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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year (fifty-three weeks) ended January 3, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from N / A to N / A.
Commission File Number 0-8514
LIQUI-BOX CORPORATION
(Exact name of registrant as specified in its charter)
________________OHIO__________________________31-0628033________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6950 Worthington-Galena Road, Worthington, Ohio_________________43085 __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code_________(614) 888-9280_______
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, No Par Value (4,725,773 outstanding at February 24, 1998)
(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 ___
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. [ X ]
Based upon the closing price reported on the NASDAQ National Market System on
February 24, 1998, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $109,748,000.
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended January 3, 1998 are incorporated by reference into Parts I and
II of this Annual Report on Form 10-K.
(2) Portions of the Registrant's Definitive Proxy Statement for its Annual
Meeting of Shareholders to be held on April 22, 1998 are incorporated by
reference into Part III of this Annual Report on Form 10-K.
Exhibit Index on Page 11
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PART I
Item 1. Business:
GENERAL DEVELOPMENT OF BUSINESS - Liqui-Box Corporation and its
subsidiaries ("Liqui-Box" or the "Company") is one of the largest
companies in the world specializing in the research, development and
manufacture of bag-in-box flexible liquid packaging systems. The
Company was incorporated in January, 1962 in the state of Ohio. Its
principal offices are located at 6950 Worthington-Galena Road,
Worthington, Ohio.
Liqui-Box is a major producer of bag-in-box flexible packaging and related
filling equipment systems for the beverage, processed foods, dairy, wine
and other specialty products industries. The Company is also the leading
supplier of containers and dispensing systems to the bottled water
industry.
The Company and its subsidiaries operate 11 manufacturing plants in
the United States and Europe. Through licensees, agents and direct
exporters, Liqui-Box serves markets in many countries worldwide.
DESCRIPTION OF PRINCIPAL PRODUCTS - The principal product of the
Company is plastic packaging. Such packaging includes specialty
plastic bags and plastic blow molded containers; injection molded
plastic products used in liquid packaging and a variety of
industrial and commercial plastic packaging films. In addition, the
Company manufactures equipment for filling such packaging products
(less than 3% of total net sales). These products are marketed
nationwide primarily to the edible products industries principally
through a direct sales force. These products are also marketed
internationally through a direct sales force, licensees, agents and
the Company's own export operations. In 1997, the Company
maintained its position in its principal markets of beverage,
processed foods and specialty industrial products.
COMPETITION - The plastic packaging market is large and highly
fragmented. There are numerous competitors and the major markets in
which the Company sells its products are very competitive. These
products are in competition with similar products produced by other
manufacturers, and in some instances, with products produced by
other industries from other raw materials.
The plastic packaging industry is, therefore, highly price
competitive. A substantial number of manufacturers compete in the
national and international markets. None are considered to be
dominant. According to information in the public domain, Liqui-Box
supplies less than one percent of the total plastic packaging market
in the United States.
While Liqui-Box's product and customer mix is generally diverse, The
Perrier Group of America constitutes a buying group of customers
that is a material part of the Company's business to the extent that
loss of this buying group, with which the Company has a good
relationship, would have a material effect on the Company's
business. The risk associated with such a potential loss is
mitigated by an exclusive 3 year supply agreement between the
Company and The Perrier Group of America. This agreement, which was
renegotiated in 1997 in accordance with the terms of the original
supply agreement, expires on December 31, 2000. Sales to this
customer constituted 19%, 18% and 17% of total sales in 1997, 1996
and 1995, respectively.
RESEARCH AND DEVELOPMENT - Liqui-Box emphasizes applied research and
development as a vital aspect of meeting the needs of its customers
for plastic packaging. Thus, the Company's research activities
focus on the development of new plastic packaging products and
packaging systems to increase quality, improve production efficiency
and/or reduce costs to its customers and to the ultimate consumer.
The Company also devotes significant efforts to the research,
development and improvement of plastic packaging machinery and
equipment for use by its customers and in its own production
operations.
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R & D expenditures in 1997, 1996 and 1995 were $1,371,000,
$1,856,000 and $1,265,000, respectively. All such activities were
entirely Company-funded from operations. It should also be noted
that the funding levels only represent costs directly charged to
research and development. The amounts do not represent the
commitment and work of all employees of Liqui-Box to improving
existing products and processes and to developing new products and
processes. Many employees who are not part of the research and
development organization of the Company spend part of their efforts
on developing new products and processes.
