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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 fiscal year ended Commission file number
December 31, 1994 0-325
THE DURIRON COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 31-0267900
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Research Boulevard 45420
Dayton, Ohio (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (513) 476-6100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 par value
(Title of Class)
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 [ ]
(Continued)
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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 or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
[ X ]
At close of business on February 10, 1995:
Number of Shares of Common Stock,
$1.25 par value, outstanding ................. 18,999,223
Aggregate market value of shares of Common
Stock, $1.25 par value, held by
nonaffiliates of the Company ................. $340,946,628
INDEX TO EXHIBITS at page 42 of this Report
____________________
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. The Duriron Company, Inc. Proxy Statement for its 1995 Annual Meeting of
Shareholders to be held on April 21, 1995 (the "Proxy Statement").
Definitive copies of the Proxy Statement will be filed with the Commission
within 120 days of the end of the Company's most recently completed fiscal
year. Only such portions of the Proxy Statement as are specifically
incorporated by reference under Part III of this Report shall be deemed
filed as part of this Report.
____________________
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PART I
------
ITEM 1. BUSINESS
- - - - ------- --------
The Duriron Company, Inc. was incorporated under the laws of the State of
New York on May 1, 1912. All references herein to the "Company" or "Duriron"
refer collectively to The Duriron Company, Inc. and its subsidiaries unless
otherwise indicated by the context.
Duriron is principally engaged in the design, manufacture and marketing of
fluid handling equipment, primarily pumps and valves, for industries that
utilize difficult to handle and often corrosive fluids in manufacturing
processes. The Company specializes in the development of precision-engineered
equipment that is capable of withstanding the severely deteriorating effects
associated with the flow of acids, chemical solutions, slurries and gases.
Based upon its analysis of trade association data and other market
information, the Company considers itself a leading supplier of corrosion
resistant fluid movement and control equipment to the basic chemical industry.
The Company's materials expertise, design, engineering capabilities and
applications know-how have enabled it to develop product lines that are
responsive to the chemical process industries' desire to achieve manufacturing
efficiencies, avoid premature equipment failure and reduce maintenance cost.
The Company operates primarily in one business segment, fluid movement and
control equipment (primarily pumps, valves and related equipment). Included at
Note 19, on page 34 in the Financial Statements provided as part of Item 8 of
this Report and incorporated herein by this reference, is information
concerning the Company's revenues, operating profit and identifiable assets by
geographic area for each year in the three-year period ended December 31, 1994.
With respect to a majority of its products, the Company's domestic operations
supply each other and the Company's foreign manufacturing subsidiaries with
components and subassemblies.
PRODUCTS
--------
The Company's principal fluid movement and control equipment products are
pumps, valves and related equipment, marketed primarily under the trademarks
"Durco," "Atomac," "Valtek," "Automax," "Accord," "Kammer," "Mecair," and
"Sereg." In many manufacturing processes, fluids must be moved by pumps, and
flow must be controlled by valves. The Company's pumps and valves are designed
to withstand the corrosive nature of the fluids and the varying temperatures
and pressures under which manufacturing processes occur.
The Company manufactures, under the Durco trade name, several lines of
centrifugal pumps, including metallic and non-metallic pumps, varying in size,
capacity, material components and sealant specifications. Durco pumps are used
primarily to move liquids during processing activities as well as in auxiliary
services such as waste removal, water treatment and pollution control.
Critical elements in pump selection include the nature and volume of the fluids
to be handled, the height and distance the fluids are to be moved,
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the temperature and pressure at which they are to flow, the presence of stray
elements or particles, and the toxicity of the fluids. The Company also
manufactures several lines of metering pumps which are generally used to inject
measured quantities of additives or catalysts into a process stream.
The Company's valves are used to control the flow of liquids and gases in
industrial processing systems. The Company manufactures product lines of plug
and butterfly valves under the Durco trademark which are made of various
metals, alloys and plastics. The Company also produces a lined ball valve
under the Atomac trade name. Actuators and other control accessories
manufactured by the Company under the Automax and Accord trade names are either
sold independently or mounted on these valves to move them from open to closed
positions and to various specified positions in between.
The Company manufactures, under the Valtek, Kammer and Sereg trade names,
automatic control valves, valve actuators and related components. Automatic
control valves are important components in the automation of manufacturing and
processing systems since they are capable of modulating (that is, automatically
adjusting) the rate and amount of fluids moving in a manufacturing production
system. The Valtek product line includes high-pressure valves, rotary valves,
and anti-noise and anti-cavitation valves. Substantially all of the Valtek
valves are sold with an actuator. The Company also developed and manufactures
a Valtek automatic control valve (under the "StarPac" trade name) with "on-
board" sensor and microprocessor capabilities. The Kammer automated control
valves are primarily sold with actuators to chemical process applications
requiring alloy steel control valves of a smaller size than most of the Valtek
products. The Company sells control valves under the Valtek Sereg trade name
primarily in France and other European countries.
Finally, the Company also manufactures filtration products and related spare
parts under the Durco trade name.
MARKETING AND DISTRIBUTION
--------------------------
The Company's Durco pump and Durco quarter-turn valve products are primarily
marketed to end-users and engineering contractors through the Company's own
sales forces, regional service centers, a national parts distribution center
and independent distributors and representatives. The Company sales personnel
are divided, for the Durco pump and Durco valve products, into separate
organizations which specialize in the respective product lines. The
specialization of these two sales forces helps enable them to maintain a high
level of technical knowledge about their applicable products, customer
applications, in-plant installation and maintenance services. Both the pump and
quarter-turn valve sales organizations have field sales offices located in
principal industrial markets and resident sales personnel at additional
locations.
The Company also maintains regional service centers in the greater Houston,
Salt Lake City and metropolitan Philadelphia areas. These centers stock a full
array of critical pump parts and have machining and product modification
capabilities. A national pump parts distribution and service center, located
in Birmingham, Alabama, provides 24-hour assistance to customers and ships
critical replacement parts on an immediate need basis.
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The Company also has licensed certain independent valve distributors located
throughout the United States to service and remanufacture its quarter-turn
valve products.
Automax and Atomac products are distributed with Durco manual valves by
Duriron sales personnel and through a network of independent stocking
distributors. The Company's sales force provides training and technical
assistance to the Company's independent distributors, who also participate in
periodic training programs relating to Company products and customer
applications.
Valtek products are marketed through specialized sales offices with sales
engineers and service centers in Springville (Utah), Houston, Philadelphia,
Beaumont (Texas), Corpus Christi and Baton Rouge. In other territories, Valtek
products are sold on a commission basis through independent manufacturers'
representatives located in principal marketing centers in the United States.
The Company provides extensive training in the sophisticated Valtek products
and customer applications for its sales representatives.
Kammer products are primarily marketed through a direct sales force in
Germany and through independent distribution in other countries. Kammer
products are marketed with Valtek products in certain U.S. locations, with a
Kammer product sales office located in Pittsburgh, Pennsylvania, supporting
U.S. marketing. Valtek Sereg products are generally sold through employees in
France and combined with other Valtek products for sale in the U.S. and
elsewhere.
The Company maintains a subsidiary, Davco Equipment Inc., to market its
Durco pumps, Durco quarter-turn valves, Automax actuators and Valtek control
valves directly and on a consolidated basis through employees of this
subsidiary to customers in the Freeport, Texas area. Formerly, the Company
had marketed these varying product lines through a variety of specialized
independent distributors and employees.
The Company's international sales include domestic export sales and sales by
the Company's foreign subsidiaries. Duriron Canada Inc., headquartered in
Woodbridge, Ontario, manufactures and sells Durco pumps and valves throughout
eastern Canada. S.A. Durco Europe N.V. is headquartered in Brussels, Belgium.
This subsidiary manufactures pumps and valves in its Petit Rechain, Belgium
facility and maintains selling organizations in Europe and sales
representatives in the Middle East. Atomac, of Ahaus, Germany, and a division
of Durco GmbH, engages in the manufacture and sale of lined ball valves and
associated equipment. The Company further maintains subsidiaries in the United
Kingdom, Italy, Spain and France to provide sales and service of Durco products
in these countries.
A Singapore subsidiary, Durco Valtek (Asia Pacific) Pte. Ltd., services and
prepares pumps, quarter-turn valves and control valves for sale in the Asian
market in a recently expanded facility.
As the result of an acquisition completed in 1994, the Company's new Italian
subsidiary manufactures actuators sold in the U.S. under the Automax trade name
and elsewhere under the "Mecair" trade name. The Company worked to standardize
such worldwide marketing under the Automax trade name over 1994.
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The Company has manufacturing and marketing operations for Valtek products
in Australia and Canada. Valtek products are also manufactured and marketed by
licensees in the United Kingdom and Brazil under long-term license
arrangements. The Company has additionally entered into a joint venture with
Yokogawa Electric Corporation and Kitz Corporation, both of which are Japanese
companies, to manufacture and sell certain Valtek products within Japan.
The Company has entered into licenses with local manufacturers in Mexico,
South Korea and India to permit them to manufacture and market pumps and valves
under the Durco trade name and pursuant to Company specifications in those
respective countries.
The Company maintains a strategic alliance agreement with A. Ahlstrom, a
Finnish company with significant world-wide sales to the pulp and paper
industry, to permit A. Ahlstrom to market and sell Durco pumps to this
industry. The Company also maintains a strategic alliance with Elsag Bailey to
market and sell Valtek control valves as part of the computer-based process
control systems of Elsag Bailey.
The Company also acquired Sereg Vannes, S.A., a French company in 1994.
Through this transaction, the Company expanded its control valve product
offerings and distribution network in France and other locations.
BACKLOG
-------
The Company's backlog of orders was approximately $67.6 million, $61.0
million, $65.2 million at December 31, 1994, 1993 and 1992, respectively.
Nearly all current backlog is expected to be shipped within the next 12 months.
Sales of the Company's products are not normally subject to material seasonal
fluctuations. Almost all of the Company's customers are in the private sector,
and the Company's backlog is thus not exposed to renegotiation at the election
of a government customer.
COMPETITION AND CUSTOMERS
-------------------------
Based upon its analysis of trade association data and other marketing data,
the Company considers itself a leading supplier of corrosion-resistant pumps,
valves, valve actuators and control valves to the basic U.S. chemical industry,
with generally a lesser market share in other countries. No significant
competitor of the Company manufactures both pumps and valves or has as its
single primary market the basic chemical industry. However, the Company
competes with companies which manufacture either pumps or valves, portions of
whose product lines are sold to the chemical process industries. The Company
competes in general on the basis of product design and quality, materials
expertise, delivery capability, price, application know-how, parts support and
similar factors. The Company believes that it is, in the aggregate, strong in
these areas. During 1994, no single customer or group of related customers
accounted for more than 10% of sales.
MANUFACTURING AND RAW MATERIALS
-------------------------------
The Company is a vertically-integrated manufacturer. Many of the
corrosion-resistant castings for Company products are manufactured at its
Dayton, Ohio foundries,
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which include a highly automated precision foundry, plus resin shell, no bake
and centrifugal foundries. Ductile iron, gray iron, steel and large alloy
metal castings are purchased from outside sources. Other Company manufacturing
locations machine castings to precise specifications and assemble Company
products. The Company's commitment to Total Quality control procedures and
cellular manufacturing technologies is key to the efficient and successful
manufacture of its products.
