to various state, county, municipal and township highway departments and
drainage commissions and toll road authorities. The balance of the net sales of
this division are derived primarily from public utilities, pipeline companies,
railroads, general contractors and other industrial, commercial and
noncommercial users. During the past three years, approximately 90% of the net
sales of this division were derived from contracts entered into with various
governmental authorities located in the states of Ohio, West Virginia, Michigan,
Indiana, New York, Kentucky and Tennessee.
The work performed by the Chemical Group is seasonal inasmuch as warm
dry weather is needed to apply pavement marking and vegetation control
materials. The season in the Company's general area of operations is from April
1 through November 30. This season is extended on occasions when the Company is
able to obtain contracts in Southern states where the more favorable weather
conditions allow work to be performed December through March.
-6-
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The Chemical Group's highway operations with various governmental
authorities are generally conducted under fixed price contracts awarded by the
governmental authorities for a fixed period of time ranging from a few months to
two years. These contracts generally require the Company to comply with
standards and specifications relating to (i) the type and amount of chemicals,
paints and polyesters used by the Company, (ii) the type, size and number of
applicating units used by the Company, (iii) the training, work experience and
licensing of the personnel used by the Company and (iv) the method of
application of chemicals, paints, polyesters and plastics used by the Company.
The Company owns the equipment it uses in its operation of the Chemical
Group.
Supplies
- - --------
The principal supplies used by the pavement marking department are
paint, polyester, glass beads, and preformed plastic materials. The Company
obtains these materials from a wide range of suppliers. Herbicides used in
vegetation management and CADCO material sales are obtained from a wide range of
suppliers. The Company does not believe that the loss of any one source of
supply would have a material effect on its business.
Backlog
- - -------
The dollar amounts of backlog of the Chemical Group believed to be firm
as of March 1, 1997 and 1996 were approximately $2,909,000 and $3,494,000,
respectively. Dollar amounts of backlog can vary significantly based upon the
timing of bid lettings and the division's success in obtaining contracts and are
not necessarily indicative of the results for the year. All of the contracts
comprising the 1997 backlog are expected to be completed during 1997.
Competition
- - -----------
The business done by the Chemical Group is highly competitive. Most
contracts are awarded on the basis of price, reputation, experience and ability
to perform. The number of competitors is greatly reduced as the size of the job
and the complexity of tasks to be performed are increased. Generally, the
competitors of the Company are local companies operating in a particular
geographical area. Although reliable statistics are not available, the Company
believes that based on annual net sales of the Chemical Group, it is one of the
larger contractors in the states in which it operates in the application of
highway vegetation control materials and of highway pavement marking and
striping materials.
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Since the Company obtains all of its public contracts through
competitive bidding, there can be no assurance that the Company will retain all
of its present contracts after their respective dates of expiration nor is there
any assurance that the Company's record of obtaining additional contracts will
continue. Although the Company believes that its relationship with its customers
is good, loss of existing contracts due to expiration or cancellation could have
a materially adverse effect on the Company's net sales and net income.
Regulations
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Much of the Chemical Group's business is oriented to highway safety
considerations. Regulations applicable to the various public authorities with
whom the Company contracts affect the demand and specifications for highway
striping and vegetation control performed by the Company.
CORY ORCHARD & TURF DIVISION
Products
- - --------
The Cory Orchard & Turf Division, located in Indianapolis, Indiana, and
Louisville, Kentucky, is engaged in the wholesale and retail sale and
distribution of a broad range of agricultural chemicals and equipment including
insecticides, fungicides, herbicides, rodenticides, fertilizers, growth
regulators, power and hand sprayers, mowing and aerification equipment, washing
and grading equipment, hydraulic tools, air tools and safety equipment. The Cory
Orchard & Turf Division accounted for 8%, 9% and 9% of the Company's revenues
for 1996, 1995 and 1994, respectively.
Marketing and Distribution
- - --------------------------
Sales of the Company's products carried by this division are primarily
made directly to farmers, orchardists, landscapers, golf courses, lawn care
companies and pesticide operators in a marketing area which includes the states
of Indiana, Kentucky, Michigan, Ohio and Illinois. The Company does not have any
single customer which accounts for more than 10% of the net sales of this
division. Since a majority of the sales of this division's products are directly
related to agricultural production, approximately 80% of its net sales occurs in
the early Spring, late Summer and early Fall.
The Company's retail sales are made directly from its warehouse and
sales office in Indianapolis, Indiana and Louisville, Kentucky. Sales to the
Company's wholesale customers are made through Company sales staff.
The Company transports the products sold by this division by means of
its own truck fleet.
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Supplies
- - --------
The products sold by this division are available from many suppliers.
The Company does not believe that the loss of any one source of supply would
have a material effect on the business.
Backlog
- - -------
The dollar amounts of backlog of the Cory Orchard & Turf Division
believed to be firm as of March 3, 1997 and 1996, were approximately $103,000
and $141,000, respectively. The timing of orders and backlog can vary from year
to year due to weather conditions, etc. and is not necessarily indicative of the
sales results for the period. All of the 1997 backlog is expected to be filled
during 1997.
Competition
- - -----------
The markets for the products sold by this division are highly
competitive and the Company competes with many companies having a higher total
sales volume and greater financial resources than the Company. This division
competes with a wide variety of other suppliers on the basis of service and
price. Competition is particularly intense with respect to large quantity orders
placed by customers early in the growing season. To combat the intense
competition, the Cory sales staff spends the winter months working with
individual customers toward improving their next season's chemical programs as
well as conducting seminars in various product categories.
LEASING AND FINANCE DIVISION
- - ----------------------------
Through the Company's Leasing and Finance Division, its qualified
customers are offered two alternate methods of financing the purchase of the
Company's steel tanks (the "Tank Finance Plan" and the "Tank Lease Plan").
Under the Tank Finance Plan, the Company finances 90% of the sales
price over a 24 to 48 month period at an effective annual interest rate which
during 1996 was approximately 10.25% to 11.0%. The Company retains a security
interest in the tanks as additional security for the payment of the financed
amount. The installment paper evidencing the customer's obligation is either
held by the Company as an investment, sold with recourse for the principal
amount thereof to the Company's profit sharing plan or pledged as collateral for
borrowings over a like period. In 1996, the Company borrowed $3,275,000 under
the latter arrangement and sold with recourse $2,001,692 to the Company's profit
sharing plan. For the fiscal year ended December 31, 1996, approximately 15% of
the total net sales of the Tank Division were sold to customers under the Tank
Finance Plan.
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Under the Tank Lease Plan, leases of liquid propane gas tanks to
customers for noncancellable terms of five or ten years are recorded as sales
at inception. The present value of the minimum payments is included in net
sales and the cost of the tanks is charged to cost of sales. Estimated residual
values of the leased tanks are not significant. During the fiscal year ended
December 31, 1996, the Leasing and Finance Division invested in approximately
$279,234 in customer sales type leases of which it pledged $104,808 as
collateral for borrowings. Approximately 1% of the total net sales of the Tank
Division for the fiscal year ended December 31, 1996 were made under the Tank
Lease Plan.
In 1996, consistent with the Company's prior practice, income and
expense of the Leasing and Finance Division are recorded in the Tank Division
and in unallocated corporate income and expense.
PATENTS, LICENSES, FRANCHISES AND CONCESSIONS
The Company has a design patent on Cal-Van's #825 spark plug ramp gauge
which was issued in 1992 for a period of 14 years. The Company does not own any
other patents nor is it licensed under any patent licenses. It does not hold any
franchises or concessions from any governmental body.
EMPLOYEES
The following table sets forth information with respect to the
Company's 447 employees:
Division Permanent Seasonal
-------- --------- --------
Corporate Staff ---------------------------------- 22 0
Tank Division ------------------------------------ 153 0
Cal-Van Tools Division --------------------------- 90 9
Chemical Group ----------------------------------- 47 112
Cory Orchard & Turf Division --------------------- 14 0
------------------------
Total ---------------------- 326 121
=== ===
Employees at the Company's Tank Division Plant in Fremont, Ohio are
subject to a collective bargaining agreement between the Company and the United
Steelworkers of America, AFL-CIO-CLC, Local 1915. The current agreement will
expire April 30, 1999.
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Seasonal employees in the Company's Chemical Group are subject to a
collective bargaining agreement between the Company and Laborers International
Union Local 480, which will expire March 1, 1998.
The Company believes that its relations with its Union and other
employees is good, and does not anticipate problems in negotiating new
collective bargaining agreements.
ENERGY AND ENVIRONMENT
The Company consumes electricity, propane gas, natural gas and
various fuels in manufacturing, in selling its products and services and in
lighting and heating the facilities it operates. Although the Company has never
experienced any significant interruptions of its operations due to shortages of
energy, there can be no assurance that a serious curtailment of the availability
of such fuels or acceptable substitutes would not adversely affect the Company's
operations.
Federal, state and local authorities are considering various
legislation and regulations related to environmental and energy matters. The
Company is not aware of any presently existing legislation relating to such
matters which has or will have a materially adverse effect upon the Company's
operations or which will require material capital expenditures in the next two
years; however, the Company cannot predict the effect of future legislation or
regulations.
