Exhibit 13
Management's Discussion and Analysis
(Dollars in thousands, except per share amounts)
Elco Industries, Inc.
Results of Operations
Fiscal 1994 Compared to Fiscal 1993
For the year ended June 30, 1994, net sales were a record $225,901, an
increase of 13.4% over the prior year's sales of $199,179. Net income
increased 69.0% to $8,229, or $1.65 per share, from $4,869, or $.98 per share.
Sales in the Industrial Products Group were $169,078, a 16.4% increase
which represented approximately 90% of the total sales increase. Sales to
the automotive market increased 19% on an 11% increase in automotive
production. This resulted in sales per car and light truck produced
increasing to $8.42 per vehicle versus $7.78 the prior year. Sales to the
nonautomotive industrial markets increased 12%, with especially strong
growth to manufacturers of controls and instruments, hand tools and
compressors. Sales in the Home and Construction Group increased 5.5%.
Sales growth in this segment was adversely impacted by the loss of two
significant customers. However, new business gained at two home center
customers more than offset this loss.
Gross profit margin increased to 18.9% from 18.3% in the prior year as
a result of higher capacity utilization and cost containment efforts. Raw
material cost and wages measured as a percentage of sales remained
constant. Benefit costs increased at a higher rate than sales because of
increases in medical costs and employee incentive programs.
Selling and administrative expenses increased at a lower rate than sales.
The majority of the increase was caused by higher benefits costs, higher
professional expenses primarily resulting from expenses associated with an
industrial bond refinancing, additional employees and higher wage rates.
Measured as a percentage of sales, selling and administrative expenses were
11.5%, the lowest level in over 10 years.
Income from operations was $16,569, or 7.3% of sales, versus
$12,427, or 6.2% of sales, in the prior year. This improvement was
primarily due to strong performance from the Industrial Products Group
where greater capacity utilization and a shift in sales to higher margin
products contributed to a 54% increase in operating income. The Home and
Construction Products Group experienced a decrease in operating income
due to an expense of approximately $500 related to the loss of one of the
customers mentioned previously and to initial stocking and product
introduction costs associated with new business gained at two home center
customers.
Page 23
Interest expense was lower because of lower debt levels and the
refinancing of two industrial revenue bonds at lower interest rates.
Elco's share of profits from Rocknel Fastener, Inc., a joint venture
company, was $189 versus a loss of $258 in the prior year. Greater
capacity utilization and efficiencies contributed to this improvement.
Fiscal 1993 Compared to Fiscal 1992
For the year ended June 30, 1993, net sales were $199,179, up
5.2% from the prior year's sales of $189,337. Net income for the year was
$4,869, or $.98 per share, versus a loss of $2,525, or $(.52) per share. The
prior fiscal year included a pretax, nonoperating charge of $5,091 to reduce
the value of a promissory note receivable and a onetime, noncash charge for
retiree health care costs of $1,355, net of a related deferred tax benefit of
$852. These two charges reduced the prior year's net income by $4,485, or
$.94 per share.
Sales in the Industrial Products Group increased 9.0%, or $12,049.
Approximately $9,000 of this increase resulted from sales to the automotive
industry. Production of cars and light trucks increased 9.0%, while sales to
the automotive industry increased 10.3%, indicating a continuing increase in
market share. Sales to domestic nonassembly automotive plants and
foreign-owned automotive suppliers represented approximately 90% of this
increase. Sales to nonautomotive markets increased modestly because of
stronger economic activity. Sales in the Home and Construction Products
Group decreased $2,207 as a result of warehouse inventory reduction
programs at certain major customers.
Gross profit margin was 18.3% versus 17.1% in the prior year. This
improvement resulted from higher sales, improved operating efficiencies
which lowered manufacturing costs and, to a lesser extent, the introduction
of new products. These positive factors were partially offset by continuing
pricing pressures, primarily in the automotive market. The prior year's gross
profit included costs associated with moving the Bear-Kat operations and
with reorganizing certain operating units in the Industrial Products Group.
Selling and administrative expenses increased 3.6% on a 5.2% sales
increase. The majority of the increase was caused by increases in wages and
benefit costs. Measured as a percentage of sales, selling and administrative
expenses were 12.0% of sales.
Income from operations was $12,427, or 6.2% of sales, versus $9,243,
or 4.9% of sales in the prior year. This increase of 34.4% in operating
income resulted from the
Page 24
significant improvement in the Industrial Products
Group. The prior year's operating income in this segment included the cost
of reorganizing certain divisions. The benefits of this reorganization are
being realized in improved operating efficiencies and better cost containment
programs. Higher sales and, to a lesser extent, higher average selling prices
of new products also contributed to margin improvement. Operating income
in the Home and Construction Products Group decreased primarily because
of lower sales.
Interest expense was lower primarily because of benefits derived from an
interest rate swap agreement which effectively lowered interest rates on
approximately 60% of total debt.
Elco's share of losses from Rocknel Fastener, Inc., a joint venture
company, was $258 versus $649 the prior year. This reduction in losses
was a result of continual cost containment efforts, productivity
improvements and introduction of new products.
Outlook
Management believes that sales and earnings will increase next year.
This belief is based upon projections of higher automobile production,
continuing growth in market penetration and further economic expansion. It
is assumed that further rises in interest rates will not significantly affect
the economy, especially automotive sales. Operating income should grow faster
than sales because of implementation of profit enhancing strategies.
Sales growth in the Industrial Products Group is expected to result from
higher automotive production, introduction of new products, expansion in
the transplant market and generally higher demand from commercial
markets. Operating income is expected to increase because of higher sales
and improved operating leverage. Growth in sales and earnings might be
affected somewhat by capacity constraints. Also, profit improvement will
not likely equal the improvement experienced in the year ended June 30,
1994.
This segment will continue to be adversely impacted by pricing pressures,
especially in the automotive industry. Recently, prices of various raw
materials have begun to increase. Steel and plastic price increases could
have an impact on profit margins.
Sales in the Home and Construction Products Group are expected to
increase primarily because of growth in the home center market. For the
next two or three quarters, initial stocking and product introduction costs
associated with the new home center business will cause operating margins
to be below historical levels. Management expects margins to improve
toward the end of the fiscal year.
The Company is currently involved in matters of litigation arising from the
normal course of business, including certain environmental and product
liability matters. For a further discussion of these issues, refer to Notes
to Consolidated Financial Statements, Footnote 16, "Contingencies," on page
36.
Balance Sheet Discussion
Total assets increased 3% to $151,465 on a 13% increase in net sales.
Working capital at June 30, 1994 was $33,380, or approximately 15%
of sales, a level the Company considers normal. Both accounts receivable
and inventories increased by approximately the same percentage as sales.
The increases in accounts receivables and inventories, caused by higher
sales, were partially offset by a decrease in cash and an increase in accrued
salaries, wages and commissions.