Information on research and development can also be found on Pages
and [Management's Discussion and Analysis] and on Page 31 [Note
1, Accounting Policies, of the Notes to Consolidated Financial
Statements] of the 1997 Annual Report and is incorporated herein by
reference.
PATENTS AND LICENSES - Liqui-Box holds and maintains patents for
packaging design, fitments and packaging equipment which are used by
the Company in its production and which are also licensed to other
manufacturers. Revenues from royalties from these patents and
licenses are not material to the total revenues of the Company.
ENVIRONMENT - Consumer recognition of environmental friendliness of
liquid plastic packaging systems is growing. Compared to a
conventional 5-gallon plastic pail, the 5-gallon plastic bag-in-box
reduces total plastic use by 90 percent. An empty, collapsed
5-gallon bag requires a small fraction of the disposal space of a
comparable number of No. 10 cans, five wide-mouth one gallon jars
or one 5-gallon pail occupy. The corrugated box used to transport
and store packaged liquids is completely recyclable. Liqui-Box
utilizes proper recycling codes on all of its products for quick
identification in community recycling programs.
The bag-in-box design is increasingly seen as a major part of the
solution to the problem of environmental waste, storage and
disposal. In addition, Liqui-Box is asking its suppliers to
experiment in the use of reprocessed material in the products
furnished to the Company and several promising applications are
being actively explored. The Company has also committed to zero
scrap in the waste stream of its plant operations through sorting
and recycling for use in shipping bags and other non food
applications. This commitment represents the elimination of more
than one million pounds of waste annually.
As a major player in the solution of societal environmental
problems, the Company supports such conscientiousness and is not
aware of any federal, state or local statutory or regulatory
provisions concerning environmental protection or the discharge of
materials into the environment that will have any material effect on
the capital expenditures, sales, earnings or competitive position of
the Company in the future.
RAW MATERIALS - The primary raw material essential to the Company's
business is plastic resin. There are a number of suppliers for this
material and the market is highly competitive. The Company is
confident that its sources of supply of resin are adequate for its
needs in the foreseeable future.
SEASONALITY OF BUSINESS - The demand for some applications of
certain plastic packaging products is seasonal in nature. A mild
summer, for example, can reduce the Company's sales to the beverage
industry. However, experience over the years has shown that these
variations generally offset each other and tend to level the total
demand for the Company's products throughout the year. As a result,
the Company usually experiences only minor variations in sales
volume attributable to seasonal demands.
BACKLOG OF ORDERS - Sales of the Company's packaging products
generally are closely coordinated with the product production of its
customers. Typically, orders are filled within 30 days. Therefore,
the backlog of orders is not significant.
EMPLOYEES - Liqui-Box employed 682 individuals in its operations
throughout the United States and in Europe on January 3, 1998.
Approximately 2% of these employees are members of a collective
bargaining unit. The Company considers itself an industry leader
in participative management of its human resources, placing a
premium value on innovation, creativity and attentiveness to solving
customers' problems in packaging. Accordingly, the Company believes
its relations with its employee group to be an asset.
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FOREIGN OPERATIONS AND SALES - The Company's European operations constituted 13%
of consolidated net sales, less than 10% of consolidated income before taxes and
20% of consolidated identifiable assets as of and for the year ended January 3,
1998. European operations constituted 12% of net sales, less than 10% of
consolidated income before taxes and 22% of identifiable assets as of and for
the year ended December 28, 1996. Further information can be found on page 37
[Note 9 of the Notes to Consolidated Financial Statements] of the 1997 Annual
Report and is incorporated herein by reference.
Item 2. Properties:
At January 3, 1998, the Company owned or leased property at sixteen (16)
locations for manufacturing and offices with a total of approximately 652,000
square feet of floor space. The following table summarizes the properties owned
or leased.
