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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 27, 2001
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 0-15046
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WESTERBEKE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 041925880
- ---------------------------------------- ---------------------------
(State or other jurisdiction of Employer (I.R.S. Identification No.)
incorporation or organization)
Myles Standish Industrial Park
Taunton, Massachusetts 02780 02780
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 823 - 7677
----------------
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock,
$.01 par value
--------------
(Title of class)
Indicate by a 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 as 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 a check mark if disclosure of delinquent filers, pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
1
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid
and asked prices of such stock, as of a specified date within 60 days prior
to the date of filing.
Aggregate market value as of January 7, 2002............ $1,234,800
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value, as of January 7, 2002..... 1,935,455
shares
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
PART I
ITEM 1. BUSINESS.
General
- -------
The Company is primarily engaged in the business of designing,
manufacturing and marketing marine engine and air-conditioning products. The
Company was organized in 1932 and was re-incorporated in Delaware in 1986.
The Company's marine products consist of diesel and gasoline engine-driven
electrical generator sets, inboard propulsion engines, self-contained,
reverse-cycle air-conditioners, and associated spare parts and accessories.
In addition, the Company manufactures and markets electrical generator sets
for use in non-marine applications. The Company markets its products
throughout the United States and internationally principally for
recreational marine applications. Accordingly, the market for the Company's
products is dependent on the market for recreational boats, including
auxiliary powered sailboats, powerboats, houseboats and other pleasure
boats. The market for recreational boats, and consequently the Company's
products, may be adversely affected by general economic conditions.
Products
- --------
The Company's marine engine product line consists of 25 models of
electrical generator sets, 22 models of inboard propulsion engines, and
associated spare parts and accessories. The Company also offers 9 models of
non-marine generator sets.
The Company's diesel and gasoline engine-driven marine generator sets
are installed in powerboats, houseboats, large sailboats and other pleasure
and commercial boats to provide electricity for communication and
navigational equipment, lighting, refrigeration and other galley services,
and other safety, operating and convenience needs. The Company's present
line of generator sets produce from 3.8 to 95 kilowatts of electricity. A
generator set consists of an electrical generator and an attached diesel or
gasoline engine used to drive the generator. These engines are water-cooled
and range from one to six cylinders.
The Company's propulsion engines are inboard engines, generally
installed as auxiliary power systems for sailboats. The Company's propulsion
engines are water-cooled and range from one to six cylinders and from 7 to
170 horsepower. Management believes that more than 90% of the propulsion
engines produced by the Company are installed in sailboats of up to 50 feet
in length. The Company's higher horsepower propulsion engines are also
installed in powerboats of up to approximately 30 feet in length such as
fishing boats, cruisers and work boats.
The Company's product line also includes marine auxiliary engines and
associated spare and replacement parts marketed under the Universal(R) name
and marine air-conditioning products marketed under the Rotary Aire(R) name.
The Company
3
manufactures and markets two sizes of self-contained, reverse-cycle air-
conditioning units and accessories under the Rotary Aire(R) name. These
units can be installed in powerboats, houseboats, sailboats and other
pleasure and commercial boats.
The Company's product line includes 9 models of non-marine electrical
generator sets which may be installed in fire trucks, rescue vehicles, motor
coaches, refrigerated trucks and other specialty vehicles to provide
electricity for lighting, refrigeration and other safety, operating and
convenience needs. These generators may also be used as stand-by or
secondary power sources in the event of power outages or in locations where
primary power is not readily available, such as construction sites, rural
areas and less developed countries.
The Company offers a complete line of spare parts and accessories for
its current product lines and for most discontinued models. The Company's
line of spare parts includes oil and fuel filters, belts, thermostats,
distributor caps, fuses, spark plugs, wiring, alternators, heat exchangers,
circuit breakers, water and fuel pumps, starter motors and fuel solenoids.
Many basic parts are packaged and sold as spare part kits. Accessories
offered by the Company include various control and instrument panels,
exhaust silencers and generator sound enclosures.
The Company provides all its customers with documentation covering
operation, maintenance and repair procedures for its products. Management
believes that the provision of current and comprehensive documentation
enhances the Company's marketing and competitive effectiveness. See
"Marketing and Sales" and "Competition" below.
Each of the Company's products is covered by a one-year limited
warranty covering parts and authorized labor. In addition, the Company
offers a five-year limited warranty on certain marine generator sets. Many
of the Company's suppliers also warrant their products for parts and labor.
Some of the Company's major suppliers warrant their products for the
duration of the Company's warranties. The Company believes it has made
adequate provisions for probable warranty claims. See Note 1 of Notes to
Consolidated Financial Statements included in "Item 8 - Financial Statements
and Supplementary Data." The Company's distributors are generally
responsible for administering the Company's warranties through the dealer
network. See "Marketing and Sales" below.
Governmental Regulation
- -----------------------
Many of the Company's products are subject to exhaust emission
standards pursuant to regulations promulgated by the Environmental
Protection Agency (the "EPA"), effective September 1, 1996, and by the State
of California, effective August 1, 1995. The emission standards are intended
to reduce the emissions of hydrocarbons, nitrogen oxides, carbon monoxide,
particulates and smoke. It is anticipated that by January 1, 2005, all of
the Company's products will be subject to such regulations. All of the
regulations include manufacturer testing requirements, mandated warranties
4
on emissions related components, product labeling and reporting
requirements. Additionally, future regulations may include provisions for
selective enforcement audits and recall and repair requirements.
At this time, all of the Company's products which are subject to these
emissions regulations comply with the regulations. Achieving and maintaining
this compliance has been accomplished through significant design and
development expense. The emission standards established by the regulations
will become broader in scope and more stringent regarding emissions levels
each year. As a result, research and development expenditures for emissions
compliance will continue at a significant level for the foreseeable future.
Additionally, if at any time the Company cannot effect the required
modifications of its products to meet the required emissions levels within
the time frame allowed, the Company could be materially adversely affected.
Design and Development
- ----------------------
The Company has an ongoing product improvement and development program
intended to enhance the reliability, performance and longevity of existing
products, and to develop new products. A significant portion of the
Company's senior management's time, as well as the efforts of the Company's
thirteen-person product engineering department, is spent in this area. As
part of the Company's ongoing product development program, the Company
upgrades its engine products and periodically adds models to its product
line. For example, as and when improvements in component parts allow, the
Company may manufacture smaller or more lightweight versions of existing
models. In fiscal 2001, the product-engineering department focused
principally on the modernization of the Company's existing product line and
modifications, which the Company believes will be required as a result of
the emissions standards discussed above. In addition, in response to demand,
the Company expanded its engine product line by developing generator sets
and propulsion engines with different kilowattage and horsepower than its
existing models. The Company intends to introduce upgraded and new models as
and when developed.
The Company's design and engineering focus is on reliability, ease of
maintenance, compactness, operating smoothness, safety and longevity, among
other technical and performance factors. The Company's technical and
performance specifications are utilized by the Company's suppliers in
producing certain component parts, metal and nonmetal fabrications and other
peripheral equipment that the Company manufactures and assembles into
finished products. Generally, the Company retains title to Company-developed
drawings, patterns and specifications used by these suppliers.
For the three fiscal years ended October 2001, the Company incurred
expenses of approximately $4,312,600 for design and development activities
as follows: 2001 - $1,445,800, 2000 - $1,501,500 and 1999 - $1,365,300.
All these activities were conducted and sponsored by the Company and the
major portion of these expenses was applied toward salaries and other
expenses of the Company's product design and engineering personnel.
5
Manufacturing and Sources of Supply
- -----------------------------------
The Company's manufacturing activities are conducted in an
approximately 110,000 square foot facility owned by the Company. See "Item 2
- - Properties" below. The Company has approximately 52 persons employed in
various manufacturing and assembly functions. See "Employees" below.
The Company's engine products generally contain from 250 to 500
component parts and assemblies purchased from domestic and foreign
manufacturers and suppliers. Some of these component parts are manufactured
to Company specifications, while others are further machined and assembled
by the Company. The basic component of the Company's engine products is a
"long block" engine, which is a complete engine block and head assembly
without peripheral equipment. Peripheral equipment added by the Company
includes subassemblies (generators, transmissions, alternators, carburetors,
motors and pumps), machined castings (flywheels, bell housings, manifolds,
mounts, pulleys, brackets and couplings), sheet metal fabrications (control
and instrumentation panels), injection-molded plastic and other non-metallic
fabrications (belt guards, drip trays, belts, hoses and panels) and various
other component parts (mounts, switches and other electrical devices).
The Company purchases "long block" engines from seven foreign
manufacturers. The Company currently purchases all of its requirements of
"long block" engines on a purchase order basis rather than pursuant to long-
term supply agreements. In certain cases, the Company has an agreement with
its "long block" engine manufacturers to supply these component parts
exclusively to the Company for marine products of the type produced by the
Company. Orders for "long block" engines are dollar-denominated however,
subsequent purchases are subject to fluctuations in the dollar exchange rate
and therefore fluctuations in the dollar exchange rate have had and will
continue to have an effect on the cost of the Company's raw materials. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company believes that the purchase of "long
block" engines on a purchase order basis has become the more common industry
practice. Interruption of the supply of "long block" engines would have a
material adverse effect on the Company if the time to develop new sources of
supply and replacement products is longer than the time it takes to exhaust
the Company's inventory of existing "long block" engines. In addition, the
Company does not have long-term supply agreements with other manufacturers
of other component parts or peripheral equipment. The Company believes that
it can obtain these parts and equipment from a variety of sources on
commercially reasonable terms. However, the disruption of its supply of
these parts, equipment or "long block" engines would have a material adverse
effect on the Company's operations.
The lead-time between ordering and receipt of component parts varies
with the part involved, but generally ranges from a few weeks in the case of
unfinished products to three to six months in the case of "long block"
engines, generators and transmissions. The Company has not experienced any
difficulties in obtaining finished or unfinished components or peripheral
equipment on commercially reasonable terms.
6
Most of the Company's purchases of component parts and peripheral
equipment from Japanese ("long block" engines), Italian (generators) and
other foreign manufacturers are dollar-denominated. Fluctuations in exchange
rates have resulted, and may in the future result, in price increases from
some of the Company's suppliers. Management believes that to varying degrees
the Company's competitors in the engine product markets have been and will
be similarly affected since many of its competitors also purchase component
parts and peripheral equipment abroad. However, some of the Company's
principal competitors are divisions of large and diversified multinational
companies with extensive production facilities and sales and marketing
staffs and substantially greater financial resources than the Company and
therefore may be better situated to accommodate price increases from
suppliers due to fluctuations in exchange rates. The engine product markets
are price sensitive, and there can be no assurance that the Company will be
able to pass on price increases from its suppliers to its customers.
The manufacturing of a particular engine product requires the
integration of a number of engineering, machining and assembly functions in
order to produce high quality components. Prior to final assembly, the
Company's manufacturing activities involve machining various metal and
nonmetal component parts on computer-controlled and conventional milling
machines, lathes, drill presses, welders and other machinery, modification
and assembly of electrical and mechanical subassemblies, calibration of
electrical devices and components, and testing for variances from
specifications and operating parameters. The Company has approximately 9
machine operators who satisfy approximately 95% of the Company's machining
needs. Independent contractors perform the remainder of the machining.
The Company has a final assembly line for its engine products where
component parts, subassemblies and peripheral equipment are assembled onto
"long-block" engines. Following final assembly, each generator set and
propulsion engine is tested at increasing loads up to full operating
capacity to verify performance and safety features. After product testing,
the product is pressure hot water washed, primed and painted, unpainted
components are attached, and the product is packed and shipped to the
customer, generally via common carrier freight collect.