ITEM 2. PROPERTIES
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The following table lists the materially important physical properties
used in its operations together with certain information regarding such
properties:
Description Land Building
and Location (1) (acres) (sq. ft.) Use
- - ---------------- ------- --------- ---
Land and buildings 80 30,400 Administrative offices
2776 & 2780 CR 69 of the Company;
Gibsonburg, Ohio 43431 Chemical Group
offices; maintenance
and storage for
spraying, striping and
traffic survey
equipment (2)
Land and buildings 6.28 45,000 Former Tank Division
2098 W. State Street facility; currently
Fremont, Ohio 43420 being held for lease
or sale
Land and buildings 10.76 91,050 Cal-Van Tools Division
1500 Walter Avenue offices; manufacture
Fremont, Ohio 43420 and resale of automotive
specialty tools (3)
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Land and buildings 4.85 28,840 Cory Orchard & Turf
6739 Guion Road Division offices;
Indianapolis, Indiana 46268 warehouse space for
spraying equipment and
supplies; repair
center for sprayers;
retail and wholesale
sale of chemicals,
equipment and
supplies. (2)
Leased warehouse N/A 6,660 Cory Orchard & Turf
13000 Middleton Industrial Blvd. Branch office; ware-
Louisville, Kentucky 40223 house space for
spraying equipment and
supplies; retail and
wholesale sale of
chemicals, equipment
and supplies. One
year lease expires
February of 1998.(2)
Land and building 16.10 68,800 Tank Division offices;
721 Graham Drive manufacture of propane
Fremont, Ohio 43420 and anhydrous ammonia
tanks. Operations
commenced during the
second quarter of
1993 (See note 5 to
the financial state-
ments for mortgage
information)(2)
<FN>
(1) The Company believes that its properties are adequately maintained, are
in good condition and are suitable and adequate for its business as
presently conducted.
(2) The Company believes these facilities are being used to approximately
75 to 100 percent of their capacity.
(3) The Company believes that this facility is being used to approximately
50% of capacity based upon 24 hour utilization.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company, along with fourteen other parties, has been designated in a
letter dated July 13, 1995, as a potentially responsible party by the United
States Environmental Protection Agency (the "EPA") at the County Line Landfill,
Fremont, Ohio under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended. The EPA is requesting that the
potentially responsible parties initiate an Engineering Evaluation and Cost
Analysis (EECA) to evaluate what future response activities may be necessary at
the site, which was licensed and operated as a landfill from 1969 to 1984. The
potentially responsible parties have commenced participation in an engineering
evaluation at the site. There is no volumetric ranking of the parties available.
Although the EPA takes a position that any potentially responsible party is
liable jointly and severally for response costs, the Company is only one of many
parties believed to have used the site. There is also no information as to the
extent and nature of any necessary future response action to the site. During
the period in question the Company maintained various insurance policies and
management is exploring the availability of coverage of claims which may arise.
Because of the preliminary state of this matter and lack of information, it is
not possible to estimate the financial impact or range of probable financial
impact on the Company. During the year ended December 31, 1995, the Company
expensed $9,132, its portion of the expenses of the current engineering
evaluation.
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Since 1995 the Company has not reflected any amount or accrued expenses to
cover any future cost of additional evaluation or remediation relating to the
site. While the ultimate outcome of this matter cannot now be predicted, the
Company believes, based on the facts now known to it, that costs arising out of
this matter will not have a material adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the Company's shareholders
during the last quarter of the period covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
----------------------------------------------------------------
MATTERS
-------
(a) Market Information.
-------------------
The Company's common stock trades on the NASDAQ Small Cap Market under
the symbol CTRL. The Company believes the range of high and low sales prices for
1996 and 1995 is as follows:
1996
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
$12.0625-$10.50 $11.625-$9.375 $11.75-$9.25 $13.125-$10.00
1995
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
$10.45-$9.50 $11.00-$9.125 $11.50-$10.25 $12.00-$11.00
Prices have been adjusted to reflect the 10% stock dividends of March 1995.
(b) Numbers of Holders of Common Stock
----------------------------------
There were 359 shareholders of record on March 5, 1997. Management
believes the number of holders of Chemi-Trol's Common Shares at March 5, 1997,
including persons holding through a nominee holder, was 774.
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(c) Dividends Paid per Common Share
-------------------------------
1996 1995
------------------------- ------------------------
Quarter Ended Quarter Ended
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
Dividends declared
were $.36 per common
share in 1996 and 1995,
respectively.
Dividends have been $.090 $.090 $.090 $.090 $.082 $.090 $.090 $.090
adjusted to reflect
the 10% stock
dividends of March
1995.
The Company has paid a cash dividend on its Common Shares each year
since its incorporation in 1952.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Years Ended December 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Operating Results:
Revenues $70,452,126 $71,048,476 $67,823,972 $62,099,805 $58,905,134
Net Income 1,258,283 1,474,705 1,609,719 896,731 1,488,410
Net Income
Per Common Share .63 .74 .80 .45 .74
At Year-end:
Total
Assets 47,423,367 48,592,539 45,917,360 41,186,807 36,589,365
Long-Term
Debt 3,329,267 9,789,973 7,235,827 8,761,989 5,964,152
Working
Capital 11,151,188 14,430,716 12,218,263 12,174,075 12,180,603
Cash Dividends
Declared Per Common
Share $ .360 $ .360 $ .327 $ .298 $ .260
Share data has been computed on the basis of the weighted average number of
common shares outstanding during each period and restated for the 6 for 5 stock
split in November of 1992 and the 10% stock dividends in March 1995 and 1994.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
- - -------------------------------
Liquidity is the measure of a company's ability to generate adequate
funds to meet its needs. Funds can be generated internally from operations or
externally by borrowing. Primary measures of liquidity include the amount of
working capital, the working capital ratio and the ability to borrow funds. As
shown in the following chart, the Company's ability to borrow funds remains
strong as evidenced by the unused commitment for term financing and the
unpledged notes and leases at December 31, 1996.
1996 1995 1994
Working capital $11,151,188 $14,430,716 $11,218,263
Working capital
ratio 1.5 to 1 1.9 to 1 1.7 to 1
Unused commitment for
term financing of
customer notes and
leases $ 4,780,500 $ 2,076,500 $7,500,000
Unpledged notes and
leases $ 1,407,022 $ 1,310,185 $5,274,000
The decreases in working capital and working capital ratio in 1996
were largely the result of the ballon payment on the mortgage note, which is
secured by the Tank Production facility and is due in October 1997. The Company
may elect to refinance this note on a long-term basis if additional working
capital is needed.
A substantial amount of the Company's working capital over the past
three years has been provided from operations. Long-term borrowings of
$3,379,808 in 1996 and $8,300,500 in 1995 were used to finance customer sales
type leases or notes receivable for the purchase of steel tanks produced by the
Company's Tank Division, pursuant to the arrangements described under ITEM 1
BUSINESS Leasing and Finance Division. This financing has been arranged through
area banks. The Company has a commitment to provide term financing for tank
notes and leases extended to customers for amounts up to $7,000,000, of which
$4,780,500 was available at year end. The total amounts borrowed with collateral
under the lease and finance plans at December 31, 1996 were $1,437,833 and
$5,757,108, respectively.
Due to the seasonal nature of the operations of the Company's Chemical
Group and extension of fall payment terms in certain other divisions, the
Company has an uneven cash flow pattern. Operations of the Chemical Group begin
approximately mid-April and run through November. There are substantial cash
requirements in the second quarter for this division associated with inventory
build up and the purchase of equipment and supplies. Since the majority of the
contracts performed by this division are for political subdivisions and the
contracts stretch over the entire summer season, a fair percentage of the
payments are not received until mid-September and October. This creates a cash
shortage from June to October which has made it necessary for the Company to
borrow short-term funds. For this reason, the Company has arranged a short-term
borrowing line of $15,750,000 through local banks. In 1996 the Company used
amounts ranging from month-end amounts of $2,965,000 to $11,238,000 of its
short-term credit line.
-15-
16
Capital expenditures during 1996 decreased to a more normal level
of $925,920 from the previous year expenditures of $2,171,262. Expenditures
during 1995 included the addition of a 31,750 square foot warehouse to provide
Cal-Van with better storage of its inventory and a more efficient production
layout.
1996 1995 1994
Capital expenditures $ 925,920 $2,171,262 $1,298,677
Capital expenditures are budgeted at $782,000 for 1997. The Company
intends to make these expenditures with funds provided from operations.
Results of Operations
- - ---------------------
(a) 1996 versus 1995
Despite the fact that the Company's revenues for the first half were
down, record sales in both the third and fourth quarters resulted in total
revenues decreasing only slightly, less than 1%, from last year's record levels.
Net income decreased by 14.7% to $.63 per share.
