UNITED STATES 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 (FEE REQUIRED)
For the fiscal year ended May 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 number 0-10095
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AUTOCLAVE ENGINEERS, INC.
(Exact name of registrant as specified in its charter)
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Pennsylvania 25-0941759
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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2930 West 22nd Street 16506
Erie, Pennsylvania (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number,
including area code: (814) 838-5700
---------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.15 par value
(Title of each class)
Continued
- 2 -
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
-----
On August 1, 1995, 3,436,566 shares of the Corporation's
Common Stock, $.15 par value, were held by non-affiliates. The
aggregate market value of such shares, computed by reference to
the closing price of the Corporation's Common Stock on NASDAQ-
NMS on July 28, 1995, was $48,971,066.
4,259,650 shares of the Corporation's Common Stock, $.15 par
value, were outstanding on August 1, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
None
-3-
PART I
Item 1. Business.
GENERAL
Autoclave Engineers, Inc. (the "Company" or "Autoclave") was
incorporated in Pennsylvania in 1958 and is the successor in
interest, as the result of a merger, to Autoclave Engineers,
Inc., an Illinois corporation founded in 1946. From fiscal year
1986 through fiscal year 1995, the Company consisted of three
independent operating segments. One segment was comprised of
Burton Corblin, S.A., located in France, and Burton Corblin North
America, Inc., located in the USA, collectively Burton Corblin.
Burton Corblin designed and manufactured high pressure diaphragm
and piston compressors and associated equipment. In January
1995, the Company sold this segment. Autoclave Products was the
second business segment of the Company and was comprised of the
Autoclave Engineers Group and the Autoclave Engineers Europe
division, collectively Autoclave Engineers or AEG. Autoclave
Engineers designed, manufactured and marketed autoclaves,
compressors, valves, fittings and related systems, components and
accessories principally for elevated temperatures and/or pressure
applications. During the fourth quarter of fiscal 1995, the
Company formalized a plan for the disposition of AEG. On August
14, 1995, the Company entered into an agreement to sell AEG to
Snap-tite, Inc. The third, and only remaining business segment
of the Company, is the design and manufacture of mass flow
controllers ("MFC's") through the Company's Unit Instruments,
Inc. ("Unit") subsidiary. MFC's are precision devices that
control the flow of gases into wafer fabrication chambers that
are integral in the manufacture of integrated circuits, commonly
referred to as "ICs".
Autoclave maintains its principal executive offices at 2930
West 22nd Street, Erie, Pennsylvania 16506; but, intends to
relocate these offices to the facilities occupied by Unit
Instruments, Inc. in Yorba Linda, California.
DISCONTINUED OPERATIONS
In January, 1995 the Company sold Burton Corblin to James
Howden & Godfrey Overseas Limited ("Howden") for $9.1 million and
the forgiveness of certain debt. A gain on this divestiture has
been recorded in fiscal 1995 and the results of Burton Corblin's
operations through the date of sale have been accounted for as
income from discontinued operations. The Company's Autoclave
Engineers Europe ("AEE") division, which was located in certain
facilities of Burton Corblin in France, was not part of the sale
to Howden; but management concluded that without Burton Corblin's
administrative support for AEE, the continued operation of AEE
was not feasible. The AEE operation has been restructured for
sale; the cost of which has been charged against the results of
AEG's operations for the year.
Given the formalized plan for the disposition of AEG, this
operation also has been treated as a discontinued operation for
reporting purposes. The assets and liabilities relating to AEG
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have been classified on the balance sheet under the heading
"Assets of Discontinued Operations Held for Sale". In connection
with the fourth quarter 1995 decision to dispose of AEG, the
costs to restructure and dispose of AEE (previously included in
the third quarter gain on the sale of Burton Corblin) were
reclassified to AEG's results from discontinued operations.
Based upon the expected net proceeds from the pending sale of
AEG, a gain on sale, net of tax, is expected to be recognized in
the fiscal year ending May 31, 1996. Operating results of AEG
through the anticipated date of disposal are also expected to be
positive.
See Notes 1 and 2 of Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K for additional
information on these discontinued operations.
PRODUCTS
Unit designs and manufactures MFCs that are used to control
the flow of gases in the fabrication of semiconductor wafers.
These wafers are produced in process chambers that require the
introduction of various gases that are virtually contamination-
free and are precisely controlled as to flow rate and volume.
Unit produces two primary families of MFCs; Elastomeric and All-
Metal. The All-Metal MFCs are typically used in more demanding
process control environments and offer a higher level of
contamination-free gas delivery. MFCs represented over 85% of
Unit's sales for fiscal years 1995, 1994 and 1993.
Unit also produces a line of Pressure Controllers that
control the pressure of gas as it enters the fabrication chamber,
gas panels that integrate various flow components into a single
panel and, a Digital Power Supply, trade name DX-5, that can
control up to five Mass Flow Controllers or Meters. The Company
recently introduced a digital calibration device, SmartCable,
that plugs-in to existing analog MFCs and provides for automatic
calibration which improves gas delivery accuracy. Unit services
its customer base through four domestic service centers and
generates additional revenue from this service activity.
AEG has developed complete system capability with
accompanying instrumentation, sub-systems and components for use
in high pressure processes and research. AEG's products include
autoclaves, compressors, valves, fittings, tubing,
instrumentation, controllers and related accessories. AEG also
manufactures sophisticated bench-top chemical reaction systems
for process research. AEG provides both standard products and
specially engineered products for specific customer applications.
AEG participates in a 50/50 joint venture agreement with the
Swedish multi-national firm, ASEA Brown Boveri. The joint
venture, called ABB Pressure Systems AB, located in Columbus,
Ohio, markets worldwide hot and cold isostatic presses
manufactured by either AEG's facility in Erie, or ASEA's Quintas
Press Division in Sweden, depending upon the size and parameters
of the particular press system. The joint venture gives each
party access to the other's technology while providing the
financial strength that this continually advancing, leading-edge
technology demands.
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APPLICATIONS
Unit's products are sold principally to semiconductor
manufacturers. Unit's technology has potential application in
the petrochemical, fiber optic and other industries.
AEG's products are used in research and critical production
applications by a number of diverse industries, including the
chemical, petrochemical, materials forming, energy, aerospace,
defense and electronics industries.
DISTRIBUTION AND MARKETING
Unit distributes its products primarily through a direct
sales and application engineering team of 24 representatives
which is supplemented by several independent international
distributors. The Company actively employs several methods to
market its products, including regular participation in trade
shows, frequent advertisement in trade journals, submission of
demonstration products to selected Original Equipment
Manufacturers (OEMs) and end-users for evaluation and
participation in prototype development efforts by major customers
for "next" generation equipment.
Unit sells approximately 75% of its product to OEMs and the
balance to end-users. OEM customers and potential customers
include the world's leading manufacturers of semiconductor wafer
processing equipment including Applied Materials, Lam Research,
Tokyo Electron, Watkins-Johnson, Novellus and others. End-user
customers and potential customers include the world's leading
manufacturers of semiconductors including Intel, Motorola, IBM,
AMD, Samsung, Toshiba, and Siemens.
For fiscal year 1995, Applied Materials accounted for 37% of
the continuing Company's net sales and Lam Research accounted for
18% of net sales.
Approximately 10%, 10% and 14% of the Unit's net sales were
exported from the United States in fiscal 1995, 1994 and 1993,
respectively.
AEG's marketing activities in the United States and Canada
are handled by an employee field staff, the majority of whom are
sales engineers, operating out of its Erie location, a direct
sales office located in Texas and one sales office in Canada.
AEG also uses domestic independent sales agents and independent
distributors. Sales in foreign countries are presently handled
by one direct sales office in France and by independent sales
agents and independent distributors. The field sales activities
are supported by an administrative staff in Erie, Pennsylvania
including application engineers. AEG also markets certain of its
products domestically and abroad through manufacturers'
representatives.
AEG maintains distribution warehouses for standard valves
and fittings in Houston, Texas and Burlington, Canada.
-6-
The Company's standard warranty on its products covers
repair and replacement of defective products for a period of one
year from the date of shipment. The Company employs full-time
field service personnel to provide repair, maintenance and
warranty services for domestic and foreign customers.
BACKLOG
The Company's backlog for continuing operations at May 31,
1995 was approximately $3.3 million, compared to backlog at May
31, 1994 of approximately $2.4 million, General industry
practice allows for orders to be rescheduled or canceled without
significant penalty. Most customer orders in backlog are
deliverable within one to four weeks and, accordingly, the
Company's backlog at any given date is not necessarily indicative
of actual sales for any succeeding period.
INVENTORY AND WORKING CAPITAL
Unit is required to carry significant amounts of inventory
to meet the rapid delivery requirements of its customers and to
buffer against extended leadtimes for certain raw materials. The
Company does not provide extended payment terms to its domestic
customers, but does selectively extend payments terms to certain
international customers. Returns for customer convenience are
not allowed by the Company.
PRODUCT DEVELOPMENT
Unit is a leader in the development of mass flow controllers
and peripheral accessories. The Company commits substantial
resources toward enhancing existing products and developing new
products that establish industry standards for performance,
reliability and pricing.
For fiscal 1995, 1994 and 1993, Unit spent $1,874,000,
$1,067,000 and $762,000, respectively, for research and
development activities.
INTELLECTUAL PROPERTY
The Company has a policy to aggressively seek patents on new
products and improvements when appropriate. Unit currently holds
14 U.S. patents and has applied for 6 additional U.S. patents.
In addition, Unit has 8 foreign patents and 14 pending
applications. Although the Company believes its patents have
value and could potentially provide a competitive advantage, it
believes the success of the business depends on innovation,
technical expertise and know-how of its personnel, along with
other factors.
-7-
COMPETITION
The market for Unit's mass flow controllers is highly
competitive. Significant competitive factors include product
quality, performance and capabilities, price, delivery leadtimes,
customer service and support, breadth of product offering, size
of installed base and historical relationship with the customer.
The Company believes that it competes favorably with respect to
these competitive factors, with the primary exception of being
predominantly a one-product supplier, i.e. mass flow controllers.
Unit has three major domestic competitors and two Japanese
competitors. Unit has a small manufacturing facility in Japan to
support and augment its efforts to penetrate the Japanese market;
and while some market share penetration has occurred, it is still
limited. For Unit to maintain and enhance its competitive
position, significant investments in engineering, manufacturing
process improvements, marketing, customer service and support
will be required in the future.
Although AEG is not aware of any other single company which
markets its full line of products, AEG's business is subject to
intense competition. Many of AEG's competitors (including
customers who may elect to manufacture high pressure systems or
catalytic reaction systems for internal use) have financial,
marketing and other resources greater than those of AEG. There
are a number of companies that specialize in a limited number of
the products manufactured by AEG.
The most significant competitive factors with respect to
AEG's products are technical performance, quality control and the
engineering and sales service support experience of its
personnel. Certain products sold by AEG's competitors are less
expensive than comparable products sold by AEG, thereby
subjecting these products to intense price competition.
MANUFACTURING AND SUPPLIERS
Unit designs, manufactures and assembles precision
components at its own facilities but also relies on third-party
suppliers for various machined parts and subassemblies. All
final assembly activity is performed in cleanrooms. Unit has
three manufacturing facilities: the main facility in Yorba
Linda, California; and two smaller facilities in Japan and
Ireland. Customers are increasingly seeking reductions in
leadtimes, increases in quality and higher price/performance
levels. To meet and exceed customer expectations, several
manufacturing strategies have been implemented, including TQM and
team benchmarking. The Company is in the process of implementing
ISO 9001 certification for its Yorba Linda facility and expects
this to be accomplished during fiscal year 1996.
-8-
Most materials used in Unit's products are standard items
that are available from multiple sources. However, certain
machined parts and raw materials are obtained from a single
source or a limited number of suppliers. In addition, selected
raw materials have an extended leadtime. Although the Company
seeks to limit its dependency on sole or limited source suppliers
and to reduce leadtimes for raw materials, the partial or
complete loss of these suppliers or an abrupt change in leadtimes
for raw material could have a material adverse effect on the
Company's results of operations.
