SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
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 [NO FEE REQUIRED]
For the transition period from _________ to ________
Commission File No. 0-8282
OSMONICS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0955759
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5951 Clearwater Drive, Minnetonka, Minnesota 55343
(Address of principal executive offices) (Zip Code)
(612) 933-2277
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, par value $0.01 per share New York Stock Exchange
(Title of each class) (Name of each exchange
on which registered)
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 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].
As of March 1, 1996, 12,802,582 Common Shares were outstanding.
The aggregate market value of the Common Shares held by non-affiliates
of the Registrant on such date (based upon the closing price of such
shares on the New York Stock Exchange on March 1, 1996) was
$162,774,788.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year
ended December 31, 1995 (the "Annual Report to Shareholders"), are
incorporated by reference into Parts II and IV. Portions of the
definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on May 9, 1996 (the "Proxy Statement"), and to be filed within
120 days after the Registrant's fiscal year ended December 31, 1995, are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
Osmonics, Inc. and its wholly-owned subsidiaries (the "Company")
design, manufacture and market machines, systems and components used in
the processing and handling of fluids. The Company was founded in 1969
and manufactures replaceable, semi-permeable membranes and other filter
media for use in fluid separation and filtration. The Company's
processing equipment employs crossflow filtration (including reverse
osmosis, nanofiltration, ultrafiltration and microfiltration), normal
filtration (including microfiltration and particle filtration),
coalescing filtration, ion exchange, clarification, chromatography,
ozonation and distillation. The Company's fluid handling equipment
includes centrifugal, diaphragm and bellows pumps; electronic
controllers to operate precision valves for water conditioning; flow
control and measuring devices and instrumentation; and specialty holders
and devices for retaining its membranes and filter media.
Crossflow, normal and coalescing filtration are precision
processes in which a semi-permeable membrane or other filter material
separates a fluid's components. Separation is accomplished by applying
pressure to a fluid in order to cause selective passage of some
components of the fluid through the membrane or filter media. Ion
exchange and chromatography are quasi-filtration processes in which
specialized plastic beads are used to selectively remove ionized or
charged particles from a fluid. The fluid is pressurized and passes
through a bed of the plastic beads in a normal filtration mode.
Distillation is the condensation of steam from boiling water to produce
ultrapure water. Ozone generation equipment uses electricity to develop
a corona discharge which produces ozone, a strong oxidant used in the
purification of water and other fluids.
The Company's processing products are used in fractionation,
preferential separation, conditioning and purification in connection
with such processes as purification of water and industrial solutions,
dewatering and recycling of commercial and industrial fluids, pollution
control and seawater desalting. The Company's principal domestic and
international markets, from which it derives more than 50% of its sales,
include the electronics, potable water, health care, biotechnology, food
and beverage, chemical processing and power generation industries.
Filtration processes cover a broad spectrum ranging from those
which separate discrete molecules and ions to those which separate
particles visible to the naked eye. Historically, the Company
specialized in products utilizing crossflow filtration processes
designed to separate particles in the molecular range. Through
acquisitions and internal product developments, the Company now has a
full line of filtration products including depth cartridge filters for
particle filtration and pleated membrane cartridge filters for
microfiltration. The filtration media and membrane is produced
primarily from polymers; however, inorganic membranes and filters of
metal and ceramic are also manufactured. In addition, the Company
manufactures housings to contain the filters. The crossflow filter
elements (sepralators), and the microfilter and depth filter cartridges
are replaceable while the housings are a permanent fixture in the fluid
processing system.
To provide a complete line of products for the production of pure
water, the Company manufactures distillation equipment, both single-
effect and more energy efficient multi-effect. In addition,
deionization and softening equipment in both laboratory size and large
scale is manufactured in multiple locations.
In June 1989, the Company acquired Ozone Research & Equipment
Corporation of Phoenix, Arizona. Ozone Research was founded in 1957 and
is a pioneer in the manufacture of ozone generation equipment for the
purification of water and the testing of elastomeric materials.
In November 1989, the Company acquired certain assets for the
manufacture and sale of MACE flow control and pumping products to
increase its fluid handling offerings. MACE products are made from
Teflon PTFE, the most chemically stable polymer available, and are used
to handle ultrapure and aggressive chemicals.