Total property, plant and equipment at cost increased $9,614 reflecting
capital expenditures of $12,388 which were offset by $2,774 of retirements and
disposals. Approximately 85% of capital expenditures were for the Industrial
Products Group.
Total interest-bearing debt decreased $3,729 from $50,026 to $46,297
as a result of scheduled payments. Scheduled payments are $4,437 for
fiscal year 1995. The weighted average interest rate on the indebtedness
was 6.8% at June 30, 1994 versus 7.4% at June 30, 1993. It is expected
that the weighted average interest rate will increase this year as rising
interest rates decrease the benefit from interest rate swaps.
Liquidity and Capital Resources
Fiscal 1994
For fiscal 1994, operating activities generated $17,090 of cash flow,
a level lower than in 1993. While net income, depreciation and amortization
generated additional cash, other noncash working capital, primarily
inventories, required significant cash to finance the increasing sales base.
Investing activities consisted primarily of $12,388 of additions to
property, plant and equipment, an amount 25% greater than the level of
depreciation. Machinery and equipment represented 73% of the total
expenditures. During the past three years, capital expenditures were
$32,507, compared to $27,773 of depreciation. Capital expenditures for
fiscal 1995 are expected to approximate $14,500.
Page 25
Financing activities consisted primarily of the refinancing of $7,000 of
industrial development revenue bonds to obtain lower interest rates and the
payment of $3,705 of required principal. While the Company has $18,000
of bank lines of credit, no borrowings were required during the year.
Dividend payments of $.52 per share totaled $2,593. In August 1994, the
Company increased the dividend to an annual rate of $.60 per share, a 15%
increase. In June 1994, the Company purchased 135,000 shares of its
stock for $2,498 from a major stockholder.
Fiscal 1993
For fiscal 1993, cash sources were primarily depreciation and
amortization of intangibles of $9,916 and net income of $4,869. Also,
reduction in noncash working capital and construction funds held in trust
totalling $4,753 contributed to the positive cash flow. The primary use of
cash was the capital expenditure program of $9,569 and, to a lesser extent,
repayment of debt and payment of dividends.
During the year, cash reserves increased $5,451 and total indebtedness
decreased $3,565. Since equity increased $3,036 and debt decreased,
financial leverage decreased producing a debt to total capital ratio of 45.0%.
The Company had $18,000 of bank lines of credit to provide for any
unplanned cash requirements. There were no requirements to use these lines
during the year.
New Accounting Pronouncements
In November 1992, the Financial Accounting Standards Board (FASB)
adopted Statement No. 112, "Employers' Accounting for Postemployment
Benefits," which will be effective for the year ended June 30, 1995, and will
require accrual accounting for the estimated cost of benefits provided to
former or inactive employees after employment but before retirement.
Management has begun evaluating those benefits that may require accrual
accounting and believes that it is not likely to have a material impact on the
Company.
During December 1991, the FASB issued SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," which will require additional
disclosures regarding long-term debt and other financial instruments. The
Company must adopt SFAS No. 107 no later than June 30, 1996. Adoption
of this statement will not impact the carrying value of the Company's assets
and liabilities.
Page 26
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Elco Industries, Inc.
June 30
1994 1993
ASSETS
Current Assets
Cash and cash equivalents $3,861 $8,013
Accounts receivable-less allowances (June 30, 1994,
$473; June 30, 1993, $475) 32,684 29,282
Inventories 25,652 22,324
Deferred taxes on income 2,055 1,166
Prepaid and other current assets 562 446
-------- -------
Total current assets 64,814 61,231
-------- -------
Property, Plant and Equipment
Land 449 449
Land and leasehold improvements 3,260 3,074
Buildings and building equipment 25,052 23,287
Machinery and equipment 114,458 105,084
Furniture and office equipment 8,489 8,448
Construction in progress 1,510 3,262
-------- --------
Total 153,218 143,604
Less accumulated depreciation and amortization 83,901 76,183
-------- -------
Property, plant and equipment-net 69,317 67,421
-------- -------
Intangibles, Net 10,101 11,201
-------- -------
Investment in and Advances to Unconsolidated Affiliate 1,908 1,628
-------- --------
Other Assets 5,324 5,708
-------- --------
TOTAL $151,464 $147,189
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable-trade creditors $12,845 $13,153
Current maturities of long-term obligations 4,437 3,736
Accrued liabilities:
Salaries, wages and commissions 5,001 3,039
Compensated absences 2,234 2,131
Federal and state taxes on income 736 1,112
Other taxes 1,189 1,074
Retirement plans 961 819
Interest 764 812
Other 3,267 2,853
------ ------
Total current liabilities 31,434 28,729
------ ------
Long-Term Debt 41,860 46,290
------ ------
Long-Term Lease Obligations 7
------
Contingencies
Deferred Taxes On Income 8,117 6,859
------ ------
Other Deferred Liabilities 5,087 4,153
------ ------
Stockholders' Equity
Capital stock:
Preferred-Authorized, 250,000 shares at $1 par value;
issued and outstanding-none
Common-Authorized, $5 par value, June 30, 1994 and 1993,
20,000,000 shares; issued June 30, 1994,
4,987,635 shares and June 30, 1993, 4,984,255 shares 24,938 24,921
Additional paid-in capital 7,872 7,867
Retained earnings 34,048 28,412
------ ------
Total 66,858 61,200
Less common stock in treasury at cost-
June 30, 1994, 103,081 shares; June 30, 1993,
4,081 shares 1,892 49
------ ------
Total stockholders' equity 64,966 61,151
-------- --------
TOTAL $151,464 $147,189
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 27
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)
Elco Industries, Inc.
Years Ended June 30,
1994 1993 1992
Net sales $225,901 $199,179 $189,337
Cost of products sold 183,258 162,768 156,948
-------- -------- --------
Gross profit 42,643 36,411 32,389
Selling and administrative expenses 26,074 23,984 23,146
-------- -------- --------
Income from operations 16,569 12,427 9,243
Interest expense 3,162 3,701 4,688
Interest income 106 113 263
Non-operating expenses 5,091
-------- ------- --------
Income (loss) before provision for taxes, equity in
income (loss) of unconsolidated affiliate and
cumulative effect of change in accounting 13,513 8,839 (273)
Provision for taxes on income: -------- ------- -------
Current:
Federal 3,880 2,709 1,068
State 1,224 829 325
Deferred 369 174 (1,145)
-------- ------- -------
Total provision for taxes on income 5,473 3,712 248
-------- ------- -------
Income (loss) before equity in income (loss) of
unconsolidated affiliate and cumulative effect
of change in accounting 8,040 5,127 (521)
Equity in income (loss) of unconsolidated affiliate 189 (258) (649)
Cumulative effect of change in accounting ($.28 per
common share in 1992) (1,355)
------- ------- --------
Net income (loss) $8,229 $4,869 $(2,525)
======= ======= ========
Net income (loss) per common share $1.65 $.98 $(.52)
===== ===== =======
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in thousands except per share amounts)
Elco Industries, Inc.