The Company's air-conditioning products are produced on a separate
assembly line where component parts (compressors, evaporator and condensing
coils, fans, electrical components and plastic housings), purchased from
manufacturers and suppliers, are assembled into final units. The Company
does not have any long-term supply agreements with the manufacturers of
these component parts. However, the Company believes it can obtain most of
these parts from a variety of sources on commercially reasonable terms.
Following assembly, each air-conditioner is painted and tested for
performance, leakage and compliance with safety standards.
7
Quality Control and Computerization
- -----------------------------------
Management believes that maintaining high quality manufacturing
standards is important to its competitive position and also believes that
the Company has developed a reputation for high quality products. The
Company maintains quality control systems and procedures which it reviews
with its manufacturing personnel and which it modifies as appropriate.
The Company's quality control systems and procedures include the
testing of each fully assembled generator set and propulsion engine at
increasing loads up to full operating capacity to verify performance and
safety features. The checklist includes testing wiring and electrical
systems, all connections and fittings, fuel and oil systems, the fresh
water-cooling system and safety shutdown features. In the case of the
Company's generator sets, output current, voltage and frequency are also
tested. The results of the tests are recorded, and each product is approved
by quality assurance personnel before it leaves the testing area.
In line with its policy of updating and improving its manufacturing
operations, the Company utilizes a computerized manufacturing management
system, which integrates the Company's inventory control, sales and
financial functions with its manufacturing operations.
Marketing and Sales
- -------------------
The Company's marine engine and air-conditioning products are marketed
through a nationwide and international network of distributors and dealers.
The Company markets its non-marine engine products through a sales
representative and to distributors. In addition, the Company's sales
management and senior management devote a substantial amount of time to the
overall coordination of the Company's sales to distributors, as well as to
the Company's direct sales to boat and other manufacturers (OEM's). Direct
sales by the Company to OEM's accounted for approximately 43%, 47%, and 44%
of total sales for the fiscal years ended October 2001, 2000 and 1999,
respectively.
The Company's marine products are sold to distributors for resale to
manufacturers of powerboats, houseboats, sailboats and other pleasure and
commercial boats, and to boat dealers and marinas. Boat manufacturers
install the Company's products as original equipment. In addition, the
Company's distributors resell the Company's marine products to over 600
authorized dealers (including boatyards and marinas) located on or near
major navigable waterways throughout the world. These dealers install the
Company's generator sets, propulsion engines and air-conditioners as either
new or replacement equipment. In addition, many of these dealers maintain
inventories of spare parts and accessories in order to maintain and repair
the Company's marine products.
8
The Company's distributor network consists of 9 domestic and 58
foreign distributors. The Company's domestic distributors are located along
the East, West and Gulf Coasts and in the Great Lakes Region. The 58 foreign
distributors service 70 countries worldwide and 14 islands in the Caribbean.
Of the 58 foreign distributors, 25 are located in Europe, the Mid-East and
Scandinavia, 12 in South, Central and North America, 9 in the Far East, 8 in
the Caribbean, and the remainder in Southern Africa, Australia and New
Zealand. Each distributor operates in a specified region under a
distribution agreement with the Company, which assigns to the distributor
the nonexclusive responsibility for sales, and service of the Company's
products in its territory, including warranty administration, accounts
receivable collection and other customer related functions. Each distributor
maintains inventories of the Company's marine products, including spare
parts and accessories, in order to provide boat manufacturers and dealers
with prompt delivery of products. Typically, the Company's distributors and
dealers also distribute and sell other marine accessories and products.
Generally, however, the Company's distributors do not sell products, which
compete with the Company's products.
Sales to international customers totaled $2,523,000 (8.8% of net
sales), $2,849,400 (8.3% of net sales) and $2,591,600 (8.9% of net sales)
for the fiscal years ended October 2001, 2000 and 1999, respectively. See
Note 2 of Notes to Consolidated Financial Statements included in "Item 8 -
Financial Statements and Supplementary Data" for additional information
concerning sales to international customers for the Company's three most
recent fiscal years. Management is not aware of any special tariffs,
importation quotas or any other restrictions imposed by the foreign
countries in which the Company sells its products. All of the Company's
international sales are dollar-denominated which protects the Company to
some extent against foreign currency exchange rate fluctuations, although
significant increases in the value of the dollar in relation to foreign
currencies may adversely impact the Company's ability to market its products
abroad. Management believes that, to varying degrees, the Company's
competitors in the marine product market are similarly affected since many
of its competitors also sell products abroad. However, some of the Company's
principal competitors are divisions of large and diversified multinational
companies with extensive production facilities and sales and marketing
staffs and substantially greater financial resources than the Company and
therefore may be better situated to accommodate fluctuations in exchange
rates. Management is not aware of any other unusual or special risks
associated with this aspect of the Company's business. The Company considers
international customers to be an important market for its marine products.
An important aspect of the Company's marketing approach and
competitive position is the ability of its technical personnel and its
distributors to provide technical assistance to boat manufacturers and
dealers with a view to developing specifications and performance parameters
for unit or serial production of its marine products. To that end, the
Company selects its distributors with great care and continually monitors
their technical expertise. In addition, at times the Company conducts
seminars in each distribution region. These sessions are conducted by
personnel from the Company and from its distributors and are open to boat
manufacturers, dealers and individual boat
9
owners. The Company occasionally sponsors service schools at its
manufacturing facility designed to upgrade a distributor's technical
expertise and to introduce product innovations and new products. See
"Competition" below.
The Company markets the Westerbeke(R), Universal(R) and Rotary Aire(R)
names and its marine products through various methods of advertising.
Certain advertising is accomplished under a cooperative system with the
Company's distributors. Under this system, the Company pays a portion of the
cost of and approves the advertising developed by its distributors.
Advertisements are placed in trade publications such as Soundings, Motor
Boating, Sail, Power & Motor Yacht and Cruising World. In addition, a
substantial amount of the Company's advertising is conducted through the
distribution of technical and sales literature and pamphlets, direct
mailings and sponsorship of exhibits at boat shows. During the fiscal years
ended October 2001, 2000 and 1999, the Company incurred advertising and
promotional expenses of $668,500, $684,600, and $647,500, respectively. See
Note 1 of Notes to Consolidated Financial Statements included in " Item 8 -
Financial Statements and Supplementary Data."
For the fiscal year ended October 27, 2001, sales to Sea Ray Boats,
Inc. and Marysville Marine Distributors, Inc., accounted for approximately
26.4% and 18.5%, respectively, of the Company's total sales. See Note 2 of
Notes to Consolidated Financial Statements included in " Item 8 - Financial
Statements and Supplementary Data" and "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company
believes that, if necessary, it could replace any of its distributors or
sell the products presently distributed by them directly to boat
manufacturers and dealers. However, the loss of these customers or the
inability to replace these distributors could have a material adverse effect
on the Company.
The market for the Company's products is dependent on the market for
recreational boats, including auxiliary powered sailboats, powerboats,
houseboats and other pleasure boats. In addition, the recreational marine
boat business is seasonal in nature and accordingly, the Company's business
generally experiences some fluctuations in its business during the course of
the year. See Note 14 of Notes to Consolidated Financial Statements included
in "Item 8 - Financial Statements and Supplementary Data."
Proprietary Rights
- ------------------
Although the Company follows a policy of protecting its proprietary
rights to its marine engine products and designs, it does not believe that
its business, as a whole, is materially dependent upon such protection. The
Company has registered the names Westerbeke(R), Universal(R), Rotary Aire(R)
and Atomic Four(R) under Federal trademark law.
Backlog and Credit Terms
- ------------------------
The Company believes that because its production is based upon
cancelable purchase orders rather than long-term agreements, the amount of
its backlog is not an
10
important indicator of future sales. The Company extends credit to certain
of its customers on terms, which it believes are normal and customary in the
marine industry.
Competition
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The business of manufacturing and supplying marine products is
extremely competitive. The Company faces competition from a number of
companies, including at least five significant competitors, some of which
are divisions of large and diversified multinational companies with
extensive production facilities and sales and marketing staffs and
substantially greater financial resources than the Company. Such competitors
may be better situated to accommodate price increases from suppliers due to
fluctuations in exchange rates. In addition, the Company faces competition
from similar companies as it expands its product line or seeks other non-
marine applications for its product line. Although price is an important
competitive factor, the Company believes that its pricing is competitive.
The market for the Company's marine products is dependent on the
market for recreational boats, which may experience contracting sales as a
result of general economic conditions. A contracting market may result in
additional competition particularly for direct sales to large boat
manufacturers.
The Company believes that it can compete effectively with all of its
present competitors based upon the high quality, reliability, performance
and longevity of its products, the comprehensiveness of its line of
products, price, the effectiveness of its customer service, and the
technical expertise of its personnel and that of its distributors.
Employees
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At December 21, 2001, the Company had 91 full-time employees,
including officers and administrative personnel. None of the Company's
employees is covered by a collective bargaining agreement and the Company
considers its relationship with its employees to be excellent.
Directors and Executive Officers of the Company
- -----------------------------------------------
The directors and executive officers of the Company are as follows:
Name Position with the Company Age
- ---- ------------------------- ---
John H. Westerbeke, Jr Chairman, President and 61
Director (Class C)
Carleton F. Bryant, III Executive Vice President, 56
Treasurer, Chief Operating
Officer and Secretary
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Gerald Bench Director (Class A) 60
Thomas M. Haythe Director (Class B) 62
James W. Storey Director (Class B) 67
John H. Westerbeke, Jr. has been President and a director of the
Company since 1976. In June 1986, Mr. Westerbeke, Jr. assumed the additional
position of Chairman of the Company. Mr. Westerbeke, Jr. has served in
various managerial capacities since joining the Company in 1966.
Carleton F. Bryant, III has been Executive Vice President, Treasurer,
Chief Operating Officer, and Secretary of the Company since May 1993. From
October 1987 to May 1993, Mr. Bryant was Director of Business Development
for Analysis & Computer Systems, Inc., a developer of computer software and
systems. From June 1980 to October 1987, Mr. Bryant held various management
positions with Bird-Johnson Company, a manufacturer of ship propellers, bow
thrusters and hydraulic actuators. From 1969 to 1980, Mr. Bryant held a
variety of management positions with Bath Iron Works Corporation, a
shipbuilder.
Gerald Bench has been a director of the Company since June 1986. Mr.
Bench has been the Vice Chairman of TDG Aerospace, Inc. (manufacturer of
aircraft de-icing devices) since January 2001. From November 1996 to January
2001, Mr. Bench was the President of BFT Holdings Co., Inc., a company that
invests in emerging growth businesses. Mr. Bench was the President and Chief
Executive Officer of Hadley Fruit Orchards, Inc. from November 1996 to June
1999 and was a consultant from March 1995 to November 1996. Mr. Bench was a
partner in ICAP Marine Group (consulting firm) from November 1993 to February
1995. Mr. Bench was the Chairman and President of TDG Aerospace, Inc. from
October 1991 to November 1993. Mr. Bench was the President of Thermion, Inc.
(manufacturer of heaters for aircraft de-icing devices) from April 1990 to
September 1991. From July 1989 to March 1990, Mr. Bench was the general
manager of Lermer Corporation (manufacturer of airline galley equipment).
Mr. Bench is the former Chairman of the Board, President, Chief Executive
Officer and director of E&B Marine Inc. (marine supplies and accessories).
Mr. Bench had held various executive positions with E&B Marine Inc. for more
than 30 years.
Thomas M. Haythe has been a director of the Company since June 1986.
Mr. Haythe has been a business and legal consultant since February 2000.
