ITEM 1. BUSINESS
GENERAL
Plasti-Line, Inc. which was incorporated in Tennessee in 1984, is a leading producer of indoor and outdoor signs for corporate identification programs. These signs are used primarily at retail outlets of large national or regional companies such as automobile dealerships, gasoline stations, banks and fast food restaurants. Plasti-Line, Inc. designs, engineers and manufactures substantially all its products in Knoxville, Tennessee, Florence, Kentucky, and Ontario, California. Plasti-Line, Inc. markets its products throughout the United States and, to a limited extent, in Canada. As used herein, the "Company" refers to Plasti-Line, Inc. and its subsidiary unless the context requires otherwise.
The Company concentrates on providing a complete range of products and services to high-volume users in the automotive, fast food, petroleum, banking and other retail markets. The Company's manufacturing facilities in Knoxville, Tennessee and Ontario, California serve this aspect of the business. The Company's subsidiary, American Sign and Marketing Services, Inc. ("American Sign"), in Florence, Kentucky, concentrates on production and marketing of small outdoor signs, indoor signs and menuboards.
PRODUCTS
The Company's basic sign product is composed of two rigid plastic faces that are molded and decorated to reflect the customer's name and logo. These faces are mounted in a steel or aluminum frame and generally placed on a steel column to permit visibility. Typically, the signs are internally illuminated to make them visible at night. The sign faces range in size from two square feet to 245 square feet.
The Company's products are used by its customers primarily for brand identification of their retail outlets. For high-volume customers in the automotive and fast food markets, and to a lesser extent for petroleum customers, the Company produces a full package of signs used to identify a particular retail location with the corporate image known to consumers. A package may consist of many sign elements, including (i) road signs decorated with the customer's logo and colors and often built in a distinctive shape; (ii) high rise signs typically used for locations adjacent to interstate highways or in high traffic areas; (iii) menuboards with changeable copy areas and price mechanisms to enable fast food customers to identify and change their menus and prices; (iv) signs typically used by petroleum customers to provide on-site advertising of the prices of various products; (v) specialty lighting products that provide accent or decorative lighting, typically at fast food restaurants and gasoline stations; and (vi) illuminated fascia signage that is mounted on buildings for decoration and identification.
The Company concentrates on high-volume, standardized products, but also produces customized signage as an accommodation to its regular customers. Custom signs typically require special fabrication techniques and tend to generate low-volume production runs with longer lead times.
The Company provides at least a one-year limited warranty on all signs for defects in materials and workmanship, with the Company being obligated to repair or replace any defective product.
In addition to production, the Company offers a complete spectrum of sign services, including design, site analysis, graphic analysis, installation and maintenance. Working with the customer or a design consultant retained by the customer, the Company assists in developing designs that meet the customer's goals. Upon customer request, the Company coordinates the sign package with local ordinances and regulatory requirements, assists in determining where to place the signs for maximum visibility and assists in obtaining necessary permits and variances. In cases where the Company has a contract for the installation of a sign, the Company utilizes the services of a subcontractor in the area in which the sign is to be installed. Maintenance service, regular cleaning, inspection and replacement of lights and other parts when needed or on a predetermined schedule are also provided through local subcontractors.
CUSTOMERS
The Company for internal purposes separates its business by customers into automotive, banks, fast food, petroleum and other industry groupings. For its automotive, bank, and fast food customers, the Company typically provides a full range of products and services, including most or all of those described above. For the petroleum industry, the Company typically manufactures signs to the customer's specifications and ships them for installation by the customer's own subcontractors. Customer commitments vary by market segment and specific account. Commitments range from multi-year contracts with firm prices for all products and services, to specific orders for specific quantities at firm prices. From time to time, the Company is awarded large, one-time contracts by customers who are changing their name or image. These programs can create concentrated surges in volume.
PRINCIPAL CUSTOMERS Since 1969, the Company's principal customers have been subsidiaries of General Motors Corporation ("General Motors"). General Motors accounted for approximately 21% of the Company's net sales in fiscal 1994. The loss of General Motors as a customer would have a material adverse effect on the Company if it were unable to compensate promptly for that loss by generating new business.
The Company's original contract for the supply of internally illuminated outdoor signs for the General Motors dealership sign program extended through December 31, 1990 with two automatic two year extensions if the Company maintained established performance levels. Both extensions were granted to the Company. Recently, another one year extension through December 31, 1995 was executed. The Company furnishes all services associated with the manufacture and installation of signs and replacement parts ordered by General Motors for approximately 9,000 participating dealerships. The contract is terminable on 30 days' notice by either party and is non-exclusive; however, the Company believes that it is currently the sole supplier for the General Motors dealership sign program. Signs are supplied for new dealerships, as replacements of signs at existing dealerships and in connection with moves to new locations. The Company provides General Motors with a 10-year limited warranty for defects in materials and workmanship, with the Company being obligated to repair or replace any defective product.
