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UNITED STATES
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, 2003
or
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] For the transition period from ____________ to ____________.
Commission File Number 1-5005
SELAS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1069060
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
1260 Red Fox Road
Arden Hills, Minnesota 55112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (651) 636-9770
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------------------------- --------------------
Common Shares, $1 par value per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2 of the Act) Yes [ ] No [X]
The aggregate market value of the voting common shares held by non-affiliates of
the registrant on June 30, 2003 was $7,080,846. Common shares held by each
officer and director and by each person who owns 10% or more of the outstanding
common shares have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of outstanding shares of the registrant's common shares on March 19,
2004 was 5,129,214.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 2003 annual report to shareholders are incorporated by
reference into Part II of this report. Portions of the Company's proxy statement
for the 2004 annual meeting of shareholders are incorporated by reference into
Part III of this report; provided, however, that the Compensation Committee
Report, The Audit committee Report, the graph showing the performance of the
Company's stock and any other information in such Proxy Statement that is not
required to be included in the Annual Report on Form 10-K, shall not be deemed
to be incorporated herein or filed for the purposes of the Securities Act of
1933 or the Securities Exchange Act of 1934. Except for the parts of such
documents that have been specifically incorporated herein by reference, such
documents shall not be deemed "filed" for the purposes of this report.
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Table of Contents
Page No.
PART I
Item 1. Business 4
Item 2. Properties 15
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 4A. Executive Officers of the Registrant 17
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters 18
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 18
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
Item 9A. Controls and Procedures 19
PART III
Item 10. Directors and Executive Officers of the Registrant 19
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners
and Management 20
Item 13. Certain Relationships and Related Transactions 20
Item 14. Principal Accounting Fees and Services 20
PART IV
Item 15. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 21
SIGNATURES 27
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PART I
ITEM 1. Business
Selas Corporation of America (together with its subsidiaries referred herein as
the "Company") (the Company) is an international firm with operations and sales
that engages in the design, development, engineering and manufacturing of micro-
miniature components, systems and molded plastic parts primarily for the hearing
instrument, electronics, telecommunications, computer and medical equipment
industries. The Company, headquartered in Arden Hills, Minnesota has facilities
in California, Singapore, and Germany, and operates directly or through
subsidiaries. Within discontinued operations, the Company has facilities in
Pennsylvania and Japan. The Company is a Pennsylvania corporation that was
founded in 1930.
Currently, the Company has one operating segment, its precision miniature
medical and electronics products segment. In the past the Company had operated
three segments, precision miniature medical and electronics products segment,
heat technology segment, and tire holders, lifts and related products segment.
Since 2001, the Company began focusing on its precision miniature medical and
electronics products segment and developing plans to exit the businesses that
comprised the heat technology segment, and tire holders, lifts and related
products segment. The Company successfully exited the tire holders, lifts and
related products business in 2003 and is in the process of exiting the heat
technology segment. The Company has classified its heat technology segment as
discontinued operations.
2003 Developments
Sale of Deuer Manufacturing. In July 2003, the Company completed its planned
sale of its Tire Holders, Lifts and Related Products segment. This segment
consisted of one wholly-owned subsidiary, Deuer Manufacturing, Inc. (Deuer)
which operated on a stand alone basis. In 2003, prior to its sale, Deuer
generated approximately $8.5 million of sales and $8,000 in net income. Deuer
had sales of $16.8 million and net income of $1.1 million in 2002. The net
purchase price of $6.6 million was determined by negotiations between the
parties. The Company recognized a gain of approximately $1.5 million, net of
tax, on the transaction. Proceeds from the transaction were used primarily to
reduce the Company's outstanding bank debt. The Company classified the
subsidiary as a discontinued operation beginning December 2002.
Insolvency of French subsidiary. Selas SAS, the Company's French subsidiary,
filed insolvency in France in July 2003 after four consecutive quarters of
substantial losses. Under French law, Selas SAS is now under the control of a
French insolvency court administrator. Because Selas SAS and its subsidiaries
are no longer under the control of Selas, its results of operations are excluded
from the Company's continuing operations and Selas' historical financial
information has been restated to reflect these subsidiaries as discontinued
operations. For more detailed information on this matter, please refer to note 2
to the Consolidated Financial Statements, which are incorporated by reference
into "Item 8. Financial Statements and Supplementary Data" from the 2003 annual
report to shareholders.
Burners and Components Business. In the fourth quarter of 2003, Selas initiated
its plan to sell the remainder of its Heat Technology segment. This segment
consists of the operating assets of Selas Corporation of America (Dresher,
Pennsylvania) and Nippon Selas (Tokyo, Japan). Selas plans to sell the segment
during 2004 and has classified the segment as a discontinued operation and,
accordingly, has reclassified its historical financial data. For more detailed
information, see notes 2 and 14 to the Consolidated Financial Statements, which
are incorporated by reference into "Item 8. Financial Statements and
Supplementary Data" from the 2003 annual report to shareholders.
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2002 Developments
In the fourth quarter of 2001, the Company initiated its plan to dispose of the
assets of the Company's primary custom-engineered furnace business, Selas SAS
(Paris), along with two other closely related subsidiaries Selas Italiana,
S.r.L. (Milan) and Selas U.K. (Derbyshire). The sale, with the exception of
Selas Italiana, S.r.L., was completed in December 2002. These subsidiaries
formed the Company's large custom-engineered furnaces division used primarily in
the steel and glass industries worldwide. The furnaces engineered by this
division were custom-engineered to meet customer specific requirements. This
business generated approximately $13.5 million, $15.6 million and $27.3 million
of sales and a net loss from operations of $8.0 million, $5.3 million and
$69,000 in 2002, 2001 and 2000, respectively. The Company accounted for the plan
to dispose of this business as a discontinued operation and, accordingly,
reclassified the historical financial data for this business. See further
information in note 2 to the consolidated financial statements, which are
incorporated by reference into "Item 8. Financial Statements and Supplementary
Data" from the 2003 annual report to shareholders.
As of January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets". Statement 142 set forth new financial and reporting
standards for the acquisition of intangible assets, other than those acquired in
a business combination, and for goodwill and other intangible assets subsequent
to their acquisition. This accounting standard requires that goodwill no longer
be amortized but tested for impairment on a periodic basis. The Company
discontinued the amortization of goodwill effective January 1, 2002. The
provisions of Statement 142 also required the completion of a transitional
impairment test with any impairment identified accounted for as a cumulative
effect of a change in accounting principle. As of the date of adoption, the
Company had unamortized goodwill in the amount of $14,693,000. The Company
determined the goodwill associated with its operations had been impaired and
wrote-off goodwill of $9,428,000 as of January 1, 2002. The charge was
recognized as a cumulative change in accounting principle in the 2002
consolidated statement of operations. The corresponding deferred tax asset of
$743,000, was offset by a valuation allowance. See note 6 to the consolidated
financial statements. In 2003, the results of the annual impairment test yielded
no additional impairment of the remaining $5.2 million of goodwill. Changes in
the estimated future cash flows from these businesses could have a significant
impact on the amount of any future impairment, if any.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Annual Report
on Form 10-K or the Company's other public filings and releases, which are not
historical facts, are forward-looking statements (as such term is defined in the
Securities Exchange Act of 1934, and the regulations thereunder), which are
intended to be covered by the safe harbors created thereby. These statements may
include, but are not limited to:
o statements in "Business" "Legal Proceedings" and "Risk Factors", such as
the Company's ability to focus on the precision miniature medical and
electronics products business segment and exit the heat technology segment,
the ability to compete, the adequacy of insurance coverage, and potential
increase in demand for the Company's products; and
o statements in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" statements in "Notes to the Company's
Consolidated Financial Statements," which are incorporated by reference
into this Annual Report on Form 10-K from the 2003 Annual Report to
Shareholders, such as the potential sale of and marketing for the Dresher
property and use of proceeds therefrom, new digital products to gain market
share, recovery of the telecommunications market, potential growth
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in the Company's medical profits, future gross profit margins, future cost
savings, net operating loss carryforwards, the impact of future cash flows,
the ability to maintain financial covenants, the ability to meet working
capital requirements, future level of funding of employee benefit plans,
the ability to negotiate extension on purchases, the impact of foreign
currencies and litigation.