From 1982 to January 2000, Mr. Haythe was a partner of the law firm of
Haythe & Curley (renamed Torys in 2000). Mr. Haythe is also a director of
Novametrix Medical Systems Inc. (manufacturer of electronic medical
instruments) and Ramsay Youth Services, Inc. (provider of youth and
educational services).
James W. Storey has been a director of the Company since June 1986.
Mr. Storey was the President of Wellingsley Corporation (private investment
management company) from December 1986 through December 1992. Mr. Storey is
currently an independent consultant. From 1982 to 1986, Mr. Storey was the
President and Chief Executive Officer
12
of Codex Corporation, a subsidiary of Motorola, Inc., and was a Vice
President of Motorola, Inc. Mr. Storey had held various managerial positions
with Codex Corporation since 1966.
ITEM 2. PROPERTIES.
The Company's executive and administrative offices and manufacturing
operations are located in Taunton, Massachusetts in an approximately 110,000
square foot facility owned by the Company. The Company also leases a
warehouse of approximately 26,000 square feet. Annual warehouse rent was
approximately $151,800 in fiscal 2001 and $152,300 in fiscal 2000. See Note
10 of Notes to Consolidated Financial Statements included in "Item 8 -
Financial Statements and Supplementary Data."
ITEM 3. LEGAL PROCEEDINGS.
As previously announced, the award of damages in the amount of
$4,202,300 in the Company's arbitration against Daihatsu Motor Company, LTD
("Daihatsu") for breach of contract and other claims has been vacated by the
United States District Court for the Southern District of New York, and the
court has remanded the case to the arbitrator for a new determination of
damages. The Company has appealed the court's decision to the United States
Court of Appeals for the Second Circuit. Accordingly, the Company is unable
to predict when, if ever, it will receive payment of the award. Therefore,
the Company will not record any recovery until received. See Note 10 of
Notes to Consolidated Financial Statements included in " Item 8 - Financial
Statements and Supplementary Data" and "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company
dismissed a separate but related case pending in the United States District
Court for the District of Massachusetts, in which the Company sought damages
from Briggs & Stratton Corporation for tortious interference with the
Company's Agreement with Daihatsu and other related claims.
In addition, from time to time, the Company is party to certain
claims, suits and complaints, which arise, in the ordinary course of
business. Currently, there are no such claims, suits or complaints, which,
in the opinion of management, would have a material adverse effect on the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") under the symbol WTBK. On January 7, 2002, there were
approximately 126 shareholders of record. The following table sets forth the
range of high and low sales prices per share of the Company's Common Stock
from October 24, 1999 through October 27, 2001, on the NASDAQ.
Common Stock Prices
High Low
---- ---
FISCAL 2000
First Quarter (October 24, 1999 to
January 22, 2000) $2.750 $2.375
Second Quarter (January 23, 2000 to
April 22, 2000) 4.438 2.344
Third Quarter (April 23, 2000 to
July 22, 2000) 3.250 2.625
Fourth Quarter (July 23, 2000 to
October 21, 2000) 3.375 2.500
FISCAL 2001
First Quarter (October 22, 2000 to
January 27, 2001) $3.125 $2.500
Second Quarter (January 28, 2001 to
April 28, 2001) 3.000 2.000
Third Quarter (April 29, 2001 to
July 28, 2001) 2.250 2.050
Fourth Quarter (July 29, 2001 to
October 27, 2001) 2.450 1.800
On January 7, 2002, the last high and low sales price for the
Company's Common Stock was $1.500.
14
No dividends have been paid or declared on the Common Stock of the
Company and the Company does not expect to pay any dividends on its Common
Stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
Five-Year Comparison of Selected Financial Data
October 27, October 21, October 23, October 24, October 25,
2001 2000 1999 1998 1997
-----------------------------------------------------------------------
For the Year: (In thousands, except for per share amount)
Net sales $28,694 $34,528 $29,114 $26,202 $24,620
Gross profit 6,461 7,752 6,563 5,966 5,556
Selling, general and
administrative expense 4,436 5,756 4,359 3,684 3,106
Research and development expense 1,446 1,501 1,365 1,181 1,030
Income from operations 1,132 494 839 1,100 1,420
Interest income (expense) (618) (172) 60 (10) (71)
Other income (expense) 10 (189) 387 - -
Net income 319 228 796 644 799
Net income per share, diluted* 0.16 0.11 0.39 0.31 0.37
At end of year:
Total assets $21,878 $24,839 $15,384 $14,670 $14,811
Working capital 5,808 5,537 7,616 5,650 5,800
Long-term liabilities 4,770 5,030 647 893 1,069
Stockholders' equity 11,580 11,627 11,381 10,719 10,136
* See Note 1 of Notes to Consolidated Financial Statements.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Results of Operations:
The following table sets forth, for the years indicated, the percentages,
which the following items in the Consolidated Statements of Operations bear
to Net Sales.
Years Ended
-----------------------------------------
October 27, October 21, October 23,
2001 2000 1999
-----------------------------------------
Net sales 100.0% 100.0% 100.0%
Gross profit 22.5 22.5 22.5
Selling, general and administrative
expense 15.5 16.7 15.0
Research and development expense 5.0 4.3 4.7
Income from operations 3.9 1.4 2.9
Interest income (expense), net (2.2) (0.5) 0.2
Other income (expense) - (0.5) 1.3
Provision for income (benefit) taxes 0.7 (0.3) 1.7
Net income 1.1 0.7 2.7
16
Fiscal 2001 compared to Fiscal 2000
- -----------------------------------
Net sales decreased $5,834,200 or 16.9% in fiscal 2001 as compared to fiscal
2000. The decrease in net sales was attributable to general business
conditions in the domestic recreational marine market, in particular,
deceased demand for new boats. International sales were $2,523,000 in 2001,
representing 8.8% of net sales, as compared to $2,849,400 in 2000 or 8.3% of
net sales.
Gross profit decreased $1,290,600 or 16.6% in fiscal 2001 as compared to
fiscal 2000. Gross profit as a percentage of sales remained constant at
22.5% in both fiscal 2001 and fiscal 2000.
Selling, general and administrative expense decreased $1,320,400 or 22.9% in
fiscal 2001 as compared to fiscal 2000. The decrease was primarily the
result of a decrease in legal costs associated with the legal proceeding
against the Company's former "long block" supplier and a decrease in
compensation expenses.
Research and development expense decreased $55,700 or 3.7% in fiscal 2001 as
compared to fiscal 2000.
The gain on the sale of the facility, in the amount of $552,800, was from the
sale of the Company's property located in Avon, Massachusetts.
Net interest expense was $618,200 in fiscal 2001 as compared to $171,700 in
fiscal 2000. The increase in interest expense was primarily due to the
mortgage on the Company's new Taunton facility and also higher outstanding
balances on the revolving loan balance.
Other income is the realized gain from the sale of certain investments
relating to the deferred compensation agreement (discussed below), which is
offset by an increase in selling, general and administrative expenses.
On May 17, 2001, the Board of Directors of the Company, at the request of
John H. Westerbeke, Jr., agreed to have the Company pay Mr. Westerbeke all
amounts previously deferred under an agreement, pursuant to which Mr.
Westerbeke had elected to defer the payment of certain amounts of salary and
bonuses awarded to him.
The Company's net income was $318,800 in fiscal 2001 as compared to $228,300
in fiscal 2000. The increase is mainly attributable to the gain on the sale
of the Company's property located in Avon, Massachusetts.
The Company is currently renegotiating its exclusive agreement with its
largest customer. The existing agreement will expire on June 30, 2002. The
Company cannot predict the results of these negotiations. The loss of the
revenues associated with this agreement would have a material adverse effect
on the Company's operating results and financial condition if the Company
was unable to replace the business and or reduce operating expenses.
17
Fiscal 2000 compared to Fiscal 1999
- -----------------------------------
Net sales increased $5,414,700 or 18.6% in fiscal 2000 as compared to fiscal
1999. The increase was attributable to higher unit sales of the Company's
products, primarily the result of more favorable economic conditions
benefiting the pleasure boat industry. International sales were $2,849,400
in 2000, representing 8.3% of net sales, as compared to $2,591,600 in 1999,
or 8.9% of net sales.
Gross profit increased $1,188,900 or 18.1% in fiscal 2000 as compared to
fiscal 1999. Gross profit as a percentage of sales remained constant at
22.5% in both fiscal 2000 and fiscal 1999.
Selling, general and administrative expense increased $1,397,100 or 32.0% in
fiscal 2000 as compared to fiscal 1999. The increase was primarily the
result of higher legal costs associated with the legal proceeding against
the Company's former "long block" supplier, increased hiring expenses and
also an increase in sales and marketing costs, offset by a reduction in
amounts due under the deferred compensation agreement. Although the Company
has been awarded damages of $4,202,300 in connection with its case against a
former "long block" supplier, the award is subject to appeal. Therefore, the
Company will not record any recovery until received.
Research and development expense increased $136,200 or 10.0% in fiscal 2000
as compared to fiscal 1999. The increase is due to additional engineering
personnel. The Company also experienced increased costs to comply with
federal and state exhaust requirements for existing and new engines. See
"Business - Governmental Regulation."
Other expense in the amount of $188,600 is comprised of the net realized
losses from the sale of certain investments relating to the deferred
compensation agreement. This loss is offset by a benefit in selling, general
and administrative expenses. In addition, the Company recognized a loss of
$53,900 on the disposal of machinery and equipment.
Net interest expense was $171,700 in fiscal 2000 compared to net interest
income of $59,700 in fiscal 1999. The increase in interest expense is
primarily due to the mortgage on the Company's new Taunton facility and also
higher outstanding balances on the revolving loan balance.
The Company had an income tax benefit of $94,400 in fiscal 2000 as compared
to an expense of $489,400 in fiscal 1999. The income tax benefit in fiscal
2000 was related primarily to state investment tax credits as a result of
the acquisition of the Taunton facility.
The Company's net income was $228,300 in fiscal 2000 as compared to $796,000
in fiscal 1999. The decrease is mainly attributable to the increase in legal
costs and the increase in interest expense during fiscal 2000.
18
Liquidity and Capital Resources
- -------------------------------
During fiscal 2001, net cash provided by operations was $993,600 as compared
to net cash used in operations of $2,309,200 in fiscal 2000. The increase
in net cash provided by operations is primarily due to the decrease in
inventory and accounts receivable. The decrease in inventories is primarily
the result of decreased demand for the Company's products.
During fiscal 2001 and 2000, the Company purchased property, plant and
equipment of $1,440,600 and $7,384,700, respectively. On April 25, 2000, the
Company purchased a 110,000 square foot facility located in Taunton,
Massachusetts. This facility has enabled the Company to consolidate its
operations into one location. The MassDevelopment Financing Agency approved
the Company for a $5,000,000 tax-exempt industrial revenue bond, which has
been financed by GE Capital Public Finance. The real estate portion of the
loan is $4,600,000 for fifteen years at a fixed rate of 6.46%. The equipment
portion of the loan is $400,000 for seven years at a fixed rate of 6.46%.
The Company plans capital spending of approximately $300,000 during fiscal
2002.
On June 26, 2000, the Company entered into a $5,000,000 Credit Agreement
with Brown Brothers Harriman & Co. collateralized by inventory, accounts
receivable and general intangibles. The Credit Agreement was increased on
September 25, 2000 to a maximum availability of $6,000,000. The actual
amount available for borrowing is based on a calculation of eligible
accounts receivable and eligible inventory. Based on this calculation, at
October 27, 2001, the Company had approximately $4,964,800 available for
borrowing. At October 27, 2001, the Company had $2,500,000 in outstanding
borrowings under the Credit Agreement and approximately $160,900 committed
to cover the Company's reimbursement obligations under certain letters of
credit and bankers' acceptances. The Credit Agreement does not have an
expiration date, but is payable on written demand.
