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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1995
Commission File Number 0-7336
ADAGE, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 04-2225121
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Willowbrook Lane,
West Chester, PA 19382
(Address of principal executive offices) (Zip Code)
Telephone: (610) 430-3900
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.60
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
Indicate by check mark whether the registrant (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 |_|
The aggregate market value, as of March 8, 1996, of voting Common Stock
held by non-affiliates of the registrant was based on the last reported sales
price on the over-the-counter market as reported by NASDAQ on that date was
$19,977,196.
The number of shares outstanding of the registrant's only class of Common
Stock as of March 8, 1996 was 5,121,535.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the following documents are incorporated by reference in Parts II,
III and IV of this Form 10-K Report.
(1) Registrant's Annual Report to Shareholders for the year ended
December 31, 1995 - Items 5, 6, 7, 8, 13, and 14
PART I
ADAGE BUSINESS
ITEM 1. BUSINESS
GENERAL
In February, 1990 a subsidiary of Adage, known as Adage Acquisition Corp.,
merged with a privately held Pennsylvania company, General Business Investment
Corporation ("GBIC"). This transaction provided for the exchange of 1,961,275,
shares of Adage common stock for all of the outstanding stock of GBIC.
GBIC was incorporated in February, 1960 under the laws of the District of
Columbia as a small business investment company under the Small Business
Investment Act of 1958. In January, 1968, GBIC was acquired by a group headed by
Donald Goebert, Adage's current Chairman of the Board and principal shareholder.
In November, 1969, GBIC surrendered its license with the Small Business
Administration and ceased doing business as a small business investment company.
In December, 1980, GBIC amended its Articles of Incorporation and reincorporated
as a Pennsylvania corporation.
Adage is not engaged in any active trade or business but owns directly or
indirectly, at least eighty percent (80%) of various subsidiaries. Minority
interests in less than wholly-owned subsidiaries are owned by current subsidiary
management. The various businesses controlled directly or indirectly by Adage
are divided into three industry segments - wireless communications equipment,
specialty manufacturing, and recycled paper manufacturing.
Adage's subsidiary, Fort Orange Paper Company, (Fort Orange), is subject
to the Clean Water Act, federal legislation that regulates the type of amount of
contamination that are permitted to be discharged into rivers, streams and other
waterways. In addition, Fort Orange is subject to the Clean Air Act, which is
also federal legislation. The Clean Air Act was applicable to Fort Orange
because the company had burned coal in boilers, and the amount of pollutants
permitted to be discharged is governed by the Clean Air Act.
Aside from Fort Orange, compliance with federal, state, and local
environmental laws have no material effect upon capital expenditures, earnings
and competitive positions of Adage or any of its subsidiaries.
1
In June, 1991 Adage, a Massachusetts corporation, reincorporated in
Pennsylvania, and GBIC was thereafter merged into Adage. As of December 31,
1995, Adage and its subsidiaries employed 675 persons all located in various
facilities in Pennsylvania, New York, Indiana, Florida, California, Kansas and
Nebraska.
Adage employs 5 individuals at its corporate offices.
Products and Subsidiaries of Adage
Specialty Manufacturing Group
Allister Manufacturing Company, Inc., a Pennsylvania business corporation
located in West Chester, Pennsylvania, is a manufacturer of automatic garage
door and gate control systems. Pursuant to various leases, Allister
Manufacturing leases appromimately 35,000 square feet in West Chester,
Pennsylvania, approximately 15,000 square feet in Palmerton, Pennsylvania, and
2,500 square feet in Vista, California. Allister Manufacturing has approximately
69 employees.
The market for automatic garage door control systems (garage door openers)
is very competitive and price sensitive. In the residential market, in which
Allister Manufacturing competes, there are two segments. The largest segment is
the over-the-counter segment in which operators are sold through department
stores, lumber yards and home improvement centers to individuals who install the
product themselves. Allister does not presently compete in this segment.
The second market segment for residential garage door openers is the
professionally installed market in which garage door openers are sold and
installed by a contractor (typically a door dealer or door operator dealer).
Allister distributes its products primarily through installing dealers. Many of
the sellers in the over-the-counter market, including Chamberlain (Sears), Genie
and Stanley, actively seek sales in this segment. This segment is heavily
dependent on housing starts.
Allister Manufacturing has approximately 1,600 customers, the largest of
which accounted for 3.1% of 1995 sales. The five largest customers accounted for
12.3% of sales. Allister Manufacturing has approximately twelve significant
competitors in the residential market. Although Allister Manufacturing sells
exclusively in the professionally installed market, because of competition from
over-the-counter dealers, sales prices established in the over-the-counter
market have a significant impact on the prices which Allister Manufacturing may
charge in its market.
In July, 1989 Allister Manufacturing acquired 80% of the outstanding stock
of Larko Electronics Corporation, a California
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corporation. In 1992 it acquired the additional 20%. Larko manufactures
automatic sliding gate and swinging gate operators.
During 1992 Allister transistioned its manufacture of electronic
components to Adage's RELM Communications subsidiary facility located in
Melbourne, Florida and sold its facility in Hendersonville, Tennessee.