Approximate Owned Expiration
Floor Space or Date of
Use and Location: (Sq. Ft.) Leased Lease
- ------------------ ----------- ------ ----------------
Executive offices, research and
manufacturing:
Worthington, Ohio 63,000 Owned N/A
Manufacturing:
Ashland, Ohio 43,000 Leased Less than 1 year
Ashland, Ohio 22,000 Owned N/A
Houston, Texas 33,000 Leased 1999
Elkton, Maryland 58,000 Leased 2015
Auburn, Massachusetts 30,000 Leased Less than 1 year
New Albany, Indiana 61,000 Owned N/A
Ontario, California 61,000 Leased 2003
Upper Sandusky, Ohio 58,000 Owned N/A
Lake Wales, Florida 8,000 Owned N/A
Lake Wales, Florida 12,000 Owned N/A
Sacramento, California 74,000 Leased 2002
Sacramento, California 24,000 Leased Less than 1 year
Allentown, Pennsylvania 40,000 Leased 2006
Romiley, England 53,000 Leased 2006
Romiley, England 12,000 Leased 2006
The Company believes that its properties, plant, and equipment are all in good
operating condition and are adequate for its expected needs. Certain of the
leases contain renewal options which the Company expects to exercise to maintain
its operations at the facilities.
Item 3. Legal Proceedings:
See page 23 [Note 3 of the Notes to Consolidated Financial Statements] of the
1997 Annual Report and is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable
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Executive Officers of the Registrant:
The names, ages, and positions of all of the executive officers of Liqui-Box, as
of February 24, 1998, are listed below along with their business experience
during the past five years. Executive officers are appointed annually by the
Board of Directors at the annual meeting of directors immediately following the
annual meeting of shareholders. There are no arrangements or understandings
between any executive officer and any other person pursuant to which the
executive officer was selected.
Name Age Title
Samuel B. Davis (1) 56 Chairman of the Board, Chief Executive
Officer, Treasurer and Director
Robert S. Hamilton (2) 69 Vice Chairman of the Board and
Director
C. William McBee (3) 55 Chief Operating Officer, President and
Director
Samuel N. Davis (4) 33 Vice President, Development and Director
Joseph F. Pranckus (5) 37 Vice President, Sales
Stewart M. Graves (6) 40 Vice President, International
(1) Samuel B. Davis has been Chairman of the Board, Chief Executive Officer and
Treasurer since August, 1982. Mr. Davis was President from September, 1991
to December, 1997 upon the promotion of C. William McBee.
(2) Robert S. Hamilton has been Vice Chairman of the Board since July, 1989.
Mr. Hamilton was President and Chief Operating Officer from April, 1984 to
September, 1991 with a period of retirement from January, 1990 to May, 1990
and another period of retirement from September, 1991 until May, 1995.
(3) C. William McBee has been Chief Operating Officer and President since
December, 1997. Mr. McBee became a director in April, 1995. From October,
1994 until December, 1997, Mr. McBee was Vice President of Manufacturing.
Mr. McBee was also Vice President, Administration from February, 1994 to
October 1995. Prior to February, 1994, Mr. McBee was a General Manager for
Stone Container Corporation, Columbus, Indiana, a manufacturer of
corrugated cardboard containers.
(4) Samuel N. Davis became Vice President, Development and an executive officer
in April, 1996. From September, 1995 until April, 1996 Mr. Davis held the
position of Special Projects Coordinator. From January, 1993 through
August, 1995, Mr. Davis was an active investor in Zacchaeus Clothiers,
Columbus, Ohio, a clothing retailer. Prior to January, 1993, Mr. Davis held
various offices with Liqui-Box.
(5) Joseph F. Pranckus became Vice President, Sales and an executive officer in
October, 1996. Mr. Pranckus held the position of National Sales Manager
from March, 1996 until October, 1996. Prior to March, 1996, Mr. Pranckus
held various sales management positions with Liqui-Box.
(6) Stewart M. Graves became Vice President, International and an executive
officer in August, 1996. Prior to August, 1996, Mr. Graves held the
position of Managing Director of LB Europe Limited.
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PART II
The following items are incorporated herein by reference from the indicated
pages of the 1997 Annual Report:
Pages
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 5
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operation 20-23
Item 8. Financial Statements and Supplementary Data 24-38
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure No response required
PART III
The following items are incorporated herein by reference from the indicated
pages of the Registrant's definitive Proxy Statement for its 1998 Annual Meeting
filed pursuant to Regulation 14A of the Securities Exchange Act of 1934.