Forward-looking statements also include, without limitation, statements as to
the Company's expected future results of operations and growth, the Company's
business strategy, the expected benefits of reduction in employee headcount, the
expected increases in operating efficiencies, anticipated trends in the hearing
health market related to the Company's Precision Miniature Medical and
Electronic Products segment, estimates of goodwill impairments and amortization
expense of other intangible assets, the effects of changes in accounting
pronouncements, the effects of litigation and the amount of insurance coverage,
and statements as to trends or the Company's or management's beliefs,
expectations and opinions. Forward-looking statements are subject to risks and
uncertainties and may be affected by various factors that may cause actual
results to differ materially from those in the forward-looking statements. In
addition to the factors discussed in this Annual Report on Form 10-K, certain
risks, uncertainties and other factors can cause actual results and developments
to be materially different from those expressed or implied by such
forward-looking statements, including, without limitation, the following:
o the ability to implement the Company's business strategy;
o risks arising in connection with the insolvency of Selas SAS and potential
liabilities and actions arising in connection therewith;
o the volume and timing of orders received by the Company;
o changes in estimated future cash flows;
o foreign currency movements in markets the Company services;
o changes in the global economy and financial markets;
o changes in the mix of products sold;
o acceptance of the Company's products;
o competitive pricing pressures;
o pending and potential future litigation;
o availability of electronic components for the Company's products;
o ability to create and market products in a timely manner;
o ability to pay debt when it comes due;
o ability to sell businesses, and assets marked for sale; and
o the risks associated with terrorist attacks, war and threats of attacks and
wars.
The Company does not undertake to update any forward-looking statement that may
be made from time to time by or on behalf of the Company.
RISK FACTORS
You should carefully consider the risks described below. If any of the risks
actually occur, the Company's business, financial condition or results of future
operations could be materially adversely affected. This Annual Report on Form
10-K contains forward-looking statements that involve risk and uncertainties.
Our actual results could differ materially from those anticipated in the
forward-looking statements as a result of many factors, including the risks
faced by the Company described below and elsewhere in this Annual Report on Form
10-K.
THE COMPANY HAS EXPERIENCED AND EXPECTS TO CONTINUE TO EXPERIENCE FLUCTUATIONS
IN ITS RESULTS OF OPERATIONS, WHICH COULD ADVERSELY AFFECT THE COMPANY.
Factors that affect the Company's results of operations include, but are not
limited to, the volume and timing of orders received, changes in the global
economy and financial markets, changes in the mix of products sold, market
acceptance of the Company's and its customer's products, competitive pricing
pressures, global currency valuations, the availability of electronic
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components that the Company purchases from suppliers, the Company's ability to
meet increasing demand, the Company's ability to introduce new products on a
timely basis, the timing of new product announcements and introductions by the
Company or its competitors, changing customer requirements, delays in new
product qualifications, and the timing and extent of research and development
expenses. These factors have caused and may continue to cause the Company to
experience material fluctuations in operating results on a quarterly and/or
annual basis. These fluctuations could materially adversely affect the Company's
business, financial condition and results of operations, which in turn, could
adversely affect the price of the Company's common stock.
IF THE COMPANY'S PRECISION MINIATURE MEDICAL AND ELECTRONIC PRODUCTS BUSINESS IS
UNABLE TO CONTINUE TO DEVELOP NEW PRODUCTS THAT ARE INEXPENSIVE TO MANUFACTURE,
THE COMPANY'S RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.
The Company may not be able to continue to achieve its historical profit margins
in its Precision Miniature Medical and Electronic Products business due to
advancements in technology. The ability to continue its profit margins is
dependent upon the Company's ability to stay competitive by developing products
that are technologically advanced and inexpensive to manufacture.
The Precision Miniature Medical and Electronic Products business has also been
affected by unfavorable conditions in the hearing instrument market and the
impact of the Asian economic situation. The Company is unable to predict with
any certainty when and if these conditions will improve.
THE COMPANY OPERATES IN SINGAPORE, GERMANY AND JAPAN, AND VARIOUS FACTORS
RELATING TO ITS INTERNATIONAL OPERATIONS COULD AFFECT ITS RESULTS OF OPERATIONS.
The Company operates in Singapore, Germany, and Japan. Approximately 18% of the
Company's revenues were derived from these countries in 2003. Political or
economic instability in these countries could have an adverse impact on the
Company's results of operations due to diminished revenues in these countries.
The Company's future revenues, costs of operations and profit results could be
affected by a number of factors related to the Company's international
operations, including changes in foreign currency exchange rates, changes in
economic conditions from country to country, changes in a country's political
condition, trade protection measures, licensing and other legal requirements and
local tax issues. Unanticipated currency fluctuations in the Euro, Japanese Yen,
and Singapore Dollar could lead to lower reported consolidated revenues due to
the translation of these currencies into U.S. dollars when the Company
consolidates its revenues.
THE COMPANY OPERATES IN A HIGHLY COMPETITIVE BUSINESS AND IF THE COMPANY IS
UNABLE TO BE COMPETITIVE, ITS FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED.
Several of the Company's competitors have been able to offer more standardized
and less technologically advanced hearing products at lower prices. Price
competition has had an adverse effect on the Company's sales and margins. There
can be no assurance that the Company will be able to maintain or enhance its
technical capabilities or compete successfully with its existing and future
competitors.
IF THE COMPANY IS UNABLE TO SELL THE ASSETS IT HAS MARKED AS DISCONTINUED
OPERATIONS, ITS RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED.
The Company may not be successful in finding a buyer for its Heat Technology
business in 2004, which is shown as a discontinued operation. There can be no
assurance that this business will remain a competitive supplier in view of,
among other things, the highly competitive nature of the market and possible
technological advances by competitors. If the remaining Heat Technology business
losses its competitiveness, it may be difficult to sell at a price
7
favorable to the Company or at all. Also, the Company may be unable to sell its
property in Dresher, Pennsylvania, on terms favorable to the Company. In
connection with any sale, the Company may be required to take additional charges
to earnings which could adversely affect the market price of our stock.