The Company also produces most of its highly engineered corrosion resistant
plastic parts for its pump and valve product lines. This includes rotomolding
as well as injection and compression molding of a variety of fluorocarbon and
other plastic materials.
Basic manufacturing raw materials are purchased from various foreign and
domestic vendors. These materials include nickel, chrome, molybdenum, high
silicon pig iron, ferro silicon, fused silica, epoxy resins and fluorocarbon
resins. In addition, bar stock, tubing, motors and other necessary equipment
for inclusion in the Company's finished products are purchased from various
suppliers. The supply of raw materials and components has been, in general,
sufficient and available without significant delivery delays.
RESEARCH AND DEVELOPMENT
------------------------
The Company's research and development laboratories in Dayton, Ohio,
Cookeville, Tennessee, Ahaus, Germany, and Springville, Utah, support the
Company's manufacturing efforts by providing hydraulic test facilities for the
Company's fluid movement and control products as well as facilities for the
development of corrosion-resistant alloys and plastics.
The Company spent approximately $6.4 million, $6.0 million, and $5.5 million
on Company sponsored research and development activities in 1994, 1993 and
1992, respectively. The expenditures were primarily for new product
development.
PATENTS, TRADEMARKS & LICENSES
------------------------------
The Company owns a number of trademarks, patents and patent applications
relating to the name and design of its products. While the Company considers
that, in the aggregate, its trademarks and patents are useful to its
operations, the Company believes that the successful manufacture and sale of
its products generally depend more upon its specialized materials, designs and
manufacturing methods developed over a period of time. The Company, in
general, is the owner of the rights to the products which it manufactures and
sells, and the Company is not dependent in any material way upon any licenses
or franchises in order to so operate.
PERSONNEL
---------
At January 1, 1995, the Company employed approximately 2,575 persons, of
whom about 1,800 were employed in the United States. Approximately 400 of the
Company's employees are represented by either the United Steel Workers of
America or the International Union of Electronic, Electrical, Technical
Salaried & Machine Workers. The Company believes, in general, that it has good
relations with these unions and its nonunion
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employees. Production workers at the Company's Cookeville Valve Division voted
to decertify their representation by the United Steel Workers in 1993. The
Company also successfully concluded in 1993 a three year collective bargaining
agreement with the United Steel Workers representing production workers at its
pump and foundry operations in Dayton, Ohio.
Information with regard to the directors and executive officers of the
Company is incorporated herein by reference to Item 10 of this Report and the
Proxy Statement.
ENVIRONMENTAL MATTERS
---------------------
The Company completed projects in prior years relating to compliance with
federal, state and local environmental protection regulations. At present, the
Company has no plans for material capital expenditures for environmental
control facilities. However, the Company has experienced and continues to
experience substantial operating costs relating to environmental matters,
although certain costs have been offset in part by the Company's successful
waste minimization programs.
FOREIGN OPERATIONS
------------------
The Company's foreign operations are affected by various factors and subject
to risks which may be different from or in addition to those present in
domestic operations. These may include currency exchange rate fluctuations,
restrictions on the Company's ability to repatriate funds to the United States,
and potential political and economic instability. As the Company expands its
international business, the factors and risks associated with international
operations will likely have a more significant impact on the Company's results.
However, the Company believes that, in general, the geographical
diversification of its business operations is of benefit in expanding the size
of its markets and in helping to partially offset the full impact of normal
business cycles in the U.S. market.
ORGANIZATION
------------
Within its fluid movement and control business segment, the Company
maintains three strategic business units to market its products on a global
basis. The first business unit, or the Rotating Equipment Group, manufactures
and markets pumps and related equipment under the "Durco" trade name. The
Industrial Products Group manufactures and sells manual plug, ball and
butterfly valves, valve actuators and filtration equipment, all as previously
described, under the "Durco," "Automax," "Atomac," "Accord" and "Mecair" trade
names. The Flow Control Group builds and sells control valves and accessories
under the "Valtek," "Kammer" and "Sereg" trade names.
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ITEM 2. PROPERTIES
- - - - ------- ----------
The Company's headquarters and executive offices are located in Dayton,
Ohio, in a leased site in the Miami Valley Research Park, which encompasses
approximately 40,000 square feet.
The location, size and products manufactured of the Company's principal
manufacturing facilities are as follows:
Square Products
Location Footage Manufactured
- - - - -------- ------- ------------
Domestic:
- - - - --------
Dayton, Ohio 600,000 Castings and Durco pumps
Cookeville, Tennessee 190,000 Durco valves
Springville, Utah 140,000 Valtek valves and actuators
Angola, New York 96,000 Durco filters, filtration systems and metering pumps
Springboro, Ohio 50,000 Plastic components for pumps and valves
Cincinnati, Ohio 35,000 Automax actuators
Provo, Utah 30,000 Valtek product components
International:
- - - - -------------
Woodbridge, Ontario, Canada 32,000 Durco pumps and valves
Petit Rechain, Belgium 65,000 Durco pumps and valves
Edmonton, Alberta, Canada 35,000 Valtek valves and actuators
Melbourne, Australia 32,000 Valtek valves and actuators
Ahaus, Germany 68,000 Atomac valves
Singapore 30,000 Durco pumps and valves, Valtek valves
Essen, Germany 50,000 Kammer valves and actuators
Cormano, Italy 35,000 Automax actuators
Nova, Italy 44,000 Automax actuators
Thiers, France 33,000 Valtek Sereg valves and actuators
All manufacturing facilities are owned with the exception of the Cookeville,
Tennessee facility, the Cincinnati, Ohio facility, the Springboro facility,
the Melbourne, Australia facility, the Italian facilities and a portion of the
Angola, New York facility. The Company also leases space for district sales
offices and service centers throughout the United States, Canada, Europe, and
Asia.
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On the average, the Company utilizes roughly 75% of its manufacturing
capacity. The Company could, in general, increase its capacity through the
purchase of new or additional manufacturing equipment without obtaining
additional facilities.
ITEM 3. LEGAL PROCEEDINGS
- - - - ------- -----------------
Although the Company is involved in certain litigation incidental and
related to its business, there are no material legal proceedings involving the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - - - ------- ---------------------------------------------------
None.
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PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- - - - ------ -----------------------------------------------------------------
MATTERS
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MARKET INFORMATION
The common stock of the Company (DURI) is traded in the Over-the-Counter
market and quotations are supplied by the National Association of Securities
Dealers through NASDAQ's National Market System.
In January 1995, Transfer Agent records showed 2,110 shareholders of record.
Based on these records plus requests from brokers and nominees listed as
shareholders of record, the Company estimates there are approximately 6,800
shareholders of its common stock. During 1994, the Company paid a dividend of
10.5 cents per share each calendar quarter, and in 1993, a dividend of 10 cents
per share was paid each calendar quarter.
On February 10, 1995, a 9.5% dividend increase was declared which will raise
the quarterly dividend from 10.5 cents per share to 11.5 cents per share.
Price Range of Duriron Common Stock
(high/low closing prices)
1994 1993
---- ----
1st Quarter $19.83/$14.83 $18.17/$14.50
2nd Quarter $18.00/$14.50 $17.17/$14.00
3rd Quarter $18.75/$15.00 $16.83/$14.07
4th Quarter $18.25/$15.63 $15.83/$14.33
Prices have been restated to reflect the March 25, 1994 stock dividend which
had the effect of a three-for-two stock split.
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ITEM 6. SELECTED FINANCIAL DATA
- - - - ------- -----------------------
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(dollars in thousands except for per share data)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS 1994 1993(A) 1992(B) 1991 1990
Net sales $345,388 $313,920 $300,357 $296,489 $296,787
Cost of sales $217,249 $195,837 $188,857 $183,998 $182,317
Gross profit margin $128,139 $118,083 $111,500 $112,491 $114,470
Selling and administrative expense $ 85,345 $ 78,969 $ 72,169 $ 67,370 $ 63,836
Research, engineering and
development expense $ 9,613 $ 9,178 $ 9,193 $ 11,025 $ 10,231
Restructuring expense - - $ 5,965 - -
Interest expense $ 4,346 $ 3,852 $ 2,916 $ 2,946 $ 3,498
Other expense, net $ 1,897 $ (309) $ 598 $ 49 $ 3,525
Earnings before income taxes $ 26,938 $ 26,393 $ 20,659 $ 31,101 $ 33,380
Provision for income taxes $ 9,780 $ 9,901 $ 7,430 $ 11,500 $ 12,470
Cumulative effect of change in
accounting principle $ - $ (385) $(21,063) - -
Net earnings (loss) $ 17,158 $ 16,107 $( 7,834) $ 19,601 $ 20,910
Average shares outstanding (thousands)(c) 19,147 19,078 19,070 19,004 18,803
Net earnings (loss) per share(c) $ .90 $ .84 $ (.41) $ 1.03 $ 1.11
Dividends paid (on shares outstanding)(c) $ .42 $ .40 $ .40 $ .37 $ .33
Incoming business $349,394 $312,630 $311,537 $290,746 $307,157
Ending backlog $ 67,603 $ 61,043 $ 65,166 $ 54,817 $ 68,912
- - - - ------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS (AS A PERCENT OF NET SALES)
Cost of sales 62.9% 62.4% 62.9% 62.1% 61.4%
Gross profit margin 37.1% 37.6% 37.1% 37.9% 38.6%
Selling and administrative 24.7% 25.2% 24.0% 22.7% 21.5%
Research, engineering and development 2.8% 2.9% 3.1% 3.7% 3.5%
Earnings before income taxes 7.8% 8.4% 6.9% 10.5% 11.2%
Net earnings (loss) 5.0% 5.1% (2.6%) 6.6% 7.0%
- - - - ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
Cash and cash equivalents $ 16,341 $ 22,640 $ 17,342 $ 21,637 $ 16,972
Working capital $ 96,014 $ 93,736 $ 84,454 $ 86,847 $ 84,926
Net property, plant and equipment $ 82,221 $ 73,777 $ 77,444 $ 65,179 $ 59,896
Intangibles and other assets $ 42,113 $ 34,878 $ 37,782 $ 15,068 $ 14,959
Total assets $274,104 $247,940 $250,560 $213,385 $206,395
Capital expenditures $ 9,943 $ 8,883 $ 15,307 $ 15,412 $ 16,600
Depreciation and amortization $ 14,017 $ 11,807 $ 11,788 $ 9,865 $ 8,897
Long-term debt $ 39,032 $ 34,925 $ 41,963 $ 21,064 $ 26,786
Postretirement benefits and
other deferred items $ 42,237 $ 39,895 $ 37,590 $ 9,294 $ 9,312
Shareholders' equity $139,079 $127,571 $120,127 $136,736 $123,683
- - - - ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Return on average shareholders' equity 12.9% 13.1% (5.7%) 15.1% 18.2%
Return on average net assets 9.1% 8.9% (3.2%) 12.7% 14.5%
Debt ratio 17.7% 17.3% 21.0% 12.6% 16.8%
Current ratio 2.8 3.1 2.7 2.9 2.8
Interest coverage ratio 7.2 7.9 8.1 11.6 10.5
Cash dividends as a percent of
beginning shareholders' equity 6.2% 6.3% 5.5% 5.7% 5.8%
Book value (on shares outstanding)(c) $ 7.32 $ 6.73 $ 6.36 $ 7.26 $ 6.62
- - - - ------------------------------------------------------------------------------------------------------------------------------------
(a) Effective January 1, 1993, the Company early adopted SFAS No. 112. The
cumulative effect of this change in accounting principle decreased net
earnings by $0.4 million, or $.02 per share.