Management believes cash flow from operations and borrowings available under
the Credit Agreement will provide for working capital needs, principal
payments on long-term debt, and capital and operating leases through fiscal
2002.
Domestic inflation is not expected to have a major impact on the Company's
operations.
The costs of engine blocks and other components are subject to foreign
currency fluctuations (primarily the Japanese yen). The value of the U.S.
dollar relative to the yen had no material effect on the cost of the
Company's products in fiscal 2001.
This Annual Report on Form 10-K may contain forward-looking information
about the Company. The Company is hereby setting forth statements
identifying important factors that may cause the Company's actual results to
differ materially from those set forth in any forward-looking statements
made by the Company. Some of the most significant factors include: an
unanticipated down-turn in the recreational boating industry resulting in
lower
19
demand for the Company's products; the unanticipated loss of, or decline in
sales to, a major customer; the unanticipated loss of a major supplier; the
unanticipated required repayment in full of outstanding amounts under the
Company's demand credit facility; the inability of the Company to effect
required modifications of its products to meet governmental regulations with
respect to emission standards; and foreign currency fluctuations resulting
in cost increases to the Company for its foreign supplied components.
Accordingly, there can be no assurances that any anticipated future results
will be achieved.
New Accounting Pronouncements
- -----------------------------
In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 provides
new guidance on the accounting for a business combination at the date a
business combination is completed. Specifically, it requires use of the
purchase method of accounting for all business combinations initiated after
June 30, 2001, thereby eliminating use of the pooling-of-interests method.
The provisions of SFAS No. 141 are effective immediately, except with regard
to business combinations initiated prior to June 30, 2001. SFAS No. 142 will
be effective as of January 1, 2002. Goodwill and other intangible assets
determined to have an indefinite useful life that are acquired in a business
combination completed after July 1, 2001, will not be amortized, but will
continue to be evaluated for impairment in accordance with appropriate pre-
SFAS 142 accounting literature. Goodwill and other intangible assets
acquired in business combinations completed before July 1, 2001 will
continue to be amortized prior to the adoption of SFAS No. 142. The Company
does not believe there will be a material effect from the adoption of these
new standards. SFAS No. 142 establishes new guidance on how to account for
goodwill and intangible assets after a business combination is completed.
Among other things, it requires that goodwill and certain other intangible
assets will no longer be amortized and will be tested for impairment at
least annually and written down only when impaired. This statement will
apply to existing goodwill and intangible assets beginning with fiscal years
starting after December 15, 2001. The Company is currently evaluating the
impact of these provisions.
On August 16, 2001, FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." The standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related long-
lived asset. Over time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon
settlement. The standard will apply to the Company effective October 27,
2002. The Company is currently reviewing the impact of this provision.
On October 3, 2001, FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," that replaced FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets To Be Disposed Of."
20
The primary objectives of this project were to develop one accounting model
based on the framework established in Statement No. 121 for long-lived
assets to be disposed of by sale and to address significant implementation
issues. The accounting model for long-lived assets to be disposed of by sale
applies to all long-lived assets, including discontinued operations, and
replaces the provisions of APB Opinion No. 30, Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, for
the disposal of segments of a business. Statement No. 144 requires that
those long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no longer
be measured at net realizable value or include amounts for operating losses
that have not yet occurred. The provisions of Statement No. 144 will apply
to the Company effective October 27, 2002. The Company is currently
reviewing the impact of these provisions.
21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
We have not entered into any transactions using derivative financial
instruments or derivative commodity instruments and we believe that our
exposure to market risk associated with other financial instruments (such as
fixed and variable rate borrowings), is not material.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
WESTERBEKE CORPORATION AND SUBSIDIARY
-------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended October 27, 2001,
October 21, 2000 and October 23, 1999
23
KPMG LLP
99 High Street Telephone 617 988 1000
Boston, MA 02110-2371 Fax 617 988 0800
Independent Auditors' Report
----------------------------
To the Board of Directors and Stockholders of
Westerbeke Corporation:
We have audited the accompanying consolidated balance sheets of Westerbeke
Corporation and subsidiary as of October 27, 2001 and October 21, 2000, and
the related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended October 27, 2001. In connection with our audits of the
consolidated financial statements, we have also audited the financial
statement schedule as listed in Item 14(a) 2. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Westerbeke Corporation and subsidiary as of October 27, 2001 and October 21,
2000, and the results of their operations and their cash flows for each of
the years in the three-year period ended October 27, 2001, in conformity
with accounting principles generally accepted in the United States of
America. Also in our opinion, the related 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.
By /s/ KPMG LLP
---------------
Boston, Massachusetts
December 7, 2001
24
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
October 27, October 21,
2001 2000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 40,300 $ 421,100
Accounts receivable, net of allowance for doubtful
accounts of $115,000 at October 27, 2001 and
October 21, 2000 (Note 2) 2,131,800 2,569,700
Inventories (Note 3) 7,566,800 9,040,900
Prepaid expenses and other assets 397,500 411,100
Prepaid income taxes 354,700 310,500
Deferred income taxes (Note 9) 844,200 965,100
--------------------------
Total current assets 11,335,300 13,718,400
Property, plant and equipment, net (Notes 4,8 and 10) 8,862,400 8,863,300
Split dollar premiums (Note 5) 1,237,000 1,525,100
Other assets, net 190,200 555,900
Investments in marketable securities 109,200 101,400
Note receivable - related party (Note 6) 56,200 74,800
Deferred income taxes (Note 9) 87,400 -
--------------------------
$21,877,700 $24,838,900
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Notes 8 and 10) $ 317,900 $ 280,100
Revolving demand note payable (Note 7) 2,500,000 3,850,000
Accounts payable 2,164,300 3,159,900
Accrued expenses and other liabilities 545,200 891,600
--------------------------
Total current liabilities 5,527,400 8,181,600
--------------------------
Deferred income taxes (Note 9) - 42,200
Deferred compensation - 345,800
Long-term debt, net of current portion (Notes 8 and 10) 4,770,400 4,642,200
--------------------------
Total Liabilities 10,297,800 13,211,800
--------------------------
Commitments and contingencies (Notes 7 and 10)
Stockholders' equity (Notes 11 and 12):
Common stock, $.01 par value; authorized 5,000,000 shares; issued
2,225,328 shares in 2001 and 2,195,950 in 2000. 22,300 22,000
Additional paid-in-capital 6,105,100 6,042,500
Accumulated other comprehensive income (loss) (359,800) 17,800
Retained earnings 6,619,600 6,300,800
--------------------------
12,387,200 12,383,100
Less - Treasury shares at cost, 289,873 shares in 2001 and
268,138 shares in 2000 807,300 756,000
--------------------------
Total stockholders' equity 11,579,900 11,627,100
--------------------------
$21,877,700 $24,838,900
==========================
The accompanying notes are an integral part of
the consolidated financial statements.
25
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
-----------------------------------------
October 27, October 21, October 23,
2001 2000 1999
----------- ----------- -----------
Net sales (Note 2) $28,694,200 $34,528,400 $29,113,700
Cost of sales 22,232,800 26,776,400 22,550,600
-----------------------------------------
Gross profit 6,461,400 7,752,000 6,563,100
Selling, general and administrative expense 4,435,900 5,756,300 4,359,200
Research and development expense 1,445,800 1,501,500 1,365,300
Gain on sale of facility 552,800 - -
-----------------------------------------
Income from operations 1,132,500 494,200 838,600
Interest income (expense), net (618,200) (171,700) 59,700
Other income (expense), net 9,700 (188,600) 387,100
-----------------------------------------
Income before income taxes 524,000 133,900 1,285,400
Provision for income (benefit) taxes (Note 9) 205,200 (94,400) 489,400
-----------------------------------------
Net income $ 318,800 $ 228,300 $ 796,000
=========================================
Income per common share, basic $ .16 $ .12 $ .42
=========================================
Income per common share, diluted $ .16 $ .11 $ .39
=========================================
Weighted average common shares, basic 1,941,391 1,920,147 1,917,812
=========================================
Weighted average common shares, diluted 2,042,912 2,057,891 2,055,682
=========================================
The accompanying notes are an integral part of
the consolidated financial statements.
26
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Three years ended October 27, 2001
Accumulated
Common Additional Other
Stock Paid-in Comprehensive Retained Treasury Stockholders' Comprehensive
Amount Capital Income Earnings Stock Equity Income
---------------------------------------------------------------------------------------------
October 24, 1998 $21,900 $6,025,300 $ 151,200 $5,276,500 $(756,000) $10,718,900
Unrealized gains on marketable
securities net of reclassification
adjustment (see note) - - (134,300) - - (134,300) $(134,300)
Net income - - - 796,000 - 796,000 796,000
-----------------------------------------------------------------------------------------
October 23,1999 21,900 6,025,300 16,900 6,072,500 (756,000) 11,380,600 661,700
Exercise of stock options 100 11,200 - - - 11,300
Tax benefit from the exercise of
stock options - 6,000 - - - 6,000
Unrealized gains on marketable
securities - - 900 - - 900 900
Net income - - - 228,300 - 228,300 228,300
-----------------------------------------------------------------------------------------
October 21, 2000 22,000 6,042,500 17,800 6,300,800 (756,000) 11,627,100 229,200
Exercise of stock options 300 46,000 - - - 46,300
Tax benefit from the exercise of
stock options - 16,600 - - - 16,600
Repurchase of 21,735 shares - - - - (51,300) (51,300)
Unrealized losses on marketable
securities - - (377,600) - - (377,600) (377,600)
Net income - - - 318,800 - 318,800 318,800
-----------------------------------------------------------------------------------------
October 27, 2001 $22,300 $6,105,100 $(359,800) $6,619,600 $(807,300) $11,579,900 $ (58,800)
=========================================================================================
Note: (Year ending October 23, 1999)
Unrealized holding loss arising during
period $ (2,600)
Less: reclassification adjustment for
gains included in net income (131,700)
---------
Net unrealized gains on securities $(134,300)
=========
The accompanying notes are an integral part of
the consolidated financial statements.
