SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
or
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number: 0-3585
EVEREST & JENNINGS INTERNATIONAL LTD.
(Exact name of Registrant as specified in its charter)
Delaware 95-2536185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4203 Earth City Expressway, Earth City, Missouri 63045
(Address of principal executive offices)
Registrant's telephone number, including area code: (314) 512-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $.01 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
the filing requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
As of March 15, 1996, there were 72,280,646 shares of Common Stock
outstanding. The market price of the Common Stock was $0.375 per share,
and the aggregate market value of Common Stock held by nonaffiliates was
$5,432,082 on that date. For this reporting purpose, all shares held by
executive officers, directors, 5% stockholders and their respective
affiliates are considered to be held by affiliates, but neither the
registrant nor such persons concede that they are affiliates of the
registrant.
Portions of the Company's definitive proxy materials to be filed in
connection with the 1996 annual meeting are incorporated by reference into
Part III.
INDEX TO ANNUAL REPORT
ON FORM 10-K
Page
----
PART I
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Executive Officers of the Company 9
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 48
PART III
Item 10. Directors and Executive Officers of the Registrant 48
Item 11. Executive Compensation 48
Item 12. Security Ownership of Certain Beneficial Owners
and Management 48
Item 13. Certain Relationships and Related Transactions 48
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 49
Signatures 53
Financial Statement Schedule 54
PART I
ITEM 1. BUSINESS
General Development of Business and Company Strategy
Everest & Jennings International Ltd. ("E&J" or the "Company") through
its subsidiaries manufactures wheelchairs and distributes homecare beds.
Effective in the fourth quarter of 1993, the Company adopted a plan to
dispose of its hospital and nursing home bed and institutional casegoods
businesses (the "Institutional Business") of its wholly-owned subsidiary,
Smith & Davis Manufacturing Company ("Smith & Davis"), and recorded a
reserve of $13 million to write down the assets of the Institutional
Business to their estimated net realizable values and for the estimated
operating losses during the phase out period and the estimated costs of
disposition. See Note 2 - Restructuring Expenses, and Note 4 - Assets Held
for Sale, of the Notes to the Consolidated Financial Statements included in
Item 8 of this Form 10-K. Pursuant to an Asset Purchase Agreement dated
February 15, 1995, the Company sold its Institutional Business effective
April 4, 1995. In connection with the sale of the Institutional Business,
the Company entered into an agreement with the purchaser to supply the
Company's requirements for homecare bed products. Smith & Davis also held
a small position in the oxygen therapy market which the Company sold
effective August 9, 1995.
The Company is one of the larger manufacturers of wheelchairs in the
United States and, with its Canadian and Mexican subsidiaries, holds a
material share of the North American market.
Since 1989 the Company has incurred substantial financial losses in a
continuing effort to restructure its operations with the objective of
improving its competitive position within the durable medical equipment
industry. Restructuring activities to date have included asset sales,
significant reductions in headcount, salaries and fringe benefits, plant
closures and consolidations, product line rationalization, debt to equity
conversion and outsourcing of manufacturing operations. In 1992 the
Company relocated its corporate headquarters and principal wheelchair
manufacturing operations from California to Missouri. The relocation
facilitated the consolidation of corporate offices and other key
administrative, sales/marketing, and technical functions with existing
Company operations in the St. Louis area. In October 1993, the Company
transferred its data processing operations from California to Missouri,
which represented the final step in the Company's relocation. In April
1995, the Company sold the Institutional Business of its Smith & Davis
subsidiary. The process of lowering costs is ongoing as the Company
intends to increase the outsourcing of product parts and components and
further consolidate its manufacturing and distribution facilities. The
Company is striving to become a low cost producer with respect to all of
its products, while maintaining its reputation for quality products.
Background
The Company is a Delaware corporation, formed in 1987 by the
reincorporation of Everest & Jennings International, a California
corporation formed in 1967 for the purpose of acquiring and holding all of
the stock of Everest & Jennings, Inc. and the stock of certain subsidiary
companies. Everest & Jennings, Inc., the Company's principal subsidiary,
was formed in 1946 through the incorporation of a partnership originally
established in 1932 by Herbert A. Everest and Harry C. Jennings, Sr.
Messrs. Everest and Jennings pioneered the design and production of folding
wheelchairs.
The Company had its initial public offering of common stock in 1968.
Its common stock was traded on the NASDAQ National Market System until 1980
when the common stock became listed on the American Stock Exchange.
In a series of transactions since 1991, BIL (Far East Holdings) Limited
(collectively, with its affiliates, "BIL") has acquired control of the
Company through the acquisition, on a fully diluted basis, of approximately
85.54% of the voting securities of the Company. As of March 30, 1996, BIL
beneficially owned the following securities of the Company:
Class Number of Shares Percent
----- ---------------- -------
Common Stock 57,799,352 80%
Series A Preferred Stock 7,867,842 100%
Series B Preferred Stock 786,357 100%
Series C Preferred Stock 20,000,000 100%
Each share of the Series A, B and C Preferred Stock is convertible into
one share of Common Stock and is entitled to vote with the Common Stock on
an as converted basis. See Note 6 - Debt Restructuring and Conversion,
Note 7 - Debt and Note 10 - Common and Preferred Stock, of the Notes to the
Consolidated Financial Statements included in Item 8 of this Form 10-K
The Company's principal subsidiaries include Everest & Jennings, Inc.
located in St. Louis County, Missouri; Everest & Jennings Canadian Limited
located in Toronto, Canada; Everest & Jennings de Mexico, S.A. de C.V.
located in Guadalajara, Mexico; and Smith & Davis Manufacturing Company,
which is also located in St. Louis County, Missouri. Each of the Company's
subsidiaries manufactures wheelchairs and wheelchair parts, with the
exception of Smith & Davis. Smith & Davis has continued to sell homecare
beds after the sale of the Institutional Business. The Company owned a
30% interest in a joint venture in Indonesia which it sold in January 1996.
The sale did not have a material impact on the consolidated financial
statements. An affiliate of the joint venture partner supplies wheelchair
parts and components to the Company for assembly into finished products in
the United States.
Industry Overview
All of the Company's products can be characterized as durable medical
equipment. Third party reimbursement through private or government
insurance programs and managed care programs impact a significant component
of the Company's business. The market for and the pricing of wheelchairs
and beds is influenced by such programs. As a result, reductions or
cutbacks in Medicare, state reimbursement or private insurance programs for
the purchase or rental of durable medical equipment may adversely affect
the Company's business. However, the Company's business is favorably
impacted by medical progress in rehabilitating the seriously injured and
disabled and by the demographics of longer life spans.
Wheelchairs
The Company designs, manufactures and markets wheelchairs in North
America. The wheelchair market is divided into two primary categories --
rehabilitation and homecare.
The rehabilitation market is characterized by individual needs, ongoing
product innovation and government reimbursement levels. Rehabilitation
products are more sophisticated, command higher prices and support a higher
price margin structure. Most rehabilitation chairs are sold through a core
group of 400 "Rehab" dealers working in conjunction with therapists who
prescribe the products for end users.
The homecare market is characterized by lower priced, commodity
products and includes significant institutional sales. Typically, end
users are geriatrics, those temporary disabled or individuals with limited
access to funding. The Company's homecare chairs are sold directly through
approximately 4,000 homecare dealers as well as selected distributors.
The Company develops, designs, manufactures and markets state-of-the-
art wheelchairs including ultra-lightweight wheelchairs in the Company's
Vision product line. The Company continues to invest in the development
of its rehabilitation wheelchair lines, both power and manual, with primary
focus on products that are well matched to user needs and reimbursement
levels and are easier to manufacture and support.
Market Information -- Management estimates that the aggregate domestic
wheelchair market approximates $350 million with the total North American
market slightly larger at approximately $425 million. The Company believes
it has a material share of these combined markets.
Competition -- The Company, Invacare Corporation and Sunrise Medical
Inc. are the primary competitors in the wheelchair business. In addition,
there are a range of smaller competitors. Competition for sales of
wheelchairs is intense and is based on a number of factors including
quality, reliability, price, financing programs, delivery and service. The
Company believes its products' quality, reputation and recent technological
advances are favorable factors in competing with other manufacturers.
Homecare Beds
Homecare beds are sold to the same homecare dealer network that
purchases homecare wheelchairs. A patient who is discharged from a
hospital or other institution may rent a homecare bed to aid in their
recovery. Accordingly, dealers primarily retain homecare beds in a rental
fleet.
Market Information -- Management estimates that the aggregate domestic
market for homecare beds is approximately $60 million. The Company
believes it has a material share of the domestic homecare bed market.
Competition -- The Company, Invacare Corporation, Sunrise Medical, Inc.
and Fuqua Enterprises, Inc. are the largest suppliers of homecare beds to
the industry. Competition for sales of homecare beds is intense and is
based primarily on price.
International Operations
The Canadian market is served through the Company's Canadian
subsidiary, while the Central and South American markets are served through
Everest & Jennings de Mexico. The Company has not placed great emphasis on
expanding its markets beyond North America. Substantially all export sales
of the Company's products manufactured in the United States are denominated
in United States dollars although such sales are immaterial to consolidated
revenues.
Sales and Distribution
The Company's homecare products are marketed in the United States and
Canada by approximately 4,000 non-exclusive dealers and national accounts
who, in turn, sell the products to consumers. The support and servicing of
these dealers and national accounts are the responsibility of the Company's
trained sales staff operating within the United States and Canada. The
Company also uses manufacturer's representatives and distributors in
selected geographic areas and market segments as appropriate. The Company
also sells directly to United States and Canadian government agencies. In
Mexico, the Company's products are marketed through its own dealer network
system as well as through independent non-exclusive dealers. No dealer or
distributor domestically or internationally represents more than 10% of the
Company's total sales.
The Company's rehab sales representatives conduct training activities
for the benefit of its dealers and their personnel and for physical and
occupational therapists. This training is primarily concerned with the
features and benefits of the Company's rehab products, and the training
also covers the proper fitting and use of wheelchairs and related
equipment. The Company advertises in trade publications and its
representatives attend trade shows and similar conventions as a method of
displaying product lines to doctors, therapists and others.
Finished goods inventories are maintained in several public warehouses
strategically located throughout the United States. The Company
manufactures its basic homecare products for stock and maintains
inventories at such warehouses and its St. Louis manufacturing facility for
sale; however, a substantial portion of the Company's rehab wheelchair
products are built-to-order and are not maintained as stock.
Raw Materials
The Company purchases a variety of raw materials and components, and
has entered into supply agreements to purchase certain of these items from
single suppliers. A change in suppliers could cause a delay in
manufacturing; however, the Company believes that numerous alternative
supply sources are available for all such materials.
Product Development, Engineering and Patents
The Company continuously seeks to improve the quality, performance and
reliability of its products to enhance its competitive position in its
industry and to develop new products to meet the needs of its customer
base. The Company has a design staff and research and development ("R&D")
organization, the Everest & Jennings Design Center, in northern California.
This Center is responsible for new product design for the Company. During
the years ended December 31, 1995, 1994 and 1993, the Company spent $1.1
million, $1.9 million and $10.8 million, respectively, on Company sponsored
research and development activities.
Employees
As of March 15, 1996, the Company had 729 full-time and full-time
equivalent employees, comprised of 510 in manufacturing, 16 in research and
development, 157 in sales and customer service, and 66 in general and
administrative functions. A total of 288 of the Company's employees
located in Missouri, Canada and Mexico are covered by collective bargaining
agreements. The Company considers its labor relations to be satisfactory.
Financial Information
The Company's operations consist of the manufacture and sale of durable
medical equipment. The percentage of the Company's consolidated revenues
contributed by each class of similar products which accounted for ten
percent or more of such consolidated revenues in any of the last three
fiscal years is as follows:
Years Ended December 31
-----------------------
1995 1994 1993
Wheelchairs 80% 80% 65%
Institutional beds and furniture -0-% -0-% 18%
Homecare beds 14% 11% 12%
ITEM 2. PROPERTIES
The Company owns or leases manufacturing facilities located in the
United States, Canada and Mexico. The Company believes that these
facilities are generally adequate for its operations and are in reasonably
good operating condition. The Company's principal wheelchair manufacturing
operations are located in a 147,000 square foot leased facility in St.
Louis, Missouri.
Owned Leased
----- ------
(Square footage)
Everest & Jennings, Inc.:
St. Louis, Missouri -- 178,000
Other locations -- 2,500
Smith & Davis Manufacturing Co. 65,570 --
Everest & Jennings Canadian Ltd.:
Toronto, Canada 67,000 5,000
Everest & Jennings de Mexico S.A. de C.V.:
Guadalajara, Mexico 63,000 --
Other locations -- 15,000
------- -------
195,570 200,500
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various lawsuits and
other proceedings, including a stockholder class action which seeks
unspecified damages for alleged non-disclosure and misrepresentation
concerning the Company in violation of federal securities laws, various
environmental lawsuits and proceedings and various product liability and
other lawsuits and proceedings arising out of the Company's businesses.
Although the ultimate outcome of these actions cannot be determined with
certainty at this time, the Company has provided for those actions deemed
by management to be most likely of potential adverse disposition. Although
further liabilities of indeterminate amounts may be imposed against the
Company, after considering the relevant facts and the opinions of outside
counsel, it is the opinion of management of the Company that the ultimate
resolution of such lawsuits and proceedings will not in the aggregate have
a material adverse effect on the Company's consolidated financial position
or results of operations.
See Note 13 - Contingent Liabilities, of the Notes to the Consolidated
Financial Statements in Item 8 of this Form 10-K for a description of
certain pending lawsuits and proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished pursuant to General Instruction
G(3) of Form 10-K with respect to the executive officers of the Company:
Positions or Offices Position With the
Name Age With the Company Company Since
---- --- -------------------- -----------------
Bevil J. Hogg 47 President and 1994
Chief Executive Officer
Timothy W. Evans 45 Senior Vice President, 1994
Chief Financial Officer
and Secretary
The following are brief summaries of the business experience during the
past five years of each of the executive officers:
Bevil J. Hogg joined the Company as Executive Vice President on January
14, 1994 following the Company's acquisition of Medical Composite
Technology, Inc. ("MCT"), a wheelchair designer and manufacturer, and
was elected President and Chief Executive Officer on January 21, 1994.
He served as chief executive officer of MCT from December, 1992 until
its acquisition by the Company, and as chief executive officer of Cycle
Composite, Inc., a bicycle manufacturing company, from 1986 to
December, 1992.
Timothy W. Evans joined the Company in 1993 as its Controller, was
elected Vice President, Chief Financial Officer and Secretary on
September 20, 1994, and was elected Senior Vice President on July 25,
1995. Prior to joining the Company, Mr. Evans spent over ten years in
various financial functions with Chromolloy America Corporation, a
large diversified company.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The following table sets forth the high and low sales prices of the
Company's Common Stock for each quarter in the two-year period ended
December 31, 1995. The Company's Common Stock is listed on the American
Stock Exchange under the symbol of EJ. Discussions between the Company and
The American Stock Exchange as to the continued listing are ongoing.
