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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED: MAY 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER: 0-10095
UNIT INSTRUMENTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-0077406
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
22600 SAVI RANCH PARKWAY, YORBA LINDA, CALIFORNIA 92887
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 921-2640
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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 ____
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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. [_]
On July 31, 1996, 3,913,644 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 31, 1996 was $42,071,673.
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
CLASSES OUTSTANDING AT JULY 31, 1996:
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Common Stock $.15 Par Value...... 4,379,454
PART I
INTRODUCTORY NOTE
This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include [(i) the existence and development of
the Company's technical and manufacturing capabilities, (ii) anticipated
competition, (iii) potential future growth in revenues and income, (iv)
potential future decreases in costs, and (v) the need for, and availability of,
additional financing].
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These forward-
looking statements are based on assumptions that the Company will not lose a
significant customer or customers or experience increased fluctuations of demand
or rescheduling of purchase orders, that the Company's markets will continue to
grow, that the Company's products will remain accepted within their respective
markets and will not be replaced by new technology, that competitive conditions
within the Company's markets will not change materially or adversely, that the
Company will be successful in integrating the operations of its Control Systems,
Inc. subsidiary with the rest of the Company's operations, that the Company will
retain key technical and management personnel, that the Company's forecasts will
accurately anticipate market demand, and that there will be no material adverse
change in the Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions, and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking statements will be realized. In
addition, the business and operations of the Company are subject to substantial
risks which increase the uncertainty inherent in such forward-looking
statements. In light of the significant uncertainties inherent in the forward-
looking information included herein, the inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
3
ITEM 1. BUSINESS
GENERAL
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Unit Instruments, Inc. ("Unit"), a California corporation, was incorporated
in 1984 and is the successor-in-interest to Autoclave Engineers, Inc.
("Autoclave"), a Pennsylvania corporation founded in 1946. Unit commenced
operations in 1980 and was acquired by Autoclave in 1984. From 1986 to 1995, the
predecessor Company consisted of three operating segments: Burton Corblin,
Autoclave Engineers Group and Unit Instruments. Burton Corblin designed and
manufactured high pressure diaphragm and piston compressors. Autoclave Engineers
Group designed, manufactured and marketed autoclaves, compressors, valves,
fittings and related systems, components and accessories, principally for
elevated temperatures and/or pressure applications. During fiscal 1995, Burton
Corblin was sold and a formal plan for the disposition of Autoclave Engineers
Group was adopted by the Board of Directors of the predecessor Company. In the
second quarter of fiscal 1996, Autoclave Engineers Group was sold (see "Item 1.
Discontinued Operations" for a more complete narrative of the above-referenced
restructuring). At the Annual Meeting of Shareholders held in November, 1995,
the shareholders approved the change of the predecessor Company's state of
incorporation from Pennsylvania to California, pursuant to a Plan of Merger
which provided for Autoclave to be merged into its wholly-owned subsidiary, Unit
Instruments, Inc. In conjunction with this action, the corporate office in Erie,
Pennsylvania was relocated to Unit's facilities in Yorba Linda, California. As
used herein, the term "Company" shall mean and refer to Unit, its predecessor
Company and its subsidiary, as appropriate.
Following the restructuring, the Company consists of one operating segment
which designs, manufactures and markets mass flow controllers that are used to
control the flow of process gases into semiconductor wafer fabrication chambers
and other related semiconductor fabrication equipment. Wafer fabrication
involves deposition, etching and stripping processes that each require the
introduction of process gases that must be precisely controlled to ensure system
throughput and process yields. The Company's products are marketed and sold
worldwide through a direct sales force and sales representatives. Principal
marketing and service centers are maintained in the United States, Ireland,
Japan and Korea.
DISCONTINUED OPERATIONS
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During fiscal 1995, the Company sold its Burton Corblin subsidiary to James
Howden & Godfrey Overseas Limited for $9.1 million and the forgiveness of
certain intercompany debt owed to Burton Corblin. A gain on disposal of Burton
Corblin of $963,000 was recognized in fiscal 1995. Subsequent to the sale of
Burton Corblin, the Company adopted a formalized plan for the disposition of
Autoclave Engineers Group ("AEG") and, correspondingly, the results for AEG for
fiscal 1995 were accounted for as discontinued operations. In September, 1995,
the Company sold AEG to Snap-tite, Inc.
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and recorded a gain on disposal of $1,454,000. The operating results of AEG for
fiscal 1996, through the date of sale, were recorded as discontinued operations.
In conjunction with the sale of Burton Corblin and AEG, the Company also
adopted a restructuring plan that involved the merger of Autoclave Engineers,
Inc. into its wholly owned subsidiary, Unit Instruments, Inc., and the
relocation of the corporate office function to Unit Instruments' headquarters in
Yorba Linda, California. The corporate office function was transferred to Unit
Instruments in September, 1995 and the shareholders, at the Annual Shareholders'
Meeting in November, 1995, approved the merger of Autoclave Engineers, Inc. into
Unit Instruments, Inc., with Unit being the surviving corporation in such
merger. As a result of these activities, restructuring costs of $1,230,000 were
incurred during fiscal 1995 and $373,000 of costs were recorded for fiscal 1996.
SUBSEQUENT EVENT
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Subsequent to the end of fiscal 1996, the Company concluded its acquisition
of Control Systems, Inc. ("CSI"). CSI fabricates high purity gas isolation boxes
and gas panels for semiconductor manufacturers. CSI, based in Rio Rancho, New
Mexico, will be operated as a wholly-owned subsidiary of the Company. The
acquisition of CSI was accounted for as a purchase with consideration of $1.2
million and 289,000 shares of Common Stock valued at approximately $4.0 million
on the acquisition date of June 3, 1996. This acquisition is expected to result
in the recording of goodwill of approximately $4.8 million.
PRODUCTS
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The Company designs, manufactures and markets mass flow controllers
("MFCs") that are used primarily in the fabrication of integrated circuits
("ICs"). The fabrication of ICs fundamentally involves the deposition of
insulating or conducting materials onto a wafer, the etching of the wafer to
remove unprotected deposited material, and the stripping of the leftover
photoresist from the wafer after etching. This process may be repeated up to 30
or more times in the fabrication of a sophisticated IC. Each step of the wafer
fabrication process involves the introduction of various gases that must be
virtually contamination-free and accurately controlled at a precise flow rate
and volume. Following the processing of each wafer, process gases are completely
evacuated from the fabrication chamber and then re-introduced at the beginning
of the next wafer processing cycle.
Units mass flow controllers measure gas (or mass) flow by channeling a
small portion of the gas into a capillary tube that produces a thermal
differentiation. This thermal difference is measured by a sensor that feeds the
signal information to a control circuit that adjusts the internal valve to
either increase or decrease gas flow. Accuracy, speed of response, repeatability
and particle generation are the key technical criteria the industry uses in
evaluating MFCs.
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The Company primarily produces two types of MFCs: elastomer and all-metal
seal. Elastomer MFCs incorporate many of the same subassemblies as all-metal
seal products, but use less costly organic or elastomer seals that are typically
used in less process sensitive applications. All-metal MFCs incorporate metal
seals exclusively and are typically used in more demanding process control
environments. The Company recently introduced a line of digital MFCs that
supplement its extensive analog MFC product line. MFCs represented over 85% of
Units sales for fiscal years 1996, 1995 and 1994.
The Company also produces a line of pressure controllers that control the
pressure of gas as it enters the fabrication chamber, gas panels that integrate
various components into a single gas delivery system, digital power supplies and
ratio controllers. Customer service is provided through four domestic and nine
international service centers.
MARKETING AND CUSTOMERS
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The Company markets its MFCs directly to a well-defined group of original
equipment manufacturers ("OEMs") of wafer fabrication and related process
equipment. In addition, the Company markets directly to the semiconductor
manufacturers ("end users") who purchase directly from the Company for spares
and replacement MFCs. Additionally, end users can "nominate" a particular MFC
supplier when purchasing fabrication equipment from the OEMs. The Company
believes this "pull through" effect by the end users is an important element in
determining market share in the industry. OEMs accounted for approximately 75%
of total Company sales in fiscal 1996, with the balance attributable to end
users and service activities.
Unit primarily markets its products through a worldwide network of direct
sales personnel and representatives. In addition, the Company has one
strategically positioned international distributor that services certain Pacific
Rim countries. The Company has six domestic and five international sales
offices. In addition to direct sales efforts, the Company utilizes regular
participation in trade shows, frequent advertising in trade journals, and
placement of evaluation units to market its products. The Company also works
with existing and potential customers in prototype development efforts for "next
generation" equipment applications.
For fiscal year 1996, Applied Materials Inc. accounted for 29% of Units
total sales and Lam Research Corporation accounted for 19% of total sales.
Export and international sales were approximately 17%, 17% and 21% of total
sales in fiscal 1996, 1995 and 1994, respectively. However, the Company believes
that a substantial portion of domestic product shipments to OEMs are
subsequently shipped to end users outside of the United States.
6
BACKLOG
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The Company's backlog at May 31, 1996 was approximately $3.5 million,
compared to backlog at May 31, 1995 of approximately $3.3 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.
MANUFACTURING AND SUPPLIERS
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Unit designs, manufactures and assembles precision components at its own
facilities but also relies on third-party suppliers for various machined parts
and electronic 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 lead-times, 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 has augmented its quality focus over the past several
years with the goal of reducing costs and increasing customer satisfaction. In
fiscal 1995, the Company's facility in Ireland achieved registration under ISO
9002. In fiscal 1996, the Company achieved registration under ISO 9001 for its
main manufacturing facility in Yorba Linda, California. ISO 9000 registration is
an international quality standard that signifies that a manufacturer has
appropriate controls, documentation and procedures in all significant aspects of
its manufacturing operation to produce consistent high quality products. ISO
9001 is the most comprehensive level in the ISO 9000 series.
Most materials used in the Company'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 lead-time. Although the
Company seeks to limit its dependency on sole or limited sources, suppliers and
extended lead-times for raw materials, the partial or complete loss of these
suppliers, or an abrupt change in lead-times for raw material, could have a
material adverse effect on the Company's results of operations.
The Company's standard warranty period is from one to two years.
