OEA, INC.
FORM 10-K
Fiscal Year Ended July 31, 1995
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 July 31, 1995.
[ ] 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 2-32231.
OEA, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2362379
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization.)
34501 East Quincy Avenue, P. O. Box 100488, Denver, Colorado 80250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (303) 693-1248
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered:
Common Stock, Par Value $0.10 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X].
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of October 20, 1995. Common Stock, $.10 par value - $450,192,680.
The number of shares outstanding of the issuer's classes of common stock as of
October 20, 1995. Common Stock $.10 par value - 20,490,403.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held
January 12, 1996, are incorporated by reference into Part III.
PART I
ITEM 1 - BUSINESS
General Development of Business
OEA, Inc. ("Registrant" or the "Company") was organized as a Delaware business
corporation on October 1, 1969. Its predecessor, Ordnance Engineering
Associates, Inc., an Illinois corporation, was organized on July 13, 1957, and
was merged into the Registrant on December 3, 1969. OEA, Inc. consists of the
OEA Automotive Safety Products Divisions, OEA Aerospace, Inc., Pyrospace S.A.
(45% ownership) and Pyroindustrie S.A. (80% direct ownership, 9% indirect
ownership). OEA Automotive Safety Products consists of the Automotive Initiator
Division - Denver, Automotive Initiator Division - Utah, Hybrid Gas Generator
Division, and Hybrid Inflator Division.
Explosive Technology, Inc. was acquired as a wholly owned subsidiary of the
Registrant on March 30, 1971. It was organized as a California business
corporation on June 21, 1961. Effective December 11, 1989, the subsidiary's name
was changed to ET, Inc. On October 1, 1994, the name was again changed to OEA
Aerospace, Inc. The Aerospace Systems Group from the Parent Company (Denver
Operations) was merged into the subsidiary effective October 1, 1994.
Aerotest Operations, Inc., a California corporation, was acquired as a wholly
owned subsidiary of OEA Aerospace, Inc. (described above) on April 1, 1974.
Pyrospace S.A. was organized on July 29, 1987, in France as a joint venture
(45% OEA, Inc. ownership) with two French firms, Aerospatiale and SNPE. Its
facility is located in Les Mureaux, 25 miles northwest of Paris.
Pyroindustrie S.A. was incorporated on June 21, 1994, in France as a joint
venture (80% OEA, Inc., 20% Pyrospace S.A.) with Pyrospace. Its facility is
collocated with Pyrospace in Les Mureaux, 25 miles northwest of Paris.
There has been no material change in the mode of business conducted by the
Registrant or its above-named subsidiaries and divisions during fiscal year
1995, except as mentioned above.
1
Financial Information about Industry Segments
FY 1995 FY 1994 FY 1993
------- ------- -------
Sales to Unaffiliated Customers
Automotive ........ $ 90,141,512 $ 67,652,256 $ 46,295,683
Nonautomotive ..... 39,069,259 42,240,486 47,888,510
---------- ---------- ----------
Total $129,210,771 $109,892,742 $ 94,184,193
============ ============ ============
Inter-Segment Sales or Transfers
Automotive ........ $ 120,532 $ 3,500 $ 0
Nonautomotive ..... 117,061 81,916 93,787
------- ------ ------
Total $ 237,593 $ 85,416 $ 93,787
============ ============ ============
Operating Profit
Automotive ........ $ 27,935,374 $ 21,026,298 $ 12,818,618
Nonautomotive ..... 6,991,332 9,045,161 10,814,227
--------- --------- ----------
Total $ 34,926,706 $ 30,071,459 $ 23,632,845
============ ============ ============
Identifiable Assets
Automotive ........ $115,910,167 $ 81,435,183 $ 65,932,340
Nonautomotive ..... 44,991,668 53,879,721 57,245,815
---------- ---------- ----------
Total $160,901,835 $135,314,904 $123,178,155
============ ============ ============
2
Narrative Description of Business
Automotive Safety Products
The Company established the Automotive Safety Products division in 1989 as a
separate division to support the rapid growth in automotive air bags and related
technologies. Prior to 1989, automotive-related work was performed in the
aerospace division. The Company designs, tests, develops, and manufactures
propellant and other pyrotechnic devices for use in automotive safety products.
Major products currently in production include electric initiators, hybrid gas
generators and linear cord, all for use in inflators. These products are sold to
automotive inflator manufacturers for assembly into air bag modules for delivery
to the auto companies.
The Company is currently completing the prototype phase for smokeless hybrid
inflators for passenger, driver and side-impact inflators. These products are
environmentally friendly and produce no toxic materials. In addition, these
inflators are smaller, lighter, and less expensive than current designs in
production. High-volume production of the new smokeless hybrid inflators is
scheduled to begin in April 1996. The inflators are sold to module manufacturers
for delivery to the auto companies.
The Company's principal officers and engineers represent its sales force. A
significant investment in plant and equipment will be required by the Company to
provide the previously announced projected sales of inflators of more than 2.5
million units for model year 1997. While the Company has ordered equipment from
companies experienced in the manufacture of automated high-rate production
equipment, no assurance can be given that the equipment will perform as designed
and at the capacity required until the equipment has been operated for a period
of time in our plant.
The automotive segment accounted for approximately 70%, 62%, and 49% of the
Company's net sales for fiscal years 1995, 1994, and 1993, respectively.
Initiators are produced in three plants owned by the Company with highly
automated equipment: Denver, Colorado; Tremonton, Utah; and Les Mureaux, France.
Hybrid gas generators are produced in Denver with highly automated equipment.
The initial production of hybrid inflators will be performed in Denver.
Raw materials used by the Company include stamped and machined parts, elastomer
seals, and commercially available pyrotechnic materials. The Company is not
dependent upon any one source for purchased materials because alternate sources
of supply are generally available in the marketplace.
3
The initiator business is not dependent upon patented items, trademarks,
franchises, concessions, or licenses thereunder. The Company does not pay any
substantial royalties or similar payments in connection with any patents or
license agreements. The gas generator and smokeless hybrid inflator business is
covered by several patents. Some of the patents have been issued and others are
pending.
The Company's business is not seasonal in nature.
Products are manufactured to order; accordingly, significant amounts of
inventory are not required to be maintained. Most customers operate in a
just-in-time inventory environment. Customer payments are reasonably prompt and
extended terms are not required.