(b) During 1992, the Company changed its accounting method to early comply
with SFAS No. 106 and to immediately recognize the cumulative effect of
the transition obligation. This change decreased net earnings by $21.1
million, or $1.10 per share, for the recognition of the cumulative
transition obligation and increased postretirement benefit expense in 1992
by an after tax amount of approximately $0.9 million, or $.05 per share.
(c) Prior years share and per share data have been restated to reflect the
March 25, 1994 stock dividend which had the effect of a three-for-two
stock split.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - - - ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- - - - ---------------------
Net sales for 1994 of $345.4 million were at a record level for the third
consecutive year reflecting increases of 10.0% over $313.9 million in 1993 and
15.0% over $300.4 million in 1992. Strong capital spending in the North
American and Asian markets and a recovering European economy were major factors
in 1994's record. In addition, the 1994 acquisitions of Sereg Vannes S.A., a
control valve manufacturer located in Thiers, France, and Mecair SpA, a
manufacturer of valve actuators located in Milan, Italy, and the 1992
acquisition of Kammer Ventile GmbH, a control valve manufacturer in Essen,
Germany, contributed to the record sales levels over the three year period.
Excluding the acquisitions, 1994 sales were considerably above the 1993 level.
However, 1993 sales without acquisitions were below 1992 sales due to weakness
in the international marketplace during that period.
Incoming business for 1994 of $349.4 million reached a record level for the
third consecutive year, up 11.8% over the previous record of $312.6 million in
1993 and 12.2% higher than $311.5 million in 1992. The 1994 incoming business
volume reflected aggressive capital spending by the worldwide process
industries as well as the impact of the acquisitions. Record incoming business
of $97.9 million in the fourth quarter of 1994 resulted in an ending backlog of
$67.6 million at December 31, 1994, an increase of $6.6 million, or 10.8%, over
the 1993 ending backlog of $61.0 million.
International subsidiary contributions to consolidated net sales were an
historic high of 31.1% in 1994, compared to 24.3% and 26.0% in 1993 and 1992,
respectively. Export sales from the United States were $24.1 million in 1994,
compared to $34.7 million and $21.0 million in 1993 and 1992, respectively.
The 1993 export sales were unusually high due to shipment of the Malaysian
liquefied natural gas project from the Company's Valtek Incorporated
subsidiary. Total net sales to international customers, as a percentage of net
sales, were a record 38.1% in 1994, compared to 35.4% in 1993 and 32.5% in
1992. The increase in sales to international customers reflects the effects of
the Sereg Vannes, Mecair and Kammer acquisitions, strong shipments from the
Company's Asia-Pacific operations and improved European shipments. The Company
expects the percent of international sales contributions to consolidated net
sales to increase in future years as management continues its strategic
emphasis on international sales and market development in the Asia-Pacific
region and as business conditions within the European market strengthen.
Gross profit margins were 37.1% in 1994, compared with 37.6% and 37.1% in
1993 and 1992, respectively. The 1994 gross profit margin was favorably
impacted by improved burden absorption due to higher levels of plant
utilization at the Company's North American operations, as well as the
continuing positive effects of cost reduction and productivity improvement
programs throughout the Company. Offsetting these were transition costs
associated with the acquisition of Sereg Vannes and the negative effects of
continued competitive pricing pressures, particularly in Valtek's automatic
control valve business. In addition, 1993 gross profit margin was unusually
high due to the positive impact of a planned reduction in inventories which
favorably impacted the LIFO inventory pool resulting in earnings of $.11 per
share. The Company believes its emphasis on becoming the low total cost
producer, Valtek's Customer Oriented Reengineering Program, and implementation
of cellular manufacturing which provides greater operational flexibility,
shorter lead times, reduced inventory levels and improved customer service will
have a favorable impact on the gross profit margin in the future. However,
pricing levels within the Company's global market are expected to remain
competitive.
Selling and administrative expenses as a percent of net sales were 24.7% in
1994, compared to 25.2% and 24.0% in 1993 and 1992, respectively. The
leveraging of selling and administrative expense as a percent of net sales in
1994 compared with 1993 was planned. Selling and administrative expense in
dollars increased in 1994
13
14
from 1993 due to consolidation of the Mecair and Sereg Vannes expense.
Excluding the 1994 acquisitions, selling and administrative expenses in 1994
were relatively flat with 1993 while administrative expenses were flat over the
three year period. The 1993 selling and administrative expenses, both in
absolute dollars and as a percent of net sales, were above the 1992 level due
to a full year of Kammer expense and an increase in Valtek sales commissions.
The Company continues to invest resources in the development and growth of
international and automation business operations. While this has increased
selling and service costs at the expense of short-term profits, these programs
are consistent with the Company's longer-range goals. The Company expects to
further leverage selling and administrative expenses as a percent of net sales
in 1995.
Research, engineering and development expenses (including research and
development expenses reported in footnote 15 of this report) as a percent of
net sales were 2.8% in 1994, compared to 2.9% and 3.1% in 1993 and 1992,
respectively. Spending levels in 1994 reflect the Company's continued
investment in new products and production processes. Research, engineering and
development as a percent of net sales declined over the three year period
because of a planned reduction of expenses in manufacturing engineering as the
majority of the Company's transition to focused factory (cellular) programs has
been implemented. New products introduced in 1994 include the "MaxFlo"
automatic control valve package, the "Marathon" high cycle/low emission valve
and the "CHEMSTAR ISO" standard magnetic drive pump. The Company believes that
continued investment in research, engineering and development will provide
important new products and processes that will benefit its customers and
shareholders in future years.
Interest expense in 1994 was $4.3 million, compared to $3.9 million in 1993
and $2.9 million in 1992. The increase in interest expense in 1994 and 1993
from 1992 reflects interest on the long-term debt borrowed to purchase Sereg
Vannes and Kammer, which was partially offset by a reduction in expense related
to planned repayments of debt.
Other expense, net, resulted in expense of $1.9 million in 1994 compared to
income of $.3 million in 1993 and expense in 1992 of $.6 million. The increase
in expense reflects foreign currency losses in 1994 of $1.0 million compared
with gains of $.4 million and $.1 million in 1993 and 1992, respectively. A
significant portion of the losses in 1994 occurred when foreign currency
contracts to hedge anticipated business transactions were closed in the third
quarter of 1994. Material currency losses are not expected to recur in 1995.
In addition, accrued incentive compensation expense and amortization of
goodwill related to the acquisitions increased significantly in 1994 over 1993
and 1992.
In 1992, the Company initiated a restructuring program which resulted in a
one-time pretax expense of $6.0 million ($3.8 million after tax), or $.20 per
share. This program covered the closing or write-down of certain
under-utilized assets resulting from the Company's continued cost reduction and
productivity improvement efforts, the inventory write-off of product lines
which were discontinued due to new product introductions and expenses
associated with the reassignment and relocation of personnel throughout the
Company's global organization. The Company believes that the restructuring had
a slightly favorable impact on 1994 and 1993 results and will continue to
provide positive long-term effects. The programs covered in the restructuring
were essentially complete at December 31, 1994, with minimal changes in
estimates from the original accrual. This compares with a balance of $1.0
million at December 31, 1993.
In 1994, the Company modified its postretirement health care benefit and
pension plans. The net effect of these plan changes as well as lower than
anticipated health care cost increases had the effect of reducing the Company's
accumulated pension and postretirement health care obligations significantly in
1994. This net decrease in benefit obligations reduced 1994 pretax expense by
approximately $.8 million and is expected to reduce expense in 1995 by
approximately the same amount. In addition, in 1993 the Company reduced the
rates used to discount its pension and postretirement health care obligations
from 8.0% to 7.5% in order to better reflect its future obligations and reduced
the expected rate of future increases in compensation in its pension
14
15
obligations from 5.5% to 5.0%. The net effect of these combined plan changes
in 1993 increased the accumulated pension and postretirement health care
obligations by approximately $5.1 million, or about 5.6%.
During the fourth quarter of 1992, the Company adopted, effective January 1,
1992, the principles of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." SFAS No. 106 requires companies to record a
liability for its employees' accumulated postretirement benefit costs and to
recognize ongoing expenses on an accrual basis. The Company recognized a $32.9
million pretax cumulative effect with the change in accounting principle, which
represents the accumulated postretirement benefit obligations as of January 1,
1992. The effect on net earnings and shareholders' equity, net of income tax
effect, was $21.1 million, or $1.10 per share. Adoption of SFAS No. 106 also
increased the annual postretirement benefit pretax expense in 1993 and 1992 by
approximately $1.5 million. The 1994 annual postretirement benefit pretax
expense was $.5 million. The reduction in expense reflects the aforementioned
net effects of health care plan changes, the impact of lower than anticipated
health care cost increases over the past two years and a reduction in the rate
used to discount the obligation.
Effective January 1, 1993, the Company early adopted the principles of SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." Compliance with
this standard resulted in a cumulative after tax loss of $.4 million, or $.02
per share, which represents the accumulated postemployment benefit obligation
as of January 1, 1993. Compliance with SFAS No. 112 did not impact 1994
earnings and is not expected to materially impact future earnings.
The effective tax rate was 36.3% in 1994, compared to 37.5% and 36.0% in 1993
and 1992, respectively. The reduction in the 1994 tax rate reflects the
favorable impacts of the fourth quarter liquidation of a wholly owned foreign
entity, utilization of tax loss carryforwards generated within the Company's
European operations and resolution of a multi-year state tax issue. The 1994
tax rate includes an increase in rate related to the Revenue Reconciliation Act
of 1993. The 1993 tax rate was not materially affected by the tax increase
arising from this legislation because the increase in the statutory rate was
offset by a revaluation of deferred tax assets on the balance sheet. During
1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." The
cumulative effect of compliance with the principles established in this
standard did not materially impact the 1993 annual earnings. The increase in
the 1993 tax rate over 1992 resulted from SFAS No. 109 which precluded the
establishment of deferred tax benefits on the unremitted earnings of foreign
operations.
The 1994 earnings, which improved each quarter throughout the year, were
$17.2 million, or $.90 per share, compared with $16.1 million, or $.84 per
share in 1993, and $17.0 million, or $.89 per share in 1992. (The 1992
earnings and ratio figures referenced in this discussion exclude the cumulative
effect of compliance with SFAS No. 106 and the restructuring.) Improved burden
absorption, leveraging of selling and administrative expenses, a return to
profitability within the European operations, a reduction in health care costs
and a decrease in the effective tax rate contributed to the 1994 earnings
growth. However, negatively impacting earnings were transition costs
associated with the acquisition of Sereg Vannes, currency losses and
competitive pricing.
CAPITAL RESOURCES AND LIQUIDITY
The Company's capital structure, consisting of long-term debt, deferred items
and shareholders' equity, continues to enable the Company to finance short- and
long-range business objectives. At December 31, 1994, long-term debt was 17.7%
of the capital structure, compared to 17.3% and 21.0% at December 31, 1993 and
1992, respectively. The increase in long-term debt in 1994 from 1993, both as
a percent of the capital structure and in absolute dollars, resulted from the
acquisition of Sereg Vannes, but it was partially offset by scheduled debt
repayments.
15
16
The return on average net assets was 9.1%, compared to 8.9% in 1993 and 9.9%
in 1992. In 1994, return on average shareholders' equity was 12.9%, compared
to 13.1% in 1993 and 13.8% in 1992. Management is focused on improving its
performance in these areas in 1995.