THE COMPANY MAY EXPERIENCE DIFFICULTY IN PAYING ITS DEBT WHEN IT COMES DUE,
WHICH COULD LIMIT ITS ABILITY TO OBTAIN FINANCING.
The Company's ability to pay the principal and interest on its indebtedness as
it comes due will depend upon its current and future performance. The Company's
performance is affected by general economic conditions and by financial,
competitive, political, business and other factors. Many of these factors are
beyond the Company's control. The Company believes that the amended credit
facility combined with funds expected to be generated from operations, the
available borrowing capacity through its revolving credit loan facilities, the
potential sale of certain assets, curtailment of the dividend payment and
control of capital spending will be sufficient to meet its anticipated cash
requirements for operating needs through April 1, 2005. If, however, the Company
is unable to renew these lines in the future, or does not generate sufficient
cash or complete such financings on a timely basis, it may be required to seek
additional financing or sell equity on terms which may not be as favorable as it
could have otherwise obtained. No assurance can be given that any refinancing,
additional borrowing or sale of equity will be possible when needed or that the
Company will be able to negotiate acceptable terms. In addition, the Company's
access to capital is affected by prevailing conditions in the financial and
equity capital markets, as well as its own financial condition.
THE COMPANY'S SUCCESS DEPENDS ON ITS SENIOR MANAGEMENT TEAM AND IF THE COMPANY
IS NOT ABLE TO RETAIN THEM, IT COULD HAVE A MATERIALLY ADVERSE EFFECT ON THE
COMPANY.
The Company is highly dependent upon the continued services and experience of
its senior management team, including Mark S. Gorder, the Company's President,
Chief Executive Officer and a director. Mr. Gorder is also the President of the
Company's Precision Miniature Medical and Electronics Products segment. The
Company depends on the services of Mr. Gorder and the other members of its
senior management team to, among other things, continue the development and
implementation of the Company's business strategies and maintain and develop its
client relationships.
THE COMPANY IS SUBJECT TO NUMEROUS ASBESTOS-RELATED LAWSUITS, WHICH COULD
ADVERSELY AFFECT THE COMPANY'S FINANCIAL POSITION, RESULTS OF OPERATIONS OR
LIQUIDITY.
The Company is a defendant along with a number of other parties in approximately
101 lawsuits as of December 31, 2003 alleging that plaintiffs have or may have
contracted asbestos-related diseases as a result of exposure to asbestos
products or equipment containing asbestos sold by one or more named defendants.
In addition, the Company expects that claims could continue to be asserted
against it. The lead insurance carrier has informed the Company that the primary
policy for the period July 1, 1972 - July 1, 1975 has been exhausted and that
the lead carrier will no longer provide a defense under that policy. While the
Company has requested that the lead carrier substantiate this situation, there
can be no assurance that this primary policy and the Company's other insurance
policies will cover all or any portion of the costs and any awards associated
with the asbestos-related lawsuits. If the Company's insurance policies do not
cover the costs and any awards for the asbestos-related lawsuits, the Company
will have to use its cash or obtain additional financing to pay the
asbestos-related obligations and settlement costs. The ultimate outcome of any
legal matter cannot be predicted with certainty. In light of the significant
uncertainty associated with asbestos lawsuits, there is no guarantee that these
lawsuits will not materially adversely affect the Company's financial position,
results of
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operations or liquidity. In addition, the asbestos litigation may have an
unfavorable impact on the Company's ability to sell its remaining Heat
Technology business on terms favorable to the Company if a buyer were to view
the litigation as a possible liability of the business being sold.
THE MARKET PRICE OF THE COMPANY'S COMMON STOCK HAS BEEN AND IS LIKELY TO
CONTINUE TO BE VOLATILE, WHICH MAY MAKE IT DIFFICULT FOR SHAREHOLDERS TO RESELL
COMMON STOCK WHEN THEY WANT TO AND AT PRICES THEY FIND ATTRACTIVE.
The market price of the Company's common stock has been and is likely to be
highly volatile, and there has been limited trading volume in the common stock.
The common stock market price could be subject to wide fluctuations in response
to a variety of factors, including the following:
o announcements of fluctuations in the Company's or its competitors'
operating results;
o the timing and announcement of sales or acquisitions of assets by the
Company or its competitors;
o changes in estimates or recommendations by securities analysts;
o adverse or unfavorable publicity about the Company's services or the
Company;
o the commencement of material litigation, or an unfavorable verdict, against
the Company;
o terrorist attacks, war and threats of attacks and war;
o additions or departures of key personnel; and
o sales of common stock.
In addition, the stock market in recent years has experienced significant price
and volume fluctuations. Such volatility and decline has affected many companies
irrespective of, or disproportionately to, the operating performance of these
companies. These broad fluctuations and limited trading volume may materially
adversely affect the market price of the common stock, and the ability to sell
said common stock.
Most of the Company's outstanding shares are available for resale in the public
market without restriction. The sale of a large number of these shares could
adversely affect the share price and could impair the Company's ability to raise
capital through the sale of equity securities or make acquisitions for common
stock.
TERRORIST ATTACKS, WAR AND THREATS OF ATTACKS AND WAR MAY NEGATIVELY IMPACT THE
COMPANY'S RESULTS OF OPERATIONS, REVENUE AND COMMON STOCK MARKET PRICE.
Terrorist attacks, war and threats of attacks and war may negatively impact the
Company's results of operations, revenue and share price. Recent terrorist
attacks in the United States, as well as future events occurring in response or
in connection to them, including, without limitation, future terrorist attacks
against United States targets and threats of war or actual conflicts involving
the United States or its allies, may impact the Company's operations, including
affecting its ability to operate its subsidiary's abroad. More generally, any of
these events could cause consumer confidence and spending to decrease or result
in increased volatility in the economy. They could also result in the deepening
of the economic recession in the United States. Any of these occurrences could
have a material adverse effect on the Company's operating results, revenue, and
may result in the volatility of the market price for the Company's common stock.
"ANTI-TAKEOVER" PROVISIONS MAY MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO
ACQUIRE CONTROL OF THE COMPANY, EVEN IF THE CHANGE IN CONTROL WOULD BE
BENEFICIAL TO SHAREHOLDERS.
The Company is a Pennsylvania corporation. Anti-takeover provisions in
Pennsylvania law and the Company's charter and bylaws could make it more
difficult for a third party to acquire control of the Company. These provisions
could adversely affect the market price of the common stock and
9
could reduce the amount that shareholders might receive if the Company is sold.
For example, the Company's charter provides that the board of directors may
issue preferred stock without shareholder approval. In addition, the Company's
bylaws provide for a classified board, with each board member serving a
staggered three-year term. Directors may be removed only with the approval of
the holders of at least two-thirds of all of the shares outstanding and entitled
to vote.
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PRECISION MINIATURE MEDICAL AND ELECTRONIC PRODUCTS
The Precision Miniature Medical and Electronics Products business represents the
continuing operations of the Company. All other businesses are now included in
discontinued operations.
Resistance Technology, Inc. ("RTI"), a wholly-owned subsidiary, manufactures
microminiature components, systems and molded plastic parts for hearing
instrument, medical equipment, electronics, telecommunications and computer
industry manufacturers. RTI Electronics, Inc. ("RTIE"), formed in 1997, has
expanded RTI's microminiature components business through the manufacture of
thermistors and film capacitors.