During 1992 Allister and Larko were consolidated and the Larko
manufacturing was moved from California to West Chester, Pennsylvania. This
group has combined sales, engineering and administrative functions which Adage
believes will accomplish more efficient use of resources. The combined group
trades under the name "Allister Access Controls."
During 1995 Allister acquired the assets of Edwards Power Door, a
manufacturer of commercial garage door openers.
Recycled Paper Manufacturing
Fort Orange Paper Co., Inc., is a New York corporation located in
Castleton-on-Hudson, New York.
Fort Orange Paper is a manufacturer of high quality, coated, recycled
paperboard which is used primarily in the folding paper box industry. Recycled
paperboard is made from a fibrous slurry derived from the mixing of water with
newspaper, corrugated cardboard and clippings from other boxboard. The fibrous
slurry is extruded through a screen and the water is pressed out as the material
is passed through a series of cylindrical dryers. A clay coating is applied at
the end of the process to produce a surface capable of accepting high quality
print.
As more communities adopt mandatory recycling regulations, the available
supply of fiber is increasing. Regulations requiring increased use of recycled
fiber have increased which has increased demand. Post consumer fiber is a
commodity product and accordingly the cost of fiber varies from time to time
based on market conditions. Paperboard is a commodity product subject to
short-term market fluctuations. Demand for recycled paperboard has increased and
consequently prices have increased. Recycled paperboard manufactured by Fort
Orange Paper is used in its own conversion operations to manufacture folding
cartons and is sold to other folding carton producers. Approximately 77% of Fort
Orange Paper's mill output is sold to independent converters. Competition among
board manufacturers is fragmented and includes a broad spectrum of suppliers
ranging from large, integrated manufacturing and conversion operations to small,
family owned independents.
During 1990 through 1992, Fort Orange Paper had undertaken a capital
program to update and increase efficiency in its plants while raising product
capacity and quality levels. Operations and product output at Fort Orange Paper
have, in the opinion of
3
management, shown improvement as a result of these capital expenditures.
The five largest purchasers of Fort Orange Paper output comprise 41.6% of
sales, and the largest customer comprises 9.8% of their combined business.
Fort Orange Paper is in compliance with applicable environmental
regulations.
Fort Orange Paper has approximately 215 employees. Production employees
are represented by the United Paperworkers International Union Local 420 and 22.
Collective bargaining agreements with each of these unions are in place until
May 31, 1996 and May 31, 1997, respectively. Fort Orange Paper also sponsors a
salary deferred retirement plan for their non-union employees.
Fort Orange Paper is currently involved in a co-generation steam supply
agreement with Cogen Energy Technology, Inc., ("Cogen"). The project is owned
and operated by Cogen on land leased from Fort Orange Paper under a 20 year
lease. Start up of the project occurred in late 1992. Under the terms of the
project, Cogen provides steam to Fort Orange Paper at approximately 50% of its
historical cost adjusted for changes in fuel costs.
Fort Orange Paper operated at approximately 87% of its capacity during
1995. Fort Orange Paper's backlog was $3,190,000 at December 31, 1995.
Wireless Communications Equipment
On January 24, 1992 Adage acquired all of the outstanding stock of RELM
Communications, Inc. in exchange for 1,946,183 shares of Adage Common Stock.
Relm, a Florida corporation, was formed in 1947, operates exclusively in
one dominant segment, the electronics communications industry. Relm designs,
manufactures and markets electronic communications equipment consisting of voice
communications equipment (land mobile two-way radios), and digital data
communications equipment (electronic utility load management systems). Relm also
manufactures base station components and subsystems which reduce radio signal
interference related to frequency connection at radio transmitter sites. In
addition, Relm engages in contract manufacturing of communications products for
original equipment manufacturers including the radio control products sold by
Allister Access Controls and the electronic circuit boards used in Allister's
door and gate operators.
Relm owns fifty percent of the outstanding capital stock of Regency
Communications, Inc., an Indiana corporation ("Regency").
4
Regency was organized pursuant to a joint venture agreement among Relm and two
unaffiliated, privately held Japanese corporations. Pursuant to such joint
venture, Relm manufactured cellular telephones for sale to Regency. However,
operations were not significant in 1990 through 1992 and Relm and its joint
venture partners have decided to exit the cellular telephone business. The joint
venture will not be dissolved but will consider manufacturing other products.
The joint venture has not identified any such products.
In September 1993 RELM purchased the assets and business of the
Bendix/King Mobile Communications Division of AlliedSignal and hired the sales
and engineering employees of the division. This product line consists of
primarily portable voice communications equipment which compliments RELM's
existing line of voice communications equipment in that the products have
different features and applications than the RELM products. RELM did not
purchase this division's manufacturing facilities. RELM facilities operated at
approximately 65% of maximum capacity during 1994. RELM's backlog was
approximately $9,200,000 at December 31, 1995.
Description of Products and Markets
Voice Communications Equipment
Relm's current voice communications products consist of land mobile
two-way radios. Such products are sold for use by businesses and
municipalities requiring two-way communications between or among vehicles,
personnel in remote locations, and/or central locations. Such products
include base stations for the central location, mobile two-way radios for
mounting in vehicles, portable two-way radios for hand-held use, and
repeaters, which enable the two-way radio to operate over a greater area.