Common Stock
-----------------------------------------
Issued In Treasury
-------------------- ------------------ Additional
Number Number Paid-In Retained
Of Shares Par Value Of Shares At Cost Capital Earnings
BALANCE, JUNE 30, 1991 4,857,102 $24,285 6,353 $76 $6,897 $31,181
Net loss (2,525)
Issued pursuant to award plans (1,272) (15) (2)
Issued pursuant to director
compensation plan 16,941 85 95
Issued as contribution to ESOP 55,000 275 422
Cash dividends-
$.52 per common share (2,537)
--------- ------- ----- --- ------ -------
BALANCE, JUNE 30, 1992 4,929,043 $24,645 5,081 $61 $7,412 $26,119
Net income 4,869
Issued pursuant to option (1,000) (12) 2
Issued pursuant to director
compensation plan 10,212 51 69
Issued as contribution to ESOP 45,000 225 384
Cash dividends-
$.52 per common share (2,576)
--------- ------- ----- --- ------ -------
BALANCE, JUNE 30, 1993 4,984,255 $24,921 4,081 $49 $7,867 $28,412
Net income 8,229
Treasury stock purchased 135,000 2,498
Issued pursuant to option plans (1,000) (12) 9
Issued pursuant to director
compensation plan 3,380 17 43
Issued as contribution to ESOP (35,000) (643) (47)
Cash dividends-
$.52 per common share (2,593)
--------- ------- ------- ------ ------ -------
BALANCE, JUNE 30, 1994 4,987,635 $24,938 103,081 $1,892 $7,872 $34,048
========= ======= ======= ====== ====== =======
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 28
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
Elco Industries, Inc.
Years Ended June 30,
1994 1993 1992
Cash flows from operating acivities:
Net income (loss) $8,229 $4,869 $(2,525)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of property, plant and equipment 9,881 9,129 8,763
Amortization of intangibles 1,100 787 598
Loss on retirement and disposal of property, plant and equipment 244 39 251
Change in assets and liabilities:
Accounts receivable (3,402) (3,479) (1,746)
Inventories (3,328) 1,233 (741)
Prepaid and other current assets (116) 203 (238)
Accounts payable (308) 2,740 682
Accrued liabilities 2,312 1,830 290
Deferred taxes on income 369 316 (2,008)
Other deferred liabilities 934 122 448
ESOP contribution from common and treasury shares 596 609 697
Equity in loss (income) of unconsolidated affiliate (189) 258 649
Provision for loss on installment notes receivable 5,091
Provision for postretirement benefit obligation 2,207
Other 768 759 23
------ ------ ------
Net cash provided by operating activities 17,090 19,415 12,441
------ ------ ------
Cash flows from investing activities:
Additions to property, plant and equipment (12,388) (9,569) (10,550)
Proceeds from retirement and disposal of
property, plant and equipment 367 414 334
Decrease in construction/project funds held in trust 2,226 2,153
Increase in other assets (303) (637) (672)
Investment in unconsolidated affiliate (250)
Advances to unconsolidated affilite (91) (7) (11)
-------- ------- -------
Net cash required for investing activities (12,415) (7,823) (8,746)
-------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt 7,000
Payments on long-term debt (10,705) (2,980) (2,209)
Payments on long-term lease obligations (31) (585) (409)
Purchase of treasury stock (2,498)
Dividends paid (2,593) (2,576) (2,537)
------- ------- -------
Net cash required for financing activities (8,827) (6,141) (5,155)
------- ------- -------
Net increase (decrease) in cash and cash equivalents (4,152) 5,451 (1,460)
Cash and cash equivalents at beginning of year 8,013 2,562 4,022
------ ------ ------
Cash and cash equivalents at end of year $3,861 $8,013 $2,562
====== ====== ======
Cash paid for:
Interest $3,342 $3,941 $5,000
Income taxes $5,620 $2,873 $1,793
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
Elco Industries, Inc.
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Elco
Industries, Inc., and its wholly-owned subsidiaries. The Company's
investment in its affiliate is accounted for under the equity method.
Inventories are carried at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) and first-in, first-out (FIFO)
methods.
Property, plant and equipment is carried at cost. Depreciation and
amortization is designed to amortize costs over the estimated service lives
or lease periods using the straight-line method. Maintenance and repairs are
charged to expense.
Deferred taxes on income is recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities
and their financial amounts at each year-end.
Intangibles, net consist of excess of cost over net assets of businesses
acquired of $6,870 and $7,103 and other intangible assets of $3,231 and
$4,098 at June 30, 1994 and 1993, respectively. Intangibles are being
amortized on a straight-line basis over useful lives ranging from 5-39 years,
subject to impairment write-offs determined by underlying cash flow.
Accumulated amortization was $4,690 and $3,591 at June 30, 1994 and 1993,
respectively.
The Company enters into interest rate swap agreements which involve the
exchange of fixed and floating rate interest payments periodically over the
life of the agreements without the exchange of the underlying principal
amounts. The difference to be paid or received is accrued as interest rates
change and is reflected currently as an adjustment to interest expense.
Net income per common share has been computed using the average number
of shares outstanding during each year.
The Company capitalizes interest costs relating to construction of
property, equipment and its investment in unconsolidated affiliate during the
affiliate's start-up period. Interest capitalized was $132, $90 and $99 for
the years ended June 30, 1994, 1993 and 1992, respectively.
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents.
In November 1992, the FASB adopted Statement No. 112, "Employers'
Accounting for Postemployment Benefits," which will be effective for the year
ended June 30, 1995 and will require accrual accounting for the estimated
cost of benefits provided to former or inactive employees after employment but
before retirement. Management has begun evaluating those benefits that may
require accrual accounting and believes that it is not likely to have a
material impact on the Company.
2. PRODUCTS AND MAJOR CUSTOMERS
The Company is a leading domestic manufacturer and supplier of
specialty metal fasteners and custom-engineered metal and plastic components
and products. The Company's operations can be classified into two segments:
A. Industrial Products-the manufacture and sale of custom-engineered and
specialty components sold primarily to original equipment manufacturers
in a variety of markets including the transportation, electrical and
electronics, fabricated metal and other industrial markets.
B. Home and Construction Products-the packaging and merchandising of a full
line of screws, nails, consumer and hobby wire, picture hanging wire
and other standard fasteners and fastening-related products for consumer
use. Also, the design, manufacture and marketing of specialty product
lines and fastening systems for the commercial construction market.
Certain financial information by industry segment follows. Since the
Company does not maintain complete financial information by segment, the
following information includes both items directly traceable to each segment
as well as an allocation to segments (based on reasonable estimates) for items
not directly traceable to a given segment. Intersegment sales are made
primarily at cost plus a markup.