The principal material used by AEG in manufacturing
autoclaves, valves, fittings and related parts and equipment is
stainless steel, which is purchased in a variety of shapes and is
produced by AEG's raw materials suppliers in accordance with
rigid chemical and physical specifications established by AEG.
AEG purchases other metals such as inconel, nickel, monel,
hastelloy and titanium that are used in the production of
autoclaves. AEG also purchases forgings, magnets, pumps,
compressors, controls and instruments.
AEG has not experienced and does not foresee any
availability problems with respect to components of such products
beyond periodic shortages created by changing economic
conditions.
REGULATION
In the U.S.A., most states require high pressure systems to
comply with specifications established by the American Society of
Mechanical Engineers Code ("ASME Code"), which provides technical
guidelines for designing, manufacturing and quality control of
the systems. Some states have additional safety code
requirements for high pressure systems. Equipment used in
commercial nuclear facilities is subject to quality control and
quality assurance procedures established by the Nuclear
Regulatory Commission. Foreign governments regulate the sale,
installation and use of high pressure systems in their
jurisdictions and many of their regulations vary from the ASME
Code. The Corporation believes it has obtained all applicable
regulatory approvals for its products.
ENVIRONMENTAL COMPLIANCE
The Company's facilities are subject to federal, state and
local environmental control regulations. To date, compliance
with environmental regulations has not had a material effect on
the Company's earnings nor has it required the Company to expend
significant capital expenditures. See Note 12D of Notes to
Consolidated Financial Statements.
INSURANCE
Because some of the products of AEG are subject to extreme
pressures and temperatures, there are potential exposures to
personal injury as well as property damage, particularly if
operated without regard to the design limits of the systems and
components.
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AEG endeavors to minimize its product liability exposure and
insurance costs by engineering safety devices for its products,
carefully monitoring incidents involving its products to
determine areas where safety improvements may be made, and
encouraging its customers to carry out necessary maintenance and
training programs in connection with its products. Although the
Company believes that it maintains adequate product liability
insurance coverage obtained through various insurance companies,
there is no assurance that its coverage will be sufficient to
cover future claims against the Company.
EMPLOYEES
As of May 31, 1995, Unit had a total of 365 full-time and
temporary employees, of which 294 were in manufacturing and
service support, 24 in marketing, sales and applications
engineering, 24 in product development, and 23 in finance and
administration. In addition, the Company had 181 employees in
its Autoclave Engineers Group. All current employees of AEG will
be offered employment by the proposed purchaser of AEG, with the
exception of approximately 6 employees involved primarily in
corporate administrative functions. None of the Company's
employees are represented by a union or other collective
bargaining group, and the Company considers its relationship with
its employees to be good.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names of all executive
officers of the Company, their ages and their positions with the
Company
Name Age Positions with Corporation
James C. Levinson 67 Chairman of the Board of
Directors
William F. Schilling 53 Director; President and Chief
Executive Officer; President
of Autoclave Engineers Group
Michael J. Doyle 42 Director; President and
Chief Executive Officer
of Unit Instruments, Inc.
Thomas C. Guelcher 55 Vice President, Corporate
Development and Chief
Financial Officer
John G. Sontag 46 Treasurer, Secretary and
Corporate Controller
* * *
Mr. Levinson has served as a director of the Company since
1961 and was President and Chief Executive Officer from 1966
until April 30, 1992.
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Dr. Schilling joined AEG in June 1989 as assistant to the
President of AEG. He became Executive Vice President of AEG in
April 1990 and was named President of AEG, effective June 1,
1991. On April 30, 1992, he was named President and Chief
Executive Officer of the Company.
Mr. Doyle has served as a director of the Company since
1984. Mr. Doyle was a co-founder of Unit in 1980 and has served
since that date as Unit's President and Chief Executive Officer.
Mr. Guelcher joined the Company in 1989. Prior to that he
held various managerial positions during his 23 years of service
at International Paper, formerly Hammermill Paper Co., the last
being Treasurer.
Mr. Sontag has been Treasurer since 1982, Secretary since
1985 and Corporate Controller since 1989.
* * *
Each officer holds office until his successor is elected or
until his death, resignation or removal.
Mr. Levinson is the husband of Marilyn G. Levinson, a
director of the Company. There are no other family relationships
between any officers and directors.
Item 2 - Properties
Unit leases an 80,000 square foot facility in Yorba Linda,
California for manufacturing and support activities. This lease
expires in 2001 but provides for renewal options. Unit owns a
4,000 square foot manufacturing facility in Dublin, Ireland;
leases a 2,850 square foot manufacturing facility in Tokyo,
Japan; and has four leased service centers in San Jose,
California; Tempe, Arizona; Dallas and Austin, Texas.
The Company owns a 60,000 square foot building in Erie,
Pennsylvania and also owns, or leases under a long-term capital
lease from the Erie County Industrial Development Authority,
other contiguous buildings with approximately 40,000 square feet.
The lease with Erie County Industrial Development Authority
expires in 1998. Under terms of this lease, the Company has the
right to purchase for a nominal sum the property to which this
lease is related at the lease expiration date. The Company also
owns a 12,000 square foot facility in Oxford, Pennsylvania that
is being leased to a third party. The Company will transfer its
interest in the above property to the buyer of AEG.
The Company's domestic manufacturing operations are being
utilized generally on one full shift and partial second and third
shifts, while the foreign operations operate on a single shift.
Management believes that the Company's existing facilities will
be adequate for its immediate needs.
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Item 3. Legal Proceedings.
Unit is not a party to any claims or legal proceedings.
AEG is involved in a number of claims and legal proceedings
of a nature considered normal to its business, principally
product liability matters. Certain of these cases seek damages
which, if awarded, would require sizeable payments. While it is
not feasible to predict the outcome of these actions
with certainty, management of the Company, based upon available
information, believes that any liability that may arise from
these proceedings will not have a material adverse effect on the
consolidated financial condition or projected results of
operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year covered by this
report, no matter was submitted to a vote of security holders of
the Company.
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PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters.
Common Equity Market Data
The Common Stock of Autoclave Engineers, Inc. is traded in the
over-the-counter market through the National Association of
Securities Dealers Automated Quotation National Market System
(NASDAQ-NMS). The Company's NASDAQ-NMS symbol is ACLV. High and
low closing prices for the Company's Common Stock, as reported on
NASDAQ-NMS, and cash dividends paid per share, for the fiscal
quarters indicated, were as follows:
Period High Low Dividends Paid
1994 First Quarter $ 8.00 $ 7.00 $.06
Second Quarter 10.00 7.375 .06
Third Quarter 9.75 7.25 .06
Fourth Quarter 8.75 6.00 .06
1995 First Quarter $ 9.25 $ 7.375 $.06
Second Quarter 9.50 8.50 .06
Third Quarter 10.00 8.00 .06
Fourth Quarter 13.625 8.75 .06
The Company had 414 holders of record of its Common Stock on
May 31, 1995.
Under the covenants of one the Company's term debt agreements,
the aggregate amount of dividends that can be paid in any fiscal
year cannot exceed $1,100,000, subject to renegotiation in the
event of an additional stock issuance. (See Note 6 of Notes to
Consolidated Financial Statements.)
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Item 6. Selected Financial Data - (in thousands, except per share
data)
The following table provides a comparison of financial results for each of
the five fiscal years in the period ended May 31, 1995.
Fiscal Year Ended May 31
1995 1994 1993 1992 1991
Net sales(1) $48,256 $33,141 $23,965 $21,500 $23,511
Income(loss) from
continuing operations
before cumulative
effect of accounting
change(1) 705 (212) (1,610) (696) (706)
Discontinued operations
Income, net 1,334 1,186 1,715 1,971 (274)
Gain on disposal, net 963 -- -- -- --
Net income(loss) 3,002 1,198 105 1,275 (980)
Earnings per share:
Income(loss) from
continuing operations
before cumulative
effect of accounting
change(1) .16 (.05) (.38) (.16) (.17)
Discontinued opera-
tions .53 -- -- -- --
Net income(loss) .69 .28 .02 .30 (.23)
Cash dividends
declared per share .24 .24 .24 .30 .24
Average shares used in
computing earnings
per share 4,340 4,268 4,233 4,243 4,178
Working capital $27,573 $25,128 $26,210 $26,605 $26,716
Total assets 51,902 58,250 61,823 61,292 63,845
Long-term debt 453 952 1,417 3,152 3,623
Shareholders' equity 38,478 37,721 38,087 38,894 38,623
(1)Reclassified to reflect continuing operations. See Notes 1 and
2 of Notes to Consolidated Financial Statements for information
on discontinued operations.
During fiscal 1993, the Company changed its method of valuing
certain inventories from the last-in, first-out method to the
first-in, first-out method. The selected financial data for the
fiscal years 1991 and 1992 have been restated to reflect this
change in accounting principle. The impact on net earnings for
each of the restated years was: a decrease of $235,000, or $.06
per share in 1992 and a decrease of $460,000, or $.11 per share
in 1991.
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In fiscal 1994, the Company changed the method of accounting for
overhead costs in certain inventories. Prior to 1994, costs
related to material processing and handling activities were
applied to production as a function of direct labor incurred;
however, effective in 1994, they were applied based on their
relationship to material costs incurred. The cumulative effect
of adopting this change as of June 1, 1993 is included in the net
income and net income per share for the fiscal year ended May 31,
1994. Prior years' financial data have not been restated.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Amounts in thousands, except share data)
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes related
thereto. All information is based on Autoclave Engineers' fiscal year.
Results of Operations
The following table sets forth, for the periods indicated: (i)
certain income and expense items expressed as a percentage of the Company's
sales from continuing operations; and (ii) the percentage change in the
dollar amounts of such items from year to year:
Year-to-Year
Percentage of Net Sales Increase(Decr)
----------------------- --------------
1995 1994 1993 94-95 93-94
---- ---- ---- ----- -----
Sales 100.0% 100.0% 100.0% 45.6% 38.3%
Cost of Sales 64.3 65.1 68.0 43.8 32.3
Selling and administration
expenses 27.6 30.1 38.7 33.4 7.6
Restructuring costs 2.5 -- -- N/M --
Research and
development expenses 3.9 3.2 3.2 75.6 40.0
Income(loss) before income taxes 1.9 0.6 (8.5) N/M N/M
Income(loss) from continuing
operations 1.5 -- (6.7) N/M N/M
N/M - Not Meaningful
1995 Compared to 1994
Sales from continuing operations increased 46% to $48,256
for fiscal year 1995 reflecting, in part, the continuation of the
strong upturn in the semiconductor equipment market that began in
1993. The Company introduced two new metal seal mass flow
controller ("MFC") models in fiscal 1994 that gained excellent
market acceptance during the current fiscal year. These new
products accounted for the majority of the sales increase for the
year. In addition, average selling prices were generally higher
for the current fiscal period as compared to the prior year
period. The Company's older model MFCs recorded lower unit sales
for the year but favorable mix and high average selling prices
-15-
resulting in stable revenue for the current period. Sales from
the Company's offshore operations were also stable for the fiscal
year.
Cost of sales, as a percent of sales, decreased slightly to
64% from the prior year's 65%. This decrease was attributable to
marginally lower overhead, as a percent of sales, at the
Company's main manufacturing facility in Yorba Linda, California
because of significantly higher volume levels. This improvement
was partially offset by higher expenses at the Company's facility
in Japan.
Selling and administration expenses and restructuring costs
increased $4,564 or 46% over the prior fiscal year. Unit
recorded higher expenses because of increased volume levels but
these expenses, as a percent of sales, decreased over the prior
year period. These expenses were $1,841 higher for the fiscal
year because of certain expenses associated with the
restructuring of the Company's corporate office activities,
including $1,230 in severance and related costs recorded in the
fourth quarter of 1995, which are expected to be paid in the
second quarter of 1996. The Company anticipates that corporate
expenses will decrease in the subsequent fiscal year as Unit
assumes these functions and certain cost savings are realized.