Relm manufactures base station components and subsystems which are
installed at radio transmitter sites to improve performance by reducing or
eliminating signal interference and enable the use of one antenna for both
transmission and reception. Relm sells land mobile products to original
equipment manufacturers, government agencies and dealers who resell the
products to end users.
Digital Data Communications Equipment
Relm manufactures load management systems for sale to electric
utilities, dealers and jobbers. The load management system enables a
utility to limit usage during peak demand periods. Using radio
transmitters, a signal is sent by the utility to individual receivers
which are wired to residential appliances, generally air conditioners or
hot water heaters. The appliances are turned off for short periods of time
which reduces demand and shifts consumption to non-peak hours.
5
Radio Controls for Access Control Industry
RELM manufactures small low-powered receivers, transmitters, and
control circuit boards designed by Allister Access Controls to control
automatic garage door and gate operators.
These radio products are manufactured under the Allister and Pulsar
brand names for sale by Allister to door operator and gate operator
dealers and distributors.
Electronic Components
Relm markets electronic components, primarily microprocessors and clock
oscillators, to electronic component distributors and original equipment
manufacturers through its' subsidiary RXD Corp. The components are used in
various electronic products including computers, electric scales,
electronic organs and keyboards, and electronic toys.
Research and Development
Relm employs 30 persons who devote some portion of their time to research
and development. Research and development costs were approximately $3,000,000
and $3,300,000 and $1,600,000 for the years ended December 31, 1995, 1994 and
1993 respectively. Management will continue research and development efforts to
expand the business and remain competitive.
Patents
Relm holds patents and patent licenses covering various products currently
marketed. While it is difficult to assess the precise importance of the patents
and licenses, it is believed they enhance Relm's marketing position.
Relm also holds patents covering its digital communication product line.
The patents cover, among other techniques, decoding of digital data messages,
retrieving of digital data, and high speed date transmission on FM sub-carrier
frequencies. These patents have various expiration dates to the year 2001.
Raw Materials
Raw materials and component parts are purchased for assembly into finished
products. Although certain components are available from only one supplier,
during the three years ended December 31, 1995 and 1994 and June 30, 1993, Relm
did not experience any significant delays in deliveries from any single source
supplier.
While the value of single source components is not material in comparison to the
value of all components, the absence of a single source component would delay
the manufacture of finished products.
6
Relm attempts to minimize any risk of such delays by securing second sources,
and maintaining automated engineering design capabilities to redesign around
shortages.
Competition
Relm competes with numerous domestic and foreign companies in the highly
competitive electronics communications industry. Many of Relm's competitors have
substantially greater financial, marketing and technical resources than Relm and
Adage. The principal methods of competition are price, payment terms, quality,
engineering capability and advances, and service after sale. Relm believes it is
generally competitive with regard to such factors.
Employees
Relm currently employs approximately 380 persons on a full-time basis.
Environmental Matters
Relm discovered through deep-well groundwater tests that a property held
for sale (vacant factory and seven acres of land located in Satellite Beach,
Florida) contained soil and water contaminants of higher levels than are
currently acceptable under regulations established by the U.S. Environmental
Protection Agency. Relm recorded a liability of $250,000 prior to its merger
with Adage in 1992. Approximately $240,000 has been expended through December
31, 1995 in the remediation effort. In February, 1996 RELM received a letter
from the Florida Department of Environmental Protection stating that no further
remediation action is required at this site.
Other Industries
The Other Industries segment of Adage's business is represented by the
parent company's operations, which are financial in nature. Its assets are made
up of cash, short and long term investments, and loans to subsidiary companies.
Income consists of interest and investment income.
Item 2 Properties
Owned
7
A 275,000 square foot office and industrial building on 105.6 acres
located on River Road, Castleton, New York, which is used in the production of
paperboard and folding cartons by Fort Orange Paper Company.
A 105,000 square foot office and industrial building on 20 acres located
in West Melbourne, Florida which is used by RELM Communications, Inc. to
manufacture wireless communication equipment.
A 40,000 square foot building on 7 acres located in Satellite Beach,
Florida, which is currently not being used in the business and is offered for
sale.
Leased
A 500 square foot office facility located in West Chester, Pennsylvania
used by Adage, Inc. as corporate headquarters and administrative offices. This
facility is shared with Redgo Properties, Inc.
A 2,000 square foot office facility located in West Chester, Pennsylvania
used by Redgo Properties as administrative and sales offices. This facility is
leased at a total monthly rental of $3,107 with the term of the lease expiring
November 30, 1997.
A 35,000 square foot facility located in West Chester, Pennsylvania, used
by Allister Manufacturing Co., Inc., a subsidiary of Adage, Inc., used in the
manufacture of garage door operators. This facility is leased at a monthly
rental of $16,000 plus operating costs with the term of the lease expiring in
July, 2001.
A 2,500 square foot facility located in Vista, California, used by
Allister Manufacturing Co., Inc. a subsidiary of Adage, Inc., used for the
warehousing of garage door and gate operators. This facility is leased at a
monthly rental of $1,584 with the term of the lease expiring in September,1998.