The Company's customer providing more than 10% of consolidated sales for the
fiscal year ended July 31, 1995, was Morton International, 57%. The loss of
OEA's primary automotive safety products customer, Morton International, would
have a materially adverse effect on the Company. As the Company's sales of
inflators to module manufacturers grow, its sales to Morton International may
decrease both as a percentage of total sales and in amount.
There is no particular relationship between the Company and its customers other
than that of supplier/customer, except for the following:
1. An agreement with Daicel Chemical Industries, Ltd., Tokyo,
Japan, for the transfer of technology and manufacture of
OEA's automotive air bag initiators, and
2. An agreement with Daicel Chemical Industries, Ltd., Tokyo, Japan, for
the transfer of technology and manufacture of OEA's smokeless hybrid
inflators for passenger, driver and side-impact automotive air bags for
manufacture in Asia for the Asian market. The initial payment for this
fifteen year agreement was received in 1995.
Auto manufacturers generally change designs every three to five years. The
Company receives annual blanket purchase orders, but deliveries are specified by
customers on weekly releases for deliveries over the next 10 to 12 weeks.
Because this is the accepted practice in the automotive industry, the amount of
backlog at any given time is not representative of annual sales.
The Company currently has orders from Takata Corporation, Daicel Chemical
Industries and Delphi Interior & Lighting, a division of General Motors, to
supply in excess of 2.5 million passenger side inflators for model year 1997.
4
The Company believes that OEA is the only independent inflator manufacturer in
the world that is not affiliated with, or owned by, a module manufacturer. This
independence gives us wide latitude to sell to all module manufacturers. By
fiscal year 2000, OEA's Inflator Division could be the largest customer of the
OEA Initiator Division.
Currently, there are three major air bag initiator manufacturers in the United
States: Imperial Chemical Industries, Inc., Special Devices, Inc., and the
Company. Additionally, there are four major air bag initiator manufacturers in
Europe: Davey Bickford Smith, Nouvelle Cartoucherie de Survilliers, Patvag and
Pyroindustrie (89% owned directly/indirectly by OEA, Inc.). The Company is
currently the world's leading producer of initiators for automotive air bags.
Daicel Chemical Industries is expected to begin manufacturing automotive air bag
initiators under the previously mentioned technology transfer and manufacturing
agreement in 1997. Other companies may enter the automotive initiator market;
however, substantial financial resources, development, and qualification time
would be required to achieve design and product verification. Contracts are
generally awarded based upon competitive price, product reliability and
production capacity. The Registrant believes it is in a good competitive
position.
Currently, the Company is aware of two major hybrid gas generator manufacturers
in the world, a joint venture between Atlantic Research Corporation and Allied
Signal, and the Company. The Company is currently the world's second leading
producer of hybrid gas generators for automotive air bags.
The estimated amount spent by the automotive segment during each of the last
three fiscal years for customer-sponsored and company-sponsored research and
development activities was:
Customer- Company-
Sponsored Sponsored
--------- -----------
Fiscal year 1995 $500,000 $3,300,000
Fiscal year 1994 300,000 1,600,000
Fiscal year 1993 800,000 3,500,000
Compliance with federal, state, and local provisions regulating the discharge of
materials into the environment is not expected to materially affect capital
expenditures, earnings, or competitive position of the Registrant or its
subsidiaries.
The Registrant, together with its consolidated subsidiaries and divisions,
employs approximately 700 people in its automotive segment.
5
Nonautomotive Products
The nonautomotive segment of the business is primarily aerospace (Defense and
Commercial). OEA Aerospace, Inc. designs, develops, and manufactures propellant
and explosive-actuated devices used in (1) personnel escape systems in
high-speed aircraft, (2) separation and release devices for space vehicles and
aircraft, (3) control, separation, ejection, and jettison of missiles, and (4)
flexible linear-shaped charges and mild detonating cord systems. The principal
customers for such products are the United States Government and major aircraft
and aerospace companies. Other products and services include hot gas and
explosive initiated valves, fluid control systems, inflatable systems, and the
largest neutron radiography inspection operation of its kind.
Sales are made directly to the customer. The Company's principal officers and
engineers represent its sales force. The nonautomotive segment accounted for
approximately 30%, 38% and 51% of the Company's net sales for fiscal years 1995,
1994, and 1993, respectively.
The nonautomotive products are produced principally in Fairfield, California. A
smaller test facility is located in San Ramon, California.
The Registrant's customers are primarily in the defense and space field under
prime government contracts. The major portion of the Registrant's business comes
from subcontracts which are generally awarded on a fixed-price basis. Each new
contract involves either the design and manufacture of a new product to meet a
specific requirement, or a follow-on order for additional items previously
manufactured under other contracts. Inasmuch as the Registrant's aerospace
business involves constant development and engineering of products required by
its customers, it would be inappropriate to announce each new item as a new
product.
Raw materials used by the Registrant include aluminum, inconel, monel,
molybdenum, rubbers, copper, alloy and stainless steel, ceramics, silver,
titanium alloys, certain commercially available and special-order propellants
and explosives, elastomer seals to government specifications, and epoxy sealing
materials. The Registrant is not dependent upon any one source for purchased
materials because alternate sources of supply are generally available in the
marketplace.
The Registrant's business is not dependent upon patented items, trademarks,
franchises, concessions, or licenses thereunder. The Registrant does not pay any
substantial royalties or similar payments in connection with any patents or
license agreements.
The Registrant's business is not seasonal in nature.
6
Products are manufactured to order; accordingly, significant amounts of
inventory are not required to be maintained.
Deliveries are made according to contract usually in a just-in-time environment.
Customer payments are reasonably prompt and extended terms are not required.
The Company did not have a customer providing more than 10% of consolidated
sales for the fiscal year ended July 31, 1995. Transactions with the United
States Government are with several procurement agencies and/or prime
contractors. Although the loss of all government contracts would have an adverse
effect, the loss of any one agency or prime contract would not have a materially
adverse effect on the Registrant.
There is no particular relationship between the Company and its customers other
than that of supplier/customer.
The Company's nonautomotive funded backlog of orders as of July 31, 1995, was
$40,000,000. The Company estimates that $7,000,000 of its current backlog will
not be recorded as a sale within its fiscal year ending July 31, 1996.
The majority of the business of the Registrant with the United States Government
is subject to termination of contracts for the convenience of the United States
Government. Such termination, however, is not a frequent occurrence. In
addition, a significant portion of the Registrant's sales for the current and
prior years is subject to audit by the Defense Contract Audit Agency. Such
audits may occur at any time up to three years after contract completion.
The Registrant competes for new contracts with a number of larger corporations
with substantially greater resources. Other companies, both larger and smaller
than the Registrant, also have capabilities and resources to design and develop
similar items.
