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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to _________________
Commission file number 1-5356
PENN ENGINEERING & MANUFACTURING CORP.
(Exact name of registrant as specified in its charter)
Delaware 23-09591065
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1000, Danboro, Pennsylvania 18916
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (215) 766-8853
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1.00 par value American Stock Exchange
-----------------------
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 11, 1996, the aggregate market value based on the closing sales
price on that date of the voting stock held by non-affiliates of the Registrant
was approximately $75,700,000.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date: 1,707,082 shares of Common Stock
outstanding on March 15, 1996.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of Registrant's 1995 Annual Report to Stockholders incorporated by
reference in Items 1, 3, 5, 6, 7, 8 and 14.
2. Portions of the Proxy Statement for Registrant's 1996 Annual Meeting of
Stockholders incorporated by reference in Items 10, 11, 12 and 13.
PENN ENGINEERING & MANUFACTURING CORP.
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INDEX TO FORM 10-K REPORT
-----------
PAGE
----
I. PART I. .......................................... 1
Item 1. Business.................................. 1
Item 2. Properties................................ 5
Item 3. Legal Proceedings......................... 7
Item 4. Submission of Matters to a Vote of
Security Holders......................... 7
Executive Officers of the Registrant. . . 7
II. PART II. .......................................... 8
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.......... 8
Item 6. Selected Financial Data................... 8
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................ 8
Item 8. Financial Statements and Supplementary
Data..................................... 9
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure..................... 9
III. PART III. .......................................... 9
Item 10. Directors and Executive Officers of
the Registrant........................... 9
Item 11. Executive Compensation.................... 9
Item 12. Security Ownership of Certain
Beneficial Owners and Management......... 10
Item 13. Certain Relationships and Related
Transactions............................. 10
IV. PART IV. .......................................... 10
Item 14. Exhibits, Financial Statements and
Schedules and Reports on Form 8-K........ 10
PART I
Item 1. Business.
(a) General Development of Business.
The Company, a Delaware corporation, was incorporated in 1942.
During the past five years, the primary businesses of Registrant have been:
(i) The development, manufacture and sale of PEM(R)
self-clinching and broaching fasteners and automatic insertion equipment
for such fasteners sold under the name PEMSERTER(R), and
(ii) The development, manufacture and sale through
Registrant's Pittman Division of permanent magnet field, brushcommutated direct
current electric motors under the Pittman(R) and Pitmo(R) trademarks, and
electronically commutated brushless direct current servomotors and controls
under the Elcom(R) trademark.
Self-clinching fasteners, which become a permanent part of the
material to which they are attached, provide permanent threads in sheet metal
materials too thin for threading. Broaching fasteners provide permanent threads
in non-ductile materials such as plastics and printed circuit boards.
Unless otherwise indicated or unless the context otherwise
requires, the term Registrant includes Registrant's wholly owned subsidiaries.
There were no significant developments in Registrant's business
during the fiscal year ended December 31, 1995.
-1-
(b) Financial Information About Industry Segments.
The answer to this Item is incorporated by reference to
Note 10 of the Notes to Consolidated Financial Statements "Financial Reporting
for Segments of the Company" on pages 17 and 18 of Registrant's 1995 Annual
Report to Stockholders which is included as Exhibit (13) to this Form 10-K
Report.
(c) Narrative Description of Business.
The manufacture and sale of (i) self-clinching and
broaching fasteners and plastic inserts and (ii) direct current electric motors
are Registrant's only lines of business. The following table sets forth
information with respect to the percentage of total sales attributable to each
of Registrant's principal products which accounted for 10% or more of
consolidated revenues in each of the fiscal years ended December 31, 1993, 1994
and 1995:
Percentage of Total Sales
-------------------------
Year Ended Electric
December 31 Fasteners Motors
- ----------- --------- ------
1993 77% 23%
1994 79% 21%
1995 80% 20%
The products of Registrant described in Item 1(a) are marketed
primarily through independent manufacturers' representatives and, in the case of
fasteners and inserts, also by authorized distributors.
During the year ended December 31, 1995, conditions in the
domestic market for fasteners continued to be highly competitive. It is not
possible to determine with accuracy the relative
-2-
competitive position of Registrant in the market for self-clinching, broaching
and insert fasteners. Registrant believes that it has maintained its market
share during 1995. On the basis of reports from its sales representatives and
customers, Registrant believes that it is the principal manufacturer and seller
of self-clinching, broaching and insert fasteners in the United States and that
it offers a broader range of these products than any of its competitors.