In December 1990, the Company acquired certain assets of the
FASTEK Division of Eastman Kodak for the production of reverse osmosis
membrane, home reverse osmosis sepralators, a rolled filter product, and
a blown microfiber filter cartridge product. This Syracuse, New York
facility and manufacturing equipment provides the Company with added
capacity and capability and gives the Company two sites for
manufacturing membrane and sepralators.
In October 1993, the Company acquired Autotrol Corporation through
a pooling-of-interests, stock-for-stock transaction. Autotrol was
founded in 1962 and is a leader in the manufacture of controllers for
water softening and filtration equipment. In addition, Autotrol
manufactures other fluid control and measuring devices such as a
totalizing flow meter and dosing system to assure proper treatment of
cooling tower water. Most of Autotrol's products are sold to OEM's who
then use them as a component in a water conditioning device which is
then sold to consumers.
In November 1994, the Company acquired substantially all of the
assets of Lakewood Instruments of Phoenix, Arizona. This acquisition
adds a line of instruments, sensors and analyzers used in the
measurement of fluid characteristics in the chemical water treatment and
pure water industries.
In October 1995, the Company acquired the assets and operations of
Western Filter Company, Denver, Colorado, an important supplier to the
beverage and bottled water industry for over 50 years. Western Filter
has extensive experience in providing the beverage market with
conventional water treatment technologies and membrane water treatment.
Western Filter also has experience in coagulation clarification
pretreatment technologies. These technologies will be utilized with
Osmonics' existing distribution channels, allowing the Company to expand
capability in the international markets where conventional water
treatment is required, as well as complement municipal sales in the
United States where ozone disinfection is becoming accepted.
The Company focuses the marketing of its products through three
sales groups:
1. Large equipment and systems.
2. Distributor sales.
3. Original equipment manufacturers (OEM's) and system integrators.
All of these sales groups are supported by Application Engineers and
market support personnel.
Products
Membranes and Sepralators: The Company markets polymer membranes
for crossflow applications sold in replaceable elements called
sepralators. Most membranes are produced in a spiral-wound
configuration ranging in diameter from two to twelve inches and in
length from twelve to sixty inches.
Membrane sepralators are typically replaced every 6 to 60 months,
depending upon the severity of the application. The Company
manufactures the membrane material and membrane sepralators used in its
own systems, and also manufactures membrane sepralators for other OEM's
who include them as component parts in their products.
The Company's membranes are used in many bioengineering processes
such as the production of high fructose corn sugar, enzyme purification,
and purification of pharmaceuticals produced by biological processes.
Other uses include water purification applications in hemodialysis,
semiconductor manufacturing, production of pure water for beverages,
production of ultrapure pharmaceutical and boiler feed water, industrial
water purification and waste removal for pollution control compliance.
In addition, the Company sells its home reverse osmosis (HRO)
sepralators to OEM's who package them into systems for use in homes,
offices and retail vending establishments to produce purified drinking
water. The Company is registered with the United States Food and Drug
Administration for the manufacture and sale of certain membrane
sepralators used in biological preparations.
Beginning in December 1985, the Company funded the start-up of
Poretics Corporation for the development, manufacture, and sale of
polycarbonate track-etched membrane and the hardware for use in a
variety of laboratory and medical diagnostic applications. The Company
also manufactures silver microfiltration membranes and ceramic
microfilters used in the laboratory. Use of the silver membrane in
normal filtration will neither kill bacteria nor cause them to grow,
permitting use of this separation process to count bacteria by
collecting them on the membrane. Numerous applications exist for the
Company's microfilters because of unique features, including use in air
monitoring and in laboratory procedures for cancer and other research.
Filters: The Company markets replaceable depth cartridge filters,
pleated cartridge filters, and rolled cartridge filters. The depth
cartridge filters consist of a matrix of thermally-bonded polypropylene
blown microfibers. The structure of these fibers allows particles to be
trapped throughout the depth of the cartridge filter rather than simply
on its surface, enhancing the efficiency of the filtration process. The
pleated cartridge filters use either a specially processed sheet of
blown polypropylene microfibers or microporous membranes and use surface
filtration to act as a very selective filter. Rolled cartridge filters
use media similar to pleated filters in a semicrossflow configuration,
for enhanced filtration in specialized applications. Cartridge filters
are manufactured in a range of pore sizes and particulate retention
ratings. As a result of retention of particles in the filters,
cartridge filters are typically replaced at intervals of eight hours to
four weeks.