Item 10. Directors and Executive Officers of the Registrant 3 - 5
In addition, certain information concerning the
executive officers of the Registrant called for in
this Item 10 is set forth in the portion of Part I
of this Annual Report on Form 10-K, entitled
"Executive Officers of the Registrant".
Item 11. Executive Compensation Neither the Report of the 5 - 9
Board of Directors and Stock Option Committee on
executive compensation, nor the performance graph
included in the Registrant's definitive Proxy
Statement for its 1998 Annual Meeting, are
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and 2 - 3
Management
Item 13. Certain Relationships and Related Transactions 4, 5 and 9
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K:
(a) (1) The following consolidated financial statements of Liqui-Box
Corporation and Subsidiaries, included in the Registrant's 1997
Annual Report, are incorporated by reference in Item 8 and filed
as Exhibit 13 to this report. The page numbers indicate the
location of the consolidated financial statements in the
Registrant's 1997 Annual Report.
Consolidated Balance Sheets
--January 3, 1998 and December 28, 1996 24-25
Consolidated Statements of Income
--Fifty-three weeks ended January 3, 1998,
Fifty-two weeks ended December 28, 1996 and
Fifty-two weeks ended December 30, 1995 26
Consolidated Statements of Cash Flows
--Fifty-three weeks ended January 3, 1998
Fifty-two weeks ended December 28, 1996 and
Fifty-two weeks ended December 30, 1995 27
Consolidated Statements of Stockholders' Equity
--Fifty-three weeks ended January 3, 1998,
Fifty-two weeks ended December 28, 1996 and
Fifty-two weeks ended December 30, 1995 28-29
Notes to Consolidated Financial Statements 30-37
Report of Independent Auditors 38
Report of Independent Auditors. The page number
indicates the location in this Form 10-K 54
(a) (2) The following consolidated financial statement schedules of
Liqui-Box Corporation and Subsidiaries are included in Item 14(d).
The page number indicates the location in this Form 10-K.
II - Valuation and Qualifying Accounts 9
Schedules other than those listed above are omitted because they are not
required or are not applicable.
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Item 14. (continued)
(a) (3) Listing of Exhibits - The following exhibits are included in
Item 14(c). The page number indicates
the location of the exhibit in this Form 10-K.
Exhibit No. Description Pages
- ----------- ----------- -----
3A Amended Articles of Incorporation of the Registrant as filed with the Ohio
Secretary of State on December 14, 1995 are incorporated by reference to the
Registrant's Form 10-K for the Fiscal Year ended December 30, 1995 filed with
the Securities and Exchange Commission (Exhibit 3A) (File number 0-8514) N/A
3B Code of Regulations as Amended of the Registrant are incorporated by reference
to the Registrant's Form 10-Q for the Fiscal Quarter ended July 1, 1995 filed
with the Securities and Exchange Commission (Exhibit 3B) (File number 0-8514) N/A
9 Voting Trust and Right of First Refusal Agreement, effective as of September 29,
1993, by and among Mary Ann Davis, Samuel B. Davis, as Voting Trustee, and Samuel
B. Davis, individually, is incorporated by reference to Amendment No. 6 to
Schedule 13D of Samuel B. Davis filed on March 6, 1995 (Exhibit 1). N/A
10A-B EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10A 1990 Liqui-Box Stock Option Plan is incorporated by reference to the Registrant's
Form 10-Q for the Fiscal Quarter ended June 30, 1990 filed with the Securities
and Exchange Commission (Exhibit 19(a)) (File number 0-8514). N/A
10B Summary of Profit Participation Program is incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended January 2, 1993 filed with the
Securities and Exchange Commission (Exhibit 10E) (File number 0-8514). N/A
13 Annual Report to Stockholders for the fiscal year ended January 3, 1998 11-51
21 Subsidiaries of the Registrant 53
23 Independent Auditors' Consent and Report on Schedule (Deloitte & Touche LLP) 54
24 Powers of Attorney 55-62
27.1 Financial Data Schedule 63
27.2 Financial Data Schedule 64
27.3 Financial Data Schedule 65
(b) No report on Form 8-K was filed during the fourteen weeks ended January 3, 1998. N/A
(c) Exhibits filed with this Annual Report on Form 10-K are attached hereto.
See Index to Exhibits at page 52.