Revenues of the Tank Division, which accounted for 48.5% of the total
Company revenues, decreased by 1.2% from the prior year record level, while
operating profit increased by 1.2%. The decline in revenues was comprised of a
.9% decrease in net sales to $33,291,086 and a 13.3% decrease in interest and
financing income. Cost of sales decreased at the higher rate of 2.0% and
resulted in an increase of 7.1% in gross profit. Increases of 9.0% in selling
expense and 15.9% in general and administrative expenses combined to result in
operating profit increasing at the lesser rate of 1.2%.
For the year the Cal-Van Tools Division's sales increased by 11.7% to
record levels of $17.3 million, while operating profit increased by 19.3%.
Selling expenses decreased by 1.9% from 1995 levels while general and
administrative expenses increased by 25.7%. The increase in general and
administrative expenses was largely the result of increased bad debt expense.
Net sales of the Chemical Group decreased by 6.7%, while operating
profit increased by 17.4%. The increase in operating profit was largely the
result of increased gross profits of 22.0% in the Contract Division, which
accounted for 80.2% of the Groups's sales during the year. Selling and general
administrative increased by 3.3% over the prior year levels.
Cory Orchard & Turf revenues for the period were down 15.0%, while
operating profit decreased by 88.3%. A very cold March, a very wet April and
May, followed by a very dry and mild summer in the Cory sales area had a
negative effect on the year's results. Cost of sales decreased by the lesser
rate of 14.5% causing margins to tighten. The decrease in sales and reduced
margins coupled with an increase of 2.2% in the largely fixed selling, general
and administrative expenses resulted in the reduction in operating profit.
-16-
17
For the Company as a whole net sales decreased by .6%, while cost of
sales decreased by 1.4% bettering margins and resulting in an increase in gross
profit of 4.5%. Selling expenses were almost unchanged, decreasing by less than
.1% during the year. General and administrative expenses increased by 15.6%
largely as a result of increased bad debt exenses. Interest and financing income
decreased by 14.0% largely as a result of reductions in the average balances of
notes and lease receivable outstanding during the year. Interest expense
increased by 13.4% as average borrowings to fund working capital needs increased
over the prior year levels. The effective income tax rate increased from 39.7%
in 1995 to 40.0% in 1996. For the year, net income decreased by 14.7% to
$1,258,283, or $.63 per share.
(b) 1995 versus 1994
Total revenues of the Company increased by 4.8% to a record
$71,048,476, while net income decreased by 8.4% to 74 cents per share.
The Tank Division, which accounted for approximately 48.7% of total
corporate revenue during 1995, increased revenues by approximately 4.3% over
1994 levels, a new record. The increase in revenues was the result of a 4 .4%
increase in sales and a slight decrease of less than 1% (.8) in interest and
financing income. Actual units shipped during the year increased by 1.4% over
the prior year levels. Operating profit increased by 3.3%, slightly less than
the increase in revenues, as a result of a slight decrease in gross profit
margins.
Net sales of the Cal-Van Tools Division increased by 11.3% to record
levels of $15,527,740, while operating profits decreased by 50.7% for the year
ended December 31, 1995. The disproportionate increase of 14.4% in cost of sales
coupled with a 22.8% increase in selling expenses were largely responsible for
the decrease in operating profits. Continued competitive pressure in a changing
marketplace with fewer and larger customers was responsible for the profit
decrease.
The Chemical Group revenues were static, down by 1.4%, while operating
profits increased by 11.0%. Gross profit increases of 19.3% in CADCO, the
material distribution division, were offset by decreases of 8.7% in the
Contracting Division and resulted in a slight decrease in the Group's gross
profit of 3.9%. The increase in operating profit was attributable to decreases
in divisional selling and general and administrative expenses of 15.5% and
21.0%, respectively.
Revenues of the Cory Orchard & Turf Division increased by 7.2%, while
operating profits increased over 19 times the depressed 1994 level. Higher
margins, the result of cost of goods sold increasing at a lesser rate of 4.6%
coupled with the volume increase, served to increase gross profits by 24.1%.
Selling and general administrative expenses were stable, decreasing by less than
1%.
-17-
18
For the Company as a whole, the increase in net sales of 4.9% was
slightly less than the 5.0% increase in cost of sales, forcing margins to
tighten. Selling expense increases of 12.5% were largely attributable to
Cal-Van's aggressive marketing. The 5.7% decrease in general and administrative
expenses was largely the result of decreased profit sharing allocations due to
lower profits, particularly in the second half of the year. Interest and
financing income decreased by 1.8% from 1994 levels. Interest expense increased
by 21.5% as borrowings to fund working capital and capital addition expenditures
increased during the year. Net income decreased by 8.4% to $1,474,705 or 74
cents per share.
Changes effective in state and local tax rates were largely responsible
for the increase in the effective tax rate from 38.4% in 1994 to 39.7% in 1995.
Impact of Inflation and Changing Prices on Sales and Income From
- - ----------------------------------------------------------------
Operations
- - ----------
The rate of inflation during recent years has again become a
consideration and the Company uses the following procedures to help offset its
detrimental effects. First, selling prices of the Company's products are
carefully and constantly scrutinized so that selling prices reflect current
costs. Price increases can only be instituted, of course, to the extent that the
Company's prices remain competitive within the business segments in which the
Company operates. As a result, the Company constantly monitors alternative
suppliers to assure the lowest possible costs. The Chemical Group can reasonably
account for inflation in bidding on fixed price contracts because a majority of
the contracts are bid early in the year with completion dates during the current
year. Labor rates are generally established prior to the bid and these are
generally fixed for the duration of the contract. Materials necessary to perform
a contract can be price protected by purchasing under early order programs or by
purchasing sufficient quantities of the materials necessary to complete the
contract at the time it is awarded. This allows these costs to be considered at
the time a bid is prepared. The Company uses the LIFO method of accounting for
the cost of goods sold for the majority of its products. This charges current
costs to the results of operations for both financial reporting and income tax
purposes and during periods of inflation results in improved cash flow due to
lower income taxes paid by providing a closer matching of revenues and expenses.
Finally, increasing of productivity levels in all of the Company's operating
divisions has helped to lessen the effects of inflation in the past and will
continue to be part of the Company's objective for controlling the effects of
inflation in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See ITEM 14 for an index to financial statements and financial
statement schedule.
-18-
19
Report of Independent Auditors
The Board of Directors and Shareholders
Chemi-Trol Chemical Co.
We have audited the accompanying balance sheets of Chemi-Trol Chemical Co. as of
December 31, 1996 and 1995, and the related statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chemi-Trol Chemical Co. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Toledo, Ohio
February 28, 1997
-19-
20
Chemi-Trol Chemical Co.
Balance Sheets
DECEMBER 31
1996 1995
--------------------------------------------
ASSETS
Current assets:
Cash $ 112,506 $ 80,991
Trade receivables, less allowance of $380,000
in 1996 and $310,000 in 1995:
Accounts 15,961,847 11,960,645
Notes (Note 5) 3,498,027 4,568,313
--------------------------------------------
19,459,874 16,528,958
Net investment in sales-type leases
(Notes 2 and 5) 684,120 1,005,265
Inventories (Notes 1 and 3) 10,712,677 11,799,651
Prepaid expenses and deferred income taxes (Note 7) 1,140,873 1,201,688
--------------------------------------------
Total current assets 32,110,050 30,616,553
Property and equipment, at cost (Notes 4 and 5) 21,161,344 20,501,534
Less accumulated depreciation 10,509,619 9,459,443
--------------------------------------------
Net property and equipment 10,651,725 11,042,091
Other assets (Notes 2 and 5):
Notes receivable 3,165,486 4,366,432
Net investment in sales-type leases 1,254,330 2,254,722
Other 241,776 312,741
--------------------------------------------
Total other assets 4,661,592 6,933,895
--------------------------------------------
$47,423,367 $48,592,539
============================================
-20-
21
DECEMBER 31
1996 1995
--------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 5) $ 2,964,916 $ 1,507,831
Accounts payable 7,359,161 7,102,503
Dividends payable 180,444 180,444
Income taxes 230,485 148,629
Accrued liabilities:
Insurance 1,331,966 1,027,531
Compensation 919,350 818,703
Profit-sharing 292,289 304,019
Other 379,572 392,871
Long-term debt due within one year (Note 5) 7,300,679 4,703,306
--------------------------------------------
Total current liabilities 20,958,862 16,185,837
Long-term debt (Note 5) 3,329,267 9,789,973
Deferred income taxes (Note 7) 876,000 894,000
Shareholders' equity:
Common stock, without par value; 6,000,000 shares
authorized, 2,004,930 shares issued
and outstanding (Note 6) 4,590,767 4,590,767
Retained earnings 17,668,471 17,131,962
--------------------------------------------
Total shareholders' equity 22,259,238 21,722,729
============================================
$47,423,367 $48,592,539
============================================
See accompanying notes.
-21-
22
Chemi-Trol Chemical Co.