A 18,500 square foot facility of leased office space located in Lawrence,
Kansas, which houses a portion of RELM's design engineering and sales. The lease
expires December 1998 and monthly rent payments of $10,622 are due to April 1997
and then $13,980 through the expiration date.
A 37,600 square foot facility located in Indianapolis, Indiana used by
RELM Communications, Inc. for engineering, sales and executive offices. The
lease expires in 1997. The lease payments are $6,805 per month.
A 5,000 square foot facility located in Norfolk, Nebraska, which is used
for the operations of RXD, Inc.. The lease payments are $1,000 per month.
8
Adage believes that its' facilities are modern and well maintained.
Item 3. Litigation
During 1993, Stanley T. Miller et.al named Adage among others in a civil
action. Adage filed a Motion to Dismiss the Complaint for failure to state a
claim pursuant to Rule 12(b)(6) of the Rules of Civil Procedure. Although the
Motion to Dismiss was filed in the fall of 1993, the Court has yet to rule on
the motion. No discovery has taken place in this action. In February of 1994,
the plaintiff executed and circulated for signature, a Stipulation of Voluntary
Dismissal. After the Stipulations was executed, however, plaintiffs refused to
file the Stipulation of Dismissal with the court. As a result of plaintiffs'
failure to file the Stipulation, all defendants subsequently filed a Motion to
Enforce their agreement with plaintiffs. The court has not yet ruled on that
motion.
In a related action, the trustee of Corporate Investment Company filed an
adversarial action in connection with Corporate Investment Company's bankruptcy
proceeding. The allegations against Adage in the adversarial action are
identical to those in the Miller action. In response to the complaint Adage
filed a motion to dismiss for failure to state a cause of action. That motion
was filed in late summer of 1994. The bankruptcy court has not yet ruled on the
motion.
On February 14, 1996 the Insurance Commissioner of the Commonwealth of
Pennsylvania, in her capacity a statutory liquidator for Corporate Life brought
a multiple count complaint against multiple defendants in the Commonwealth Court
of Pennsylvania. In that Complaint, there are three claims asserted against
Adage, Inc., all of which arise out of the same 1987 note transaction between
Adage and CIC.
Allister Manufacturing or its subsidiary Larko Electronic Corporation are
defendants in approximately 14 pending claims for personal injuries and-or
property damages alleged to have resulted from the malfunction of a garage door
or gate operator. The Company maintains product liability insurance with
coverages of $2,000,000, subject to deductibles ranging from $75,000 to
$500,000. During the times that such claims were made, the Company maintained
umbrella coverage extending its insurance coverage for various periods by
$3,000,000 to $10,000,000.
Allister Manufacturing is the defendant in an action brought by a supplier
to recover amounts claimed to be due on purchase orders issued by ACV Dynatherm
Corp., Inc., currently an inactive subsidiary. The total amount claimed is less
than $100,000.
Adage believes that there will be no material adverse effect on the
financial position of the Company as a result of these actions.
9
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 4A. None
ADAGE MANAGEMENT
Set forth in the table below is certain information with respect to the
executive officers of Adage:
CURRENT
NAME AGE OFFICE BUSINESS EXPERIENCE
- ---- --- ------ -------------------
Donald F.U. Goebert 59 Chairman of the Chairman of the Board of
Board of Directors Directors since March 1968;
and President President of GBIC from March
1968 to October 1988.
President of Adage since April
1993. Director of Investors
Insurance Group, Inc. since
1987; Progress Financial since
1981.
Robert T. Holland 47 Vice President Vice President, Secretary and
Secretary and Chief Financial Officer since
Chief Financial February 1990. President
Officer of Allister since April 1993.
Vice President and Chief
Financial Officer of
GBIC since July 1989.
Partner, MacDade, Abbott
& Co., 1974 to June
1989.
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS
The information required by this Item is incorporated by reference to page
2 of the Company's 1995 Annual Report to Shareholders.
10
Shareholders of record as of March 8, 1996 were approximately 5,300.
ITEM 6 SELECTED FINANCIAL DATA.
The information required by this Item is incorporated by reference to page
2 of the Company's 1995 Annual Report to Shareholders.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by this Item is incorporated by reference to
pages 20 and 21 of the Company's 1995 Annual Report to Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is incorporated by reference to
pages 6 through 19 of the Company's 1995 Annual Report to Shareholders.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is omitted from this Report in
that the registrant will file a definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statements") not later than 120 days after the end of
the fiscal year covered by this Report, and certain information included therein
is incorporated herein by reference.
11
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table set forth the information concerning the ownership of
the Company's securities by directors and management of the Company.
Shares of Common
Stock Beneficially
PRINCIPAL OCCUPATION owned as of
NAME AGE DURING PAST FIVE YEARS DIRECTORSHIPS March 5, 1995
---- --- ---------------------- ------------- ------------------
Donald F.U. Goebert 59 Chairman of the Board Progress Financial 1,700,945 (1)(2)(3)
400 Willowbrook Lane of Directors of Adage Corporation,Investors 31.8% *
West Chester, PA 19382 (formerly GBIC) since Insurance Group, Inc.
March 1968; President
of GBIC from March 1968
to October 1988 and
President of Adage since
April, 1993.