Common Stock
High Low
---- ---
Fiscal year ended 12/31/95
1st Quarter 11/16 7/16
2nd Quarter 11/16 1/2
3rd Quarter 1 1/2
4th Quarter 15/16 7/16
Fiscal year ended 12/31/94
1st Quarter 1 7/16 5/8
2nd Quarter 1 3/16 7/8
3rd Quarter 1 5/8
4th Quarter 13/16 7/16
As of March 15, 1996, there were approximately 1952 shareholders of
record of the Company's Common Stock, and the closing price of the Common
Stock was $3/8 on that date.
No dividends on the Company's Common Stock were paid in either 1995 or
1994. Management does not currently anticipate paying cash dividends on
its Common Stock in the foreseeable future. The determination of future
cash dividends to be declared and paid on the Common Stock, if any, will
depend upon the Company's financial condition, earnings and cash flow from
operations, the level of its capital expenditures, its future business
prospects and other factors that the Board of Directors deems relevant.
The Company is currently prohibited from paying cash dividends on its
Common Stock under covenants contained in the debt agreements with its
principal lenders.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included in Item 8
of this Annual Report on Form 10-K. The following information should not
be deemed indicative of future operating results of the Company.
Year Ended December 31
------------------------------------------
1995(e) 1994(e) 1993 1992 1991
------- ------- ---- ---- ----
(Dollars in thousands, except per-share amounts)
STATEMENT OF OPERATIONS DATA:
Revenues $74,627 $79,438 $ 94,459 $107,115 $118,924
Cost of sales 58,597 65,888 83,825 89,816 89,937
------ ------ ------ ------- -------
Gross profit 16,030 13,550 10,634 17,299 28,987
Selling expenses 12,129 14,333 29,541(a) 18,302 16,414
General and admini-
strative expenses 5,527 6,519 16,441 9,275 14,638
Restructuring expenses -- -- 15,104(b) 5,150(b) 18,524(b)
------ ------ ------ ------- -------
Total operating
expenses 17,656 20,852 61,086 32,727 49,576
------ ------ ------ ------- -------
Operating loss (1,626) (7,302) (50,452) (15,428) (20,589)
------ ------ ------ ------- -------
Other income (expense):
Interest expense, net(3,730) (2,619) (5,072) (4,981) (3,887)
Earnings in European
operations -- -- -- -- 1,189(c)
Gain (loss) on sale of
European operations -- -- -- (240)(c) 6,600(c)
------ ------ ------ ------- -------
Other income
(expense), net (3,730) (2,619) (5,072) (5,221) 3,902
Loss before income
taxes (5,356) (9,921) (55,524) (20,649) (16,687)
Income tax provisions
(benefits) 96 (162) 173 (1,737)(d) 377
------ ------ ------ ------- -------
Net loss $ (5,452) $ (9,759) $(55,697) $(18,912) $(17,064)
Loss per share $(0.08) $(0.14) $(5.96) $(2.07) $(1.87)
Weighted average number
of Common Shares
outstanding 72,272,808 72,201,207 9,343,868 9,146,000 9,146,000
(f)
BALANCE SHEET DATA (at December 31):
Total assets $48,230 $61,569 $59,217 $69,459 $82,921
Total debt 47,946 42,626 30,296 58,555 54,168
Total stockholders'
deficit (23,132) (16,181) (7,008) (30,798) (21,453)
(a) Includes $9,764 of in-process research and development expense related
to the acquisition of Medical Composite Technology, Inc. See Note 5 -
- Acquisition, of the Notes to the Consolidated Financial Statements
in Item 8.
(b) As more fully explained in Note 2 -- Restructuring Expenses, of the
Notes to the Consolidated Financial Statements in Item 8 of this Form
10-K, the Company recorded $15,104 as a restructuring charge in 1993
for the consolidation of manufacturing and distribution facilities in
the United States and Canada and for the sale or other disposition of
the Smith & Davis Institutional Business. The Company recorded a
$5,150 restructuring charge in 1992 to provide for additional costs
associated with the consolidation of its domestic manufacturing and
corporate headquarters, including the closure and relocation of the
Company's principal domestic wheelchair manufacturing operation and
international headquarters from California to Missouri. In 1991, the
Company recorded a restructuring charge of $18,524 for this purpose.
(c) Effective December 31, 1990, the European subsidiaries were designated
as subsidiaries held for sale. Accordingly, their results of
operations have been reflected on the equity method in 1991. See Note
3 -- Summary of Significant Accounting Policies, of the Notes to the
Consolidated Financial Statements in Item 8 of this Form 10-K.
(d) During 1992 the Company resolved certain disputed issues with the
California Franchise Tax Board for the years 1975 through 1983. As a
result of agreements reached, assessments including related accrued
interest in the aggregate amount of $1.8 million were withdrawn and
credited to the income tax provision.
(e) Revenues of the Institutional Business and related costs were included
in the consolidated results of operations of the Company in years
prior to 1994. At December 31, 1993 the related assets of the
Institutional Business were classified as held for sale and the
results of its operations for 1994 through the sale date in 1995 were
aggregated and charged to accrued restructuring expenses in the
consolidated balance sheet. By Agreement dated February 15, 1995, the
Company sold the Institutional Business effective April 4, 1995.
(f) See Note 6 - Debt Restructuring and Conversion, of the Notes to the
Consolidated Financial Statements included in Item 8 of this Form 10-
K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
In recent years, the Company has undergone an extensive restructuring
of its operations with the objective of improving its competitive position
within the durable medical equipment industry. The restructuring was
designed to reduce costs and the eliminate excess manufacturing capacity.
Asset sales were undertaken to generate cash to partially finance
restructuring activities and reduce debt levels. Credit facilities were
modified or expanded as needed to partially fund the overall restructuring,
in addition to contributing to the funding of the Company's operations.
In early 1992 the Company announced its intention to consolidate its
domestic wheelchair manufacturing operations and corporate headquarters by
relocating its California-based manufacturing and corporate offices to
Missouri by the end of 1992. This decision was made to further reduce
costs through the consolidation of administrative and support functions
with existing operations in Missouri. The relocation from California was
begun in the second quarter of 1992, and, except for data processing
operations, was largely completed by the end of 1992. In October, 1993,
the Company transferred its data processing operations from California to
Missouri, which represented the final step in the Company's relocation.
As a result of the relocation, the Company experienced major start-up
problems in wheelchair production and manufacturing delays and
inefficiencies attributable generally to the commencement of relocated
manufacturing operations and specifically to the need to train a large
number of new employees. These start-up problems impacted most severely
the Company's high margin rehab wheelchair products, and the resulting
reduction in sales and cash flow hindered the Company's ability to keep
vendor payments current and to otherwise implement corrective measures
quickly and effectively.
Shipment delays caused a substantial build-up in back-ordered power and
rehab wheelchair products in the second half of 1992 and the first half of
1993, which the Company reduced over time. Customer confidence and
frustration resulting from such delays combined to increase the order
cancellation rate and to decrease the incoming order rate, particularly for
the affected wheelchairs. As a result, orders and market share decreased,
and manufacturing activity generally shifted disproportionately to lower
margin commodity wheelchairs. Incoming orders, product backlog and timely
shipments were improved during the second half of 1993, with continued
improvement during 1994 and 1995. However, the Company believes order
rates, margins and market share must continue to improve and customer
confidence must be further restored and reinforced if the Company is to
generate the cash flow necessary to fund its operations on a continuing
basis and to achieve profitability. Additionally, certain production
rationalizations are in process relative to the Company's manufacturing
facilities in the US, Canada and Mexico, which are designed to improve the
Company's operating efficiencies and cost structure by reducing duplicate
overhead costs.
Production and delivery of all of the Company's homecare bed products
were unaffected by the production problems that occurred in the relocation
of the wheelchair manufacturing facility to St. Louis. The Company has
continued to deliver homecare bed products in a timely manner and
management believes that market share can be maintained in these product
lines. The sale of the Institutional Business has not adversely affected
homecare bed sales.
Effective in the fourth quarter of 1993, the Company adopted a plan to
dispose of Smith & Davis' hospital and nursing home bed and institutional
casegoods businesses (the "Institutional Business") and recorded a reserve
of $13 million to write down the assets of the Institutional Business to
their estimated net realizable values and for the estimated operating
losses during the phase out period and the estimated costs of disposition.
See Note 2 - Restructuring Expenses, and Note 4 - Assets Held for Sale, of
the Notes to the Consolidated Financial Statements included in Item 8 of
this Form 10-K. By Agreement dated February 15, 1995, the Company sold the
Institutional Business effective April 4, 1995.
In the domestic market, the Company's durable medical equipment
products are sold primarily through homecare and medical equipment dealers,
as well as national accounts. Consumers and dealers are reimbursed through
federal, state and private insurer reimbursement programs. The Company
recognizes the need to counteract the impact of cutbacks in such programs
on its results of operations and cash flow through the benefits of a
reduced cost structure and by targeting new market segments.
During fiscal 1995, 1994 and 1993, the Company required approximately
$2.6 million (net), $13.7 million and $45.8 million, respectively, of
additional financing from BIL to fund its operating requirements and
accrued restructuring expenses, and the amount of outstanding advances
owing to BIL at December 31, 1995 totaled $21.1 million (see Note 6 - Debt
Restructuring and Conversion and Note 7 - Debt, of the Notes to the
Consolidated Financial Statements included in Item 8 of this Form 10-K).
In 1994, based on predominant industry practice, the Company changed
its method of classification of shipping and distribution costs in the
statement of operations. Such costs are now presented in cost of sales
versus operating expenses in prior years. For purposes of the following
discussion of results of operations, affected amounts for all years have
been reclassified to conform to the current year's classification.
RESULTS OF OPERATIONS
Revenues
- --------
Substantially all of the Company's revenues for each of the three years
ended December 31, 1995 were from products manufactured in North America.
1995 versus 1994
Revenues in 1995 decreased $4.8 million, or 6%, versus 1994, primarily
due to increased price competition related to the increased market
penetration of managed care organizations and price constraints established
by the US Government for Medicare reimbursement. Wheelchair sales were
adversely affected by competition as the Company's competitors attempted to
maximize market share. Lower homecare bed revenues reflect the impact of
increased price competition.
1994 versus 1993
Revenues in 1994 declined $15 million, or 16% versus 1993, due
primarily to the exclusion of the Institutional Business.
Revenues of the Institutional Business and related costs were included
in the consolidated results of operations of the Company in 1993 but not
1994 or 1995, as the related assets were classified as held for sale at
December 31, 1993, and the 1994 and 1995 results of operations were
aggregated and charged against accrued restructuring expenses for purposes
of the consolidated financial statements. If the 1994 revenues of the
Institutional Business ($21.2 million) had been included in the
Consolidated results for 1994, revenues would have been increased by $6.2
million or 7%. 1993 wheelchair sales and operations were negatively
impacted by the relocation of the Company's primary domestic manufacturing
facility from California to Missouri. Delivery delays caused by the 1992
move have decreased and lead times have now been brought more in line with
historical levels.
Operating Results
- -----------------
For the periods indicated, the following table summarizes operating
results of the Company (dollars in millions):
Year Ended December31,
-----------------------------------------
1995 1994 1993
---- ---- ----
Amount % Amount % Amount %
------ --- ------ --- ------ ---
Revenues $74.6 100 $79.4 100 $94.5 100
Cost of sales 58.6 79 65.8 83 83.8 89
---- ---- ---- ---- ---- ----
Gross profit 16.0 21 13.6 17 10.7 11
Operating expenses 17.6 23 20.8 26 46.0 48
---- ---- ---- ---- ---- ----
Operating loss before
restructuring expenses (1.6) (2) (7.3) (9) (35.3) (37)
Restructuring expenses -- -- -- -- 15.1 16
---- ---- ---- ---- ---- ----
Operating loss (1.6) (2) (7.3) (9) (50.4) (53)
Interest expense, BIL (1.7) (2) (0.9) (1) (2.6) (3)
Interest expense, other (2.1) (3) (1.7) (2) (2.5) (3)
---- ---- ---- ---- ---- ----
Loss before income taxes (5.4) (7) (9.9)(12) (55.5) (59)
Income tax provisions
(benefits) 0.1 -- (0.1) -- .2 --
---- ---- ---- ---- ---- ----
Net loss $(5.5) (7) $(9.8)(12) $(55.7) (59)
1995 versus 1994
1995 revenues decreased $4.8 million or 6% to $74.6 million from $79.4
million in 1994. Wheelchair and accessory sales of $59.7 million in 1995
decreased $4.0 million or 6% from 1994. Price pressure brought on by
competition, managed care and government cutbacks negatively impacted
domestic sales. The decrease is due primarily to discounting in the
marketplace.
Sales of Smith & Davis homecare beds in 1995 increased $1.1 million or
12% from 1994. 1995 sales of Smith & Davis oxygen concentrators and other
products decreased $1.9 million as this product line was discontinued and
sold in August 1995.
Total Company gross profit increased $2.4 million or 18% from $13.6
million in 1994 to $16.0 million in 1995. The increase in gross profit
reflects improved manufacturing efficiency and positive results of the
Company's program to outsource manufacturing to lower cost facilities,
offset in part by continued price competition in the markets for the
Company's wheelchairs and bed products. Productivity at the Company's
primary domestic manufacturing facility was negatively impacted during the
fourth quarter of 1995 as a result of a WARN act notice issued pursuant to
the layoff of 30% of the work force at that facility. These layoffs, which
were completed during the first quarter of 1996, were a result of the
transfer of workload to lower-cost facilities and the Company's continued
manufacturing rationalization.
Operating expenses decreased $3.2 million from $20.8 million in 1994 to
$17.6 million in 1995. This decrease is primarily due to continued cost
containment and favorable changes in insurance rates and claims.
Interest expense increased to $3.8 million in 1995 from $2.6 million in
1994 due to increased borrowings during 1995. See Note 6 -- Debt
Restructuring and Conversion, of the Notes, and Note 7 -- Debt, of the
Consolidated Financial Statements included in Item 8 of this Form 10-K.
1994 versus 1993
Wheelchair and accessory sales of $65.7 million in 1994 increased $3.9
million or 6% from 1993. The 1992 relocation of the Company's primary
domestic manufacturing facility from California to Missouri and the related
production and delivery problems negatively affected sales during 1993.
Shipments during 1993 were further negatively impacted by complications
arising out of a major computer system implementation which occurred in
October, 1993. The majority of the problems associated with the computer
system conversion have since been rectified. The domestic wheelchair order
rate demonstrated improvement throughout 1994 as operations in Missouri
stabilized.
Sales of Smith & Davis homecare beds of $10.7 million in 1994 decreased
$0.7 million or 6% from 1993 due primarily to increased competition and
price erosion. Sales of the Institutional Business for 1993 approximated
$17 million. This business was not included in the Company's consolidated
results of operations for 1994 or 1995, as discussed above.