There is no official information available concerning total annual purchases
from all manufacturers of the types of products which the Registrant produces
for the nonautomotive segment. The Registrant believes it has at least seven
competitors in its principal field of propellant and explosive devices. No
individual competitor dominates the field. The Registrant believes it is in a
good competitive position.
On new development and qualification programs, contract awards are based upon
technical and competitive price proposals. Subsequent production awards are both
negotiated with the customer and subject to competitive bid.
7
The estimated amount spent by the nonautomotive segment during each of the last
three fiscal years for customer-sponsored and company-sponsored research and
development activities was:
Customer- Company-
Sponsored Sponsored
Fiscal year 1995 $3,200,000 $ 200,000
Fiscal year 1994 4,500,000 200,000
Fiscal year 1993 3,700,000 200,000
Compliance with federal, state, and local provisions regulating the discharge of
materials into the environment is not expected to materially affect capital
expenditures, earnings, or competitive position of the Registrant or its
subsidiaries.
The Registrant, together with its subsidiaries and divisions, employs
approximately 375 people in its nonautomotive segment.
8
Financial Information about Foreign and Domestic Operations and Export Sales
Sales to Unaffiliated Customers FY 1995 FY 1994 FY 1993
United States .................. $100,980,428 $ 97,209,060 $ 82,397,321
Foreign Sales
Europe .................... 4,845,644 4,576,576 3,801,310
Asia ...................... 22,470,143 7,700,842 7,135,149
Other ..................... 914,556 406,264 850,413
------- ------- -------
Total Foreign Sales .... 28,230,343 12,683,682 11,786,872
---------- ---------- ----------
Total Sales ...... $129,210,771 $109,892,742 $ 94,184,193
============ ============ ============
Notes:
(1) Sales amounts differ from those previously reported for 1993 as a result of
reclassifications of domestic and foreign sales.
(2) There were no sales or transfers between the geographic areas reported
above.
(3) It is not possible, under the existing accounting systems, to isolate
profits and identifiable assets by geographic areas.
9
ITEM 2 - PROPERTIES
The Registrant's properties are located in Arapahoe County, Colorado (near
Denver); Fairfield, California; San Ramon, California; Tremonton/Garland, Utah;
and Les Mureaux, France.
The Arapahoe County facilities are located on 640 acres of land which the
Registrant owns. In fiscal year 1995, automotive and nonautomotive operations
were conducted in various one-story brick and steel buildings containing 213,000
square feet of floor space in the aggregate. Effective October 1, 1994, only
automotive operations are conducted in these facilities. The facilities vacated
by the aerospace division's transfer to Fairfield, California, will be used for
smokeless hybrid inflators.
The Fairfield, California, facilities are occupied by OEA Aerospace, Inc., a
wholly owned subsidiary of the Registrant. Its nonautomotive and automotive
operations are conducted in twenty buildings containing 162,700 square feet of
floor space in the aggregate, located on 515 acres of land which the Company
owns. All parts of the various buildings are occupied and used in the operations
of the Company's business.
The San Ramon, California, property consists of a 10,000 square foot steel
building situated on approximately one acre of land which the Company owns. It
is occupied by Aerotest Operations, Inc., a wholly owned subsidiary of OEA
Aerospace, Inc., which conducts neutron radiography therein. Also contained in
this building, as a part of the premises, is a 250-kilowatt nuclear reactor used
in the process.
The property in Tremonton/Garland, Utah, consists of a 66,000 square-foot
manufacturing facility located on 160 acres which the Registrant owns. This
facility will accommodate the growing demand for air bag initiators and other
automotive safety products.
The property in Les Mureaux, France, consists of a 34,600 square foot
manufacturing facility located on 6 acres which the Company owns. It is occupied
by Pyroindustrie, S.A., a joint venture (80% OEA, Inc., 20% Pyrospace S.A.) with
Pyrospace. This facility will accommodate the growing demand for air bag
initiators and other automotive safety products for the European market.
The above-described properties are considered suitable and adequate for the
Registrant's operations.
10
ITEM 3 - LEGAL PROCEEDINGS
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
11
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) (1)
(i) Registrant has only common capital stock, $0.10 par value,
issued. Its principal United States market is made on the New
York Stock Exchange, New York, New York, where such shares
have been listed.
(ii) The high and low sales prices for the Registrant's shares
traded, as reported in the consolidated transaction reporting
system over the last two fiscal years on a quarterly basis,
are as follows:
Fiscal Year 1994 High Low
1st Quarter 32.25 25.50
2nd Quarter 31.25 26.88
3rd Quarter 28.50 24.00
4th Quarter 31.00 22.63
Fiscal Year 1995 High Low
1st Quarter .... 32.00 24.25
2nd Quarter .... 27.75 21.88
3rd Quarter .... 31.25 23.88
4th Quarter .... 30.75 26.00
(iii) Not applicable
(iv) Not applicable
(v) Not applicable
(b) The approximate number of holders of record of Registrant's issued and
outstanding shares at October 16, 1995, was 1330.
(c) It is anticipated that the Company will pay a dividend
during fiscal year 1996.
The Board of Directors has declared dividends during the last three
fiscal years as follows:
Amount
Declared Payable Per Share
November 20, 1992 ................... December 21, 1992 $ .12
November 12, 1993 ................... December 13, 1993 .15
November 4, 1994 .................... December 9, 1994 .20
12
ITEM 6 - SELECTED FINANCIAL DATA
Consolidated Summary of Operations
1995 1994 1993 1992 1991
Net Sales ......................... $ 129,210,771 109,892,742 94,184,193 88,071,691 83,726,317
Operating Profit .................. 34,926,706 30,071,459 23,632,845 18,481,827 18,728,216
Earnings Before Minority Interest
and Income Taxes ............... 36,225,734 29,465,492 23,676,115 23,115,911 19,167,346
Minority Interest ................. 519,564 -- -- -- --
Income Taxes ...................... (15,469,088) (11,512,973) (9,105,017) (7,866,954) (7,038,451)
Net Earnings (Loss)
Before Settlement of
Environmental Matters ....... 23,526,210 17,952,519 14,571,098 15,248,957 12,128,895
From Settlement of
Environmental Matters (Note 1) (2,250,000) -- -- -- --
----------- ---------- ---------- ---------- ----------
Total Net Earnings ...... $ 21,276,210 17,952,519 14,571,098 15,248,957 12,128,895
============= ========== ========== ========== ==========
Earnings (Loss) Per Share (Note 2)
Before Settlement of
Environmental Matters ....... 1.15 .88 .72 .75 .60
From Settlement of
Environmental Matters ........ (0.11) - - - -
-------- ----------- ---------- ---------- -----------
Total Earnings Per Share $ 1.04 .88 .72 .75 .60
============= === === === ===
Cash Dividends Per Share .......... $ .20 .15 .12 .10 .083
============= === === === ====
Stock Dividends ................... - - - 200% -
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted Average Number of
Shares Outstanding During Year . 20,480,060 20,438,587 20,376,308 20,315,240 20,210,958
========== ========== ========== ========== ==========
(Note 2)
Total Number of Shares
Outstanding at Year End ........ 20,486,628 20,465,545 20,413,146 20,350,609 20,256,057
========== ========== ========== ========== ==========
(Note 2)
<FN>
Notes:
(1) On December 13, 1994, the Company reached a final settlement in its
environmental matters in the net amount of $2,250,000.