Capital expenditures in 1994 were $9.9 million, compared to $8.9 million and
$15.3 million in 1993 and 1992, respectively. The 1994 expenditures were
devoted to manufacturing equipment for replacement and new product
introductions and improved information systems associated with Valtek's
Customer Oriented Reengineering Program. The 1993 capital expenditures were
unusually low as many of the Company's major cellular manufacturing and
international expansion programs were completed in 1992. The planned 1995
expenditures, expected to be approximately $13.0 million, will be invested in
tools and process technology to enable the Company to further progress toward
its goal of being the highest quality/lowest total cost producer in its market.
Cash and cash equivalents decreased to $16.3 million, compared to $22.6
million and $17.3 million at December 31, 1993 and 1992, respectively.
However, the Company's positive cash flow from operations was $27.9 million in
1994, compared with $30.5 million in 1993 and $24.8 million in 1992. This
positive cash position enabled the Company to internally fund portions of the
1994 acquisitions. The Mecair acquisition was funded through the utilization
of internal cash, and Sereg Vannes was funded with the combination of internal
cash and external borrowings. Cash in excess of current requirements was
invested in high-grade, short-term securities. The Company currently has $22.9
million of lines of credit and $12.2 million available under revolving credit
agreements, and believes that available cash and these lines of credit
arrangements will be adequate to fund operating and capital expenditure cash
needs through the coming year.
The Company's liquidity position is reflected in a current ratio of 2.8 to 1
at December 31, 1994. This compares to 3.1 to 1 and 2.7 to 1 at December 31,
1993 and 1992, respectively. Working capital increased to $96.0 million in
1994, compared to $93.7 million and $84.4 million in 1993 and 1992,
respectively. Working capital as a percent of net sales decreased to 27.8%,
compared to 29.9% and 28.1% for 1993 and 1992, respectively. The decrease in
working capital as a percentage of net sales reflects the 1994 acquisitions.
16
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - - - ------- -------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands except per share data)
Years ended December 31, 1994 1993 1992
- - - - ------------------------------------------------------------------------------------------------
Net sales $345,388 $313,920 $300,357
Costs and expenses:
Cost of sales 217,249 195,837 188,857
Selling and administrative 85,345 78,969 72,169
Research, engineering and development 9,613 9,178 9,193
Interest 4,346 3,852 2,916
Other, net 1,897 (309) 598
Restructuring - - 5,965
- - - - ------------------------------------------------------------------------------------------------
318,450 287,527 279,698
- - - - ------------------------------------------------------------------------------------------------
Earnings before income taxes 26,938 26,393 20,659
Provision for income taxes 9,780 9,901 7,430
- - - - ------------------------------------------------------------------------------------------------
Earnings before cumulative effect
of a change in accounting principle 17,158 16,492 13,229
Cumulative effect of change in method
of accounting for postemployment benefits -
net of tax of $231 - $.02 per share - (385) -
Cumulative effect of change in method
of accounting for postretirement benefits -
net of tax of $11,848 - $1.10 per share - - (21,063)
- - - - ------------------------------------------------------------------------------------------------
Net earnings (loss) $ 17,158 $ 16,107 $ (7,834)
================================================================================================
Earnings per share before
cumulative effect of a change
in accounting principle $ .90 $ .86 $ .69
Net earnings (loss) per share $ .90 $ .84 $ (.41)
================================================================================================
Average common and common
equivalent shares outstanding
(in thousands of shares) 19,147 19,078 19,070
================================================================================================
(See accompanying notes.)
17
18
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(dollars in thousands except share data)
Foreign
currency Total
Capital in and other share-
Common excess of Retained equity holders'
stock par value earnings adjustments equity
- - - - -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 $15,692 $10,640 $109,449 $ 955 $136,736
Net loss - - (7,834) - (7,834)
Cash dividends - - (7,549) - (7,549)
Stock issued (42,853) under stock plans 53 354 - 136 543
Foreign currency translation adjustment - - - (1,540) (1,540)
Nonqualified pension plan adjustment - - - (221) (221)
Net treasury stock activity,
287 shares held at cost - - - (8) (8)
- - - - -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 15,745 10,994 94,066 (678) 120,127
Net earnings - - 16,107 - 16,107
Cash dividends - - (7,573) - (7,573)
Stock issued (39,045) under stock plans 49 439 - 48 536
Foreign currency translation adjustment - - - (1,599) (1,599)
Nonqualified pension plan adjustment - - - 126 126
Net treasury stock activity,
7,137 shares held at cost - - - (153) (153)
- - - - --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 15,794 11,433 102,600 (2,256) 127,571
Net earnings - - 17,158 - 17,158
Cash dividends - - (8,034) - (8,034)
Shares issued for three-for-two stock split 7,897 (7,897) - - -
Stock issued (45,467) under stock plans 57 138 - 138 333
Foreign currency translation adjustment - - - 1,686 1,686
Nonqualified pension plan adjustment - - - 263 263
Net treasury stock activity,
3,500 shares held at cost - - - 102 102
- - - - --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $23,748 $ 3,674 $111,724 $ (67) $139,079
================================================================================================================================
(See accompanying notes.)
18
19
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
December 31, 1994 1993
- - - - -----------------------------------------------------------------------------------------------------------------------
ASSETS
- - - - -----------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 16,341 $ 22,640
Accounts receivable 67,189 57,196
Inventories 62,246 55,000
Prepaid expenses 3,994 4,449
- - - - -----------------------------------------------------------------------------------------------------------------------
Total current assets 149,770 139,285
- - - - -----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 187,731 164,824
Less accumulated depreciation and amortization 105,510 91,047
- - - - -----------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 82,221 73,777
- - - - -----------------------------------------------------------------------------------------------------------------------
Intangibles and other assets 42,113 34,878
- - - - -----------------------------------------------------------------------------------------------------------------------
$274,104 $247,940
=======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - - -----------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 19,480 $ 14,138
Notes payable 2,251 339
Income taxes 236 2,676
Accrued liabilities 26,838 22,734
Long-term debt due within one year 4,951 5,662
- - - - -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 53,756 45,549
- - - - -----------------------------------------------------------------------------------------------------------------------
Long-term debt due after one year 39,032 34,925
- - - - -----------------------------------------------------------------------------------------------------------------------
Postretirement benefits and other deferred items 42,237 39,895
- - - - -----------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Serial preferred stock, $1.00 par value,
no shares issued - -
Common stock, $1.25 par value, 18,998,350
shares issued (18,952,883 in 1993) 23,748 15,794
Capital in excess of par value 3,674 11,433
Retained earnings 111,724 102,600
- - - - -----------------------------------------------------------------------------------------------------------------------
139,146 129,827
Foreign currency and other equity adjustments (67) (2,256)
- - - - -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 139,079 127,571
- - - - -----------------------------------------------------------------------------------------------------------------------
$274,104 $247,940
=======================================================================================================================
(See accompanying notes.)
19
20
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
Years ended December 31, 1994 1993 1992
- - - - --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
- - - - --------------------------------------------------------------------------------------------------------------------
Operating activities:
Earnings before cumulative effect of
a change in accounting principle $ 17,158 $ 16,492 $ 13,229
Cumulative effect of change in
accounting principle - (385) (21,063)
- - - - --------------------------------------------------------------------------------------------------------------------
Net earnings (loss) 17,158 16,107 (7,834)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 14,017 11,807 11,788
Loss on the sale of fixed assets 107 176 438
Change in assets and liabilities net of
effects of acquisitions:
Accounts receivable (1,445) (4,472) (9)
Inventories 1,577 2,282 (1,641)
Prepaid expenses 582 1,582 (1,364)
Accounts payable and accrued liabilities (1,872) 239 1,252
Income taxes (2,441) (2,994) (668)
Postretirement benefits and other
deferred items 217 5,822 22,859
- - - - --------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 27,900 30,549 24,821
- - - - --------------------------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures (9,943) (8,883) (15,307)
Payment for acquisitions, net of
cash acquired (14,900) - (25,248)
Other 622 (2,027) (1,028)
- - - - --------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (24,221) (10,910) (41,583)
- - - - --------------------------------------------------------------------------------------------------------------------
Financing activities:
Net repayments under lines-of-credit (1,850) (892) (1,300)
Payments on long-term debt (6,727) (6,457) (6,283)
Proceeds from long-term debt 6,411 299 29,066
Proceeds from issuance of common stock 697 509 314
Dividends paid (8,034) (7,573) (7,549)
- - - - ---------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (9,503) (14,114) 14,248
- - - - --------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes (475) (227) (1,781)
- - - - --------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (6,299) 5,298 (4,295)
Cash and cash equivalents at beginning of year 22,640 17,342 21,637
- - - - --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 16,341 $ 22,640 $ 17,342
====================================================================================================================
(See accompanying notes.)
20
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars presented in tables in thousands except per share data)
- - - - --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions have been eliminated.
CASH EQUIVALENTS - Cash equivalents represent short-term investments
which are highly liquid with principal values that are not subject to
significant risk of change due to interest rate fluctuations.
ACCOUNTS RECEIVABLE - Accounts receivable are stated net of the
allowance for doubtful accounts of $881,000 and $597,000 at December 31, 1994
and 1993, respectively.
INVENTORIES - Inventories are stated at the lower-of-cost or market.
Cost is determined for all domestic inventories by the last-in, first-out
(LIFO) method and for foreign inventories by the first-in, first-out (FIFO)
method.
FINANCIAL INSTRUMENTS - Gains and losses on hedges of existing assets
or liabilities are included in the carrying amounts of those assets or
liabilities and are ultimately recognized in income as part of those carrying
amounts. Gains and losses related to hedges of anticipated transactions are
recognized in income as the transactions occur.
The carrying amounts of the Company's financial instruments approximate
fair value as defined under SFAS No. 107. Fair value is estimated by reference
to quoted prices by financial institutions, as well as through other valuation
techniques.
RETIREMENT BENEFIT COSTS - Defined benefit pension expense and
postretirement benefit expense are based on independent actuarial valuations
assuming current and prior service costs are recognized over employees'
expected service periods.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Depreciation and
amortization of property, plant and equipment is computed on the straight-line
method based on the estimated useful lives of the depreciable assets.
INTANGIBLES AND OTHER ASSETS - Excess cost over the fair value of net
assets acquired (or goodwill) generally is amortized on a straight-line basis
over 15-40 years. The carrying value of goodwill will be reviewed if the facts
and circumstances suggest that it may be impaired. If this review indicates
that goodwill will not be recoverable, as determined based on the undiscounted
cash flows of the entity acquired over the remaining amortization period, the
Company's carrying value of the goodwill will be reduced by the estimated
shortfall of cash flows.
21
22
2. ACQUISITIONS
On April 28, 1994, the Company purchased Sereg Vannes S.A., an
automatic control valve company headquartered in Thiers, France. The
acquisition was funded with the combination of internal cash and external
borrowings.
On January 5, 1994, the Company purchased the valve actuator business
of Mecair SpA in Milan, Italy and its associated Mecair companies in Limburg,
Germany; Alton Hampshire, England; and Gennevilliers, France. The acquisition
was funded through the utilization of internal cash.
The 1994 acquisitions are not material, either individually or in the
aggregate, thus no pro forma information is presented for these acquisitions.