Statements of Income
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
Revenues:
Net sales $69,556,888 $70,007,608 $66,763,748
Interest and financing income 895,238 1,040,868 1,060,224
-------------------------------------------------------------
70,452,126 71,048,476 67,823,972
Costs and expenses:
Cost of sales 59,744,177 60,622,638 57,712,244
Selling 3,703,169 3,706,662 3,295,078
General and administrative 3,330,847 2,881,262 3,056,648
Interest 1,577,650 1,391,209 1,145,283
-------------------------------------------------------------
68,355,843 68,601,771 65,209,253
-------------------------------------------------------------
Income before income taxes 2,096,283 2,446,705 2,614,719
Income taxes (Note 7):
Federal:
Current 699,000 687,000 666,000
Deferred 3,000 120,000 182,000
State and local 136,000 165,000 157,000
-------------------------------------------------------------
838,000 972,000 1,005,000
-------------------------------------------------------------
Net income $ 1,258,283 $ 1,474,705 $ 1,609,719
=============================================================
Per common share (Note 6) $.63 $.74 $.80
=============================================================
See accompanying notes.
-22-
23
Chemi-Trol Chemical Co.
Statements of Shareholders' Equity
Years ended December 31, 1996, 1995 and 1994
Common Stock
--------------------------------- Retained
Shares Amount Earnings Total
--------------------------------------------------------------------
Balance - December 31, 1993 1,657,182 $ 991,122 $19,027,715 $20,018,837
Net income 1,609,719 1,609,719
Cash dividends - $.33 per share
(Note 6) (656,207) (656,207)
10% stock dividend issued 165,614 1,801,052 (1,801,052) -
Cash dividend issued for
fractional shares (1,133) (1,133)
--------------------------------------------------------------------
Balance - December 31, 1994 1,822,796 2,792,174 18,179,042 20,971,216
Net income 1,474,705 1,474,705
Cash dividends - $.36 per share
(Note 6) (721,774) (721,774)
10% stock dividend issued 182,134 1,798,593 (1,798,593) -
Cash dividend issued for
fractional shares (1,418) (1,418)
--------------------------------------------------------------------
Balance - December 31, 1995 2,004,930 4,590,767 17,131,962 21,722,729
Net income 1,258,283 1,258,283
Cash dividends - $.36 per share
(Note 6) (721,774) (721,774)
====================================================================
Balance - December 31, 1996 2,004,930 $4,590,767 $17,668,471 $22,259,238
====================================================================
See accompanying notes.
-23-
24
Chemi-Trol Chemical Co.
Statements of Cash Flows
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
OPERATING ACTIVITIES
Net income $ 1,258,283 $ 1,474,705 $ 1,609,719
Adjustments to reconcile net income to net cash
provided by operating activities:
Notes receivable from product sales (4,916,255) (7,476,136) (7,347,207)
Collections from customers on notes receivable 5,145,795 4,681,181 4,328,688
Notes receivable sold 2,001,692 2,348,145 2,138,527
Proceeds from sales-type leases 1,600,771 2,023,828 1,085,206
Additions to net investment in sales-type
leases (279,234) (1,283,777) (1,106,954)
Depreciation 1,301,257 1,238,437 1,184,800
Provision for deferred income taxes 3,000 120,000 182,000
Gain on sale of property and equipment (14,185) (47,168) (4,825)
Increase in allowance for doubtful accounts 70,000 - -
Changes in operating assets and liabilities:
Accounts receivable (4,031,202) (543,785) (2,414,999)
Inventories 1,086,974 (2,418,981) (897,912)
Prepaid expenses 39,815 101,733 117,827
Other assets 70,965 (9,230) (143,985)
Accounts payable 256,658 388,046 2,601,573
Income taxes payable 81,856 43,132 71,340
Accrued liabilities 380,053 (306,498) (43,026)
-----------------------------------------------------
Net cash provided by operating activities 4,056,243 333,632 1,360,772
INVESTING ACTIVITIES
Additions to property and equipment (925,920) (2,171,262) (1,298,677)
Proceeds from disposals of property and equipment 29,214 110,249 42,568
-----------------------------------------------------
Net cash used in investing activities (896,706) (2,061,013) (1,256,109)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 3,379,808 8,300,500 3,418,178
Payments of long-term debt (7,243,141) (4,791,733) (4,701,801)
Net borrowings under line of credit 1,457,085 (1,992,169) 2,200,000
Cash dividend payments (721,774) (705,386) (641,297)
Payments in lieu of issuing fractional shares - (1,418) (1,133)
-----------------------------------------------------
Net cash provided by (used in) financing activities (3,128,022) 809,794 273,947
-----------------------------------------------------
Increase (decrease) in cash 31,515 (917,587) 378,610
Cash at beginning of year 80,991 998,578 619,968
-----------------------------------------------------
Cash at end of year $ 112,506 $ 80,991 $ 998,578
=====================================================
Supplemental cash flow information:
Cash paid for interest $ 1,574,702 $ 1,389,427 $ 1,144,411
=====================================================
Cash paid for income taxes $ 753,143 $ 748,868 $ 615,483
=====================================================
See accompanying notes
-24-
25
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CREDIT PRACTICES
Credit terms are granted and periodically revised based on general industry
practices and evaluations of the customers' credit reports, payment history and
financial condition. The Company retains a security interest in products sold on
the installment basis. Credit losses are provided for in the financial
statements and consistently have been within management's expectations.
INVENTORY VALUATION
Substantially all inventories are valued at the lower of cost, determined by the
last-in, first-out (LIFO) method, or market.
NOTES RECEIVABLE
Notes receivable are due in installments from customers for sales of liquid
propane gas tanks. The notes are issued for three or four year terms and bear
interest based on the prevailing interest rate. At December 31, 1996, the
carrying value of notes receivable approximates their fair value based on the
Company's current incremental lending rates.
LEASES
Leases of liquid propane gas tanks to customers for noncancellable terms of five
or ten years are recorded as sales at inception. The present value of the
minimum payments is included in net sales and the cost of the tanks is charged
to cost of sales. Estimated residual values of the leased tanks are not
significant. The leases are financed through notes payable to banks with terms
similar to the leases. The obligations to the banks are included in long-term
debt. Interest income computed at the rates implicit in the leases is recognized
on the interest method.
-25-
26
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenues for product sales are recognized when goods are shipped to customers in
accordance with their purchase orders. Contracts within the Chemical segment are
typically completed by December 31 of each year. On an interim basis, these
contracts are accounted for based on percentage completion.
DEPRECIATION
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets.
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of shares
outstanding of 2,004,930, after giving retroactive effect to the 10% stock
dividends issued in March 1994 and 1995. Shareholders' rights, which have a
potentially dilutive effect, have been excluded from the weighted average shares
computation as conditions to the exercisability of such rights have not been
satisfied (see Note 6).
2. NET INVESTMENT IN SALES-TYPE LEASES
The components of the net investment in sales-type leases at December 31 are as
follows:
1996 1995
----------------------------------------
Minimum lease payments receivable $2,309,775 $3,944,355
Unearned financing income 371,325 684,368
----------------------------------------
Net investment 1,938,450 3,259,987
Current portion 684,120 1,005,265
----------------------------------------
Noncurrent portion $1,254,330 $2,254,722
========================================
At December 31, 1996 minimum lease payments receivable for each of the five
subsequent years are as follows: 1997 - $869,000; 1998 - $665,000; 1999 -
$477,000; 2000 - $251,000 and 2001 - $49,000.
At December 31, 1996 the carrying value of sales-type leases approximates fair
value based on the Company's current incremental lending rates.
-26-
27
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
3. INVENTORIES
Inventories are comprised of the following at December 31:
1996 1995
--------------------------------------------
Manufacturing inventories:
Raw materials and supplies $ 2,584,509 $ 3,304,000
Work in process 438,662 465,290
Finished goods 1,188,521 2,061,184
Purchased inventory held for resale 6,148,461 5,694,549
Materials used in contracting 352,524 274,628
============================================
$10,712,677 $11,799,651
============================================
Under the LIFO method, inventories have been reduced by approximately $1,544,000
and $1,766,000 at December 31, 1996 and 1995, respectively, from amounts which
would have been reported under the first-in, first-out method.
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following at December 31:
1996 1995
--------------------------------------------
Land and land improvements $ 1,253,866 $ 1,253,421
Buildings 4,898,066 4,897,303
Machinery and equipment 10,130,938 9,194,219
Automobiles and trucks 4,857,556 4,764,544
Construction in process 20,918 392,047
============================================
$21,161,344 $20,501,534
============================================
-27-
28
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
5. DEBT
The Company has a $15,000,000 bank line of credit available for revolving loans
with interest payable at the bank's prime rate less 1/2% (7.75% and 8.00% at
December 31, 1996 and 1995, respectively); revolving loans of $2,964,916 and
$1,507,831 were outstanding at December 31, 1996 and 1995, respectively. Under
this credit arrangement, the Company may convert, on or before May 2, 1997, up
to $7,000,000 of revolving loans to term loans, payable over thirty-six or sixty
months with interest at an annual rate equal to the yield for U. S. Treasury
obligations of similar maturity plus a specified number of basis points.
Converted term loans ($2,219,500 at December 31, 1996) reduce the line of credit
available for revolving loans. Revolving loans are secured by accounts
receivable and inventory; term loans are secured as described below.