Years Ended June 30,
1994 1993 1992
Net Sales
Sales to unaffiliated customers:
Industrial Products $169,078 $145,308 $133,259
Home and Construction Products 56,823 53,871 56,078
Intersegment sales:
Industrial Products 23,650 20,384 15,103
Home and Construction Products 2,725 1,957 1,731
Adjustments and eliminations (26,375) (22,341) (16,834)
-------- -------- --------
Consolidated net sales $225,901 $199,179 $189,337
======== ======== ========
Income from Operations
Industrial Products $14,589 $9,444 $5,511
Home and Construction Products 4,323 4,751 5,451
Corporate expenses (2,343) (1,768) (1,719)
------- ------- ------
Total income from operations $16,569 $12,427 $9,243
======= ======= ======
Total Assets
Industrial Products $99,868 $94,500 $91,175
Home and Construction Products 40,291 37,576 40,117
------- ------- -------
Total identifiable assets 140,159 132,076 131,292
Equity and investment in unconsolidated affiliate 1,908 1,628 1,629
Corporate assets 9,397 13,485 9,990
-------- -------- --------
Total assets at June 30 $151,464 $147,189 $142,911
======== ======== ========
Additions to Property, Plant and Equipment
Industrial Products $10,499 $8,209 $7,397
Home and Construction Products 1,889 1,360 3,153
------- ------ -------
Total additions $12,388 $9,569 $10,550
======= ====== =======
Depreciation and Amortization
Industrial Products $8,169 $7,665 $7,441
Home and Construction Products 1,712 1,464 1,322
------ ------ ------
Total $9,881 $9,129 $8,763
====== ====== ======
Page 30
Sales to the Company's largest customer are included in the industrial
products segment and totaled approximately $39,723, $33,947 and $31,426 in
1994, 1993 and 1992, respectively. Sales to the Company's second largest
customer, also included in the industrial products segment totaled
approximately $30,733, $26,769 and $28,716 in 1994, 1993 and 1992,
respectively. The Company's accounts receivable from these two customers
were approximately $7,336 and $9,077 at June 30, 1994 and 1993, respectively.
3. INVENTORIES
Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for approximately 46%
and 48% of the Company's inventories at June 30, 1994 and 1993, respectively,
and by the first-in, first-out (FIFO) method for all other inventories. The
inventories are summarized as follows:
June 30,
1994 1993
Raw materials and supplies $13,350 $11,701
Work in process 8,609 7,798
Finished goods 12,288 10,808
------ ------
34,247 30,307
Less LIFO reserve (8,595) (7,983)
------- -------
Total $25,652 $22,324
======= =======
The replacement cost of inventories at June 30, 1994 and 1993
approximates FIFO value.
4. INVESTMENT IN UNCONSOLIDATED AFFILIATE
In June 1989, Elco and Nagoya Screw Manufacturing Co., Ltd.
("Nagoya") formed a joint venture known as Rocknel Fastener, Inc.
("Rocknel"). Each company has a 50% interest in the venture and provided
the initial funding in August 1989. The following represents condensed
financial information of Rocknel as of and for the periods ended June 30,
1994, 1993 and 1992.
June 30,
1994 1993 1992
Current assets $4,585 $3,374 $3,184
Noncurrent assets 6,480 7,083 7,049
------- ------- -------
Total assets $11,065 $10,457 $10,233
======= ======= =======
Current liabilities $10,350 $10,108 $9,850
Noncurrent liabilities 25 36 56
Stockholders' equity 690 313 327
------- ------- -------
Total liabilities and equity $11,065 $10,457 $10,233
======= ======= =======
Net sales $12,198 $9,424 $8,517
Costs and expenses 11,821 9,939 9,815
------- ------ --------
Net income (loss) $377 $(515) $(1,298)
======= ====== ========
Rocknel had $5,000 of unsecured lines of credit, which were
fully utilized at June 30, 1994. The lines require no compensating balances
or commitment fees. Elco and Nagoya are each contingently liable as
guarantors of 50% of amounts used under the line.
5. OTHER ASSETS
Included in other assets is the remaining balance of notes
receivable from Acme Rivet and Machine Corp. ("Acme") of $489 and $1,336 at
June 30, 1994 and 1993, respectively. The notes receivable from Acme, which
are currently not accruing interest, are expected to be repaid from the
proceeds of the sale of its land and buildings which were collateral
associated with the notes. During 1994, the notes increased $303 as a result
of a final loan guarantee payment advanced to Acme. The notes were written
down approximately $1,150 in 1994 as the value of collateral underlying the
notes declined, primarily as a result of higher than anticipated
environmental remediation costs. Environmental cost estimates are based on
information provided by environmental consultants involved in the cleanup
efforts and reflect future cleanup costs.
See Note 15, Non-Operating Expenses, for other transactions related to
the Acme divestiture.
6. SHORT-TERM LINES OF CREDIT
At June 30, 1994, the Company had unused bank lines of credit
permitting borrowing up to an aggregate of $18,000 at the banks' corporate
base rate or at a fixed rate (at the option of the Company) as defined in the
agreements. The lines require no compensating balances or commitment fees.
The lines, generally reviewed annually for renewal, are subject to the usual
terms and conditions applied by the banks.
7. LONG-TERM DEBT
Long-term debt at June 30, 1994 and 1993 (exclusive of current
maturities) consisted of the following:
June 30,
1994 1993
Notes payable to institutional investors:
10.04% due serially 1996-2001 $25,200 $27,600
9.15% due serially 1996-1997 3,000 5,000
Economic development revenue bonds 13,500 13,500
Other 160 190
------- -------
$41,860 $46,290
======= =======
Maturities of long-term debt outstanding at June 30, 1994,
in aggregate amounts, are as follows for years ended June 30: 1995, $4,430;
1996, $4,560; 1997, $4,000; 1998, $4,100; and 1999, $6,900.
At June 30, 1994, the Company had two interest rate swap agreements.
One agreement matures on April 16, 1997 and has a notional amount of $27,600.
The notional amount incrementally decreases to $21,600 by October 16, 1996.
The agreement,
Page 31
which effectively converts the fixed-rate debt into
variable-rate debt, is indexed to the six-month LIBOR rate. The counterparty
to this aggreement is a major financial institution. The notional amount is
used to measure the volume of this agreement and does not represent exposure
to credit loss. The market risk is that the LIBOR rate, which is reset every
six months, will exceed the fixed rate of 5.93%. Payments due to or from the
counterparty are payable at the end of each six-month period.
The other agreement matures on November 2, 1996 and has a notional
amount of $7,000. The agreement, which effectively converts the fixed-rate
debt into variable-rate debt, is indexed to the six-month LIBOR rate. The
counterparty to this agreement is a major financial institution. The
notional amount is used to measure the volume of this agreement and does not
represent exposure to credit loss. The market risk is that the LIBOR rate,
which is reset every six months, will exceed the fixed rate of 4.28%.