Approximately ten other companies are known to be competing with Registrant in
the manufacture and sale of such fasteners. Some of Registrant's competitors
also manufacture products other than self-clinching, broaching and insert
fasteners.
Registrant also believes the Pittman Division maintained its
competitive position in the electric motor market in 1995.
Among Registrant's principal customers for fasteners and
PEMSERTERS(R) are manufacturers of business machines, electronic and
communications equipment, electrical equipment, industrial controls
instrumentation, vending machines, automotive subcontractors and other
fabricated metal products. The principal customers for the direct current
electric motors and servomotors are manufacturers of automated production
equipment, instruments, computer peripherals, business machines and medical
equipment. In the opinion of Registrant, no material part of its business is
dependent upon a single customer or a few customers, the loss of any one or more
of which would have a material adverse effect on the business of Registrant.
However, sales of fasteners to one of Registrant's authorized distributors
totalled approximately $14,322,000 for the
-3-
year ended December 31, 1993, $16,554,000 for the year ended December 31, 1994
and $20,854,000 for the year ended December 31, 1995, or approximately 14.2%,
13.6% and 14.8%, respectively, of Registrant's consolidated net sales in such
years.
As of December 31, 1995, Registrant had an order backlog of
$70,364,000, compared with $41,902,000 as of December 31, 1994. Registrant
estimates that substantially all of its backlog as of December 31, 1995 will be
shipped during its fiscal year ending December 31, 1996.
The raw materials used by Registrant are generally available in
adequate supply.
Registrant holds a number of patents, and has patent applications
pending, in the United States and various foreign countries. Management
believes, however, that Registrant's business is not materially dependent on any
patent or group of patents. The principal trademarks of Registrant are
registered in the United States and various foreign countries.
Research and development is carried on by the operating personnel
of Registrant on a continuing basis. The amounts expended for research and
development for the fiscal years ended December 31, 1993, 1994 and 1995 were
approximately $1,161,000, 1,136,000 and $1,460,000, respectively.
Registrant believes that compliance with federal, state and local
laws and regulations that have been enacted or adopted regulating the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, will not
-4-
have a material adverse effect upon the earnings or competitive
position of Registrant.
As of December 31, 1995, 1,211 persons were employed by
Registrant, 123 more than were employed as of December 31, 1994.
Registrant does not consider its business to be seasonal in any
material respect, nor is any material portion of Registrant's business subject
to the renegotiation of profits or termination of contracts at the election of
the Government.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales.
The answer to this Item is incorporated by reference to Note 10
"Financial Reporting for Segments of the Company" on pages 17 and 18 of
Registrant's 1995 Annual Report to Stockholders, which is included as Exhibit
(13) to this Form 10-K. Also, all foreign sales except for those of PEM
International, Ltd. are sold F.O.B., Registrant's factory, payable in U.S.
dollars. Sales in the United Kingdom and Western Europe are made through
Registrant's wholly owned subsidiary, PEM International, Ltd. and are
denominated in pounds sterling. All foreign sales are subject to special risks
of exchange controls and restrictions on the repatriation of funds and also may
be affected by the imposition or increase of taxes and/or tariffs and
international instability.
Item 2. Properties.
As of December 31, 1995, Registrant's principal plants and
offices, all of which were owned by it, were as follows:
-5-
Location Size of Facility Use of Facility
-------- ---------------- ---------------
Danboro, Pennsylvania Two buildings Executive offices
totalling 183,442 and manufacture
sq. ft. on 106.9 of fasteners
acres
Winston-Salem, 58,280 sq. ft. Manufacture of
North Carolina building on 3.4 components for
acres fasteners
Harleysville, 58,000 sq. ft. Manufacture of
Pennsylvania building on miniature
6 acres electric motors
Suffolk, Virginia 50,000 sq. ft. Manufacture of
building on components for
17.2 acres fasteners
Doncaster, South 10,500 sq. ft. Office and ware-
Yorkshire, England building on house for the
5.25 acres distribution of
fasteners
Registrant considers all of its plants and equipment to be modern
and well maintained. Registrant is building a 43,000 square foot addition to its
Danboro facility for increased manufacturing capacity and office space. This
addition is expected to be completed by June 1996. Registrant also has purchased
a 16.3 acre commercial plot in Winston-Salem, N.C. Registrant is planning to
build a 120,000 square foot building at this location and will then sell its
current building and site in North Carolina. This new facility is scheduled for
completion by late 1996.