The credit agreement, amended as of February 28, 1997, contains provisions which
require the Company to, among other things, maintain minimum debt to net worth
and current ratios, minimum tangible net worth and certain working capital
levels. The Company was in compliance with these amended covenants at December
31, 1996.
The Company also has a $750,000 unused line of credit available for short-term
borrowings with interest payable at a rate to be determined.
Long-term debt outstanding at December 31 consists of the following:
1996 1995
----------------------------------------
6.63% - 9.35% (6.08% - 9.35% in 1995), term
loans due in varying monthly amounts with a
final maturity in December, 2001, secured by
certain sales-type leases and notes receivable of
approximately $7,195,000 at December 31, 1996 $ 7,194,941 $10,884,547
7 3/4% mortgage note with a final maturity in October, 1997,
secured by tank production facility with a net book value
of $4,169,000 at December 31, 1996
3,435,005 3,608,732
----------------------------------------
10,629,946 14,493,279
Amount due within one year 7,300,679 4,703,306
----------------------------------------
$ 3,329,267 $ 9,789,973
========================================
-28-
29
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
5. DEBT (CONTINUED)
Annual maturities of long-term debt for the five years subsequent to December
31, 1996 are as follows: 1997 - $7,301,000; 1998 - $2,070,000; 1999 -
$1,050,000; 2000 - $190,000 and 2001 - $19,000.
At December 31, 1996, the carrying value of long-term debt approximates fair
value based on the Company's current incremental borrowing rates.
6. COMMON STOCK
In March 1994 and 1995, the Company issued 10% stock dividends. Income and cash
dividends per common share amounts for all years presented in the statements of
income and shareholders' equity have been adjusted to reflect these stock
dividends.
The Company has adopted a Shareholders' Rights Plan designed to ensure that all
of the Company's shareholders receive fair and equal treatment in the event of
any proposal to acquire control of the Company. Under the Rights Plan, each
right will entitle shareholders to buy one one-hundredth of a share of common
stock of the Company at an exercise price of $42.97 (as adjusted for the 10%
stock dividends issued in March 1994 and 1995). The rights will be exercisable
only if a person or group acquires beneficial ownership of 20 percent or more of
the Company's common stock or announces a tender or exchange offer after which
such person or group would beneficially own 30 percent or more of the common
stock without the prior approval of the Company's Board of Directors, or if they
determine that any person is an "Adverse Person." Under certain circumstances,
the rights will become exercisable for common stock or other assets or
securities of the Company or common stock of the surviving corporation in a
merger involving the Company. In such event, the rights would entitle the
holders thereof to purchase such stock at 50% of the then-current market value
of the stock.
The Board of Directors of Chemi-Trol Chemical Co., except as otherwise provided
in the Rights Plan, will generally be able to redeem the rights at one cent per
right at any time during a 10-day period following any of the events which
result in the rights becoming exercisable. During this 10-day period, the Board
may also extend the time during which it may redeem the rights. The rights are
not exercisable until the expiration of the redemption period and will expire
upon the earlier to occur of May 27, 2003 or their redemption in accordance with
provisions of the plan.
-29-
30
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:
1996 1995
----------------------------------------
Deferred tax liabilities:
Property and equipment $1,054,000 $ 953,000
Prepaid expenses 54,000 89,000
Sales-type leases 10,000 38,000
----------------------------------------
Total deferred tax liabilities 1,118,000 1,080,000
Deferred tax assets:
Accrued insurance 270,000 256,000
Inventories 156,000 156,000
Accrued compensation 149,000 152,000
Allowance for doubtful accounts 129,000 105,000
Other 71,000 71,000
----------------------------------------
Total deferred tax assets 775,000 740,000
----------------------------------------
Net deferred tax liabilities $ 343,000 $ 340,000
========================================
Net deferred tax liabilities are included in the balance sheets at December 31
as follows:
1996 1995
----------------------------------------
Current assets $ 533,000 $ 554,000
Noncurrent liabilities 876,000 894,000
----------------------------------------
Net deferred tax liabilities $ 343,000 $ 340,000
========================================
-30-
31
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
7. INCOME TAXES (CONTINUED)
The effective income tax rate differs from the statutory U. S. federal income
tax rate for the following reasons and by the following percentages:
YEAR ENDED DECEMBER 31
1996 1995 1994
----------------------------------------
Statutory U. S. federal income tax rate 34.0% 34.0% 34.0%
Increase in taxes resulting from:
State and local income taxes, net of federal tax
effect 4.3 4.5 4.0
Non-deductible expenses 1.7 1.6 1.1
Other - (.4) (.7)
----------------------------------------
Effective income tax rate 40.0% 39.7% 38.4%
========================================
8. EMPLOYEES' RETIREMENT PLAN
The Company has a profit-sharing plan which provides retirement benefits for
full-time employees. The plan provides for Company contributions at the
discretion of the Board of Directors of an amount not to exceed that deductible
for federal income tax purposes. Costs charged to operations amounted to
$292,000 in 1996, $305,000 in 1995 and $527,000 in 1994.
9. SALE OF NOTES WITH RECOURSE
The Company has a contingent liability of approximately $3,087,000 at December
31, 1996 for customers' installment notes sold with recourse to the Chemi-Trol
Chemical Company Profit Sharing Plan. The credit risk associated with these
notes is minimal as the Company retains a security interest in the product sold
on the installment basis.
10. ENVIRONMENTAL
In 1995, the Company was named a potentially responsible party (PRP) for site
investigation and cleanup costs under the Comprehensive Environmental Response,
Compensation, and Liability Act (Superfund) or similar state laws with respect
to a certain site. The Company has notified third party insurers about this
matter. While the ultimate outcome of this matter cannot now be predicted, the
Company believes, based on the facts now known to it, that costs arising out of
this matter will not have a material adverse effect on the Company's financial
position.
-31-
32
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
11. INFORMATION PERTAINING TO INDUSTRY SEGMENTS
The Company has four operating segments which are in separate industries. The
Tank division produces and sells steel pressure tanks for the storage of liquid
propane gas and anhydrous ammonia to customers in the U.S. and Canada;
operations of the Chemical division involve the sale and application of highway
pavement marking and vegetation control materials in the U.S.; the Cal-Van Tools
division purchases for resale and manufactures automotive specialty hand tools
for the U.S. and foreign automotive aftermarket; the Cory Orchard & Turf
division sells agricultural chemicals, products and equipment to U. S.
customers. Total revenues by segment include sales to unaffiliated customers, as
reported in the Company's income statement, and intersegment sales, which are on
substantially the same terms as sales to unaffiliated customers. No customer
exceeds 10% of total revenues; however, one customer of Cal-Van Tools consisted
of 22%, 14%, and 11% of total Company accounts receivable at December 31, 1996,
1995 and 1994, respectively. Operating profit (total revenues less operating
expenses) excludes general corporate expenses, interest expense, corporate
interest income, corporate other income and income taxes. Corporate assets
include cash investments and the administrative offices.
The following summarizes the Company's operations and identifiable assets:
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
Revenues:
Tank $34,171,719 $34,599,551 $33,185,903
Cal-Van Tools 17,673,442 15,903,979 14,263,708
Chemical 13,376,509 14,452,831 14,720,536
Cory Orchard & Turf 5,701,208 6,715,684 6,268,846
Corporate interest 2,575 24,707 35,806
Eliminations - inter-segment (473,327) (648,276) (650,827)
=============================================================
Total revenues $70,452,126 $71,048,476 $67,823,972
=============================================================
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11. INFORMATION PERTAINING TO INDUSTRY SEGMENTS (CONTINUED)
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
Operating profit:
Tank $ 4,221,715 $ 4,172,778 $ 4,039,036
Cal-Van Tools 460,409 384,359 779,825
Chemical 674,526 574,587 517,557
Cory Orchard & Turf 26,085 222,345 16,944
-------------------------------------------------------------
Total operating profit 5,382,735 5,354,069 5,353,362
General corporate expenses (1,711,377) (1,540,862) (1,629,166)
Corporate interest expense (1,577,650) (1,391,209) (1,145,283)
Corporate interest income 2,575 24,707 35,806
-------------------------------------------------------------
Income before income taxes $ 2,096,283 $ 2,446,705 $ 2,614,719
=============================================================
Identifiable assets:
Tank $25,346,790 $28,449,834 $26,928,426
Cal-Van Tools 14,076,619 11,676,495 9,304,139
Chemical 3,058,300 3,346,820 3,927,242
Cory Orchard & Turf 3,332,322 3,324,853 3,240,630
Corporate assets 1,609,336 1,794,537 2,516,923
-------------------------------------------------------------
Total assets $47,423,367 $48,592,539 $45,917,360
=============================================================
Depreciation:
Tank $ 576,549 $ 565,766 $ 542,420
Cal-Van Tools 263,689 222,842 191,297
Chemical 324,944 296,107 304,731
Cory Orchard & Turf 87,298 93,455 91,050
Corporate assets 48,777 60,267 55,302
-------------------------------------------------------------
Total depreciation $ 1,301,257 $ 1,238,437 $ 1,184,800
=============================================================
-33-
34
Chemi-Trol Chemical Co.