Products and Industries Serviced. RTI is a leading manufacturer and supplier of
microminiature electromechanical components to hearing instrument manufacturers.
These components consist of volume controls, microphones, trimmer potentiometers
and switches. RTI also manufactures hybrid amplifiers and integrated circuit
components ("hybrid amplifiers"), along with faceplates for in-the-ear and
in-the-canal hearing instruments. Components are offered in a variety of sizes,
colors and capacities in order to accommodate a hearing manufacturer's
individualized specifications. Sales to hearing instrument manufacturers
represented approximately 65% of 2003 annual net sales for the Company's
precision miniature medical and electronic products business.
Hearing instruments, which fit behind or in a person's ear to amplify and
process sound for a hearing impaired person, generally are composed of four
basic parts and several supplemental components for control or fitting purposes.
The four basic parts are microphones, amplifier circuits, miniature
receivers/speakers and batteries. RTI's hybrid amplifiers are a type of
amplifier circuit. Supplemental components include volume controls, trimmer
potentiometers, which shape sound frequencies to respond to the particular
nature of a person's hearing loss, and switches used to turn the instrument on
and off and to go from telephone to normal speech modes. Faceplates and an ear
shell molded to fit the user's ear often serve as a housing for hearing
instruments. RTI manufactures its components on a short lead-time basis in order
to supply "just-in-time" delivery to its customers and, consequently, order
backlog amounts are not meaningful.
Using DSP technology, RTI is building a new generation of affordable,
high-quality hearing aids and similar amplifier devices. Compared to most
products currently on the market, DSP devices have better clarity, attractive
pricing points and an improved ability to filter out background noise. Low to
moderately-priced DSP hearing aids, like newly introduced line of ClariD Digital
ONE(TM) DSP hearing-aid amplifiers, represent the fastest-growing segment in the
hearing-aid market.
In the medical market, the Company is focused on sales of microelectronics,
micromechanical assemblies and high-precision plastic molded components to
medical device manufacturers. Targeted customers include medical product
manufacturers of portable and lightweight battery powered devices, large
AC-powered units often found in clinics and hospitals, as well as a variety of
sensors designed to connect a patient to an electronic device.
The medical industry is faced with pressures to reduce the costs of healthcare.
RTI offers medical manufacturers the capabilities to design, develop and
manufacture components for medical devices that are easier to use, measure with
greater accuracy and provide more functions while reducing the costs to
manufacture these devices. Examples of RTI products used by medical device
manufacturers include components found in intravenous fluid administration pumps
that introduce drugs into the bloodstream. RTI manufacturers and supplies bubble
sensors and flow restrictors that monitor and control the flow of fluid in an
intravenous infusion system.
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RTI also manufactures a family of safety needle products for an OEM customer
that utilizes RTI's insert and straight molding capabilities. These products are
assembled using full automation including built-in quality checks within the
production lines. Other examples include sensors used to detect pathologies in
specific organs of the body and monitoring devices to detect cardiac and
respiratory functions. The early and accurate detection of pathologies allows
for increased likelihood for successful treatment of chronic diseases and
cancers. Accurate monitoring of multiple functions of the body, such as heart
rate and breathing, aids in generating more accurate diagnosis and treatments
for patients.
RTI entered the high-quality audio communication device market in 2001, and now
has a line of miniature, professional audio headset products used by performers
and support staff in the music and stage performance markets. For customers
focusing on homeland security needs, the line includes several communication
devices that are more portable and perform well in noisy or hazardous
environments. These products are also well suited for applications in the fire,
law enforcement, safety, aviation and military markets.
RTIE manufactures and sells thermistors and thermistor assemblies, which are
solid state devices that produce precise changes in electrical resistance as a
function of any change in absolute body temperature. RTIE's Surge-Gard TM
product line, an inrush electric current limiting device used primarily in
computer power supplies, represented approximately a third of RTIE's sales in
2003. The balance of sales represents various industrial, commercial and
military sales for thermistor and thermistor assemblies to domestic and
international markets.
RTI's and RTIE's principal raw materials are plastics, polymers, metals, various
metal oxide powders and silver paste, for which there are multiple sources of
supply.
In order to enhance its product line offering, between 1998 and 2001, RTI made
three strategic acquisitions. These acquisitions bolstered RTI's and RTIE's
precision miniature mechanical and electronic products. In 1998, the Company
acquired a capacitor manufacturer in California and purchased the microphone
capsule product line from a Singapore Company, Lectret Precision PTE LTD. In
2001, the Company acquired the shares of Lectret Precision PTE LTD. The
acquisitions expanded RTI's product capability and gave them access to lower
manufacturing costs than in the Company's United States operations.
Marketing and Competition. RTI sells its hearing instrument components directly
to domestic hearing instrument manufacturers through an internal sales force.
Sales of microphone products and of molded plastic parts to industries other
than hearing instrument manufacturers are made mainly through an internal sales
force. In recent years, five companies have accounted for a substantial portion
of the United States hearing instrument sales. In 2003, one customer, Sonic
Innovations, accounted for $4.5 million or 12.4% of the Company's consolidated
net sales and five customers accounted for approximately $11.6 million or 32% of
the Company's consolidated net sales. See note 5 to the consolidated financial
statements for a discussion of net sales and long-lived assets.
Internationally, sales representatives employed by Resistance Technology, GmbH
("RT, GmbH"), a German company 90% of whose capital stock is owned by RTI,
solicits sales from European hearing instrument manufacturers on behalf of RTI.
RTI believes that it is the largest supplier worldwide of micro-miniature
electromechanical components to hearing instrument manufacturers and that its
full product line and automated manufacturing process allow it to compete
effectively with the two other manufacturers within this market.
In the market of hybrid amplifiers and molded plastic faceplates, RTI's primary
competition is from the hearing instrument manufacturers themselves.
12
The hearing instrument manufacturers produce a substantial portion of their
internal needs for these components.
RTI markets its high performance microphone products to the radio communication
and professional audio industries and has several larger competitors who have
greater financial resources. RTI holds a small market share in the global market
for microphone capsules and other related products.
RTIE sells its thermistors and film capacitors through a combination of
independent sales representatives and internal sales force.
RTIE has many competitors, both domestic and foreign, that sell various
thermistor and film capacitors and some of these competitors are larger and have
greater financial resources. In addition, RTIE holds a relatively small market
share in the world-market of thermistor and film capacitor products.
Operations. The Precision Miniature Medical and Electronic Products business has
a total of 424 employees. RTI currently employs 243 people, of whom 22 are
executive and administrative personnel, 13 sales, and 208 engineering and
operations personnel at RTI's two facilities near Minneapolis, Minnesota. At RT,
GmbH, the Company employs 3 sales personnel located in Munich, Germany. In
Singapore, RTI Tech PTE Ltd. employs 106 people, of whom 6 are administrative
personnel, 3 sales, and 97 engineering and operations personnel. At its
facilities in Anaheim, California, RTIE employs 72 employees, of which 3 are
administrative, 5 are sales, and 64 are engineering and operations personnel.