Research and development expenses increased 75% over the
prior year and increased as a percent of sales to 3.9% in fiscal
1995 from 3.2% for fiscal 1994. These higher expenses represent
additional staffing and increased development activity directed
toward product enhancements and new products.
Interest income increased to $230 in 1995 compared to $66 in
1994. The increase in interest income was attributable to higher
cash balances generated from the sale of Burton Corblin in 1995
which were offset, to a limited extent, by generally lower
interest rates. Interest expense decreased to $339 from $448
because of lower average borrowings outstanding and lower
interest rates on these borrowings.
The effective rate for income tax provided in 1995 was
approximately 25% compared to a 199% rate in the prior year.
The prior year rate was adversely impacted because of low pre-tax
income, the inclusion, for tax purposes, of nondeductible foreign
losses and other expense items, including goodwill and business
meal expenses, the adjustment of prior accruals, and the adoption
of Statement of Financial Accounting Standards (SFAS) No. 109 -
Accounting for Income Taxes.
Effective June 1, 1993, the Company adopted prospectively
SFAS No. 109. This Statement required the Company to change its
method of accounting for income taxes from the deferred method to
-16-
the liability method which requires the recognition of deferred
tax assets and liabilities for the estimated future taxes payable
or recoverable, arising from temporary differences between the
tax bases of assets and liabilities and their financial statement
bases. The effect of adopting SFAS No. 109 was an increase to
the provision for income tax on continuing operations of
approximately $162 and a decrease on discontinued operations of
$25.
The Company's results of operations may be affected in the
future by a variety of factors including: the dependency of
sales on a few large customers, product mix, new product
introductions by the Company and the Company's competitors,
operating expenses and the scheduling of orders by customers. In
addition, the Company's results could be affected by demand for
semiconductor equipment, which has experienced strong growth the
past two years, and technology changes in the market.
During the third quarter of fiscal 1995, the Company sold
its compressor operations in the United States and France and
recorded a gain on disposal of this business segment. During the
fourth quarter, the Company recorded additional reserves for this
discontinued operation. Under the terms of the sale agreement,
the Company has retained certain known product warranty exposures
and has provided a commitment for the realization of purchased
assets, primarily accounts receivable. The current estimate of
these costs is $225,000 which has been provided for in 1995.
Approximately $365,000 of the proceeds from the sale remain in
escrow until settlement or realization of these contingencies.
In the fourth quarter of fiscal 1995, the Company developed
a plan for the disposition of its Autoclave Engineers Group
("AEG") business segment. Accordingly, this operation has been
accounted for as a discontinued operation for year-end reporting
purposes. A definitive agreement for sale has since been
executed, and based upon management's estimation of net proceeds
from the sale of AEG and associated costs relating to this sale,
a gain on disposal is probable and will be recorded when
realized, expected to be during the second quarter of fiscal
1996.
1994 Compared to 1993
Sales from continuing operations increased 38% to $33,141
for fiscal year 1994 as compared to the prior year's sales of
$23,965. Sales of MFCs were favorably impacted by a strong
upturn in the semiconductor equipment market and the introduction
of two new metal seal MFC models that received good market
acceptance. Sales into the Japanese market recovered modestly
-17-
over the prior year because of increased activity in the
semiconductor market as did sales into the European market
through the Company's subsidiary in Ireland.
Cost of sales, as a percent of sales, decreased to 65% from
the prior year's 68%. This decrease in cost of sales resulted
from several factors: the absorption of fixed overhead costs at
the Company's main manufacturing facility in Yorba Linda over
significantly higher sales volume; increases in manufacturing
efficiencies; and, the favorable impact of new pricing
arrangements on certain long-term contracts. Lower cost of sales
at the Company's facility in Japan also contributed to the
overall improvement in the current fiscal year.
Selling and administration expenses increased $705 or 8%
over fiscal year 1993 but declined dramatically, as a percent of
sales, to 30% from almost 39% the prior year. Unit recorded
higher expenses for sales commissions and sales support
activities because of higher sales levels while Corporate
expenses declined marginally, reflecting the impact of tight
expense controls.
Research and development expenses increased 40% over the
prior year but remained constant, as a percent of sales, at 3.2%.
These higher expenses were directed toward a new model
development, product enhancements and continued work on advanced
sensor technology.
Interest income declined compared to the prior year because
of lower interest rates and a decrease in average cash balances
available for investment. Interest expense rose slightly because
of higher average borrowings outstanding during the fiscal year.
Other income dropped for the fiscal year to $70 from $563 the
prior year because of lower foreign currency exchange gains and
the recording, in fiscal 1993, of a $263 pre-tax gain on the sale
of stock in Autoclave Toll Services Limited.
Income taxes were provided for at a 199% rate in 1994 as
compared to 21% benefit in fiscal 1993. The 1994 rate was
adversely impacted by the factors previously mentioned. See Note
7 of Notes to Consolidated Financial Statements for a
reconciliation of the effective tax rate for each fiscal year to
the normal federal statutory rate of 34%.
-18-
Liquidity and Capital Resources
Cash and short-term investments increased by $3,648 to
$9,384 at May 31, 1995. During the third quarter, the Company
sold its Burton Corblin subsidiary and received cash proceeds of
$8,312. Accounts receivable and inventory balances at Unit
increased approximately $4.6 million during the year in support
of rapidly increasing sales. This trend is expected to continue
during fiscal 1996.
Unit's capital expenditures were approximately $2.8 million
in the current fiscal year and are projected to be in the four to
five million dollar range over the next several years. These
expenditures are primarily required to augment manufacturing
capacities and capabilities in the production of MFCs. At May
31, 1995, the Company was not committed to any significant plant
or equipment contracts except $850 for construction of an
additional clean room at the Yorba Linda, California facility.
For fiscal 1995, research and development expenditures
totaled $1,874 which was a 76% increase over the prior year. The
Company anticipates that research and development charges will
increase by approximately 50% in the coming fiscal year and will
remain at a relatively high level for the foreseeable future.
In addition to the $9,384 cash and cash equivalents balances
at year-end, the Company had approximately $5.7 million available
under domestic credit facilities at May 31, 1995. In addition,
the Company expects to realize approximately $13 million in cash
from the sale of AEG during the second fiscal quarter of 1996.
The Company believes that these cash resources are adequate to
meet its near-term financing needs.
-19-
Item 8. Financial Statements and Supplementary Data.
Report of Independent Accountants
To the Shareholders and the
Board of Directors of Autoclave Engineers, Inc.
In our opinion, the consolidated financial statements listed in
the accompanying index appearing under item 14(a) 1 and 2 on page
56 present fairly, in all material respects, the financial
position of Autoclave Engineers, Inc. and its subsidiaries at May
31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended May
31, 1995, in conformity with generally accepted accounting
principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 4 to these Consolidated Financial
Statements, the Company changed its method of accounting for
overhead costs in certain inventories in fiscal 1994.
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219
August 15, 1995
-20-
CONSOLIDATED STATEMENT OF INCOME
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
1995 1994 1993
Net sales $48,256 $33,141 $23,965
Operating costs and expenses:
Cost of goods sold 31,011 21,565 16,295
Selling and administration 13,317 9,983 9,278
Restructuring costs 1,230 -- --
Research and development 1,874 1,067 762
------- ------- -------
Operating income(loss) 824 526 (2,370)
Interest income 230 66 152
Interest expense (339) (448) (385)
Other income, net 222 70 563
------- ------- -------
Income(loss) from continuing
operations before income taxes,
and cumulative effect of
accounting change 937 214 (2,040)
Provision for(benefit from)
income taxes 232 426 (430)
------- ------- -------
Income(loss) from continuing
operations before cumulative
effect of accounting change 705 (212) (1,610)
Discontinued operations:
Income, net of income tax provision 1,334 1,186 1,715
of $1,119, $684 and $1,004 in 1995,
1994 and 1993, respectively
Gain on disposal, including tax 963 -- --
benefit of $171
Cumulative effect to June 1, 1993
of change in accounting for
certain overhead costs, net of
income tax provision of $125 -- 224 --
------- ------- -------
Net income (loss) $ 3,002 $ 1,198 $ 105
======= ======= =======
Per common share:
Income(loss) from continuing
operations before acct'g. change $ 0.16 $ (0.05) $ (0.38)
Discontinued operations:
Income 0.31 0.28 0.40
Gain on disposal 0.22 -- --
Cumulative effect of
accounting change -- 0.05 --
------- ------- -------
Net income(loss) $ 0.69 $ 0.28 $ 0.02
======= ======= =======
Average shares used in computing
earnings per share 4,340,384 4,267,533 4,233,489
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
-21-
CONSOLIDATED BALANCE SHEET
May 31, 1995 and 1994
(amounts in thousands, except share data)
Assets 1995 1994
------- -------
Current assets:
Cash and cash equivalents $ 4,465 $ 5,719
Short-term investments, at cost 4,919 17
Accounts and notes receivable 9,543 18,320
Inventories 8,440 14,318
Prepaid expenses and other 1,569 3,195
Net assets of discontinued operations held
for sale 11,072 --
------- -------
Total current assets 40,008 41,569
------- -------
Property, plant and equipment, at cost:
Land and improvements -- 266
Buildings and improvements 2,346 6,167
Machinery and equipment 9,338 19,648
------- -------
11,684 26,081
Accumulated depreciation and amortization 5,740 16,815
------- -------
5,944 9,266
Construction-in-progress 880 --
------- -------
6,824 9,266
------- -------
Property held for sale, net of accumulated
depreciation of $1,166 -- 996
Investment in equity interests -- 739
Goodwill, net of accumulated amortization
of $1,571, 1995; $1,417, 1994 4,490 4,643
Other assets 580 1,037
------- -------
$51,902 $58,250
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
-22-
CONSOLIDATED BALANCE SHEET
May 31, 1995 and 1994
(amounts in thousands, except share data)
1995 1994
------- -------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings - banks $ -- $ 1,500
Accounts and notes payable - trade 3,139 6,627
Accrued compensation and benefits 1,560 3,504
Income taxes 672 888
Current installments on term debt 3,156 703
Other current liabilities 3,908 3,219
------- -------
Total current liabilities 12,435 16,441
Term debt 453 952
Deferred income taxes 77 216
Other long-term liabilities and deferred credits 459 1,278
------- -------
13,424 18,887
------- -------
Excess of net assets acquired over cost -- 1,642
------- -------
Commitments and contingencies (Note 12)
Shareholders' equity:
Common stock, $.15 par value; authorized shares
12,000,000; issued: 4,416,193 shares 662 662
Additional paid-in capital 20,413 20,083
Retained earnings 18,171 16,183
Foreign currency translation adjustment (252) 1,369
------- -------
38,994 38,297
Less treasury stock, at cost: 173,888 shares,
1995; 201,573 shares, 1994 (516) (576)
------- -------
Total shareholders' equity 38,478 37,721
------- -------
$51,902 $58,250
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
-23-
CONSOLIDATED STATEMENT OF CASH FLOW
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands)
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,002 $ 1,198 $ 105
Adjustments to reconcile net income
to net cash provided from operating
activities:
Cumulative effect of accounting change, net -- (224) --
Depreciation and amortization 2,850 2,906 3,240
Deferred income taxes (828) (96) (158)
Equity interests (758) 103 71
Changes in assets and liabilities, net
of effect of business sold:
Accounts receivable (1,634) (2,050) 5,287
Inventories (2,817) (478) 2
Prepaids and other assets 312 (626) (303)
Accounts payable and accrued liabilities 4,232 2,188 (1,543)
Income taxes 283 (113) 427
Other current liabilities (34) (50) (55)
Loss on disposal of property,
plant and equipment 15 73 91
Gain on sale of business (963) -- (263)
Other 188 63 (281)
Net cash provided from operating activities 3,848 2,894 6,620
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,548) (2,363) (3,118)
Proceeds from sale of property, plant
and equipment 256 99 11
Proceeds from sale of business, net of cash 4,456 -- 1,596
Change in short-term investments (4,998) 6,611 (6,268)
Other 89 (210) (248)
Net cash provided from (used in)
investing activities (4,745) 4,137 (8,027)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (459) (431) (435)
Proceeds from issuance of long-term debt -- -- 483
Change in short-term borrowings, net 556 (3,467) 3,946
Cash dividends paid (1,014) (1,011) (1,007)
Other 141 7 212
Net cash provided from (used in)
financing activities (776) (4,902) 3,199
Effect of exchange rate changes on
cash and cash equivalents: 419 (317) (68)
Net increase(decrease) in cash and
cash equivalents (1,254) 1,812 1,724
Cash and cash equivalents at beginning of year 5,719 3,907 2,183
Cash and cash equivalents at end of year $ 4,465 $ 5,719 $ 3,907
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 339 $ 269 $ 495
Income taxes paid $ 2,168 $ 1,441 $ 296
The accompanying notes are an integral part of the consolidated financial
statements.