27
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
-----------------------------------------
October 27, October 21, October 23,
2001 2000 1999
-----------------------------------------
Cash flows from operating activities:
Net income $ 318,800 $ 228,300 $ 796,000
Reconciliation of net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 774,100 509,200 466,800
Loss (gain) on disposal of fixed assets (554,000) 53,900 1,300
Deferred income taxes 243,100 (358,600) (140,600)
Changes in operating assets and liabilities:
Accounts receivable 437,900 (67,600) (209,200)
Inventories 1,474,100 (3,400,700) (248,600)
Prepaid expenses and other assets 13,600 65,800 (133,900)
Split-dollar premiums (344,500) (55,500) (128,300)
Prepaid income taxes (27,600) (268,900) (35,600)
Other assets 345,800 159,500 (90,700)
Accounts payable (995,600) 911,200 342,800
Accrued expenses and other liabilities (346,300) (22,400) 245,000
Deferred compensation (345,800) (63,400) 88,500
Accrued income taxes payable - (93,900)
-----------------------------------------
Net cash provided by (used in) operating activities 993,600 (2,309,200) 859,600
-----------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,440,600) (7,384,700) (312,100)
Proceeds from sale of fixed assets 1,241,200 - -
Proceeds from sale of marketable securities - - 1,465,000
Purchase of marketable securities (4,600) (9,100) -
Proceeds from payment of note receivable 18,600 18,600 14,600
-----------------------------------------
Net cash (used in) provided by investing activities (185,400) (7,375,200) 1,167,500
-----------------------------------------
Cash flows (used in) from financing activities:
Exercise of stock options 46,300 11,300 -
Net borrowings (repayments) under revolving
demand note (1,350,000) 3,850,000 (200,000)
Purchase of treasury stock (51,300) - -
Proceeds from GE Capital - 5,000,000 -
Proceeds from Massachusetts Development 500,000 - -
Principal payments on long-term debt and
capital lease obligations (334,000) (495,100) (189,700)
-----------------------------------------
Net cash (used in) provided by financing activities (1,189,000) 8,366,200 (389,700)
-----------------------------------------
(Decrease) increase in cash and cash equivalents (380,800) (1,318,200) 1,637,400
Cash and cash equivalents, beginning of year 421,100 1,739,300 101,900
-----------------------------------------
Cash and cash equivalents, end of year $ 40,300 $ 421,100 $ 1,739,300
=========================================
Continued
28
Supplemental cash flow disclosures:
Interest paid $ 623,200 $ 185,100 $ 92,500
Income taxes paid $ 10,000 $ 644,000 $ 668,900
Supplemental disclosures of non-cash flow items:
Increase (decrease) in unrealized gains on
marketable securities, net of income taxes $ 2,000 $ 900 $ (2,600)
Unrealized loss in split-dollar life insurance
Investments, net of income taxes $ (379,600) - -
Supplemental disclosures of non-cash operating activities:
Tax benefit from the exercise of stock options $ 16,600 $ 6,000 -
The accompanying notes are an integral part of
the consolidated financial statements.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 27, 2001, October 21, 2000 and October 23, 1999
1. Summary of Significant Accounting Policies:
The Company is primarily engaged in the business of designing, manufacturing
and marketing marine engine and air-conditioning products.
Items Affecting Comparability
Our fiscal year ends on the Saturday of the last full week of October and,
as a result, a fifty-third week is added every five or six years. The fiscal
year ended October 27, 2001 consisted of fifty-three weeks. The fifty-third
week increased 2001 net sales by an estimated $475,000 and operating profits
by an estimated $10,900.
Principles of Consolidation
The consolidated financial statements include the accounts of Westerbeke
Corporation (the "Company"), and its wholly owned subsidiary, Westerbeke
International, Inc. (a foreign sales corporation). All inter-company
accounts are eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses. Actual results could differ from these estimates.
Cash Equivalents
All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents.
Investments in Marketable Securities
Marketable investment securities at October 27, 2001 and October 21, 2000
consist of equity securities in various mutual funds. The Company employs
the provisions of Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (Statement
115). Under Statement 115, the Company classifies its marketable securities
in one of two categories: trading or available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses on trading securities are included in
earnings. Unrealized holding gains and losses on available-for-sale
securities are excluded from earnings and are reported as a separate
component of stockholders' equity until realized. Transfers of securities
between categories are recorded at fair value at the date of transfer.
Unrealized holding gains and losses are recognized in earnings for transfers
into trading securities.
A decline in the market value of any available-for-sale security below cost
that is deemed other than temporary is charged to earnings resulting in the
establishment of a new cost basis for the security.
Dividend and interest income are recognized when earned. Realized gains and
losses, if any, for securities classified as available-for-sale are included
in earnings with cost determined using the specific identification method.
30
Marketable investment securities held in connection with the deferred
compensation arrangement are classified as trading securities. These
securities were sold during the year ended October 27, 2001. All other
marketable securities are classified as available-for-sale. Equity
securities are stated at the fair market value at October 27, 2001 and at
October 21, 2000. The total cost of the marketable securities at October 27,
2001 and October 21, 2000 was $65,300. Unrealized holding gains in
investment securities, net of income taxes, which is included in accumulated
other comprehensive income at October 27, 2001 and October 21, 2000 were
$19,700 and $17,800, respectively.
Inventories
Inventories are valued at the lower of cost (determined on the last-in,
first-out method) or market.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
Depreciation and Amortization
The Company computes depreciation and amortization expense on a straight-
line basis over the following estimated useful lives:
Asset Classification Estimated Useful Lives
- -------------------- ----------------------
Building and building improvements 15 - 40 years
Machinery and equipment 10 years
Patterns 5 years
Furniture and fixtures 5 - 10 years
Transportation equipment 3 - 5 years
Equipment under capital lease 5 - 10 years
Intangibles 3 - 17 years
Intangible assets, primarily acquired patents, are classified in other
assets. Maintenance and repairs are charged to expense in the period
incurred. The cost and accumulated depreciation of assets retired or sold
are removed from the accounts and any gain or loss is credited or charged to
income.
Leasehold improvements are amortized on a straight-line basis over the
shorter of the life of the lease or their estimated useful lives.
Revenue Recognition
The Company recognizes revenue upon shipment of product.
Fair Value of Financial Instruments
Financial instruments of the Company consist of cash, cash equivalents,
accounts receivable, long-term and short-term debt, accounts payable and
accrued liabilities. The carrying value of these financial instruments
approximates their fair value because of the short maturity of these
instruments. Based upon borrowing rates
31
currently available to the Company for issuance of similar debt with similar
terms and remaining maturities, the estimated fair value of long-term debt
approximates their carrying amounts.
Product Warranty Cost
The anticipated costs related to product warranty are expensed at the time
of sale of the product. Accrued warranty expense of $360,000 is included in
accrued expenses and other liabilities at October 27, 2001 and October 21,
2000.
Advertising
Advertising and promotional expenditures are expensed as incurred. During
the fiscal years ended October 2001, 2000 and 1999, the Company incurred
advertising and promotional expenses of $668,500, $684,600, and $647,500,
respectively.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred taxes of a
change in tax rate is recognized in income in the period that includes the
enactment date.
Split-Dollar Premiums
The Company has a split dollar life insurance agreement with John H.
Westerbeke, Jr., Chairman, President and Chief Executive Officer of the
Company. The value reflected on the balance sheet is the lesser of the fair
value of the mutual funds in which the premiums are invested or the
cumulative value of the premiums paid. The Company accounts for this
arrangement in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The investments are classified as
available for sale and unrealized gains and losses are reflected as a
component of other comprehensive income net of tax.
Net Income Per Share
Basic income per common share is computed by dividing income available to
common stockholders by the weighted average number of shares outstanding for
the period. Diluted income per share reflects the maximum dilution that
would have resulted from the exercise of stock options. Diluted income per
share is computed by dividing net income by the weighted average number of
common shares and all dilutive securities, except when the effect would be
antidilutive.
For the twelve months ended:
--------------------------------------------------------------------------------------------------------------
October 27, 2001 October 21, 2000 October 23, 1999
---------------------------------- ---------------------------------- ----------------------------------
Income Net Income Net Income Net
per share Shares Income per share Shares Income per share Shares Income
--------------------------------------------------------------------------------------------------------------
Basic $.16 1,941,391 $318,800 $.12 1,920,147 $228,300 $.42 1,917,812 $796,000
Effect of
Stock options - 101,521 - (.01) 137,744 - (.03) 137,870 -
------------------------------- ------------------------------- -------------------------------
Diluted $.16 2,042,912 $318,800 $.11 2,057,891 $228,300 $.39 2,055,682 $796,000
32
At October 27, 2001, there were 229,022 exercisable options outstanding,
which were convertible into 229,022 common shares. Included in the 229,022
exercisable options outstanding are 33,300 options that have been excluded
from the earnings per share calculation, since their inclusion would have
been antidilutive.
The gain on the sale of the Avon property increased earnings per share by
$0.17 for the year ended October 27, 2001.
2. Business Segment
The Company has one business segment; the designing, manufacturing and
marketing of marine engines and related products. The profitability of the
Company is directly tied to the marine industry. The industry is subject to
fluctuations in economic conditions that may adversely affect the Company.
Net sales include export sales, primarily to customers in the Netherlands,
England, Italy, South Africa and Puerto Rico of approximately $2,523,000,
$2,849,400 and $2,591,600 for fiscal years ended October 27, 2001, October
21, 2000, and October 23, 1999, respectively. In fiscal 2001, three
customers each accounted for sales in excess of 10% of net sales as follows:
$7,948,000, $5,565,900 and $3,400,200. In fiscal 2000, two customers each
accounted for sales in excess of 10% of net sales as follows: $8,896,200 and
$6,166,700. In fiscal 1999, two customers each accounted for sales in excess
of 10% of net sales as follows: $7,657,400, and $5,791,000.
At October 27, 2001, three customers each accounted for trade accounts
receivable in excess of 10% of net accounts receivable as follows: $534,100,
$397,900 and $304,700. At October 21, 2000, two customers each accounted for
trade accounts receivable in excess of 10% of net accounts receivable as
follows: $671,700, and $596,300. The Company performs ongoing credit
evaluations of its customers and therefore does not require
collateralization of trade receivables.
3. Inventories
Inventories consist of the following:
October 27, 2001 October 21, 2000
---------------- ----------------
Raw materials $5,734,300 $7,260,800
Work-in-process 855,800 617,000
Finished goods 976,700 1,163,100
---------- ----------
$7,566,800 $9,040,900
========== ==========
The Company uses the last-in, first-out (LIFO) method to value inventory.
The Company believes the LIFO inventory method results in a better matching
of costs and revenues during periods of changing prices. Inventories would
have been $918,600 and $1,168,600 higher at October 27, 2001 and October 21,
2000, respectively, if the first-in, first-out (FIFO) method had been used.
In 2001, inventory was reduced resulting in the liquidation of LIFO
inventory layers. The effect of the inventory reductions was to reduce cost
of sales by approximately $70,600. Inventory cost determined on the FIFO
method approximates replacement or current cost.
The basic component of the Company's engine products is a "long block"
engine, which is a complete engine block and head assembly without
peripheral equipment. The Company purchases "long block" engines from five
foreign manufacturers. Interruption of the supply of "long block" engines
would have a material adverse effect on the Company if the time to develop
new sources of supply and replacement
33
products is longer than the time it takes to exhaust the Company's inventory
of existing "long block" engines.
4. Property, Plant and Equipment
Property, plant and equipment, at cost, consists of the following:
October 27, 2001 October 21, 2000
---------------- ----------------
Land $ 921,500 $ 969,500
Building and building improvements 5,630,200 5,302,900
Furniture and fixtures 706,800 654,400
Machinery, patterns and equipment 4,853,800 4,188,900
Transportation equipment 80,400 84,900
Leasehold improvements 20,400 20,400
Equipment under capital lease 769,200 769,200
Construction in progress - 1,207,800
----------- -----------
12,982,300 13,198,000
Less accumulated depreciation 4,119,900 4,334,700
----------- -----------
$ 8,862,400 $ 8,863,300
=========== ===========
The Company incurred depreciation expense of approximately $754,300,
$494,800, and $445,100 for fiscal years 2001, 2000, and 1999, respectively.
5. Spit-Dollar Premiums
The Company has a split-dollar life insurance arrangement with John H.
Westerbeke, Jr., the Chairman, President and Chief Executive Officer of the
Company, as part of his employment agreement (see note 10), pursuant to
which the Company will pay the premium costs of certain life insurance
policies. This agreement allows the premiums paid to be invested in a select
group of mutual funds thereby subjecting the total cash value of premiums
paid to market risk. The cash proceeds the Company would receive depends
upon the method of termination. If termination is initiated by death, the
Company is entitled to repayment of an amount equal to the cumulative
premiums previously paid, with all remaining payments to be made to the
estate of Mr. Westerbeke Jr. or his beneficiaries. If the policy is
terminated for other reasons, the Company would receive the lesser of the
fair value of the mutual funds in which the premiums are invested or the
cumulative value of premiums paid. The Company accounts for this arrangement
in accordance with SFAS No. 115, Accounting for Certain Investments in Debt
and Equity Securities. The investments are classified as available for sale
and unrealized gains and losses are reflected as a component of other
comprehensive income net of tax. Included in other assets at October 27,
2001 and October 21, 2000 is $1,237,000 and $1,525,100, respectively, which
represents the fair market value of insurance premiums paid to date. At
October 27, 2001, in connection with the split-dollar insurance arrangement,
the Company recorded an unrealized loss of $379,600, net of taxes of
$253,000, in other comprehensive income.