Notes to Financial Statements
December 31, 1996
11. INFORMATION PERTAINING TO INDUSTRY SEGMENTS (CONTINUED)
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
Capital expenditures:
Tank $256,145 $ 596,230 $ 383,928
Cal-Van Tools 283,997 1,034,017 404,376
Chemical 341,093 404,624 336,732
Cory Orchard & Turf 8,430 115,349 95,357
Corporate assets 36,255 21,042 78,284
-------------------------------------------------------------
Total capital expenditures $925,920 $2,171,262 $1,298,677
=============================================================
-34-
35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The following information as of March 1, 1997 is furnished with respect
to each director, each executive officer and certain significant employees:
Director
Offices and Positions Continuously Current term
Name Age Held with the Company Since through July
---- --- --------------------- ----- ------------
Arthur F. Doust 73 Director, Chairman of 1952 1999
the Board and Chief
Executive Officer
Robert W. Woolf 54 Director and President 1987 1997
John P. Simcox 47 Director, Vice President 1990 1998
and General Manager - Tank
Division
Kevin D. Lauck 46 Director, Secretary and 1990 1999
Controller
Robert F. Veh 67 Director 1975 1998
W. Burton Lloyd 58 Director 1986 1999
Robert H. Moyer 68 Director 1992 1997
Fred J. Roynon 64 Director 1993 1998
Richard J. Dudley 66 Director 1993 1997
Gerald J. Porczak 62 Treasurer, General Manager -- --
Lease and Finance
Division
James C. Herl 50 General Manager, Chemical -- --
Group
James R. LaBenne 51 General Manager - Cal-Van
Tools Division -- --
Jon M. Cravens 44 General Manager - Cory
Orchard & Turf Division -- --
-35-
36
Arthur F. Doust joined the Company in 1952. He has served as Chairman
of the Board (1985 to date), Chief Executive Officer (1987 to date), President
(1969 to 1988) and as First Vice President and General Manager (1952 to 1969) of
the Company.
Robert W. Woolf joined the Company in 1972. He has served as Assistant
Controller (1972 to 1977), Executive Administrator and Assistant Secretary (1977
to 1985), Vice President (1985 to 1988) and as President (1988 to date) of the
Company.
John P. Simcox joined the Company in 1972. He has served as Vice
President (1991 to date) and General Manager of the Tank Division (1990 to
date), Director of Sales for the Company (1987 to 1989), Sales Manager for
Chemical Group and Assistant Sales Manager for Tank Division (1977 to 1987), and
as a salesman for the Chemical Group and Tank Division in both Indiana and Ohio
(1972 to 1977).
Kevin D. Lauck joined the Company in 1977. He has served as Secretary
and Controller (1988 to date), Assistant Secretary and Assistant Controller
(1985 to 1987) and Assistant Controller (1977 to 1985).
Robert F. Veh is the retired President of Veh & Son, Inc., a
corporation located in Gibsonburg, Ohio, which operated a retail furniture store
and funeral home. He retired in 1989. He is a Director of Fifth Third Bank of
Northwest Ohio National Association.
W. Burton Lloyd has been the President for more than the past five
years of Advanced Insulation Concepts, Inc. formerly American Isowall
Corporation, located in Florence, Kentucky, which manufactures various insulated
panels for use in the construction of cold storage units.
Robert H. Moyer is the President of The Mosser Group, located in
Fremont, Ohio, a holding company of: Mosser Construction, Inc. of which he is
Chairman; Contractors Equipment, Inc.; WMOG Investment, Inc.; and Telamon
Construction, Inc. Mosser Construction, a commercial construction and
contracting company, is located in Fremont, Ohio. He is also a Director of
Croghan Bancshares, Inc., the publicly owned holding company of Croghan Colonial
Bank.
Fred J. Roynon is a retired bank executive with twenty-four years
experience in community bank management, including Chairman, President and CEO
of Society Bank Northwest Ohio (1980-1985).
Richard J. Dudley retired as Chairman of the Board, President and CEO
of S.E. Hyman Co., a manufacturing company located in Fremont, Ohio, and served
as Assistant to the President of Terra Technical College, Fremont, Ohio
(1987-1990).
Gerald J. Porczak joined the Company in 1966. He has served as
Treasurer (1993 until his retirement on March 7, 1997), General Manager of the
Lease and Finance Division (1978 until his retirment on March 7, 1997) and as
Corporate Credit Manager (1966 until his retirement March 7, 1997).
-36-
37
James C. Herl joined the Company in 1974. He has served as Engineer in
the Chemical Group, with primary responsibility in the Pavement Marking
Division. (1974-1994) and as General Manager of the Chemical Group (1995 to
date).
James R. LaBenne joined the Company in 1970. He has served as salesman
covering one half the State of Michigan for the Chemical Group and Tank Division
(1970 to 1987), Assistant General Manager for the Cal-Van Tools Division (1987
to 1988), and as General Manager - Cal-Van Tools Division (1988 to date).
Jon M. Cravens joined the Company in 1975. He has served as salesman in
the State of Indiana for the Chemical Group and the Tank Division (1975 to
1988). Mr. Cravens has also been Assistant General Manager of the Cory Orchard &
Turf Division (1985 to 1988), and General Manager of the Cory Orchard & Turf
Division (1988 to date).
Messrs. Doust, Woolf, and Veh are members of the Executive Committee of
the Company. Messrs. Doust, Veh and Lloyd are members of the Governance
Committee. Messrs. Doust, Veh, Lloyd and Woolf are members of the Compensation
Committee and the Audit Committee is comprised of the following independent
directors, Messrs. Moyer, Roynon and Dudley.
The Company has no standing nominating committee or committee
performing similar tasks.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Jon M.
Cravens, General Manager at the Cory Orchard & Turf Division, was delinquent in
filing a Form 4 Statement of Changes in Beneficial Ownership, to report the
sale of 1000 shares of stock in March of 1996, but timely filed form 5 to
rectify the delinquency. The Company believes that all other Directors and
Officers have timely filed all reports required by Section 16(a) of the Act.
Directors of the Company are elected at the Company's annual meeting of
shareholders for a term of three years and until their successors are elected
and qualified. The executive officers of the Company are elected by and serve at
the pleasure of the Board of Directors of the Company.
-37-
38
ITEM 11. EXECUTIVE COMPENSATION
Summary Information
The following table summarizes the total compensation for each of
the last three years of (i) the Company's Chief Executive Officer and (ii) any
of its other four most highly compensated executive officers who received salary
and bonus in 1996 in excess of $100,000.
Summary Compensation Table
Annual Compensation
----------------------------------------------------
Name and Other All Other
Principal Annual Compen-
Position Year Salary $ Bonus $ Compensation sation $
- - -------- ---- -------- ------- ------------ --------
Arthur F. Doust 1996 55,996 24,000 3,000(a) 2,480(b)
Chairman and 1995 53,225 17,000 3,000(a) 2,177(b)
CEO 1994 40,379 24,000 3,000(a) 3,863(b)
Robert W. Woolf 1996 106,814 20,000 3,000(a) 3,931(b)
President and 1995 102,086 18,125 3,000(a) 3,726(b)
COO 1994 87,899 25,500 3,000(a) 6,804(b)
<FN>
(a) Director Fees paid for service on Board of Directors.
(b) Company's profit sharing plan account contribution.
During the year ended December 31, 1996, each Director of the Company
was compensated for services as a Director by the total payment of $3000 for the
four regularly scheduled meetings. Outside or independent Directors are
compensated $400 for attending special meetings that are scheduled on days other
than the regular quarterly meetings.
Executive Employment Agreements
In August 1996, the Company entered into agreements to employ Mr.
Robert Woolf as the President and Chief Operating Officer, Mr. John P. Simcox
as Vice President and General Manager of the Tank Division, and Mr. Kevin D.
Lauck, as Secretary and Controller for terms of three-years. The employment
agreements provide for annual base compensation equal to an amount which is not
less than the officer's annual base compensation on the date of the agreement
and for an annual bonus which is not less than the greater of 15% annual base
compensation or the bonus paid in the preceding fiscal year. In addition the
employment agreements provide that during the term of the agreement and for one
year thereafter, the officers shall not compete with any business carried on by
the Company (provided that no change of control shall have occurred). The
agreements further provide that if the officer's employment is terminated
following a change of control, other than for cause, disability or retirement,
the officer shall be entitled to receive, in lieu of any salary or bonuses
payable under the agreement, an amount equal to three times the present
value of his annual base compensation and bonus plus the cash surrender value
of all life insurance maintained by the Company on the officer's life.
Compensation Committee Interlocks and Insider Participation
- - -----------------------------------------------------------
The Compensation Committee consists of Arthur F. Doust and Robert W.
Woolf, each of whom is an executive officer of the Company, and Robert F. Veh
and W. Burton Lloyd, independent directors.