INTELLECTUAL PROPERTY
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The Company holds various U.S. and foreign patents on certain design and
functional aspects of its mass flow controllers. Although the Company believes
its patents have value and may potentially provide a competitive advantage, it
believes the success of the business depends primarily on product innovation,
technical expertise and
7
know-how of its personnel, along with other factors. The Company has developed
proprietary information relating to the design and manufacture of its products,
along with the metrology of gases used in the IC manufacturing process. There
can be no assurance that competitors will not independently develop
substantially equivalent or superior proprietary information.
COMPETITION
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The market for the Company's mass flow controllers is highly competitive.
Significant competitive factors include product quality and performance, price,
delivery lead-times, 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 factors with
the primary exception of being predominantly a one product supplier, i.e., mass
flow controllers. The Company has three major domestic competitors and two
major 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 the Company to
maintain and enhance its competitive position, significant continuing
investments in engineering, manufacturing process improvements, marketing,
customer service and support will be required for the foreseeable future.
PRODUCT DEVELOPMENT
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The Company is a leader in the development of mass flow controllers and
peripheral accessories. The Company's product development activities target
enhancing existing products and developing new products that will successfully
compete on the basis of performance, reliability and pricing. A variety of
engineering skills are required in the development of the Company's products,
including mechanical, thermal dynamics, electrical, gas metrology and sensor
technology. Certain skills that are outside the Company's core technical
competencies, or augment internal expertise, are acquired through consulting
engineers. The Company has 39 full-time employees dedicated to research and
development activities.
For fiscal 1996, 1995 and 1994, the Company spent $3,757,000, $2,871,000
and $1,792,000, respectively, for research and development activities.
INVENTORY AND WORKING CAPITAL
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The Company is required to carry significant amounts of inventory to meet
the rapid delivery requirements of its customers and to buffer against extended
lead-times for certain raw materials. The Company does not provide extended
payment terms to its customers. Returns for customer convenience are not allowed
by the Company.
8
ENVIRONMENTAL COMPLIANCE
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The Company has identified ground water and soil contamination at its
previously owned Erie, Pennsylvania operation of Autoclave Engineers Group.
These findings have been reported to the appropriate authorities and the Company
has established a reserve of $681,000 for estimated costs of further
investigation and potential remediation related to the matter. In the opinion of
management, the final outcome of this matter will not have a material adverse
effect on the Company's financial position or results of operations. See Note 13
of Notes to Consolidated Financial Statements.
The Company's facilities are subject to federal, state and local
authorities' environmental control regulations. In the opinion of management,
compliance with these laws and regulations has not had, and will not have, a
material effect upon the capital expenditures, earnings and competitive position
of the Company.
EMPLOYEES
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At May 31, 1996, the Company and its subsidiaries had 448 employees, of
which 339 were in manufacturing and service support, 37 in marketing, sales and
applications engineering, 39 in research, development and engineering and 33 in
finance and administration. As of the end of fiscal 1996, the Company had 389
employees in the United States, 35 in Europe and 24 in the Pacific Rim. None of
the Companys employees are represented by a union or other collective bargaining
agent, and the Company considers its relations with its employees to be good.
EXECUTIVE OFFICERS
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The executive officers of Unit Instruments, their ages and position with the
Company as of May 31, 1996 are as follows:
NAME AGE POSITION
- ---- --- --------
Michael J. Doyle 43 President and Chief Executive Officer
John E. Lamirande 40 Vice President, Manufacturing
John W. Leggat 53 Vice President, Sales and Marketing
Gary N. Patten 49 Vice President, Chief Financial Officer
and Secretary
Michael Saloka 57 Vice President, International
Kathryn S. Tricoli 49 Vice President, Human Resources
Nelson Urdaneta 46 Vice President, Engineering
9
Mr. Doyle has been President and Chief Executive Officer of the Company
since September, 1995. Formerly, he was President of Unit from 1984 to 1995
while it was a wholly-owned subsidiary of Autoclave Engineers, Inc. Mr. Doyle
also served as a director of Autoclave Engineers, Inc. from 1984 until its
merger into Unit in September, 1995. Mr. Doyle co-founded Unit Instruments in
1980.
Mr. Lamirande has served as Vice President, Manufacturing since June, 1995.
From September, 1994 to June, 1995, he served as Director of Quality. From 1984
to September 1994, Mr. Lamirande was employed by Baxter International, a
diversified medical products manufacturer, as Director of Operations in the
Stratus Division and as Director of Quality Assurance in the MicroScan division.
Mr. Leggat has served as Vice President, Sales and Marketing since June,
1995. From 1993 to 1995, he was President of Imaging Technology, a systems
integrator of bar code printers, and, from 1992 to 1993, he was co-founder of
Market Focus, a market research firm. From 1981 to 1992, he was a marketing
executive with Data Products Corporation, a manufacturer of printer products.
Mr. Patten has served as Vice President, Chief Financial Officer and
Secretary since June, 1995. From 1986 to 1995, he was Vice President, Chief
Financial Officer and Secretary of Optical Radiation Corporation, a diversified
manufacturer of medical devices, eyeware and industrial products.
Mr. Saloka has served as Vice President, International since June, 1995.
From 1987 to 1995, he served as Vice President, Finance while it was a wholly-
owned subsidiary of Autoclave Engineers, Inc. From 1983 to 1987, he was Director
of Internal Audit at Knott's Berry Farm, a theme park.
Ms. Tricoli has served as Vice President, Human Resources since April,
1993. From 1989 to 1993, she was Director of Human Resources at Kwikset, a
division of Black & Decker, which manufactures door hardware and locks.
Mr. Urdaneta has served as Vice President, Engineering since April, 1993.
From 1991 to 1993, he was Director of Research and Development at Baxter
Healthcare, a division of Baxter International. Prior to that, he served as Vice
President, Engineering for Racal Dana, an instrumentation manufacturer, from
1974 to 1991.
ITEM 2. PROPERTIES
The Company maintains its headquarters and principal manufacturing facility
in a leased 82,000 square foot building in Yorba Linda, California. The lease on
this facility expires in 2006 and provides for a 5-year renewal option. The
Company owns a 7,000 square foot manufacturing facility in Dublin, Ireland;
leases a 2,700 square foot manufacturing facility in Tokyo, Japan; has four
leased service centers in San Jose,
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California, Tempe, Arizona, Dallas and Austin, Texas. Internationally, Unit has
leased service centers in Kyusha Island and Osaka, Japan; Sungnam, Korea and
Munich, Germany.
The Company believes that the existing facilities are generally suitable
and adequate for its business.
ITEM 3. LEGAL PROCEEDINGS
The predecessor to the Company, Autoclave Engineers, Inc., is a named co-
defendant, along with numerous other companies, in several lawsuits in state and
federal courts in which plaintiffs allege personal injury from exposure to
asbestos-related products. Autoclave manufactured marine steam valves that may
have contained some minor quantities of asbestos, but ceased the production of
these products several years ago. The Company has product liability insurance
and has been generally successful in being dismissed from these types of
actions. To date, the Company has not incurred any financial liability related
to asbestos litigation. While it is not feasible to predict the outcome of
pending or future asbestos-related claims, management of the Company, based upon
available information and the settlement history of similar litigation involving
the Company, believes that any liability that may arise from these actions will
not have a material adverse effect on the consolidated financial condition or
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 REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
COMMON EQUITY MARKET DATA
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The Common Stock of Unit Instruments, 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 UNII. 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
------ ---- --- --------------
1995 First Quarter $ 9.250 $ 7.375 $0.060
Second Quarter 9.500 8.500 0.060
Third Quarter 10.000 8.000 0.060
Fourth Quarter 13.625 8.750 0.060
1996 First Quarter $17.625 $11.500 $0.060
Second Quarter 19.250 10.625 0.060
Third Quarter 15.250 11.625 --
Fourth Quarter 15.500 11.875 --
The Company had 351 holders of record of its Common Stock on May 31, 1996.
The Company suspended its regular quarterly dividends in fiscal 1996 and does
not anticipate resuming cash dividend payments in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(amounts in thousands, except per share data)
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YEARS ENDED MAY 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------
Net sales $65,568 $48,256 $33,141 $23,965 $21,500
Income (loss) from continuing
operations before cumulative
effect of accounting change 4,778 705 (212) (1,610) (696)
Discontinued operations:
Income, net 750 1,334 1,186 1,715 1,971
Gain on disposal, net 1,454 963 -- -- --
Net income 6,982 3,002 1,198 105 1,275
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Earnings per share:
Income (loss) from continuing
operations before cumulative
effect of accounting change $ 1.09 $ 0.16 $ (0.05) $ (0.38) $ (0.16)
Discontinued operations 0.50 0.53 0.28 0.40 0.46
Net income 1.59 0.69 0.28 0.02 0.30
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Cash dividends per share $ 0.06 $ 0.24 $ 0.24 $ 0.24 $ 0.30
Average shares used in computing
earnings per share 4,393 4,340 4,268 4,233 4,243
MAY 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Working capital $26,724 $27,573 $25,128 $26,210 $26,605
Total assets 52,780 51,902 58,250 61,823 61,292
Long-term debt -- 453 952 1,417 3,152
Shareholders' equity 43,224 38,478 37,721 38,087 38,894
- --------------------------------------------------------------------------------------------
The selected financial data should be read with the related consolidated
financial statements and notes thereto, included herein.
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 year 1992 has been restated
to reflect this change in accounting principle. The impact on net earnings was
a decrease of $235,000, or $.06 per share in 1992.
13
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 of $224,000, or $.05 per share, 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
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes related thereto.
RESULTS OF OPERATIONS
OPERATING PERCENTAGES
-------------------------
1996 1995 1994
------ ------ -------
Net sales 100.0% 100.0% 100.0%
Cost of net sales 60.2% 62.2% 62.9%
Selling, general and administrative 22.2% 27.6% 30.1%
Restructuring costs .6% 2.5% --
Research and development 5.7% 5.9% 5.4%
Income from operations 11.2% 1.7% 1.6%
Income (loss) from continuing operations 7.3% 1.5% (0.6%)
Discontinued operations 3.4% 4.8% 3.6%
Net income 10.6% 6.2% 3.6%
1996 COMPARED TO 1995
- ---------------------
Sales from continuing operations for fiscal 1996 increased 36% to $65.6
million from $48.3 million the prior fiscal year. This increase in sales is
primarily the result of a strong semiconductor equipment market upturn that
began during 1993. Sales of the Company's newest model metal seal MFCs grew
disproportionately, while sales for older model metal seal product and elastomer
MFCs grew at a much more modest rate. Identifiable international sales
increased 38%, but the Company believes that a significant portion of sales made
to domestic original equipment manufacturers are subsequently delivered to
foreign semiconductor manufacturers.