Buck Scott 66 Vice President of Electrical 11,167 (2)
** Energy Enterprises, Inc. 0.21% *
1994 to January 1995. President
of Electrical Energy
Enterprises, Inc. from
1990 to 1993; Director of
Adage (formerly GBIC)
from 1980 to Present.
Robert L. McDonald 67 Retired - Director of 4,167 (2)
** Financial Aid Wharton 0.08% *
Graduate Division and
Lecturer in Management,
Wharton School,
University of Pennsylvania
1953 to 1993, Director of
Adage, Inc. since 1991.
Ralph R. Whitney,Jr. 61 President of Hammond IFR Systems, Inc., 46,187 (2)
** Kennedy Whitney & Co., Excel Industries, 0.86% *
Inc., a private invest- Inc., and Baldwin
ment banking firm with Technology Corporation.
offices at 230 Park Avenue
New York, New York.
Director of Adage, Inc.
since January 1992.
Robert T. Holland 47 Vice President, Secretary 132,087 (1)(3)
and Chief Financial 2.5% *
Officer of Adage, Inc.
(formerly GBIC) since July
1989. Director of Adage, Inc.
since January 1992.
12
James C. Gale 45 Managing Director of Prins Recycling 4,167 (2)
*** Gruntal & Co., Inc. Corporation, Latshaw 0.08% *
from 1989 to present. Enterprises, Inc.
Managing Director of
Maiden Lane Associates, Inc.,
New York, NY 1989 to 1992.
Joel A. Schleicher 43 Private Investor 4,166 (2)
*** Chief Operating 0.08% *
Officer of Nextel
Communications,
Inc. from October, 1989 until
January, 1995.
George N. 58 Consultant, Trig Systems 4,267 (2)
Benjamin,III LLC, July 1987 to Present 0.08% *
*** President and CEO of TIE/
Communications, Inc. from
April 1, 1992 to November 1,
1995. Vice President of The
Marmon Group, Inc. from
August, 1988 to April, 1992.
*** Member of Compensation Committee.
** Member of Audit Committee.
(1) Includes incentive stock options as disclosed under the Stock
Option section of this
(2) Includes 4,166 director stock options.
(3) Includes 23,366 shares held in a custodian account for the Adage Employee
Stock Purchase Program.
(4) As stated in form 4 dated February 8, 1995 filed by Mr. Goebert, he is the
direct owner of 1,232,326 shares and has beneficial ownership through
Chester County Fund, Inc. of 85,942 shares, Investors Insurance Group,
Inc., of 188,971 shares, Donald Goebert Partnership of 60,000 shares and
Trusts for his minor childred of 11,840 shares.
* The class of Common Stock consists of 5,121,535 shares issued and outstanding
plus 235,703 shares which may be acquired through exercise of options.
13
Directors' Compensation
As described below, options granted under the Corporation's 1988
Non-Employee Director Stock Option Plan are in addition to non-employee
directors' fees. Directors' compensation consists of a $6,000 annual retainer
plus $1,000 per meeting.
Additionally, non-employee directors' are paid $500 for each committee
meeting which is held on a day other than the regular director's meeting.
Adage Director Plan
The Adage Director Plan was adopted by the Board of Directors on April 7,
1988, and approved by Adage's shareholders on July 28, 1988. A total of 33,333
shares of Adage Common Stock (subject to adjustment in certain events) may be
issued under the Adage Director Plan. The Adage Director Plan is administered by
the Board of Directors. Options are granted pursuant to the Adage Director Plan
only to non-employee members of the Board of Directors who are not officers of
Adage. As of April 6, 1995, options for an aggregate of 20,832 shares with an
exercise price of $4.75 to $7.875 per share are outstanding. During the period
January 1, 1993 to December 31, 1995, no directors options were exercised.
ITEM 11 EXECUTIVE COMPENSATION.
The following table sets forth certain information regarding compensation
incurred during each of the past three years to the Company's Executive
Officers.
Annual Compensation
-------------------------------------------
Name and Principal
Position Year Salary Bonus
- ------------------ ---- ------------------- -----
Donald F.U. Goebert 1995 $150,000 -
President 1994 $150,000 -
1993 $150,000 -
Robert T. Holland 1995 $192,600 5,000
Vice President & 1994 $192,600 -
Secretary 1993 $192,600 -
Other compensation is not included in the summary compensation table
because it does not equal the lesser of $50,000 or 10% individually or in the
aggregate of the annual salary and bonus reported for the executive officers.
14
Number of Unexercised Value of Unexercised
Options Held at In the Money Options
December 31, 1995(1) at December 31, 1995
---------------------- --------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Donald F.U. Goebert 25,000 75,000 - 0 - - 0 -
Robert T. Holland 31,250 43,750 - 0 - - 0 -
(1) The options held by Mr. Holland expire in 1997 (25,000) and 1999
(50,000). The options held by Mr. Goebert expire in 1999.