Payments due to or from the counterparty are payable at the end of each
six-month period.
Economic development revenue bonds include four issues by two
municipalities. Two issues have interest rates varying with maturity and
average 5.2%. Those bonds, initially issued in 1988, were refunded in October
1993. The other two issues have variable interest rates which were 2.7% and
3.2% at June 30, 1994. The bonds are collateralized by either certain
property and equipment with a book value of approximately $4,398 at June 30,
1994 or collateralized by a letter of credit.
Interest expense on long-term debt, net of the interest rate swap
benefit, was recorded at a weighted-average rate of approximately 6.8% and
7.4% at June 30, 1994 and 1993, respectively.
The Company must meet certain debt covenants. Under the most
restrictive covenant, $2,657 of retained earnings at June 30, 1994 is not
restricted as to payments of dividends. The agreements include a change in
control provision which may result in a prepayment penalty and all unpaid
principal and interest due immediately.
During December 1991, the Financial Accounting Standards Board issued
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," which
will require additional disclosures regarding long-term debt and other
financial instruments. The Company must adopt SFAS No. 107 no later than
June 30, 1996. Adoption of this statement will not impact the carrying value
of the Company's assets and liabilities.
8. RETIREMENT PLANS AND POSTRETIREMENT HEALTH CARE
The Company and its subsidiaries have defined benefit and defined
contribution pension plans covering substantially all employees. The Company
also has an unfunded retirement plan for certain key employees which is being
provided for by charges to earnings sufficient to meet the benefit obligation.
Charges to consolidated income for retirement plans were as follows:
Years Ended June 30,
1994 1993 1992
Defined benefit plans $306 $177 $352
Profit sharing plans 1,413 737 351
Employee Stock Ownership Plan (ESOP) 1,200 1,300 500
------ ------ ------
$2,919 $2,214 $1,203
====== ====== ======
Actuarially computed information on net defined benefit plan costs
includes the following components:
Years Ended June 30,
1994 1993 1992
Service cost-benefits earned during the period $412 $221 $442
Interest cost on projected benefit obligation 892 975 1,061
Actual return on assets (272) (1,442) (541)
Net amortization and deferral (726) 423 (610)
----- ------ -----
$306 $177 $352
===== ===== =====
Major assumptions:
Discount rate 7.25% 7.75% 7.75%
Rate of increase in future compensation 5.00% 6.00% 6.00%
Expected long-term rate of return 8.00% 8.50% 8.50%
The following table sets forth the plans' funded status:
June 30, June 30,
1994 1993
Status of Plans Status of Plans
------------------ ------------------
Plans Plans Plans Plans
Where Where Where Where
Assets Benefits Assets Benefits
Exceed Exceed Exceed Exceed
Benefits Assets Benefits Assets
Actuarial present value of benefit obligations:
Vested benefit obligation $7,558 $847 $10,122 $915
====== ====== ======= ======
Accumulated benefit obligation $7,585 $1,860 $10,168 $1,739
====== ====== ======= ======
Plan assets at fair value $11,043 $12,550
Projected benefit obligation 8,861 1,860 11,828 1,739
------- ------ ------- ------
Plan assets in excess of (less than) projected
benefit obligation 2,182 (1,860) 722 (1,739)
Unrecognized net loss (gain) due to
changes in assumptions 400 (51) 1,860 53
Unrecognized prior service cost 51 55
Unrecognized net assets being recognized over
approximately 18 years (179) (5) (196) (6)
Minimum liability (47)
------ -------- ------ --------
Pension assets (liabilities) $2,454 $(1,916) $2,441 $(1,739)
====== ======== ====== ========
Page 32
The employer contribution to one profit sharing plan is the sum of 10%
of profits (as defined in the plan) and an additional discretionary amount
that the directors may designate. For the years ended June 30, 1994, 1993
and 1992, there was no additional discretionary amount. The employer
contribution to another profit sharing plan is discretionary as determined by
the directors.
The Company has an Employee Stock Ownership Plan (ESOP) covering
substantially all employees. Contributions may be made in cash, newly-issued
stock or treasury stock. Cash contributions may be used to purchase shares
from the Company or on the open market, depending on the Company's financing
needs and the market price of its common shares.
The fiscal 1994 contributions were made using 50% cash and 50% stock.
The fiscal 1993 contributions were made using 53% cash and 47% stock. The
fiscal 1992 contributions were made in stock.
In addition to providing pension and other supplemental benefits,
certain health care benefits are provided for eligible retired employees.
Employees become eligible for these benefits if they meet minimum age and
service requirements, are eligible for retirement benefits and contribute a
portion of the cost.
During 1992, the provisions of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" were adopted. The Statement requires companies to
accrue the expected cost of providing postretirement benefits other than
pensions over the years that employees render the necessary service rather
than the cash basis previously used. The projected benefit obligation of
$1,355 (net of tax of $852) relating to prior service cost was a non-cash
transaction recognized as a cumulative effect of accounting change as of
July 1, 1991. The total cumulative effect of this accounting change was to
decrease net earnings by $.28 per share.
The accounting for the unfunded health care plan incorporates the
pattern of cost-sharing of changes to the existing plan. The plan benefits
are discretionary and are subject to modification or termination.
The following table sets forth the plan's obligation.
June 30,
1994 1993
Accumulated postretirement benefit obligation:
Retirees $1,277 $1,290
Fully eligible active plan participants 31 30
Other active plan participants 1,428 1,138
------ ------
Accumulated postretirement benefit obligation 2,736 2,458
Unrecognized net loss from past
experience different from that assumed (336) (258)
------ ------
Total accumulated postretirement benefit liability $2,400 $2,200
====== ======
The Company has included $1,950 in other deferred liabilities and $450
in current liabilities.
Years Ended June 30,
1994 1993 1992
Service cost-benefits attributed to service
during the period $102 $72 $68
Interest cost on accumulated postretirement
benefit obligation 200 176 193
Other 4
---- ---- ----
Net periodic postretirement benefit cost $306 $248 $261
==== ==== ====
The discount rates used in determining the accumulated postretirement
benefit obligation were 8.0% and 8.5% for fiscal years 1994 and 1993,
respectively. The actuarial calculations for fiscal 1994, 1993 and 1992
assume an increase in the health care cost trend rate of 10%, 11% and 11%,
respectively. The assumed rate decreases gradually to 6% in 2051 and remains
constant beyond that point. A 1% increase in the health care trend rate
would increase the accumulated postretirement benefit obligation by $137 at
year end 1994 and the net periodic cost by $10 for the year.