-24-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
Foreign
Currency
Addi- Trans-
Common tional lation
Stock Paid-In Retained Adjust- Treasury
Issued Capital Earnings ment Stock Total
------ -------- -------- -------- -------- -------
Balance at
May 31, 1992 $662 $19,956 $16,898 $2,047 $(669) $38,894
Transactions
during the
fiscal year
ended 5/31/93:
Net income 105 105
Dividends, $.24
per share (1,007) (1,007)
Issuance of
31,818 shares of
common stock
upon exercise of
stock options 123 90 213
Foreign currency
translation
adjustment (118) (118)
---- ------- ------- ------- ------ -------
Balance at
May 31, 1993 $662 $20,079 $15,996 $1,929 $ (579) $38,087
The accompanying notes are an integral part of the consolidated financial
statements.
-25-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
Foreign
Currency
Addi- Trans-
Common tional lation
Stock Paid-In Retained Adjust- Treasury
Issued Capital Earnings ment Stock Total
------ ------- -------- --------- -------- -------
Balance at
May 31, 1993 $662 $20,079 $15,996 $1,929 $(579) $38,087
Transactions
during the
fiscal year
ended
May 31, 1994:
Net income 1,198 1,198
Dividends, $.24
per share (1,011) (1,011)
Issuance of
1,000 shares of
common stock
upon exercise of
stock options 3 3 6
Tax benefit from
compensation
arising from
exercise of
stock options 1 1
Foreign currency
translation
adjustment (560) (560)
---- ------ ------- ------- ------ --------
Balance at
May 31, 1994 $662 $20,083 $16,183 $1,369 $(576) $37,721
==== ======= ======= ====== ====== =======
The accompanying notes are an integral part of the consolidated financial
statements.
-26-
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Fiscal Years Ended May 31, 1995, 1994 and 1993
(amounts in thousands, except share data)
Foreign
Currency
Addi- Trans-
Common tional lation
Stock Paid-In Retained Adjust- Treasury
Issued Capital Earnings ment Stock Total
------ -------- -------- -------- -------- -------
Balance at
May 31, 1994 $662 $20,083 $16,183 $1,369 $(576) $37,721
Transactions
during the
fiscal year
ended 5/31/94:
Net income 3,002 3,002
Dividends, $.24
per share (1,014) (1,014)
Issuance of
31,815 shares of
common stock
upon exercise of
stock options 100 94 194
Purchase of 3,630
shares of common
stock for treasury (34) (34)
Tax benefit from
compensation arising
from exercise of
stock options 55 55
Issuance of 100,000,
4 year,warrants for
common stock at an
exercise price of
$8.925 to a financial
advisory firm 175 175
Relief of translation
adjustment balance
applicable to
discontinued
operations (1,626) (1,626)
Current year
translation activity 5 5
---- ------- ------- ------ ------ -------
Balance at
May 31, 1995 $662 $20,413 $18,171 $ (252) $ (516) $38,478
==== ======= ======= ====== ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
-27-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting
policies followed by the Company in the preparation of the
accompanying consolidated financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of Autoclave Engineers, Inc. and its subsidiaries (the Company).
The fiscal year for the Company is a twelve-month year ending on
May 31.
The Company sold its Burton Corblin operations in January
1995 and has developed a plan to sell the Autoclave Engineers
Group (AEG). Both of these operations have been accounted for as
discontinued operations in the accompanying financial statements.
The Consolidated Statement of Income reflects the results from
the continuing operations of Unit Instruments, Inc. and its
subsidiaries and corporate activities while the results of the
discontinued operations have been segregated and shown separately
for all years presented. The net assets of AEG including related
deferred taxes have been classified as a single line item on the
Balance Sheet at May 31, 1995. Prior years' information for
discontinued operations on the Consolidated Balance Sheet and
Consolidated Statement of Cash Flow has not been reclassified or
restated.
The Company has a 50% interest in ABB Pressure Systems AB
and had a one third interest in a corporate joint venture in
Germany, both accounted for on the equity method. The interest
in the German joint venture was terminated as of June 30, 1994,
with an immaterial effect.
All material intercompany accounts and transactions are
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company's policy is to include cash and all time
deposits and marketable securities with an initial maturity of
three months or less in cash and cash equivalents.
INVENTORY VALUATION
Inventories are carried at the lower of cost or market with
cost being determined on the first-in, first-out method.
-28-
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY, PLANT AND EQUIPMENT
The Company computes depreciation for financial statement
purposes principally on the straight-line method.
Repairs and maintenance are charged to expense as incurred.
Major renewals and betterments are capitalized. The cost of
property, plant or equipment replaced, retired, or otherwise
disposed of and the related accumulated depreciation are
eliminated from the accounts. Any resulting gain or loss, after
giving effect to salvage and removal costs, is added to or
deducted from income.
GOODWILL
Goodwill relates to continuing operations and is amortized
on a straght line basis over a period of forty years from the
date of the related business combination.
REVENUE RECOGNITION
The Company recognizes income principally on the completed
contract basis.
EARNINGS PER SHARE
Earnings per share is computed using the average number of
shares outstanding during each period plus common share
equivalents which would arise from the exercise of stock options
and stock warrants
.
PRODUCT WARRANTY COSTS
The Company expenses product warranty costs principally when
incurred; however, prospective product warranty costs on
significant contracts are provided for at the time management
determines that such costs are likely to be incurred and can be
reasonably estimated.
2. DISCONTINUED OPERATIONS
On January 19, 1995, the Company sold its Burton Corblin
compressor operations in the United States and France to James
Howden & Godfrey Overseas Limited (Howden) for a cash sales price
of $9,064 and the forgiveness of $2,584 in debt owed by Autoclave
Engineers, Inc. to Burton Corblin, S.A. (BCSA). Howden did not
acquire control of Autoclave Engineers Europe (AEE) which was
owned by BCSA and operated out of the BCSA facility in France;
however, interdivisional debt of $3,122, owed by AEE to BCSA was
forgiven. The transaction resulted in an after tax gain of $963
after provision for certain estimated costs.
-29-
2. DISCONTINUED OPERATIONS (continued)
In May 1995, the Board of Directors of the Company developed
a plan to dispose of the Autoclave Engineers Group (AEG) or
Autoclave Products business segment. This segment also has been
treated as a discontinued operation at May 31, 1995. Based on
the terms of a definitive agreement subsequently reached with a
prospective buyer of AEG, a net gain is expected to be realized
on this transaction and recognized in the second quarter of
fiscal 1996.
The net assets of AEG and related deferred taxes have been
classified as a single line on the May 31, 1995 Consolidated
Balance Sheet as "Assets of Discontinued Operations Held for
Sale". The composition of these net assets was:
Current assets $ 9,970
Property, plant & equipment, net 3,588
Other assets 1,710
Current liabilities ( 3,534)
Other liabilities ( 74)
Deferred taxes ( 588)
--------
$11,072
=======
The results of operations of Burton Corblin and AEG have
been reported as discontinued operations in the accompanying
Consolidated Statement of Income for all three years presented
theron. The net sales and net income for the discontinued
operations for the years ended May 31, 1995 is presented below:
1995 1994 1993
______ ______ ______
Net sales:
AEG $28,683 $26,887 $31,308
Burton Corblin 19,792 19,878 21,995
Net income:
AEG 753 88 444
Burton Corblin 581 1,098 1,271
With the disposition of Burton Corblin and AEG, the
continuing operations of the Company represent a single business
segment for Mass Flow Control Equipment. The identifiable assets
of the discontinued segments at May 31, 1994 and 1993 were:
1994 1993
______ ______
Autoclave Products (primarily US) $24,328 $23,784
Compressors (primarily France) 23,978 28,175
As the administrative and management support of AEE was
previously provided by BCSA, the Company determined that the
continued operation of AEE without this support was not feasible
and began a plan to restructure AEE for ultimate sale. Included
in the net income of AEG presented above was an after tax charge
of $494 for the estimated cost of this restructuring effort.
-30-
2. DISCONTINUED OPERATIONS (continued)
Related to the above divesting activity, the Company
established a plan to restructure the Corporate office function
currently located in Erie, Pennsylvania and relocate it within
Unit in Yorba Linda, California. Virtually all of the $1,230
fourth quarter 1995 restructuring costs relate to severance
benefits for six corporate officers and staff. Payment of these
benefits is anticipated to occur in fiscal 1996.
3. SHORT-TERM INVESTMENTS
Short-term investments at May 31, 1995 and 1994 consisted of
the following:
May 31, 1995 May 31, 1994
Face Market Face Market
Value Cost Value Value Cost Value
Municipal bonds $1,600 $1,600 $1,600 $-- $-- $--
Commercial paper 3,000 2,906 2,967 -- -- --
Corporate stocks 0 0 0 -- 17 17
Money market acc't. 413 413 413 -- -- --
------ ------ ------ --- --- ---
$5,013 $4,919 $4,980 -- $17 $17
====== ====== ====== === === ===
The municipal bonds and money market account are interest
bearing at various rates of interest. Commercial paper is
acquired at a discount with rates averaging 6.25%.
4. INVENTORIES
Inventories at May 31, 1995 and 1994 consisted of the
following:
1995 1994
Raw materials $ 5,326 $ 3,142
Work in process 1,896 2,056
Finished goods 1,218 1,276
Inventory of discontinued
operations -- 7,844
------- -------
$ 8,440 $14,318
======= =======
In the fourth quarter of 1994, the Company changed the
method of accounting for overhead costs in certain inventories.
These costs related to material processing and handling
activities which, prior to 1994, were applied to production as a
function of direct labor incurred. The Company believes that the
more appropriate method of applying the costs of these material-
support activities is based on their relationship to material
costs incurred.
-31-
4. INVENTORIES (continued)
The cumulative effect of adopting this change as of June 1,
1993 is shown in the Consolidated Statement of Income for the
year ended May 31, 1994. Prior years' financial statements have
not been restated. The Company has determined that the pro forma
effect of restating the consolidated results of operations for
the fiscal year ended May 31, 1993 would have increased net
income by $90 and net income per share by $0.02.
5. BANK LINES OF CREDIT
At May 31, 1995, the Company had arrangements at two
domestic banks for unsecured lines of credit totalling $8,450, of
which $250 is specifically in support of any foreign exchange
contracts entered into by the Company with one of the bank's
affiliates. The lines provide for interest at the banks' prime
rates. The unused portion of these lines of credit, after
deducting letters of credit supported by the lines, was $5,690 at
May 31, 1995.
6. TERM DEBT
As of May 31, 1995 and 1994, term debt consisted of the
following:
1995 1994
Capital lease obligations at interest
rates approximating 7.25% at May 31,
1995, due from 1995 through 1999 (a) $ 100 $ 141
Term loan (b) 812 1,201
Other bank notes payable (c) 2,697 313
------ ------
Total term debt 3,609 1,655
Less current installments (3,156) (703)
------- -------
$ 453 $ 952
====== =======
(a) The Company has capitalized the leases of its manufacturing
facilities which were acquired with the proceeds from industrial
revenue bonds.