Total Company gross profit increased $2.9 million or 27% from $10.7
million in 1993 to $13.6 million in 1994. The increase in gross profit
reflected manufacturing efficiencies experienced in the wheelchair
operations as operations stabilized subsequent to the 1992 relocation of
wheelchair manufacturing to Missouri. Gross profit was adversely affected
during the fourth quarter of 1994 by a $3.0 million charge to reserves for
product liability, workers' compensation claims and inventory cost
adjustments. As a percentage of sales, gross profit increased from 11% in
1993 to 17% in 1994.
Operating expenses decreased $25.2 million from $46.0 million in 1993
to $20.8 million in 1994. This decrease is primarily due to a $9.7 million
charge relating to in-process research and development expenses (selling
expenses) recorded during 1993 pursuant to the Company's acquisition of
Medical Composite Technology, Inc., a $2.0 million charge recorded during
1993 for anticipated costs of environmental remediation, and a $2.4 million
charge recorded during 1993 for severance obligations and other cost
reductions implemented during 1994. Additionally, during 1994 $1.7 million
was charged to restructuring reserves relating to General and
Administrative expenses allocated to the Institutional Business.
Restructuring expenses recorded during 1993 of $15.1 million primarily
relate to losses anticipated on the disposition of the Company's
Institutional Business.
Interest expense decreased to $2.6 million in 1994 from $5.1 million in
1993 due primarily to the fourth quarter 1993 conversion of $75 million of
debt and accrued interest to equity. See Note 6 -- Debt Restructuring and
Conversion, of the Notes to the Consolidated Financial Statements included
in Item 8 of this Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided from
operations and borrowings. At December 31, 1995, the Company had $0.1
million in cash or $0.4 million less than the $0.5 million in cash at
December 31, 1994. At December 31, 1995, total debt of $47.9 million was
$5.3 million higher than the $42.6 million in debt at December 31, 1994.
The debt conversion transaction in 1993 resulted in conversion of $75
million of indebtedness and accrued interest to $55 million of Common Stock
and $20 million of Series C Preferred Stock. Prior to such debt conversion
transaction, the indebtedness had increased during 1993 due to advances
from BIL in the amount of $37.8 million, which were used to fund operating
losses and previously accrued restructuring expenses and to repay $5.7
million to The Hongkong and Shanghai Banking Corporation Limited -- Chicago
Branch ("HSBC"). During 1994 and 1995 BIL advanced the Company an
additional $13.7 million and $5.6 million, respectively, which was used to
fund operating losses and previously accrued restructuring expenses.
In December 1995, HSBC and E&J Inc. agreed to amend the Revolving
Credit Agreement originally entered into on September 30, 1992 and extend
its term through September, 1997. The HSBC facility, as amended, provides
up to $6 million of letter of credit availability and cash advances of up
to $25 million to E&J Inc. Advances under the Revolving Credit Agreement
bear interest at the prime rate plus 0.25%, as announced by Marine Midland
Bank N.A., from time to time, and are guaranteed by Brierley Investments
Limited, an affiliate of BIL. Repayment of existing debt with BIL is
subordinated to the HSBC debt.
On December 21, 1995, $3 million of the increased credit facility was
utilized to repay an advance from BIL made earlier in 1995. As of December
31, 1995, $18.7 million of the $25 million available for cash advances from
HSBC had been utilized.
At December 31, 1995 and December 31, 1994, under the debt agreements
with BIL and HSBC, the Company was obligated to repay the following amounts
at the various dates listed below.
12/31/95 12/31/94
Balance Balance
Debt Agreement $ millions $ millions Repayment Date
---------- ---------- --------------
Revolving Promissory 21.1 18.5 Revolving Promissory Note
Note to BIL matures September 30, 1997
HSBC Revolving Credit 18.7 10.0 September 30, 1997
Agreement (1)
Accrued, unpaid 2.6 1.0
interest due BIL
----- -----
TOTAL $42.4 $29.5
(1)Excludes approximately $5.7 million and $5.1 million
committed with respect to outstanding letters of credit at
December 31, 1995 and December 31, 1994, respectively.
There can be no assurance that the Company's operation will produce
positive cash flow in sufficient amounts so that the Company will be able
to secure additional borrowings or make asset sales that will enable it to
make its debt payments when due.
The Company entered into a debt conversion agreement as of September
30, 1993 with BIL whereby $75 million of the indebtedness due BIL was
restructured by the issuance of a Common Stock Note and a Preferred Stock
Note. The balance of the BIL indebtedness ($6.8 million) which was not
converted into the Common Stock Note and the Preferred Stock Note was
treated as advances under the the Company's revolving promissory note with
BIL. See Note 6 -- Debt Restructuring and Conversion, of the Notes to the
Consolidated Financial Statements in Item 8 of this Form 10-K for a
discussion of the debt conversion transaction.
BIL agreed, upon stockholder approval of the debt conversion
transaction and related recapitalization proposals, to advance to E&J Inc.
an additional $10 million. Such advance by BIL to E&J Inc. resulted in an
increase in the principal amount of the Common Stock Note from $45 million
to $55 million and a decrease in the balance of BIL's revolving promissory
note to $4.8 million effective as of December 31, 1993.
As part of the debt conversion transaction, BIL agreed to provide to
the Company and E&J Inc. a revolving credit facility of up to $12.5
million, as evidenced by BIL's revolving promissory note. As of December
31, 1995, this facility was completely utilized and an additional $8.6
million, net, had been advanced to the Company and E&J Inc. by BIL. BIL
has agreed to extend the due date of such debt to September 30, 1997.
In July, 1991, the Company obtained a three-year $13 million secured
credit line for its Smith & Davis subsidiary which is secured by
substantially all of the subsidiary's assets. In February, 1993 this
credit line was amended to increase the availability of funding to the
Company and reduce the borrowing costs thereunder. The cash proceeds from
the sale of the Institutional Business of approximately $4.5 million were
used to reduce this debt. The balance due under this credit line was
repaid in December 1995 utilizing funds advanced from BIL. The Company's
Canadian subsidiary has existing credit facilities in the aggregate of
$4.7 million, of which $4.7 million was borrowed as of December 31, 1995.
During June, 1994 the Company's Mexican subsidiary obtained a credit
facility in the aggregate of $1.0 million, on which $0.7 million was
borrowed as of December 31, 1995.
Pursuant to an Asset Purchase Agreement dated February 15, 1995, the
Company sold the Smith & Davis Institutional Business effective April 4,
1995. The proceeds consisted of approximately $4.5 million in cash (which
was used to repay debt), $2.7 million in assumption of liabilities, and
notes valued at approximately $2.1 million; $0.2 million of such notes were
repaid in 1995 with the remainder expected to be repaid in 1996.
At December 31, 1995 the Company owed $24.7 million to banks and other
commercial lenders, $2.1 million under capitalized lease obligations, and
$21.1 million to BIL.
The Company's 1995 and 1994 revenues and operating results were
negatively impacted by ongoing price competition. Long lead times and
shipping delays due to start-up inefficiencies in the wheelchair
manufacturing operations adversely impacted customer confidence.
Management continues to address the Company's problems with manufacturing
and shipment delays. Additionally, the Company continues to address the
rationalization of its production facilities in the US, Canada and Mexico
and the increased outsourcing of products and product components, which the
Company expects will lower its production costs. Order rates, margins and
market share must increase, production and operating costs must be further
reduced and customer confidence must continue to be restored if the Company
is to generate the cash flow necessary to fund its debt service and
operations on a continuing basis and to achieve profitability. Although
the Company has programs in place which are designed to address these
issues, there is no assurance that such programs will achieve their
objectives. With respect to its wheelchair and homecare bed products, the
Company anticipates severe price and product competition for the
foreseeable future.
The accompanying consolidated financial statements have been prepared
under the going concern concept. The going concern concept anticipates an
entity will continue in its present form and, accordingly, uses the
historical cost basis to prepare financial statements. The Company has
incurred substantial restructuring expenses and recurring operating losses
and has a net capital deficiency at December 31, 1995. No assurance can be
made that the Company will successfully emerge from or complete its
restructuring activities.
Management believes that the Company's domestic and international
manufacturing capacity is sufficient to meet anticipated demand for the
foreseeable future. Capital expenditures of approximately $1.3 million are
projected for 1996 versus actual expenditures of $0.8 million in 1995. The
Mexican peso has resulted in lower manufacturing costs for the Company's
Mexico subsidiary.
No dividends on the Company's Common Stock were paid in either 1995 or
1994. Management does not currently anticipate paying cash dividends on
its Common Stock in the foreseeable future. The determination of future
cash dividends to be declared and paid on the Common Stock, if any, will
depend upon the Company's financial condition, earnings and cash flow from
operations, the level of its capital expenditures, its future business
prospects and other factors that the Board of Directors deems relevant.
The Company is currently prohibited from paying cash dividends on its
Common Stock under covenants contained in the debt agreements with its
principal lenders.
Net Operating Loss Carryforwards
The Company and certain subsidiaries file consolidated federal income
and combined state tax returns. For federal income tax purposes, as of
December 31, 1995, the Company has net operating loss (NOL) carryforwards
of approximately $143 million and tax credit carryforwards of approximately
$1 million that expire in 1997 through 2010. In accordance with the
Internal Revenue Code, when certain changes in company ownership occur,
utilization of NOL carryforwards is limited. The Company has determined
that there has been a change in ownership due to the various debt and
equity transactions consummated with BIL as described in Note 7 -- Debt, of
the Notes to the Consolidated Financial Statements. As a result,
approximately $88.5 million of the Company's NOL carryforwards are subject
to an annual limitation of approximately $3 million. If the full amount of
that limitation is not used in any year, the amount not used increases the
allowable limit in the subsequent year.
In addition, there are approximately $7 million and $6 million,
respectively, of preacquisition NOL carryforwards generated by Smith &
Davis and MCT with expiration dates through 2004. Annual utilization of
these NOLs is limited to $0.6 million for Smith & Davis and $0.5 million
for MCT to reduce each entity's future contribution to consolidated taxable
income.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders
of Everest & Jennings International Ltd.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' deficit and
of cash flows present fairly, in all material respects, the financial
position of Everest & Jennings International Ltd. and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. These
consolidated financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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 consolidated
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion expressed above.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has
suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ PRICE WATERHOUSE LLP
St. Louis, Missouri
March 15, 1996
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per-share data)
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
Revenues $74,627 $79,438 $94,459
Cost of sales 58,597 65,888 83,825
------- ------- -------
Gross profit 16,030 13,550 10,634
------- ------- -------
Selling expenses 11,006 12,448 18,777
General and administrative expenses 5,527 6,519 16,441
Research & development expenses
(Note 5) 1,123 1,885 10,764
Restructuring expenses (Note 2) -- -- 15,104
------- ------- -------
Total operating expenses 17,656 20,852 61,086
------- ------- -------
Loss from operations (1,626) (7,302) (50,452)
------- ------- -------
Other expense:
Interest expense, BIL (Note 7) (1,669) (897) (2,585)
Interest expense, other (2,061) (1,722) (2,487)
------- ------- -------
Other expense, net (3,730) (2,619) (5,072)
------- ------- -------
Loss from operations before
income taxes (5,356) (9,921) (55,524)
Income tax provision (benefit)(Note 8) 96 (162) 173
------- ------- -------
Net loss $ (5,452) $ (9,759) $(55,697)
Loss per share $(0.08) $(0.14) $(5.96)
Weighted average number of
Common Shares outstanding 72,272,808 72,201,207 9,343,868
The accompanying Notes are an integral part of these
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
December 31 December 31
1995 1994
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 117 $ 513
Accounts receivable, less allowance
for doubtful accounts of $1,847
and $2,088, respectively (Note 4) 16,952 18,894
Inventories (Notes 4 and 9) 19,570 20,449
Assets held for sale (Notes 1 and 4) -- 11,289
Other current assets 1,299 1,444
------ ------
Total current assets 37,938 52,589
------ ------
PROPERTY, PLANT AND EQUIPMENT (Note 4):
Land 261 237
Buildings and improvements 4,500 4,056
Machinery and equipment 15,380 14,636
------ ------
20,141 18,929
Less accumulated depreciation and
amortization (12,992) (10,994)
------ ------
Property, plant and equipment, net 7,149 7,935
NOTES RECEIVABLE (Note 4) 2,524 --
INTANGIBLE ASSETS, NET (Note 3) 402 710
OTHER ASSETS 217 335
------ ------
TOTAL ASSETS $48,230 $61,569
The accompanying Notes are an integral part of these
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per-share data)
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31 December 31
1995 1994
----------- -----------
CURRENT LIABILITIES:
Short-term borrowings and current installments of long-term
debt of $1,089 and $2,600, respectively (Note 7)$ 4,473 $11,155
Short-term borrowings from BIL (Note 7) -- 6,503
Accounts payable 8,361 11,958
Accrued payroll costs 6,327 7,900
Accrued interest, BIL (Note 7) 2,629 960
Accrued expenses 5,310 9,612
Accrued restructuring expenses
(Notes 1, 2 and 4) 659 4,476
------ ------
Total current liabilities 27,759 52,564
------ ------
LONG-TERM DEBT, NET OF CURRENT PORTION
(Note 7) 22,370 12,968
LONG-TERM BORROWINGS FROM BIL (Note 7) 21,103 12,000
OTHER LONG-TERM LIABILITIES 130 218
COMMITMENTS AND CONTINGENCIES (Notes 12 and 13)
STOCKHOLDERS' DEFICIT (Notes 6 and 10):
Series A Convertible Preferred Stock 13,175 12,087
Series B Convertible Preferred Stock 1,317 1,317
Series C Convertible Preferred Stock 20,000 20,000
Single Class Common Stock, par value: $.01;
authorized 120,000,000 shares 722 722
Additional paid-in capital 105,608 105,595
Accumulated deficit (159,793) (153,228)
Minimum pension liability adjustment (3,264) (1,812)
Cumulative translation adjustments (897) (862)
------ ------
Total stockholders' deficit (23,132) (16,181)
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $48,230 $61,569
The accompanying Notes are an integral part of these
Consolidated Financial Statements
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
(Dollars in thousands)
Series A Series B Series C
Convertible Convertible Convertible Class A(1) Class B(1)
Preferred Stock Preferred Stock Preferred Stock Common Stock Common Stock
Shares Amt Shares Amt Shares Amt Shares Amt Shares Amt
Balance at December 31, 1992 6,075,419 $10,174 786,357 $1,317 -- $ -- 6,792,852 $68 2,353,427 $24