(2) The number of shares outstanding and per-share amounts have been
adjusted to give effect to treasury share transactions and stock
distributions effected in the form of a 200 percent stock dividend
paid on February 14, 1992.
</FN>
13
Balance Sheet Data at July 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Current Assets ...... $ 74,871,359 62,389,466 60,913,834 56,949,971 61,201,306
Current Liabilities . $ 12,160,275 8,882,678 11,944,465 7,835,271 8,656,954
Working Capital ..... $ 62,711,084 53,506,788 48,969,369 49,114,700 52,544,352
Working Capital Ratio 6.2 to 1 7.0 to 1 5.1 to 1 7.3 to 1 7.1 to 1
Total Assets ........ $160,901,835 135,314,904 123,178,155 106,180,082 91,464,417
Shareholders' Equity $140,352,333 121,854,462 106,801,460 94,535,957 81,003,180
Book Value Per Share $ 6.85 5.95 5.23 4.65 4.00
14
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Fiscal Year 1995 vs. 1994
Net sales and operating profits for the fiscal year ended July 31, 1995, were a
record $129,210,800 and $34,926,700, respectively, compared to prior-year net
sales of $109,892,700 and operating profits of $30,071,500. Net earnings and
earnings per share for fiscal year 1995 were $21,276,200 and $1.04,
respectively, compared to prior-year net earnings of $17,952,500 and earnings
per share of $0.88. In the first half of fiscal year 1995, the Company reached a
final settlement in its environmental matters in the net amount of $2,250,000 or
$0.11 per share. Eliminating the effect of the above settlement, current-year
net earnings from operations would have been $23,526,200 and earnings per share
would have been $1.15.
The Automotive Safety Products division was again the primary contributor to the
sales and operating profit increases over the prior year. Automotive sales and
operating profit both increased 33% due primarily to the increased volume.
Nonautomotive sales decreased 8% with an operating profit decrease of 23%. Total
operating profit as a percentage of sales for fiscal year 1995 was 27%,
consistent with the prior year. This performance was accomplished in spite of an
increased expenditure of funds for Company funded research and development
($3,507,300 in 1995 vs. $1,814,800 in 1994) primarily for smokeless hybrid
inflators for automotive air bags.
Automotive segment sales for fiscal year 1996 are expected to increase
significantly due to the increased demand for driver and passenger side air
bags, including initial production deliveries of hybrid inflators in the fourth
quarter.
Potential effects of changes in defense spending are not expected to have a
material impact upon the operations of the nonautomotive segment. While it is
impossible to accurately predict what the defense procurement budget will be,
the Registrant anticipates that nonautomotive segment sales during fiscal year
1996 will increase due to deliveries on a number of programs currently in the
backlog and programs expected to book soon.
The Registrant's contract pricing methods have offset the effect of inflation.
15
Fiscal Year 1994 vs. 1993
Net sales and operating profits for the fiscal year ended July 31, 1994, were
$109,892,700 and $30,071,500, respectively, compared to fiscal year 1993 net
sales of $94,184,200 and operating profits of $23,632,800. Net earnings and
earnings per share for fiscal year 1994 were $17,952,500 and $0.88,
respectively, compared to fiscal year 1993 net earnings of $14,571,100 and
earnings per share of $0.72. Fiscal year 1994 net earnings include $148,900 and
$0.01 per share related to a technology transfer agreement for the Japanese FSX
aircraft program. Fiscal year 1993 net earnings included $397,800, or $0.02 per
share, related to that same technology transfer agreement. Eliminating the
effect of the above agreement, fiscal year 1993 net earnings from operations
would have been $14,173,300 and earnings per share would have been $0.70, and
fiscal year 1994 net earnings from operations would have been $17,803,600 and
earnings per share would have been $0.87.
The Automotive Safety Products division was the primary contributor to the sales
and operating profit increases over fiscal year 1993. Automotive sales increased
46% and the operating profit increased 64% due primarily to the increased volume
and a significant reduction in research and development cost. Nonautomotive
sales decreased 12% with an operating profit decrease of 16%. Total operating
profit as a percentage of sales increased to 27% in 1994 as compared to 25% for
1993. This increase was achieved primarily because of a reduced expenditure of
funds for Company funded research and development ($1,814,800 in 1994 vs.
$3,729,600 in 1993).
Liquidity and Capital Resources
The Company's working capital at July 31, 1995, increased to $62,711,100, from
the $53,506,800 at July 31, 1994, due to increased earnings from operations
resulting in increased cash and cash equivalents of $14,495,300, offset by
reductions in accounts receivable and inventories.
During fiscal year 1995, the Company made capital expenditures totaling
$19,912,300 as compared to $16,823,900 and $19,593,100 in fiscal years 1994 and
1993, respectively. These capital expenditures were funded principally from
operations. Currently the Company has capital expenditure commitments totaling
approximately $20,000,000 for fiscal year 1996.
In January 1995 the Company renewed an $8,000,000 Revolving Credit Agreement
with its principal bank and at July 31, 1995, had no outstanding balance against
this line of credit. Anticipated working capital requirements, capital
expenditures, and facility expansions are expected to be met through
16
internally generated funds and, when necessary, borrowings from the agreement
mentioned above, which can be increased when required.
Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiary are translated to
U.S. dollars at period-end exchange rates. Income and expense items are
translated at average exchange rates prevailing during the period. The local
currency is used as the functional currency for the subsidiary. A translation
adjustment results from translating the foreign subsidiary's accounts from
functional currencies to U.S. dollars. Exchange gains (losses) resulting from
foreign currency transactions are included in the consolidated statements of
earnings.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedules of the Company filed
as part of this report on Form 10-K are listed in Item 14.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
17
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will appear in, and is incorporated by
reference from, the Registrant's definitive proxy statement for its 1996 annual
shareholders meeting to be filed with the Securities and Exchange Commission
prior to November 29, 1995.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item will appear in, and is incorporated by
reference from, the Registrant's definitive proxy statement for its 1996 annual
shareholders meeting to be filed with the Securities and Exchange Commission
prior to November 29, 1995.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item will appear in, and is incorporated by
reference from, the Registrant's definitive proxy statement for its 1996 annual
shareholders meeting to be filed with the Securities and Exchange Commission
prior to November 29, 1995.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item, if any, will appear in, and is
incorporated by reference from, the Registrant's definitive proxy statement for
its 1996 annual shareholders meeting to be filed with the Securities and
Exchange Commission prior to November 29, 1995.
18
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
(1) Financial Statements:
Report of Independent Auditors
Consolidated Balance Sheets - July 31, 1995 and
1994
Consolidated Statements of Earnings
Years ended July 31, 1995, 1994, and 1993
Consolidated Statements of Stockholders' Equity
Years ended July 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows
Years ended July 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules required to be filed by Item 8
of Form 10-K and by paragraph (d) of this Item 14:
The schedules for which provision is made in the
applicable accounting regulation of the Securities
and Exchange Commission are not required under the
related instructions or are inapplicable, and
therefore, have been omitted.
(3) Exhibits required to be filed by Item 601 of
Regulation S-K and paragraph (c) of this Item 14:
Exhibit 3 - Articles of Incorporation, as amended,
(incorporated by reference) and By-
laws, as amended (incorporated by
reference).
Exhibit 10 - Material contracts between the
Registrant and its Chairman/CEO and
President/COO include retirement
agreements dated May 5, 1989, and May
15, 1990, respectively, (incorporated
by reference).
19
Exhibit 22 - During fiscal year 1995, the
Registrant was the parent company of
each of the following described
companies:
Percent of Outstanding
Corporation Stock Owned by Parent
OEA Aerospace, Inc. 100%
a California corporation,
which owns 100% of Aerotest
Operations, Inc., a California
Corporation
Foreign Corporate Percentage of
Joint Venture Ownership
----------------- -------------
Pyrospace S.A. 45%
a corporation in France
Pyroindustrie S.A. 80%
a corporation in France
The above entities are included in the consolidated financial
statements of the Registrant being submitted herewith.
(b) Reports on Form 8-K during the quarter ended July 31,
1995.
None
20
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: October 23, 1995
OEA, INC.
Registrant
By_________________________
Ahmed D. Kafadar, Chairman
and Chief Executive Officer
DIRECTORS AND OFFICERS
Ahmed D. Kafadar,Chairman of the Charles B. Kafadar, President,
Board and Principal Executive Principal Operating Officer, and
Officer Director
John E. Banko, Director George S. Ansell, Director
J. Robert Burnett, Director Philip E. Johnson, Director
Paul J. Martin, Vice President/ John E. Banko IV, Controller
Treasurer and Principal
Financial Officer
21
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
Year Ended July 31, 1995
OEA, Inc. and Subsidiaries
Denver, Colorado
21A
Report of Independent Auditors
The Board of Directors and Stockholders
OEA, Inc.
We have audited the accompanying consolidated balance sheets of OEA, Inc. and
subsidiaries as of July 31, 1995 and 1994, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
three years in the period ended July 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OEA, Inc. and
subsidiaries at July 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
July 31, 1995, in conformity with generally accepted accounting principles.
September 29, 1995
22
OEA, Inc. and Subsidiaries
Consolidated Balance Sheets
July 31
1995 1994
---- ----
Assets
Current assets:
Cash and cash equivalents $ 19,342,034 $ 4,846,732
Accounts receivable 23,879,495 26,525,958
Unbilled costs and accrued earnings 3,974,500 3,734,521
Inventories 24,656,806 26,429,389
Income taxes receivable 2,476,800 -
Prepaid expenses and other 541,724 852,866
------- -------
Total current assets 74,871,359 62,389,466
Property, plant, and equipment:
Land and improvements 1,726,211 1,208,024
Buildings and improvements 32,898,017 26,824,481
Machinery and equipment 70,409,817 58,580,588
Furniture and fixtures 5,687,470 5,057,964
--------- ---------
110,721,515 91,671,057
Accumulated depreciation and amortization 31,276,450 25,027,396
---------- ----------
79,445,065 66,643,661
Cash value of life insurance 363,508 325,564
Long-term receivable 3,000,000 3,000,000
Investment in foreign joint venture 2,829,554 2,547,415
Other assets 392,349 408,798
------- -------
Total assets $160,901,835 $135,314,904
============ ============
23
July 31
1995 1994
---- ----
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 5,769,163 $ 4,220,447
Accrued expenses:
Salaries and wages 2,628,992 2,351,764
Profit sharing and pension contributions 1,501,958 447,108
Other 975,881 536,710
Deferred income 206,168 206,168
Income taxes:
Current - 183,777
Deferred 1,078,113 936,704
--------- -------
Total current liabilities 12,160,275 8,882,678
Deferred compensation 944,339 822,035
Deferred income taxes 5,771,775 3,538,994
Deferred income 216,735 216,735
Commitments and contingencies
Minority interest 1,456,378 -
Stockholders' equity:
Common stock, $0.10 par value:
Authorized shares - 50,000,000
Issued and outstanding shares-22,019,700 2,201,970 2,201,970
Additional paid-in capital 12,012,450 11,878,124
Retained earnings 126,849,357 109,669,560
Treasury stock, 1,533,072 and 1,554,155 shares
in 1995 and 1994, respectively, at cost (1,869,483) (1,895,192)
Equity adjustment from translation 1,158,039 -
--------- ------------
Total stockholders' equity 140,352,333 121,854,462
----------- -----------
Total liabilities and stockholders' equity$160,901,835 $135,314,904
============ ============
See accompanying notes.