The Company markets ceramic cartridge filters for microfiltration
and particulate filtration. The ceramic cartridge filters operate
similar to the pleated cartridge filters in that particles are trapped
on the surface. Ceramic cartridge filters are used to sterilize
pharmaceutical solutions and are used in laboratory applications, where
many analytic and diagnostic procedures require purification or
sterilization.
The Company also markets separation elements and equipment used in
coalescing filtration, a process distinct from crossflow and normal
filtration, which separates different liquids based on their density and
adsorption differences. This process can reduce concentrations of
contaminants of several percent to only a few parts per million.
Applications of coalescing filtration include removal of contaminants
from compressed air and gas lines, dewatering of solvents and jet fuel,
and removal of trace oil from waste water prior to disposal.
Ion Exchange and Chromatography Equipment: The Company markets
equipment using ion exchange technology. Ion exchange plastic beads and
selected polymer gels are utilized to preferentially adsorb ionized and
charged material from a fluid stream. After the ion exchange beads have
adsorbed a certain amount of material, they must be regenerated,
typically with acid or caustic, or in the case of chromatography with a
selected fluid to strip off the adsorbed material. The most used ion
exchange process is for water softening where the ions of calcium and
magnesium are replaced with sodium to reduce soap usage, improve boiler
operation and improve cleaning. The Company is a leader in the
manufacture of the controllers and valves used to effect softening.
Another ion exchange application is to polish ultrapure water for
electronics manufacture and high pressure boiler feed. Chromatography
is primarily used to purify biotech fluids and food proteins.
Distillation Equipment: The Company markets distillation and
related water purification equipment used primarily in the laboratory
and pharmaceutical industries. Distillation, which involves the
condensation of steam from boiling water, was one of the first
technologies used to purify water. The Company's distillation product
lines range from laboratory stills to elaborate 2000-gallon-per-hour
multi-stage purifiers.
Ozonation Equipment: The Company markets equipment to generate
ozone from electricity using corona discharge. Ozone is becoming
increasingly important as a bactericide and water purifier because it
kills bacteria, virus and giardia cysts 10 to 300 times faster than
chlorine.
Ozone is also effective in oxidizing trace organic materials in
water which are precursors of the carcinogenic trihalomethanes. Ozone
can also be used to purify solvent-contaminated groundwater and is often
used to de-color water and waste water.
Pumps, Valves and Flow Control Devices: The Company markets a
line of multi-stage centrifugal pumps. These pumps were developed by
the Company to meet the need for dependable high pressure pumps and are
available in 60 standard sizes with flows ranging from 3 gallons per
minute to 500 gallons per minute and pressure capabilities from
25 pounds per square inch (psi) to 500 psi. The pumps are capable of
operating in series to obtain 1000 psi for seawater desalting and other
high pressure applications.
The Company markets two types of chemical-resistant, air-operated
pumps used in both the chemical and electronics industries. These
unique pumps are constructed of Teflon PTFE or polypropylene materials
making them resistant to acids, caustics, solvents and numerous other
aggressive chemicals.
The Company markets a dry chemical feeder system to sanitize well
water and reduce iron and sulfur odors, and also markets the pellets
used in the feeder.
The Company markets totalizing flow meters and electronic
controllers made of corrosion resistant Noryl plastic, as well as a line
of Teflon PTFE fluid control products including valves, fittings and
flow meters used in the electronics, pharmaceutical and chemical
industries. The PTFE is molded and machined into unique shapes to
provide extremely chemical resistant high temperature parts.
The acquisition of Lakewood Instruments brings to the Company a
line of analog and digital instrumentation which strengthens and
broadens corporate offerings to the chemical water treatment and high
purity water industries. Lakewood manufactures conductivity, pH, ORP,
chlorine and specific ion sensors, analyzers and controllers, which
offer unique synergies with Autotrol's flow-based controls, enabling
chemical water treatment companies to offer a comprehensive line of
products for cooling tower and boiler water treatment from a single
source. Lakewood is also developing new local operating network (LON)
communications and data acquisition capabilities, which allow networking
multiple sensors to an individual control/display device using standard
telephone cable.