The assets recorded under these capital leases are
depreciated as company-owned facilities and are included in
property, plant and equipment at May 31, 1995 and 1994 as
follows:
1995 1994
Land and land improvements $ -- $ 115
Building and improvements -- 402
Machinery and equipment 416 416
------- -------
416 933
Less accumulated depreciation (330) (653)
------- -------
$ 86 $ 280
======= =======
-32-
6. TERM DEBT (continued)
(b) The Company has a Loan Agreement (the Agreement) with PNC
Bank N.A. under which the Company borrowed two unsecured loans
with interest rate options for five and seven years. At the end
of the initial term of a loan, the interest rate can be
reestablished for another fixed period. The initial term plus
the renewal period cannot exceed ten years. Various interest
alternatives are available under the agreement. The Company has
the option of prepaying a loan at the end of any fixed term. At
May 31, 1995, the loans bear interest at 8.5% and 9.5%. Payments
are due in monthly installments of $40, including interest,
through 1997.
The Company is required to comply with certain restrictive
covenants under the Agreement. The most significant of these
covenants are: to maintain consolidated net worth as defined in
the Agreement of not less than $15,000; to maintain a ratio of
total liabilities to consolidated tangible net worth not to
exceed 1.5 to 1; to maintain working capital of at least $3,000;
to not pay dividends in excess of $1,100 in any year (subject to
renegotiation in the event of additional issuance of stock); to
not incur additional term indebtedness in excess of $1,000 in any
one year; and to not incur capital expenditures in excess of
$7,000 in any one year. The above restrictive covenants can be
waived by the bank at any time if deemed appropriate by the bank.
(c) The Company has two loans with foreign banks to provide
working capital to its subsidiary in Japan. The loans have
annual maturities and bear interest at 3 1/2%. Both loans are
secured by letters of credit drawn against one of the Company's
domestic bank lines of credit.
The following is a schedule by year of principal payments,
excluding interest, as of May 31, 1995:
Capital Other Term
Year Ending Leases Debt Total
1996 $ 39 $3,117 $3,156
1997 29 390 419
1998 28 2 30
1999 4 -- 4
---- ------ ------
$100 $3,509 $3,609
==== ====== ======
-33-
7. INCOME TAXES
The composition of the provision for income taxes included in the
consolidated statement of income was as follows:
1995 1994 1993
Current provision (benefit):
Federal $1,550 $ 799 $ 103
State 406 118 (116)
Foreign 300 306 737
------ ------ ------
2,256 1,223 724
Deferred
Federal (865) 12 (146)
State (211) -- (4)
------ ------ ------
$1,180 $1,235 $ 574
====== ====== ======
A reconciliation of the federal statutory tax rate to the
effective tax rate on income from continuing operations follows:
1995 1994 1993
--------------- --------------- ---------------
Percent Percent Percent
of of of
Pre-Tax Pre-Tax Pre-Tax
Amount Income Amount Income Amount Income
Normal federal
statutory tax
rate $ 319 34.0% $ 73 34.0% $(694) (34.0)%
Add (deduct)
the tax effect
of:
State income
taxes, net of
federal income
tax benefit 26 2.8 (24) (11.2) (61) (3.0)
Amortization of
good will 52 5.5 52 24.3 52 2.5
Tax on foreign
source income
in excess of
(less than)
US tax rate (19) (2.0) 64 29.9 448 22.0
Adjustments of
prior accruals (276) (29.4) 120 56.1 (182) (8.9)
Change in
valuation
allowance 105 11.2 -- -- -- --
SFAS No. 109
adjustment -- -- 162 75.7 -- --
Other 25 2.7 (21) (9.8) 7 0.3
------ ----- ------- ----- ----- ------
Provision for
income taxes $ 232 24.8% $ 426 199.0% $(430) (21.1)%
====== ===== ====== ====== ====== =======
-34-
7. INCOME TAXES (continued)
Temporary differences, arising from continuing operations,
between the financial bases and tax bases of assets and
liabilities result in deferred income taxes. The types of
temporary differences that gave rise to a significant portion of
the deferred tax assets and liabilities in the Corporation's
balance sheet at May 31, 1995 and 1994 were:
1995 1994
Property, plant and equipment net $ (344) $ (569)
Inventory adjustments 317 (177)
Prepaid pension costs -- (435)
Deferred compensation 202 255
Accruals for losses 153 220
Operating losses and credit carryforwards -- 136
Accrued benefits 55 321
Other deferred tax assets 156 165
Other deferred tax liabilities (59) (61)
Restructuring accruals 631 --
----- -----
Deferred income tax, net asset (liability) $1,111 $ (145)
===== =====
A valuation allowance of $450 has been continued against deferred
tax assets related to the utilization of foreign tax credits; a
valuation allowance of $105 has been established for state
operating loss carryforwards unusable after AEG is discontinued.
At May 31, 1995, the Company had foreign tax credit carryforwards
available for federal income tax purposes, operating loss
carryforwards attributable to certain of its foreign subsidiaries
and state loss carryforwards. The amount of these carryforwards
and the year in which they expire are:
Foreign State
Fiscal Year In Which Foreign Operating Operating
Carryforward Expires Tax Credits Losses Losses
1996 $144 $ 322 $ 367
1997 4 231 --
1998 302 114 1,133
1999 -- 270 --
2000 -- 139 --
Indefinite -- 171 --
---- ------ ------
$450 $1,247 $1,500
==== ====== ======
-35-
7. INCOME TAXES (continued)
Income from continuing operations before income taxes (and before
allocation of general corporate expenses) derived from foreign
subsidiaries was $277, $33 and $41 for the years ended May 31,
1995, 1994 and 1993, respectively.
The cumulative amount of unrepatriated earnings, of continuing
foreign subsidiaries and entities owned 20% or more, for which no
deferred taxes have been provided is $1,361 at May 31, 1995. It
is the Company's intention to reinvest undistributed earnings of
certain of its foreign subsidiaries and thereby indefinitely
postpone their remittance.
Effective June 1, 1993, the Company adopted prospectively
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". This Statement required the
Company to change its method of accounting for income taxes from
the deferred method to the liability method which requires the
recognition of deferred tax assets and liabilities for the
estimated future taxes payable or recoverable, arising from
temporary differences between the tax bases of assets and
liabilities and their financial statement bases. Prior to fiscal
1994, accounting for income taxes was determined under the
provisions of Accounting Principles Board Opinion No. 11.
The effect of adopting SFAS No. 109 increased the provision for
income tax for continuing operations in fiscal 1994 by
approximately $162 and reduced the provision for income tax for
discontinued operations by $25. The consolidated financial
statements for the periods prior to fiscal 1994 have not been
restated. This accounting change would not have had a material
effect on the Company's net income for fiscal 1993.
8. RETIREMENT AND PROFIT SHARING PLANS
The Company has maintained a contributory, defined benefit plan
covering substantially all employees of AEG and corporate
employees, who meet certain age and length of service
requirements. As a condition of participation, employees have
been required to contribute 3% of their salaries to the plan for
a maximum of thirty years. The Company's funding policy has been
to make annual contributions to the plan in amounts determined by
enrolled actuaries which, when combined with employees'
contributions, will provide the defined level of benefits at
retirement. These benefits are based on the average of total
compensation for certain specified months of service prior to
retirement.
The employees of Burton Corblin, S.A. particpated in an unfunded,
retirement indemnity plan as required by French law.
-36-
8. RETIREMENT AND PROFIT SHARING PLANS (continued)
The following table sets forth, for discontinued operations, the
estimated funding status of the defined benefit and retirement
indemnity plans as of the end of fiscal 1994:
1994
Defined Retirement
Benefit Indemnity
Plan
Actuarial present value
of pension benefits:
Accumulated benefit obligation,
primarily vested $10,919 $ 278
Additional amount related
to projected compensation
increases 1,432 67
Actuarial present value of
projected benefit obligation
for service rendered to date 12,351 345
Plan assets at fair value 13,924 --
Plan assets in excess of (less
than) projected benefit obligation 1,573 (345)
Unrecognized net assets at
beginning of year (964) --
Unrecognized net loss 477 --
Prepaid(Accrued) pension cost at
at end of year $ 1,086 $(345)
The plan assets in the preceding table include listed corporate
stocks and bonds, immediate participation contracts and 50,000
shares of the common stock of the Company at May 31, 1994.
Unit maintains a qualified profit sharing (401K) plan for
substantially all of its employees who meet certain age and
length of service requirements. Contributions equal to 50% of
the participants' contributions are made by Unit to the plan.
Additional contributions may be made by Unit at the discretion of
Unit's Board of Directors. Contributions to the plan were
$564,000 in 1995, $327,000 in 1994, and $260,000 in 1993.
9. STOCK OPTION PLANS
The Company maintains a 1987 Stock Plan, under which employees
may be awarded incentive stock options, non-qualified stock
options, stock awards or opportunities to make direct purchases
of stock in the Company. These awards, in the aggregate, are not
to exceed 1,600,000 shares.
During fiscal 1995, 1994 and 1993, options were exercised for
31,815, 1,000 and 31,818 shares, respectively.
-37-
9. STOCK OPTION PLANS (continued)
The Company also maintains a 1990 Non-Employee Director Stock
Option Plan (the 1990 Plan). Under the 1990 Plan, each director
who is not an employee nor an officer of the Company (an "outside
director") receives an automatic grant of 1,000 non-qualified
stock options on September 1 of each year, provided that person
has served as a director since at least December 31 of the
preceding year. Each outside director also receives stock
options as part of the director's compensation under a formula
approved by the shareholders. The aggregate options available
under this plan shall not exceed 250,000 shares.
1987 Stock Plan 1990 Plan
----------------------- -----------------------
No. of No. of
Shares Shares
Under Option Price Under Option Price
Option Per Share Option Per Share
------ ------------ ------ ------------
May 31, 1995 402,532 $4.95-$11.25 68,643 $7.00-$8.75
May 31, 1994 391,122 $4.95-$11.02 45,000 $7.00-$8.75
May 31, 1993 393,827 $4.95-$11.02 21,000 $7.00-$8.75
All options outstanding at May 31, 1995 are exercisable, except
for 12,500 options granted under the 1987 Stock Plan which become
exercisable effective August 11, 1995.
10. EXPORT SALES AND MAJOR CUSTOMERS
Included in net sales for 1995, 1994 and 1993 are shipments
exported from the United States by the continuing Company. These
export sales are summarized below by major geographic
destinations:
1995 1994 1993
United Kingdom and Ireland $ 1,473 $ 958 $1,008
Canada 74 56 39
Western Europe 185 141 153
Far East 2,806 1,890 1,717
Middle East 33 12 14
------- ------- ------
4,571 3,057 2,931
Less sales to consolidated
subsidiaries 2,432 1,605 1,375
------- ------- ------
$ 2,139 $ 1,452 $1,556
======= ======= ======
During 1995, 1994 and 1993, one customer purchased $16,672,
$9,769 and $5,640, respectively of product and services from the
Company, while a second customer purchased $8,194, $4,808 and
$3,509, respectively.
-38-
11. INDUSTRY SEGMENT INFORMATION
A. The continuing operations of the Company consist of one
business segment which designs, develops, manufactures, markets
and services mass flow controllers, which are precision
instruments sold principally to the semiconductor industry to
control and measure the mass flow rate of gases.
The geographic distribution of sales, operating income and
identifiable assets is as follows:
United
States France Other (a) Eliminations Total
------- ------- ------- ------------ ------
Net Sales from continuing operations
1995 $44,799 $ -- $5,889 $ (2,432) $48,256
1994 29,306 -- 5,403 (1,568) 33,141
1993 20,620 -- 4,720 (1,375) 23,965
Operating Income(Loss) from continuing operations, before general
corporate expenses
1995 $ 4,275 $ -- $ 174 $ (107) $ 4,342
1994 2,050 -- 151 2 2,203
1993 (284) -- (283) (68) (635)
Identifiable Assets(b)
1995 $49,750 $ -- $6,239 $(4,087) $51,902
1994 37,813 22,268 6,257 (8,088) 58,250
1993 35,871 27,269 6,107 (7,424) 61,823
(a) Includes Federal Republic of Germany, United Kingdom,
Ireland and Japan.