As a supplier of parts for consumer and medical products, RTI is subject to
claims for personal injuries allegedly caused by its products. The Company
maintains what it believes to be adequate insurance coverage.
Research and Development. RTI and RTIE conduct research and development
activities primarily to improve its existing products and technology. Their
research and development expenditures were $1,762,000, $848,000 and $1,237,000
in 2003, 2002 and 2001, respectively.
RTI owns a number of United States patents which cover a number of product
designs and processes. The Company believes that, although these patents
collectively add some value to the Company, no one patent or group of patents is
of material importance to its business as a whole.
HEAT TECHNOLOGY
The Company specializes in the controlled application of heat to achieve precise
process and temperature control. The Company's principal heat technology
equipment and systems are smaller standard-engineered systems, burners and
combustion control equipment. The Company expects to sell this business in 2004
and, therefore, has accounted for it as discontinued operations.
Standard Engineered Systems. The Company engineers and fabricates a variety of
small heat treating furnaces and heat processing equipment. This standard
equipment and small-furnace business is conducted principally by its
wholly-owned subsidiary, Nippon Selas (Tokyo, Japan).
The Company produces custom designed barrel furnaces used primarily to heat
treat long metal parts, and also products specialized glass lehrs for heating
glass products. Other furnaces are designed to harden and etch glass and ceramic
tableware.
Burners and Combustion Control Equipment. At its Dresher, Pennsylvania facility
and through its subsidiary in Japan, Nippon Selas (Tokyo), the
13
Company designs, manufactures and sells an array of original equipment and
replacement gas-fired industrial burners for many applications. This business
has 31 employees in Pennsylvania and 11 in Japan.
The Company is a producer of burners used in fluid processing furnaces serving
the petrochemical industry. One type of fluid processing burner is capable of
minimizing the emission of oxides of nitrogen as combustion products. As many
jurisdictions reduce the permissible level of emissions of these compounds, the
Company believes that the demand for "low Nox" burners will increase. The
Company also produces burners suitable for creating a high temperature furnace
environment desirable in steel and glass heat treating furnaces. The Company's
burners accommodate a wide variety of fuel types, environmental constraints and
customer production requirements.
The Company furnishes many industries with gas combustion control equipment sold
both as component parts and as systems that have been engineered to meet a
particular customer's needs. This equipment is provided with the Company's
original custom-engineered and standard heat treating equipment, as replacement
or additional components for existing furnaces being refurbished or upgraded,
and as original components for heat treating equipment manufactured by others.
The components of the combustion control systems include mixing valves capable
of mixing gas and air and controlling the air/gas ratio, pressure and total flow
of the mixed gases. The Company also produces its Qual-O-RimeterTM automated
monitoring and control device used in conjunction with its mixing valves to
maintain precise, uniform heat release and flame shape, despite fluctuations in
fuel mix and quality, air temperature and humidity.
Additional combustion control products include Flo-ScopeTM flow meters, which
measure the rate of flow of gases, and automatic fire checks and automatic
blowouts, which arrest flame and pressure resulting from backfire from the
burners into the pipe line.
Marketing and Competition. The Company markets its standard-engineered systems
products on a global basis through its sales and marketing personnel located in
Dresher, Pennsylvania, and also sells these products through licensees and
agents located in various parts of the world. Although the Company competes for
orders for such products with many other manufacturers, some of which are larger
and have greater financial resources, the Company believes that its reputation
and its high standard for quality allow it to compete effectively with other
manufacturers.
Operations. The Heat Technology Segment has a total of 53 employees. At its
Dresher facility, the Company has 36 employees; 6 are executive and
administrative personnel, 10 are sales and engineering personnel and 20 are
personnel engaged in manufacturing. The hourly personnel are represented by a
union, and the current union contract expires in May 2004. The Company considers
its relations with its employees to be satisfactory.
In April 2001, the Company sold a minority interest of Nippon Selas to three
directors of Nippon Selas. Its Tokyo facility employs 11 people; 4
administrative and 7 sales and engineering.
The principal components used in the Company's heat processing equipment and
other products are steel, special castings (including high-alloy materials),
electrical and electronic controls and materials handling equipment. These items
are available from a wide range of independent suppliers.
Research and Development. The Company conducts limited research and development
activities at its Dresher facility to support its heat processing services and
products. Research and development expenditures for heat processing aggregated
$16,000, $66,000 and $33,000 in 2003, 2002 and 2001, respectively. It is the
Company's policy to apply for domestic and foreign patents on those inventions
and improvements which it considers significant and which are likely to be
incorporated in its products. It owns a number of
14
United States and foreign patents. It is licensed under patents owned by others
and has granted licenses to others on a fee basis. The Company believes that,
although these patents collectively are valuable, no one patent or group of
patents is of material importance to its business as a whole.
AVAILABLE INFORMATION
The Company files annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, proxy statements and other information with the
SEC. You may read and copy any reports, statements and other information that
the Company files with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C., 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
Company's filings are also available on the SEC's Internet site as part of the
EDGAR database (http://www.sec.gov).
The Company maintains an internet web site at www.selas.com. We maintain a link
to the SEC's website by which you may review our annual report on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act.
The information on the website listed above, is not and should not be considered
part of this annual report on Form 10-K and is not incorporated by reference in
this document. This website is and is only intended to be an inactive textual
reference.
In addition, we will provide, at no cost (other than for exhibits), paper [or
electronic] copies of our reports and other filings made with the SEC. Requests
should be directed to:
Corporate Secretary
Selas Corporation of America
1260 Red Fox Road
Arden Hills, MN 5112
ITEM 2. Properties
Continuing Operations
RTI leases a 47,000 sq. ft. manufacturing facility in Arden Hills, Minnesota,
which also serves as the Company's headquarters, from a partnership consisting
of two former officers of RTI and Mark S. Gorder who serves as an officer of the
Company and RTI and on the Company's Board of Directors. At this facility, RTI
manufactures all of its products other than plastic component parts. The lease
expires in October 2011.
In addition, RTI owns, subject to a mortgage from a third party lender, a 34,000
sq. ft. building in Vadnais Heights, Minnesota at which RTI produces plastic
component parts. See notes 16 and 17 to the Company's consolidated financial
statements, which are incorporated by reference into "Item 8. Financial
Statements and Supplementary Data" from the 2003 annual report to shareholders.
RTIE leases a building in Anaheim, California, which contains its manufacturing
facilities and offices and consists of a total of 50,000 square feet. The lease
expires in September 2008.
RTI Technologies PTE LTD leases a building in Singapore which houses its
production facilities and administrative offices. The building contains 6,000
square feet and its lease expires in June 2004, with a three-year renewal
option.
15
Discontinued Operations
The Company owns the manufacturing facility in Dresher, Pennsylvania in which
its standard-engineered systems, burners and combustion control equipment are
produced on a 17 acre site. The 136,000 square foot Dresher facility has
substantially more space than is currently needed for the Company's operations.
The Company is seeking to sell this property separate of the heat technology
business. If the property were to sell before the sale of the heat technology
business, the Company would lease office and manufacturing space in the
surrounding area. This property is subject to a mortgage from a third party
lender. See note 8 to the Company's consolidated financial statements, which are
incorporated by reference into "Item 8. Financial Statements and Supplementary
Data" from the 2003 annual report to shareholders. Nippon Selas leases office
space in Tokyo, Japan for its sales and administrative facilities pursuant to a
month-to-month lease.