Compensation Committee Report on Executive Compensation
- - -------------------------------------------------------
This report sets forth the compensation policies of the Compensation
Committee applicable to the Company's executive officers and the relationship of
corporate performance to executive compensation.
The Company's compensation package for its executive officers consists
of base salary, annual performance-based bonus and participation in the
Company's Profit Sharing Plan. These particular elements are further explained
below.
-38-
39
Base salaries are determined primarily on the basis of salaries being
paid in the competitive marketplace, Company-wide performance and each executive
officer's responsibilities, individual performance, knowledge, ability, time in
position and prior experience. Salaries are adjusted annually as determined by
individual performance, the competitive marketplace, Company-wide performance
and changes in the cost of living. In general, base salaries are set at levels
believed by the Committee to be sufficient to attract and retain qualified
individuals when considered with the other components of the Company's
compensation structure.
Annual performance-based bonuses are determined at year end by the
Committee for each executive officer, with the amount for each depending upon
individual accomplishments and the overall performance of the Company, as
weighted and applied on an individual basis by the Compensation Committee.
Performance bonuses for executive officers have historically not exceeded 30% of
base compensation.
The Company's Profit Sharing Plan is qualified under Section 401(a) of
the Internal Revenue Code and is for the benefit of all employees who complete a
specified number of hours of service to the Company each Plan year and are
employees through year-end. The Board of Directors of the Company determines the
amount to be contributed from income to the Plan for each year based upon
Company performance, historical contribution levels and other factors deemed
appropriate by the Board. Company contributions to the Plan are allocated to the
accounts of eligible employees pro rata according to each employee's annual
compensation, without any variance of such formula for executive officers.
Retirement, disability or death benefits under the Plan commence on the earlier
of retirement, disability or death of an eligible employee, based upon the
employee's Plan account balance. Upon termination of employment for reasons
other than retirement, disability or death, rights of eligible employees depend
upon their number of years of service to the Company. All executive officers of
the Company are currently participating in the Profit Sharing Plan.
The foregoing report has been furnished by Arthur F. Doust, W. Burton
Lloyd, Robert F. Veh, and Robert W. Woolf, members of the compensation committee
of the Board of Directors.
-39-
40
Stock Performance Graph
- - -----------------------
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S & P 500 Stock Index and the Diversified
Mfg. Group for the period commencing December 31, 1991, and ending December 31,
1996.
[GRAPH]
Assumes that the value of the investment in Chemi-Trol Chemical Common
Stock and each index was $100 on December 31, 1991, and that all dividends were
reinvested monthly.
Source: S&P Compustat Base Year = 100: 12/31/91
Company Name Dec.-91 Dec.-92 Dec.-93 Dec.-94 Dec.-95 Dec.-96
Chemi-Trol Chemical Co. 100.00 128.06 146.33 151.30 179.66 166.48
S&P 500 COMP-LTD 100.00 107.61 118.41 120.01 164.95 202.72
Manufacturing (Div.INDLS) 100.00 108.38 131.55 136.19 191.71 264.15
-40-
41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
Set forth below is certain information concerning persons who are known
by the Company to own beneficially more than 5% of any class of the Company's
voting shares on December 31, 1996.
Amount and
Nature of
Title of Name and Address Beneficial Percent
Class of Beneficial Owner Ownership (1) of class
- - ----- ------------------- ------------- ----------
Common Shares Trilon Dominion Partners, 241,351(2) 12.03%
L.L.C.
F/K/A Venture Capital,
Equities, L.L.C.
250 Park Avenue, Suite 2020
New York, NY 10017
Common Shares Arthur F. Doust 252,515(3) 12.59%
2690 C.R. 69
Gibsonburg, OH 43431
Common Shares David Meredith Hudson, 100,346(4) 5.00%
President
Hudson Capital Management
239 NW 13th Ave., Ste. 207
Portland, OR 97209
<FN>
- - -------------
(1) All shares are held of record with sole voting and investment power unless
otherwise indicated.
(2) Based upon most recent Schedule 13D filing dated September 27, 1996. VC
Holdings, Inc., the sole manager and the holder of 100% of the voting interests
of Trilon Dominion Partners, L.L.C. ("the L.L.C."), is the indirect beneficial
owner of the 241,351 shares of common stock of the issuer owned by L.L.C.
Ronald W. Cantwell ("Mr. Cantwell") is the holder of 100% of the capital stock
of VC Holdings, Inc., which is the sole manager and the holder of 100% of the
voting interests of L.L.C. Consequently, Mr. Cantwell is the indirect
beneficial owner of the 241,351 shares of common stock of the issuer owned by
the L.L.C. Dominion Capital, Inc. holds a 50% non-voting preferred interest in
the L.L.C. Dominion Capital, Inc. has disclaimed beneficial ownership of these
securities.
(3) Includes (a) 157,014 shares held in trust by Arthur F. Doust and Anna K.
Doust, Co-Trustees, of which 78,507 shares are held for their own benefit; (b)
44,765 shares owned by Anna K. Doust, wife of Arthur F. Doust; and and (c)
12,743 shares owned by the children of Arthur F. Doust.
-41-
42
(4) Based upon the most recent Schedule 13 G dated December 21, 1995.
Includes (a) 15,890 shares held by Hudson Capital Management, Inc., Registered
Investment Advisor, whose President David Meredith Hudson has sole voting power
over these shares; (b) 80,826 shares held by Hudson Capital Management, Inc.,
General Partner for Portland Partners, an Oregon Limited Partnership, whose
President David Meredith Hudson has sole voting power over these shares; (c)
1,452 shares held as joint tenants with rights of survivorship by David
Meredith and Roseanna Hudson; and 2,178 shares held by David Meredith Hudson.
(b) Security Ownership of Management
--------------------------------
The following table sets forth information as to the beneficial
ownership of the Common Shares of the Company, as of December 31, 1996, by each
Director of the Company and by all directors and officers of the Company as a
group:
Amount and
Nature of
Beneficial
Beneficial Owner Title of Class Ownership(1) Percent
- - ---------------- -------------- ------------ -------
Arthur F. Doust Common Shares 252,515(2) 12.59%
Robert W. Woolf Common Shares 4,070 .20%
John P. Simcox Common Shares 1,500 .07%
Kevin D. Lauck Common Shares 2,852 .14%
Robert F. Veh Common Shares 19,665(3) .98%
W. Burton Lloyd Common Shares 61,463(4) 3.07%
Robert H. Moyer Common Shares 2,452 .12%
Fred J. Roynon Common Shares 500 .02%
Richard J. Dudley Common Shares 242 .01%
All directors and Common Shares 384,064 19.16%
officers as a group
(13 persons)
<FN>
- - ------------
(1) All shares are held of record with sole voting and investment power unless
otherwise indicated.
(2) Includes (a) 157,014 shares held in trust by Arthur F. Doust and Anna K.
Doust, Co-Trustees, of which 78,507 shares are held for their own benefit; (b)
44,765 shares owned by Anna K. Doust, wife of Arthur F. Doust; and (c) 12,743
shares owned by the children of Arthur F. Doust.
(3) Includes (a) 1,016 shares owned by Wanda Veh, wife of Robert F. Veh.
(4) Includes (a) 58,269 shares owned by Roselyn Lloyd, wife of W. Burton Lloyd.
- 42-
43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
No disclosure required.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) 1. and 2. Financial Statements and Financial Statement
--------------------------------------------
Schedule
--------
Page
Balance sheets at December 31, 1996 and 1995 20 & 21
Statements of income for each of the three
years in the period ended December 31, 1996 22
Statements of shareholders' equity for each
of the three years in the period ended
December 31, 1996 23
Statements of cash flows for each of the three
years in the period ended December 31, 1996 24
Notes to financial statements 25
Schedule for each of the three years in the period ended December 31, 1996:
VIII - Reserves 47
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
-43-
44
(a) 3. Exhibits
Exhibit
Number Description of Document
------ -----------------------
3(i) Amended Articles of Incorporation of the Registrant
(Incorporated herein by reference to Exhibit 3.1 to
Form 10-K annual report for year ended December 31, 1993).
3(ii) Amended and Restated Code of Regulations of the
Registrant. (Incorporated herein by reference to
Exhibit 3.2 to Form 10-K annual report for year
ended December 31, 1993).
4.1 Articles Fourth and Fifth of the Amended Articles
of Incorporation of the Registrant (Incorporated
herein by reference to Exhibit 3.1 to Form 10-K
annual report for year ended December 31, 1993).
4.2 Articles II, III, VIII and XIII of the Amended and
Restated Code of Regulations of the Registrant
(Incorporated herein by reference to Exhibit 3.2 to
Form 10-K annual report for year ended December 31, 1993).
4.3 Specimen Common Share Certificate (Incorporated
herein by reference to Exhibit 4(d) to Form S-1
Registration Statement No. 2-59959 of the
Registrant filed on September 27, 1977 (the
"Registration Statement")).
4.4 Shareholder rights plan of the Registrant dated
May 27, 1993 (Incorporated herein by reference to
Exhibit 5(a) to Form 8-K Current Report of the
Registrant dated May 27, 1993).