24
OEA, Inc. and Subsidiaries
Consolidated Statements of Earnings
Year ended July 31
1995 1994 1993
---- ---- ----
Net sales $129,210,771 $109,892,742 $94,184,193
Cost of sales 83,399,001 71,558,302 61,249,036
---------- ---------- ----------
Gross profit 45,811,770 38,334,440 32,935,157
General and administrative expenses 7,377,782 6,448,215 5,572,754
Research and development expenses 3,507,282 1,814,766 3,729,558
--------- --------- ---------
Operating profit 34,926,706 30,071,459 23,632,845
Other income (expense):
Interest income 769,718 410,006 430,282
Interest expense (25,770) (112,111) (103,193)
Equity in earnings of foreign
joint venture 282,139 42,833 44,062
Other, net 272,941 (946,695) (327,881)
------- -------- --------
1,299,028 (605,967) 43,270
--------- -------- ------
Earnings before minority interest and
income taxes 36,225,734 29,465,492 23,676,115
Minority interest in net loss of
consolidated subsidiary 519,564 - -
------- ---------- ----------
Earnings before income taxes 36,745,298 29,465,492 23,676,115
Income tax expense 15,469,088 11,512,973 9,105,017
---------- ---------- ---------
Net earnings $21,276,210 $17,952,519 $14,571,098
=========== =========== ===========
Earnings per share $1.04 $0 .88 $0.72
===== ===== =====
Weighted average number of shares
outstanding during year 20,480,060 20,438,587 20,376,308
========== ========== ==========
See accompanying notes.
25
OEA, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Equity
Common Stock Additional Adjustment Total
------------------------ Paid In Retained From Treasury Stockholders'
Shares Amount Capital Earnings Translations Stock Equity
----------------------------------------------------------------------------------------
Balances at July 31, 1992 22,019,700 $2,201,970 $11,198,224 $82,656,814 $ - $(1,521,051)$ 94,535,957
Purchase of 6,831 shares of
common stock for treasury - - - - - (184,169) (184,169)
Issuance of 69,368 shares of
treasury stock for options
exercised - - 253,993 - 69,598 323,591
Net earnings - - - 14,571,098 - - 14,571,098
Cash dividends ($0.12 per
share) - - - (2,445,017) - - (2,445,017)
---------- --------- ---------- --------- ------- ---------- ----------
Balances at July 31, 1993 22,019,700 2,201,970 11,452,217 94,782,895 - (1,635,622) 106,801,460
Purchase of 11,433 shares of
common stock for treasury - - - - - (329,344) (329,344)
Issuance of 63,832 shares of
treasury stock for options
exercised - - 425,907 - - 69,774 495,681
Net earnings - - - 17,952,519 - - 17,952,519
Cash dividends ($0.15 per
share) - - - (3,065,854) - - (3,065,854)
---------- --------- ---------- ---------- ------- --------- -----------
Balances at July 31, 1994 22,019,700 2,201,970 11,878,124 109,669,560 - (1,895,192) 121,854,462
Issuance of 21,083 shares of
treasury stock for options
exercised - - 134,326 - - 25,709 160,035
Net earnings - - - 21,276,210 - - 21,276,210
Cash dividends ($0.20 per
share) - - - (4,096,413) - - (4,096,413)
Translation adjustment - - - - 1,158,039 - 1,158,039
---------- --------- --------- ----------- --------- --------- ---------
Balances at July 31, 1995 $22,019,700 $ 2,201,970 $12,012,450 $126,849,357 $1,158,039 $ (1,869,483) $140,352,333
=========== =========== =========== ============ ========== ============ ============
See accompanying notes.
26
OEA, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year ended July 31
1995 1994 1993
---- ---- ----
Operating activities
Net earnings ......................................... $ 21,276,210 $ 17,952,519 $ 14,571,098
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Undistributed earnings of foreign joint venture .... (282,139) (42,833) (44,062)
Depreciation and amortization ...................... 7,471,300 5,502,125 4,667,525
Deferred income taxes .............................. 2,374,190 170,755 1,051,345
Decrease in long-term receivable ................... - - 1,000,000
Minority interest in net loss of consolidated subsidiary (519,564) - -
Increase in deferred compensation ................ 122,304 60,756 60,756
Loss on sale of property, plant, and equipment 759,430 708,639 164,105
Changes in operating assets and liabilities:
Accounts receivable ............................ 2,553,125 214,541 (4,905,101)
Unbilled costs and accrued earnings (239,979) 2,957,882 (278,231)
Inventories .................................... 1,734,084 (1,075,020) 411,791
Prepaid expenses and other ..................... 309,561 (34,853) (113,162)
Accounts payable and accrued expenses 3,416,518 (154,498) 1,027,813
Deferred income ................................ - (58,802) (54,447)
Income taxes ................................... (2,660,577) 171,704 62,343
---------- ------- ------
Net cash provided by operating activities 36,314,463 26,372,915 17,621,773
Investing activities
Additions to investments in and advances to affiliates 1,975,942 - -
Decrease in marketable securities .................... - 376,818 1,153,505
Capital expenditures ................................. (19,912,283) (16,823,885) (19,593,058)
Proceeds from sale of property, plant, and equipment 68,379 535 174,875
Increase in cash value of life insurance ............. (37,944) (5,698) (33,019)
------- ------ -------
Net cash used in investing activities ................ (17,905,906) (16,452,230) (18,297,697)
Financing activities
Purchase of common stock for treasury ................ - (329,344) (184,169)
Proceeds from issuance of treasury stock ............. 160,035 495,681 323,591
Increase (decrease) in net borrowings under line-of-credit
agreement ......................................... - (2,900,000) 2,900,000
Decrease in deferred income .......................... - (206,168) (264,970)
Payment of dividends ................................. (4,096,413) (3,065,854) (2,445,017)
---------- ---------- ----------
Net cash provided by (used in) financing activities (3,936,378) (6,005,685) 329,435
Effect of exchange rate changes on cash .............. 23,123 - -
------ -------- -------
Net increase (decrease) in cash and cash equivalents 14,495,302 3,915,000 (346,489)
Cash and cash equivalents at beginning of year...... 4,846,732 931,732 1,278,221
--------- ------- ---------
Cash and cash equivalents at end of year ........... $ 19,342,034 $ 4,846,732 $ 931,732
============ ============= =============
Supplemental information:
Interest payments ............................... $ 24,935 $ 112,111 $ 103,193
Income tax payments ............................. 15,599,291 11,226,646 7,764,426
See accompanying notes.
27
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
July 31, 1995
1. Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts and transactions of
OEA, Inc. (the "Company"), its wholly owned subsidiary, OEA Aerospace, Inc., and
a foreign joint venture in which the Company has more than 50% equity ownership.
All significant intercompany balances and transactions have been eliminated.