Machines and Systems: The crossflow and normal filtration
machines manufactured by the Company are comprised of one or more
sepralators, cartridge filters, pumps, valves, controls, transformers,
heat exchangers, pipes and a steel frame on which the components are
mounted. The size and number of sepralators and filters can vary
greatly. Pumps, pipes and frames of various sizes can be combined and
configured to accommodate the sepralators or filters required for
various fluid handling or separation tasks.
The systems sold by the Company are comprised of one or more
machines or pieces of equipment designed and manufactured by the Company
as well as ancillary equipment, such as prefilters and postfilters, ion
exchange equipment, ozonator equipment, additional pumps, heat
exchangers and holding tanks. The type, size and number of machines and
the ancillary equipment included in a system will vary with the nature
and size of the fluid separation task.
The Company is registered with the United States Food & Drug
Administration as a Class II medical device manufacturer for certain of
its reverse osmosis machines, as is required to supply water
purification equipment for use in artificial kidney dialysis.
The following table shows the percentage of net sales during the
past five years attributable to the Company's fluid processing and
handling equipment compared to its replaceable components:
Year Ended Replaceable
December 31 Equipment1 Components2
1995 56% 44%
1994 60% 40%
1993 60% 40%
1992 60% 40%
1991 60% 40%
1 Equipment includes: (i) sepralators, filter elements, ion
exchange resin and filter cartridges sold with machines, (ii)
pumps, controls, instruments, valves, fittings, chemicals, and
other ancillary equipment sold with systems and (iii) pumps,
control valves, instruments and machines sold separately.
2 Replaceable components include only those sepralators, coalescer
and dielectric elements, cartridges, membranes, filters and other
components sold by the Company as replacements for its machines,
systems and products, or as replaceable components for products
manufactured by others. They do not include those components
originally sold as parts of new machines or systems manufactured
by the Company. Sales of components and replacement parts
provide the Company with a relatively stable and continuing
source of revenue.
Sales and Marketing
The Company markets its custom machines and systems through its
direct sales force. The Company's standard products are marketed to a
network of independent distributors with the help of Company district
managers. These distributors provide worldwide installation service and
stocking of a wide range of the Company's standard products. Some sales
are made directly to certain of the Company's largest customers and to
other manufacturers of filtration equipment and systems.
The Company's marketing activities include appearances at trade
shows, direct mail campaigns, advertisements in professional and trade
journals and appearances before professional organizations. The Company
participates with its customers in planning the systems in which its
products are to be used, particularly if new applications are involved.
In some cases, the sale of a system designed for a particular customer
may result from an engineering and service relationship which has
extended over several years.
Research and Development
Research and development activities emphasize product development
and applied research, with the goal of developing proprietary products.
Such expenditures totaled $7,779,000 in 1995, $7,174,000 in 1994, and
$6,795,000 in 1993. The Company anticipates that research and
development expenditures in 1996 will be similar to the 1995 level as a
percent of sales.
Patents and Trademarks
The Company has been granted domestic and certain foreign
trademarks on numerous product names, and on its logo-types. The
Company holds domestic and foreign patents on certain of its filter
media, filters, controlling valves, machine designs and other products.
Although the Company believes that its patents have value, the Company's
business is not dependent on any patent or group of related patents.
The Company considers its technological position to be based primarily
on its proprietary manufacturing methods, innovative engineering and
marketing expertise.
Employees
As of December 31, 1995, the Company employed 1,017 persons,
including 187 holding engineering or technical degrees.
Competition
The Company experiences competition from a variety of sources with
respect to virtually all of its products, although the Company knows of
no single entity that competes with it across the full range of its
products and systems. Competition in the markets served by the Company
is based on a number of factors, which may include price, technology,
applications experience, know-how, availability of financing,
reputation, product warranties, reliability, service and distribution.
With respect to the Company's membrane and related water treatment
equipment business activity, there are a number of companies, including
several sizable chemical companies, that manufacture membranes, but not
equipment. There are numerous smaller companies, primarily fabricators,
that build water treatment and desalination equipment, but which
generally do not have their own proprietary membrane technology. A
limited number of companies manufacture both membranes and equipment.
In ozone and distillation equipment, there are both large and small
competitors with no single dominant competitor. In water softener
controls and valves, the Company has three primary and numerous
secondary competitors. Some competitors sell only controller valves and
some sell complete softeners. The Company has numerous competitors in
its conventional water treatment and filtration products business
activities.