ITEM 3. Legal Proceedings
The Company is a defendant along with a number of other parties in approximately
101 lawsuits as of December 31, 2003 (approximately 108 lawsuits as of December
31, 2002) alleging that plaintiffs have or may have contracted asbestos-related
diseases as a result of exposure to asbestos products or equipment containing
asbestos sold by one or more named defendants. Due to the non-informative nature
of the complaints, the Company does not know whether any of the complaints state
valid claims against the Company. The lead insurance carrier has informed the
Company that the primary policy for the period July 1, 1972 - July 1, 1975 has
been exhausted and that the lead carrier will no longer provide a defense under
that policy. The Company has requested that the lead carrier substantiate this
situation. The Company has contacted representatives of the Company's excess
insurance carrier for some or all of this period. The Company does not believe
that the asserted exhaustion of the primary insurance coverage for this period
will have a material adverse effect on the financial condition, liquidity, or
results of operations of the Company. Management believes that the number of
insurance carriers involved in the defense of the suits and the significant
number of policy years and policy limits to which these insurance carriers are
insuring the Company make the ultimate disposition of these lawsuits not
material to the Company's consolidated financial position or results of
operations.
The Company is also involved in other lawsuits arising in the normal course of
business. While it is not possible to predict with certainty the outcome of
these matters, management is of the opinion that the disposition of these
lawsuits and claims will not materially affect the Company's consolidated
financial position, liquidity, or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
16
ITEM 4A. Executive Officers of the Registrant
The names, ages and offices (as of March 18, 2004) of the Company's executive
officers were as follows:
Name Age Position
- ----------------------- -------- ---------------------------------------------
Mark S. Gorder [57] President, Chief Executive Officer and
Director of the Company; President of
Resistance Technology, Inc.
Robert F. Gallagher [48] Chief Financial Officer, Treasurer and
Secretary of the Company
Gerald H. Broecker [54] Vice President of Administration of the
Company, Assistant Secretary
Mr. Gorder joined the Company in October 1993 when Resistance Technology, Inc.
("RTI") was acquired. Prior to the acquisition, Mr. Gorder was President and one
of the founders of RTI, which began operations in 1977. Mr. Gorder was promoted
to Vice President of the Company and elected to the Board of Directors in April
1996. In December 2000, he was elected President and Chief Operating Officer and
in April 2001, Mr. Gorder assumed the role of Chief Executive Officer.
Mr. Gallagher joined the Company in August 2002 as Chief Financial Officer. From
October 2000 until June 2002, he was Chief Financial Officer for Visionics
Corporation (which merged with Identix Corporation in June 2002). From October
1989 until June 2000 he was employed by TSI Incorporated (which was acquired and
taken private in June 2000), most recently as Chief Financial Officer. Both
Visionics Corporation and TSI Incorporated were publicly-held.
Mr. Broecker joined RTI in 1982 and last held the position of Vice President of
Strategic Business Services for RTI prior to his promotion to Vice President of
the Company in December 2002.
17
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common shares are listed on the American Stock Exchange under the
ticker symbol "SLS". The high and low sale prices during each quarterly period
during the past two years were as follows:
MARKET AND DIVIDEND INFORMATION
2003 2002
-------------------------- -------------------------
MARKET MARKET
-------------------------- -------------------------
PRICE RANGE PRICE RANGE
-------------------------- -------------------------
Quarter High Low High Low
First......... $1.89 $1.26 $2.35 $1.65
Second........ 1.62 1.15 2.88 2.15
Third......... 1.95 1.40 2.69 2.03
Fourth........ 3.85 1.58 2.35 1.50
At March 19, 2004 the Company had 401 shareholders of record of common shares.
The Company ceased paying quarterly cash dividends in the fourth quarter of 2001
and has no intention of paying cash dividends in the foreseeable future. The
payment of any future cash dividends is subject to the discretion of the Board
of Directors and is dependent on a number of factors, including the Company's
capital requirements, financial condition, financial covenants and cash
availability. Terms of the Company's banking agreements prohibit the payment of
cash dividends without prior bank approval.
See "ITEM 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters -- Equity Compensation Plans" for disclosure
regarding our equity compensation plans.
ITEM 6. Selected Financial Data
Certain selected financial data is incorporated by reference from "Five-Year
Summary of Operations" and "Other Financial Highlights" as contained in the
Company's 2003 annual report to shareholders.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations is incorporated by reference from the Company's 2003 annual report to
shareholders.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosure about market risk is incorporated by
reference as discussed in "Quantitative and Qualitative Disclosures About Market
Risk" contained in the Company's 2003 annual report to shareholders.
18
ITEM 8. Financial Statements and Supplementary Data
The information called for by Item 8 are from the Company's Consolidated
Financial Statements, the "Notes to the Consolidated Financial Statements", and
the "Report of Independent Auditors" disclosure is incorporated by reference as
contained in the Company's 2003 annual report to shareholders.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
ITEM 9A. Controls and Procedures
The Company's management, with the participation of its chief executive officer
and chief financial officer, conducted an evaluation of the effectiveness of our
disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e),
as of December 31, 2003. Based on that evaluation, the Company's chief executive
officer and chief financial officer concluded that the Company's disclosure
controls and procedures were effective in reaching a reasonable level of
assurance that management is timely alerted to material information relating to
the Company during the period when the Company's periodic reports are being
prepared.
The Company's management, with the participation of the Company's chief
executive officer and chief financial officer, also conducted an evaluation of
the Company's internal control over financial reporting, as defined in Exchange
Act Rule 13a-15(f), to determine whether any changes occurred during the quarter
ended December 31, 2003 that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.
Based on that evaluation, there was no such change during the quarter ended
December 31, 2003.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information called for by Item 10, except for the information concerning
executive officers included in Item 4A hereof, is incorporated by reference to
the Company's definitive proxy statement relating to its 2004 annual meeting of
shareholders.
Code of Ethics
The Company has adopted a code of ethics that applies to its directors, officers
and employees, including its chief executive officer, chief financial officer,
controller and persons performing similar functions. Copies of the Company's
code of ethics are available without charge upon written request directed to
Robert F. Gallagher, Corporate Secretary, Selas Corporation of America, 1260 Red
Fox Road, Arden Hills, MN 5112.
19
ITEM 11. Executive Compensation
The information called for by Item 11 is incorporated by reference to the
Company's definitive proxy statement relating to its 2004 annual meeting of
shareholders.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is incorporated by reference to the
Company's definitive proxy statement relating to its 2004 annual meeting of
shareholders.