Cost of sales decreased to 60.2% of net sales in 1996, compared to 62.2% in
1995, primarily because of greater manufacturing overhead absorption and higher
productivity. Partially offsetting this lower cost of sales percentage for the
fiscal year was higher material costs because of product mix and higher costs
recorded by the Company's offshore manufacturing facilities.
14
Selling, general and administrative expenses decreased as a percent of sales
to 22.2% in 1996 from 27.6% in the prior fiscal year. This decrease is
primarily attributable to the increased sales levels and to the closure of the
former corporate office in Erie, Pennsylvania and the relocation of the
corporate office function to Unit Instruments' headquarters in Yorba Linda,
California. The Company believes that, on an annualized basis, it will save in
excess of $1 million from the reduction of corporate office expenses.
The Company concluded its restructuring activities during the second quarter
of fiscal 1996 with the sale of the Autoclave Engineers Group and the relocation
of the corporate office function. Restructuring charges of $373,000 were
recorded during the year, as compared to $1,230,000 recorded for fiscal 1995.
No additional restructuring costs were incurred subsequent to the second quarter
and none are anticipated in the immediate future.
Research, development and engineering expenses increased 31% for fiscal 1996,
but declined marginally as a percent of sales to 5.7% from 5.9% in 1995. The
Company decided during the year to lessen its dependency on outside consulting
engineers and augment its internal resources. This resulted in headcount
increasing to 39 individuals dedicated to research, development and engineering
at the end of fiscal 1996 from 24 at the end of the prior fiscal year. The
Company believes that the continued timely development of new products and
enhancements to existing products is essential to maintaining and increasing its
competitive position. Accordingly, the Company anticipates that such expenses
will continue to increase in absolute dollar terms and potentially as a percent
of sales.
Interest income increased substantially in fiscal 1996 because of much higher
average cash balances which resulted from the sale of two operating units of the
Company. Interest expense decreased as cash resources generated from the sale
of Autoclave Engineers Group in September, 1995 were used to repay all domestic
bank borrowings.
Income from continuing operations before income taxes for fiscal 1996
increased to $7.8 million from $.9 million for the prior fiscal year. This
increase is attributable to several factors, including higher sales levels,
lower cost of sales, lower restructuring expenses and lower administrative costs
resulting from the relocation of the corporate office.
Income taxes on continuing operations were provided for at a 38.7% rate for
fiscal 1996, which is significantly higher than the prior rate of 24.8%. The
fiscal 1995 tax rate was favorably impacted by modest pre-tax income and certain
effects of the restructuring activities.
Income from continuing operations advanced to $4.8 million, or $1.09 per
share, for the current fiscal year from $.7 million, or $0.16 per share in the
prior fiscal year. Income from discontinued operations resulted from Autoclave
Engineers Group's
15
performance through the date of sale in September, 1995. A net gain of $1.5
million was recorded on the sale of Autoclave Engineers Group. For the prior
fiscal year, a net gain of $1.0 million was recorded on the sale of Burton
Corblin. Net income for fiscal 1996 was $7.0 million, or $1.59 per share, which
compares favorably to fiscal 1995 results of $3.0 million, or $0.69 per share.
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 offerings by the Company and its competitors,
competitive pricing pressures, new technologies, product cost changes and the
acquisition of new businesses with different cost and expense structures.
Specifically, the Company is heavily dependent on one industrial segment, the
semiconductor equipment market, and any significant change in this segments
activity level would have a direct impact on the Company's performance.
1995 COMPARED TO 1994
- ----------------------
Sales from continuing operations increased 46% to $48.3 million 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 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 higher average selling prices resulted
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 62.2% from the
prior years 62.9%. This decrease was attributable to marginally lower overhead
at the Company's main manufacturing facility in Yorba Linda, California which
was partially offset by higher expenses at the Company's operation in Japan.
Selling, general and administrative expenses decreased as a percent of sales
to 27.6% from 30.1% in fiscal 1994. This decrease primarily resulted from
operating leverage achieved by the 46% sales increase for the fiscal year.
Restructuring costs of $1.2 million were incurred during fiscal 1995
principally for severance charges related to the Company's planned sale of the
Autoclave Engineers Group and closure of the Erie corporate office.
Research and development expenses increased 60% over the prior year and
increased as a percent of sales to 5.9% in fiscal 1995 from 5.4% for fiscal
1994. These higher expenses represent additional staffing and increased
development activity directed toward product enhancements and new products.
16
Interest income increased to $230,000 in 1995 compared to $66,000 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 $339,000 from $448,000 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 non-
deductible 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 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 $162,000 and a decrease on discontinued
operations of $25,000.
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 retained certain product warranty exposures and a
commitment for the realization of accounts receivable. A reserve of $225,000
was established in 1995 for these contingencies. Subsequently, in fiscal 1996,
it was determined that an additional $159,000 was required to resolve the
product warranties and realization of accounts receivable.
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 yearend reporting purposes. The sale of AEG was completed on September 22,
1995 and the Company recorded a net gain on the disposal of $1.5 million.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During fiscal 1996, the Company's financial condition improved based upon
strong operating performance and the sale of an operating unit. Cash and
equivalents, plus short-term investments, totaled approximately $14.6 million at
fiscal 1996 yearend compared to $9.4 million at May 31, 1995.
17
OPERATING ACTIVITIES
--------------------
In fiscal 1996, the Company generated approximately $3.9 million in net
cash from operating activities primarily as a result of $7.0 million in net
income and $2.0 million in depreciation and amortization, offset by an
increase of $5.1 million in net operating assets and liabilities. Accounts
receivable and inventory increased approximately $1.9 million, due
primarily to higher sales, while accounts payable decreased $1.2 million,
primarily because of the liquidation of restructuring related liabilities.
Correspondingly, accrued liabilities decreased $1.5 million as certain
restructuring related liabilities were paid.
INVESTING ACTIVITIES
--------------------
The Company received approximately $12.5 million in net cash proceeds
and a 5-year interest bearing note for $.8 million from the sale of
Autoclave Engineers Group during fiscal 1996. Capital expenditures were
$5.2 million for the year and were primarily directed at increasing the
Company's manufacturing capacity and worldwide service capabilities. At May
31, 1996, the Company had no material commitments for capital expenditures.
The Company estimates that it will spend approximately $2.0 million on
capital expenditures in fiscal 1997.
In June, 1996, the Company acquired Control Systems, Inc. for a
combination of common stock, cash and the assumption of liabilities. As
such, this acquisition will require the use of cash resources during fiscal
1997. In addition, the Company continues to evaluate potential
acquisitions, joint ventures and strategic alliances that would complement
the Company's existing businesses and product lines. Any such undertaking
during fiscal 1997 could require the use of the Company's cash resources.
FINANCING ACTIVITIES
--------------------
As part of the restructuring commenced by the Company in fiscal 1995,
the Company repurchased 220,000 shares of Common Stock in fiscal 1996 for a
total consideration of $2.6 million and discontinued the payment of regular
quarterly dividends, subsequent to the dividend paid for the second
quarter. Lastly, borrowings were reduced $1.8 million through funds
generated by the sale of the Company's Autoclave Engineers Group.
During fiscal 1996, the Company established an unsecured $5.0 million
line of credit to support the issuance of letters of credit and borrowings.
At May 31, 1996, the Company had $3.0 million available against this line
and had committed $2.0 million to support standby letters of credit.
18
The Company expects that current cash balances, available lines of
credit and anticipated cash flow from operations will be adequate to meet
its near-term financing needs.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Unit Instruments, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index appearing under Item 14(a)(1) and (2) on page 48, present
fairly, in all material respects, the financial position of Unit Instruments,
Inc. and its subsidiaries at May 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1996, 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
Costa Mesa, California
July 12, 1996
20
UNIT INSTRUMENTS, INC.
CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 AND 1995
(amounts in thousands)
1996 1995
------- -------
ASSETS
Current assets:
Cash and cash equivalents $14,572 $ 4,465
Short-term investments, at cost -- 4,919
Accounts receivable, less reserves of
$135 in 1996 and $110 in 1995 10,179 9,543
Inventories (Note 4) 9,709 8,440
Prepaid expenses and other 191 381
Deferred taxes 1,042 1,188
Net assets of discontinued operations
held for sale -- 11,072
------- -------
Total current assets 35,693 40,008
Fixed assets, net (Note 5) 10,223 6,824
Goodwill, net of accumulated amortization
of $1,723 in 1996 and $1,571 in 1995 4,338 4,490
Deferred taxes 249 --
Other assets 2,277 580
------- -------
Total $52,780 $51,902
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,969 $ 3,139
Accrued compensation and benefits 1,786 1,560
Income taxes (Note 7) 1,141 672
Current installments on term debt
(Note 6) 1,845 3,156
Other current liabilities 2,228 3,908
------- -------
Total current liabilities 8,969 12,435
Long-term debt (Note 6) -- 453
Deferred income taxes (Note 7) -- 77
Other long-term liabilities and
deferred credits 587 459
Total 9,556 13,424
------- -------
Commitments and contingencies
(Notes 8, 12 and 13)
Shareholders' equity:
Common stock, $.15 par value; authorized
shares: 12,000,000; issued
shares: 4,090,146 in 1996 and 4,416,193
in 1995 613 662
Additional paid-in capital 19,247 20,413
Retained earnings 23,673 18,171
Foreign currency translation
adjustment (309) (252)
------- -------
43,224 38,994
Less treasury stock, at cost: 173,388
shares in 1995 -- (516)
------- -------
Total shareholders' equity 43,224 38,478
------- -------
$52,780 $51,902
======= =======
The accompanying notes are an integral part of the
consolidated financial statements.