9. LEASES
A summary of the Company's property under capital leases, which is
classified as property, plant and equipment in the accompanying balance
sheets, follows:
June 30,
1994 1993
Machinery and equipment $351 $410
Less accumulated amortization (337) (371)
---- -----
$14 $39
==== =====
At June 30, 1994, minimum future lease payments on all noncancelable
leases are as follows:
Capital Operating
Years ending June 30: Leases Leases
1995 $8 $2,375
1996 2,047
1997 1,443
1998 640
1999 459
Thereafter 2,349
-- ------
8 $9,313
======
Imputed interest (rates ranging from 11.5% to 15.3%) (1)
--
Present value of net minimum lease payments $7
==
Rental expense on operating leases for the years ended June 30, 1994,
1993 and 1992 approximated $3,328, $3,267 and $2,923, respectively.
Page 33
Certain leases require payments by the Company, as lessee, for
insurance, maintenance and property taxes.
10. PERFORMANCE AWARD PLAN
The Company has a long-term incentive plan under which key employees
may be granted a monetary target award. The awards are earned only to the
extent that the Company achieves predetermined performance goals during a
three-year performance period. Payment for awards earned is payable in cash
or shares of common stock, or a combination thereof, at the sole discretion of
the Board of Directors.
A maximum of 14,189 awards were earned in 1994 and were paid in
August 1994 by the issuance of 4,062 shares of common stock with the balance
paid in cash, such allocation determined by the Board of Directors.
There were no performance share awards earned in 1993 and 1992.
At June 30, 1994, a maximum of 235,443 shares remained available for
issuance under the 1988 Performance Share Plan.
The Company recognizes compensation costs attributable to the plan on a
basis that spreads estimates of such costs over the performance period. Such
costs totaled $382, $150 and $85 in 1994, 1993 and 1992, respectively.
11. STOCK OPTIONS
Under the 1991 Stock Option Plan, a non-qualified plan, 175,000
shares of the Company's common stock are reserved for issuance upon the
exercise of options granted. Options are not exercisable until five years
after date of grant.
A summary of the option transactions follows:
Number of Shares
Years Ended June 30,
1994 1993 1992
Outstanding, July 1 105,400 76,700 72,550
Granted -0- 31,100 7,900
Exercised -0- -0- -0-
Cancelled (4,700) (2,400) (3,750)
------- ------- -------
Outstanding, June 30 100,700 105,400 76,700
======= ======= =======
Exercisable, June 30 5,500 -0- -0-
======= ======= ======
The outstanding options at June 30, 1994 and 1993 had an average
exercise price of $10.91 per share, or $1,099 and $1,150 in total, respectively.
In October 1992, the Company adopted the 1992 Stock Option Plan for
Non-Employee Directors. Under the plan, 50,000 shares of the Company's
common stock are reserved for issuance to non-employee directors upon the
exercise of options granted. Options are not exercisable until six months
after the grant date.
A summary of the directors' option transactions follows:
Number of Shares
------------------------
Years Ended June 30,
1994 1993
Outstanding, July 1 7,000 -0-
Granted 8,000 8,000
Exercised (1,000) (1,000)
Cancelled -0- -0-
------ -------
Outstanding, June 30 14,000 7,000
====== =======
Exercisable 14,000 7,000
====== =======
The outstanding options at June 30, 1994 and 1993 had an average
exercise price of $15.32 and $11.75 per share, respectively, or $214 and $82
in total, respectively.
12. DIRECTOR COMPENSATION PLAN
The Company has a plan that requires the payment of the annual
retainer for non-employee directors under 60 years of age in common stock of
the Company rather than in cash. This plan also allows non-employee
directors over 60 years of age the option of receiving the annual retainer in
common stock rather than cash. The directors' rights to the shares vest over
five-year periods at the rate of 20% per year. However, each director is
entitled to receive dividends and exercise voting rights with respect to all
shares prior to vesting. Any unvested shares are forfeited if the director
ceases to be a director for any reason other than death or disability.
13. STOCKHOLDER RIGHTS PLAN
During 1988, the Company adopted and amended a Stockholder Rights
Plan and issued common stock purchase rights at the rate of one right for
each outstanding share of common stock.
Each right will entitle stockholders, other than those held by person or
group that has acquired more than 20% of the Company's voting stock without
board approval, to buy one newly-issued share of common stock of the Company
at an exercise price of $40 or, in the alternative, allows the board (by vote
of disinterested directors) to exchange rights for shares of common stock.
The rights may be exercised or exchanged only if a person or group, without
Elco board approval, acquires beneficial ownership of more than 20% of the
Company's voting stock. The Company will generally be entitled to redeem the
rights at $.025 per right at any time until 15 days following a public
announcement that a greater than 20% position has been acquired.
If the Company is involved in a merger or other business combination
transaction, without board approval, with any other person or group in which
the Company's common stock is changed or converted, or sells 50% or more of
the Company's
Page 34
assets or earning power to any other person or group, each
right entitles its holder to purchase, at the right's exercise price, shares
of common stock of such other person having a value of twice the right's then
current exercise price.
In addition, if without Elco board approval, any person or group becomes
the beneficial owner of more than 20% of the Company's voting stock, then
each right not owned by such other person or related parties entitles its
holder to purchase, at the right's then current exercise price, shares of
common stock of Elco with a market value of twice the right's then current
exercise price.
In August 1989, the Company's Board of Directors approved an agreement
with Okabe Company Limited permitting Okabe to increase its ownership to not
more than 21% of the Company's outstanding shares provided that, for a period
of 10 years, Okabe will limit its ownership to no more than 21%. Because the
Company's board approved this increase, Okabe's cumulative purchases of
amounts of not more than 21% will not trigger the Company's Stockholder
Rights Plan.
On June 15, 1994, the Company purchased 135,000 shares of its common
stock for $2,498 from Okabe Company Limited. The purchase was pursuant
to the terms of a share purchase agreement dated as of June 7, 1994, which,
in addition to such purchase, provided that if requested by Okabe, the
Company would file a registration statement for an underwritten public
offering of Okabe's remaining shares no later than September 1, 1994 (or as
soon thereafter as practicable), Okabe will not solicit offers to buy its
remaining shares of the Company in private transactions until the earlier of
November 15, 1994 or five business days following the effective date of such
registration statement, and Okabe is permitted to sell up to 25,000 of its
remaining shares of the Company per month on NASDAQ without first offering
such shares to the Company as required by a letter agreement dated
June 27, 1989 between the Company and Okabe. Okabe did not request of the
Company by September 1, 1994 that a registration statement be filed.
No other stockholder beneficially owns, to the knowledge of the Company,
more than 5% of the Company's Common Stock.
14. TAXES ON INCOME
Taxes on income differed from calculations at the U.S. Federal
statutory rate as follows:
Years Ended June 30,
1994 1993 1992
Federal income tax at statutory rate $4,630 $3,005 $(93)
Add (deduct):
State income taxes, net of
Federal tax benefit 796 547 171
Amortization of excess of cost over net
assets of businesses acquired 95 105 109
Other items, net (48) 55 61
------ ------ ----
Total provision $5,473 $3,712 $248
====== ====== ====
Included in the cumulative effect of changes in accounting is $852 of
deferred income taxes for 1992. The income tax for the 1992 accounting
change has been provided at a rate higher than the Federal statutory rate to
provide for State income taxes.