On September 23, 1992, the Company purchased all the issued and
outstanding stock of Kammer Ventile GmbH of Essen, Germany and its associated
Kammer companies in Pittsburgh, Pennsylvania, Paris, France and
La Chaux-de-Fonds, Switzerland. Simultaneously, the Company acquired the fixed
assets of a sole proprietorship owned by Mr. Eckhard Kammer which were leased
to or otherwise used by Kammer Ventile GmbH. Assets of $18,079,000 were
acquired and liabilities of $4,942,000 were assumed in 1992 as a result of the
above acquisition.
The Company's acquisition of Kammer required the aggregate payment of
DM 42,000,000 or approximately $28,500,000 at the exchange rate on or about
September 23, 1992. The acquisition was funded through a combination of
deutsche mark denominated long-term debt totalling $25,000,000 at the exchange
rate on or about September 23, 1992 and Company cash resources for the balance.
The following reflects certain unaudited condensed consolidated pro
forma financial data for the year ended December 31, 1992, assuming the
purchase had been consummated as of the beginning of the period presented.
Pro Forma Statement of Operations Including Kammer
- - - - ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands except per share data) 1992
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Revenues $315,165
Earnings before cumulative effect
of change in accounting principle 13,707
Cumulative effect of change in method
of accounting for postretirement benefits (21,063)
Net loss $ (7,356)
Earnings per share before cumulative effect
of a change in method of accounting for
postretirement benefits $ .72
Net loss per share $ (.39)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
All of these transactions were accounted for under the purchase method of
accounting.
3. RESTRUCTURING
During the fourth quarter of 1992, the Company initiated a
restructuring program which resulted in a one-time pretax expense of
approximately $6,000,000, or $.20 per share. This program covered the closing
or write-down of certain under-utilized assets resulting from the Company's
continued cost reduction and productivity improvements efforts, the inventory
write-off of product lines which were discontinued due to new product
introductions, and expenses associated with the reassignment and relocation of
personnel throughout the global organization.
22
23
4. INVENTORIES
Inventories at December 31, 1994 and 1993 and the method of determining cost were as follows:
Domestic Foreign
inventories inventories Total
(LIFO) (FIFO) inventories
----------- ----------- -----------
December 31, 1994:
Raw materials $ 234 $ 719 $ 953
Work in process
and finished goods 34,554 26,739 61,293
------- ------- -------
$34,788 $27,458 $62,246
======= ======= =======
December 31, 1993:
Raw materials $ 303 $ 695 $ 998
Work in process
and finished goods 35,328 18,674 54,002
------- ------- -------
$35,631 $19,369 $55,000
======= ======= =======
LIFO inventories at current cost were $26,770,000 and $26,341,000
higher than reported at December 31, 1994 and 1993, respectively. During 1993
certain inventory quantities were reduced which resulted in a liquidation of
LIFO inventory quantities carried at lower costs prevailing in prior years.
The effect of the 1993 liquidation was to increase net earnings by $2,792,000.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1994 and 1993 were as
follows:
1994 1993
-------- --------
Land $ 3,318 $ 2,696
Buildings 45,109 38,585
Machinery and equipment 117,164 102,340
Furniture and fixtures 22,140 21,203
-------- --------
$187,731 $164,824
======== ========
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets at December 31, 1994 and 1993 were as
follows:
1994 1993
------- -------
Cost in excess of fair value
of tangible net assets acquired $30,208 $26,707
Amortization of intangibles (4,594) (3,814)
Pension assets 6,417 5,636
Deferred tax assets 3,053 2,460
Other 7,029 3,889
------- -------
$42,113 $34,878
======= =======
23
24
7. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1994 and 1993 were as follows:
1994 1993
------- -------
Wages and other compensation $14,083 $11,296
Commissions 2,536 3,657
Other 10,219 7,781
------- -------
$26,838 $22,734
======= =======
8. LONG-TERM DEBT AND DIVIDEND RESTRICTIONS
Long-term debt, including capital lease obligations, at December 31,
1994 and 1993 were as follows:
1994 1993
------- -------
8.94% loan due annually
1995 through 2001 $24,021 $21,378
7.45% loan due quarterly
1996 through 1999 6,180 -
9.50% promissory notes due
annually through 1997 6,000 8,000
Capital lease obligations 2,161 2,819
Other, various maturities and rates 5,621 8,390
------- -------
43,983 40,587
Less amounts due within one year 4,951 5,662
------- -------
$39,032 $34,925
======= =======
Interest paid amounted to $3,858,000, $3,839,000, and $2,463,000 in
1994, 1993 and 1992, respectively.
Maturities of long-term debt, including capital lease obligations for
each of the four years subsequent to 1995, are as follows:
1996 $7,813
1997 $8,160
1998 $6,129
1999 $6,204
In 1992, the Company incurred long-term debt to finance the Kammer
acquisition. The U.S. dollar denominated debt was effectively converted to a
deutsche mark obligation through a currency swap agreement. The currency swap
is a hedge of the net investment in the subsidiary. Unrealized gains and
losses on the hedge are not recognized in income, but are shown in the
cumulative translation adjustment account included in Shareholders' equity with
the related amounts due to and from the counterparty included in Long-term
debt. The maturity and repayment terms of the swap match precisely the
maturity and repayment terms of the underlying debt.
The long-term debt agreements require the Company to maintain specified
levels of tangible net worth and restrict the payment of cash dividends.
Approximately $16,246,000 and $15,442,000 of consolidated retained earnings
were available for payment of dividends at December 31, 1994 and 1993,
respectively. Dividends are limited to $15,000,000 plus 50% of defined net
earnings subsequent to January 1, 1992.
At December 31, 1994 and 1993, the Company had credit facilities
available from banks under which it could borrow, at a rate not to exceed prime
or local market rates, up to $22,940,000 and $8,200,000, respectively. Under
these facilities, the Company had $2,251,000 and $339,000 in borrowings
outstanding at December 31, 1994 and 1993. The weighted average interest rate
on short-term borrowings at December 31, 1994 and 1993, was 8.8% and 7.2%,
respectively. In both years, these borrowings were used primarily to support
the operations of foreign subsidiaries. Additionally, the Company has
available $12,188,000 in revolving credit agreements with domestic banks.
24
25
9. POSTRETIREMENT BENEFITS AND OTHER DEFERRED ITEMS
Deferred postretirement benefits and other deferred items at December
31, 1994 and 1993 were as follows:
1994 1993
------ ------
Postretirement benefits $36,620 $35,910
Other 5,617 3,985
------- -------
$42,237 $39,895
======= =======
10. LEASES AND RENTALS
Assets subject to capitalized leases and included in property, plant
and equipment at cost amounted to $7,706,000 in 1994 and $7,727,000 in 1993.
Accumulated amortization for the capitalized leases amounted to $6,216,000 in
1994 and $6,003,000 in 1993.
The minimum rental commitments as of December 31, 1994 for all
noncancelable leases are as follows:
Operating Capital
leases leases
--------- --------
1995 $ 3,396 $ 863
1996 2,643 723
1997 1,939 646
1998 1,438 571
1999 1,081 74
2000 and subsequent 2,026 40
--------- -------
Total minimum lease payments $12,523 2,917
=========
Less amount representing interest
on capital leases 503
--------
Present value of minimum capital
lease payments $2,414
========
Total rental expense amounted to $6,334,000, $5,771,000 and $5,789,000
in 1994, 1993 and 1992, respectively.
25
26
11. CONTINGENCIES
The Company has received notification alleging potential involvement at
six former public waste disposal sites which may be subject to remediation.
The sites are in various stages of evaluation by federal and state
environmental authorities. The projected cost of remediating these sites, as
well as the Company's alleged "fair share" allocation, is uncertain and
speculative until all studies have been completed and the parties have either
negotiated an amicable resolution or the matter has been judicially resolved.
At each site, there are many other parties who have similarly been identified,
and the identification and location of additional parties is continuing under
applicable federal or state law. Many of the other parties identified are
financially strong and solvent companies which appear able to pay their share
of the remediation costs. Based on the Company's preliminary information about
the waste disposal practices at these sites and the environmental regulatory
process in general, the Company believes that it is likely that ultimate
remediation liability costs for each site will be apportioned among all liable
parties, including site owners and waste transporters, according to the volumes
and/or toxicity of the wastes shown to have been disposed of at the sites.
The Company also owns and formerly operated a captive spent foundry
sand disposal site near its Dayton foundry. Pursuant to a consent decree with
the State of Ohio, an independent consultant was selected by the State and
engaged to determine the extent of environmental contamination at the site.
The consultant has completed its investigation and submitted its report to the
State which concludes, in general, that no environmental contamination
attributable to the Company was found at this site. The Company is currently
working with the State to resolve the few remaining issues on an informal basis
involving limited and voluntary remediation at the site in return for
terminating this consent decree.
The Company is also a defendant in a number of products liability
lawsuits which are insured, subject to applicable deductibles. The Company has
fully accrued the estimated loss reserve for each such lawsuit. The Company
has additionally accrued a limited general reserve against possible increases
in the Company's liability exposure if further adverse facts develop during the
lawsuits. Given the inherent volatility and uncertainty of any products
liability litigation, there is a possibility of further increases in the costs
of resolving these claims, although the Company has no current reason to now
believe that any such increase is probable or quantifiable.
Although none of the aforementioned gives rise to any additional
liability that can now be reasonably estimated, it is possible that the Company
could incur additional costs in the range of $100,000 to $500,000 over the
upcoming five years to fully resolve these matters. The Company has accrued
the minimum end of this range. In determining this estimated range of
contingent liability, the Company has not discounted to present value nor
offset any insurance recoveries against such range. The Company will continue
to evaluate these contingent loss exposures and, if they develop, recognize
expense as soon as such losses can be reasonably estimated.
26
27
12. SHAREHOLDERS' EQUITY
On March 25, 1994, the Company distributed a stock dividend which had
the effect of a three-for-two stock split. All per share and share data, where
appropriate, have been restated to reflect this stock split. At December 31,
1994 and 1993, the Company had 30,000,000 shares of common stock, $1.25 par
value, and 1,000,000 shares of $1.00 par value preferred stock authorized.
Each share of the Company's common stock contains a preferred stock
purchase right. These rights are not currently exercisable and trade in
tandem with the common stock. The rights, in general, become exercisable and
trade separately in the event of certain significant changes in common stock
ownership or on the commencement of certain tender offers which, in either case,
may lead to a change of control of the Company. Upon becoming exercisable, the
rights provide shareholders the opportunity to acquire a new series of Company
preferred stock to be then automatically issued at a pre-established price. In
the event of certain forms of acquisition of the Company, the rights also
provide Company shareholders the opportunity to purchase shares of the
acquiring company's common stock from the acquirer at a 50% discount from the
current market value. The rights are redeemable for $.022 per right by the
Company at any time prior to becoming exercisable and will expire in August,
1996.
At December 31, 1994, approximately 1,347,000 shares of common stock
were reserved for exercise of stock options and for grants of restricted stock.
27
28
13. STOCK PLANS
The Company has two stock option plans and a restricted stock plan.
The 1979 Stock Option Plan was approved by shareholders in 1979 and
expired on April 15, 1989. The 1989 Stock Option Plan was approved by
shareholders on April 26, 1989 and will expire on December 31, 1998. Under
both plans, options have been granted to officers and employees to purchase
shares of the Company's common stock at a price not less than the fair market
value at the date of grant. Generally, these options become exercisable over
staggered periods, but may not be exercised after 10 years from the date of the
grant.