MARKETING
Products and services are marketed on a direct basis and through sales representatives throughout the United States and, to a limited extent, in Canada. The Company's principal marketing focus is on companies with many retail outlets requiring substantial numbers of signs. This type of business enables the Company to maintain economic production runs, and increases the opportunity to provide a full range of services.
Marketing opportunities are generated by the construction of new facilities, acquisition of existing locations requiring re-identification, addition of signage at existing locations, design of a new image requiring re-identification of all facilities and replacement of parts damaged by storms, vandalism and accidents.
PRODUCTION AND RAW MATERIALS
Production of the Company's products is a labor intensive process. The typical sign consists of large acrylic or polycarbonate faces mounted in a metal frame and internally illuminated. The shapes of the faces are formed using vacuum or press forming after the face material has been heated. Letters or logos that are not molded into the faces are either glued or silk-screened on the faces. During the production process, signs move through the plants on an overhead monorail system. After the signs are manufactured, they are crated and shipped from the Company's facilities principally by commercial trucking companies.
The practice of the Company is to start producing finished goods only after receipt of a firm order from a customer, although for customers with long-term programs, the Company produces finished goods in anticipation of customer needs. Credit terms are generally net 30 days from the date of sale. Occasionally the Company engages the services of subcontractors for special manufacturing work to assist during peak production periods.
The Company designs and engineers its products to customer specifications. The Company's manufacturing operations include machining, welding, plastic molding and fabrication, painting, assembly and packaging. The principal raw materials and purchased components used in the Company's manufacturing process are steel shapes and sheet, aluminum shapes and sheet, electrical components (wire, sockets, ballasts and lamps) and acrylic and polycarbonate sheets. The Company does not hold any material patents or trademarks.
To date, the Company has experienced no difficulty in satisfying its requirements for raw materials and subcontractor assistance. It considers its sources of supply to be adequate.
COMPETITION
The Company defines its principal market as the volume production sign industry. Competition varies depending on the market segment and the size of the project. Larger projects require a more comprehensive service capability which limits the number of competitors. Smaller, less complex projects attract a larger number of competitors.
Although no authoritative ranking of the Company's industry is published, the Company believes that in 1994 it was the leading supplier of volume production signs and related services in the United States. Most of the Company's competition is from other suppliers, rather than from other products.
Competition for national accounts, the principal source of the Company's business, is intense. The Company believes it has adequate financial resources with which to compete. In general, the Company believes that its products, contract conditions, terms, and warranty provisions are consistent with those prevailing in the industry. The Company believes that its principal advantage is its ability to provide a complete range of products and services to customers on a competitive basis.
EMPLOYEES
The Company had a total of 843 full-time employees as of January 1, 1995 of which approximately sixty percent were employed under union contract.
PRODUCT BACKLOG
At January 1, 1995, booked orders believed to be firm amounted to approximately $32.1 million as compared with approximately $27.1 million at January 2, 1994. Products are shipped by the Company against customer delivery schedules, which generally call for delivery two to four months after the order is placed. The Company believes that substantially all of its product backlog at January 1, 1995 will be shipped before the end of its current fiscal year. In addition to firm product backlog, the Company has open commitments from a number of customers to supply products as required to meet their construction schedules. At the time such a customer gives the Company a release to ship signs to a particular location, the Company includes the products covered by the release in backlog and commences production or ships the items from inventory.
SEASONALITY
The Company's sales in fiscal 1994 exhibited some limited seasonality, with sales in the first quarter being the lowest and those in the fourth quarter the highest. First quarter sales tend to be relatively lower because of weather constraints which slow down customers' construction schedules and their pattern of sign purchases. Sales normally accelerate in the second, third and fourth quarters corresponding with accelerating construction schedules.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages, present positions and business experience of all Executive Officers of the Company. Officers are appointed to serve at the pleasure of the Board.
ITEM 2.