Common Stock Issued -- -- -- -- -- -- 53,333 -- -- --
Reclassification of Common
Stock (1) -- -- -- -- -- 2,353,427 24 (2,353,427) (24)
Preferred Stock Issued --
Debt Conversion -- -- -- -- 20,000,000 20,000 -- -- -- --
Common Stock Issued --
Debt Conversion -- -- -- -- -- -- 55,000,000 550
Stock Issuance Costs --
Debt Conversion -- -- --
Common Stock Issued --
MCS Acquisition -- -- -- 8,000,000 80
Pay-in-kind dividends on Series
A Convertible Preferred Stock 546,787 915 -- -- -- -- -- --
Net loss -- -- -- -- -- --
Adjustment for Pension Liability -- -- -- -- -- --
Translation adjustments -- -- -- -- -- --
--------- ------- ------- ------ --------- ------- ---------- --- ---- ---
Balance at December 31, 1993 6,622,206 $11,089 786,357 $1,317 20,000,000 $20,000 72,199,612 $722 -0- -0-
<FN>
(1) Effective November 18, 1993, Class A Common Stock and Class B Common
Stock were combined into a single class Common Stock
</FN>
The accompanying Notes are an integral part of these Consolidated Financial
Statements
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
(Dollars in thousands)
(continued)
Minimum
Additional Accumu- Pension Cumulative
Paid-in lated Liability Translation
Capital Deficit Adjustments Adjustments Total
Balance at December 31, 1992 $43,708 $(85,585) -- $(504) $(30,798)
Common Stock Issued -- -- -- -- --
Reclassification of Common Stock (1) -- -- -- -- --
Preferred Stock Issued --
Debt Conversion -- -- -- -- 20,000
Common Stock Issued --
Debt Conversion 54,450 -- -- -- 55,000
Stock Issuance Costs --
Debt Conversion (500) -- -- -- (500)
Common Stock Issued --
MCS Acquisition 7,920 -- -- -- 8,000
Pay-in-kind dividends on Series A
Convertible Preferred Stock -- (1,167) -- -- (252)
Net loss -- (55,697) -- -- (55,697)
Adjustment for Pension Liability -- -- (2,606) -- (2,606)
Translation adjustments -- -- -- (155) (155)
------ -------- ------- ----- -----
Balance at December 31, 1993 $105,578 $(142,449) $(2,606) $(659) $(7,008)
<FN>
(1) Effective November 18, 1993, Class A Common Stock and Class B Common
Stock were combined into a single class Common Stock
</FN>
The accompanying Notes are an integral part of these Consolidated
Financial Statements
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
(Dollars in thousands)
(continued)
Series A Series B Series C
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
Shares Amt Shares Amt Shares Amt Shares Amt
Balance at December 31, 1993 6,622,206 $11,089 786,357 $1,317 20,000,000 $20,000 72,199,612 $722
Common Stock Issued for
Exercised Stock Options -- -- -- -- -- -- 58,200 --
Pay-in-kind dividends on
Series A Convertible
Preferred Stock 595,998 998 -- -- -- -- -- --
Net loss -- -- -- -- -- --
Adjustment for Pension Liability -- -- -- -- -- --
Translation adjustments -- -- -- -- -- --
--------- ------- ------- ------ --------- ------- ---------- ---
Balance at December 31, 1994 7,218,204 $12,087 786,357 $1,317 20,000,000 $20,000 72,257,812 $722
The accompanying Notes are an integral part of these Consolidated Financial
Statements
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
(Dollars in thousands)
(continued)
Minimum
Additional Accumu- Pension Cumulative
Paid-in lated Liability Translation
Capital Deficit Adjustments Adjustments Total
Balance at December 31, 1993 $105,578 $(142,449) $(2,606) $(659) $(7,008)
Common Stock Issued for
Exercised Stock Options 17 -- -- -- 17
Pay-in-kind dividends on Series A
Convertible Preferred Stock -- (1,020) -- -- (22)
Net loss -- (9,759) -- -- (9,759)
Adjustment for Pension Liability -- -- 794 -- 794
Translation adjustments -- -- -- (203) (203)
------ -------- ------- ----- -----
Balance at December 31, 1994 $105,595 $(153,228) $(1,812) $(862) $(16,181)
The accompanying Notes are an integral part of these Consolidated
Financial Statements
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
(Dollars in thousands)
(continued)
Series A Series B Series C
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
Shares Amt Shares Amt Shares Amt Shares Amt
Balance at December 31, 1994 7,218,204 $12,087 786,357 $1,317 20,000,000 $20,000 72,257,812 $722
Common Stock Issued for
Exercised Stock Options -- -- -- -- -- -- 22,834 --
Pay-in-kind dividends on
Series A Convertible
Preferred Stock 649,638 1,088 -- -- -- -- -- --
Net loss -- -- -- -- -- --
Adjustment for Pension Liability -- -- -- -- -- --
Translation adjustments -- -- -- -- -- --
--------- ------- ------- ------ --------- ------- ---------- ---
Balance at December 31, 1995 7,867,842 $13,175 786,357 $1,317 20,000,000 $20,000 72,280,646 $722
The accompanying Notes are an integral part of these Consolidated Financial
Statements
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
(Dollars in thousands)
(continued)
Minimum
Additional Accumu- Pension Cumulative
Paid-in lated Liability Translation
Capital Deficit Adjustments Adjustments Total
Balance at December 31, 1994 $105,595 $(153,228) $(1,812) $(862) $(16,181)
Common Stock Issued for
Exercised Stock Options 13 -- -- -- 13
Pay-in-kind dividends on Series A
Convertible Preferred Stock -- (1,113) -- -- (25)
Net loss -- (5,452) -- -- (5,452)
Adjustment for Pension Liability -- -- (1,452) -- (1,452)
Translation adjustments -- -- -- (35) (35)
------ -------- ------- ----- -----
Balance at December 31, 1995 $105,608 $(159,793) $(3,264) $(897) $(23,132)
The accompanying Notes are an integral part of these Consolidated
Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net loss $ (5,452) $ (9,759) $(55,697)
Adjustments to reconcile net
loss to cash used in operating
activities:
Depreciation and amortization 2,153 1,978 2,637
Charge for in-process R&D on
MCT acquisition -- -- 9,764
Restructuring expenses (Note 2):
Reserve on disposition of Smith
& Davis institutional business -- -- 13,000
Net increase (decrease) in
certain accrued expenses (3,817) (2,262) 245
Changes in operating assets and
liabilities, net of effects of
the 1993 MCT acquisition (Note 5):
Accounts receivable 3,069 (1,800) (1,652)
Inventories (107) (2,329) 2,336
Accounts payable (1,357) 3,699 (9,268)
Accrued interest, BIL 1,669 775 2,409
Accrued expenses (6,138) (2,277) 1,421
Other, net 319 (140) 817
------ ------ ------
Cash used in operating activities (9,661) (12,115) (33,988)
------ ------ ------
Cash flows from investing activities:
Capital expenditures, net (772) (1,463) (955)
MCT acquisition, net of cash
acquired -- -- (1,833)
Proceeds from sale of assets held
for sale 4,518 -- --
Receipt of principal of notes
receivable 309 -- --
------ ------ ------
Cash provided by (used in)
investing activities 4,055 (1,463) (2,788)
------ ------ ------
Cash flows from financing activities:
Advances from BIL (Note 7) 5,600 13,701 45,795
Repayments to BIL (Note 7) (3,000) -- --
Increase (decrease) in short-term
and long-term borrowings, net 2,720 (1,371) (6,326)
Costs pertaining to equity conversion -- -- (500)
Exercise of Common Stock Option 13 17 --
Changes in other long-term
liabilities (88) -- (311)
------ ------ ------
Cash provided by financing
activities 5,245 12,347 38,658
------ ------ ------
Effect of exchange rate changes
on cash flows (35) (128) (155)
------ ------ ------
Increase (decrease) in cash balance (396) (1,359) 1,727
Cash and cash equivalents at
beginning of year 513 1,872 145
------ ------ ------
Cash and cash equivalents at
end of year $ 117 $ 513 $1,872
Supplemental cash flow information:
Cash paid for interest $2,111 $1,675 $2,611
Cash paid for income taxes 216 142 164
Supplemental information for noncash financing and investing activities:
During 1995, the Company sold the Smith & Davis Institutional Business
for proceeds that included approximately $4.5 million in cash (which was
used to repay debt), $2.7 million in assumption of liabilities, and notes
valued at approximately $2.1 million.
Effective as of December 31, 1993, a Common Stock Note in the principal
amount of $55,000 was converted into 55,000,000 shares of Common Stock and
a Preferred Stock Note in the principal amount of $20,000 was converted
into 20,000,000 shares of Series C Convertible Preferred Stock.
In accordance with SFAS No. 87, the Company recorded an additional
minimum pension liability for underfunded plans of $2,606 at December 31,
1993 (Note 11). This amount was adjusted to $1,812 at December 31, 1994.
As of December 31, 1995 this amount was increased to $3,264 due to a
decrease in the discount rate utilized to determine the liability.
During 1993, the Company entered into new capital lease agreements of
$2,465 for a new computer and phone system.
The accompanying Notes are an integral part of these
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except as noted and per-share data)
NOTE 1 -- CORPORATE RESTRUCTURING
Everest & Jennings International Ltd. ("E&J" or the "Company") through
its subsidiaries manufactures wheelchairs and distributes homecare beds.
Effective in the fourth quarter of 1993, the Company adopted a plan to
dispose of Smith & Davis' hospital and nursing home bed and institutional
casegoods businesses (the "Institutional Business") and recorded a reserve
of $13 million to write down the assets of the Institutional Business to
their estimated net realizable values and for the estimated operating
losses during the phase out period and the estimated costs of disposition.
See Note 2 - Restructuring Expenses and Note 4 - Assets Held for Sale.
Pursuant to an Asset Purchase Agreement dated February 15, 1995, the
Company sold the Institutional Business effective April 4, 1995. The
proceeds consisted of approximately $4.5 million in cash (which was used to
repay debt), $2.7 million in assumption of liabilities, and notes valued at
approximately $2.1 million. The reduction in accrued restructuring expense
since December 31, 1994 primarily reflects changes in estimates,
adjustments and the payment of disposal costs related to the sale.
Since 1989 the Company has incurred substantial financial losses in a
continuing effort to restructure its operations with the objective of
improving its competitive position within the durable medical equipment
industry. Restructuring activities to date have included asset sales,
significant reductions in headcount, salaries and fringe benefits, plant
closures and consolidations, product line rationalization, debt to equity
conversion and outsourcing of manufacturing operations. In 1992 the
Company relocated its corporate headquarters and principal wheelchair
manufacturing operations from California to Missouri. The relocation
facilitated the consolidation of corporate offices and other key
administrative, sales/marketing, and technical functions with existing
Company operations in the St. Louis area. In October, 1993, the Company
transferred its data processing operations from California to Missouri,
which represented the final step in the Company's relocation.
Additionally, the Company continues to analyze its cost structure and
operating efficiencies for potential savings.
On September 30, 1992, the Company finalized a $20 million revolving
credit facility with The Hongkong and Shanghai Banking Corporation Limited
- - Chicago Branch ("HSBC"). The repayment of the HSBC facility has been
guaranteed by Brierley Investments Limited, an affiliate of BIL (Far East
Holdings) Limited ("BIL"), currently the Company's majority shareholder.
From the proceeds of the HSBC facility, $11 million was utilized to repay
advances previously made by BIL. The remaining proceeds were used to fund
restructuring expenses, to replace existing letters of credit and for
working capital purposes. In December 1995, the revolving credit facility
was amended to allow borrowings of up to $25 million. See Note 7 -- Debt.
Through September 30, 1993, BIL provided the Company with $43.3 of
additional funding beyond the amounts available under the HSBC credit line.
As of September 30, 1993, the Company and BIL entered into a Debt
Conversion Agreement, which provided, in part, for the conversion of
$75,000,000 of short-term indebtedness and accrued interest into equity.
See Note 6 -- Debt Restructuring and Conversion. From October 1, 1993 to
December 31, 1995, BIL advanced $27.4 million to the Company to fund
operating losses and previously accrued restructuring charges. See Note 7
- -- Debt for details as to the Company's indebtedness to BIL and other
lenders. At December 31, 1995, the total amount of outstanding advances
from BIL was $21.1.
The Company's 1995 and 1994 revenues and operating results were
negatively impacted by ongoing price competition. Long lead times and
shipping delays due to start-up inefficiencies in manufacturing operations
adversely impacted customer confidence. Management continues to address
the Company's problems with manufacturing and shipment delays.
Additionally, the Company continues to address the rationalization of its
production facilities in the US, Canada and Mexico and the increased
outsourcing of products and product components, which the Company expects
will lower its production costs. Order rates, margins and market share
must increase, production and operating costs must be further reduced and
customer confidence must continue to be restored if the Company is to
generate the cash flow necessary to fund its debt service and operations on
a continuing basis and to achieve profitability. Although the Company has
programs in place which are designed to address these issues, there is no
assurance that such programs will achieve their objectives.
The accompanying consolidated financial statements have been prepared
under the going concern concept. The going concern concept anticipates an
entity will continue in its present form and, accordingly, uses the
historical cost basis to prepare financial statements. The Company has
incurred substantial restructuring expenses and recurring operating losses
and has a net capital deficiency at December 31, 1995. No assurance can be
made that the Company will successfully emerge from or complete its
restructuring activities.
NOTE 2 -- RESTRUCTURING EXPENSES
As disclosed in Note 1, the Company sold the Institutional Business of
its Smith & Davis subsidiary effective April 4, 1995. At December 31, 1993
the Company had prepared estimates of the net realizable value of related
assets to be sold (see Note 4 -- Assets Held for Sale) and other costs
directly associated with the decision to dispose of such business along
with operating losses expected to be incurred until the business was sold.
No additional provision was required to the amount discussed below which
was recorded in 1993 relative to the disposal of the Institutional
Business. The proceeds from the sale of the Institutional Business were
used primarily to reduce debt.
During the fourth quarter of 1993, the Company recorded $15.1 million
of restructuring expenses in connection with the consolidation of
manufacturing and distribution facilities in the United States and Canada
($2.1 million) and the sale of the Smith & Davis Institutional Business
($13 million). The charge with respect to the manufacturing and
distribution facilities primarily relates to the termination of various
facilities leases. The amount recorded for the sale of the Institutional
Business was as follows:
Reduction of assets to estimated net realizable values $10.0 million
Estimated operating losses during phase-out period 1.3 million
Disposal costs, including transaction costs 1.7 million
-------------
$13.0 million
The reduction of assets to estimated net realizable value is mainly
attributable to intangible assets and property, plant and equipment.
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its subsidiaries. The Company's principal
subsidiaries include Everest & Jennings, Inc. located in St. Louis,
Missouri; Everest & Jennings Canadian Limited located in Toronto, Canada;
Everest & Jennings de Mexico, S.A. de C.V. located in Guadalajara, Mexico;
and Smith & Davis Manufacturing Company, also located in St. Louis,
Missouri. Net assets of the foreign subsidiaries totalled $3,154 as of
December 31, 1995. All significant intercompany accounts and transactions
have been eliminated.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid short-
term investments with original maturities of three months or less to be
cash equivalents and, therefore, includes such investments as cash and cash
equivalents in its consolidated financial statements.