The 1989 Plan authorized the grant of options to purchase up to
1,125,000 shares of the Company's common stock. Any option, or portion
thereof, granted under the Plan may include a stock appreciation right. A
stock appreciation right will permit the optionees to elect to surrender their
option, or any portion thereof and receive, in exchange therefor, cash in an
amount equal to the excess of the current fair market value over the option
price of the option surrendered. The impact on earnings for the three years
ending December 31, 1994, was not significant.
At December 31, 1994, 1993 and 1992, the aggregate number of options
exercisable under the plans was 384,576, 355,108 and 387,421, respectively.
Information with respect to the stock option plans follows:
Common shares Average
----------------------------------- option price
1979 Plan 1989 Plan per share
---------- --------- ------------
Outstanding at
December 31, 1991 198,217 385,009 $10.19
Options granted - 109,722 14.64
Options exercised (44,616) (23,280) 7.05
Options canceled - ( 5,850) 11.81
-------- --------
Outstanding at
December 31, 1992 153,601 465,601 11.31
Options granted - 133,026 14.65
Options exercised (30,805) (14,887) 6.81
Options canceled - ( 4,699) 12.18
------- -------
Outstanding at
December 31, 1993 122,796 579,041 12.23
Options granted - 120,453 16.39
Options exercised (44,039) (23,195) 7.48
Options canceled (577) (27,201) 13.84
-------- --------
Outstanding at
December 31, 1994 78,180 649,098 $13.29
======== ========
During 1994, options for 110,916 shares became exercisable at an
average price of $13.72 per share.
The 1989 Restricted Stock Plan was approved by shareholders on April
26, 1989. The Plan authorized the grant of up to 337,500 shares of the
Company's common stock as restricted shares to directors and employees of the
Company. In general, the shares cannot be sold, transferred, pledged or
assigned for a period of not less than one nor more than ten years, and are
subject to forfeiture during the restriction period. The market value of
shares awarded under the Plan is amortized to compensation expense over the
periods in which the restrictions lapse. Restricted stock grants of 2,400,
19,686 and 1,410 shares were made in 1994, 1993 and 1992, respectively, at an
average market value of $15.18 per share.
28
29
14. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting
for income taxes as required by SFAS No. 109, "Accounting for Income Taxes".
As permitted under the new rules, prior years' financial statements have not
been restated. The cumulative effect of adopting SFAS No. 109 was not
material.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1994 and 1993 were as follows:
1994 1993
-------- --------
Deferred tax assets related to:
Postretirement benefits $13,549 $13,287
Compensation accruals 1,164 938
Other benefit accruals 543 1,488
Other 2,181 4,959
------- -------
Total deferred tax assets 17,437 20,672
------- -------
Deferred tax liabilities related to:
Depreciation 5,107 5,891
Pension benefits 2,172 1,444
Passive foreign investments 1,612 1,200
Other 3,728 6,389
------- -------
Total deferred tax liabilities 12,619 14,924
------- -------
Net deferred tax asset $ 4,818 $ 5,748
======= =======
Earnings before income taxes consist of the following components:
1994 1993 1992
-------- -------- --------
Earnings before income taxes:
United States $22,264 $22,360 $15,348
Foreign 4,674 4,033 5,311
------- ------- -------
$26,938 $26,393 $20,659
======= ======= =======
Significant components of the provision for income taxes attributable
to continuing operations are as follows:
1994 1993 1992
--------- -------- --------
Current:
United States $ 6,991 $ 6,337 $ 7,260
Foreign 1,195 1,251 1,648
State and local 664 995 544
------- ------- -------
Total current 8,850 8,583 9,452
------- ------- -------
Deferred:
United States 682 924 (2,426)
Foreign 209 341 547
State and local 39 53 (143)
------- ------- -------
Total deferred 930 1,318 (2,022)
------- ------- -------
$ 9,780 $ 9,901 $ 7,430
======= ======= =======
29
30
The components of the provision for deferred income taxes for the years
ended December 31, 1994, 1993 and 1992 were as follows:
1994 1993 1992
-------- -------- --------
Postretirement benefits $ (262) $ (551) $ (543)
Restructuring reserve - 1,414 (1,709)
Pensions 533 87 120
Other 659 368 110
------- -------- --------
Provision for deferred
income taxes $ 930 $ 1,318 $(2,022)
======= ======== ========
Income taxes paid amounted to $9,226,000, $11,942,000 and $10,454,000
during 1994, 1993 and 1992, respectively.
The reasons for the differences between the effective tax rate and the
U.S. federal income tax rate were as follows:
1994 1993 1992
-------- -------- --------
U.S. federal income tax rate 35.0% 35.0% 34.0%
Revaluation - deferred tax,
rate change - (1.2) -
Foreign tax rate differential .5 2.4 1.0
Foreign sales corporation (1.4) (1.8) (1.2)
State and local income taxes, net
of federal income tax benefit 1.7 2.5 1.7
Other net (none more than 1.75%) .5 .6 .5
--------- ------- --------
Effective tax rate 36.3% 37.5% 36.0%
========= ======= ========
30
31
15. RESEARCH AND DEVELOPMENT
Research and development expense amounted to $6,351,000, $6,020,000 and
$5,521,000 in 1994, 1993 and 1992, respectively.
16. RETIREMENT BENEFITS
The Company sponsors several noncontributory defined benefit pension
plans, covering approximately 60% of domestic employees, which provide benefits
based on years of service and compensation. Retirement benefits for all other
employees are provided through defined contribution pension plans and
government sponsored retirement programs. All defined benefit pension plans
are funded based on independent actuarial valuations to provide for current
service and an amount sufficient to amortize unfunded prior service over
periods not to exceed thirty years.
Net defined benefit pension income for 1994, 1993 and 1992 included the
following components:
1994 1993 1992
------- ------- -------
Service cost - benefits earned
during the period $ 1,660 $ 1,518 $ 1,532
Interest cost on projected
benefit obligations 4,157 4,153 3,818
Actual loss (gain) on plan assets 405 (8,346) (5,157)
Net amortization and deferral (6,297) 2,568 (396)
------- ------- -------
Net defined benefit pension
income $ (75) $ (107) $ (203)
======= ======= =======
The following table presents defined benefit pension plan funded status
and amounts recognized in the Company's consolidated balance sheet at December
31, 1994 and 1993:
1994 1993
------- ------
Actuarial present value of:
Vested benefits $44,061 $45,837
Nonvested benefits 6,219 5,770
------- -------
Accumulated benefit obligations 50,280 51,607
Projected future compensation increases 7,130 7,506
------- -------
Projected benefit obligations 57,410 59,113
Less plan assets, at fair value 66,703 72,953
------- -------
Plan assets in excess of projected
benefit obligations 9,293 13,840
Unrecognized net transition asset (3,569) (4,154)
Unrecognized net gain (2,425) (6,276)
Unrecognized prior service cost 2,537 460
------- -------
Net pension asset $ 5,836 $ 3,870
======= =======
The average discount rate and the assumed rate of increase in future
compensation levels used in determining the actuarial present value of benefit
obligations were 7.5% and 5.0%, respectively. Plan amendments had the effect
of increasing projected benefit obligations by $2,293,000 for 1993. The
expected long-term rate of return on plan assets was 8.0%. Plan assets include
marketable equity securities, corporate and government debt securities,
insurance company contracts and real estate.
The Company sponsors several defined contribution pension plans
covering substantially all domestic and Canadian employees. Employees may
contribute to these plans and these contributions are matched in varying
amounts by the Company. The Company may also make additional contributions to
eligible employees. Defined contribution pension expense for the Company was
$2,182,000, $2,130,000 and $2,130,000 for 1994, 1993 and 1992, respectively.
31
32
16. RETIREMENT BENEFITS
(Continued from previous page)
The Company also sponsors several defined benefit postretirement health
care plans covering approximately 60% of future retirees and most current
retirees in the United States. These medical and dental benefits are provided
through insurance companies and health maintenance organizations, include
participant contributions, deductibles, co-insurance provisions and other
limitations, and are integrated with Medicare and other group plans. The plans
are funded as insured benefits and health maintenance organization premiums are
incurred.
During 1992, the Company adopted, effective January 1, 1992, the
principles of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". The Company elected to recognize the $32,912,000
cumulative effect of the change in accounting principle, which represents the
accumulated postretirement benefit obligations as of January 1, 1992. The
effect on net earnings and shareholders' equity, net of income tax effect, was
$21,063,000 or $1.10 per share.
Adoption of SFAS No. 106 increased postretirement benefit expense by
approximately $1,508,000 in 1992. Net postretirement benefit expense for 1994,
1993 and 1992 included the following components:
1994 1993 1992
------ ------ ------
Service cost - benefits earned during the period $ 536 $ 610 $ 595
Interest cost on accumulated postretirement
benefit obligations 2,212 2,682 2,567
Net amortization and deferral (316) - -
------- ------ ------
Net postretirement benefit expense $2,432 $3,292 $3,162
====== ====== ======
The following table presents postretirement benefit amounts recognized
in the Company's consolidated balance sheet at December 31, 1994 and 1993:
1994 1993
------- -------
Actuarial present value of accumulated
postretirement benefit obligations:
Retirees $15,758 $19,044
Active employees eligible to retire 3,751 4,495
Active employees not eligible to retire 11,876 14,430
------- -------
Total 31,385 37,969
Unrecognized prior service cost 1,686 -
Unrecognized net gain (loss) 3,549 (2,059)
------- -------
Deferred postretirement benefits $36,620 $35,910
======= =======
The average discount rate used in determining accumulated
postretirement benefit obligations was 7.5%. The assumed annual rates of
increase in per capita costs were, for periods prior to Medicare, 10% for 1994
and 9.5% for 1995 with a gradual decrease to 6% for 2002 and future years and,
for periods after Medicare, 8% for 1994 and 7.5% for 1995 with a gradual
decrease to 5% for 2000 and future years. Increasing the assumed rate of
increase in postretirement benefit costs by 1% in each year would increase net
postretirement benefit expense by approximately $323,000 and accumulated
postretirement benefit obligations by $2,941,000.
32
33
17. POSTEMPLOYMENT BENEFITS UNDER SFAS NO. 112
Effective January 1, 1993, the Company early adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits", in accounting for workers'
compensation and health care continuation benefits. The cumulative effect as
of January 1, 1993 of this change in accounting principle was to decrease
pretax income by $616,000, or $.02 per share. Prior to January 1, 1993, the
Company recognized the cost of providing these benefits on a cash basis. Under
the new method of accounting, the Company accrues the benefits when it becomes
probable that such benefits will be paid and when sufficient information exists
to make reasonable estimates of the amounts to be paid. As required by the
Statement, prior year financial statements have not been restated to reflect
the change in accounting principle. The effect of the change on 1994 and 1993
income before the cumulative effect of the change was not material.
18. FOREIGN CURRENCY TRANSLATION
The foreign currency translation equity decreases consist of the following:
1994 1993 1992
------- -------- -------
Current year translation
adjustment $ 1,686 $(1,514) $(2,704)
Income tax effect - (85) 1,164
-------- ------- --------
1,686 (1,599) (1,540)
Foreign currency translation
equity adjustment:
Beginning of year (949) 650 2,190
-------- -------- --------
End of year $ 737 $ (949) $ 650
======== ======== ========
33
34
19. OPERATIONS IDENTIFIED BY GEOGRAPHIC AREA
The Company operates in predominantly one business segment, fluid
movement and control equipment (pumps, valves and related equipment).