Registrant carries fire, casualty, business interruption and
public liability insurance for all of its facilities in amounts which are deemed
adequate.
-6-
Item 3. Legal Proceedings.
The answer to this Item is incorporated by reference to
Note 9 of Notes to Consolidated Financial Statements "Contingencies" on page 17
of Registrant's 1995 Annual Report to Stockholders which is included as Exhibit
(13) to this Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
Certain information about the executive officers of
Registrant as of March 15, 1996 is as follows:
Name Age Position Held With Registrant
---- --- -----------------------------
Kenneth A. Swanstrom 56 Chairman of the Board, Chief
Executive Officer and President
Martin J. Bidart 59 Vice President - Manufacturing
Raymond L. Bievenour 52 Vice President - Sales/Marketing
Richard B. Ernest 61 Vice President - Quality Control
Joseph F. Lopes 62 Vice President - Engineering
Mark W. Simon 57 Vice President - Finance
and Corporate Secretary
Kent R. Fretz 58 Vice President and General
Manager - Pittman Division
All of the executive officers of Registrant have been
principally employed as officers or employees of Registrant for
more than the past five years, except Mr. Lopes. During the past
-7-
five years, Mr. Lopes served in various engineering management
positions with SPS Technologies, Inc.
The executive officers of Registrant are elected each year at
the organization meeting of the Board of Directors of Registrant which is held
following the Annual Meeting of Stockholders.
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters.
The answer to this Item is incorporated by reference to page 8
of Registrant's 1995 Annual Report to Stockholders which is included as Exhibit
(13) to this Form 10-K Report.
Item 6. Selected Financial Data.
The Five-Year Financial Data and other financial information for
Registrant is incorporated by reference to page 4 of Registrant's 1995 Annual
Report to Stockholders, which is included as Exhibit (13) to this Form 10-K
Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The answer to this Item is incorporated by reference to pages 6
and 7 of Registrant's 1995 Annual Report to Stockholders, which is included as
Exhibit (13) to this Form 10-K Report.
-8-
Item 8. Financial Statements and Supplementary Data.
The answer to this Item is incorporated by reference to
pages 9 through 19 of Registrant's 1995 Annual Report to Stockholders, which is
included as Exhibit (13) to this Form 10-K Report, and the schedules included
herewith.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information concerning directors necessary to answer
this item is incorporated by reference to Registrant's Proxy Statement for its
1996 Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission separately pursuant to Rule 14a-6 under the Securities
Exchange Act of 1934.
Information with respect to executive officers of Registrant is
included in Part I of this Form 10-K report.
Item 11. Executive Compensation.
The answer to this Item is incorporated by reference to
Registrant's Proxy Statement for its 1996 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission separately pursuant to
Rule 14a-6 under the Securities Exchange Act of 1934.
-9-
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The answer to this item is incorporated by reference to
Registrant's Proxy Statement for its 1996 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission separately pursuant to
Rule 14a-6 under the Securities Exchange Act of 1934.
Item 13. Certain Relationships and Related Transactions.
The answer to this item is incorporated by reference to
Registrant's Proxy Statement for its 1996 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission separately pursuant to
Rule 14a-6 under the Securities Exchange Act of 1934.
PART IV
Item 14. Exhibits, Financial Statements and Schedules and
Reports on Form 8-K.
(a) Financial Statements, Financial Schedules and
Exhibits Filed.
1. Consolidated Financial Statements. Page
----
The following Consolidated Financial Statements of
Registrant and its subsidiaries are filed as part of this
Form 10-K Report:
Consolidated Balance Sheets at
December 31, 1995 and 1994. 9*
Statements of Consolidated Income and 10*
Retained Earnings for the years ended
December 31, 1995, 1994 and 1993.
-10-
Page
----
Statements of Consolidated Cash Flows for 11*
the years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements. 12-18*
Independent Auditors' Report 19*
2. Financial Schedules.
**Schedules (consolidated) for the years ended
December 31, 1995, 1994 and 1993 (as applicable):
II - Consolidated Valuation Accounts F-1
Independent Auditors' Report on Schedule
- -------------------
* Refers to the respective page of Registrant's 1995 Annual Report
to Stockholders, which is filed as Exhibit (13) to this Form 10-
K Report. With the exception of the portions of such Annual
Report specifically incorporated by reference in this Item, and
in Items 1, 3, 5, 6, 7 and 8 hereof, such Annual Report shall
not be deemed filed as a part of this Form 10-K Report or
otherwise deemed subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934.