(d) Financial Statement Schedules -- See Item 14.(a)(2)
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SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(amounts rounded to the nearest thousand dollars)
LIQUI-BOX CORPORATION AND SUBSIDIARIES
Column A Column B Column C Column D Column E
Additions
-----------------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Period Expenses Accounts Deductions(1) Period
- ----------- --------- ------------------------------ ------------- ----------
Reserves deducted from assets:
Fifty-three weeks ended
January 3, 1998:
Allowance for
doubtful accounts $742,000 $685,000 $(494,000) $933,000
Fifty-two weeks ended
December 28, 1996:
Allowance for
doubtful accounts $679,000 $747,000 $(684,000) $742,000
Fifty-two weeks ended
December 30, 1995:
Allowance for
doubtful accounts $594,000 $723,000 $(638,000) $679,000
(1) Uncollectible accounts written off, net of recoveries.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LIQUI-BOX CORPORATION
3/24/98 * Samuel B. Davis
Date: ________________________ By: _______________________________________________
Samuel B. Davis
Chairman of the Board, Chief Executive Officer,
Treasurer and Director
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.
3/24/98 *Samuel B. Davis
Date: _________________________ By: _______________________________________________
Samuel B. Davis
Chairman of the Board, Chief Executive Officer,
Treasurer and Director
(Principal Executive and Financial Officer)
3/23/98 *Samuel N. Davis
Date: __________________________ By: ________________________________________________
Samuel N. Davis
Vice President of Devlopment and Director
3/23/98 *Robert S. Hamilton
Date: __________________________ By: ________________________________________________
Robert S. Hamilton
Vice Chairman and Director
3/24/98 *Charles R. Coate
Date: __________________________ By:_________________________________________________
Charles R. Coate
Director
3/27/98 *C. William McBee
Date: __________________________ By:_________________________________________________
C. William McBee
President, Chief Operating Officer, Director
and Secretary
3/26/98 *Carl J. Aschinger, Jr.
Date: __________________________ By:_________________________________________________
Carl J. Aschinger, Jr.
Director
3/23/98 *Russell M. Gertmenian
Date: __________________________ By:_________________________________________________
Russell M. Gertmenian
Director
3/20/98 *James B. Holloway
Date: __________________________ By:_________________________________________________
James B. Holloway
Controller
3/20/98 /S/ James B. Holloway
Date: __________________________ By:_________________________________________________
James B. Holloway
Attorney in Fact
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Index to Exhibits
Listing of Exhibits - The following exhibits are included in Item 14(c).
The page number indicates the location of the exhibit in this Form 10-K.
Exhibit No. Description Pages
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3A Amended Articles of Incorporation of the Registrant as filed with the Ohio
Secretary of State on December 14, 1995 are incorporated by reference to the
Registrant's Form 10-K for the Fiscal Year ended December 30, 1995 filed with
the Securities and Exchange Commission (Exhibit 3A) (File number 0-8514) N/A
3B Code of Regulations as Amended of the Registrant are incorporated by reference
to the Registrant's Form 10-Q for the Fiscal Quarter ended July 1, 1995 filed
with the Securities and Exchange Commission (Exhibit 3B) (File number 0-8514) N/A
9 Voting Trust and Right of First Refusal Agreement, effective as of September 29,
1993, by and among Mary Ann Davis, Samuel B. Davis, as Voting Trustee, and
Samuel B. Davis, individually, is incorporated by reference to Amendment No. 6
to Schedule 13D of Samuel B. Davis filed on March 6, 1995 (Exhibit 1). N/A
10A 1990 Liqui-Box Stock Option Plan is incorporated by reference to
the Registrant Form 10-Q for the Fiscal Quarter ended June 30, 1990 filed
with the Securities and Exchange Commission ( Exhibit 19(a))
(File number 0-8514). N/A
10B Summary of Profit Participation Program is incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended January 2, 1993 filed with
the Securities and Exchange Commission (Exhibit 10E) (File number 0-8514). N/A
13 Annual Report to Stockholders for the fiscal year ended January 3, 1998 11-51
21 Subsidiaries of the Registrant 53
23 Independent Auditors' Consent and Report on Schedule (Deloitte & Touche LLP) 54
24 Powers of Attorney 55-62
27.1 Financial Data Schedule 63
27.2 Financial Data Schedule 64
27.3 Financial Data Schedule 65
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