EXECUTIVE AND OTHER EMPLOYEE BENEFIT PLANS
Stock Options
The Adage 1988 Stock Plan was adopted by Adage's Board of Directors on
January 28, 1988 and approved by Adage's shareholders on July 28, 1988. A total
of 500,000 shares of Adage Common Stock (subject to adjustment in certain
events) may be issued under the Adage 1988 Stock Plan pursuant to the exercise
of options or in connection with awards of authorizations to make direct
purchases of Adage Common Stock. The shareholders approved an increase in the
number of shares authorized to be issued under the 1988 Stock Plan from 250,000
to 500,000 at the 1994 annual meeting.
There have been 37,500 share of Adage Common Stock issued pursuant to the
exercise of options granted under the 1988 Stock Plan.
The following table sets forth, as to each of Adage's executive officers
whose aggregate cash compensation exceeded $60,000, as to all current executive
officers as a group and as to all employees as a group (i) the number of shares
of Adage Common Stock subject to options granted pursuant to the 1988 Stock Plan
from January 1, 1992 to December 31, 1994, (ii) the average per share options
granted from January 1, 1992 to December 31, 1994 the average per share option
exercise price thereof, (iii) the number of shares of Adage Common Stock
purchased upon the exercise of options during that period, (iv) the net value
realized upon such exercise, and (v) the number of shares of Adage Common Stock
subject to options at April 1, 1995. Except as described above for the Adage
Director Plan, no directors who were not also employees of Adage were granted or
exercised any stock options during the period. None of the options are subject
to stock appreciation or other tandem rights.
15
Options Granted From Options Exercised From
January 1, 1993 through January 1, 1993 through
December 31, 1995 December 31, 1995
----------------------- ----------------------------
Number Average Number Net Value Realized Options
of Exercise Price of Upon Exercise Outstanding
Shares Per Share Shares of Options(1) April 1,1995
------ -------------- ------ ------------------ ------------
Donald F.U. Goebert 100,000 $ 4.625 0 $ 0 100,000
Robert T. Holland 75,000 $ 4.833 0 $ 0 75,000
All current executive
officers as a group
(2 persons) 175,000 $ 4.714 0 $ 0 175,000
All employees as a
group (other than
current executive
officers) 42,547 $ 4.122 0 $ 0 39,868
- ----------
(1) The net value realized upon exercise of option is the difference between
the market value of the shares received and the exercise price thereof.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Beneficial owners of more than 5% of the outstanding voting securities of
The Company who are not nominees for directors or management of the Company.
NONE
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information concerning certain Relationships and Related Transactions
required by this Item is incorporated by reference to the Company's 1995 Annual
Report to Shareholders.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial Statements. The following Consolidated
16
Financial Statements of Adage, Inc. and Report of Independent Public Accountants
are incorporated by reference to the Registrant's 1995 Annual Report to
Shareholders:
Consolidated Balance Sheet - December 31, 1995 and 1994
Statement of Consolidated Operations - Years Ended
December 31, 1995, 1994, and 1993
Statement of Consolidated Stockholders' Equity - Years Ended
December 31, 1995, 1994, and 1993
Statement of Consolidated Cash Flows - Years Ended December 31,
1995, 1994, and 1993
Notes to Consolidated Financial Statements
Independent Auditor's Report
17
Quarterly Financial Data (Unaudited)
(000's Omitted except for Per Share Data)
The following is a tabulation of the unaudited quarterly results of
operations for the years ended December 31, 1995, 1994, and 1993 restated to
reflect discontinued operations.
Income Income
Total Revenues (Loss) from (Loss) from Net
from Continuing Continuing Discontinued Income
Operations Operations Operations (Loss)
--------------- ----------- ------------ ------
1995
Quarters
First $20,267 $ (244) $ 366 $ 122
Second 22,606 (47) 449 402
Third 19,257 (741) 1,081 340
Fourth 19,668 248 - 248
Earnings per Share
------------------
Continuing Discontinued Net
Operations Operations Income (Loss)
---------- ------------ -------------
1995
Quarters
First $ (.05) $ .07 $ .02
Second (.01) .09 .08
Third (.14) .21 .07
Fourth .05 . - .05
18
Income Income
Total Revenues (Loss) from (Loss) from Net
from Continuing Continuing Discontinued Income
Operations Operations Operations (Loss)
--------------- ----------- ------------ ------
1994
Quarters
First $18,796 $ (467) $ 39 $ (428)
Second 22,027 368 183 551
Third 20,280 202 116 318
Fourth 19,822 419 (1,918) (1,499)
Earnings per Share
------------------
Continuing Discontinued Net
Operations Operations Income (Loss)
---------- ------------ -------------
1994
Quarters
First $ (.09) $ .01 $ (.08)
Second .07 .04 .11
Third (.04) .02 .06
Fourth .08 (.38) (.30)
19
Income Income
Total Revenues (Loss) from (Loss) from Net
from Continuing Continuing Discontinued Income
Operations Operations Operations (Loss)
--------------- ----------- ------------ ------
1993
Quarters
First $15,641 $ (1,359) $ 203 $(1,156)
Second 16,594 252 (131) 121
Third 15,460 (108) 182 74
Fourth 20,555 609 27 636
Earnings per Share
------------------
Continuing Discontinued Net
Operations Operations Income (Loss)
---------- ------------ -------------
1993
Quarters
First $ (.27) $ .04 $ (.23)
Second .05 (.02) .03
Third (.02) .03 .01
Fourth .12 .01 .13
2. Financial Statement Schedules. The following financial statement
schedules of Adage, Inc. for the years ended December 31, 1995, 1994, and 1993
are filed as part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Adage, Inc.