** All other schedules are omitted because the required information, as
applicable, is included in the Consolidated Financial Statements and Notes
which have been incorporated by reference herein.
3. Exhibits.
Reference is made to the Exhibit Index on page 13.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1995, Registrant did not
file any reports on Form 8-K.
-11-
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PENN ENGINEERING &
MANUFACTURING CORP.
Date: March 29, 1996 By:/s/Kenneth A. Swanstrom
-----------------------
Kenneth A. Swanstrom,
Chairman/CEO/President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Kenneth A. Swanstrom Chairman/CEO/President March 29, 1996
- ------------------------- (Principal
Kenneth A. Swanstrom Executive Officer)
/s/ Mark W. Simon V.P. Finance,Corporate March 29, 1996
- ------------------------- Secretary and Director
Mark W. Simon (Principal Financial
and Accounting Officer)
/s/Willard S. Boothby, Jr. Director March 29, 1996
- -------------------------
Willard S. Boothby, Jr.
/s/ Frank S. Hermance Director March 29, 1996
- -------------------------
Frank S. Hermance
/s/ Lewis W. Hull Director March 29, 1996
- -------------------------
Lewis W. Hull
/s/ Thomas M. Hyndman, Jr. Director March 29, 1996
- -------------------------
Thomas M. Hyndman, Jr.
/s/ Maurice D. Oaks Director March 29, 1996
- -------------------------
Maurice D. Oaks
/s/ Daryl L. Swanstrom Director March 29, 1996
- -------------------------
Daryl L. Swanstrom
PENN ENGINEERING & MANUFACTURING CORP.
--------------------------------------
EXHIBIT INDEX
-------------
Page
Item Description Number
---- ----------- ------
(3)(i) Certificate of Incorporation
of Registrant, as amended
(incorporated by reference to
Exhibit (3)(A) of Registrant's
Form 10-K Annual Report for the
fiscal year ended December 31,
1987).
(3)(ii) By-laws of Registrant, as amended
(incorporated by reference to
Exhibit 3(ii) of Registrant's
Form 10-K Annual Report for the
fiscal year ended December 31, 1994).
(10)(i) Right of First Refusal dated as of
September 5, 1986 between Registrant
and Lawrence W. Swanstrom and
Daryl E. Swanstrom. (Incorporated
by reference to Exhibit A to the
Company's Form 8-K Current Report
dated September 5, 1986, the date
of the earliest event reported.)
(13) 1995 Annual Report to Stockholders
(Only those pages expressly
incorporated by reference in Items
1, 3, 5, 6, 7, 8, and 14 of this
Form 10-K report)
(21) Subsidiaries of Registrant
(27) Financial Data Schedule
-13-
PENN ENGINEERING & MANUFACTURING CORP. AND SUBSIDIARIES
-------------------------------------------------------
SUPPLEMENTAL DATA
-----------------
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
SCHEDULE II
PENN ENGINEERING & MANUFACTURING CORP. AND SUBSIDIARIES
CONSOLIDATED VALUATION ACCOUNTS
- -------------------------------------------------------------------------------
Balance, Charged Balance,
Beginning (Credited) to End
DESCRIPTION of Year Expenses Deductions of Year
Year Ended December 31, 1995:
Allowance for doubtful accounts $800,000 $ 156,294 $ 56,294 $900,000
-------- --------- -------- --------
Year Ended December 31, 1994:
Reserve for impairment of
short-term investments $100,000 $(100,000)
-------- ----------
Allowance for doubtful accounts $524,400 $ 343,630 $ 68,030 $800,000
Year Ended December 31, 1993:
Warranty reserve $ 57,500 $ 57,500
-------- --------
Reserve for impairment of
short-term investments $200,000 $(100,000) $100,000
-------- ---------- --------
Allowance for doubtful accounts $450,000 $ 144,327 $ 69,927 $524,400
-------- --------- -------- --------
-14-
INDEPENDENT AUDITORS' REPORT
Penn Engineering & Manufacturing Corp.:
We have audited the consolidated financial statements of Penn Engineering &
Manufacturing Corp. and subsidiaries as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995, and have issued
our report thereon dated February 6, 1996; such consolidated financial
statements and report are included in your 1995 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
consolidated financial schedule of Penn Engineering & Manufacturing Corp. and
subsidiaries, listed in Item 14(a)2. This consolidated financial schedule is the
responsibility of the Corporation's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial 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.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 6, 1996