ITEM 2. PROPERTIES
The Company owns its corporate headquarters and manufacturing space in Knoxville which are housed in two buildings on 45 acres of land. One building contains approximately 23,000 square feet of office space. The other building contains approximately 325,000 square feet of manufacturing space. The facilities and equipment in Knoxville were financed in part with the proceeds of industrial revenue bonds issued on behalf of the Company and are collateralized by mortgages or liens. American Sign owns an approximately 230,000 square foot manufacturing and office facility in Florence, Kentucky. The Company owns an approximately 170,000 square foot manufacturing and office facility in Centerville, Tennessee, at which operations ceased during 1992. The Company also rents approximately 20,000 square feet of manufacturing and office facility in Ontario, California. The Company's equipment consists primarily of molds, vacuum forming equipment, computers and general office equipment. The Company believes its existing facilities and equipment are adequate for present and anticipated business. The Company does not hold any material patents or trademarks.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On December 5, 1994, the Company and its subsidiary, American Sign, filed a complaint (the "Complaint") against Teledyne Industries, Inc. ("Teledyne") in Knoxville, Tennessee, in the United States District Court for the Eastern District of Tennessee, Northern Division. This litigation arose in connection with an agreement with Teledyne whereby Teledyne was designing and developing on behalf of the Company and American Sign a drive-through order verification product for fast food restaurants ("Horizon"). Pursuant to the Complaint, the Company and American Sign are seeking approximately $650,000 plus interest from Teledyne plus additional amounts to be proven at trial in connection with their contract with Teledyne relating to Horizon design flaws. The Company and American Sign are also seeking a declaratory judgment against Teledyne stating that the Company and American Sign are not obligated to purchase any Horizon units.
In connection with the Complaint, on January 20, 1995 Teledyne filed a counterclaim against the Company and American Sign in the United States District Court for the Eastern District of Tennessee, Northern Division seeking approximately $2,355,754 plus interest and additional amounts to be proven at trial. This counterclaim is based on the Horizon contract and related fraud and tortious interference claims. The Company and American Sign dispute the allegations in Teledyne's counterclaim and intend to vigorously defend themselves in such litigation.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of stockholders, through a solicitation of proxies or otherwise, during the fourth quarter of the 1994 fiscal year.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
This information is incorporated by reference from the inside back cover of the Company's 1994 Annual Report to Stockholders, which is attached hereto as Exhibit 13.0.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
This information is incorporated by reference from the inside cover of the Company's 1994 Annual Report to Stockholders, which is attached hereto as Exhibit 13.0.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is incorporated by reference from pages 15-16 of the Company's 1994 Annual Report to Stockholders, which is attached hereto as Exhibit 13.0.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated by reference from pages 5-15 of the Company's 1994 Annual Report to Stockholders, which is attached hereto as Exhibit 13.0.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information required under this Item with respect to Directors is incorporated by reference from pages 2-8 of the Company's Proxy Statement dated March 21, 1995. Information about Executive Officers of the Company is included in Item 1 of Part I of this Annual Report on Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item may be found in the sections captioned "Executive Compensation" appearing on pages 6 through 8 of the Company's Proxy Statement dated March 21, 1995. Such information is incorporated herein by reference. In no event shall the information contained in the section 5 captioned "Compensation Committee Report" on pages 8 through 11 of the Company's Proxy Statement dated March 21, 1995, and "Performance Graph" on page 11 of the Company's Proxy Statement dated March 21, 1995 be incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference from pages 13-14 of the Company's Proxy Statement dated March 21, 1995.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from page 12 of the Company's Proxy Statement dated March 21, 1995.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements: See Index to Financial Statements and Financial Statement Schedules, pages 9 and 10.
2. Financial Statement Schedules: See Index to Financial Statements and Financial Statement Schedules, pages 9 and 10.
3. Exhibits: See Index to Exhibits, page 13.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATED: April 3, 1995
PLASTI-LINE, INC.
James R. Martin -------------------------------- James R. Martin (Principal Executive Officer)
Each person whose signature appears below hereby authorizes James R. Martin and Mark J. Deuschle, and each of them, as attorneys-in-fact and agents, with full powers of substitution, to sign on his or her behalf, amendments to this Annual Report on Form 10-K with the Securities and Exchange Commission, granting to said attorney-in-fact and agents full power and authority to perform any other act on behalf of the undersigned required to be done in the premises.
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 Company in the capacities and on the dates indicated.
PLASTI-LINE, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PLASTI-LINE, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
PLASTI-LINE, INC. AND SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
Years ended January 1, 1995 (1994), January 2, 1994 (1993) and January 3, 1993 (1992) (In thousands)
- ------------------------------- (a) Write-offs, net of recoveries, of uncollectible accounts.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors Plasti-Line, Inc.
Our report on the consolidated financial statements of Plasti-Line, Inc. and Subsidiary has been incorporated by reference in this Form 10-K from page 15 of the 1994 Annual Report to Stockholders of Plasti-Line, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 11 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND
Knoxville, Tennessee February 17, 1995
PLASTI-LINE, INC. AND SUBSIDIARIES EXHIBIT INDEX
Exhibits marked with an asterisk are filed herewith. The remainder of the exhibits have heretofore been filed with the Commission and are incorporated herein by reference.
- -------------------------- (1) Plans and arrangements where executives receive compensation.