Equity Compensation Plans
The following table details information regarding the Company's existing equity
compensation plans as of December 31, 2003:
(c)
Number of securities
remaining available for
(a) (b) future issuance under
Number of securities to Weighted-average equity compensation
be issued upon exercise exercise price of plans (excluding
of outstanding options, outstanding options, securities reflected in
Plan Category warrants and rights warrants and rights column (a))
- ------------------------------------ ----------------------- -------------------- ------------------------
Equity compensation plans approved
by security holders................. 434,400 $5.29 1,465,600
Equity compensation plans not
approved by security holders(1)..... 107,500 $3.13 142,500
------- ----- ---------
Total............................... 541,900 $4.86 1,608,100
(1) Represents shares issuable under the Non-Employee Directors Stock Option
Plan, pursuant to which directors who are not employees of the Corporation or
any of its subsidiaries receive an automatic one-time grant of an option to
acquire 5,000 common shares upon their initial election or appointment to the
Board of Directors. The Plan also permits discretionary grants. The exercise
price of the option is the fair market value of the stock on the date of grant.
Options become exercisable in equal one-third annual installments beginning one
year from the date of grant, except that the vesting schedule for discretionary
grants is determined by the Compensation Committee.
ITEM 13. Certain Relationships and Related Transactions
The information called for by Item 13 is incorporated by reference to the
Company's definitive proxy statement relating to its 2004 annual meeting of
shareholders.
ITEM 14. Principal Accountant Fees and Service
The information called for by Item 14 is incorporated by reference to the
Company's definitive proxy statement relating to its 2004 Annual Meeting of
shareholders.
20
PART IV
ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements - The Company's consolidated financial statements, as
described below, are incorporated by reference as contained in the
Company's 2003 annual report to shareholders.
Consolidated Balance Sheets at December 31, 2003 and 2002.
Consolidated Statements of Operations for the years ended December 31,
2003, 2002 and 2001.
Consolidated Statements of Cash Flows for the years ended December 31,
2003, 2002 and 2001.
Consolidated Statements of Shareholders' Equity and Comprehensive Loss for
the years ended December 31, 2003, 2002 and 2001.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Financial Statements Schedules
The Board of Directors and Shareholders
Selas Corporation of America:
Under date of February 29, 2004, except as to note 8, which is as of March 18,
2004, we reported on the consolidated balance sheets of Selas Corporation of
America and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss, and cash flows for each of the years in the three-year period ended
December 31, 2003, as contained in the 2003 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 2003. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Minneapolis, Minnesota
February 29, 2004
21
Schedule II - Valuation and Qualifying Accounts
SELAS CORPORATION OF AMERICA AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 2003, 2002 AND 2001
"Addition"
Balance at charged to "Other"(a) Balance
beginning costs and additions "Less"(b) at end
Description of Year expense (deductions) deductions of year
----------- ------- ------- ------------ ---------- -------
YEAR ENDED DECEMBER 31,2003
Allowance for doubtful $414,509 $ 191,771 $ 59 $ 352,499 $ 253,840
accounts
Deferred tax asset
valuation $743,859 $6,922,951 -- -- $7,666,810
allowance
YEAR ENDED DECEMBER 31,2002
Allowance for doubtful $ 90,653 $ 338,949 $ 143 $ 15,236 $ 414,509
accounts
Deferred tax asset
valuation -- $ 743,859 -- -- $ 743,859
allowance
YEAR ENDED DECEMBER 31,2001
Allowance for doubtful $185,686 $ 58,653 $(1,890) $ 151,796 $ 90,653
accounts
Deferred tax asset
valuation -- -- -- -- --
allowance
a) Represents the difference between translation rates of foreign currency at
beginning and end of year and the average rate during the year. b)
Uncollectible accounts written off.
All other schedules are omitted because they are not applicable, or because
the required information is included in the consolidated financial
statements or notes thereto.
3. Exhibits
2.1(1) Asset and Share Purchase Agreement dated as of October 11,
2002 among the Company, Selas S.A.S, Andritz A.G. and
Andritz Acquisition S.A.S. Schedules and attachments are
listed under section 1.2 of the agreement and will be
provided to the Commission upon request.
2.2(2) Stock purchase Agreement dated July 21, 2003 between the
Company and Ventra Ohio Corp, and VTA USA, INC. Schedules
and attachments are listed beginning on page 38 of the
agreement and will be provided to the Commission upon
request.
3.1(3) The Company's Articles of Incorporation as amended May 18,
1984 and April 25, 1991.
3.2 The Company's By-Laws as amended March 15, 2004.
22
4.1(4) Amended and Restated Credit Agreement dated July 31, 1998 among
the Company, Deuer Manufacturing, Inc., Resistance Technology,
Inc., RTI Export, Inc. and RTI Electronics, Inc
4.2(4) Amended and Restated Revolving Credit Note, dated July 31, 1998,
of the Company in favor of First Union National Bank.
4.3(5) Amendment to Amended and Restated Credit Agreement dated
June 30, 1999 among the Company, Deuer Manufacturing, Inc.,
Resistance Technology, Inc., RTI Export, Inc. and RTI
Electronics, Inc
4.4(6) Guaranty dated February, 1998 of the Company in favor of First
Union/First Fidelity, N.A. Pennsylvania
4.5(7) Second Amendment to Amended and Restated Credit Agreement, dated
as of July 7, 2000
4.6(8) Third Amendment to Amended and Restated Credit Agreement, dated
as of January 19, 2001.
4.7(9) Waiver and Amendment Agreement dated November 20, 2001 among the
Company, certain of its subsidiaries, and First Union National
Bank.
4.8(10) Second Waiver and Amendment Agreement dated April 15, 2002 among
the Company, certain of its subsidiaries, and First Union
National Bank.
4.9(11) Third Waiver and Amendment Agreement dated March 14, 2003 among
the Company, certain of its subsidiaries, and Wachovia Bank.
Exhibit 4L to the Company's report on Form 10-K for the year
ended December 31, 2002 is incorporated by reference.
4.10 Second Amendment to Third Waiver and Amendment Agreement dated
May 15, 2003 among the Company, certain of its subsidiaries, and
Wachovia Bank, formerly First Union National Bank.
4.11 Third Amendment to Third Waiver and Amendment Agreement dated
August 14, 2003 among the Company, certain of its subsidiaries,
and Wachovia Bank.
4.12 Fourth Amendment to Third Waiver and Amendment Agreement dated
November 11, 2003 among the Company, certain of its subsidiaries,
and Wachovia Bank.
4.13 Amended, Restated and Consolidated Loan Agreement dated
March 18, 2004 among the Company, certain of its subsidiaries,
and Wachovia Bank.
4.14 Amended, Restated and Consolidated Guaranty dated March 18, 2004
among the Company, certain of its subsidiaries, and Wachovia
Bank.
4.15 Amended, Restated and Consolidated Term Loan Note dated
March 18, 2004 among the Company, certain of its subsidiaries,
and Wachovia Bank.
4.16 Amended and Restated Revolving Credit Note dated March 18, 2004
among the Company, certain of its subsidiaries, and Wachovia
Bank.
23
4.17 Seventh Amendment to First Mortgage and Security Agreement
dated March 18, 2004 among the Company and Wachovia Bank.
4.18 Fourth Amendment to Mortgage, Security Agreement and Fixture
Financing Statement dated March 18, 2004 among Resistance
Technology, Inc., a subsidiary of the Company, and Wachovia Bank.
+ 10.1(12) 1985 Stock Option Plan, as amended.
+ 10.2(12) Form of Option Agreements granted under the 1985 Stock Option
Plan.