(b) Included in identifiable assets for the United States
and France are amounts attributable to discontinued
operations.
12. COMMITMENTS AND CONTINGENCIES
A. The Company is a 50% guarantor on line of credit borrowings
of its unconsolidated joint venture, ABB Pressure Systems
AB. No borrowings were outstanding at May 31, 1995 on the
$3,000 available line of credit.
-39-
12. COMMITMENTS AND CONTINGENCIES (continued)
B. Litigation
(1) As previously disclosed, Autoclave Engineers, Inc.
(Autoclave) had been named as a codefendant, with
numerous other companies, in a number of lawsuits filed
in state and federal courts in which the plaintiffs
alleged personal injury from exposure to asbestos-
related products. To date, Autoclave was named in a
total of 17 lawsuits, all of which were filed by
approximately 8,900 employees and former employees of
one shipbuilding facility.
Autoclave was dismissed from 16 of the lawsuits and is
seeking dismissal from the 17th. The dismissals were
all obtained after counsel for Autoclave met with the
lead attorney for each of the plaintiff groups and
discussed the specific Autoclave product allegedly
involved in the lawsuits. The form of dismissal was
merely dependent upon which plaintiff attorney led the
plaintiff group.
Four of the dismissals were "with prejudice" which
means that Autoclave cannot be renamed in the lawsuits.
These four lawsuits involved over 5,800 of the
plaintiffs. The other 12 dismissals were "without
prejudice" which means that Autoclave could be renamed
in the lawsuits by the plaintiffs. Management of the
Company believes that the possibility of Autoclave
being renamed in any of the lawsuits is remote.
The Company no longer sells asbestos-containing
products.
(2) The Company is involved in a number of other claims and
legal proceedings of a nature considered normal to its
business, principally product liability matters.
Certain of these cases seek damages which, if awarded,
would require sizable payments. While it is not
feasible to predict the outcome of these actions with
certainty, management of the Company, based upon
available information, believes that any liability that
may arise from these proceedings is not expected to
have a material adverse effect on the consolidated
financial condition or projected results of operations
of the Company.
C. The Company leases facilities for Unit's headquarters and
manufacturing operations and all of the Company's outside
sales offices and service centers. These leases are
operating leases, having terms ranging from three to ten
years, with options to renew for an additional one to five
years.
-40-
12. COMMITMENTS AND CONTINGENCIES (continued)
Additionally, the Company leases various office equipment
and vehicles under operating leases expiring during the next
four years.
Included in the Consolidated Statement of Income for the
fiscal years ended May 31, 1995, 1994 and 1993 was rent
expense, under all operating leases for continuing
operations, of $1,294, $1,210 and $1,134, respectively.
The following is a schedule by year of future minimum rental
payments required for continuing operations under operating
leases that have initial or remaining noncancelable lease
terms in excess of one year as of May 31, 1995:
Year Ending May 31,
1996 $ 1,041
1997 1,007
1998 906
1999 868
2000 851
Subsequent to 2000 5,458
-------
$10,131
=======
D. The Company has identified potential ground water
contamination at its Erie, PA operating location.
Consultations on this matter indicate that further analysis
and monitoring, but not the need to remediate, is probable
at this time. As of May 31, 1995, the Company has accrued
$100,000 for the probable and estimable costs of further
analysis and related legal and other costs. There is
potential for additional costs such as remediation, further
monitoring, and legal services, but such costs cannot be
estimated until the need is established through further site
analysis expected to take place in the second and third
quarters of fiscal 1996.
E. On June 22, 1995, the Company entered into a Share
Repurchase Agreement (the Agreement) with its largest
shareholder, the J & L Levinson Partnership (the
Partnership). Under the Agreement, the terms of which are
contingent upon the closing of the sale of the assets of the
Autoclave Engineers Group, the Company will repurchase
220,000 shares of the common stock of the Company from the
Partnership at a price of $11.75 per share. The
Partnership, and its general partners, have agreed not to
sell, assign, pledge, transfer, or otherwise dispose of
additional shares of common stock of the Company for a
period of 18 months following the closing of this repurchase
of shares. This Agreement would automatically terminate if
-41-
12. COMMITMENTS AND CONTINGENCIES (continued)
the Company would sell substantially all of its remaining
assets. This Agreement may be terminated by the Partnership
if the sale of AEG is not consumated by December 19, 1995;
or, by the Company if the sale is not consumated by June 21,
1996.
=================================================================
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
-42-
PART III
Item 10. Directors and Executive Officers of the Company.
DIRECTORS
The Board of Directors is divided into three classes.
Directors are generally elected for terms of three years and
until their successors are elected and have qualified. The terms
of each class expire in successive years at the Annual Meeting of
Shareholders. The terms of three directors expire at the 1995
Annual Meeting of Shareholders.
The following table sets forth the names of all directors of
the Company, their ages, their positions with the Company and the
respective years in which their terms of office expire.
Positions with Term
Name Age the Company Expires
---- --- --------------- -------
James C. Levinson(1) 67 Chairman of the Board 1995
of Directors
William F. Schilling 53 President and Chief 1997
Executive Officer
A. Wade Blackman, Jr.(3) 67 Director 1995
Michael J. Doyle 42 Director 1996
Edward P. Junker, III(1)(2) 58 Director 1997
W. Gregg Kerr(3) 67 Director 1997
Marilyn G. Levinson 65 Director 1997
Carl J. Schlemmer(1)(2) 69 Director 1995
George H. Schofield(1)(2) 65 Director 1996
Donald M. Spero(3) 55 Director 1996
------------------
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of
Directors.
(3) Member of the Audit Committee of the Board of Directors.
-43-
Mr. Levinson, currently Chairman and formerly President and
Chief Executive Officer of the Company, has served as a director
of the Company since 1961. Mr. Levinson is a general partner of
J&L Levinson Partnership.
Dr. Schilling was elected President and Chief Executive
Officer of the Company and has served as a director of the
Company since 1992. He has been President of the Autoclave
Engineers Group ("AEG"), an operating group of the Company, since
1991. For 16 years prior to that time, Dr. Schilling was with
the General Electric Company, having served as Manager-
Manufacturing, Engineering and Technology for the firm's Gas and
Turbine Division.
Mr. Blackman has served as a director of the Company since
1984. He is President of Farmington Capital Management Company,
a private investment company, and a former Managing General
Partner of American Research & Development Inc., a venture
capital firm.
Mr. Doyle has served as a director of the Company since 1984.
He has been President and Chief Executive Officer of Unit
Instruments, Inc. ("Unit"), a subsidiary of the Company which
manufactures mass-flow controllers for use in the semiconductor
industry, since 1980.
Mr. Junker has served as a director of the Company since
1990. He is Vice Chairman of PNC Bank, N.A. and PNC Bank Corp.
and Chairman and Chief Executive Officer of Marine Bank. He also
serves as a director of PNC Bank, N.A.
Mr. Kerr has served as a director of the Company since 1969.
Until December 31, 1994, he was a partner in the firm of Eckert
Seamans Cherin & Mellott, a law firm in Pittsburgh, Pennsylvania,
which serves as counsel to the Company. Mr. Kerr has continued
his association with Eckert Seamans Cherin & Mellott as Special
Counsel beginning in January 1995.
Mrs. Levinson was appointed a director of the Company in
April 1994. She is the wife of Mr. James C. Levinson and
daughter of the late founder of the Company, Mr. Fred Gasche.
She has served as a general partner of the J & L Levinson
Partnership since 1993.
Mr. Schlemmer has served as a director of the Company since
1989. He was Vice President of the General Electric Company and
General Manager of Transportation Systems Business Operations
from 1975 until his retirement in 1989. He also serves as a
director to Collins & Aikman Corp.
-44-
Mr. Schofield has served as a director of the Company since
1990. He had held various senior management positions since 1985
at Zurn Industries Inc., a diversified provider of products,
equipment and services to the waste-to-energy and water control
markets. Mr. Schofield retired as Chairman of the Board of Zurn
Industries, Inc. in 1995. Mr. Schofield is also a director of
National Fuel Gas Company and The Goodyear Tire & Rubber Co.
Mr. Spero has served as a director of the Company since 1987.
He is a founder and former President of Fusion Systems Company in
Rockville, Maryland, a supplier of ultraviolet curing systems
used on industrial production lines for drying photo-sensitive
inks, coatings and adhesives. He is currently President of Spero
Quality Strategies, a management consulting company.
See also the section entitled Executive Officers of the
Company appearing in Part I hereof.
-45-
Item 11. Executive Compensation.
The following table sets forth the annual and long-term compensation
for services in all capacities with the Company and its subsidiaries for
the fiscal years ended May 31, 1995, 1994 and 1993, of those persons who
were at May 31, 1995 (i) the chief executive officer; (ii) the other four
most highly compensated executive officers; and (iii) any executive
officers, up to a maximum of two, who departed during the year but who
would have been among the four most highly compensated officers of the
Company:
SUMMARY COMPENSATION TABLE
Annual Compensation(1)
---------------------------
Name and Principal Position Year Salary($) Bonus($)(3)
--------------------------- ---- --------- -----------
William F. Schilling 1995 $191,796 $145,725
Chief Executive Officer 1994 $181,908 $ 55,500
President & Director 1993 $171,600 0
James C. Levinson 1995 $127,795 0
Chairman & Director 1994 $135,384 0
1993 $220,000 0
Michael J. Doyle 1995 $160,937 $ 97,125
President of Unit & 1994 $135,608 $ 62,613
Director 1993 $131,886 0
Thomas C. Guelcher 1995 $131,000 $ 68,775
Vice President of Corporate 1994 $127,930 $ 27,510
Development & Chief 1993 $114,615 0
Financial Officer
John G. Sontag 1995 $110,532 $ 44,620
Corporate Treasurer, 1994 $107,692 $ 13,248
Secretary and Controller 1993 $102,307 0
Jean-Claude Pineau 1995 $134,295 $217,152
President of 1994 $149,365 $ 31,270
Burton Corblin, S.A. 1993 $139,136 0
-46-
SUMMARY COMPENSATION TABLE (continued)
Long-Term Compensation(2)
-------------------------
Awards Payouts
------------ --------
Securities
Name and Principal Underlying LTIP All Other
Position Year Options/SARs(#) Payout($) Compensation($)
------------------ ---- --------------- --------- ------------------
William F. Schilling 1995 0 0 $742,422(5)(6)
Chief Executive 1994 0 0 0
Officer, President 1993 0 0 0
& Director
James C. Levinson 1995 0 0 0
Chairman & Director 1994 0 0 0
1993 0 0 0
Michael J. Doyle 1995 0 0 $ 11,250(4)
President of Unit 1994 0 0 $ 8,820(4)
& Director 1993 0 0 $ 8,400(4)
Thomas C. Guelcher 1995 0 0 $403,776(5)
V. P. of Corporate 1994 0 0 0
Development & Chief 1993 0 0 0
Financial Officer
John G. Sontag 1995 0 0 $324,775(5)
Corporate Treasurer 1994 0 0 0
Secretary and 1993 0 0 0
Controller
Jean-Claude Pineau 1995 0 0 0
President of 1994 0 0 0
Burton Corblin, S.A. 1993 0 0 0
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000
or 10% of the total salary and bonus reported.
(2) The Company did not grant any restricted stock awards or stock
appreciation rights (SARs) during the fiscal years ended May 31,
1995, 1994 and 1993.
(3) Includes bonus payments earned by the Named Officers in the year
indicated, for services rendered in such year, which were paid in the
next subsequent year.
(4) Consists of contribution of $11,250 in 1995, $8,820 in 1994 and $8,400
in 1993 by Unit for account by Mr. Doyle pursuant to Unit's 401(k)
plan.
(5) Represents severance costs accrued in 1995 which will be payable in
the next fiscal year as part of the Company's restructuring and
transferring of all corporate activities from Erie, PA to Yorba
Linda, CA.
(6) Includes $225,000 special incentive payment.