Transfers between geographic areas are accounted for primarily at cost
plus a profit margin. Operating profit consists of revenues less certain costs
and expenses. In determining operating profit none of the following items have
been added or deducted: unallocated general corporate expense, interest
expense and income taxes. Identifiable assets are those assets of the Company
that are identifiable with the operations in each geographic area. Unallocated
general corporate assets principally reflect future tax benefits.
Financial information by geographic area follows:
Years ended December 31, 1994 1993 1992
-------- -------- --------
Revenues:
United States $239,072 $238,765 $225,949
Europe 72,390 44,641 44,250
Canada 18,956 18,488 18,527
Other 14,970 12,026 11,631
-------- -------- --------
Consolidated totals 345,388 313,920 300,357
-------- -------- --------
Inter-geographic transfers:
United States $ 19,583 14,262 15,322
Europe 11,623 5,876 3,218
Canada 61 18 22
Eliminations & adjustments (31,267) (20,156) (18,562)
-------- -------- --------
Consolidated totals - - -
-------- -------- --------
Total revenues & transfers:
United States $258,655 253,027 241,271
Europe 84,013 50,516 47,468
Canada 19,017 18,506 18,549
Other 14,970 12,027 11,631
Eliminations & adjustments (31,267) (20,156) (18,562)
-------- -------- --------
Consolidated totals $345,388 $313,920 $300,357
======== ======== ========
Operating profit (loss):
United States $ 29,231 $ 31,262 $ 22,142
Europe 4,444 626 4,315
Canada 819 1,402 1,158
Other (408) (145) (1,009)
Eliminations & adjustments 620 179 2
-------- -------- --------
Consolidated totals 34,706 33,324 26,608
Corporate expense 3,422 3,079 3,033
Interest expense 4,346 3,852 2,916
-------- -------- --------
Earnings before income taxes $ 26,938 $ 26,393 $ 20,659
======== ======== ========
Identifiable assets:
United States $167,811 $165,210 $157,961
Europe 81,918 57,569 64,484
Canada 13,382 14,284 12,839
Other 13,149 10,699 11,274
Eliminations & adjustments (8,796) (6,731) (8,696)
-------- -------- --------
Consolidated totals 267,464 241,031 237,862
General corporate assets 6,640 6,909 12,698
-------- -------- --------
Total assets $274,104 $247,940 $250,560
======== ======== ========
In 1994, 1993, and 1992 foreign currency transaction (losses)/gains of
approximately ($996,000), $420,000 and $70,000, respectively, were included in
earnings before income taxes.
34
35
20. FINANCIAL INSTRUMENTS
The Company enters into various types of foreign exchange contracts in
managing its foreign exchange risk. The table below summarizes by currency,
the notional amounts of the Company's forward exchange and option contracts:
Purchased
Forward Option Total
$ in Millions Contracts Contracts Contracts
- - - - ------------- --------- --------- ---------
Currency
Belgian francs $ 2.5 $ - $ 2.5
French francs - 2.4 2.4
British pounds 1.8 1.0 2.8
Deutsche mark .7 - .7
Other 1.7 .4 2.1
------ ------ ------
Total $ 6.7 $ 3.8 $ 10.5
====== ====== ======
The Company enters into forward exchange contracts to hedge certain assets and
liabilities and purchases currency options to hedge anticipated foreign
currency transactions. The term of the contracts is generally less than three
months and deferred gains or losses are not material at any period end. The
purpose of the Company's foreign currency hedging activities is to protect the
Company from transaction losses arising from foreign currency assets and
liabilities and to protect cash flows from being adversely affected by foreign
currency sales and purchases.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on foreign currency contracts of all classes. However, the
counterparties are predominantly AA rated institutions, and the Company does
not anticipate nonperformance by any of these counterparties.
35
36
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
The Duriron Company, Inc.
We have audited the accompanying consolidated balance sheet of The
Duriron Company, Inc. as of December 31, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Duriron Company, Inc. at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.
As discussed in Notes 14, 16 and 17 to the consolidated financial
statements, effective January 1, 1992, the Company changed its method of
accounting for postretirement benefits other than pensions, and effective
January 1, 1993, the Company changed its method of accounting for income taxes
and postemployment benefits.
Ernst & Young LLP
Dayton, Ohio
February 23, 1995
36
37
UNAUDITED QUARTERLY FINANCIAL DATA
(dollars in thousands except per share data)
Earnings before cumulative
effect of change in accounting Net earnings
------------------------------ ------------------
Net Cost
sales of sales Per share Per share
- - - - -----------------------------------------------------------------------------------------------------------------------
Quarter ended:
March 31, 1994 $ 77,958 $ 48,546 $ 3,765 $ .20
June 30, 1994 85,750 54,294 4,012 .21
September 30, 1994 91,794 58,059 4,608 .24
December 31, 1994 89,886 56,350 4,773 .25
- - - - -----------------------------------------------------------------------------------------------------------------------
$345,388 $217,249 $17,158 $ .90
=======================================================================================================================
Quarter ended:
March 31, 1993 $ 74,363 $ 47,318 $ 2,871 $ .15 $ 2,486 $ .13
June 30, 1993 78,209 48,489 3,610 .19 3,610 .19
September 30, 1993 76,685 48,101 3,909 .20 3,909 .20
December 31, 1993 84,663 51,929 6,102 .32 6,102 .32
- - - - -----------------------------------------------------------------------------------------------------------------------
$313,920 $195,837 $ 16,492 $ .86 $16,107 $ .84
=======================================================================================================================
1993 per share data have been restated to reflect the March 25, 1994 stock
dividend which had the effect of a three-for-two stock split.
Effective January 1, 1993, the Company early adopted SFAS No. 112. The
cumulative effect of this change in accounting principle decreased net earnings
by $0.4 million, or $.02 per share.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- - - - ------- --------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
37
38
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - - - -------- --------------------------------------------------
Officers are, in general, appointed annually to their
respective positions at the April meeting of the Board of Directors. The
executive officers and other officers of the Company at February 1, 1995 were
as follows:
William M. Jordan, President and Chief Executive Officer, Director
Bruce E. Hines, Senior Vice President and Chief Administrative Officer
George A. Shedlarski, Group Vice President - Industrial Products
Curtis E. Daily, Group Vice President - Rotating Equipment
Mark E. Vernon, Group Vice President - Flow Control
Ronald F. Shuff, Vice President - Secretary and General Counsel
Gregory L. Smith, Treasurer
Kathleen A. Giddings, Controller
WILLIAM M. JORDAN, 51, was elected President and Chief
Executive Officer in 1993 and a Director in 1991. Mr. Jordan became Executive
Vice President in 1990 and President in 1991. He was Chief Operating Officer
from 1990 to 1993. From 1984 until 1991, Mr. Jordan was the Group Vice
President of International Operations, and he was the Assistant Group Vice
President - International Operations in 1983. From 1979 to 1983, he was Vice
President and General Manager of Duriron Canada Inc. Mr. Jordan joined the
Company in 1972 as a sales engineer and held various sales positions prior to
1979.
BRUCE E. HINES, 51, who rejoined the Company in 1989, was then
elected Senior Vice President and added the position of Chief Administrative
Officer in 1990. He previously had served as President of Vernay Labs, a
manufacturer of precision rubber components. Prior to joining Vernay Labs, Mr.
Hines had served in a variety of financial positions with the Company for
nineteen years. He also functions as Chief Financial Officer.
GEORGE A. SHEDLARSKI, 51, was elected a Group Vice President
in 1987 and is responsible for the Company's worldwide manual valve, actuator,
foundry and filtration products and for certain foreign operations. From 1984
until becoming a Group Vice President, Mr. Shedlarski was President of the
Filtration Systems Division. From 1983 to 1984, he served as President and
General Manager of Duriron Canada Inc. Mr. Shedlarski joined the Company in
1972 as a filtration product specialist and held various sales and managerial
positions prior to 1983.
CURTIS E. DAILY, 51, was elected a Group Vice President in
1990. He is responsible for all the Company's worldwide pump operations and
certain foreign operations. He previously was the corporate Director of
International Operations in 1989 after serving as the resident President of the
Company's Belgian subsidiary, S.A. Durco Europe N.V. He joined the Company in
1965.
MARK E. VERNON, 42, was elected a Group Vice President in
1993. He is responsible for the worldwide operations of the Company's control
valve products which are marketed under the Valtek, Kammer and Sereg trade
names. He was President of the Company's Valtek Inc. subsidiary from 1991 to
1993 and Senior Vice President of Valtek from 1988 to 1990. Mr. Vernon joined
Valtek Incorporated in 1978.
38
39
RONALD F. SHUFF, 42, was elected Vice President - Secretary
and General Counsel of the Company in 1990. He joined the Company in 1988 as
General Counsel and Assistant Secretary and became General Counsel and
Secretary in 1989. Previously, he served as General Counsel and Secretary of
AccuRay Corporation (a manufacturer of process control equipment which
subsequently became a subsidiary of Asea Brown Boveri).
GREGORY L. SMITH, 41, was elected Treasurer in 1987. He
joined the Company in 1975. From 1985 until assuming his present position, he
was Assistant Treasurer and, prior to becoming Assistant Treasurer, he was
Manager of Corporate Tax.
KATHLEEN A. GIDDINGS, 32, was elected Controller in 1993. She
joined the Company in 1985. She has served the Company in a number of
financial management positions, including Director of Financial Reporting and
Corporate Controller in 1993, Manager Financial Accounting from 1990 to 1992,
Supervisor Financial Accounting in 1989 and Financial Accountant from 1985 to
1989.
Additional information required by this Item 10 is
incorporated herein by this reference from the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
- - - - -------- ----------------------
The information required by this Item 11 is set forth in the
Proxy Statement and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - - - -------- --------------------------------------------------------------
The information required by this Item 12 is set forth in the
Proxy Statement and is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - - - -------- ----------------------------------------------
The information required by this Item 13 is set forth to the
extent applicable in the Proxy Statement and is incorporated herein by this
reference.
39
40
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- - - - -------- ----------------------------------------------------------------
(a) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are
incorporated herein by this reference as part of this Report at Item 8 hereof.
Report of Independent Auditors
Consolidated Statement of Operations for the years ended December 31,
1994, 1993 and 1992
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheet at December 31, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended December 31,
1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a) (2) FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts (at page 49
of this Report)
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(a) (3) EXHIBITS
See INDEX to EXHIBITS
(b) REPORTS ON FORM 8-K
None.
40
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, The Duriron Company, Inc. has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on this 24th day of February, 1995.
THE DURIRON COMPANY, INC.