6. Note Receivable-Related Party
The Company holds a note receivable from John H. Westerbeke, Jr., the
chairman, president and chief executive officer of the Company. The
principal amount of the secured loan at October 27, 2001 and October 21,
2000 was $56,200 and $74,800, respectively. The loan was used by Mr.
Westerbeke, Jr. to purchase a 40-foot sailboat. The loan bears interest at
7-3/4% per annum, is secured by a security interest in the sailboat and is
payable in monthly installments over a ten year period. The Company has
leased the sailboat from Mr. Westerbeke, Jr. pursuant to a lease expiring in
July 2004 at a rental of $2,793 per month (see Note 10). The Company makes
use of the boat to evaluate the performance of its marine engines and
products and for other corporate matters.
34
7. Revolving Demand Note Payable
The Company has a $6,000,000 Credit Agreement with Brown Brothers Harriman &
Co., collateralized by inventory, accounts receivable and general
intangibles. The Credit Agreement was entered into on June 26, 2000. The
actual amount available for borrowing is based on a calculation of eligible
accounts receivable and eligible inventory. Based on this calculation, at
October 27, 2001, the Company had approximately $4,964,800 available for
borrowing. As of October 27, 2001, the Company had approximately $2,303,900
in unused borrowing capacity under the Credit Agreement and approximately
$160,900 committed to cover the Company's reimbursement obligations under
certain open letters of credit and bankers' acceptances. The Agreement does
not have an expiration date, but is payable on written demand.
8. Long-Term Debt
October 27, 2001 October 21, 2000
---------------- ----------------
Term Loan with an interest rate of 8.50%, with
repayment terms through October 2007. $ 446,100 -
Term Loan with an interest rate of 6.46%, with
repayment terms through April 2015. 4,313,400 4,507,500
Term Loan with an interest rate of 6.46%, with
repayment terms through April 2007. 328,800 377,000
Capital Lease with an interest rate of 8.75%
with repayment terms through September 2001. - 37,800
------------------------------
5,088,300 4,922,300
Less current portion 317,900 280,100
------------------------------
Long term debt net of current portion $4,770,400 $4,642,200
==============================
Aggregate maturities of long-term debt for each of the ensuing five years
are as follows:
Year Amount
---- ------
2002 $ 317,900
2003 340,300
2004 364,300
2005 390,200
2006 417,800
Thereafter 3,257,800
----------
$5,088,300
==========
35
9. Income Taxes
Income tax (benefit) expense attributable to income from continuing
operations consists of:
Years Ended
--------------------------------------------------------
October 27, 2001 October 21, 2000 October 23, 1999
---------------- ---------------- ----------------
Federal:
Current $ (85,000) $ 217,200 $ 413,700
Deferred 270,000 (95,500) (36,300)
-------------------------------------------------
185,000 121,700 377,400
-------------------------------------------------
State:
Current 47,100 47,500 123,200
Deferred (26,900) (263,600) (11,200)
-------------------------------------------------
20,200 (216,100) 112,000
-------------------------------------------------
Total $ 205,200 $ (94,400) $ 489,400
=================================================
The Company has state net operating loss carryforwards of approximately
$360,000 and approximately $277,000 of state tax credits, which are available
to offset future taxable income and income taxes over a five-year and ten-year
period, respectively.
Income tax (benefit) expense differed from the amounts computed by applying
the U.S. federal income tax rate of 34 percent to pretax income as a result
of the following:
Years Ended
--------------------------------------------------------
October 27, 2001 October 21, 2000 October 23, 1999
---------------- ---------------- ----------------
Provision at statutory rate $178,200 $ 45,500 $437,000
State tax provision,
net of federal tax benefit 13,300 (142,600) 74,000
Other, net 13,700 2,700 (21,600)
------------------------------------------------
Total $205,200 $ (94,400) $489,400
================================================
The income tax expense (benefit) was allocated as follows:
Years Ended
--------------------------------------------------------
October 27, 2001 October 21, 2000 October 23, 1999
---------------- ---------------- ----------------
Income from continuing operations $205,200 $ (94,400) $489,400
Stockholders' equity, for compensation
expense for tax purposes in excess of
amounts recognized for financial
reporting purposes (16,600) (6,000) -
------------------------------------------------
Total $188,600 $(100,400) $489,400
================================================
36
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at October
27, 2001 and October 21, 2000 are presented below.
October 27, 2001 October 21, 2000
---------------- ----------------
Deferred tax assets:
Accounts receivable $ 97,400 $ 133,400
Inventory 601,800 558,800
Accrued bonus - 139,300
Warranty 145,000 145,000
Unrealized loss on split-dollar life insurance 239,900 -
Massachusetts net operating tax loss 22,600 -
Massachusetts investment tax credit 183,100 139,900
------------------------------
Total gross deferred tax assets 1,289,800 1,116,400
------------------------------
Deferred tax liabilities:
Fixed assets, principally due to
accelerated depreciation methods (358,200) (181,500)
Unrealized gain on marketable securities - (12,000)
------------------------------
Total gross deferred tax liabilities (358,200) (193,500)
------------------------------
Net deferred tax assets $ 931,600 $ 922,900
==============================
Management believes that the realization of deferred tax assets is more
likely than not because future operations of the Company are expected to
generate sufficient taxable income.
10. Commitments and Contingencies
Lease Obligations
The Company has lease agreements for a warehouse and certain equipment (see
note 6) expiring at various dates through 2005. Rental expense under
operating leases was $185,400, $185,800, and $173,000 for the years ended
October 27, 2001, October 21, 2000 and October 23, 1999, respectively.
The following capital leases are included in property, plant and equipment:
October 27, 2001 October 21, 2000
---------------- ----------------
Property, plant and equipment $769,200 $769,200
Less accumulated amortization 680,000 662,500
-------- --------
$ 89,200 $106,700
======== ========
The future minimum lease payments required under operating leases that have
initial or remaining noncancelable lease terms in excess of one year are as
follows:
Year Operating
---- ---------
2002 $135,900
2003 36,800
2004 36,800
2005 2,500
--------
Total future minimum lease payments $212,000
========
37
Letters of Credit and Bankers' Acceptances
Certain foreign vendors require the Company to provide letters of credit at
the time purchase orders are placed. As of October 27, 2001, the Company was
contingently liable for open letters of credit and bankers' acceptances of
approximately $160,900 (see note 7).
Employment Agreements
In March of 1993, the Company entered into an Employment Agreement (the
"Agreement") with John H. Westerbeke, Jr., the chairman of the board,
president, and chief executive officer of the Company. The Agreement
provides for Mr. Westerbeke, Jr. to be paid an annual base salary, subject
to increases based upon the Consumer Price Index and at the discretion of
the Company. During fiscal 2001, Mr. Westerbeke's salary was $231,629. The
Agreement also provides for payment of a bonus at the discretion of the
board of directors of the Company. In March 2001, the Board of Directors
extended for a period of two years the incentive plan previously established
in September 1996, whereas Mr. Westerbeke has an annual bonus opportunity,
based on net income and increases in sales. Mr. Westerbeke may elect to have
all or any part of his base salary or bonus paid as deferred compensation in
five annual installments commencing upon his retirement or other termination
of employment, or upon a change of control of the Company, as defined in the
Agreement. Amounts deferred by Mr. Westerbeke are contributed by the Company
to a trust established to hold and invest these funds until such time as the
amounts are payable to Mr. Westerbeke. The Agreement also requires the
Company to pay premiums for certain life insurance policies on the life of
Mr. Westerbeke, Jr. In addition, in the event of a change in control of the
Company, Mr. Westerbeke, Jr. may terminate his employment during the one
year period following such change in control, and in such event, the Company
is required to pay him a lump sum cash payment in an amount equal to three
times his average annual cash compensation during the most recent five
taxable years of the Company. In addition, in such circumstances, the
Company is required to continue to carry group life and health insurance for
Mr. Westerbeke, Jr. for a three-year period and is required to pay any
premiums payable on the life insurance policies on his life for a three-year
period.
Legal Proceedings
The United States District Court for the Southern District of New York has
vacated the Company's award of damages of $4,202,300 payable by a former
supplier. The Company has appealed the court's decision to the United States
Court of Appeals for the Second Circuit. The ultimate receipt of the award
is not certain. Accordingly, the Company has not recorded the award in the
accompanying financial statements.
11. Stockholders' Equity
In June 1986, the board of directors and the stockholders of the Company
adopted the Company's 1986 Stock Option Plan (the "Option Plan"), under
which 300,000 shares of common stock have been made available. The Company
has also reserved 250,000 shares of common stock for issuance in connection
with a Supplemental Stock Option Plan (the "Supplemental Plan"). The
Supplemental Plan permits acceleration of the exercisability of options in
the event of a change in control of the Company with the Company retaining
the right of first refusal with respect to shares issued under this plan.
In March 1996, the board of directors and the stockholders of the Company
adopted the Company's 1996 Stock Option Plan (the "1996 Option Plan"), under
which 150,000 shares of common stock have been made available. As of October
27, 2001, there has been no activity under the 1996 Option Plan.
Options under the plans may be either nonqualified stock options or
incentive stock options. Options may be granted to eligible employees of the
Company and members of the board of directors.
The price at which the shares may be granted may not be less than the lower
of fair market value or tangible book value in the case of nonqualified
options, or 110% of the fair market value in the case of incentive stock
38
options. The options generally become exercisable in 20% annual increments
beginning on the date of the grant and expire at the end of ten years.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123 in October 1995, which statement
establishes financial accounting and reporting standards for stock based
employee compensation plans. The Company has adopted the disclosure
requirements of SFAS No. 123 and continues to apply the accounting
provisions of Opinion No.25 of the Accounting Principles Board. Proforma
disclosure required under SFAS 123 is not provided as no stock options have
been granted during the three years ended October 27, 2001.
Information for fiscal years 1999, 2000 and 2001, with respect to the Option
Plan, is as follows:
Weighted average
exercise price of
Shares shares under plan
------ -----------------
Balance outstanding at October 24, 1998
and October 23, 1999 150,000 $1.125
Exercised (10,000) 1.125
-------
Balance outstanding at October 21, 2000 140,000 1.125
Exercised (19,278) 1.125
-------
Balance outstanding and exercisable at October 27, 2001 120,722 $1.125
=======
The outstanding options expire on various dates through May 2003. Options
for 88,100 shares are available for future grant under the Option Plan.
The following table summarizes information concerning currently outstanding
and exercisable options under the Option Plan as of October 27, 2001:
Weighted
average Weighted
Range of remaining average Weighted
exercise Number contractual outstanding Options average
prices outstanding life (years) option price exercisable exercise price
- ----------------------------------------------------------------------------------------
$1.125 120,722 1.4 $1.125 120,722 $1.125
Information for fiscal years 1999, 2000 and 2001, with respect to the
Supplemental Plan, is as follows:
Weighted average
exercise price of
Shares shares under plan
------ -----------------
Balance outstanding at October 24, 1998, October 23, 1999
and October 21, 2000 118,400 $1.631
Exercised (10,100) 0.875
-------
Balance outstanding and exercisable at October 27, 2001 108,300 $1.702
=======
39
The following table summarizes information concerning currently outstanding
and exercisable options under the Supplemental Plan as of October 27, 2001:
Weighted
average Weighted
Range of remaining average Weighted
exercise Number contractual outstanding Options average
prices outstanding life (years) option price exercisable exercise price
- -----------------------------------------------------------------------------------------------
$1.125 - $3.000 108,300 2.4 $1.702 108,300 $1.702
The outstanding options expire on various dates through June 2006. Options
for 41,300 shares are available for future grant under the Supplemental
Plan.