21
UNIT INSTRUMENTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED MAY 31, 1996, 1995, 1994
(amounts in thousands, except share data)
1996 1995 1994
---------- ---------- ----------
Net sales $ 65,568 $ 48,256 $ 33,141
Operating costs and expenses:
Cost of goods sold 39,501 30,014 20,840
Selling, general and administrative 14,587 13,317 9,983
Restructuring costs 373 1,230 --
Research, development and engineering 3,757 2,871 1,792
---------- ---------- ----------
Operating income 7,350 824 526
Interest income 690 230 66
Interest expense (112) (339) (448)
Other income (expense) (132) 222 70
---------- ---------- ----------
Income from continuing operations before
income taxes, and cumulative effect
of accounting change 7,796 937 214
Provision for income taxes 3,018 232 426
---------- ---------- ----------
Income (loss) from continuing
operations before cumulative effect of
accounting change 4,778 705 (212)
Discontinued operations (Note 2):
Income, net of income tax provision
of $521, $1,119 and $684 in 1996,
1995 and 1994, respectively 750 1,334 1,186
Gains on disposals, including tax
provision of $1,011 in 1996 and tax
benefit of $171 in 1995 1,454 963 --
Cumulative effect of change in
accounting for certain overhead costs,
net of income tax provision of $125 -- -- 224
---------- ---------- ----------
Net income $ 6,982 $ 3,002 $ 1,198
========== ========== ==========
Per common share:
Income (loss) from continuing
operations before accounting change $ 1.09 $ 0.16 $ (0.05)
Discontinued operations:
Income 0.17 0.31 0.28
Gain on disposal 0.33 0.22 --
Cumulative effect of accounting change -- -- 0.05
---------- ---------- ----------
Net income $1.59 $0.69 $ 0.28
========== ========== ==========
Average shares used in computing
earnings per share 4,393,230 4,340,384 4,267,533
========== ========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
22
UNIT INSTRUMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MAY 31, 1996, 1995, 1994
(amounts in thousands)
1996 1995 1994
--------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,982 $ 3,002 $ 1,198
Adjustments to reconcile net income to net cash
provided from operating activities:
Cumulative effect of accounting change, net -- -- (224)
Depreciation and amortization 2,023 2,850 2,906
Deferred income taxes (180) (828) (96)
Equity interests -- (758) 103
Changes in assets and liabilities, net of effect of businesses sold:
Accounts receivable (636) (1,634) (2,050)
Inventories (1,269) (2,817) (478)
Prepaid expenses and other 249 312 (626)
Accounts payable and accrued compensation and benefits (944) 4,232 2,188
Income taxes 469 283 (113)
Other current liabilities (1,421) (34) (50)
Loss on disposal of property, plant and equipment -- 15 73
Gain on sale of business (1,454) (963) --
Other 126 188 63
------- ------- -------
Net cash flow provided from operating activities 3,945 3,848 2,894
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,182) (4,548) (2,363)
Proceeds from sale of property, plant and equipment -- 256 99
Proceeds from sale of business, net of cash 12,526 4,456 --
Note receivable from sale of business (750) --
Change in short-term investments 4,919 (4,998) 6,611
Issuance of note receivable (1,025) -- --
Other (67) 89 (210)
------- ------- -------
Net cash provided by (used in) investing activities 10,421 (4,745) 4,137
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (453) (459) (431)
Change in short-term borrowings, net (1,311) 556 (3,467)
Cash dividends paid (517) (1,014) (1,011)
Purchase of company common stock (2,585) -- --
Stock option exercise, related tax benefit and other 664 141 7
------- ------- -------
Net cash (used in) financing activities (4,202) (776) (4,902)
Effect of exchange rate changes on cash and cash equivalents: (57) 419 (317)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 10,107 (1,254) 1,812
Cash and cash equivalents at beginning of year 4,465 5,719 3,907
------- ------- -------
Cash and cash equivalents at end of year $14,572 $ 4,465 $ 5,719
------- ------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 112 $ 339 $ 269
Income taxes paid $ 4,493 $ 2,168 $ 1,441
The accompanying notes are an integral part of the
consolidated financial statements.
23
UNIT INSTRUMENTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED MAY 31, 1996, 1995, 1994
(amounts in thousands)
FOREIGN
COMMON COMMON ADDITIONAL CURRENCY
STOCK STOCK PAID-IN RETAINED TRANSLATION TREASURY
SHARES ISSUED CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------ ------ ---------- -------- ----------- -------- --------
Balance at May 31, 1993 4,416 $662 $20,079 $15,996 $ 1,929 $(579) $38,087
Net income 1,198 1,198
Dividends (1,011) (1,011)
Exercise of stock options 3 3 6
Tax benefit from stock options 1 1
Foreign currency translation (560) (560)
----- ---- ------- ------- ------- ----- -------
Balance at May 31, 1994 4,416 662 20,083 16,183 1,369 (576) 37,721
Net income 3,002 3,002
Dividends (1,014) (1,014)
Exercise of stock options 100 94 194
Purchase of common stock (34) (34)
Tax benefit from stock options 55 55
Issuance of warrants for
common stock 175 175
Relief of foreign currency (1,626) (1,626)
translation
Foreign currency translation 5 5
----- ---- ------- ------- ------- ----- -------
Balance at May 31, 1995 4,416 662 20,413 18,171 (252) (516) 38,478
Net income 6,982 $ 6,982
Dividends (258) (258)
Exercise of stock options 67 10 386 396
Purchase of common stock (220) (33) (1,330) (1,222) (2,585)
Tax benefit from stock options 268 268
Retirement of treasury stock (173) (26) (490) 516 --
Foreign currency translation (57) (57)
----- ---- ------- ------- ------- ----- -------
Balance at May 31, 1996 4,090 $613 $19,247 $23,673 $ (309) $ -- $43,224
===== ==== ======= ======= ======= ===== =======
The accompanying notes are an integral part of the
consolidated financial statements.
24
UNIT INSTRUMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
- --------
The Company primarily designs, manufactures and markets mass flow
controllers that are used to control and measure the flow of process gases in
the fabrication of semiconductor wafers.
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of Unit
Instruments, Inc. and its wholly-owned subsidiaries ("the Company"). Significant
inter-company accounts and transactions have been eliminated.
FISCAL YEAR
- -----------
For the current year, the Company's fiscal year ended on the Saturday
closest to May 31st. For clarity of presentation, the current year will be
reported as ending on May 31, 1996. The current method of ending the fiscal year
on the Saturday closest to May 31st is expected to be continued. Fiscal years
prior to this reporting year, that are presented in or referenced by this
report, ended on May 31st of the respective years.
CASH AND CASH EQUIVALENTS
- -------------------------
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
INVENTORY VALUATION
- -------------------
Inventories are valued at lower of cost (first-in, first-out) or market.
FIXED ASSETS, DEPRECIATION AND AMORTIZATION
- -------------------------------------------
The Company computes depreciation using the straight line method over the
estimated useful lives of the related assets or the remaining lives of the
related leases (three to ten years), whichever is shorter. Repairs and
maintenance are charged to expense as incurred. Major renewals and betterments,
which extend the useful life of the related asset, are capitalized. Asset
values are recorded at original cost.
25
RESEARCH AND DEVELOPMENT
- ------------------------
Research and development costs are expensed in the period incurred.
WARRANTY RESERVE
- ----------------
The Company generally provides customers with a limited one to two-year
warranty. The liability for future warranty claims reflects the estimated
future cost of warranty repairs on products previously sold. The Company
recognizes the estimated cost of warranty obligations at the time the related
products are sold and periodically evaluates and adjusts the warranty reserve to
the extent actual warranty experience varies from original estimates.
INTANGIBLE ASSETS
- -----------------
Intangible assets are recorded at cost and amortized over their estimated
useful lives using the straight-line method. Goodwill represents the excess of
cost over the fair market value of assets acquired and is amortized over forty
years using the straight-line method. The Company regularly reviews the
realizability of goodwill and recognizes, on a current basis, any material
impairment in the carrying value of goodwill.
FOREIGN CURRENCY TRANSLATION
- ----------------------------
The accounts of foreign subsidiaries are measured using local currencies as
the functional currency. Assets and liabilities are translated from such foreign
currencies into U.S. dollars at period-end exchange rates and income and expense
accounts are translated at average monthly exchange rates. Net gain or loss
resulting from the translations are excluded from the income and loss accounts
and applied to a separate component of shareholders' equity. Gains and losses
from foreign currency transactions are insignificant and are included in
selling, general and administrative expenses.
REVENUE RECOGNITION
- -------------------
Product sales are recorded at the time of shipment and service revenues are
recorded when the related services are performed.
INCOME TAXES
- ------------
The Company accounts for income taxes using the asset and liability method in
accordance with Financial Accounting Standards No. 109 "Accounting for Income
Taxes."
26
EARNINGS PER SHARE
- ------------------
Earnings per share is computed based on weighted average number of common and
common share equivalent shares outstanding during each year. Stock options and
warrants that have a dilutive effect are considered common stock equivalents for
purposes of earnings per share. Fully diluted net income per share is not
materially different from primary net income per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
- -----------------------------------
The Company values financial instruments as required by Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Values of Financial
Instruments" (SFAS 107). The carrying amounts of cash and cash equivalents,
accounts and other receivables, accounts payable, accrued liabilities and debt
approximate fair value.
IMPAIRMENT OF LONG-LIVED ASSETS
- -------------------------------
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
(SFAS 121), establishes accounting standards for the impairment of long-lived
assets to be reviewed whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Under the provisions of
SFAS 121, companies are required to review the recoverability of long-lived
assets and intangible assets by comparing cash flows on an undiscounted basis to
the net book value of the assets. In the event the projected and discounted
cash flows are less than the net book value of the assets, the carrying values
of the assets are written down to their fair value, less cost to sell. In
addition, SFAS 121 requires that assets to be disposed of be measured at the
lower of cost or fair value, less cost to sell. The Company will adopt SFAS 121
during fiscal year 1997. The adoption of SFAS 121 is not expected to have a
material effect upon the Company's financial position or results of operations.
ACCOUNTING FOR STOCK-BASED COMPENSATION
- ---------------------------------------
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), which establishes financial accounting and reporting
standards for stock-based employee compensation. Under SFAS 123, companies are
encouraged, but not required, to adopt a method of accounting for stock
compensation awards based upon the estimated fair value at the date the
options/awards are granted as determined through the use of a pricing model (the
"Fair Value Method"). Companies continuing to account for such awards in
accordance with the existing guidance of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), will have to disclose,
in the Notes to Financial Statements, the proforma impact on net income and net
income per share had the Company utilized the Fair Value Method. The Company
anticipates accounting for future stock compensation awards in accordance with
APB 25 with the appropriate footnote disclosure required under SFAS 123.