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
The primary effect of adoption on the Company is that the balance sheet
classification of deferred taxes now corresponds to the related assets or
liability. Under the previous method, the balance sheet classification of
deferred taxes was based on when the temporary differences between financial
reporting and tax reporting were expected to reverse. The effect of the
change on net income was immaterial to the Company. Accordingly, no
cumulative adjustment for the adoption of SFAS 109 was required.
The components of the Company's net deferred tax liability as of
June 30, 1994 were as follows:
Taxable temporary differences:
Depreciation $(9,185)
Other (1,117)
--------
Total taxable temporary differences (10,302)
Deductible temporary differences 5,335
Valuation allowance (1,095)
--------
Net deferred tax liability $(6,062)
========
For 1993 and 1992, the provision (credit) for taxes payable in
future years, arising from the temporary differences between the financial
statement and tax bases of assets and liabilities, at the tax rates in effect
when these differences are expected to reverse, are as follows:
Years Ended June 30,
1993 1992
Depreciation $(219) $(225)
Retirement and performance award plans (147) (75)
Tax credit usage (carry forwards) 693 (765)
Vacation pay (52) (219)
Inventory reserves (69) 194
Workers compensation/product liability insurance (84) (67)
Accounts receivable reserves (48) (33)
Other items, net 100 45
------ --------
Total $174 $(1,145)
====== ========
15. NONOPERATING EXPENSES
The Company divested Acme Rivet and Machine Corp. ("Acme") in
June 1986 and as partial payment received promissory notes. During 1992, the
Company incurred non-operating expenses of $5,091 to reflect the reduced
value of notes and related collateral for the promissory notes received.
Page 35
16. CONTINGENCIES
The Company is currently involved in matters of litigation arising
from the normal course of business, including certain environmental and
product liability matters. At June 30, 1994, the Company had accruals of
approximately $1,100 (approximately $900 at June 30, 1993) with respect to
such matters based on the Company's current estimate of the most likely
amount of losses that it believes will be incurred. These amounts, which
are expected to be paid over the next several years, have been included in
current and other deferred liabilities. The most significant portion of this
accrual relates to the following two paragraphs.
The Company, together with other parties, has been designated a
"potentially responsible party" (PRP) by the United States Environmental
Protection Agency (USEPA) with respect to the cost of investigation and
cleanup of a third-party site in Illinois. Certain removal and other interim
remediations have been completed and paid for by the PRPs. The Company's
current accrual for this matter is based on the percentage of costs incurred
to date that have been allocated to the Company and its estimate of the most
likely future investigation and cleanup costs. At June 30, 1994, the Company
has separately recorded a receivable related to this matter of approximately
$300 for the amount it believes is probable of recovery under insurance
contracts.
The Company is also a third-party defendant in a federal enforcement
action brought by the USEPA against several other primary defendants. The
Company's accrual for this matter is based on a settlement offer proposed
in July 1994.
It is the opinion of management, after consultation with counsel, that
additional liabilities, if any, resulting from litigation matters are not
expected to have a material adverse effect on the financial condition of the
Company, although such matters could have a material effect on quarterly or
annual operating results when (or if) resolved in a future period.
In January 1994, the USEPA notified the Company that it is one of over
300 PRPs with respect to the old Southington Landfill Superfund Site in
Southington, Connecticut. Elco was identified as a successor to a company
that allegedly used the site. The USEPA has not yet selected a plan of
remediation for the site. The Company has insufficient information to
determine its potential exposure in connection with the site, when (or if) it
will incur such costs and the ultimate impact of the costs upon the Company's
financial condition and results of operations.
Page 36
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Elco Industries, Inc. is responsible for the preparation
and integrity of the Company's financial statements. These financial
statements have been prepared in accordance with generally accepted
accounting principles and include the use of management's reasonable and
prudent judgments and estimates where necessary. All other financial data in
this report have been presented on a basis consistent with the information
included in the financial statements.
Elco maintains a system of internal accounting controls, policies and
procedures designed to provide reasonable assurance that its financial
records are materially accurate, that the assets of the Company are
protected and that the financial statements present fairly the financial
position and results of operations of the Company. The Company also
maintains an internal auditing function that evaluates the adequacy and
effectiveness of such internal accounting controls, policies and procedures.
Four directors of the Company, not members of management, serve as the
Audit Committee of the Board of Directors and meet periodically with the
independent and internal auditors and with management to review accounting,
auditing and financial reporting matters. The Audit Committee, the
independent auditors and the internal auditors have unrestricted access to
one another.
The Company's independent auditors, Coopers & Lybrand, L.L.P.,
audited the financial statements prepared by the management of Elco
Industries, Inc. Their opinion on these statements is presented on the
following page.
John C. Lutz August F. DeLuca
John C. Lutz August F. DeLuca
President Vice President-Finance
Chief Executive Officer Chief Financial Officer
Page 37
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Elco Industries, Inc.
We have audited the accompanying consolidated balance sheets of Elco
Industries, Inc. and Subsidiaries as of June 30, 1994 and 1993, and the
related statements of consolidated income, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 Elco
Industries, Inc. and Subsidiaries as of June 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the financial statements, the Company changed
its method of accounting for postretirement benefits in 1992.
Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Rockford, Illinois
August 5, 1994
Page 38
QUARTERLY FINANCIAL DATA
(Dollars and shares in thousands except per share amounts)
Elco Industries, Inc.
Selected unaudited quarterly financial information for the years
ended June 30, 1994 and 1993 follows:
1st 2nd 3rd 4th
QUARTER QUARTER QUARTER QUARTER TOTAL
1994:
Net sales $52,877 $53,439 $57,692 $61,893 $225,901
Gross profit 10,813 9,772 10,992 11,066 42,643
Income from operations 4,092 3,588 4,417 4,472 16,569
Income before equity in income (loss) of
unconsolidated affiliate 1,944 1,636 2,145 2,315 8,040
Equity in income (loss) of
unconsolidated affiliate (19) 2 94 112 189
Net income 1,925 1,638 2,239 2,427 8,229
Net income per common share .39 .33 .45 .49 1.65
Dividends per common share .13 .13 .13 .13 .52
Average shares outstanding 4,980 4,983 4,984 4,963 4,977
1993:
Net sales $46,625 $46,928 $50,735 $54,891 $199,179
Gross profit 8,468 8,170 9,631 10,142 36,411
Income from operations 2,660 2,292 3,521 3,954 12,427
Income before equity in loss of
unconsolidated affiliate 950 811 1,542 1,824 5,127
Equity in loss of
unconsolidated affiliate -0- (104) (67) (87) (258)
Net income 950 707 1,475 1,737 4,869
Net income per common share .19 .14 .30 .35 .98
Dividends per common share .13 .13 .13 .13 .52
Average shares outstanding 4,947 4,956 4,959 4,964 4,956
Page 39
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Dollars and shares in thousands except per share amounts)
Elco Industries, Inc.