With respect to the Company's disposable filter and lab products,
two companies, Pall and Millipore, dominate the industry with several
smaller companies competing in selected product lines.
With respect to the Company's pump and fluid handling products,
there are numerous competitors of larger size and with greater resources
than the Company. Some competitors have significantly broader product
lines than the Company.
The Company is unable to state with certainty its relative market
position in all aspects of its business. Many of its competitors have
financial and other resources greater than those of the Company.
Raw Materials
The principal raw materials used by the Company are various
plastic materials including polyvinyl chloride, polypropylene, Noryl
PPO, cellulose acetate, polycarbonate, polyester, polysulfone, and PTFE;
ceramic and glass materials, stainless steel, steel, brass, copper,
titanium, silver and various synthetic materials, all of which are
normally available from sources within the continental United States.
Most raw materials used by the Company are available from multiple
sources of supply. A limited number of materials are proprietary
products of major chemical companies which, if not available, would have
a material effect on the Company's sales and profits. The Company
believes it could find substitutes for these materials if they should
become unavailable, but has no assurance that the substitute would
perform as well or be priced as favorably.
To date, the Company has experienced no difficulty in securing any
of its needed raw materials and components.
Customers
No one customer accounted for 10 percent or more of the Company's
consolidated revenue in 1995, 1994 or 1993.
Backlog
The dollar amount of the Company's backlog of orders considered to
be firm at December 31, 1995, was $20.6 million. The comparable backlog
at December 31, 1994, was $15.7 million. The Company expects that
nearly all orders included in the backlog at December 31, 1995, will be
filled during the 1996 fiscal year. The Company does not believe that
its backlog at any time is necessarily indicative of annual sales. The
business of the Company is not subject to significant seasonal
variations.
Governmental Regulation
Certain applications of the Company's reverse osmosis and
ultrafiltration products and distillation equipment are subject to
governmental regulation. Systems used for fractionation of cheese whey
for human consumption are subject to regulation by the United States
Department of Agriculture. Reverse osmosis, ultrafiltration and
distillation systems used in medical applications, particularly the
systems used in artificial kidney dialysis equipment and pharmaceutical
water for injection, are subject to regulation by the United States Food
and Drug Administration. Ultrafiltration and microfiltration products
used for biological separations are subject to regulation by the United
States Food and Drug Administration.
To date, compliance with federal, state and local provisions
relating to the protection of the environment has had no material effect
upon the capital expenditures, earnings or competitive position of the
Company.
Foreign Operations
Substantially all of the Company's operations and assets are
located in the United States. The Company has sales offices and
distribution facilities in France, Thailand, Switzerland, Hong Kong,
Japan, Australia, Singapore and China. Limited assembly is conducted in
Europe and Asia. The profitability of domestic and foreign sales is
substantially equal. Sales to Canada are made on the same trade terms
as are available to U.S. customers.
Large export sales are made on the basis of confirmed irrevocable
letters of credit or time drafts to selected customers in U.S. dollars.
Therefore, the Company believes that problems of currency fluctuation or
political and economic stability do not constitute substantial risks.
See Note 11 of Notes to Consolidated Financial Statements for a
breakdown of the Company's foreign operations and export sales by
geographic area.
Potential Acquisition
The Company announced in December 1995, an agreement in principle
to merge with Desalination Systems Inc. (DESAL) in a stock transaction.
The outstanding shares of DESAL will be exchanged for the Company's
common stock. The transaction is structured to qualify as a tax-free
exchange and a "pooling-of-interests" for accounting and financial
purposes. At current market prices, the value of the transaction is
approximately $30 million. The transaction is expected to add over
$20 million to Osmonics' 1996 sales.
The transaction will require the approval of a definitive merger
agreement by both companies, regulatory approvals, and the satisfaction
of customary closing conditions. The transaction is expected to close
in second quarter 1996.
DESAL, located in Vista, California, is primarily in the
manufacture of membranes and spiral-wound elements used for reverse
osmosis, nanofiltration, and ultrafiltration. The membrane elements are
sold to companies throughout the world. Approximately 40% of DESAL's
sales go to customers outside the United States.
ITEM 2. PROPERTIES
The executive offices and principal manufacturing facilities of
the Company are located in a modern facility in Minnetonka, Minnesota, a
suburb of Minneapolis.