VALUATION OF INVENTORIES: Inventories are stated at the lower of cost,
determined by the first-in, first-out (FIFO) method, or market. Inventory
costs consist of material cost, labor cost and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are carried
at cost except for certain assets held for sale which were written down in
value in anticipation of their being sold (see Note 2 -- Restructuring
Expenses and Note 4 -- Assets Held for Sale). Provisions for depreciation
and amortization are determined using the straight-line method based upon
the estimated useful life of the asset, with asset lives ranging from one
to forty years. Leasehold improvements are amortized over the life of the
related lease.
INVESTMENT IN JOINT VENTURE: On August 15, 1990, the Company entered into
a joint venture agreement with an Indonesian company. The Company
contributed fixed assets valued at $300 to the joint venture in exchange
for 30% of the joint venture's outstanding common stock. Due to continued
losses experienced by the joint venture, the Company wrote off this
investment in 1993 and sold its remaining interest in 1996, resulting in an
immaterial impact on the Consolidated Financial Statements.
EXCESS OF INVESTMENT OVER NET ASSETS ACQUIRED: Intangible assets, net,
includes primarily the excess of cost over net assets acquired (goodwill)
of Medical Composite Technology, Inc. of $900, which is being amortized
using the straight-line method over a period of three years. See Note 5 --
Acquisition.
INCOME TAXES: The Company utilizes an asset and liability approach in
accounting for income taxes and requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's consolidated financial
statements or tax returns. Since it is unlikely that the Company will
realize the future tax benefits of the net deferred tax asset due to its
substantial net operating losses, a valuation allowance has been
established for the full amount.
LOSS PER SHARE: Loss per share for each of the years in the three-year
period ended December 31, 1995 is calculated based on the weighted average
number of the combined shares of both Class A and Class B Common Stock
outstanding during the periods, and the weighted average number of shares
of single class Common Stock outstanding after November 18, 1993.
CONCENTRATION OF CREDIT RISK: The Company sells its products to customers
in the healthcare industry, primarily in North America. Third party
reimbursement through private or governmental insurance programs and
managed care programs impacts a significant component of the Company's
business. Concentration of credit risk with respect to trade receivables
is limited due to the size of the customer base and its dispersion. The
Company performs on-going credit evaluations of its customers and generally
does not require collateral. The Company maintains reserves for potential
credit losses and such losses have been within management's expectations.
Net sales by product line for each year of the three year period ended
December 31, 1995 are as follows:
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
Net sales, durable medical
products:
Wheelchairs $ 59,762 $ 63,819 $ 61,750
Beds and Accessories 10,265 9,098 29,266
Other 4,600 6,521 3,443
--------- --------- ---------
$ 74,627 $ 79,438 $ 94,459
Export sales to unaffiliated customers by domestic operations in the
United States are not significant. No single customer accounts for 10% or
more of the consolidated revenues.
The Company currently buys ready-to-assemble wheelchair kits, an
important component of its products, from one supplier. A change in
suppliers could cause a delay in manufacturing and a possible loss of
sales, which would affect operating results adversely. However, the
Company believes that numerous alternative supply sources are available for
these materials.
FOREIGN CURRENCY TRANSLATION: The financial statements of the Company's
foreign subsidiaries are translated into U.S. dollars in accordance with
the provisions of SFAS No. 52, "Foreign Currency Translation." Assets and
liabilities are translated at year-end exchange rates. Revenues and
expenses are translated at the average exchange rate for each year. The
resulting translation adjustments for each year are recorded as a separate
component of stockholders' equity. All foreign currency transaction gains
and losses are included in the determination of income and are not
significant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT: In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"),
which addresses accounting for stock option, purchase and award plans. The
Company will adopt SFAS 123 in 1996 and will then have the option of
valuing stock compensation using either the "fair value based method" or
the "intrinsic value based method". The Company anticipates that, when
adopted, SFAS 123 will have no material effect on its financial position or
results of operations.
RECLASSIFICATION: Certain reclassifications (beginning in 1994) including
the reclassification of shipping and distribution costs from operating
expenses to cost of sales have been made to prior period consolidated
financial statements to conform with current period presentation. The
reclassifications have no effect on loss from operations and net loss as
previously reported.
NOTE 4 -- ASSETS HELD FOR SALE
Pursuant to an Asset Purchase Agreement dated February 15, 1995, the
Company sold the Smith & Davis Institutional Business effective April 4,
1995. The proceeds consisted of approximately $4.5 million in cash (which
was used to repay debt), $2.7 million in assumption of liabilities, and
notes valued at approximately $2.1 million; $0.2 million of such notes were
repaid in 1995 with the remainder expected to be repaid in 1996.
Net assets held for sale of the Institutional Business consisted of the
items in the following table as of December 31, 1994 (stated at estimated
net realizable values). The value of these assets approximated the net
proceeds from the sale of the Institutional Business on the sale date of
April 4, 1995.
December 31, 1994
-----------------
Accounts receivable $ 4,099
Inventories 4,298
Land and buildings 1,350
Machinery & equipment 1,200
Other assets 342
-------
Total assets held for sale $11,289
Revenues of the Institutional Business and related costs were included
in the consolidated results of the Company in years prior to 1994. The
1993 restructuring provision included an estimate of losses to be incurred
during the phase-out period. During the phase out period commencing
January 1, 1994 through the disposal date (April 4, 1995), the results of
the Smith & Davis Institutional Business were included as a component of
accrued restructuring expenses on the consolidated balance sheet. The
reduction in accrued restructuring expense since December 31, 1994
primarily reflects changes in estimates, adjustments and the payment of
disposal costs related to the sale. Revenues and net income (loss) from
operations (unaudited) for the Institutional Business were as follows:
January 1, 1995 For Year Ended December 31,
through April 4, 1995 1994 1993
--------------------- ---- ----
Revenues $5,508 $21,220 $ 17,335
Net income (loss) $ 129 $(1,400) $(17,310)
Pursuant to an Asset Purchase Agreement dated July 24, 1995, the
Company sold the Smith & Davis Oxycon line of oxygen concentrator products.
This transaction was finalized effective August 9, 1995. The proceeds from
the sale consisted of a note valued at $0.6 million. This transaction did
not result in a material gain or loss.
NOTE 5 -- ACQUISITION
In January 1994, the Company completed the acquisition (the
"Acquisition") of Medical Composite Technology, Inc. ("MCT"). The $10.6
million purchase price consisted of the issuance of 8,000,000 shares of
Common Stock, $2 million in the form of pre-closing cash advances, and the
assumption of $0.6 million of net liabilities. Additionally, the Company
assumed 107,614 unvested and 300,422 vested stock options; such options are
for the purchase of the Company's Common Stock. MCT develops and designs
state-of-the-art durable medical equipment, including wheelchairs and other
medical mobility products.
The Acquisition was accounted for as a purchase. Of the $10.6 million
purchase price, $9.7 million of the purchase price is attributable to in-
process research and development which was expensed in the fourth quarter
of 1993. The balance of the purchase price over the fair value of assets
acquired, $0.9 million, was allocated to goodwill and is being amortized
over a period of three years.
For purposes of consolidated financial statement presentation, the
Acquisition was effective on December 31, 1993. Accordingly, the Company's
consolidated balance sheet as of December 31, 1995, 1994 and 1993 include
the assets and liabilities of MCT. MCT's results of operations are
included in the consolidated financial statements from the date of
acquisition.
Pro forma combined results of operations (unaudited) of the Company and
MCT for the year ended December 31, 1993 are presented below. Pro forma
results of operations are not necessarily indicative of the results of
operations if the companies had constituted a single entity during the
period combined (dollars in millions except per share data).
Net sales $ 95.4
Net loss from continuing operations (60.1)
Net loss per share (17,343,868 shares) (3.47)
NOTE 6 -- DEBT RESTRUCTURING AND CONVERSION
As of September 30, 1993, the Company, Everest & Jennings, Inc. ("E&J
Inc."), Jennings Investment Co. and BIL entered into a Debt Conversion
Agreement to provide for the conversion (the "Debt Conversion Transaction")
of approximately $75 million in principal and accrued, unpaid interest (the
"Converted BIL Debt"), owed by the Company and E&J Inc. to BIL. Pursuant
to the Debt Conversion Transaction, the Company and E&J Inc. issued to BIL
a Convertible Promissory Note -- Common Stock (the "Common Stock Note") in
the initial principal amount of $45 million and a Convertible Promissory
Note -- Preferred Stock (the "Preferred Stock Note") in the original
principal amount of $20 million. The Common Stock Note was subsequently
increased to $55 million via a transfer of $10 million from the Revolving
Promissory Note to the Common Stock Note. The Common Stock Note was
converted into 55 million shares of Common stock and the Preferred Stock
Note was converted into 20 million shares of Series C Convertible Preferred
Stock on January 12, 1994 upon the satisfaction of certain preestablished
conditions.
The Company held a Special Meeting of Stockholders on December 31,
1993, to ratify and approve the Debt Conversion Transaction. Concurrent
with ratification and approval of the Debt Conversion Transaction, the
Company's stockholders approved and adopted amendments to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 25,000,000 to 120,000,000 and to increase the number of
authorized shares of Preferred Stock from 11,000,000 to 31,000,000 (the
"Recapitalization Proposals").
The effects of the conversions of both the Common Stock Note and the
Preferred Stock Note have been reflected in the consolidated financial
statements as of December 31, 1995, 1994 and 1993. No gain or loss was
recognized as a result of the Debt Conversion Transaction.
NOTE 7 -- DEBT
The Company's debt as of December 31, 1995 and 1994 is as follows:
1995 1994
---- ----
Revolving Promissory Note to BIL $ -0- $ 6,503
Loans payable to HSBC 18,700 10,000
Other domestic debt 2,622 8,913
Foreign debt 5,521 5,210
Long-term loan payable to BIL 21,103 12,000
------ ------
Total debt 47,946 42,626
Less short-term debt and current
installments of long-term debt 4,473 17,658
------ ------
Long-term debt, net of current
installments, including Revolving
Promissory Note to BIL in 1994 $43,473 $24,968
Aggregate long-term debt maturities during each of the next five fiscal
years is as follows:
1996 $ 4,473
1997 41,333
1998 965
1999 375
2000 275
Thereafter 525
-------
$47,946
The weighted average interest rate at December 31, 1995 on outstanding
short-term borrowings of $4,473 was approximately 9%. The short-term
borrowings at December 31, 1995 are as follows:
Foreign Debt $3,396
Other Short-term Debt 1,077
------
$4,473
In order to facilitate the relocation process by the Company from
California to Missouri, in February, 1992, BIL acquired all of Security
Pacific National Bank's rights (the "Bank Interest") in the First Amended
and Restated Credit Agreement that had been executed in 1991 ("Bank Loan").
The acquisition of the Bank Loan by BIL resulted in BIL acquiring the
Series B Convertible Preferred Stock (786,000 shares). As a condition of
the HSBC Revolving Credit Agreement, BIL subordinated the repayment of the
Bank Loan and the Amended 10.5% Note (as defined below) to the repayment of
the HSBC debt. As of September 30, 1993, the Bank Loan was restructured as
part of the Debt Conversion Transaction.
As of September 30, 1993, the Company entered into the Debt Conversion
Agreement with BIL whereby $75 million of the indebtedness due BIL was
restructured by the issuance of the Common Stock Note and the Preferred
Stock Note (see Note 6). The balance of the indebtedness owed BIL ($6.8
million) which was not converted into the Common Stock Note and the
Preferred Stock Note was treated as advances under the Revolving Promissory
Note.
In December 1995, HSBC and E&J Inc. agreed to amend the Revolving
Credit Agreement originally entered into on September 30, 1992 and extend
its term through September, 1997. The HSBC facility, as amended, provides
up to $6 million of letter of credit availability and cash advances of up
to $25 million to E&J Inc. Advances under the Revolving Credit Agreement
bear interest at the prime rate plus 0.25%, as announced by Marine Midland
Bank N.A. from time to time (8.5% at December 31, 1995), and are guaranteed
by Brierley Investments Limited, an affiliate of BIL. Repayment of
existing debt with BIL is subordinated to the HSBC debt, and Brierley
Investments Limited, an affiliate of BIL, guaranteed its repayment.
On December 21, 1995, $3 million of the increased credit facility was
utilized to repay an advance from BIL made earlier in 1995. As of December
31, 1995, $18.7 million of the $25 million available for cash advances had
been utilized.
As part of the Debt Conversion Transaction, BIL agreed to provide to
the Company and E&J Inc. a revolving credit facility of up to $12.5
million, as evidenced by the Revolving Promissory Note. At December 31,
1995, this facility was completely utilized. BIL has advanced the Company
an additional $8.6 million under the Revolving Promissory Note, bringing
the total outstanding advances from BIL to the Company at December 31, 1995
to $21.1 million. The Revolving Promissory Note and other advances mature
on September 30, 1997, bear interest at the rate of 8% per annum, and are
secured by a lien on and security interest in all assets of the Company and
E&J Inc. The Revolving Promissory Note is subordinated to all debt
borrowed by the Company or E&J Inc. from, or the payment of which has been
guaranteed by the Company or E&J Inc. to HSBC, the Pension Benefit Guaranty
Corporation and any other financial institution constituting a principal
lender to the Company and/or E&J Inc. As of December 31, 1995, $2.6
million of accrued, unpaid interest is due BIL under the Revolving
Promissory Note.
In July 1991, the Company obtained a three-year secured credit facility
in the amount of up to $13 million at an interest rate of prime plus 3% for
its Smith & Davis subsidiary. The facility was secured by substantially
all of the assets of Smith & Davis. In February 1993, this credit line was
amended to increase the availability of funding to the Company, reduce the
borrowing cost to prime plus 2% and extend the term to December 31, 1995.
The proceeds from the sale of the Institutional Business were used to
reduce this debt, and in December 1995 the balance under this credit line
was fully repaid utilizing funds advanced from BIL. Additionally, Smith &
Davis had other borrowings primarily consisting of amounts owed under an
industrial revenue bond totaling $0.1 million at December 31, 1995, with an
interest rate approximating 6%. The remaining balance is due in March
1996.
During May 1992, the Company's Canadian subsidiary renewed existing
credit facilities in the aggregate of $4.7 million, which was fully
utilized as of December 31, 1995 at interest rates ranging from prime plus
1% to prime plus 1-1/4%. The loans are secured by the assets of the
Canadian subsidiary.
During June 1994, the Company's Mexican subsidiary obtained a credit
facility in the aggregate of $1.0 million, of which $0.7 million was
borrowed as of December 31, 1995 at interest rates approximating 13%. The
loans are secured by the assets of the Mexican subsidiary and are due in
annual installments through 1999.
At December 31, 1995, the Company was contingently liable under
existing letters of credit in the aggregate amount of approximately $5.75
million.
At December 31, 1995 the Company owed $24.7 million to banks and other
commercial lenders, $2.1 million under capitalized lease obligations, and
$21.1 million to BIL.