+ 10.3(12) Form of Amendments to Stock Option Agreements granted under the
1985 Stock Option Plan.
+ 10.4(6) Amended and Restated 1994 Stock Option Plan.
+ 10.5(13) Form of Stock Option Agreements granted under the Amended and
Restated 1994 Stock Option Plan.
+ 10.6(9) 2001 Stock Option Plan.
+ 10.7(13) Supplemental Retirement Plan (amended and restated effective
January 1, 1995).
+ 10.8(14) Employment Agreement dated June 19, 2001 among the Company,
Resistance Technology, Inc. and Mark S. Gorder.
+ 10.9(14) Amended and Restated Agreement on Termination Following Change of
Control or Asset Sale, dated June 19, 2001, between the Company
and Mark S. Gorder.
10.10(15) Amended and Restated Office/Warehouse Lease, between Resistance
Technology, Inc. and Arden Partners I. L.L.P. (of which Mark S.
Gorder is one of the principal owners) dated November 1, 1996.
+ 10.11(9) Amended and Restated Non-Employee Directors' Stock Option Plan.
+ 10.12(7) Retirement Agreement, Consulting Agreement and General Release,
dated August 30, 2000, between the Company and Stephen F. Ryan.
10.13(9) Separation Agreement dated November 30, 2001 between the Company
and Robert W. Ross.
10.14(16) Settlement agreement dated September 12, 2003 between the Company
and Andritz AG, Andritz Acquisition S.A.A.
24
13. "Five-Year Summary of Operations" as contained in the Company's
2003 annual report to shareholders; "Other Financial Highlights"
as contained in the Company's 2003 annual report to shareholders;
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" as contained in the Company's 2003 annual
report to shareholders; and the Company's consolidated financial
statements, including the "Notes to Consolidated Financial
Statements" and the "Report of Independent Auditors" as contained
in the Company's 2003 annual report to shareholders.
21. List of significant subsidiaries of the Company.
23. Consent of Independent Auditors.
31.1 Certification of principal executive officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of principal financial officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
32 Certifications pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
- ----------------------------
+ Denotes management contract, compensatory plan or arrangement.
(1) Incorporated by reference from the Company's current report on
Form 8-K filed with the Commission on December 17, 2002.
(2) Incorporated by reference from the Company's current report on
Form 8-K/A filed with the Commission on July 23, 2003.
(3) Incorporated by reference from the Company's annual report on
Form 10-K for the year ended December 31, 1984 and the Company's
annual report on Form 10-K for the year ended December 31, 1991.
(4) Incorporated by reference from the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1998.
(5) Incorporated by reference from the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1999.
(6) Incorporated by reference from the Company's annual report on
Form 10-K for the year ended December 31,1997.
(7) Incorporated by reference from the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 2000.
(8) Incorporated by reference from the Company's annual report on
Form 10-K/A filed with the Commission on October 29, 2001 for the
year ended December 31, 2000.
(9) Incorporated by reference from the Company's annual report on
Form 10-K for the year ended December 31, 2001.
(10) Incorporated by reference from the Company's current report on
Form 8K/A filed with the Commission on April 19, 2002.
(11) Incorporated by reference from the Company's annual report on
Form 10-K for the year ended December 31, 2002.
25
(12) Incorporated by reference from the Company's registration
statement on Form S-2 filed with the Commission on June 15, 1990
(No. 33-35443).
(13) Incorporated by reference from the Company's annual report on
Form 10-K for the year ended December 31, 1995.
(14) Incorporated by reference from the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 2001.
(15) Incorporated by reference from the Company's annual report on
Form 10-K for the year ended December 31, 1996.
(16) Incorporated by reference from the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 2003.
(b) Reports on Form 8-K - Current Report on Form 8-K furnished to the SEC on
November 12, 2003 to announce the Company's earnings for the quarter ended
September 30, 2003.
26
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.
SELAS CORPORATION OF AMERICA
(Registrant)
By: /s/ Robert F. Gallagher
------------------------
Robert F. Gallagher
Chief Financial Officer,
Treasurer and Secretary
Dated: March 24, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons (including a majority of members
of the Board of Directors) on behalf of the registrant and in the capacities and
on the dates indicated.
/s/ Mark S. Gorder
- ----------------------------
Mark S. Gorder
President and Chief Executive
Officer and Director (principal executive officer)
March 24, 2004
/s/ Robert F. Gallagher
- ----------------------------
Robert F. Gallagher
Chief Financial Officer
Treasurer and Secretary
(principal accounting and financial officer)
March 24, 2004
/s/Frederick L. Bissinger
- ----------------------------
Frederick L. Bissinger
Director
March 24, 2004
/s/Nicholas A. Giordano
- ----------------------------
Nicholas A. Giordano
Director
March 24, 2004
/s/Robert N. Masucci
- ----------------------------
Robert N. Masucci
Director
March 24, 2004
/s/ Michael J. McKenna
- ----------------------------
Michael J. McKenna
Director
March 24, 2004
27
EXHIBIT INDEX
EXHIBITS:
3.2 The Company's By-Laws as amended.
4.10 Second Amendment to Third Waiver and Amendment Agreement dated May 15,
2003 among the Company, certain of its subsidiaries, and Wachovia
Bank, formerly First Union National Bank.
4.11 Third Amendment to Third Waiver and Amendment Agreement dated August
14, 2003 among the Company, certain of its subsidiaries, and Wachovia
Bank.
4.12 Fourth Amendment to Third Waiver and Amendment Agreement dated
November 11, 2003 among the Company, certain of its subsidiaries, and
Wachovia Bank.
4.13 Amended, Restated and Consolidated Loan Agreement dated March 18, 2004
among the Company, certain of its subsidiaries, and Wachovia Bank.
4.14 Amended, Restated and Consolidated Guaranty dated March 18, 2004 among
the Company, certain of its subsidiaries, and Wachovia Bank.
4.15 Amended, Restated and Consolidated Term Loan Note dated March 18, 2004
among the Company, certain of its subsidiaries, and Wachovia Bank.
4.16 Amended and Restated Revolving Credit Note dated March 18, 2004 among
the Company, certain of its subsidiaries, and Wachovia Bank.
4.17 Seventh Amendment to First Mortgage and Security Agreement dated March
18, 2004 among the Company and Wachovia Bank.
4.18 Fourth Amendment to Mortgage, Security Agreement and Fixture Financing
Statement March 18, 2004 among Resistance Technology, Inc., a
subsidiary of the Company, and Wachovia Bank.
13. "Summary of Operations" as contained in the Company's 2003 annual
report to shareholders; "Other Financial Highlights" as contained in
the Company's 2003 annual report to shareholders; "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" as contained in the Company's 2003 annual report to
shareholders; and the Company's consolidated financial statements,
including the "Notes to Consolidated Financial Statements" and the
"Report of Independent Auditors" as contained in the Company's 2003
annual report to shareholders.
21. List of significant subsidiaries of the Company.
23. Consent of Independent Auditors.
28
31.1 Certification of principal executive officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of principal financial officer pursuant to Section 302
of the Sarvanes-Oxley Act of 2002.
32 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes Oxley Act of 2002.
29