The investment in a foreign joint venture in which the Company does not have
control, but has the ability to exercise significant influence over operating
and financial policies (greater than 20% ownership), is accounted for using the
equity method, under which the Company's share of earnings of the joint venture
is reflected in income as earned and distributions will be credited against the
investment when received.
Revenue Recognition
Sales of products within the government contracting segment are recognized as
deliveries are made or when the products are completed and held on the Company's
premises to meet specified contract delivery dates. Sales of undelivered
products are included in unbilled costs and accrued earnings and are anticipated
to be delivered and billed within 12 months of the balance sheet date. Costs are
based on the estimated average cost per unit based on units to be produced under
the contract.
Inventories
Inventories of raw materials and component parts are stated at the lower of cost
(principally first-in, first-out) or market. Inventoried costs of work in
process and finished goods are stated at average production costs consisting of
materials, direct labor, and manufacturing overhead, reduced by costs identified
with recorded sales. General and administrative expenses, initial tooling, and
other nonrecurring costs are not included in inventoried costs.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred and major renewals
and betterments are capitalized. Upon sale or retirement, the cost of the assets
and related allowances for depreciation are removed from the accounts, and the
resulting gains or losses are reflected in operations.
28
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Depreciation is computed on the straight-line, double-declining balance, and
units-of-production methods at rates calculated to amortize the cost of the
depreciable assets over the related useful lives.
Depreciation charged to costs and expenses was $7,454,851, $5,485,673 and
$4,651,073 in 1995, 1994, and 1993, respectively. Repairs and maintenance
charged to costs and expenses was $5,027,645, $4,090,642 and $2,950,358 in 1995,
1994, and 1993, respectively.
Earnings per Share
Earnings per share of common stock is computed on the basis of the weighted
average number of shares outstanding during the year.
The effect on reported earnings per share from the assumed exercise of stock
options outstanding during the years ended July 31, 1995, 1994, and 1993 would
be insignificant.
Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Research and Development
Expenses for new products or improvements of existing products, net of amounts
reimbursed from others, are charged against operations in the year incurred.
Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiary (Pyroindustrie S.A.)
are translated to U.S. dollars at period-end exchange rates. Income and expense
items are translated at average exchange rates prevailing during the period. The
local currency is used as the functional currency for the subsidiary. A
translation adjustment, which is recorded as a separate component of
stockholders' equity, results from translating the foreign subsidiary's accounts
from functional currencies to U.S. dollars. Exchange gains (losses) resulting
from foreign currency transactions are included in the consolidated statements
of earnings.
29
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Stock Options
On January 13, 1995, the shareholders approved an Employees' Stock Option Plan
(the "Employees' Plan") and Nonemployee Directors' Stock Option Plan (the
"Directors' Plan"). These plans provide for stock options to be granted for a
maximum of 600,000 shares of common stock under the Employees' Plan and a
maximum of 50,000 shares of common stock under the Directors' Plan. Options may
be granted to employees and nonemployee directors at prices not less than fair
market value of the Company's common stock on the date of grant. Options granted
under the Employees' Plan may be exercised at any time after the grant date and
options issued under the Directors' Plan may be exercised after the first six
months following the grant date. Shares may be granted from either authorized
but unissued common stock or issued shares reacquired and held as treasury
stock. As of July 31, 1995, no options have been granted under either plan.
Prior to July 28, 1994, the Company had a qualified incentive stock option plan
for key employees of the Company whereby a total of 666,000 shares of common
stock were reserved for issuance. Options were granted to key employees at
prices not less than the fair market value of the Company's common stock on the
date of grant, and were exercisable after one year of continuous employment
following the date of grant. Under this plan, options for 624,153 shares, net of
forfeitures, were granted at an average option price of $7.50, and options for
175,695 shares remain outstanding as of July 31, 1995. During 1995, options for
10,336 shares were forfeited. During 1995 and 1994, options for 21,083 and
63,832 shares, respectively, were exercised at an average price of $7.59 and
$7.77, respectively.
3. Line of Credit
At July 31, 1995, the Company has an $8,000,000 unsecured revolving credit line
with a financial institution with an interest rate at the lower of the
institution's prime interest rate or 1% per annum above the federal funds rate.
In addition, at the request of the borrower, the Bank, in its sole discretion,
may make loans to the borrower at an interest rate equal to "LIBOR" plus 1%. The
Company is required to pay an annual commitment fee equal to .1875 of 1% on the
total amount of the commitment. The facility will expire on December 31, 1995.
The Company has no debt outstanding relating to the line of credit as of July
31, 1995.
30
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Inventories
Inventories are summarized as follows:
July 31
1995 1994
---- ----
Raw materials and component parts .......... $11,316,265 $11,197,176
Work in process ............................ 10,754,339 11,650,102
Finished goods ............................. 2,586,202 3,582,111
--------- ---------
$24,656,806 $26,429,389
=========== ===========
5. Investment in Foreign Joint Ventures
On October 5, 1986, a joint venture agreement was signed between the Company and
two French companies for the establishment of a company (Pyrospace S.A.) in
France. Pyrospace is engaged in the design, development, and manufacture of
propellant and explosive devices for European space programs, as well as
aircraft and missiles. The Company is a 45% owner of Pyrospace.
During October 1993, a joint venture agreement was signed between the Company
and Pyrospace for the establishment of a company (Pyroindustrie S.A.) in France.
Pyroindustrie is engaged in the manufacture of initiators for the European air
bag market. The Company is an 80% owner of Pyroindustrie.
6. Profit Sharing and Pension Plans
The Company has noncontributory profit sharing and defined contribution pension
plans covering all full-time employees. Combined contributions to these plans
for the years ended July 31, 1995, 1994, and 1993 were $1,501,958, $1,430,984
and $1,232,671, respectively.
The Company is committed to contribute to the pension plans 5% of participants'
eligible annual compensation as defined in the plan documents. Employer
contributions to the profit sharing plans are discretionary, but are not to
exceed 10% of eligible annual compensation.