Schedule
--------
V - Property, Plant and Equipment
VI - Accumulated Depreciation, Depletion and Amortization
VIII - Valuation and Qualifying Accounts
IX - Short-term Borrowings
X - Supplementary Income Statement Information
XI - Real Estate and Accumulated Depreciation
XII - Mortgage Loans on Real Estate
20
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or Notes thereto.
3. Exhibits: The Exhibits listed on the accompanying Index to Exhibits
immediately following the financial statement schedules are filed as part of, or
incorporated by reference into, this Report.
(b) Reports on Form 8-K.
21
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE V
Property, Plant & Equipment
(000 Omitted)
Balance Additions Balance
1-1-95 at cost Retirement Other Changes 12-31-95
------- --------- ---------- ----- ------- --------
Land $ 470 $ -- $ -- (a) $ (128) $ 342
(a) (1,427)
Buildings & Improvements 5,386 -- -- (c) 112 4,071
(a) (9,579)
Machinery & Equipment 28,592 574 297 (b) 48 19,714
(c) 376
Equipment under Capital (a) (192)
Lease 1,030 742 -- (b) (48) 1,751
(c) 219
Pollution Control Facility 1,596 -- -- -- 1,596
(a) (166)
Construction in progress 535 338 -- (c) (707) --
-------- -------- -------- -------- --------
$ 37,609 $ 1,654 $ 297 $(11,492) $ 27,474
(a) Discontinued operations
(b) Reclassified during year
(c) Transfer of completed construction
22
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE V
Property, Plant & Equipment
(000 Omitted)
Balance Additions Balance
1-1-94 at cost Retirement Other Changes 12-31-94
------- --------- ---------- ----- ------- --------
Land $ 470 $ -- $ -- $ -- $ 470
Buildings & Improvements 5,092 294 -- -- 5,386
(c) 603
Machinery & Equipment 26,566 1,320 85 (b) 296 28,592
(a) (108)
Equipment under Capital
Lease 639 687 -- (b) (296) 1,030
Pollution Control Facility 1,596 -- -- -- 1,596
Construction in progress 858 280 -- (c) (603) 535
-------- -------- -------- -------- --------
$ 35,221 $ 2,581 $ 85 $ (108) $ 37,609
(a) Discontinued operations
(b) Acquired at termination of lease
(c) Transfer of completed construction
23
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE VI
Accumulated Depreciation, Depletion,
and Amortization of Property, Plant
and Equipment
(000 Omitted)
Additions
Charged
Balance to Cost Other Balance
1-1-95 & Expense Retirement Charges 12-31-95
------ --------- ---------- ------- --------
Accumulated depreciation $16,473 $2,088 $ 288 (a) $(4,361) $13,912
Additions
Charged
Balance to Cost Other Balance
1-1-94 & Expense Retirement Charges 12-31-94
------ --------- ---------- ------- --------
Accumulated depreciation $13,706 $2,912 $ 65 (a) $ (80) $16,473
(a) Discontinued operations
24
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE VIII
Valuation and Qualifying Account
(000 Omitted)
Additions
Balance Charged to Balance
1-1-95 Expenses Deductions 12-31-95
------- ---------- ---------- --------
Allowance for doubtful
accounts $ 634 $ 22 $ 181 * $ 381
(a) (68)
(b) 162
Additions
Balance Charged to Balance
1-1-94 Expenses Deductions 12-31-94
------- ---------- ---------- --------
Allowance for doubtful
accounts $ 618 $ 342 $ 367 * $ 634
(a) (41)
Additions
Balance Charged to Balance
1-1-93 Expenses Deductions 12-31-93
------- ---------- ---------- --------
Allowance for doubtful
accounts $ 724 $ 367 $ 506 * $ 618
(a) (33)
* Write off of uncollectible accounts receivable.
(a) Recoveries
(b) Discontinued operations
25
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE IX
Short Term Borrowings
(000 Omitted)
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Average Outstanding Outstanding Interest
Short-term Balance Interest During the During the Rate during
Borrowings 12-31-95 Rate Period Period the Period
----------- -------- -------- ----------- ----------- -----------
Bank Notes
payable None - None None -
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Average Outstanding Outstanding Interest
Short-term Balance Interest During the During the Rate during
Borrowings 12-31-94 Rate Period Period the Period
----------- -------- -------- ----------- ----------- -----------
Bank Notes
payable None - None None -
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Average Outstanding Outstanding Interest
Short-term Balance Interest During the During the Rate during
Borrowings 12-31-93 Rate Period Period the Period
----------- -------- -------- ----------- ----------- -----------
Bank Notes
payable None 8.7% $1,221 $ 916 8.7%
26
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE X
Supplementary Income Statement
Information
(000 Omitted)
Charged to Costs and Expenses
1995 1994 1993
---- ---- ----
Maintenance and Repairs $ 2,491 $ 2,347 $ 2,237
27
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE XI
Real Estate and Accumulated Depreciation
(000 Omitted)
Balance Balance
1-1-95 Purchase Other 12-31-95
------- -------- ----- --------
Real Estate $ 321 $ - $ - $ 321
Balance Balance
1-1-94 Purchase Other 12-31-94
------- -------- ----- --------
Real Estate $ 6,440 $ - (a) $(6,119) $ 321
(a) Discontinued operations
28
ADAGE, INC.