4.5 Amended and Restated Credit Agreement between the Registrant
and Fifth Third Bank authorizing borrowing by the
Registrant of up to $15,000,000.
4.6 Amendment to credit agreement between the Registrant
and Fifth Third Bank dated as of February 28, 1997 (see
Exhibit 4.5 above) amending the terms of the credit
agreement.
-44-
45
Exhibit
Number Description of Document
------ -----------------------
No other instruments defining the rights of holders of
long-term debt of the Registrant have been included as an
exhibit because the total amount of indebtedness authorized by
any such instrument does not exceed 10% of the total assets of
the Registrant. The Registrant hereby agrees to furnish
supplementally a copy of any omitted long-term debt instrument
to the Commission upon request.
10.1 Agreement between the Registrant and Sumitomo Shoji America,
Inc. dated September 14, 1976 granting Sumitomo a right of
first refusal to supply steel plate to the Tank Division
(Incorporated herein by reference to Exhibit 13(b)(2) to the
Registration Statement).
10.2 Lease between the Registrant and the Toledo Trust
Company (now KeyBank N.A.) dated December 9, 1980 and a
representative schedule of leased equipment dated
December 29, 1980 (Incorporated herein by reference to
Exhibit 10 (i) to the Registrant's Form 10-K Annual Report
for the year ended December 31, 1980).
10.3 Equipment Lease Agreement between the Registrant and
Society National Bank of Northwest Ohio (now KeyBank N.A.)
dated September 23, 1983 and a Representative schedule of
leased equipment dated December 29, 1983 (Incorporated herein
by reference to Exhibit 10(m) to Registrant's Form 10-K
Annual Report for the year ended December 31, 1983).
10.4 Collective Bargaining Agreement between the Registrant
and the United Steelworkers of America, AFL-CIO-CLC, Local
Union No. 1915, dated May 1, 1996.
10.5 Agreement between the Registrant and Laborers Inter-
National Union, Local No. 480, effective March 1, 1997.
10.6 Form of Employment Agreements dated August 1, 1996 between the
Registrant and Robert A. Woolf, President, John P. Simcox,
Vice President and Kevin D. Lauck, Secretary.
-45-
46
Exhibit
Number Description of Document
------ -----------------------
22 Subsidiaries of the Registrant (No Exhibit is
included because the Registrant has no subsidiaries).
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
On December 6, 1996 the Registrant filed a From 8-K reporting under
Item 5, other events, the announcement that it had retained McDonald & Co. to
advise it in connection with the potential sale of two of its non-core
businesses; the Cal-Van Tools and Cory Orchard & Turf Divisions. The filing
included as an exhibit the press release dated December 6, 1996.
-46-
47
CHEMI-TROL CHEMICAL CO.
SCHEDULE VIII - RESERVES
Years ended December 31, 1996, 1995, and 1994
Additions Balance
Balance at charged to Deductions at end
Beginning costs and from of
Description of period expenses Reserves period
----------- --------- -------- -------- ------
Year ended December 31, 1996:
Allowance for doubtful
accounts $310,000 $403,218 $333,218(a) $380,000
Year ended December 31, 1995:
Allowance for doubtful
accounts 310,000 95,848 95,848(a) $310,000
Year ended December 31, 1994:
Allowance for doubtful
accounts 310,000 44,389 44,389(a) $310.000
<FN>
(a) Doubtful accounts written off.
-47-
48
SIGNATURE
---------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHEMI-TROL CHEMICAL CO.
Registrant
/S/ Arthur F. Doust
-----------------------------------
By: Arthur F. Doust, Chairman of
the Board, Chief Executive
Officer (Principal Executive
Officer)
/S/ Robert W. Woolf
-----------------------------------
By: Robert W. Woolf, President
(Chief Operating Officer)
/S/ Kevin D. Lauck
-----------------------------------
By: Kevin D. Lauck, Secretary and
Controller (Principal Accounting
Officer and Principal Financial
Officer)
Gibsonburg, Ohio
March 21, 1997
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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/ ARTHUR F. DOUST /S/ ROBERT W. WOOLF
- - ------------------------------- -------------------------------
Arthur F. Doust, March 21, 1997 Robert W. Woolf, March 21, 1997
(Director and Principal Executive (Director and President)
Officer)
/S/ RICHARD J. DUDLEY /S/ JOHN P. SIMCOX
- - ------------------------------- -------------------------------
Richard J. Dudley, March 21, 1997 John P. Simcox, March 21, 1997
(Director) (Director and Vice President)
/S/ ROBERT H. MOYER /S/ ROBERT F. VEH
- - ------------------------------- -------------------------------
Robert H. Moyer, March 21, 1997 Robert F. Veh, March 21, 1997
(Director) (Director)
/S/ FRED J. ROYNON /S/ W. BURTON LLOYD
- - ------------------------------- -------------------------------
Fred J. Roynon, March 21, 1997 W. Burton Lloyd, March 21, 1997
(Director) (Director)
/S/ KEVIN D. LAUCK
- - -------------------------------
Kevin D. Lauck, March 21, 1997
(Director and Secretary)
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
- - --------------------------------------------------------------------------------
No Annual Report covering the Registrant's last fiscal year or proxy
soliciting material for any meeting of security holders since the 1996 Annual
Meeting has been sent to the Registrant's security holders. Such report and
proxy material for the Registrant's 1997 Annual Meeting will be furnished to
security holders subsequent to the filing of this Annual Report.
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FORM 10-K EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
------ ----------------------- ------
3(i) Amended Articles of Incorporation of the Registrant ---
(Incorporated herein by reference to Exhibit 3.1 to
Form 10-K annual report for year ended December 31, 1993).
3(ii) Amended and Restated Code of Regulations of the ---
Registrant. (Incorporated herein by reference to
Exhibit 3.2 to Form 10-K annual report for year ended
December 31, 1993).
4.1 Articles Fourth and Fifth of the Amended Articles ---
of Incorporation of the Registrant (Incorporated
herein by reference to Exhibit 3.1 to Form 10-K
annual report for year ended December 31, 1993).
4.2 Articles II, III, VIII and XIII of the Amended and ---
Restated Code of Regulations of the Registrant
(Incorporated herein by reference to Exhibit 3.2 to
Form 10-K annual report for year ended December 31, 1993).
4.3 Specimen Common Share Certificate (Incorporated ---
herein by reference to Exhibit 4(d) to Form S-1
Registration Statement No. 2-59959 of the
Registrant filed on September 27, 1977 (the
"Registration Statement")).
4.4 Shareholder rights plan of the Registrant dated ---
May 27, 1993 (Incorporated herein by reference to
Exhibit 5(a) to Form 8-K Current Report of the
Registrant dated May 27, 1993).
4.5 Amended and Restated Credit Agreement between the 53
Registrant and Fifth Third Bank authorizing borrowing
by the Registrant of up to $15,000,000.
4.6 Amendment to credit agreement between the Registrant 64
and Fifth Third Bank dated as of February 28, 1997
(See Exhibit 4.5 above) amending the terms of the
credit agreement.
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Exhibit Page
Number Description of Document Number
------ ----------------------- ------
No other instruments defining the rights of holders of
long-term debt of the Registrant have been included as an
exhibit because the total amount of indebtedness authorized by
any such instrument does not exceed 10% of the total assets of
the Registrant. The Registrant hereby agrees to furnish
supplementally a copy of any omitted long-term debt instrument
to the Commission upon request.
10.1 Agreement between the Registrant and Sumitomo Shoji ---
America, Inc. dated September 14, 1976 granting
Sumitomo a right of first refusal to supply steel
plate to the Tank Division (Incorporated herein by reference
to Exhibit 13(b) (2) to the Registration Statement).
10.2 Lease between the Registrant and the Toledo Trust ---
Company (now KeyBank N.A.) dated December 9, 1980
and a representative schedule of leased equipment
dated December 29, 1980 (Incorporated herein by
reference to Exhibit 10 (i) to the Registrant's Form
10-K Annual Report for the year ended December 31, 1980).
10.3 Equipment Lease Agreement between the Registrant and ---
Society National Bank of Northwest Ohio (now KeyBank
N.A.) dated September 23, 1983 and a Representative
schedule of leased equipment dated December 29, 1983
(Incorporated herein by reference to Exhibit 10(m)
to Registrant's Form 10-K Annual Report for the year
ended December 31, 1983).
10.4 Collective Bargaining Agreement between the Registrant 66
and the United Steelworkers of America, AFL-CIO-CLC,
Local Union No. 1915, dated May 1, 1996.
10.5 Agreement between the Registrant and Laborers Inter- 104
National Union, Local No. 480, effective March 1, 1997.
10.6 Form of Employment Agreements dated August 1, 1996 108
between the Registrant and Robert W. Woolf, President,
John P. Simcox, Vice President, and Kevin D. Lauck,
Secretary.
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Exhibit Page
Number Description of Document Number
------ ----------------------- ------
22 Subsidiaries of the Registrant (No Exhibit is ---
included because the Registrant has no subsidies).
27 Financial Data Schedule
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