BY /s/ WILLIAM M. JORDAN
-------------------------
WILLIAM M. JORDAN
PRESIDENT AND CHIEF
EXECUTIVE 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 Duriron Company, Inc. and in the capacities and on the dates indicated:
______________________________________________________________________________
NAME TITLE DATE
- - - - ------------------------------------------------------------------------------
/s/ William M. Jordan President and Chief February 24, 1995
- - - - -----------------------
WILLIAM M. JORDAN Executive Officer, Director
/s/ John S. Haddick Chairman of the February 24, 1995
- - - - ------------------------
JOHN S. HADDICK Board, Director
/s/ Bruce E. Hines Senior Vice President - February 24, 1995
- - - - ------------------------
BRUCE E. HINES Chief Administrative Officer
(Principal Accounting and
Financial Officer)
/s/ Charles L. Bates Director February 24, 1995
- - - - -------------------------
CHARLES L. BATES
/s/ Hugh K. Coble Director February 24, 1995
- - - - -----------------------
HUGH K. COBLE
/s/ Diane C. Harris Director February 24, 1995
- - - - -------------------------
DIANE C. HARRIS
/s/ Steven C. Mason Director February 24, 1995
- - - - -----------------------
STEVEN C. MASON
/s/ R. Elton White Director February 24, 1995
- - - - ------------------------
R. ELTON WHITE
41
42
INDEX TO EXHIBITS
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(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 1988 Restated Certificate of Incorporation
of The Duriron Company, Inc. was filed as
Exhibit 3.1 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1988.......................................................... *
3.2 1989 Amendment to Certificate of Incorporation
was filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989............................................. *
3.3 By-Laws of The Duriron Company, Inc.
(as amended) were filed with the Commission as
Exhibit 3.2 to The Company's Annual Report on
Form 10-K for the year ended December 31,
1987.......................................................... *
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES:
4.1 Loan Agreement dated September 15, 1986 between
The Duriron Company, Inc. and the Metropolitan
Life Insurance Company was filed with the
Commission as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1986...................................... *
4.2 Lease agreement, indenture of mortgage and
deed of trust, and guarantee agreement, all
executed on June 1, 1978 in connection with
9-1/8% Industrial Development Revenue Bonds,
Series A, City of Cookeville, Tennessee....................... +
4.3 Lease agreement, indenture of trust, and
guaranty agreement, all executed on June 1,
1978 in connection with 7-3/8% Industrial
Development Revenue Bonds, Series B, City of
Cookeville, Tennessee......................................... +
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4.4 Lease agreement, indenture of mortgage and
agreement, lessee guaranty agreement, and
letter of representation and indemnity
agreement, all dated as of December 1, 1983
and executed in connection with the Industrial
Development Revenue Bonds (1983 The Duriron
Company, Inc. Project), Erie Company,
New York Industrial Development Agency
were filed with the Commission as Exhibit
4.4 to the Company's Report on Form 10-K
for the year ended December 31, 1983.................... *
4.5 Form of Rights Agreement dated as of August 1,
1986 between The Duriron Company, Inc. and Bank
One, Indianapolis, National Association, as
Rights Agent was filed as an Exhibit to the
Company's Form 8-A dated August 13, 1986................ *
4.6 Credit Agreement, dated as of March 19, 1987,
between The Duriron Company, Inc. and The Chase
Manhattan Bank, N.A., including the form of
Promissory Note delivered in connection
therewith, was filed with the Commission as
Exhibit 6 to the Company's Current Report on
Form 8-K dated April 6, 1987............................ *
4.7 Loan Agreement, dated as of March 19, 1987,
between The Duriron Company, Inc. and
Metropolitan Life Insurance Company, including
the form of Promissory Note delivered in
connection therewith, was filed with the
Commission as Exhibit 7 to the Company's
Current Report on Form 8-K dated April 6, 1987.......... *
4.8 The Credit Agreement between The Duriron
Company, Inc. and Bank One, Dayton, N.A.,
dated as of November 30, 1989........................... +
4.9 Interest Rate and Currency Exchange Agreement
between the Company and Barclays Bank dated
November 17, 1992 PLC in the amount of
$25,000,000 was filed as Exhibit 4.9 to
Company's Report of Form 10-K for year ended
December 31, 1992....................................... *
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4.10 Loan Agreement in the amount of $25,000,000
between the Company and Metropolitan Life
Insurance Company dated November 12, 1992 was
filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992 ......................................... *
4.11 Revolving Credit Agreement between the
Company and Fifth Third Bank dated
November 23, 1992 in the amount of
$10,000,000 ............................................... +
(10) MATERIAL CONTRACTS: (See Footnote "a")
10.1 The Duriron Company, Inc. Incentive Compensation
Plan (the "Incentive Plan") for Key Employees
as amended and restated effective January 1, 1994
was filed as Exhibit 10.1 to Company's Annual Report
on Form 10-K for the year ended December 31,
1993........................................................ *
10.2 The Duriron Company, Inc. Supplemental Pension
Plan for Salaried Employees was filed with the
Commission as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1987........................................... *
10.3 The Duriron Company, Inc. Deferred Compensation
Plan for Directors was filed as Exhibit 10.5
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1987................................ *
10.4 Form of Employment Agreement between The Duriron
Company, Inc. and each of the current officers was
filed as Exhibit 10.4 to the Company's Annual Report
on Form 10-K for year ended December 31, 1992............... *
10.5 The Duriron Company, Inc. CEO Discretionary
Bonus Plan was filed with the Commission as
Exhibit 10.8 to the Company's Annual Report
on Form 10-K for the year ended December
31, 1986.................................................... *
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10.6 The Duriron Company, Inc. First Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987............... *
10.7 The Duriron Company, Inc. Second Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987............... *
10.8 The Duriron Company, Inc. Long-Term Incentive
Plan (the "Long-Term Plan"), as amended and
restated effective November 1, 1993 was filed as
Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993............... *
10.9 The Duriron Company, Inc. 1989 Stock Option Plan
as amended and restated April 23, 1991 was filed
as Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1991 ........................................................ *
10.10 The Duriron Company, Inc. 1989 Restricted Stock
Plan (the "Restricted Stock Plan") as
amended and restated effective April 23, 1991,
was filed as Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year
ended December 31, 1991 ..................................... *
10.11 The Duriron Company, Inc. Retirement Compensation
Plan for Directors was filed as Exhibit 10.15 on
the Company's Annual Report to Form 10-K for the
year ended December 31, 1988................................. *
10.12 The Company's Employee Protection Plan (which
provides severance benefits for certain employees
after a change of control of the Company) was
filed as Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1989............................................ *
10.13 The Company's Benefit Equalization Pension Plan
was filed as Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989......................................................... *
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10.14 The Company's Equity Incentive Plan for
Officers was filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1990............................................ *
10.15 Supplemental Pension Agreement between the
Company and William M. Jordan dated
January 18, 1993 was filed as Exhibit 10.15
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992......................... *
10.16 1979 Stock Option Plan, as amended and
restated April 23, 1991, and Amendment #1
thereto dated December 15, 1992, was filed as
Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the year ended
December 31, 1992 ........................................... *
10.17 Amendment #1 dated December 15, 1992 to the
aforementioned Benefit Equalization Pension Plan
was filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year
ended December 31, 1992 ..................................... *
10.18 Deferred Compensation Plan for Executives was
filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992 ........................................... *
10.19 Amendment #1 to amended and restated
1989 Restricted Stock Plan was filed as Exhibit
10.20 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992 ........................ *
10.20 Amendment #1 to Equity Incentive Plan was filed
as Exhibit 10.21 to the Company's Annual Report
on Form 10-K for the year ended December
31, 1992 .................................................... *
10.21 Employment Agreement between the Company
and W. M. Jordan dated May 11, 1992 was filed as
Exhibit 10.22 to the Company's Annual Report on
Form 10-K for the year ended December 31,
1992 ........................................................ *
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10.22 Employment Agreement between the Company
(through its Utah subsidiary, Valtek
Inc.) and Charles L. Bates dated March
24, 1987 was filed as Exhibit 4 to the
Company's Report on Form 8-K dated
April 6, 1987............................................... *
10.23 Amendment #1 to the first Master Benefit Trust
Agreement dated October 1, 1987 was filed as
Exhibit 10.24 to the Company's Annual Report
on Form 10-K for the year ended December 31,
1993........................................................ *
10.24 Amendment #2 and Amendment #3 to Equity
Incentive Plan was filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1993................................ *
10.25 Amendment #2 to said First Master Benefit Trust
Agreement................................................... 50
10.26 First Amendment to said Second Master Benefit Trust
Agreement................................................... 51
10.27 Amendment #2 to said 1989 Restricted Stock Plan, as
amended and restated........................................ 53
(22) SUBSIDIARIES:
The Duriron Company, Inc. has direct or indirect subsidiaries all of
which (i) are beneficially owned or controlled; (ii) do business under the name
under which they are organized and (iii) are included in the consolidated
financial statements of the Company. The name and jurisdiction of
incorporation of each such subsidiary is set forth below.
47
48
Jurisdiction
Name of Subsidiary In Which Incorporated
------------------ ---------------------
Automax Inc. Ohio
Duriron Canada Inc. Canada
S.A. Durco Europe N.V. Belgium
Durco Process Equipment Ltd. United Kingdom
Durco GmbH Germany
Durco France S.A.R.L. France
Duriron Foreign Sales Corporation Virgin Islands
Durco Ireland Limited Ireland
Valtek Incorporated Utah
Valtek Controls Ltd. Canada
Valtek Australia Pty. Ltd. Australia
Durco Valtek (Asia Pacific) Pte. Ltd. Singapore
Durco Europe S.A. - Coordination Centre Belgium
Durco B.V. Holland Holland
Davco Equipment Inc. Ohio
Durco Valtek, S.A. Spain
Durco Italia S.r.l. Italy
Kammer Ventile GmbH Germany
Kammer Vannes S.A. Switzerland
Deutsche Mecair G.m.b.H. Germany
Mecair U.K. Ltd. United Kingdom
Mecair S.a.r.l. France
Automax Mecair S.r.l. Italy
Sereg Vannes S.A. France
_______________
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP....................... 57
(27)
27.1 Financial Data Schedule (submitted for the SEC's information)..... 58
"*" Indicates that the exhibit is incorporated by reference into this
Annual Report on Form 10-K from a previous filing with the Commission.
The Company's file number with the Commission is "0-325".
"+" Indicates that the document relates to a class of indebtedness that
does not exceed 10% of the total assets of the Company and
subsidiaries and that the Company will furnish a copy of the document
to the Commission upon request.
"a" The documents identified under Item 10 include all management
contracts and compensatory plans and arrangements required to be filed
as exhibits.
\ron\keep213
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49
THE DURIRON COMPANY, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Deductions Balance at
beginning of charged to from end of
Description year earnings reserve year
- - - - ----------- -------- -------- -------- --------
Year ended December 31, 1994:
Allowance for doubtful accounts (a): $597 $521 $237 $881
====== ====== ====== ======
Restructuring inventory provision (b): $478 $0 $478 $0
====== ====== ====== ======
Restructuring fixed asset reserve (c): $100 $0 $100 $0
====== ====== ====== ======
Year ended December 31, 1993:
Allowance for doubtful accounts (a): $740 $179 $322 $597
====== ====== ====== ======
Restructuring inventory provision (b): $1,790 $0 $1,312 $478
====== ====== ====== ======
Restructuring fixed asset reserve (c): $840 $0 $740 $100
====== ====== ====== ======
Year ended December 31, 1992:
Allowance for doubtful accounts: $693 $278 $231 $740
====== ====== ====== ======
Restructuring inventory provision: $0 $1,790 $0 $1,790
====== ====== ====== ======
Restructuring fixed asset reserve: $0 $840 $0 $840
====== ====== ====== ======
(a) Deductions from reserve represent accounts written off, net of recoveries.
(b) Deductions from reserve represent inventory written off.
(c) Deductions from reserve represent fixed assets written off, and amounts reclassified to the general
restructuring reserve.
49