NOTE 8 -- INCOME TAXES
The components of the income tax provision (benefit) from operations
for each of the years in the three year period ended December 31, 1995 are
as follows:
1995 1994 1993
---- ---- ----
Current:
Federal $-- $-- $--
Foreign 160 97 197
State -- -- --
Deferred:
Federal $-- $-- $--
Foreign (64) (259) (24)
State -- -- --
----- ----- -----
$ 96 $(162) $173
A reconciliation of the provision (benefit) for taxes on loss from
operations and the amount computed using the statutory federal income tax
rate of 34% for each of the years in the three year period ended December
31, 1995 is as follows:
1995 1994 1993
---- ---- ----
Computed "expected" tax benefit $(1,821) $(3,373) $(18,878)
Increases (reductions) due to:
State taxes, net of federal
benefit -- -- --
Foreign subsidiaries with
different tax rates (80) 52 319
Domestic losses with no tax
benefit 1,997 3,159 18,732
------ ------ ------
$ 96 $ (162) $ 173
The Company and certain subsidiaries file consolidated federal income
and combined state tax returns. For federal income tax purposes, as of
December 31, 1995, the Company has net operating loss (NOL) carryforwards
of approximately $143 million and tax credit carryforwards of approximately
$1 million that expire in 1997 through 2010. In accordance with the
Internal Revenue Code, when certain changes in company ownership occur,
utilization of NOL carryforwards is limited. The Company has determined
that there has been a change in ownership due to the various debt and
equity transactions consummated with BIL as described in Note 6 -- Debt
Restructuring and Conversion and Note 7 -- Debt. As a result,
approximately $88.5 million of the Company's NOL carryforwards are subject
to an annual limitation of approximately $3 million. If the full amount of
that limitation is not used in any year, the amount not used increases the
allowable limit in the subsequent year.
In addition, there are approximately $7 million and $6 million,
respectively, of preacquisition NOL carryforwards generated by Smith &
Davis and MCT with expiration dates through 2004. Annual utilization of
these NOLs is limited to $0.6 million for Smith & Davis and $0.5 million
for MCT to reduce that entity's future contribution to consolidated taxable
income.
The Company's foreign source income is not material.
NOTE 9 -- INVENTORIES
Inventories at December 31, 1995 and 1994 consist of the following:
1995 1994
---- ----
Raw materials $10,365 $10,249
Work-in-process 4,593 5,585
Finished goods 4,612 4,615
------- -------
$19,570 $20,449
NOTE 10 -- COMMON AND PREFERRED STOCK
At the March 17, 1992 meeting, the stockholders approved a resolution
to authorize a new class of preferred stock. Thereafter, approximately 5.9
million shares of 9% Series A Convertible Preferred Stock were issued for
conversion of BIL debt and accrued interest as discussed in Note 7. Such
preferred shares are redeemable into common stock on a one-for-one basis at
the Company's option until the second anniversary of conversion of the
debt, and thereafter at the holder's option until the seventh anniversary
of conversion of the debt except for any in-kind dividends which would be
redeemable at 150% of the market price at the time of conversion. The
preferred shares are also redeemable for cash at the Company's option at a
price of $1.67458437 per share until the second anniversary of conversion
of the debt and thereafter the seventh anniversary of the conversion to
cash at a price of $1.67458437 per share except for in-kind dividends which
would be redeemable at an amount equal to 150% of market price of the
common stock as of the redemption date. Upon notice of redemption, the
holder(s) of the preferred shares can convert such shares into shares of
common stock on a one-for-one basis. Also as discussed in Note 7, a second
series of preferred stock (Series B, consisting of 786,000 shares) was
issued to BIL, which is redeemable at the Company's option into Common
Stock on a one-for-one basis (except for any unpaid interest owed) at any
time prior to the seventh anniversary of the issuance date of said
preferred shares.
On March 17, 1992, the stockholders of the Company approved a Plan of
Reclassification. Under the Plan of Reclassification, the Certificate of
Incorporation of the Company was amended to replace the Company's
authorized Class A Common Stock and Class B Common Stock with a new single
class of Common Stock having 25,000,000 authorized shares, and reclassified
each outstanding Class A Common share and each outstanding Class B Common
share into one share of such new single class of Common Stock. The Plan of
Reclassification became effective as of the close of business on November
18, 1993.
On December 31, 1993, the Company's stockholders approved the Debt
Conversion Transaction (see Note 6), which resulted in the issuance of 55
million shares of Common Stock and 20 million shares of 7% Series C
Convertible Preferred Stock upon conversion of the Common Stock Note and
the Preferred Stock Note, respectively. Each share of Series A, B and C
preferred shares is convertible into one share of common stock and is
entitled to vote with the common stock on an as-converted basis. The
Series A and B preferred shares are callable at a price of $1.67458437.
Such call option has been waived by BIL through September 30, 1997. The
Debt Conversion Transaction resulted in an increase in the total shares
outstanding, on a fully diluted basis, to 99.6 million (including shares
issued for the MCT acquisition), and increased the percentage ownership of
the Company by BIL and its affiliates from approximately 60% at December
31, 1992 to approximately 85% at December 31, 1993.
The Company has three employee stock option plans that provide for the
grant to eligible employees of stock options to purchase shares of Common
Stock. The Everest & Jennings International Ltd. 1981 Employees Stock
Option Plan expired in 1991. Options are exercisable over a ten-year
period. Stock options were granted at prices which represent the fair
market value of the Common Stock on the date of grant. The changes in this
stock option plan in each of the years in the three year period ended
December 31, 1995 are summarized as follows:
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
Outstanding, beginning of year 56,450 102,450 234,371
Granted -- -- --
Exercised -- -- --
Cancelled (14,050) (46,000) (131,921)
------ ------ -------
Outstanding, end of year 42,400 56,450 102,450
Exercisable, end of year 42,400 56,450 102,450
Options outstanding as of December 31, 1995 were granted at prices
ranging from $1.88 to $12.75 per share. As of December 31, 1995, 42,400
shares were exercisable in the price range of $1.88 to $12.75 per share.
The Company also has an Omnibus Incentive Plan, which was adopted by
the Board of Directors during 1990. Options are exercisable over a ten-
year period, and were granted at prices which represent the fair market
value of the Common Stock on the date of grant. The changes in the Omnibus
Incentive Plan in each of the years in the three year period ended December
31, 1995 are summarized as follows:
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
Outstanding, beginning of year 219,692 549,058 725,000
Granted -- -- 219,000
Exercised -- -- --
Cancelled (128,692) (329,366) (394,942)
------- ------- -------
Outstanding, end of year 91,000 219,692 549,058
Exercisable, end of year 84,000 200,906 307,944
At December 31, 1995, 800,000 shares have been reserved for issuance
pursuant to this plan, and 91,000 options were outstanding which were
granted at prices ranging from $1.25 to $2.38.
Effective April 25, 1994, the Company adopted the 1994 Everest &
Jennings Stock Option Plan (the "1994 Plan"), providing for the granting of
nonqualified stock options to purchase up to 4,400,000 shares of the
Company's Common Stock to selected full time employees of the Company.
Under the 1994 Plan, options become exercisable in 50% increments when the
Company achieves certain performance goals and are automatically
exercisable five years after the grant date, assuming continuous employment
with the Company. Option activity in the 1994 Plan is as follows:
Year Ended December 31,
-----------------------
1995 1994
---- ----
Outstanding, beginning of year 3,152,000 3,682,000
Granted 1,009,000 --
Exercised -- --
Cancelled (968,000) (530,000)
--------- ---------
Outstanding, end of year 3,193,000 3,152,000
Options outstanding as of December 31, 1995 were granted at $0.85,
which approximates the fair market value of the Company's common stock at
the date of grant. No options were exercisable at December 31, 1995
pursuant to this Plan. At December 31, 1995, 1,207,000 shares were
available for the granting of additional options.
As part of the MCT acquisition, the Company assumed 107,614 unvested
and 300,422 vested stock options at exercise prices ranging from $0.06 to
$0.28. These options are for the acquisition of the Company's Common
Stock. Option activity in the MCT Plan is as follows:
Year Ended December 31,
-----------------------
1995 1994
---- ----
Outstanding, beginning of year 3,152,000 3,682,000
Options assumed -- 408,036
Outstanding, beginning of year 316,832 --
Exercised (22,834) (58,200)
Cancelled -- (33,004)
--------- ---------
Outstanding, end of year 293,998 316,832
Exercisable, end of year 284,193 284,193
NOTE 11 -- EMPLOYEE BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan
covering substantially all employees of its primary domestic subsidiary,
Everest & Jennings, Inc. and two non-contributory defined benefit pension
plans for the non-bargaining unit salaried employees ("Salaried Plan") and
employees subject to collective bargaining agreements ("Hourly Plan") at
its Smith & Davis subsidiary. The total pension expense (income) under
these plans was $364, $(15) and $40 for 1995, 1994 and 1993, respectively.
The following table sets forth the status of these plans and the
amounts recognized in the Company's consolidated financial statements:
1995 1994 1993
---- ---- ----
Actuarial present value of
benefit obligations:
Vested benefit obligation $17,678 $15,612 $17,695
Accumulated benefit obligation $17,678 $15,621 $17,816
Projected benefit obligation for
services rendered to date $17,678 $15,621 $17,816
Plan assets at fair value,
primarily listed stocks, bonds
and investment funds 13,513 12,100 12,763
------ ------ ------
Projected benefit obligation
in excess of plan assets (4,165) (3,521) (5,053)
Unrecognized transition amount (85) (98) (85)
Unrecognized loss from change in
discount rate 3,420 1,960 3,043
------ ------ ------
Pension liability included in
Accrued payroll costs $ (830) $(1,659) $(2,095)
The pension cost relating to these
plans is comprised of the following:
Service cost: benefits earned
during period $-- $-- $--
Interest cost on projected
benefit obligation 1,323 1,263 1,295
Actual return on plan assets (2,396) (378) (872)
Net amortization and deferral 1,437 (900) (223)
Curtailment gain -- -- (160)
------ ------ ------
Net periodic pension cost $364 $(15) $40
Effective May 1, 1991, benefits accruing under the Everest & Jennings,
Inc. Pension Plan were frozen. Due to a reduction in its weighted-average
discount rate, and in accordance with the provisions of SFAS No. 87,
"Employees' Accounting for Pensions", an additional minimum funding
liability, representing the excess of accumulated plan benefits over plan
assets and accrued pension costs of $2,606 was recorded for the Everest &
Jennings, Inc. Pension Plan as an increase in stockholders' deficit for the
year ended December 31, 1993. As of December 31, 1994, stockholders'
deficit was credited for $794 to reduce the minimum liability to $1,812.
As of December 31, 1995, stockholders' deficit was increased by $1,452 to
reflect an increase in the minimum liability as a result of a decrease in
the discount rate used to determine the minimum liability.
Additionally, during 1991 the Company froze the Smith & Davis Hourly
Plan and purchased participating annuity contracts to provide for
accumulated and projected benefit obligations. The Company has also frozen
the Smith & Davis Salaried Plan effective January 1, 1993. Participants in
the plan are eligible to participate in the Company's 401(k) Savings and
Investment Plan, as discussed below. There was no material impact on the
consolidated financial statements as a result of these changes.
The following assumptions were used to determine the projected benefit
obligations and plan assets:
Everest & Jennings, Inc. Smith & Davis
Plan Plans
------------------------ --------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
Weighted-average
discount rate 7.5% 8.5% 7.5% 8.0% 8.5% 7.5%
Expected long-term rate
of return on assets 9.0% 9.0% 9.0% 9.0% 9.0% 8.5%
Long-term rate for
compensation increases -- -- -- -- -- --
In 1995, 1994 and 1993, no long term rates for compensation increases
were assumed for the defined benefit plans, as all participants are
inactive and the plans are frozen.
The Company also sponsored a 401(k) Savings and Investment Plan (the
"401(k) plan") covering all full-time employees of Everest & Jennings, Inc.
Contributions made by the Company to the 401(k) plan are based on a
specified percentage of employee contributions up to 6% of base salary. As
of March 1, 1994, the Company suspended its contribution to the 401(k) Plan
for all non-bargaining unit employees. Employees may contribute between 1%
and 15% of base salary. Expense recorded for the 401(k) plan totaled
approximately $20 in 1995, $35 in 1994 and $134 in 1993.
NOTE 12 -- LEASE COMMITMENTS
The Company is a party to a number of noncancelable lease agreements
involving buildings and equipment. The leases extend for varying periods
up to eight years and generally provide for the payment of taxes, insurance
and maintenance by the lessee. Certain of these leases have purchase
options at varying rates.
The Company's property held under capital leases, included in property,
plant and equipment, at December 31, 1995 and 1994 consists of the
following:
December 31, December 31,
1995 1994
----------- ------------
Machinery and equipment $2,827 $2,784
Less accumulated amortization (1,769) (1,168)
------ ------
$1,058 $1,616
Minimum future lease obligations on long-term noncancelable leases in
effect at December 31, 1995 are as follows:
Capital Operating
------- ---------
1996 $ 970 $ 707
1997 933 608
1998 469 595
1999 -- 590
2000 -- 589
Thereafter -- 1,206
------ ------
Net minimum lease payments $2,372 $4,295
Less amount representing interest (262)
------
Present value of minimum lease
payments 2,110
Less current portion (804)
------
$1,306
Rental expense for operating leases amounted to approximately $1,349,
$2,122 and $1,913 in 1995, 1994 and 1993, respectively.
NOTE 13 -- CONTINGENT LIABILITIES
In July, 1990, a class action suit was filed in the United States
District Court for the Central District of California by a stockholder of
the Company against the Company and certain of its present and former
directors and officers. The suit seeks unspecified damages for alleged non-
disclosure and misrepresentation concerning the Company in violation of
federal securities laws. The Company twice moved to dismiss the complaint
on various grounds. After the first such motion was granted, plaintiff
filed a first amended complaint, which subsequently was dismissed by order
filed on September 20, 1991. Plaintiff then notified the court that it did
not intend to further amend the complaint, and an order dismissing the
complaint was entered in November 1991. Plaintiff filed a notice of appeal
to the Court of Appeals for the Ninth Circuit on December 23, 1991. The
case was briefed and oral argument heard in June, 1993. Because of the
precedent set by a Ninth Circuit decision in another case which was decided
after the district court's order of dismissal but before the Ninth Circuit
decided plaintiff's appeal, the Ninth Circuit reversed the district court's
dismissal of the case and remanded the case to the district court for
further proceedings in an opinion handed down by the Ninth Circuit on
August 24, 1995. The district court directed plaintiff to file a new
motion for class certification and the plaintiff did so on February 29,
1996. The Company opposes that motion, and it is set for hearing on March
25, 1996. The ultimate liability, if any, cannot be determined at this
time.