A summary of the Company's main operating facilities is as
follows:
Location Status Size Function
Minnetonka, MN Owned 309,600 sq ft Sales, Manufacturing,
Warehouse
Milwaukee, WI Owned 103,700 sq ft Sales, Manufacturing,
Warehouse
Phoenix, AZ Owned 60,900 sq ft Sales, Manufacturing,
Warehouse
Phoenix, AZ Leased 26,000 sq ft Sales, Manufacturing,
Warehouse
Rockland, MA Leased 38,200 sq ft Sales, Manufacturing,
Warehouse
Syracuse, NY Owned 48,500 sq ft Manufacturing, Warehouse
Upland, CA Leased 22,000 sq ft Sales, Manufacturing,
Warehouse
Denver, CO Owned 20,700 sq ft Sales, Manufacturing,
Warehouse
Hopkins, MN Leased 8,000 sq ft Warehouse
Livermore, CA Leased 6,000 sq ft Sales, Manufacturing,
Warehouse
Emmetsburg, IA Leased 8,800 sq ft Manufacturing
Bryan, TX Owned 2,500 sq ft Manufacturing, Warehouse
Le Mee, France Owned 18,300 sq ft Sales, Manufacturing,
Warehouse
Neuchatel, Leased 4,000 sq ft Sales, Warehouse
Switzerland
Total Owned 564,200 sq ft
Total Leased 113,000 sq ft
Total Owned and Leased 677,200 sq ft
In 1995, the Company purchased the land and building used for its
Milwaukee, Wisconsin operations for $3,100,000 in cash.
The current manufacturing facilities are adequate for near-term
operations, after the completion of plant and office capacity in
Minnetonka in early 1996. In addition, the Company leases small amounts
of space in Thailand, Japan, Hong Kong, and Singapore that are used
primarily for sales activities.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in several lawsuits incidental
to its business. Management does not believe that any of the lawsuits
will have a material adverse effect on the Company's financial position
or results of operations.
Autotrol's rotating biological contactor assemblies (the "RBC's")
were a product which Autotrol discontinued producing and selling in
1982. Currently there are no performance claims pending against the
Company with respect to the RBC's, and, as of December 31, 1995, the
Company has reserves to cover potential future liability with respect to
the RBC's.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
"Common Stock Data," and "Notes to Consolidated Financial
Statements," pages 19-23 of the Annual Report to Shareholders, are
incorporated herein by reference. As of March 14, 1996 there were
2,363 shareholders of record.
The Company has not paid cash dividends on its common shares. The
Board of Directors currently intends to retain its earnings for the
expansion of the Company's business. The Company has issued promissory
notes which contain a covenant limiting the payment of dividends to
shareholders. At December 31, 1995, approximately $24,742,000 of
retained earnings was restricted under this covenant.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial Data," page 26 of the Annual Report to
Shareholders, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," pages 24 and 25 of the Annual Report to
Shareholders, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial information of the Registrant
and its subsidiaries, included in the Annual Report to Shareholders, is
incorporated herein by reference:
Page(s)
Consolidated Statements of Income . . . . . . 16
Consolidated Balance Sheets . . . . . . . . . 17
Consolidated Statements of Cash Flows . . . . 18
Consolidated Statements of Changes in
Shareholders' Equity . . . . . . . . . . . 19
Independent Auditors' Report . . . . . . . . 24
Notes to Consolidated Financial Statements . . 19-23
Quarterly Income Data . . . . . . . . . . . . 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers of the Registrant
Officer
Name and Age Position with Company Since
D. Dean Spatz (51) President and Chairman 1969
of the Board
Ruth Carol Spatz (51) Secretary 1969
Howard W. Dicke (58) Vice President Human Resources 1978
and Corporate Development,
and Treasurer
L. Lee Runzheimer (53) Chief Financial Officer and 1988
Vice President Administration
James J. Carbonari (54) Vice President Sales & Marketing 1989
James W. Detert (37) Vice President Operations 1990
Kenneth E. Jondahl (39) Vice President International 1991
Andrew T. Rensink (39) Vice President Technology 1991
All of the executive officers, except Messrs. Detert, Jondahl and
Rensink, have been officers of the Company for more than five years.