Preferred Stock
As of October 27, 2001 and October 21, 2000, 1,000,000 shares of $1.00 par
value Serial Preferred Stock were authorized; none were issued or
outstanding.
Comprehensive Income
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The components of total comprehensive income (loss)
resulting from unrealized gains or losses on marketable securities, net of
income taxes for the years ending October 27, 2001 and October 21, 2000 are
as follows:
For the twelve months ended:
------------------------------------
October 27, 2001 October 21, 2000
---------------- ----------------
Net income $ 318,800 $228,300
Unrealized (losses) gains on marketable securities,
net of income taxes of $251,800 at October 27, 2001
and $600 at October 21, 2000 (377,600) 900
-----------------------------
Comprehensive income(loss) $ (58,800) $229,200
=============================
12. 1986 Employee Stock Purchase Plan
In June 1986, the board of directors and the stockholders of the Company
adopted the Company's 1986 Employee Stock Purchase Plan (the "Purchase
Plan"). Under the Purchase Plan, an aggregate of 100,000 shares of common
stock are available for purchase by eligible employees of the Company,
including directors and officers, through payroll deductions over successive
six-month offering periods. The Purchase Plan will become effective when so
declared by the board of directors.
The Purchase Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Internal Revenue Code. The
purchase price of the common stock under the Purchase Plan will be 85% of
the average of the closing high bid and last asked prices per share in the
over-the-counter market on either the first or last day of each six-month
offering period, whichever is less. As of October 27, 2001, there has been
no activity under the Purchase Plan.
40
13. Employee Benefit Plan
In 1994, the Company started an Employee Deferred Compensation Plan that
covers all employees over 21 years of age who have completed at least 3
months of service with the Company. Contributions by the Company are
discretionary and are determined by the Company's board of directors. The
Company's defined contribution plan, available to substantially all salaried
employees, contains a matched savings provision that permits both pretax and
after-tax employee contributions. Participants can contribute up to 15% of
their annual compensation and receive a 25% matching employer contribution
on up to 8% of their annual compensation. The Company contributed $41,000,
$46,600 and $41,800 for the fiscal years ended October 27, 2001, October 21,
2000 and October 23, 1999, respectively.
14. Quarterly Financial Data (Unaudited)
(In thousands, except per share amounts)
Selected quarterly financial data for the years ended October 27, 2001 and
October 21, 2000 is as follows:
Fiscal
Fiscal 2001: First Second Third Fourth Year
-----------------------------------------------
Net sales $7,436 $8,173 $6,760 $6,325 $28,694
Gross profit 1,305 1,732 1,632 1,792 6,461
Income (loss) from operations (228) 642 258 460 1,132
Other income (loss) - (8) 18 - 10
Net income (loss) (243) 274 83 205 319
* Net income (loss) per share, diluted (0.13) 0.13 0.04 0.10 0.16
Fiscal
Fiscal 2000: First Second Third Fourth Year
-----------------------------------------------
Net sales $8,791 $9,103 $8,892 $7,742 $34,528
Gross profit 2,150 1,968 2,002 1,632 7,752
Income (loss) from operations 597 337 272 (712) 494
Other income (loss) (10) (97) - (82) (189)
Net income (loss) 353 126 131 (382) 228
Net income (loss) per share, diluted 0.17 0.06 0.06 (0.18) 0.11
- --------------------
* The amounts do not add because of the first quarter's loss effect on
the determination of the diluted weighted average common shares for
that period.
41
SCHEDULE II
WESTERBEKE CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNT
For the years ended October 27, 2001, October 21, 2000
and October 23, 1999
Balance at Charged to Charged Balance
Beginning of Costs and To Other at End
Period Expenses Accounts Deductions of Year
1999
Allowance for
doubtful accounts $ 59,200 - - - $ 59,200
2000
Allowance for
Doubtful accounts $ 59,200 62,500 - 6,700 $115,000
2001
Allowance for
Doubtful accounts $115,000 - - - $115,000
42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
43
PART I I I
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain biographical information concerning the directors of the
Company as of January 1, 2002 is set forth below. Such information was
furnished by them to the Company.
Certain
Name of Director Age Biographical Information
- ---------------- --- ------------------------
GERALD BENCH 60 Vice Chairman, TDG Aerospace, Inc.
(manufacturer of aircraft de-icing devices)
since January 2001; President, BFT Holdings
Co., Inc. (investor in emerging growth
businesses) from November 1996 to January
2001; President and Chief Executive Officer,
Hadley Fruit Orchards, Inc. from November
1996 to June 1999; Consultant, Hadley Fruit
Orchards, Inc. from March 1995 to November
1996; Partner, ICAP Marine Group (consulting
firm) from November 1993 to February 1995;
Chairman and President, TDG Aerospace, Inc.
from October 1991 to November 1993;
President, Thermion, Inc. (manufacturer of
heaters for aircraft de-icing devices) from
April 1990 to September 1991; General
Manager, Lermer Corporation (manufacturer
of airline galley equipment) from June 1989
through March 1990; former Chairman of the
Board, President, Chief Executive Officer
and Director of E&B Marine Inc. (marine
supplies and accessories) from prior to
1988; Director of the Company since June
1986
THOMAS M. HAYTHE 62 Business and Legal Consultant since
February 2000: Partner, Haythe & Curley
(attorneys) (renamed Torys in 2000) from
1982 to January 2000; Director: Novametrix
Medical Systems Inc. (manufacturer of
electronic medical instruments) and Ramsay
Youth Services, Inc. (provider of youth and
educational services); Director of the
Company since June 1986.
44
JAMES W. STOREY 67 Consultant since January 1993; President,
Wellingsley Corporation (private investment
management company) from December 1986
through December 1992; President and Chief
Executive Officer of Codex Corporation, a
subsidiary of Motorola, Inc. from 1982 to
1986; Vice President of Motorola, Inc. from
1982 to 1986; Director of the Company since
June 1986.
JOHN H. WESTERBEKE, JR. 61 President of the Company since 1976;
Director of the Company since 1976;
Chairman of the Board of Directors of the
Company since June 1986.
For additional information concerning the management of the Company,
see "Item 1 - Business - Executive Officers" contained in Part I hereof.
The Board of Directors of the Company consists of three classes of
directors: Class A, Class B, and Class C. Directors in each class are
elected for a term of three years. The term of office of the Class A
directors will expire at the Annual Meeting of Stockholders to be held in
2002. Class B and Class C directors will be elected at the Annual Meetings
to be held in 2003 and 2004, respectively. Mr. Bench is Class A director,
Messrs. Haythe and Storey are Class B directors and Mr. Westerbeke, Jr. is a
Class C director.
The directors and officers of the Company other than Messrs. Bench,
Haythe, and Storey are active in the business on a day-to-day basis.
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten percent of the Company's Common Stock, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock.
Officers, directors and greater than ten percent stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16 (a)
reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and representations that no other
reports were required, during the fiscal year ended October 27, 2001 all
Section 16 (a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
45
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal years ended
October 27, 2001, October 21, 2000 and October 23, 1999 concerning the
compensation paid or awarded to the Chief Executive Officer and the other
executive officer of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
Fiscal --------------------------
Name and Year
Principal Ended All Other
Position October Salary Bonus Compensation
- ------------------------------------------------------------------------------------------
John H. Westerbeke, Jr. 2001 $231,629 $ 2,179 $55,408(5)
President, Chairman of the Board 2000 228,359(1) 134,247(2) 38,549(5)
of Directors and Class C Director 1999 226,190(3) 84,723(4) 33,385(5)
Carleton F. Bryant, III 2001 $ 94,500 $ 58,240 -
Executive Vice President, 2000 94,500 60,633 -
Treasurer, Chief Operating 1999 94,500 61,115 -
Officer and Secretary
- --------------------
Includes $75,300 of salary earned in fiscal year 2000, payment of
which had been deferred. Payment was made in fiscal 2001.
Includes a $126,692 bonus earned in fiscal year 2000, payment of which
had been deferred. Payment was made in fiscal 2001.
Includes $73,100 of salary earned in fiscal year 1999, payment of
which had been deferred. Payment was made in fiscal 2001.
Includes a $79,682 bonus earned in fiscal year 1999, payment of which
had been deferred. Payment was made in fiscal 2001.
Includes amounts ($41,896, $22,750 and $19,825 in fiscal 2001, 2000
and 1999, respectively) reflecting the current dollar value of the
benefit to Mr. Westerbeke of premiums paid by the Company with respect
to a split-dollar insurance arrangement (see "Employment Agreements"
below for a description of such arrangement). Such benefit was
determined by calculating the time value of money (using the
applicable federal rates) of the premiums paid by the Company in the
fiscal years ended October 27, 2001, October 21, 2000 and October 23,
1999 for the period from the date on which each premium was paid until
March 31, 2003 (which is the earliest date on which the Company could
terminate the agreement and request a refund of premiums paid).
The Company did not grant any stock options to the executive officers
named in the Summary Compensation Table during the fiscal year ended October
27, 2001.
46
The following table sets forth the number and value of options held by
the executive officers named in the Summary Compensation Table during the
fiscal year ended October 27, 2001.
OPTION VALUES AT OCTOBER 27, 2001
Number of Value of Unexercised
Unexercised In-the-Money(1)
Options at Options at
October 27, 2001 October 27, 2001
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------
John H. Westerbeke, Jr. 150,000 - $101,200 -
Carleton F. Bryant, I I I 45,722 - $ 30,900 -
- --------------------
In-the-money options are those where the fair market value of the
underlying Common Stock exceeds the exercise price of the option. The
value of in-the-money options is determined in accordance with
regulations of the Securities and Exchange Commission by subtracting
the aggregate exercise price of the option from the aggregate year-end
value of the underlying Common Stock.
Employment Agreements
- ---------------------
The Company has an Employment Agreement (the "Agreement") with John H.
Westerbeke, Jr., the Chairman of the Board, President and Chief Executive
Officer of the Company, which provides for his employment by the Company at
an annual base salary, subject to increases based upon the Consumer Price
Index and at the discretion of the Company. During fiscal 2001, Mr.
Westerbeke's salary was $231,629. The Agreement also provides for payment of
a bonus at the discretion of the Board of Directors of the Company. In March
2001, the Board of Directors extended for a period of two years the
incentive plan established in September 1996, whereas Mr. Westerbeke has an
annual bonus opportunity, based on net income and increases in sales. Mr.
Westerbeke may elect to have all or any part of his base salary or bonus
paid as deferred compensation in five annual installments commencing upon
his retirement or other termination of employment, or upon a change of
control of the Company, as defined in the Agreement. Amounts deferred by Mr.
Westerbeke are contributed by the Company to a trust established to hold and
invest these funds until such time as the amounts are payable to Mr.
Westerbeke. The Agreement also requires the Company to pay premiums for
certain life insurance policies on the life of Mr. Westerbeke as described
below. The Agreement may be terminated by the Company upon the disability of
Mr. Westerbeke, by the Company with or without cause, and by Mr. Westerbeke
in the event there has occurred a constructive termination of employment by
the Company. In addition, in the event of a change in control of the
Company, as defined in the Agreement, Mr. Westerbeke may terminate his
employment during the one year period following such change in control, and
in such event, the Company will be required to pay him a lump sum cash
payment in an amount equal to three times his annual cash compensation
during the most recent five taxable years of the Company, less $1,000. In
addition, in such circumstances, the Company is required to continue to
carry group life and health insurance for Mr. Westerbeke for a three-year
period and is required to pay any premiums payable on the split-dollar life
insurance policies on his life for a three-year period. Under the
47
Agreement, Mr. Westerbeke has agreed not to compete with the Company for a
period of one year following termination of his employment.