In December, 1992 ICF Kaiser Engineers, Inc. ("ICF Kaiser") filed a
Demand for Arbitration (the "Demand") against the Company before the
American Arbitration Association in Los Angeles, California. ICF Kaiser in
its demand claims breach of contract between the parties for consulting and
clean up work by ICF Kaiser at E&J's former facilities located at 3233 East
Mission Oaks Boulevard, Camarillo, California. The Arbitration Demand was
in the sum of $1.1 million. In January, 1993 an answer and counter-claim
were filed on behalf of the Company. The answer denied breach of the
contract and disputed the monetary claim asserted in the Demand. In the
counterclaim, the Company asserted that ICF Kaiser breached the contract,
above referenced, by inter alia failing to perform the services required
under the Agreement in a reasonably cost effective manner and in accordance
with the terms and conditions of the Agreement. In February, 1993 E&J made
a payment without prejudice to ICF Kaiser in the sum of approximately $0.6
million. This payment, together with prior payments, brought the total
paid to date by the Company to ICF Kaiser to approximately $0.7 million.
During June 1994 the Arbitrator ruled in favor of ICF Kaiser against the
Company in the amount of $1.3 million. This case was settled during the
fourth quarter of 1994 by payment to ICF Kaiser of $1.0 million, and such
payment was charged against existing Company reserves.
Die Cast Products, Inc. ("Die Cast Products"), a former subsidiary of
the Company, has been named as a defendant in a lawsuit filed by the State
of California pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. para 9601 et sec. The Company was
originally notified of this action on December 10, 1992. The lawsuit seeks
to recover response and remediation costs in connection with the release or
threatened release of hazardous substances at 5619-21 Randolph Street, in
the City of Commerce, California ("Randolph Street Site"). It is alleged
that the Randolph Street Site was used for the treatment, storage and
disposal of hazardous substances. The Company anticipates being named as a
defendant as a result of its former ownership of Die Cast Products, which
allegedly disposed of hazardous waste materials at the Randolph Street
Site. A settlement in principle between the State of California and the
various potentially responsible parties was reached in October 1995. It is
anticipated that the Company's portion of the settlement will be less than
was originally anticipated. Accordingly, the previously recorded reserve
for this matter was reduced in 1995.
In March, 1993, E&J Inc. received a notice from the United States
Environmental Protection Agency ("EPA") regarding an organizational meeting
of generators with respect to the Casmalia Resources Hazardous Waste
Management Facility ("Casmalia Site") in Santa Barbara County, California.
The EPA alleges that the Casmalia Site is an inactive hazardous waste
treatment, storage and disposal facility which accepted large volumes of
commercial and industrial wastes from 1973 until 1989. In late 1991, the
Casmalia Site owner/operator abandoned efforts to actively pursue site
permitting and closure and is currently conducting only minimal maintenance
activities. The EPA estimates that the Casmalia Site's closure trust fund,
approximately $10 million, is substantially insufficient to cover cleanup
and closure of the site. Since August, 1992, the EPA has undertaken
certain interim stabilization actions to control actual or threatened
releases of hazardous substances at the Casmalia Site. The EPA is seeking
cooperation from generators to assist in the cleaning up, and closing of,
the Casmalia Site. E&J Inc. and 64 other entities were invited to the
organizational meeting. E&J Inc. is a member of a manufacturers' group of
potentially responsible parties which has investigated the site and
proposed a remediation plan to the EPA. To reflect E&J Inc.'s estimated
allocation of costs thereunder, a reserve of $1.0 million was recorded,
which was included in the Consolidated Statements of Operations for 1993.
During 1995 an agreement in principle was reached with the EPA for a
settlement of the majority of the Casmalia site liability. The settlement
provides for the work to be completed in three phases. Phase I work, which
is estimated to take three to five years to complete, will require the
Company, along with other responsible parties, to participate in funding
the water management, certain construction projects and completion of the
site investigation. Phase II work, consisting of the remaining remedial
construction activities and the first five years of operation and
maintenance, will be funded by other parties and is estimated to take ten
years. Subsequent to Phase II, additional operation and maintenance will
be required for approximately 30 years. The estimated exposure of the
Company under this agreement is less than originally anticipated and the
previously recorded reserve has been reduced accordingly.
In 1989, a patent infringement case was initiated against E&J Inc. and
other defendants in the U.S. District Court, Central District of
California. E&J Inc. prevailed at trial with a directed verdict of patent
invalidity and non-infringement. The plaintiff filed an appeal with the
U.S. Court of Appeals for the Federal Circuit. On March 31, 1993, the
Court of Appeals vacated the District Court's decision and remanded the
case for trial. Impacting the retrial of this litigation was a re-
examination proceeding before the Board of Patent Appeals with respect to
the subject patent. A ruling was rendered November 23, 1993 sustaining the
claim of the patent which E&J Inc. has been charged with infringing. Upon
the issuance of a patent re-examination certificate by the U.S. Patent
Office, the plaintiff presented a motion to the District Court requesting a
retrial of the case. The Company presented a Motion for Summary Judgment
of Noninfringement based in part upon the November 23, 1993 decision of the
Board of Patent Appeals. The Motion was granted in follow-up conferences
and an official Judgment was entered November 17, 1994. The plaintiff
filed a Notice of Appeal on November 23, 1994, and a briefing schedule has
been indicated by the Appellate Court. A written opinion was filed March
21, 1995 and the appeal was argued August 8, 1995. A decision has not yet
been announced. E&J Inc. believes that this case is without merit and
intends to contest it vigorously. The ultimate liability of E&J Inc., if
any, cannot be determined at this time.
The Company and its subsidiaries are parties to other lawsuits and
other proceedings arising out of the conduct of its ordinary course of
business, including those relating to product liability and the sale and
distribution of its products. While the results of such lawsuits and other
proceedings cannot be predicted with certainty, management does not expect
that the ultimate liabilities, if any, will have a material adverse effect
on the consolidated financial position or results of operations of the
Company.
NOTE 14 -- QUARTERLY FINANCIAL INFORMATION
The following chart sets forth the highlights of the quarterly
consolidated results of operations in fiscal years 1995, 1994 and 1993:
Three Months Ended (Unaudited)(a)
-----------------------------------------------
March 31 June 30 Sept 30 Dec 31 Year
-------- ------- ------- ------ ----
Fiscal year 1995
Revenues $18,513 $18,449 $19,346 $18,319 $74,627
Gross profit 4,207 4,404 4,126 3,293(d) 16,030
Net loss (1,170) (860) (924) (2,498)(d) (5,452)
Loss per share (.02) (.01) (.01) (.04) (.08)
Fiscal year 1994
Revenues $20,213 $20,146 $19,829 $19,250 $79,438
Gross profit 4,080 4,657 4,674 139(b) 13,550
Net loss (1,673) (940) (897) (6,249)(b) (9,759)
Loss per share (.02) (.01) (.01) (.10) (.14)
Fiscal year 1993
Revenues $24,752 $23,524 $23,458 $22,725 $94,459
Gross profit 5,839 2,784 3,993 (1,982) 10,634
Net loss (2,977) (7,837) (5,236) (39,647)(c) (55,697)(c)
Loss per share (.33) (.86) (.57) (4.20) (5.96)
(a)In the fourth quarter of 1994, based on predominant industry
practice, the Company changed its method of classification of
shipping and distribution costs in the statement of operations.
Such costs are now presented in cost of sales versus operating
expenses in prior years. For purposes of quarterly financial
information all gross profit amounts presented have been revised to
reflect such reclassification.
(b)Gross profit was adversely affected during the fourth quarter of
1994 by a $3.0 million charge to reserves for product liabillity,
workers' compensation claims and inventory cost adjustments.
(c)Includes charges of $13 million for the Institutional Business
disposition, $2.1 million for the consolidation of manufacturing
and distribution facilities, and $9.7 million for MCT in-process
R&D.
(d)Productivity at the Company's primary domestic manufacturing
facility was negatively impacted during the fourth quarter of 1995
as a result of a WARN act notice issued pursuant to the layoff of
30% of the work force at that facility. These layoffs, which were
completed during the first quarter of 1996, were a result of the
transfer of workload to lower-cost facilities and the Company's
continued manufacturing rationalization.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10 THROUGH 13.
The Company intends to file with the Securities and Exchange Commission
a definitive proxy statement pursuant to Regulation 14A involving the
election of directors not later than 120 days after the end of its fiscal
year ended December 31, 1995. Accordingly, except to the extent included
in Part I under the caption "Executive Officers of the Company", the
information required by Part III (Items 10, 11, 12 and 13) is incorporated
herein by reference to such definitive proxy statement in accordance with
General Instruction G(3) to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The following consolidated financial statements of Everest & Jennings
International Ltd. and subsidiaries are included in this Annual Report
on Form 10-K:
- Report of Independent Accountants.
- Consolidated Statements of Operations - For each of the
years in the three-year period ended December 31, 1995.
- Consolidated Balance Sheets - As of December 31, 1995 and
1994.
- Consolidated Statements of Stockholders' Deficit - For
each of the years in the three-year period ended December 31,
1995.
- Consolidated Statements of Cash Flows - For each of the
years in the three-year period ended December 31, 1995.
- Notes to Consolidated Financial Statements.
2. Financial Statement Schedule:
The following Financial Statement Schedule is included in this Annual
Report on Form 10-K.
- Report of Independent Accountants on Financial Statement Schedule.
- Schedule VIII -- Valuation and Qualifying Accounts.
Other schedules are omitted because they are either inapplicable, not
required under the instructions to Annual Report on Form 10-K, or the
required information is included in the Consolidated Financial Statements
and Notes thereto.
(b) Reports on Form 8-K:
Date of Report Item(s) Reported Statements Filed
-------------- ---------------- ----------------
1. April 4, 1995 2,7 (relating to the None
disposition of assets)
(c) Exhibits:
2(a) Debt Conversion Agreement dated as of September 30, 1993 by and
among the Company, E&J Inc., BIL and the Jennings Investment Co,
filed as Exhibit 10(es) to Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1993, is hereby incorporated
herein by reference.
(b) Exchange Agreement and Plan of Merger, dated as of October 23,
1993, by and among Medical Composite Technology, Inc. ("MCT"),
certain stockholders of MCT, Everest & Jennings International
Ltd., BIL (Far East Holdings) Limited, and MCT Acquisition Corp.,
which was filed as Exhibit 2(a) to Form 8-K filed on January 14,
1994, is hereby incorporated herein by reference.
(c) Plan of Merger, dated as of January 14, 1994, by and between MCT
Acquisition Corp. and Medical Composite Technology, Inc., which
was filed as Exhibit 2(b) to Form 8-K filed on January 14, 1994,
is hereby incorporated herein by reference.
(d) Asset Purchase Agreement dated February 15, 1995 by and among
A.H. Acquisition, Inc., Smith & Davis Manufacturing Company and
Everest & Jennings International Ltd. which was filed as Exhibit
2(d) to Form 10-K filed on March 31, 1995, is hereby incorporated
herein by reference.
3(a)(i) Certificate of Incorporation, which was filed as Exhibit 3(a) to
Annual Report on Form 10-K filed on March 27, 1992, is hereby
incorporated herein by reference.
(ii) Certificate of Amendment of Certificate of Incorporation, dated
January 11, 1994, filed as Exhibit 3(c) to Annual Report on Form
10-K dated March 30, 1994, is hereby incorporated herein by
reference.
(b) Bylaws, which were filed as Exhibit 3(b) to Annual Report on Form
10-K filed on March 27, 1992, is hereby incorporated herein by
reference.
4(a)(i) First Amended and Restated Credit Agreement between the Company
and BIL, as assignee of Security Pacific National Bank, by
agreement, dated February 21, 1992 ("First Amended and Restated
Credit Agreement"), which was filed as Exhibit 10(aq) to Annual
Report on Form 10-K dated March 27, 1992, is hereby incorporated
herein by reference.
(ii) Amendment No. 1 to First Amended and Restated Credit Agreement,
which was filed as Exhibit 10(ar) to Annual Report on Form 10-K
dated March 27, 1992, is hereby incorporated herein by reference.
(iii) Amendment No. 2 to First Amended and Restated Credit Agreement,
which was filed as Exhibit 10(as) to Annual Report on Form 10-K
dated March 27, 1992, is hereby incorporated herein by reference.
(iv) Amendment No. 3 to First Amended and Restated Credit Agreement,
dated March 29, 1993 and filed as Exhibit 10(ea) to Annual Report
on Form 10-K dated April 9, 1993, is hereby incorporated herein
by reference.
(v) Amendment No. 4 to First Amended and Restated Credit Agreement,
dated June 30, 1993, filed as Exhibit 10(el) to Quarterly Report
on Form 10-Q for the Quarterly Period Ended June 30, 1993, is
hereby incorporated herein by reference.
(b)(i) Debt Restructure Agreement, dated August 30, 1991, with Security
Pacific National Bank ("Debt Restructure Agreement"), which was
filed as Exhibit 10(bi) to Annual Report on Form 10-K dated March
27, 1992, is hereby incorporated herein by reference.
(ii) Amendment No. 1 to Debt Restructure Agreement, which was filed as
Exhibit 10(bj) to Annual Report on Form 10-K dated March 27,
1992, is hereby incorporated herein by reference.
(iii) Supplement to Debt Restructure Agreement, which was filed as
Exhibit 10(bk) to Annual Report on Form 10-K dated March 27,
1992, is hereby incorporated herein by reference.
(c)(i) Revolving Credit Agreement dated September 30, 1992 between
Everest & Jennings, Inc. and The Hongkong and Shanghai Banking
Corporation Limited and filed as Exhibit 10(dd) to Annual Report
on Form 10-K dated April 9, 1993, is hereby incorporated herein
by reference.
(ii) First Amendment dated February 5, 1993 to Revolving Credit
Agreement between Everest & Jennings, Inc. and The Hongkong and
Shanghai Banking Corporation Limited and filed as Exhibit 10(dp)
to Annual Report on Form 10-K dated April 9, 1993, is hereby
incorporated herein by reference.
(iii) Second Amendment dated March 30, 1993 to Revolving Credit
Agreement between Everest & Jennings, Inc. and The Hongkong and
Shanghai Banking Corporation Limited and filed as Exhibit 10(dw)
to Annual Report on Form 10-K dated April 9, 1993, is hereby
incorporated herein by reference.
(iv) Third Amendment to Revolving Credit Agreement dated September 30,
1993 by and between E&J Inc. and The Hongkong and Shanghai
Banking Corporation Limited, filed as Exhibit 10(er) to Quarterly
Report on Form 10-Q for the Quarterly Period Ended September 30,
1993, is hereby incorporated herein by reference.
(v) Fourth Amendment to Revolving Credit Agreement dated October 8,
1993 by and between E&J Inc. and The Hongkong and Shanghai
Banking Corporation Limited, filed as Exhibit 10(ey) to Quarterly
Report on Form 10-Q for the Quarterly Period Ended September 30,
1993, is hereby incorporated herein by reference.
(vi) Fifth Amendment to Revolving Credit Agreement dated September 1,
1994 by and between Everest & Jennings, Inc. and The Hongkong and
Shanghai Banking Corporation Limited, filed as Exhibit 10(fb) to
Quarterly Report on Form 10-Q for the Quarterly Period Ended
September 30, 1994, is hereby incorporated herein by reference.