DECEMBER 31, 1995
SCHEDULE XII
Mortgage Loans on Real Estate
(000 Omitted)
Balance Payment Balance
1-1-95 Additions or Principal 12-31-95
------ --------- ------------ --------
Real Estate Mortgage $ - $ - $ - $ -
Balance Payment Balance
1-1-94 Additions or Principal 12-31-94
------ --------- ------------ --------
Real Estate Mortgage $ - $ - $ - $ -
29
EXHIBIT
NUMBER
- -------
3(a) - Restated Articles of Organization of the Company as
amended (Filed as Exhibit 4(a) to the Company's
Registration Statement No. 2072809 and incorporated here
by reference).
3(b) - By Laws of the Company, as amended (Filed as Exhibit 4(6)
to the Company's Registration Statement No. 2-72809 and
incorporated herein by reference).
10(a) - Lease between the Company and Fortune Associates, dated
May 21, 1979 (Filed as Exhibit 3 to the Company's Annual
Report on Form 10-K for the year ended March 29, 1980 and
incorporated herein by reference).
10(b) - Qualified Stock Option Plan (Filed as Exhibit 10(d) to the
Company's Registration Statement No. 2-72809 and
incorporated herein by reference).
10(c) - 1981 Employees Incentive Stock Option Plan (Filed as
Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the fiscal year ended April 3, 1982 and incorporated
herein by reference).
10(d) - 1985 Employee Incentive Stock Option Plan (Filed as
Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the fiscal year ended April 2, 1983 and incorporated
herein by reference).
10(e) - Restricted Stock Plan (Filed as Exhibit 4(e) to the
Company's Registration Statement No. 2-96182 and
incorporated herein by reference).
10(f) - 1986 Restricted Stock Option Plan (Filed as Exhibit 10(1)
to the Company's Annual Report on Form 10-K for fiscal
year ended March 29, 1986 and incorporated herein by
reference).
10(g) - Agreement and Plan of Reorganization between Adage, Inc.,
Adage Acquisition corporation, and CGX Corporation dated
August 24, 1987 (Filed as Exhibit 2(a) to the Company's
Form 8-K dated September 3, 1987 and incorporated herein
by reference).
10(h) - 1988 Stock Plan (Filed as Exhibit 10(m) to the Company's Annual
Report on Form 10-K for the fiscal year ended April 2, 1988 and
incorporated herein by reference).
10(i) - Form of Agreement under the 1988 Stock Plan (Filed as
Exhibit 10(n) to the Company's Annual Report on Form 10-K
for the fiscal year ended April 2, 1988 and incorporated
herein by reference).
30
10(j) - 1988 Non-Employee Director Stock Option Plan (Filed as
Exhibit 10(o) to the Company's Annual Report on Form 10-K
for the fiscal year ended April 2, 1988 and incorporated
herein by reference).
10(k) - Form of Agreement under the 1988 Non-Employee Director
Stock Option Plan (Filed as Exhibit 10(p) to the Company's
Annual Report on Form 10-K for the fiscal year ended April
2, 1988 and incorporated herein by reference).
10(1) - Leases between Allister Manufacturing Co., Inc. and
Chester County Fund, Inc. of various dates (Filed as
Exhibit 10(k) to Adage's Registration Statement No. 33-
43220 and incorporated herein by reference).
10(m) - Adage Escrow Agreement (Filed as Exhibit 2.2 to Adage's
Registration Statement No. 2-96182 and incorporated herein
by reference).
14 - Form 8-K filed May 14, 1990 reporting change in
independent accountants. (Filed as Exhibit 14 to the
Company's Annual Report on Form 10-K for the transition
period ended February 27, 1990 and incorporated herein by
reference).
22 - Subsidiaries of the Registrant ***
27 - Financial Data Schedule
*** Previously filed
31
Date: March 30, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
/s/Donald F. U. Goebert Chairman,President March 29, 1996
- ---------------------- and Director
Donald F.U. Goebert (Principal Executive
Officer)
/s/Robert T. Holland Vice President - March 29, 1996
- ---------------------- Finance, Secretary
Robert T. Holland and Director
(Principal Financial
and Accounting Officer)
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 or the dates indicated.
/s/Donald F. U. Goebert Director March 29, 1996
- -----------------------
Donald F. U. Goebert
/s/Buck Scott Director March 29, 1996
- -----------------------
Buck Scott
/s/James C. Gale Director March 29, 1996
- -----------------------
James C. Gale
/s/Robert L. MacDonald Director March 29, 1996
- -----------------------
Robert L. MacDonald
/s/Ralph R. Whitney, Jr Director March 29, 1996
- -----------------------
Ralph R. Whitney, Jr.
/s/Joel A. Schleicher Director March 29, 1996
- -----------------------
Joel A. Schleicher
/s/George Benjamin Director March 29, 1996
- -----------------------
George Benjamin
32