27
USE OF ESTIMATES
- ----------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the respective reporting
periods. Actual results could differ from those estimates.
RECLASSIFICATIONS
- -----------------
Certain prior year items have been reclassified to conform with the current
year presentation.
2. DISCONTINUED OPERATIONS AND RESTRUCTURING CHARGES
On September 22, 1995, the Company sold the assets of its Autoclave Engineers
Group ("AEG") located in Erie, Pennsylvania to Snap-tite, Inc. for consideration
of $16,250,000, consisting of $15,500,000 of cash and an interest bearing five-
year promissory note for $750,000. The assets purchased by Snap-tite, Inc.
included all the outstanding stock of Autoclave Engineers Canada Ltd. and
Autoclave Engineers, France, which were wholly-owned subsidiaries of Autoclave.
The sale of AEG resulted in an after tax gain of $1,454,000, and income from AEG
operations during fiscal year 1996 resulted in an after tax net income of
$750,000.
Subsequent to the sale of AEG, Autoclave Engineers, Inc., the former parent of
Unit Instruments, Inc. ("Unit"), merged into Unit resulting in Unit becoming the
surviving corporation and reporting Company.
On January 19, 1995, the Company sold its Burton Corblin compressor operation
in the United States and France to James Howden & Godfrey Overseas Limited
(Howden) for cash of $9,064,000, the forgiveness of $2,584,000 in debt owed by
Autoclave Engineers, Inc. to Burton Corblin S.A. (BCSA) and the forgiveness of
$3,122,000 of inter-company debt owed to BCSA. As a result of this transaction,
Howden acquired all outstanding stock of BCSA from the Company. The transaction
resulted in an after tax gain of $963,000 after provision for certain estimated
costs.
The results of operations of AEG and BCSA have been reported as discontinued
operations in the accompanying Consolidated Statements of Income for all three
years presented thereon. The net sales and income for discontinued operations
for the years ended May 31, 1996, 1995 and 1994 are presented below.
28
1996 1995 1994
---------- ----------- -----------
Net sales
AEG $8,341,000 $28,683,000 $26,887,000
BC -- 19,792,000 19,878,000
Net income
AEG 750,000 753,000 88,000
BC -- 581,000 1,098,000
With the disposition of AEG and BC, the continuing operations of the
Company represent a single business segment. The identifiable assets of the
discontinued segments at May 31, 1995 and 1994 are:
1995 1994
----------- -----------
Autoclave Products (primarily U.S.) $23,608,000 $24,328,000
Compressors (primarily France) -- 23,978,000
In conjunction with the divestiture of Burton Corblin and Autoclave Engineers
Group, the predecessor Company, Autoclave Engineers, Inc., established a plan of
restructuring that involved the relocation of the corporate office function from
Erie, Pennsylvania to the headquarters of Unit Instruments in Yorba Linda,
California. In fiscal 1995, a restructuring reserve of $1,230,000 was
established for severance benefits for six corporate officers and staff. In the
first half of fiscal 1996, an additional restructuring charge of $373,000 was
recorded for professional fees and severance. All severance payments were made
during the second quarter of fiscal 1996 with the relocation of the corporate
office. The Company does not anticipate any additional charges associated with
this restructuring activity.
3. SHORT TERM INVESTMENTS
There are no short term investments at May 31, 1996. Short term investments
for May 31, 1995 were comprised of the following:
May 31,1995
----------------------------------------
Face Market
Value Cost Value
------------ ----------- -----------
Municipal bonds $1,600 ,000 $1,600,000 $1,600,000
Commercial paper 3,000,000 2,906,000 2,967,000
Money market account 413,000 413,000 413,000
----------- ---------- ----------
Total $ 5,013,000 $4,919,000 $4,980,000
=========== ========== ==========
29
4. INVENTORIES
Inventories at May 31, 1996 and 1995 consist of the following:
1996 1995
----------- -----------
Raw materials $6,514,000 $5,326,000
Work in process 2,313,000 1,896,000
Finished goods 882,000 1,218,000
---------- ----------
Total $9,709,000 $8,440,000
========== ==========
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 of $224,000, or $0.05 per share, is included in
the net income and net income per share for the fiscal year ended May 31, 1994.
5. FIXED ASSETS
Fixed assets are comprised of the following:
May 31, 1996 1995
---------------------------------------------------------------------
Buildings and improvements $ 5,096,000 $ 2,346,000
Machinery and equipment 11,732,000 9,338,000
Construction-in-progress 662,000 880,000
----------- -----------
17,490,000 12,564,000
Accumulated depreciation and (7,267,000) (5,740,000)
amortization ----------- -----------
Total $10,223,000 $ 6,824,000
=========== ===========
6. DEBT
The Company has a revolving credit line with a bank which provides for an
overall credit limit of $5,000,000 and expires in January, 1997. Interest is
payable monthly at prime or an Offshore Rate plus 1.50%. The credit facility
provides for the issuance of letters of credit not to exceed $5,000,000. At May
31, 1996, there were no amounts borrowed under this agreement, but a $2,000,000
standby letter of credit was issued to support a $1,837,000 loan from a Japanese
bank to Unit Instruments, Japan. The revolving credit agreement contains
certain financial covenants that the Company was in compliance with at May 31,
1996. Term debt is comprised of the following:
30
May 31, 1996 1995
- ---------------------------------------------------------------------
Bank term loan, payable in monthly
installments of $40,000, including
interest, at rates of 8.5% and 9.5%
through 1997 $ -- $ 812,000
Bank term loan, payable quarterly and
renewable at interest rates from 1.6%
to 2.0%, secured by a standby letter
of credit 1,837,000 2,697,000
Capital lease obligation with weighted
average interest rates of 7.25% due
from 1995 through 1999 -- 100,000
Other 8,000 --
----------- -----------
1,845,000 3,609,000
Less current portion (1,845,000) (3,156,000)
----------- -----------
Long-term debt $ $ 453,000
=========== ===========
7. INCOME TAXES
The composition of the provision for income taxes included in the consolidated
statement of income was as follows:
1996 1995 1994
---------- ---------- ----------
Continuing operations:
Current provision:
Federal $2,911,000 $ 859,000 $ 287,000
---------- ---------- ----------
State 211,000 225,000 61,000
Foreign 76,000 75,000 42,000
---------- ---------- ----------
3,198,000 1,159,000 390,000
Deferred
Federal (149,000) (745,000) 36,000
State (31,000) (182,000) --
---------- ---------- ----------
Total provision - continuing operations $3,018,000 $ 232,000 $ 426,000
========== ========== ==========
Discontinued operations:
Current 1,835,000 1,097,000 708,000
Deferred (303,000) (149,000) (24,000)
Total provision - discontinued
operations $1,532,000 $ 948,000 $ 684,000
========== ========== ==========
Total tax provision $4,550,000 $1,180,000 $1,110,000
========== ========== ==========
31
A reconciliation of the federal statutory rate to the effective rate on income
from continuing operations is as follows:
1996 1995 1994
---------- ---------- --------
Provision at federal statutory rate $2,651,000 $ 319,000 $ 73,000
State income tax net of federal benefit 140,000 26,000 (24,000)
Goodwill amortization 52,000 52,000 52,000
Effect of utilized foreign tax credits (79,000) -- --
Foreign tax rate (lower) or higher than
U. S. rate 175,000 (19,000) 64,000
Adjustment of prior year accruals -- (276,000) 120,000
Change in valuation allowance -- 105,000 --
SFAS 109 adjustment -- -- 162,000
Other 79,000 25,000 (21,000)
---------- ---------- --------
Total adjustments 367,000 (87,000) 353,000
---------- ---------- --------
Total provision for income taxes $3,018,000 $ 232,000 $426,000
========== ========== ========
Temporary differences arising from continuing operations between the financial
bases and tax bases of assets and liabilities result in deferred income taxes.
Deferred tax assets and liabilities consist of the following at May 31, 1996 and
1995:
1996 1995
----------- -----------
Deferred tax assets:
Inventory valuation $ 301,000 $ 317,000
Deferred compensation 343,000 202,000
Accrued expenses 471,000 364,000
Reserves 373,000 --
Restructuring accruals -- 631,000
Foreign tax credit carryforward 615,000 555,000
---------- ----------
Total gross deferred tax assets 2,103,000 2,069,000
Valuation allowance (615,000) (555,000)
Deferred tax liabilities:
Tax over book depreciation (197,000) (344,000)
Other -- (59,000)
---------- ----------
Total deferred tax liabilities (197,000) (403,000)
---------- ----------
Net deferred tax asset $1,291,000 $1,111,000
========== ==========
A valuation allowance has been provided against deferred tax assets related to
the utilization of foreign tax credits. At May 31, 1996, the Company had foreign
tax credit carryforwards available for federal income tax purposes. The amount
of these carryforwards and the year in which they expire are:
32
Federal Foreign Foreign
Tax Credits Operating Losses
--------------- ----------------
1997 $ 4,000 $ 231,000
1998 302,000 114,000
1999 -- 270,000
2000 -- 139,000
2001 309,000 337,000
-------- ----------
TOTAL $615,000 $1,091,000
======== ==========
The domestic and foreign components of income (loss) before provision for
income taxes for continuing operations are as follows:
1996 1995 1994
----------- -------- --------
US $8,087,000 $660,000 $181,000
Foreign (291,000) 277,000 33,000
---------- -------- --------
Total $7,796,000 $937,000 $214,000
---------- -------- --------
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 $1,140,000 at May 31, 1996. 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 prospectively adopted 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 taxes
for continuing operations in fiscal 1994 by approximately $162,000 and reduced
the provision for income tax for discontinued operations by $25,000.
8. RETIREMENT PLANS
The Company 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
33
plan. Additional contributions may be made by Unit at the discretion of Unit's
Board of Directors. Contributions to the plan were $486,000 in 1996, $564,000 in
1995, and $327,000 in 1994.
In addition, the Company maintains a supplemental retirement plan for one
current and five former executives with retirement benefits based upon certain
percentages of the employees salaries. At May 31, 1996 and 1995, the Company's
estimated liability for the plan was $572,000 and $634,000, respectively.