The Company has entered into a split-dollar insurance arrangement with
Mr. Westerbeke, Jr., pursuant to which the Company will pay the premium
costs of certain life insurance policies that pay a death benefit of not
less than $6,150,000 in the aggregate upon the death of Mr. Westerbeke. Upon
surrender of the policies or payment of the death benefit thereunder, the
Company is entitled to repayment of an amount equal to the cumulative
premiums previously paid by the Company, with all remaining payments to be
made to Mr. Westerbeke or his beneficiaries. See footnote (6) to the
"Summary Compensation Table" above for further information on premium
payments made by the Company.
The Company has an agreement with Carleton F. Bryant, III, the
Executive Vice President, Treasurer and Chief Operating Officer of the
Company, which provides for his employment by the Company at an annual
salary of $94,500. Under a related agreement Mr. Bryant agrees not to
compete with the Company for a period of three years following the
termination of his employment.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
During the Company's past fiscal year, Thomas M. Haythe, a director of
the Company and a member of the Compensation Committee, rendered legal
services to the Company. It is expected that Mr. Haythe will continue to act
as the Company's general counsel in the future.
Compensation of Directors
- -------------------------
The Company currently pays its directors a fee of $2,000 for attending
each meeting of the Board of Directors of the Company.
Termination of Employment and Change of Control Arrangements
- ------------------------------------------------------------
See "Employment Agreements" above for information concerning certain
change of control arrangements with respect to John H. Westerbeke, Jr., the
Chairman of the Board, President and Chief Executive Officer of the Company.
48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The shareholders (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who, to the
knowledge of the Board of Directors of the Company, owned beneficially more
than five percent of any class of the outstanding voting securities of the
Company as of January 1, 2002, each director and each executive officer
named in the Summary Compensation Table of the Company who owned
beneficially shares of Common Stock and all directors and executive officers
of the Company as a group, and their respective shareholding as of such date
(according to information furnished by them to the Company), are set forth
in the following table. Except as indicated in the footnotes to the table,
all of such shares are owned with sole voting and investment power.
Shares of Common Stock
Name and Address Owned Beneficially Percent of Class
- ---------------- ---------------------- ----------------
Marvin A. Gordon 100,000 (1) 5.2%
750 Everett Street
Norwood, MA 02062
Gerald Bench 11,100 (2) *
17 1/2 Passaic Avenue
Spring Lake, New Jersey 07762
Thomas M. Haythe 16,100 (3) *
Myles Standish Industrial Park
Taunton, Massachusetts 02780
James W. Storey 20,100 (4) 1.0%
3 Saddle Ridge Road
Dover, Massachusetts 02030
John H. Westerbeke, Jr 1,248,250 (5) 59.9%
Myles Standish Industrial Park
Taunton, Massachusetts 02780
Carleton F. Bryant, III 45,722 (6) 2.3%
Myles Standish Industrial Park
Taunton, Massachusetts 02780
All Directors and Officers as a Group 1,341,272 (2)(3)(4)(5)(6) 62.0%
(five persons)
- --------------------
(*) Less than one percent.
49
Information as to these holdings is based upon a report on Schedule
13D filed with the Securities and Exchange Commission by Mr. Marvin A.
Gordon. Such report indicates that Mr. Gordon has sole voting and
dispositive power with respect to 100,000 shares.
Consists of 11,100 shares issuable upon the exercise of presently
exercisable stock options held by Mr. Bench.
Includes 11,100 shares issuable upon the exercise of presently
exercisable stock options held by Mr. Haythe.
Includes 11,100 shares issuable upon the exercise of presently
exercisable stock options held by Mr. Storey.
Includes 150,000 shares issuable upon the exercise of presently
exercisable stock options held by Mr. Westerbeke, Jr.
Consists of 45,722 shares issuable upon the exercise of presently
exercisable stock options held by Mr. Bryant.
To the Company's knowledge, there have been no significant changes in
stock ownership or control of the Company as set forth above since January
1, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company leases a 40-foot sailboat from Mr. Westerbeke, Jr. the
Chairman of the Board, President and Chief Executive Officer of the Company,
pursuant to a lease expiring in July 2004. The Company pays an annual rental
to him of $33,500 and also pays approximately $10,000 to $15,000 of annual
expenses in connection with the operation and maintenance of the sailboat.
The Company makes use of the sailboat to evaluate the performance of its
marine engine products and for other corporate purposes. In July 1994, Mr.
Westerbeke, Jr. executed a promissory note payable to the Company in the
principal amount of $165,000. The proceeds of the loan were used by Mr.
Westerbeke, Jr. to purchase the sailboat, which is leased, to the Company as
described above. The loan, which is due June 1, 2004, is payable in equal
monthly installments which commenced on July 1, 1994, together with interest
at 7.75% per annum and is secured by the sailboat. Management of the Company
believes that the terms of the lease and of the secured loan are no less
favorable to the Company than it could obtain from an unrelated party.
During the Company's past fiscal year, Thomas M. Haythe, a Class B
director of the Company, rendered legal services to the Company. It is
expected that Mr. Haythe will continue to act as the Company's general
counsel in the future.
50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) 1. Financial Statements:
Included in PART II of this report: Page
----
Report of KPMG LLP 24
Consolidated Balance Sheets at
October 27, 2001 and October 21, 2000 25
Consolidated Statements of Operations
for the three years in the period ended
October 27, 2001 26
Consolidated Statements of Stockholders'
Equity and Comprehensive Income for the
three years in the period ended
October 27, 2001 27
Consolidated Statements of Cash Flow
for the three years in the period ended
October 27, 2001 28-29
Notes to Consolidated Financial Statements 30
2. Financial Statement Schedule:
Included in PART II of this report:
Schedule II - Valuation and Qualifying
Account for the three years in the period
ended October 27, 2001 42
Schedules other than those listed above are omitted because
they are not applicable, or the required information is shown in
the Consolidated Financial Statements or Notes thereto. Columns
omitted from schedules filed have been omitted because the
information is not applicable.
51
3. Exhibits:
The exhibits required to be filed as part of this Annual
Report on Form 10-K are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K:
During the fiscal quarter ended October 27, 2001, the
Company did not file any Current Reports on Form 8-K.
* * *
Copies of the exhibits filed with this Annual Report on Form 10-K or
incorporated by reference herein do not accompany copies hereof for
distribution to stockholders of the Company. The Company will furnish a copy
of any of such exhibits to any stockholder requesting the same for a nominal
charge to cover duplicating costs.
52
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
appoint John H. Westerbeke, Jr. and Thomas M. Haythe as attorney-in-fact
with full power of substitution, severally, to execute in the name and on
behalf of the registrant and each such person, individually and in each
capacity stated below, one or more amendments to this Annual Report on Form
10-K, which amendments may make such changes in this Annual Report as the
attorney-in-fact acting in the premises deems appropriate and to file any
such amendment(s) to this Annual Report with the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to
be signed on its behalf by the undersigned thereunto duly authorized.
Dated: January 23, 2002
WESTERBEKE CORPORATION
By /s/ John H. Westerbeke, Jr.
---------------------------
John H. Westerbeke, Jr.
Chairman of the Board
and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Dated: January 23, 2002 By /s/ John H. Westerbeke, Jr.
---------------------------
John H. Westerbeke, Jr.
Chairman of the Board,
President and Principal
Executive Officer
Dated: January 23, 2002 By /s/ Carleton F. Bryant III
--------------------------
Carleton F. Bryant III
Executive Vice President,
Chief Operating Officer and
Principal Financial
and Accounting Officer
53
Dated: January 23, 2002 By /s/ Gerald Bench
----------------
Gerald Bench
Director
Dated: January 23, 2002 By /s/ Thomas M. Haythe
--------------------
Thomas M. Haythe
Director
Dated: January 23, 2002 By /s/ James W. Storey
-------------------
James W. Storey
Director
54
Index to Exhibits
-----------------
Exhibit
No. Name of Exhibit Page
- ------- --------------- ----
2 Agreement and Plan of Merger between the Company
and J.H. Westerbeke Corporation, a Massachusetts
corporation (1)
3 (a) Certificate of Incorporation of the Company (as
amended) (1)
3 (b) By-Laws of the Company (4)
10 (a) Agreement dated as of June 30, 1986 by and
between the Company and John H. Westerbeke, Sr (1)
10 (b) 1986 Stock Option Plan of the Company as
amended on January 6, 1987 and on May 26, 1988 (4)
10 (c) 1986 Employee Stock Purchase Plan of the
Company (1)
10 (d) Supplemental Stock Option Plan of the
Company (4)
10 (e) 1996 Stock Option Plan of the Company (2)
10 (f) Agreement dated as of June 1, 1986 by and among
the Company, Ruth A. Westerbeke, John H.
Westerbeke, Jr., John H. Westerbeke, Sr. and
Ruth A. Westerbeke, as trustees (1)
10 (g) Supplemental Medical Insurance Policy (1)
10 (h) Employment Agreement dated March 24, 1993
between the Company and John H. Westerbeke, Jr.,
Chairman, President and Chief Executive Officer of
the Company (4)
55
10 (i) Employment Agreement dated May 14, 1993
and Confidentiality Agreement dated May 14, 1993
between the Company and Carleton F. Bryant III,
Chief Operating Officer of the Company (4)
10 (j) Lease dated February 3, 1999 by and between
Urban Equities and the Company (3)
10 (k) Purchase and Sale Agreement dated March 1, 2000
between the Company and Dead River Company (5)
10 (l) Real Estate Loan Agreement dated April 24, 2000
among the Company, 150 John Hancock LLP, GE
Capital Public Finance, Inc. and Massachusetts
Development Finance Agency (5)
10 (m) Equipment Loan Agreement dated April 24, 2000
between the Company, GE Capital Public Finance, Inc.
and Massachusetts Development Finance Agency (5)
10 (n) Mortgage Security Agreement, Assignment of Leases and
Rents and Fixture Filing dated April 24, 2000 between
the Company and GE Capital Public Finance, Inc (5)
10 (o) Loan and Security Agreement dated June 26, 2000
between the Company and Brown Brothers Harriman
& Co (6)
10 (p) Revolving Credit Note dated June 26, 2000 between
the Company and Brown Brothers Harriman & Co (6)
10 (q) Amendment dated September 2000 to Loan and Security
Agreement dated June 26, 2000 between the Company
and Brown Brothers Harriman Co (7)
10 (r) Amendment dated September 2000 to Revolving Credit
Note dated June 26, 2000 between the Company and
Brown Brothers Harriman & Co (7)
21 Subsidiary of the Company
23 Consent of KPMG LLP
56
24 Power of Attorney (See Page 53
of Annual
Report on
Form 10-K)
- --------------------
Incorporated by reference to Exhibits to Registration Statement
No. 33-6972 filed with the Securities and Exchange Commission.
Incorporated by reference to Exhibits to Registration Statement
No. 333-25687 filed with the Securities and Exchange Commission.
Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q
for fiscal quarter ended January 23, 1999.
Incorporated by reference to Exhibits to Annual Report on Form 10-K
for fiscal year ended October 23, 1999.
Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q
for fiscal quarter ended April 22, 2000.
Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q
for fiscal quarter ended July 22, 2000.
Incorporated by reference to Exhibits to Annual Report on Form 10-K
for fiscal year ended October 21, 2000.