Compound Growth Rate
Years Ended June 30 5-Year 10-Year 1994 1993 1992 1991 1990
Operating Results:
Net sales 7.8% 8.5% $225,901 $199,179 $189,337 $156,391 $150,706
Income from operations 3.4% 4.5% 16,569 12,427 9,243 6,372 11,144
Net income (loss) 1.0% 5.1% 8,229 4,869 (2,525) 195 4,819
Depreciation and amortization 11.7% 11.5% 9,881 9,129 8,763 7,997 6,586
Additions to property, plant and equipment (1.4%) 5.9% 12,388 9,569 10,550 10,776 15,966
Average number of employees 4.6% 4.7% 1,971 1,833 1,755 1,608 1,585
Per Share of Common Stock:
Net income (loss) -- 2.0% $1.65 $.98 $ (.52) $ .04 $1.01
Dividends 1.6% 4.3% .52 .52 .52 .52 .52
Stockholders' equity .8% 4.1% 13.30 12.28 11.80 12.84 13.32
Average shares outstanding .9% 3.1% 4,977 4,956 4,876 4,850 4,789
Dividends paid 2.5% 7.6% $2,593 $2,576 $2,537 $2,523 $2,488
Balance Sheet:
Current assets 5.4% 7.5% $64,814 $61,231 $53,938 $52,517 $41,450
Current liabilities 10.4% 11.4% 31,434 28,729 23,669 21,723 23,147
Working capital 1.7% 4.8% 33,380 32,502 30,269 30,794 18,303
Property, plant and equipment-net 5.2% 9.8% 69,317 67,421 67,434 66,232 63,025
Total assets 5.4% 9.2% 151,464 147,189 142,911 147,866 127,746
Long-term debt 10.5% 16.2% 41,860 46,290 49,995 52,975 28,184
Long-term lease obligations 7 357 732 1,032
Stockholders' equity 1.5% 7.1% 64,966 61,151 58,115 62,287 64,538
Selected Ratios:
Operating margin 7.3% 6.2% 4.9% 4.1% 7.4%
Return on sales 3.6% 2.4% (1.3%) .1% 3.2%
Current ratio 2.1 to 1 2.1 to 1 2.3 to 1 2.4 to 1 1.8 to 1
Return on beginning equity 13.5% 8.4% (4.1%) .3% 8.0%
Return on beginning assets 5.6% 3.4% (1.7%) .1% 4.1%
Notes to Eleven-Year Summary
Results for the year ended June 30, 1992 include the effects of
adopting Financial Accounting Standards Board Statement No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions."
Results for the year ended June 30, 1990 include the effects of adopting
Financial Accounting Standards Board Statement No. 96, "Accounting for Income
Taxes."
Results of operations, assets and liabilities of Thermoplastics, Inc.,
Anchor Wire Corporation and Bear-Kat Products are included since April 1985,
April 1986 and May 1991, respectively.
Results of operations, assets and liabilities of Acme Rivet and Machine
Corp. are included through divestiture in June 1986.
Page 40
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
(Dollars and shares in thousands except per share amounts)
Elco Industries, Inc.
Years Ended June 30 1989 1988 1987 1986 1985 1984
Operating Results:
Net sales $155,390 $140,526 $127,989 $125,668 $108,802 $100,109
Income from operations 14,016 13,795 11,607 10,861 11,151 10,646
Net income (loss) 7,843 7,736 4,010 5,070 5,410 4,982
Depreciation and amortization 5,683 5,152 4,760 4,615 3,741 3,333
Additions to property, plant and equipment 13,302 9,433 8,747 11,048 8,979 6,955
Average number of employees 1,574 1,514 1,558 1,545 1,325 1,243
Per Share of Common Stock:
Net income (loss) $1.65 $1.63 $.85 $1.08 $1.41 $1.36
Dividends .48 .44 .42 .40 .36 .34
Stockholders' equity 12.79 11.64 10.66 10.22 9.54 8.92
Average shares outstanding 4,762 4,753 4,697 4,673 3,845 3,660
Dividends paid $2,289 $2,090 $1,974 $1,870 $1,408 $1,245
Balance Sheet:
Current assets $49,768 $45,668 $40,202 $36,267 $39,554 $31,558
Current liabilities 19,140 16,998 15,032 12,797 12,290 10,649
Working capital 30,628 28,670 25,170 23,470 27,264 20,909
Property, plant and equipment-net 53,765 46,437 42,289 38,607 34,964 27,150
Total assets 116,245 103,348 94,607 89,472 80,880 63,020
Long-term debt 25,390 20,095 20,297 19,998 13,400 9,300
Long-term lease obligations 1,341 1,642 1,945 2,264 5,580 5,891
Stockholders' equity 60,260 55,735 50,136 47,785 44,488 32,668
Selected Ratios:
Operating margin 9.0% 9.8% 9.1% 8.6% 10.2% 10.6%
Return on Sales 5.0% 5.5% 3.1% 4.0% 5.0% 5.0%
Current ratio 2.6 to 1 2.7 to 1 2.7 to 1 2.8 to 1 3.2 to 1 3.0 to 1
Return on beginning equity 14.1% 15.4% 8.4% 11.4% 16.6% 17.2%
Return on beginning assets 7.6% 8.2% 4.5% 6.3% 8.6% 9.1%
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STOCK PRICES AND OTHER MARKET INFORMATION
The common stock of Elco Industries, Inc. is traded in the
Over-The-Counter market. It is included in the NASDAQ National Market System
under the symbol ELCN. The table below sets forth the high and low bid
prices as reported by NASDAQ and sets forth cash dividends paid per share of
common stock.
As of September 6, 1994, Elco Industries, Inc. had approximately 785
record holders of common stock. Included in this number are shares held in
nominee or street name.
Payment of dividends is subject to certain restrictions described in
Note 7 of Notes to Consolidated Financial Statements. At June 30, 1994,
approximately $2,657 million of retained earnings are not subject to
restrictions.
Fiscal 1994 Fiscal 1993
--------------------------- --------------------------
Quarter Ended High Low Dividend High Low Dividend
- - ------------- ------ ------ -------- ------ ------ --------
September 30 16 14 $.13 12-1/2 1 $.13
December 31 20-3/4 15-1/8 .13 12-1/2 9-1/2 .13
March 31 21-1/4 17 .13 13 10 .13
June 30 20 17 .13 15 13-3/4 .13
---- ----
Total Dividend $.52 $.52
==== ====
Such over-the-counter market quotations reflect interdealer prices, without
retail markup, markdown or commission, and may not necessarily represent
actual transactions.
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