9. STOCK OPTION PLANS
The Company maintains a 1987 Stock Plan ("1987 Plan"), under which key
employees may be awarded both non-qualified and qualified stock options not to
exceed 1,600,000 shares of the Company's Common Stock. Under this plan, options
are granted at a price not less than the fair market value at the grant date and
generally become exercisable in five equal annual installments beginning one
year after the grant date. Options expire ten years after the grant date. Of the
total shares authorized for issuance, 1,003,610 shares have been granted and
216,264 shares have been exercised.
The Company also maintains a 1990 Non-Employee Director Stock Option Plan
("1990 Plan") under which each non-employee director receives an automatic grant
of options on September 1st of each year. The aggregate options available under
the 1990 Plan is not to exceed 250,000 shares of the Company's Common Stock.
Under this plan, options are granted at the fair market price on the grant date
and are completely vested. Options expire ten years after the grant date. Of the
total shares authorized, 86,563 shares have been granted and no shares have been
exercised.
The following is a summary of all stock option activity for fiscal 1996, 1995
and 1994:
Number of Shares Price Per Share
----------------- ---------------
May 31, 1993 414,827 $ 4.95 - $11.02
Options canceled or expired (1,705) $8.00
Exercised (1,000) $5.89
Granted 24,000 $8.00
-------
May 31, 1994 436,122 $ 4.95 - $11.02
Options canceled or expired (6,775) $ 8.00 - $10.38
Exercised (31,815) $ 4.95 - $8.00
Granted 73,643 $ 8.50 - $11.25
-------
May 31, 1995 471,175 $ 4.95 - $11.25
Exercised (67,341) $ 4.95 - $8.00
Granted 470,075 $12.63 - $15.38
-------
May 31, 1996 873,909 $ 4.95 - $15.38
=======
34
At May 31, 1996, there were 366,856 shares exercisable under the 1987 Plan at
option prices ranging from $4.95 to $11.25 and 86,563 shares exercisable under
the 1990 Plan at option prices ranging from $7.00 to $15.38. As options have
been granted at the fair market value, no accounting recognition is given to
stock options until they are exercised, at which time the proceeds are credited
to the capital accounts.
10. EXPORT SALES AND CONCENTRATION OF CREDIT RISK
Export sales amounted to $3,720,000, $2,139,000 and $1,452,000, or 6%, 4% and
4% of total sales, in 1996, 1995 and 1994, respectively.
The Company generates revenues principally from sales of product to customers
in the semiconductor industry. Accordingly, the Company's sales and trade
receivables are concentrated principally in this industry. During 1996, 1995 and
1994, sales to one customer totaled $19,863,000, $16,672,000 and $9,769,000,
respectively, while sales to another customer totaled $12,909,000, $8,194,000
and $4,808,000, respectively, for the same three fiscal years.
11. INDUSTRY SEGMENT INFORMATION
The Company operates in one industry segment: the design, manufacture and
distribution of mass flow controllers that are used to measure the flow of
process gases in the fabrication of semiconductor wafers. Information about the
Company's operations, by geographic locations, is shown below:
Year Ended May 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
Net sales:
United States $58,063 $42,366 $27,737
Europe 4,323 3,372 3,214
Asia 3,182 2,518 2,190
------- ------- -------
Total $65,568 $48,256 $33,141
======= ======= =======
Income from operations:
United States $ 7,460 $ 650 $ 376
Europe 133 380 346
Asia (243) (206) (196)
------- ------- -------
Total $ 7,350 $ 824 $ 526
======= ======= =======
Identifiable assets:
United States $45,165 $45,663 $30,919
Europe 4,134 3,404 24,855
Asia 3,481 2,835 2,476
------- ------- -------
Total $52,780 $51,902 $58,250
======= ======= =======
35
12. OPERATING LEASES
The Company leases manufacturing and office facilities at various locations
under non-cancelable operating leases expiring through 2006.
Future minimum lease payments under non-cancelable operating leases (with
initial lease terms in excess of one year) as of May 31, 1996 are as follows:
Year ending May 31:
-------------------
1996 $1,160,000
1997 1,128,000
1998 1,098,000
1999 1,014,000
2000 1,009,000
Thereafter 4,913,000
Total rent expense for operating leases from continuing operations was
$1,410,000, $1,294,000 and $1,210,000 for 1996, 1995 and 1994, respectively.
13. CONTINGENCIES
The Company has identified ground water and soil contamination at its
previously owned Erie, Pennsylvania operation of Autoclave Engineers Group.
These findings have been reported to the appropriate authorities and the Company
has established a reserve of $681,000 for estimated costs of further
investigation and potential remediation related to this matter. In the opinion
of management, the final outcome of this matter will not have a material adverse
effect on the Company's financial position or results of operations.
The predecessor to the Company, Autoclave Engineers, Inc., is a named co-
defendant, along with numerous other companies, in several lawsuits in state and
federal courts in which plaintiffs allege personal injury from exposure to
asbestos-related products. Autoclave manufactured marine steam valves that may
have contained some minor quantities of asbestos, but ceased the production of
these products several years ago. The Company has product liability insurance
and has been generally successful in being dismissed from these types of
actions. To date, the Company has not incurred any financial liability related
to asbestos litigation. While it is not feasible to predict the outcome of
pending or future asbestos-related claims, management of the Company, based upon
available information and the settlement history of similar litigation involving
the Company, believes that any liability that may arise from these actions will
not have a material adverse effect on the consolidated financial condition or
results of operations of the Company.
The Company has certain other actions pending that arise out of the ordinary
course of business.
36
In the opinion of management, the ultimate resolution of the these matters
will not have a material adverse impact on the Company's financial position or
results of operations.
14. RELATED PARTY TRANSACTIONS
The Company entered into a Share Repurchase Agreement ("the Agreement") in
fiscal 1995 with its largest shareholder, the J & L Levinson Partnership ("the
Partnership"), of which James C. Levinson and Marilyn G. Levinson are the sole
partners. Mr. Levinson is the Chairman of the Company's Board of Directors and
Mrs. Levinson was a member of the Board of Directors until her resignation in
September, 1995. Under the Agreement, the terms of which were contingent upon
the closing of the sale of the assets of the Autoclave Engineers Group, the
Company repurchased 220,000 shares of the Common Stock of the Company from the
Partnership at a price of $11.75 per share, or approximately $2.6 million, on
September 22, 1995.
15. SUBSEQUENT EVENT (UNAUDITED)
The Company acquired Control Systems, Inc. ("CSI") on June 3, 1996 in exchange
for $1.2 million and 289,000 shares of Company stock valued at $3,977,000. The
acquisition will be accounted for by the purchase method. Accordingly, the
results of operations of CSI will be included with those of the Company for
periods subsequent to the date of acquisition. CSI had had revenues of
$10,388,000 and net earnings of $589,000 for the calendar year ended December
31, 1995. CSI will convert to the Company's fiscal year.
The unaudited proforma condensed balance sheet of the Company and CSI as of
May 31, 1996, after giving effect to certain proforma adjustments, is as
follows:
1996
-----------
ASSETS
Current assets $37,799,000
Property, plant and equipment 11,317,000
Other assets 1,512,000
Goodwill 9,128,000
-----------
$59,756,000
===========
LIABILITIES AND EQUITY
Current liabilities $11,628,000
Other liabilities 927,000
Shareholders' equity 47,201,000
-----------
$59,756,000
===========
37
The unaudited proforma combined results of operations of the Company and CSI
for the year ended May 31, 1996, after giving effect for certain proforma
adjustments, is as follows:
Net sales $76,370,000
Income from continuing 4,641,000
operations
Income per share from $ 0.99
continuing operations
The foregoing unaudited proforma results reflect one year's amortization of
goodwill resulting from the acquisition of CSI. The Company has determined that
the goodwill has an estimated 12-year life and, for purposes of the proforma
adjustments, a 12-year amortization period has been used.
38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
--------------- --- ---------------------
A. Wade Blackman Jr. (2) 68 President, Farmington Capital Management
Corporation
George Boyadjieff (2) 56 President, Chief Executive Officer, Varco
International
Michael J. Doyle 43 President, Chief Executive Officer, Unit
Instruments
James C. Levinson (1) 68 Private Investor
Edward Rogas, Jr. (1) (2) 56 Vice President, Teradyne
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
Mr. Blackman has served as a director of the Company since 1995, and as a
director of the Company's former parent, Autoclave Engineers, Inc., from 1984
until its merger into the Company in September, 1995. He is President of
Farmington Capital Management Corporation, a private investment company.
Mr. Boyadjieff has been a director of the Company since 1995. He is President
and Chief Executive Officer of Varco International, Inc. ("Varco"), a leading
manufacturer of products used in the international oil and gas well industry.
Mr. Boyadjieff has been associated with Varco for 25 years and has served in a
variety of technical and executive positions. He is also a director of Varco.
Mr. Doyle has been President and Chief Executive Officer of the Company since
September, 1995. Formerly, he was President of Unit from 1984 to 1995 while it
was a wholly-owned subsidiary of Autoclave Engineers, Inc. Mr. Doyle also served
as a director of Autoclave Engineers, Inc. from 1984 until its merger into Unit
in September, 1995. Mr. Doyle co-founded Unit Instruments in 1980.
39
Mr. Levinson is the current Chairman of the Board. He has served as a director
of the Company since 1995, and as a director of the Companys former parent,
Autoclave Engineers, Inc., from 1961 until its merger into the Company in
September, 1995. From 1966 to 1992, Mr. Levinson was President and Chief
Executive Officer of Autoclave Engineers, Inc.