(d)* Amended and Restated Revolving Credit Agreement dated December 8,
1995 between Everest & Jennings, Inc. and The Hongkong and
Shanghai Banking Corporation Limited. (The Exhibits and
Schedules listed in said Agreement are omitted pursuant to Item
601(b)(2) of Regulation S-K; the Company hereby agrees to furnish
supplementally a copy of any omitted Exhibit or Schedule to the
Securities and Exchange Commission upon request.)
(e) Promissory Note dated January 29, 1993 between the Company and
the Retirement Plan for Employees of Everest & Jennings
International Ltd. and filed as Exhibit 10(do) to Annual Report
on Form 10-K dated April 9, 1993, is hereby incorporated herein
by reference.
(f) Certain instruments with respect to the long-term debt of the
Company and its consolidated subsidiaries are omitted pursuant to
Item 601(b)(4)(iii) of Regulation S-K since the amount of debt
authorized under each omitted instrument does not exceed ten
percent of the total assets of the Company and its subsidiaries
on a consolidated basis. The Company hereby agrees to furnish a
copy of any such instrument to the Securities and Exchange
Commission upon request.
10(a)(i) Retirement Plan for Employees of Everest & Jennings International
Ltd., effective as of January 1, 1981, which was filed as Exhibit
10(e) to Annual Report on Form 10-K filed on March 25, 1988, is
hereby incorporated herein by reference.
(ii) Amendment to Retirement Plan for Employees of Everest & Jennings
International Ltd., dated July 6, 1983, which was filed as
Exhibit 10(f) to Annual Report on Form 10-K filed on March 25,
1988, is hereby incorporated herein by reference.
(iii) Amendment No. 2 to Retirement Plan for Employees of Everest &
Jennings International Ltd. dated October 14, 1985, which was
filed as Exhibit 10(g) to Annual Report on Form 10-K filed on
March 25, 1988, is hereby incorporated herein by reference.
(iv) Amendment No. 3 to Retirement Plan for Employees of Everest &
Jennings International Ltd. dated May 10, 1988, which was filed
as Exhibit 10(i) to Annual Report on Form 10-K dated March 17,
1989, is hereby incorporated herein by reference.
(v) Amendment No. 4 to Retirement Plan for Employees of Everest &
Jennings International Ltd. dated July 22, 1988, which was filed
as Exhibit 10(j) to Annual Report on Form 10-K dated March 17,
1989, is hereby incorporated herein by reference.
(vi) Amendment No. 5 to the Retirement Plan for Employees of Everest &
Jennings International Ltd., which was filed as Exhibit 10(ao) to
Annual Report on Form 10-K dated March 27, 1992, is hereby
incorporated herein by reference.
(b) Description of Retirement Plan for Non-Employee Directors,
effective June 1, 1987, which was filed as Exhibit 10(h) to
Annual Report on Form 10-K filed on March 25, 1988, is hereby
incorporated herein by reference.
(c) 1990 Omnibus Stock Incentive Plan of Everest & Jennings
International Ltd. dated November 2, 1990, which was filed as
Exhibit 10(an) to Annual Report on Form 10-K dated March 27,
1992, is hereby incorporated herein by reference.
(e) Everest & Jennings International Ltd. Stock Option Plan dated
April 25, 1994 and related form of Stock Option Agreement dated
as of August 1, 1994, filed as Exhibit 10(fa) to Quarterly Report
on Form 10-Q for the Quarterly Period Ended September 30, 1994,
is hereby incorporated herein by reference.
21* Subsidiaries of the Registrant.
23(a)* Consent of Price Waterhouse dated March 29, 1996 with respect to
S-8 Registration Statements.
* Filed herewith in this Annual Report on Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
EVEREST & JENNINGS INTERNATIONAL LTD.
(Registrant)
Date: March 29, 1996 By /s/TIMOTHY W. EVANS
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ RODNEY F. PRICE Chairman of the Board March 29, 1996
/s/ BEVIL J. HOGG President & CEO, Director March 29, 1996
/s/ SANDRA L. BAYLIS Director March 29, 1996
/s/ ROBERT C. SHERBURNE Director March 29, 1996
/s/ CHARLES D. YIE Director March 29, 1996
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To The Board of Directors and Stockholders
of Everest & Jennings International Ltd.
Our audits of the consolidated financial statements referred to in our
report dated March 15, 1996 appearing on page 21 of this Annual Report on
Form 10-K, which report includes an explanatory paragraph describing an
uncertainty with respect to the Company's ability to continue as a going
concern, also included audits of the Financial Statement Schedule for the
three years ended December 31, 1995 listed in Item 14 (a) of this Form 10-
K. In our opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
St. Louis, Missouri
March 15, 1996
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Charged
Balance at to Costs Balance
Beginning and at End of
For the Year Ended of Period Expenses Deductions Period
- ------------------ --------- -------- ---------- --------
December 31, 1994:
Allowance for doubtful
accounts $ 2,088 $ 577 $ 818 $ 1,847
Accrued restructuring
expenses 4,476 123 3,940 659
December 31, 1994:
Allowance for doubtful
accounts $ 1,506 $ 1,630 $ 1,048 $ 2,088
Accrued restructuring
expenses 6,292 -o- 1,816 4,476
December 31, 1993:
Allowance for doubtful
accounts $ 3,505 $ 1,515 $ 3,514(a) $ 1,506
Accrued restructuring
expenses 6,0475,074 (b)(c) 4,829 6,292
(a) This includes amount related to the accounts of the Institutional
Business which have been reclassified as Assets Held for Sale.
(b) Accrued restructuring expenses include costs incurred in the process of
relocating the Company's primary domestic wheelchair manufacturing
facility from California to Missouri. $10,030 and $2,079 of
restructuring expenses were charged to other balance sheet accounts for
1993 and 1992, respectively.
(c) Accrued restructuring expenses include costs related to the disposition
of the Institutional Business.
INDEX TO EXHIBITS
Page
- ----
50 2(a) Debt Conversion Agreement dated as of
September 30, 1993 by and among the Company, E&J Inc., BIL
and the Jennings Investment Co, filed as Exhibit 10(es) to
Quarterly Report on Form 10-Q for the Quarterly Period
Ended September 30, 1993, is hereby incorporated herein by
reference.
50 (b) Exchange Agreement and Plan of Merger, dated
as of October 23, 1993, by and among Medical Composite
Technology, Inc. ("MCT"), certain stockholders of MCT,
Everest & Jennings International Ltd., BIL (Far East
Holdings) Limited, and MCT Acquisition Corp., which was
filed as Exhibit 2(a) to Form 8-K filed on January 14,
1994, is hereby incorporated herein by reference.
50 (c) Plan of Merger, dated as of January 14, 1994,
by and between MCT Acquisition Corp. and Medical Composite
Technology, Inc., which was filed as Exhibit 2(b) to Form
8-K filed on January 14, 1994, is hereby incorporated
herein by reference.
50 (d) Asset Purchase Agreement dated February 15,
1995 by and among A.H. Acquisition, Inc., Smith & Davis
Manufacturing Company and Everest & Jennings International
Ltd., which was filed as Exhibit 2(d) to Form 10-K filed
on March 31, 1995, is hereby incorporated herein by
reference.
50 3(a)(i) Certificate of Incorporation, which was
filed as Exhibit 3(a) to Annual Report on Form 10-K filed
on March 27, 1992, is hereby incorporated herein by
reference.
50 (ii) Certificate of Amendment of Certificate of
Incorporation, dated January 11, 1994, filed as Exhibit
3(c) to Annual Report on Form 10-K dated March 30, 1994,
is hereby incorporated herein by reference.
50 (b) Bylaws, which were filed as Exhibit 3(b) to
Annual Report on Form 10-K filed on March 27, 1992, is
hereby incorporated herein by reference.
50 4(a)(i) First Amended and Restated Credit
Agreement between the Company and BIL, as assignee of
Security Pacific National Bank, by agreement, dated
February 21, 1992 ("First Amended and Restated Credit
Agreement"), which was filed as Exhibit 10(aq) to Annual
Report on Form 10-K dated March 27, 1992, is hereby
incorporated herein by reference.
50 (ii) Amendment No. 1 to First Amended and
Restated Credit Agreement, which was filed as Exhibit
10(ar) to Annual Report on Form 10-K dated March 27, 1992,
is hereby incorporated herein by reference.
50 (iii) Amendment No. 2 to First Amended and
Restated Credit Agreement, which was filed as Exhibit
10(as) to Annual Report on Form 10-K dated March 27, 1992,
is hereby incorporated herein by reference.
50 (iv) Amendment No. 3 to First Amended and
Restated Credit Agreement, dated March 29, 1993 and filed
as Exhibit 10(ea) to Annual Report on Form 10-K dated
April 9, 1993, is hereby incorporated herein by reference.
50 (v) Amendment No. 4 to First Amended and Restated
Credit Agreement, dated June 30, 1993, filed as Exhibit
10(el) to Quarterly Report on Form 10-Q for the Quarterly
Period Ended June 30, 1993, is hereby incorporated herein
by reference.
51 (b)(i) Debt Restructure Agreement, dated August
30, 1991, with Security Pacific National Bank ("Debt
Restructure Agreement"), which was filed as Exhibit 10(bi)
to Annual Report on Form 10-K dated March 27, 1992, is
hereby incorporated herein by reference.
51 (ii) Amendment No. 1 to Debt Restructure
Agreement, which was filed as Exhibit 10(bj) to Annual
Report on Form 10-K dated March 27, 1992, is hereby
incorporated herein by reference.
51 (iii) Supplement to Debt Restructure Agreement,
which was filed as Exhibit 10(bk) to Annual Report on Form
10-K dated March 27, 1992, is hereby incorporated herein
by reference.
51 (c)(i) Revolving Credit Agreement dated September
30, 1992 between Everest & Jennings, Inc. and The Hongkong
and Shanghai Banking Corporation Limited and filed as
Exhibit 10(dd) to Annual Report on Form 10-K dated April
9, 1993, is hereby incorporated herein by reference.
51 (ii) First Amendment dated February 5, 1993 to
Revolving Credit Agreement between Everest & Jennings,
Inc. and The Hongkong and Shanghai Banking Corporation
Limited and filed as Exhibit 10(dp) to Annual Report on
Form 10-K dated April 9, 1993, is hereby incorporated
herein by reference.
51 (iii) Second Amendment dated March 30, 1993 to
Revolving Credit Agreement between Everest & Jennings,
Inc. and The Hongkong and Shanghai Banking Corporation
Limited and filed as Exhibit 10(dw) to Annual Report on
Form 10-K dated April 9, 1993, is hereby incorporated
herein by reference.
51 (iv) Third Amendment to Revolving Credit
Agreement dated September 30, 1993 by and between E&J Inc.
and The Hongkong and Shanghai Banking Corporation Limited,
filed as Exhibit 10(er) to Quarterly Report on Form 10-Q
for the Quarterly Period Ended September 30, 1993, is
hereby incorporated herein by reference.
51 (v) Fourth Amendment to Revolving Credit Agreement
dated October 8, 1993 by and between E&J Inc. and The
Hongkong and Shanghai Banking Corporation Limited, filed
as Exhibit 10(ey) to Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1993, is hereby
incorporated herein by reference.
51 (vi) Fifth Amendment to Revolving Credit
Agreement dated September 1, 1994 by and between Everest &
Jennings, Inc. and The Hongkong and Shanghai Banking
Corporation Limited, filed as Exhibit 10(fb) to Quarterly
Report on Form 10-Q for the Quarterly Period Ended
September 30, 1994, is hereby incorporated herein by
reference.
60 (d)* Amended and Restated Revolving Credit
Agreement dated December 8, 1995 between Everest &
Jennings, Inc. and The Hongkong and Shanghai Banking
Corporation Limited. (The Exhibits and Schedules listed
in said Agreement are omitted pursuant to Item 601(b)(2)
of Regulation S-K; the Company hereby agrees to furnish
supplementally a copy of any omitted Exhibit or Schedule
to the Securities and Exchange Commission upon request.)
51 (e) Promissory Note dated January 29, 1993 between
the Company and the Retirement Plan for Employees of
Everest & Jennings International Ltd. and filed as Exhibit
10(do) to Annual Report on Form 10-K dated April 9, 1993,
is hereby incorporated herein by reference.
52 (f) Certain instruments with respect to the long-
term debt of the Company and its consolidated subsidiaries
are omitted pursuant to Item 601(b)(4)(iii) of Regulation
S-K since the amount of debt authorized under each omitted
instrument does not exceed ten percent of the total assets
of the Company and its subsidiaries on a consolidated
basis. The Company hereby agrees to furnish a copy of any
such instrument to the Securities and Exchange Commission
upon request.
52 10(a)(i) Retirement Plan for Employees of Everest &
Jennings International Ltd., effective as of January 1,
1981, which was filed as Exhibit 10(e) to Annual Report on
Form 10-K filed on March 25, 1988, is hereby incorporated
herein by reference.
52 (ii) Amendment to Retirement Plan for Employees
of Everest & Jennings International Ltd., dated July 6,
1983, which was filed as Exhibit 10(f) to Annual Report on
Form 10-K filed on March 25, 1988, is hereby incorporated
herein by reference.
52 (iii) Amendment No. 2 to Retirement Plan for
Employees of Everest & Jennings International Ltd. dated
October 14, 1985, which was filed as Exhibit 10(g) to
Annual Report on Form 10-K filed on March 25, 1988, is
hereby incorporated herein by reference.
52 (iv) Amendment No. 3 to Retirement Plan for
Employees of Everest & Jennings International Ltd. dated
May 10, 1988, which was filed as Exhibit 10(i) to Annual
Report on Form 10-K dated March 17, 1989, is hereby
incorporated herein by reference.
52 (v) Amendment No. 4 to Retirement Plan for
Employees of Everest & Jennings International Ltd. dated
July 22, 1988, which was filed as Exhibit 10(j) to Annual
Report on Form 10-K dated March 17, 1989, is hereby
incorporated herein by reference.
52 (vi) Amendment No. 5 to the Retirement Plan for
Employees of Everest & Jennings International Ltd., which
was filed as Exhibit 10(ao) to Annual Report on Form 10-K
dated March 27, 1992, is hereby incorporated herein by
reference.
52 (b) Description of Retirement Plan for Non-
Employee Directors, effective June 1, 1987, which was
filed as Exhibit 10(h) to Annual Report on Form 10-K filed
on March 25, 1988, is hereby incorporated herein by
reference.
52 (c) 1990 Omnibus Stock Incentive Plan of Everest &
Jennings International Ltd. dated November 2, 1990, which
was filed as Exhibit 10(an) to Annual Report on Form 10-K
dated March 27, 1992, is hereby incorporated herein by
reference.
52 (e) Everest & Jennings International Ltd. Stock
Option Plan dated April 25, 1994 and related form of Stock
Option Agreement dated as of August 1, 1994, filed as
Exhibit 10(fa) to Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1994, is hereby
incorporated herein by reference.
94 21* Subsidiaries of the Registrant.
95 23(a)* Consent of Price Waterhouse dated March 29, 1996 with
respect to S-8 Registration Statements.
* Filed herewith in this Annual Report on Form 10-K