Mr. Detert joined the Company in 1986 as Assistant to the President with
responsibilities in the marketing area, was promoted to Vice President
Technology in January 1990 and was appointed Vice President Operations
in February 1991. Mr. Jondahl joined the Company in 1981 as an
Application Engineer. Since then he has served as a Regional Sales
Manager, Dairy Market Specialist, General Manager of Osmonics
Asia/Pacific, General Manager of Osmonics Europa, Marketing Manager and
International Sales Manager. He was promoted to Vice President
International in April 1991. Mr. Rensink joined the Company as Vice
President Technology in September 1991. Prior to that he had been a
plant manager and manufacturing manager for Mantaline, an elastomeric
extrusion company. Previously he held various management positions in
both engineering and manufacturing in several General Electric business
units. All executive officers are elected annually by, and serve at
the direction of, the Board of Directors. D. Dean Spatz and
Ruth Carol Spatz are husband and wife.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the definitive Proxy Statement for the Company's 1996
Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the definitive Proxy Statement for the Company's 1996
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the definitive Proxy Statement for the Company's 1996
Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
(a) (1) Financial Statement
The consolidated financial statements of the
Registrant and its subsidiaries, included in the
Annual Report to Shareholders, are incorporated by
reference in Item 8, and are also incorporated herein
by reference.
(a) (2) Financial Statement Schedules
Reports of Independent Public Accountants on
Supplemental Schedules to the Consolidated Financial
Statements.
Valuation and qualifying accounts.
Schedules not listed above have been omitted because
they are either not applicable, not material or the
required information has been given in the financial
statements or in the notes to the financial
statements.
(3)A. Certificate of Incorporation of the
Registrant, as amended. (Incorporated herein
by reference to Exhibit 3.1 to Registration
Statement on Form S-2, File No. 33-336.)
Certificate of Amendment. (Incorporated
herein by reference to Exhibit (3)A on Form
10-K for fiscal year ended December 31, 1987,
File No. 0-8282.)
B. By-Laws of the Registrant. (Incorporated
herein by reference to Exhibit 3.2 to
Registration Statement on Form S-2, File
No. 33-336.)
(4)A. Note Purchase Agreement dated July 12, 1991.
(Incorporated herein by reference to Annual
Report on Form 10-K for fiscal year ended
December 31, 1991.)
(10)A.* 1993 Stock Option Plan and related form of
stock option agreement. (Incorporated herein
by reference to Annex C of the Registrant's
Joint Proxy Statement/Prospectus dated
September 10, 1993.)
B. Stock Option Agreement with Michael L. Snow,
Director. (Incorporated herein by reference
to Annual Report on Form 10-K for fiscal year
ended December 31, 1993.)
C.* 1983 Stock Option Plan and related form of
stock option agreement. (Incorporated herein
by reference to Exhibit 10.2 to Registration
Statement on Form S-2, File No. 33-336.)
D. 1995 Employee Stock Purchase Plan.
(Incorporated herein by reference to the
Registrant's Proxy Statement dated
March 27, 1995.)
E.* 1995 Director Stock Option Plan.
(Incorporated herein by reference to the
Registrant's Proxy Statement dated
March 27, 1995.)
* Denotes Executive Compensation Plan.
(13) 1995 Annual Report to Shareholders. (Only
those portions incorporated herein by
reference shall be deemed filed with the
Commission.)
(21) Subsidiaries of the Registrant.
(23) Consent of Deloitte & Touche LLP.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
OSMONICS, INC.
By /s/ D. Dean Spatz
D. Dean Spatz, President
Dated: February 28, 1996
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:
Signatures Title Date
/s/ L. Lee Runzheimer Chief Financial Officer February 27, 1996
L. Lee Runzheimer and Vice President
Administration (Principal
Finance and Accounting Officer)
/s/ Howard W. Dicke Vice President Human February 27, 1996
Howard W. Dicke Resources and Corporate
Development, and Treasurer
/s/ Ruth Carol Spatz Director February 28, 1996
Ruth Carol Spatz
/s/ Michael L. Snow Director February 27, 1996
Michael L. Snow
/s/ Ralph E. Crump Director February 28, 1996
Ralph E. Crump
/s/ Verity C. Smith Director February 28, 1996
Verity C. Smith
Director
Charles W. Palmer
/s/ D. Dean Spatz President, Chairman of February 28, 1996
D. Dean Spatz the Board and Director
(Principal Executive Officer)