Mr. Rogas has been a director of the Company since 1995. He is Vice President
of Teradyne, Inc. ("Teradyne"), a leading manufacturer of semiconductor,
circuit-board and telecommunications test systems. Mr. Rogas has been associated
with Teradyne since 1976 in various management and executive positions.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for the
fiscal years ended May 31, 1996, 1995 and 1994 paid by the Company and/or its
predecessor, Autoclave Engineers, Inc., (i) to each individual serving as the
chief executive officer of the Company and/or its predecessor during fiscal 1996
and (ii) the other four most highly compensated executive officers of the
Company and/or its predecessor during fiscal 1996 (collectively, the "Named
Executive Officers"). Mr. William F. Schilling, who is listed in the table,
served as President and Chief Executive Officer of the Company's predecessor,
Autoclave Engineers, Inc., until his resignation, September 27, 1995, upon
consummation of the sale by the Company of the Autoclave Engineers Group.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------- ------------------------- ------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) (1) ($) ($) (#) ($) ($) (2)
- ---------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
MICHAEL J. DOYLE 1996 180,417 96,000 -- -- 150,000 133,785 5,280
PRESIDENT AND CHIEF 1995 160,937 105,273 -- -- -- -- 11,250
EXECUTIVE OFFICER 1994 135,608 62,613 -- -- -- -- 8,820
GARY N. PATTEN 1996 138,451 54,000 -- -- 42,220 -- 1,904
VICE PRESIDENT, CHIEF 1995 -- -- -- -- -- -- --
FINANCIAL OFFICER AND 1994 -- -- -- -- -- -- --
SECRETARY
JOHN W. LEGGAT 1996 138,451 54,000 -- -- 35,110 -- 1,940
VICE PRESIDENT, SALES 1995 -- -- -- -- -- -- --
AND MARKETING 1994 -- -- -- -- -- -- --
NELSON URDANETA 1996 134,998 48,600 -- -- 63,330 47,250 4,110
VICE PRESIDENT, 1995 134,662 60,410 -- -- -- -- 4,040
ENGINEERING 1994 122,000 -- -- -- -- -- 1,410
MICHAEL SALOKA 1996 130,000 46,800 -- -- 42,220 45,500 4,260
VICE PRESIDENT, 1995 120,256 58,170 -- -- -- -- 3,610
INTERNATIONAL 1994 101,243 -- -- -- -- -- 3,040
40
WILLIAM F. SCHILLING (4) 1996 65,150 26,060 -- -- -- -- --
FORMER, PRESIDENT AND 1995 191,796 145,725 -- -- -- -- 742,422 (3)
CHIEF FINANCIAL OFFICER 1994 181,908 55,500 -- -- -- -- --
AUTOCLAVE ENGINEER, INC.
(1) Represents bonuses earned by the Named Executive in the year indicated;
which were paid in the subsequent year.
(2) Represents Company contributions under the 401(K) Plan.
(3) Represents severance costs and a special $225,000 incentive.
(4) Mr. Schilling resigned as President and Chief Executive Officer effective
September 29, 1995.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information for the Named
Executive Officers with respect to grants by the Company and/or its predecessor,
Autoclave Engineers, Inc., during fiscal 1996 of stock options pursuant to the
Company's 1987 Stock Plan to purchase Common Stock of the Company. The 1987
Stock Plan was originally established by the Company's predecessor, Autoclave
Engineers, Inc., and was assumed by the Company in connection with the
reorganization.
OPTION GRANTS TABLE
INDIVIDUAL GRANTS (1)
-------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM (3)
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------------------------
NAME (#) YEAR (2) ($/SH) DATE 5%($) 10%($)
- ---- --------------- ---------- ----------- ---------- --------------- ----------------
Michael J. Doyle 150,000 33.2% $12.63 3/16/2005 $1,190,000 $3,020,000
Gary N. Patten 42,220 9.3% $12.63 3/16/2005 $ 335,000 $ 850,000
John W. Leggat 35,110 7.8% $12.63 3/16/2005 $ 279,000 $ 707,000
Nelson Urdaneta 63,330 14.0% $12.63 3/16/2005 $ 503,000 $1,275,000
Michael Saloka 42,220 9.3% $12.63 3/16/2005 $ 335,000 $ 850,000
William F. Schilling -- -- -- -- -- --
(1) These stock options were granted pursuant to the 1987 Stock Plan. All
stock options have ten year terms and vest at the rate of 20% of the total
shares on each of the first five anniversaries of the date of grant, except
for stock options granted to Mr. Urdaneta which vested 50% on the date of
grant; 20% which vest on the first and second anniversaries of the date of
grant, and 10% which vest on the third anniversary of the date of grant.
(2) An aggregate of 452,155 stock options to purchase shares of Common Stock,
pursuant to the 1987 Stock Plan, were granted to employees during fiscal
1996.
(3) Potential realizable value is based on an assumption that the stock price
of Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten year option term. One
share of stock purchased at $12.63 in 1996 would yield profits of $7.94 per
share at 5% appreciation over ten years, or $20.13 per share at 10%
appreciation over the same period. These numbers are calculated based on
the requirements promulgated by the Securities and Exchange Commission and
do not reflect the Company's estimate of future stock price.
41
DEFERRED COMPENSATION AGREEMENTS
The Company has deferred compensation agreements with one current and one
former employee, Messrs. Doyle and Levinson, respectively. Under the agreements,
the Company will make fixed monthly post-retirement payments to each employee
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. Mr. Levinson began receiving payments under the deferred
compensation program in October, 1995, upon his retirement from active service
with the Company.
LONG TERM INCENTIVE PLAN
The Company's predecessor, Autoclave Engineers, Inc., maintained a Long Term
Incentive Plan ("LTI") for each of its operating subsidiaries, of which Unit
Instruments was a subsidiary at that time. Upon the reorganization, the LTI Plan
for the divested operating subsidiaries was terminated without payment of any
earned incentive. Subsequently, the Board of Directors and management determined
that the LTI Plan was inappropriate for Unit Instruments as an independent,
publicly-held, high technology company. Accordingly, the Company proposed to the
four (4) LTI participants that the Plan be voluntarily terminated effective
August 30, 1995 and the participants agreed to such termination. In
consideration for this voluntary termination, the Company agreed to pay each
participant all of their earned incentive in cash instead of 50% to 70% in one
(1) year restricted Common Stock. Mr. Doyle was one of the participants in the
LTI Plan and his earned incentive, through the date of termination, was
$133,785, as is reflected in the "Summary Compensation Table."
INVOLUNTARY SEVERANCE AGREEMENTS
In September, 1995, the Company entered into agreements with seven officers of
the Company, inclusively, Messrs. Doyle, Patten, Leggat, Urdaneta, Saloka,
Lamirande and Ms. Tricoli, providing severance benefits in the event they are
terminated within three (3) 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 are sold or
transferred to a third party; (iv) if the Company consolidates or merges with
another company 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
42
Company, the Company shall pay such officer a sum equal to three 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 three year continuation of such officer's health, life, disability and
accident insurance. However, the agreements provide 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.
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 fiscal 1996, (ii)
the net value realized upon such exercise, (iii) the number of unexercised
options outstanding at May 31, 1996 and (iv) the value of such unexercised
options at May 31, 1996:
AGGREGATED OPTION/EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES VALUE YEAR END (#) AT FISCAL YEAR END (1) ($)
ACQUIRED ON REALIZED ------------------------------- ----------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ------------ --------- ----------- ------------- ----------- -------------
Michael J. Doyle -- -- 33,712 150,000 $264,329 $243,000
Gary N. Patten -- -- -- 42,220 -- $ 68,396
John W. Leggat -- -- -- 35,110 -- $ 56,878
Nelson Urdaneta -- -- 31,665 31,665 $ 51,297 $ 51,297
Michael Saloka 1,149 $9,965 1,705 42,220 $ 10,625 $ 68,396
William F. Schilling -- -- 37,050 -- $263,323 --
(1) Market value of underlying securities at year-end minus the exercise price
multiplied by the number of shares.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors establishes the
compensation plans and polices and the specific compensation levels for
executive officers and administers the 1987 Stock Plan.
43
COMPENSATION POLICIES
There are three major elements of the Company's executive
compensation program: base salaries, incentive bonuses and long-term stock
options.
The Compensation Committee establishes the salaries of executive
officers primarily by reference to data contained in the American
Electronics Association (AEA) survey of executive compensation in the
electronics industry. The Committee also cross-references this survey data
with salary surveys for the Southern California area. The Committee
establishes base salaries that are within the range of salaries for persons
holding positions of similar responsibility at comparably-sized technology
companies. In addition, the Committee considers factors such as relative
Company performance, the individual's past performance, his or her future
potential and the individual's experience and ability as judged by the
Committee. For fiscal 1997, the Compensation Committee has approved a base
salary merit pooling averaging approximately 4 1/2% for executive officers.
Annual bonuses for executive officers are primarily based on the
achievement of performance targets set forth in the Company's operating
plan for the year. The annual cash bonus for executives, other than the
Chief Executive Officer, Michael J. Doyle, is based on operating profits in
relation to the Company's operating plan and a factor based on Mr. Doyle's
subjective judgment of the executive's performance. Bonus payments to
executive officers, other than Mr. Doyle's, averaged approximately 35% of
such officers' base salaries for fiscal 1996. The Committee believes this
to be commensurate with overall performance against the objectives utilized
in the executive bonus program.
The Compensation Committee believes that stock options are an
effective long-term compensation device in that they serve to align the
interests of the executive officers with those of the shareholders and
motivate officers to remain in the Companys employ. The predecessor
Company's Compensation Committee granted stock options to the executives of
Unit at the time of the transition of Unit to that of a independent,
publicly-held company. The option awards were based, in part, on the
recommendations of an outside executive compensation consulting firm; the
recognition that no stock options had been awarded to Unit senior managers
since 1991 and that two executives had been recruited to join the Company
in fiscal 1996 with the commitment of competitive stock option awards.
While the current Compensation Committee did not participate in the
decision concerning the granting of these stock option awards, the current
Committee approves of these stock option grants.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Doyle's base salary was increased from $153,000 to $200,000 in
September, 1995 upon the reorganization. This increase was based upon
survey
44
data and range recommendations from an outside executive compensation
consulting firm for chief executive officers of high technology public
companies. Mr. Doyle was previously President of the Company when it was a
subsidiary of the predecessor Company.
Mr. Doyle is entitled to an annual cash bonus, which for fiscal
1996, was based entirely on the Company's operating profit, adjusted for
restructuring related charges and other non-recurring items. Mr. Doyle's
target bonus rate was 40% of his annual base salary with such amount
adjusted up or down depending on actual adjusted operating profits. For
fiscal 1996, the Company achieved an adjusted operating profit that was
approximately 104% of the target operating profit. Based on this level of
performance, Mr. Doyle received a bonus of $96,000 for fiscal 1996,
representing approximately 120% of his bonus target and approximately 48%
of his base salary.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
As a result of legislation adopted in 1993, the Internal Revenue
Code now limits the federal income tax deductibility of compensation paid
to the Company's Chief Executive Officer and to each of the other four most
highly compensated executive officers. For this purpose, compensation can
include, in addition to cash compensation, the difference between the
exercise price of stock options and the value of the underlying stock on
the date of exercise. Under this legislation, the Company may deduct
compensation with respect to any of these individuals only to the extent
that during any fiscal year such compensation does not exceed $1 million or
does not meet certain other conditions (such as shareholder approval).