-47-
Compensation of Directors
Directors of the Company, other than those who are employees
of the Company, currently receive $1,000 for each attended
meeting of the Board. Directors also receive $1,000 for each
committee meeting attended unless such meeting is held within one
day of a meeting of the Board of Directors, in which case
compensation is at the rate of $500 for each committee meeting.
Directors are also reimbursed for out-of-pocket expenses incurred
in connection with attendance at meetings and other services as a
director.
Beginning September 1, 1993, each director who is neither an
employee nor an officer of the Company or its subsidiaries is
automatically granted as additional compensation an option to
purchase a number of shares of the Company's Common Stock as
further described herein under "1990 Non-Employee Director Stock
Option Plan."
Stock Options
The 1987 Stock Plan (the "1987 Plan") was adopted by the
Board of Directors of the Company on June 18, 1987 and approved
by the shareholders on September 30, 1987. Prior to the 1990
Annual Meeting of Shareholders, a total of 605,000 shares of the
Company's Common Stock (subject to adjustment in certain events)
was authorized for issuance under the 1987 Plan (after giving
effect to two 10% stock dividends which occurred subsequent to
adoption of the 1987 Plan). At the 1990 Annual Meeting of
Shareholders, an amendment to the 1987 Plan was approved which
increased the number of shares of Common Stock authorized for
issuance thereunder to 1,600,000 shares. Under the 1987 Plan,
employees may be awarded incentive stock options ("ISO" or
"ISOs"), as defined in Section 422(b) (formerly Section 422A(b))
of the Internal Revenue Code of 1986, as amended (the "Code"),
and directors, officers, employees and consultants of the Company
may be granted (i) options which do not qualify as ISOs ("Non-
qualified Option" or "Non-qualified Options"), (ii) awards of
stock in the Company and (iii) opportunities to make direct
purchases of stock in the Company. ISOs and Non-qualified
Options are sometimes collectively referred to as "Options." As
of August 11, 1995, under the 1987 Plan, stock options have been
granted to the following officers in the following aggregate
amounts: Mr. Levinson, 34,007 shares; Dr. Schilling, 37,050
shares; Mr. Doyle, 33,712 shares; Mr. Guelcher, 12,550 shares;
Mr. Sontag, 22,691 shares; Mr. Pineau, 0 shares; and all
executive officers as a group, 140,010 shares. The exercise
prices of such Options range from $5.89 to $9.09 per share.
Option Grants in the Last Fiscal Year
During the fiscal year ended May 31, 1995, there were no
grants of stock options pursuant to the 1987 Plan to the Named
Officers reflected in the Summary Compensation Table above.
-48-
Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the 1987 Stock Option
Plan including (i) the number of shares purchased upon exercise of options
in 1995, (ii) the net value realized upon such exercise, (iii) the number
of unexercised options outstanding at May 31, 1995, and (iv) the value of
such unexercised options at May 31, 1995:
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND MAY 31, 1995 OPTION VALUES
Value of
Number of In-the-money
Shares Unexercised Options at
Acquired on Value Options at 5/31/95($)
Name Exercise (#) Realized($) 5/31/95 Exercisable
(2) (1) (2)
---- ----------- ----------- ----------- -------------
W. F. Schilling 0 0 37,050 $198,485
J. C. Levinson 0 0 34,007 $206,359
M. J. Doyle 0 0 33,712 $205,350
T. C. Guelcher 0 0 12,550 $ 56,475
J. G. Sontag 0 0 22,691 $142,656
J-C Pineau 4,355 $19,754 0 0
(1) Value is based on the difference between option exercise price and the
fair market value at 1995 fiscal year-end ($12.50 per share as quoted
on the NASDAQ National Market System) multiplied by the number of
shares underlying the option.
(2) All options are exercisable at May 31, 1995.
Options under the 1987 Plan to purchase an aggregate of 37,000 shares
of Common Stock were granted by the Board of Directors to all employees as
a group during the three fiscal years ended May 31, 1995, at an average per
share exercise price of $6.66. Options to purchase 50,000 shares of Common
Stock were granted by the Board of Directors under the 1987 Plan to one
director for being Chairman of a Special Study Committee of the Board of
Directors which performed oversight of a strategic planning advisory
project during the fiscal year ended May 31, 1995. At August 11, 1995,
options to purchase 1,046,545 shares remained available for grant under the
1987 Plan.
-49-
1990 Non-Employee Director Stock Option Plan
In August 1990, the Board of Directors adopted a stock option
plan (the "1990 Director Plan") for directors authorizing the
grant of options for up to 100,000 shares of Common Stock. The
1990 Director Plan was approved by the shareholders of the
Company in September 1990. Options are granted pursuant to the
1990 Director Plan only to members of the Board of Directors of
the Company who are not employees or officers of the Company or
its subsidiaries ("outside directors"). Each outside director is
automatically granted on September 1 of each year, without
further action by the Board of Directors, an option to purchase
one thousand (1,000) shares of the Company's Common Stock,
provided that such director shall have served as a director since
at least December 31 of the preceding year. The exercise price
per share of options granted under the 1990 Director Plan is 100%
of the fair market value of the Company's Common Stock on the
date the option is granted. The 1990 Director Plan requires that
options granted thereunder will expire on the date which is ten
(10) years from the date of grant.
In September 1992, the Shareholders approved two amendments
to the 1990 Director Plan. The authorized number of options was
increased to 250,000. The second amendment provided for each
outside director to be automatically granted, on September 1 of
each year beginning in 1993, an additional option to purchase a
number of shares of the Company's Common Stock equal to a
fraction, the numerator of which is $1,500 times the number of
full fiscal quarters during which such person served as a
director during the preceding 12 months, and the denominator of
which is 25% of the fair market value of the Common Stock on the
date the option is granted.
As of August 11, 1995, 68,643 options have been granted to
ten present or former directors of the Company under the 1990
Director Plan at per-share exercise prices that range from $7.00
to $8.75. Of the total, 23,643 options were granted at the
exercise price of $8.50 per share to seven directors during the
year ended May 31, 1995. One former director exercised 2,000
options in June 1995 at an exercise price of $7.25 per share.
The aggregate number of shares of Common Stock subject to
options under the 1990 Director Plan, as of August 11, 1995, is
66,643 shares.
-50-
Deferred Compensation Agreements
The Company has deferred compensation agreements with certain
key employees, including Messrs. Levinson, Schilling, Doyle and
Guelcher. Under the agreements, the Company will make fixed
monthly post-retirement payments to such employees until their
death, in amounts based upon the employees' annual salaries at
the time of retirement. Pursuant to such agreements, the
employees have agreed to refrain from competing with the Company,
to maintain the confidentiality of the Company's trade secrets
and to renounce all personal interest in patents, know-how and
other intellectual property developed by them during their
employment by the Company.
Involuntary Severance Agreements
In May 1994, the Company entered into agreements with
thirteen officers of the Company and its subsidiaries, including
the Chief Executive Officer and each of the Named Officers,
(except for Messrs. Levinson and Pineau) providing severance
benefits in the event they are terminated within two years
following a change in control of the Company. Pursuant to such
agreements, a change in control occurs (i) when any person
becomes the beneficial owner of securities of the Company
representing more than 20% of the combined voting power of the
Company's then outstanding securities; (ii) if, during any period
of two consecutive years, individuals who constitute the Board of
Directors cease to constitute a majority of the Board of
Directors; (iii) if all or substantially all of the Company's
assets, or the assets of the operating group in which the officer
is employed, are sold or transferred to a third party; (iv) if
the Company consolidates or merges with another corporation and
the Company is not the survivor; or (v) if the Company no longer
has a class of securities registered pursuant to Section 12 of
the Exchange Act. The agreements provide that if the officer is
terminated following a change in control of the Company, the
Company shall pay such officer a sum equal to two times his or
her annual salary and bonus paid during the twelve-month period
immediately preceding the termination, vest the officer in any
unvested benefits under any retirement or deferred compensation
plan in which the officer participates, and pay for a two year
continuation of such officer's health, life, disability and
accident insurance. However, the agreement provides that to the
extent such benefits would constitute an Excess Parachute Payment
under Section 280G of the Internal Revenue Code of 1986, the
severance payments payable thereunder shall be reduced.
-51-
Pension Plan
The Company maintains a defined benefit pension plan (the
"Pension Plan") covering all employees (other than employees of
Unit) who meet general eligibility requirements and who agree to
contribute 3% of their salary to the plan. To be eligible, an
employee must be 21 years old and complete 1,000 hours of
service. The benefits are computed by a formula which takes into
account an employee's years of service and a percentage of his or
her average monthly compensation. The average monthly
compensation is determined by averaging the compensation for the
employee's highest five calendar years of earnings. Compensation
covered by the Pension Plan includes salaries and annual bonuses.
An employee may retire after reaching the age of 55 and
completing ten years service; however, benefits are reduced if
such retirement precedes age 65.
The following table sets forth the estimated annual benefits
payable on normal retirement at age 65 under the Pension Plan:
Annual Average
of Highest
Five Calendar
Years of Annual Pension
Compensation Covered Years of Service at Age 65
-------------- ---------------------------------------------------
15 20 25 30 (Maximum)
-- -- -- ------------
$ 75,000 $15,187 $20,250 $25,312 $30,375
100,000 20,250 27,000 33,750 40,500
125,000 25,312 33,750 42,187 50,625
150,000 30,375 40,500 50,625 60,750
175,000 35,437 47,250 59,062 70,875
200,000 40,500 54,000 67,500 81,000
225,000 45,562 60,750 75,937 91,125
* Pensions shown in the table are straight-life annuity amounts notwith-
standing the availability of joint-and-survivorship pensions at a reduced
rate.
As of May 31, 1995, Mr. Levinson had 27 credited years of
service under the Pension Plan, Dr. Schilling had five credited
years of service, Mr. Guelcher had six credited years of service
and Mr. Sontag had 12 credited years of service. The
compensation covered by the Pension Plan for each of these
persons in fiscal 1995 was approximately equal to the applicable
amount set forth in the preceding Summary Compensation Table.
-52-
Bonus Plan
Management employees of the Company participate in the
Company's Annual Incentive Compensation Plan (the "Incentive
Compensation Plan"). Under the Incentive Compensation Plan,
management employees are eligible to receive cash payments
according to a weighted average formula based upon corporate,
group and individual performance. Such amounts are generally to
be paid within two and one-half months after the end of the
fiscal year in which they are earned. Annual administration of
the Incentive Compensation Plan, including establishment of
corporate objectives, participants, awards and payments, is based
upon recommendations made by the Company's President for approval
by the Compensation Committee and the Board of Directors. The
Summary Compensation Table set forth above includes amounts
earned under the Incentive Compensation Plan for performance
during fiscal 1995.
The Company has also from time to time paid discretionary
bonuses as deemed appropriate by the Board of Directors.
Unit Profit Sharing Plan
Unit has a qualified profit sharing 401(k) plan for
substantially all of its employees who meet certain age and
length of service requirements. Contributions equal to 50% of
the participants' contributions are made by Unit to the plan.
Such contributions by Unit shall not exceed 3% of a participant's
compensation. Additional contributions may be made by Unit at
the discretion of Unit's Board of Directors. Contributions to
the plan in fiscal 1995 were $564,000. The Summary Compensation
Table set forth above includes amounts accrued under the Unit
Profit Sharing Plan during fiscal 1995.
Incentive Plan
Key management employees of the Company are eligible to
participate in the Company's Long-Term Incentive Plan (the
"Plan") which is administered by the Compensation Committee of
the Board of Directors. Under the Plan, management employees are
eligible to receive awards in the form of cash and restricted
stock awarded pursuant to the 1987 Plan. Award levels are
determined by comparing actual economic value created (defined as
cash flow return in excess of cost of capital multiplied by
investment) to goals approved by the Compensation Committee.
Participation of key management employees in the Plan and the
proportions of cash and restricted stock to be included in awards
are subject to the discretion of the Compensation Committee. The
cash component of any award under the Plan cannot exceed one-half
of the award amount. Awards under the Plan are generally to be
paid within two and one-half months after the end of the last
fiscal year of the three-year performance period to which the
award related.