31
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Income Taxes
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of July 31, 1995 and 1994 are
as follows:
1995 1994
---- ----
Current deferred tax liabilities:
Unbilled receivables ......................... $510,886 $575,188
Prepaid expenses ............................. 175,463 272,333
Deferred income on DAICEL agreement .......... 370,280 370,280
Other ........................................ 43,538 1,635
------ -----
Total current deferred tax liabilities ...... 1,100,167 1,219,436
Long-term deferred tax liabilities:
Tax over book depreciation ................... 3,731,813 2,957,637
Research and development asset write-off ..... 1,554,566 -
Deferred income on DAICEL agreement .......... 821,925 849,800
Other ........................................ 13,141 45,985
------ ------
Total long-term deferred tax liabilities .... 6,121,445 3,853,422
--------- ---------
Total deferred tax liabilities ............ 7,221,612 5,072,858
Current deferred tax asset:
Inventory capitalization ..................... 22,054 282,732
Long-term deferred tax asset:
Deferred compensation ........................ 349,670 314,428
------- -------
Total deferred tax assets ................... 371,724 597,160
------- -------
Net deferred tax liabilities .............. $ 6,849,888 $ 4,475,698
=========== ===========
32
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Income Taxes (continued)
Components of income tax expense (benefit) are as follows:
Current Deferred Total
---------- --------- ----------
1995:
Federal ............ $ 11,120,737 $ 2,461,113 $ 13,581,850
State .............. 1,974,161 (86,923) 1,887,238
--------- ------- ---------
$ 13,094,898 $ 2,374,190 $ 15,469,088
============ ============ ============
1994:
Federal ............ $ 9,473,180 $ (51,740) $ 9,421,440
State .............. 1,869,038 222,495 2,091,533
--------- ------- ---------
$ 11,342,218 $ 170,755 $ 11,512,973
============ ============ ============
1993:
Federal ............ $ 6,931,347 $ 957,020 $ 7,888,367
State .............. 1,122,325 94,325 1,216,650
--------- ------ ---------
$ 8,053,672 $ 1,051,345 $ 9,105,017
============ ============ ============
Actual tax expense for 1995, 1994, and 1993 differs from "expected" tax expense
for those years (computed by applying the U.S. federal corporate tax rate of 35%
for 1995, 35% for 1994 and 34.5% for 1993 to earnings before income taxes) as
follows:
1995 1994 1993
---- ---- ----
Computed "expected" tax expense $12,860,854 $10,312,922 $8,168,260
Increases (reductions) in taxes resulting
from:
State taxes, net of federal income
tax benefit 1,226,705 1,359,496 796,905
Settlement of environmental matters 787,500 - -
Loss from foreign operations 727,300 - -
Income tax credits (461,074) (89,748) (114,431)
Other 327,803 (69,697) 254,283
------- ------- -------
Actual tax expense $15,469,088 $11,512,973 $9,105,017
=========== =========== ==========
33
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Segment Information and Major Customers
The Company operates primarily in two industry segments, automotive and
nonautomotive. Financial information for each segment and major customers is
summarized as follows:
1995
-------------------------------------------------
Automotive Nonautomotive Total
-------------------------------------------------
Net sales $ 90,141,512 $39,069,259 $129,210,771
Operating profit 27,935,374 6,991,332 34,926,706
Identifiable assets 115,910,167 44,991,668 160,901,835
Depreciation expense 6,099,672 1,355,179 7,454,851
Capital expenditures 18,888,367 1,023,916 19,912,283
1994
-------------------------------------------------
Automotive Nonautomotive Total
-------------------------------------------------
Net sales $ 67,652,256 $42,240,486 $109,892,742
Operating profit 21,026,298 9,045,161 30,071,459
Identifiable assets 81,435,183 53,879,721 135,314,904
Depreciation expense 3,533,462 1,952,211 5,485,673
Capital expenditures 15,999,897 823,988 16,823,885
1993
-------------------------------------------------
Automotive Nonautomotive Total
-------------------------------------------------
Net sales $ 46,295,683 $47,888,510 $ 94,184,193
Operating profit 12,818,618 10,814,227 23,632,845
Identifiable assets 65,932,340 57,245,815 123,178,155
Depreciation expense 2,681,316 1,969,757 4,651,073
Capital expenditures 18,582,725 1,010,333 19,593,058
The automotive segment includes the manufacturing and sales of automotive safety
products for both domestic and foreign automobile manufacturers. The
nonautomotive segment primarily includes the manufacture and sale of propellant
and explosive-actuated devices for the U.S. government and prime contractors of
the U.S. government and
34
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Segment Information and Major Customers (continued)
foreign governments, and also includes the manufacture and sale of similar
explosiveactuated devices for commercial aircraft. Customer payments of accounts
receivable are reasonably prompt and collateral is not required.
Customers representing 10% or more of consolidated net sales in each of the
years 1995, 1994, and 1993 are as follows:
1995 1994 1993
-----------------------
U.S. government agencies 5% 10% 10%
Morton International 57% 52% 44%
Accounts receivable are summarized as follows:
1995 1994
----------------------
Automotive $14,208,599 $15,003,575
Nonautomotive 9,670,896 11,522,383
--------- ----------
$23,879,495 $26,525,958
=========== ===========
9. Commitments and Contingencies
Contract disputes and other claims may arise in connection with government
contracts and subcontracts. A substantial portion of the Company's nonautomotive
sales for the current and prior years is subject to audit by the Defense
Contract Audit Agency. Such audits may occur at any time up to three years after
contract completion. In the opinion of the Company's management, a provision for
government claims is not necessary.
During December 1994, the Company effected a complete settlement of the
previously reported Colorado Department of Health ("CDH") civil action and U.S.
Environmental Protection Agency federal criminal investigation. Under the terms
of the settlement agreements, the Company agreed to pay fines in the amount of
$2,250,000. The Company has paid $2,070,000 and has accrued $180,000,
respectively, as of July 31, 1995.
35
OEA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Commitments and Contingencies (continued)
The Company has employment agreements with the Chairman of the Board and the
President providing for their full-time active service with specified retirement
benefits after employment termination. The estimated discounted present value of
these retirement benefits has been accrued as of July 31, 1995 and 1994.
The Company has commitments to purchase approximately $20,000,000 of property,
plant, and equipment.
10. Quarterly Results of Operations for 1995 and 1994 (Unaudited)
October 31 January 31 April 30 July 31
----------------------------------------------------------
1995
- ----
Net sales ........ $28,015,886 $31,896,677 $33,979,628 $35,318,580
Gross profit ..... 10,077,326 10,486,073 12,547,796 12,700,575
Net earnings ..... 2,291,782 5,054,785 6,111,397 7,818,246
Earnings per share $ 0.11 $ 0.25 $ 0.30 $ 0.38
1994
- ----
Net sales ........ $23,620,198 $24,819,906 $29,586,174 $31,866,464
Gross profit ..... 7,195,009 7,897,464 10,755,641 12,486,326
Net earnings ..... 3,185,365 3,785,750 5,170,887 5,810,517
Earnings per share $ 0.16 $ 0.19 $ 0.25 $ 0.28
36