Based on the Company's current compensation plans and policies, and
proposed regulations interpreting the new legislation, the Company and the
Committee believe that, for the near future, there is little risk that the
Company will lose any significant tax deduction for executive compensation.
James C. Levinson Edward Rogas, Jr.
of the Compensation Committee of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of James C. Levinson and Edward
Rogas, Jr. who are non-employee directors with no interlocking relationships as
defined by the Securities and Exchange Commission.
45
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of July 1, 1996 by (i) each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Company's Common Stock, (ii) each of the Company's
directors, (iii) each of the executive officers named in the Summary
Compensation Table, and (iv) all directors and executive officers of the Company
as a group:
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED (1) (2) COMPANYS COMMON STOCK
- ---- -------------------------- ---------------------
J&L Levinson Partnership........ 505,907(3) 11.6%
700 Louisiana Street
Houston, TX 77002
Marilyn G. Levinson............. 409,683(4) 9.4%
100 Anchor Drive, #460
Key Largo, FL 33037
The Pioneer Group............... 334,500 7.6%
60 State Street
Boston, MA 02109
U. S. Bancorp................... 268,540 6.1%
1118 West Fifth Avenue
Portland, OR 97202
The Killen Group, Inc........... 244,050 5.6%
1189 Lancaster Avenue
Berwyn, PA 19312
Dimensional Fund Advisors,
Inc............................ 225,626 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
James C. Levinson............... 133,496(5) 3.0%
A. Wade Blackman, Jr............ 63,383(6) 1.4%
Michael J. Doyle................ 151,789(7) 3.5%
George Boyadjieff............... 0 --
Edward Rogas, Jr................ 0 --
John W. Leggat.................. 9,522(8) *
Gary N. Patten.................. 21,444(9) *
Michael Saloka.................. 11,298(10) *
William F. Schilling............ 37,050(11) *
Nelson Urdaneta................. 44,331(12) *
All directors and officers
as a group..................... 708,213(13) 16.2%
(13 persons at July 1, 1996)
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
of July 1, 1996 are deemed to be beneficially owned by the person holding
such option or warrant for computing the percentage ownership of such
person, but are not treated as outstanding for computing the percentage of
any other person. Applicable percentages of beneficial ownership are based
on 4,379,454 shares of Common Stock outstanding on July 1, 1996.
(2) Information is as of December 31, 1995, and is based on Schedule 13Gs filed
with the Securities and Exchange Commission by the respective entities.
(3) J&L Levinson Partnership is a general partnership of which James C.
Levinson and Marilyn G. Levinson are the sole general partners.
46
(4) Includes 3,265 shares which Mrs. Levinson has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996 and 406,418 shares which Mrs.
Levinson may be deemed to beneficially own through her partnership interest
in the J&L Levinson Partnership.
(5) Includes 34,007 shares which Mr. Levinson has the right to acquire by
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996, and 99,489 shares which Mr.
Levinson may be deemed to beneficially own through his partnership interest
in the J&L Levinson Partnership. Does not include 406,418 shares owned by
Mr. Levinsons wife, Marilyn G. Levinson, through her partnership interest
in the J&L Levinson Partnership, as to which Mr. Levinson disclaims
beneficial ownership.
(6) Includes 63,383 shares which Mr. Blackman has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(7) Includes 63,712 shares which Mr. Doyle has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(8) Includes 7,022 shares which Mr. Leggat has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(9) Includes 8,444 shares which Mr. Patten has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(10) Includes 10,149 shares which Mr. Saloka has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(11) Includes 37,050 shares which Mr. Schilling has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(12) Includes 44,331 shares which Mr. Urdaneta has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within 60 days of July 1, 1996.
(13) Includes shares which the current executive officers and directors have the
right to acquire by the exercise of stock options that are currently
exercisable or will become exercisable within 60 days of July 1, 1996.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the Securities and Exchange Commission (the
"SEC") and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent shareholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during the fiscal year ended May 31, 1996, James E. Levinson did not timely
report on Form 4 the sale of 220,000 shares of Common Stock. Other than this
delayed filing, again based solely on its review of copies of such forms
received by it or written representations from certain reporting persons, the
Company believes that all other filing requirements applicable to its officers,
directors and ten percent shareholders were fulfilled.
47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a Share Repurchase Agreement ("the
Agreement") in fiscal 1995 with its largest shareholder, the J & L Levinson
Partnership ("the Partnership"), of which James C. Levinson and Marilyn G.
Levinson are the sole partners. Mr. Levinson is the Chairman of the Company's
Board of Directors and Mrs. Levinson was a member of the Board of Directors
until her resignation in September, 1995. Under the Agreement, the terms of
which were contingent upon the closing of the sale of the assets of the
Autoclave Engineers Group, the Company repurchased 220,000 shares of the Common
Stock of the Company from the Partnership at a price of $11.75 per share, or
approximately $2.6 million, on September 22, 1995.
During fiscal 1996, the law firm of Eckert Seamans Cherin & Mellot
("Eckert Seamans") rendered professional service to the Company. Mr. W. Gregg
Kerr, a director of the Company until his resignation in September, 1995, is a
former partner of Eckert Seamans and is currently special counsel for Eckert
Seamans.
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 on Form 10-K.
1. Financial Statements. The following consolidated financial statements of
--------------------
Unit Instruments, Inc. and subsidiaries and the Report of Independent
Accountants are filed as part of this Report on Form 10-K and should be read in
conjunction with the related notes thereto, included herein.
Page
----
Report of Independent Accountants 20
Consolidated Balance Sheets - May 31, 1996 and 1995 21
Consolidated Statements of Income - Years Ended 22
May 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years Ended 23
May 31, 1996, 1995 and 1994
48
Page
----
Consolidated Statements of Shareholders' Equity - 24
Years Ended May 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements 25
2. Financial Statement Schedules. All schedules are omitted because they are
-----------------------------
not required, are not applicable, or the information is included in the
consolidated financial statements or notes hereto.
3. Exhibits. The following Exhibits are filed as part of, or incorporated by
--------
reference into, this Report on Form 10-K.
EXHIBIT NUMBER: DESCRIPTION:
- -------------- ------------
3.1 Registrant's Articles of Incorporation
3.2 Registrant's By-laws
4.3 Specimen Stock Certificate
10.1 Form of Unfunded Deferred Compensation Agreement, as amended.
(Incorporated by reference to Exhibit 10(a) of Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1983.)
10.2 1987 Stock Plan, as amended. (Incorporated by reference to
Exhibit 4.1 of Registrant's Registration Statement on Form S-8
(No. 33-37292) filed on October 15, 1990.)
10.3 1990 Non-Employee Director Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 4.1 of Registrant's
Registration Statement on Form S-8 (No. 33-58550) filed on
February 17, 1993.)
10.4 Stock Purchase Agreement dated as of January 19, 1995 by the
Company and James Howden & Godfrey Overseas Limited.
(Incorporated by reference to Exhibit 2.1 to Registrant's
Current Report on Form 8-K dated January 19, 1995.)
10.5 Asset Purchase Agreement dated as of August 14, 1995 by the
Company and Snap-tite, Inc. (Incorporated by reference to
Exhibit 10(p) to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 31, 1995.)
10.6 Share Repurchase Agreement dated as of June 22, 1995 by and
among James C. Levinson, Marilyn Gasche Levinson, the J & L
Levinson Partnership and the Company. (Incorporated by
reference to Exhibit 10(q) to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1995.)
49
10.7 Plan of Merger merging Autoclave Engineers, Inc. (a
Pennsylvania Corporation) with and into Unit Instruments, Inc.
(a California corporation). (Incorporated by reference to
Exhibit 2.1 to Registrant's Current Report on Form 8-K dated
November 22, 1995.)
10.8 Business Loan Agreement dated January 23, 1996 by the Company
and Bank of America, NTSA.
10.9 Form of Involuntary Severance Agreement with certain officers
of the Company.
10.10 Agreement and Plan of Reorganization and Merger dated April
23, 1996 among the Company, CSI Acquisition Corporation and
Control Systems, Inc.
11.1 Statement regarding computation of earnings per share.
22.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants.
27 Financial Data Schedule.
(b) Reports on Form 8-K
There was one Current Report on Form 8-K filed by the Registrant
during the fourth fiscal quarter ended May 31, 1996. This Current Report stated
that the Company had reached agreement to acquire all outstanding shares of
Control Systems, Inc. ("CSI"), a privately held corporation based in Rio Rancho,
New Mexico. CSI fabricates gas isolation boxes and gas panels for semiconductor
manufacturers. Consideration in this acquisition was stated to be 275,000
shares of the Registrant's Common Stock and $1.2 million. The acquisition was to
be accounted for under purchase accounting.
(c) Exhibits
The exhibits required by this Item are listed under Item 14 (a)(3).
(d) Financial Statement Schedules
The financial statement schedules required by this Item are listed under
[Item 14(a)(2)].
50
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
UNIT INSTRUMENTS, INC.
By: /s/ Gary N. Patten
----------------------
Gary N. Patten
Chief Financial Officer
Chief Accounting Officer and Secretary
Date: August 12, 1996
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael J. Doyle and Gary N. Patten,
jointly and severally, his or her respective attorneys-in-fact, each with the
power of substitution, for each other in any and all capacities, to sign any
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her respective substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Michael J. Doyle President, Chief Executive August 12, 1996
- ----------------------------- Officer
(Michael J. Doyle)
/s/ James C. Levinson Chairman of the Board August 12, 1996
- -----------------------------
(James C. Levinson)
/s/ Gary N. Patten Chief Financial Officer, Chief August 12, 1996
- ----------------------------- Accounting Officer and
(Gary N. Patten) Secretary
/s/ A. Wade Blackman Director August 12, 1996
- -----------------------------
(A. Wade Blackman)
/s/ George Boyadjieff Director August 12, 1996
- -----------------------------
(George Boyadjieff)
/s/ Edward Rogas Director August 12, 1996
- -----------------------------
(Edward Rogas)
51