In January 1995, the Company entered into an incentive
agreement with Mr. Pineau providing for aggregate payments of
$217,152 upon consummation of the sale of Burton Corblin, S.A.
provided he was an employee on the closing date.
-53-
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of August 11, 1995, certain
information with respect to the beneficial ownership of the Company's
Common Stock by each person known to the Company to be the beneficial owner
of more than 5% of the outstanding shares of its Common Stock, by each
director, by each executive officer named below, and by all directors and
executive officers as a group:
Number of Shares Percent of
Beneficially Company's
Name Owned (1) Common Stock
---- ----------------- --------------
J&L Levinson Partnership 725,907 (2) 17.04%
700 Louisiana Street
Houston, TX 77002
The TCW Group, Inc. 358,500 8.42%
865 Figueroa Street
Los Angeles, CA 90017
The Pioneer Group 334,500 7.85%
60 State Street
Boston, MA 02109
U.S. Bancorp 288,540 6.8%
1118 West Fifth Avenue
Portland, OR 97202
Dimensional Fund Advisors, Inc. 224,526 5.27%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
James C. Levinson 176,760 (3) 4.12%
William F. Schilling 38,050 (4) *
A. Wade Blackman, Jr. 60,823 (5) 1.41%
Michael J. Doyle 121,789 (6) 2.84%
Edward P. Junker, III 9,823 (7) *
W. Gregg Kerr 16,847 (8) *
Marilyn G. Levinson 583,859 (9) 13.70%
Carl J. Schlemmer 11,923 (8) *
George H. Schofield 13,823 (8) *
Donald M. Spero 10,823 (8) *
Thomas C. Guelcher 15,650 (10) *
John G. Sontag 27,691 (11) *
Jean-Claude Pineau 5,565 *
All directors and officers as a group 1,093,426 (12) 24.22%
* Less than 1%
(1) Unless otherwise indicated, each named person has sole
voting and investment power over the shares beneficially owned by
such person.
(2) J & L Levinson Partnership is a general partnership of which
James C. Levinson and Marilyn G. Levinson are the sole general
partners.
-54-
(3) Includes 34,007 shares which Mr. Levinson has the present
right to acquire by exercise of stock options, and 142,753 shares
which Mr. Levinson may be deemed to beneficially own through his
partnership interest in the J & L Levinson Partnership. Does not
include 583,154 shares owned by Mr. Levinson's wife, Marilyn G.
Levinson, through her partnership interest in the J & L Levinson
Partnership, as to which Mr. Levinson disclaims beneficial
ownership.
(4) Includes 37,050 shares which Dr. Schilling has the right to
acquire by the exercise of stock options.
(5) Includes 60,823 shares which Mr.Blackman has the right to
acquire by the exercise of stock options.
(6) Includes 33,712 shares which Mr. Doyle has the right to
acquire by the exercise of stock options.
(7) Includes 9,823 shares which Mr. Junker has the right to
acquire by the exercise of stock options.
(8) Includes 10,823 shares which the individual has the right to
acquire by the exercise of stock options.
(9) Includes 705 shares which Mrs. Levinson has the right to
acquire by the exercise of stock options.
(10) Includes 12,550 shares which Mr. Guelcher has the right to
acquire by the exercise of stock options.
(11) Includes 22,691 shares which Mr. Sontag has the right to
acquire by the exercise of stock options.
(12) Includes 254,653 shares which the executive officers and
directors of the Company have the right to acquire by the
exercise of stock options.
-55-
Item 13. Certain Relationships and Related Transactions.
During fiscal 1995, the law firm of Eckert Seamans Cherin &
Mellot, of which Mr. Kerr, a director, was a partner until
December 31, 1994 and is currently special counsel, rendered
professional services to the Company.
The Company has loan agreements with PNC Bank, N.A. Mr.
Junker, a director of the Company, is Vice Chairman of PNC Bank.
As of May 31, 1995, the total amount outstanding on these loans
is $903,144 with maturities through 1998. At May 31, 1995, these
loans bear interest from 7.25% to 9.50% per annum. Payments are
due in monthly installments of approximately $40,000, including
interest.
During fiscal 1995, Mr. Blackman, a director of the Company,
received 50,000 stock options under the 1987 Stock Plan for
acting as Chairman of a Special Study Committee of the Board of
Directors which performed oversight of a strategic planning
advisory project.
-56-
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a) The following documents are filed as part of this
report:
Page No.
--------
(1) Financial Statements:
Report of Independent Accountants 19
Consolidated Statement of Income for
each of the three years ended
May 31, 1995, 1994 and 1993 20
Consolidated Balance Sheet at
May 31, 1995 and 1994 21-22
Consolidated Statement of Cash Flows
for each of the three years ended
May 31, 1995, 1994 and 1993 23
Consolidated Statement of Shareholders'
Equity for each of the three years
ended May 31, 1995, 1994 and 1993 24-26
Notes to Consolidated Financial
Statements 27-41
(2) Financial Statement Schedules:
Page Schedule
---- --------
S-1 II - Valuation and Qualifying
Accounts
All other schedules are omitted since they are not required,
not applicable or the information is included in the consolidated
financial statements or the notes thereto.
-57-
(3) Exhibits:
Exhibit
Number Description of Exhibit
3(a) - Articles of Incorporation, as amended (Filed
as Exhibit 3(a) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter
ended August 31, 1982, and incorporated
herein by reference).
3(b) - By-Laws, as amended (Filed herewith)
4 - See Exhibits 10(b) through 10(g).
10(a)-1* - Form of Unfunded Deferred Compensation
Agreement, as amended (Filed as Exhibit 10(a)
to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended August 31,
1983 and incorporated herein by reference).
10(b) - Agreement among the Erie County Industrial
Development Authority, Marine Bank and the
Company dated December 29, 1976, as amended,
and Supplemental Agreement, dated October 17,
1979 (Filed as Exhibit 10(b)(3)-2 to the
Company's Registration Statement No. 2-70447
and incorporated herein by reference).
10(c) - Agreement among the Erie County Industrial
Development Authority, Marine Bank and the
Company, dated as of April 14, 1980 (Filed as
Exhibit 10(b)(3)-3 to the Company's
Registration Statement No. 2-70447 and
incorporated herein by reference).
10(d) - Loan Agreement (Revolving Credit into Term
Loan) between Marine Bank, N.A. and the
Company, dated January 14, 1985 (Filed as
Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended
November 30, 1984 and incorporated herein by
reference).
10(e) - Amendment, dated as of May 29, 1987, to Loan
Agreement between the Company and Marine Bank
referred to in Exhibit 10(e) hereof (Filed as
Exhibit 10(k) to the Company's Annual Report
on Form 10-K for the fiscal year ended May
31, 1987 and incorporated herein by
reference).
-58-
10(f) - Lease between the Erie County Industrial
Development Authority and the Company, dated
April 14, 1980 (Filed as Exhibit 10(b)(4)-4
to the Company's Registration Statement No.
2-70447 and incorporated herein by refer-
ence).
10(g) - Lease between the Erie County Industrial
Development Authority and the Company, dated
June 18, 1981 (Filed as Exhibit 10(b)(4)-7 to
the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended May 16, 1981 and
incorporated herein by reference).
10(h)* - 1987 Stock Plan, as amended (Filed as Exhibit
4.1 to the Company's Registration Statement
on Form S-8 No. 33-37292 - filed on October
15, 1990 and incorporated herein by refer-
ence).
10(i)* - 1990 Non-Employee Director Stock Option Plan,
as amended (Filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-8
No. 33-58550 - filed on February 17, 1993 and
incorporated herein by reference).
10(j) - Purchase Agreement between Louis Feuillebois
and the Company relating to the Company's
investment in Societe Burton Corblin (Filed
as Exhibit 10(v) to the Company's Annual
Report on Form 10-K for the fiscal year ended
May 31, 1984 and incorporated herein by
reference).
10(k) - Amendment Agreement to Purchase Agreement
between Louis Feuillebois and the Company
referred to in Exhibit 10(j) hereof (Filed as
Exhibit 10(v) to the Company's Annual Report
on Form 10-K for the fiscal year ended May
31, 1986 and incorporated herein by
reference).
10(l) - Second Amendment Agreement, dated September
19, 1986, to Purchase Agreement between Louis
Feuillebois and the Company referred to in
Exhibit 10(j) hereof (Filed as Exhibit 10(x)
to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1987 and
incorporated herein by reference).
10(m) - Joint Venture Agreement, dated September 30,
1986, among ASEA Inc., ASEA Pressure Systems,
Inc., and the Company (Filed as Exhibit 10(y)
to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1987 and
incorporated herein by reference).
-59-
10(n)* - Form of Involuntary Severance Agreement with
certain officers of the Company or its
subsidiaries (Filed as Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1994 and incorporated
herein by reference).
10(o) - Stock Purchase Agreement dated as of January 19,
1995 by the Company and James Howden & Godfrey
Overseas Limited (Filed as Exhibit 2.1 to the
Company's Report on Form 8-K dated January 1995
and incorporated herein by reference).
10(p) - Asset Purchase Agreement dated as of August 14,
1995 between Snap-tite, Inc. and the Company
(Filed herewith).
10(q) - Share Repurchase Agreement dated as of June 22,
1995 by and among James C. Levinson, Marilyn
Gasche Levinson, the J and L Levinson Partnership
and the Company (Filed herewith).
11.1 - Computation of Average Shares Used in Computing
Earnings Per Share (Filed herewith).
22 - Subsidiaries of the Company (Filed herewith).
24 - Consent of Independent Accountants (Filed
herewith).
The Company has omitted certain agreements and
instruments defining the rights of holders of long-term debt
which does not exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish those documents to the Securities
and Exchange Commission upon request.
(b) Reports on Form 8-K: No reports on Form 8-K were filed
by the Company during the fourth quarter of the fiscal year ended
May 31, 1995.
(c) Exhibits: The Company hereby files as exhibits to this
Form 10-K those exhibits listed in Item 14(a)(3) above.
(d) Executive Compensation Plans and Arrangements:
Included under this caption are the exhibits marked by an
asterisk (*) in Item 14(a)(3) above.
(e) Financial Statement Schedules: The Company hereby
files as financial statement schedules to this Form 10-K those
financial statement schedules listed in Item 14(a)(2), above,
which are attached hereto.
-60-
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.
AUTOCLAVE ENGINEERS, INC.
(Registrant)
By /S/William F. Schilling
-------------------------
William F. Schilling, President
Date: August 28, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
/S/ William F. Schilling President and Chief August 28, 1995
------------------------ Executive Officer
William F. Schilling (Principal Executive
Officer) and Director
/S/ Thomas C. Guelcher Chief Financial August 28, 1995
------------------------ Officer (Principal)
Thomas C. Guelcher Financial Officer)
/S/ John G. Sontag Corporate Controller August 28, 1995
------------------------ (Principal Accounting
John G. Sontag Officer)
/S/ James C. Levinson Chairman of the August 28, 1995
------------------------ Board
James C. Levinson
/S/ A. Wade Blackman Director August 28, 1995
------------------------
A. Wade Blackman
-61-
/S/ Michael J. Doyle Director August 28, 1995
------------------------
Michael J. Doyle
/S/ Edward P. Junker III Director August 28, 1995
-------------------------
Edward P. Junker, III
/S/ W. Gregg Kerr Director August 28, 1995
-------------------------
W. Gregg Kerr
/S/ Marilyn G. Levinson Director August 28, 1995
-------------------------
Marilyn G. Levinson
/S/ Carl J. Schlemmer Director August 28, 1995
-------------------------
Carl J. Schlemmer
/S/ George H. Schofield Director August 28, 1995
-------------------------
George H. Schofield
/S/ Donald M. Spero Director August 28, 1995
-------------------------
Donald M. Spero
-62-
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
for the fiscal years ended 1995, 1994 and 1993
Additions
---------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
Reserve for slow moving inventory
1995 $ 287,000 $1,279,000 $ -- $1,133,000 $ 433,000
1994 114,000 451,000 -- 278,000 287,000
1993 48,000 66,000 -- -- 114,000
S-1