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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: June 29, 1996
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Commission file number: 0-20328
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AMTROL INC.
(exact name of registrant as specified in its charter)
Rhode Island 05-0246955
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1400 Division Road, West Warwick, RI 02893-1008
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(Address of principal executive offices)
Registrant's telephone number, including area code: (401) 884-6300
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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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
7,438,506 shares of Common stock $.01 par value
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as of June 29, 1996
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INDEX
PAGE
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PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets -
June 29, 1996 and December 31, 1995 1
Condensed Consolidated Statements of Income -
For the Quarters and the Six Months Ended
June 29, 1996 and July 1, 1995 2
Condensed Consolidated Statement of Shareholders' Equity -
For the Six Months Ended June 29, 1996 3
Condensed Consolidated Statements of Cash Flows -
For the Six Months Ended June 29, 1996 and July 1, 1995 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 7
PART II. Other Information 10
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures 11
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AMTROL INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except per share data)
ASSETS
June 29, December 31,
1996 1995
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CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 3,100 $ 9,078
Accounts receivable, less allowance for doubtful accounts ................. 34,409 24,108
Inventories ............................................................... 21,469 21,315
Prepaid income taxes ...................................................... 2,850 2,793
Prepaid expenses and other ................................................ 1,251 462
Assets held for sale ...................................................... 1,786 3,736
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Total current assets ............................................. 64,865 61,492
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Net Property, Plant and Equipment ......................................... 30,488 27,933
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OTHER ASSETS:
Cash surrender value of officers' life insurance .......................... 1,708 3,156
Other ..................................................................... 1,141 1,328
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2,849 4,484
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$98,202 $93,909
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short Term Debt ........................................................... $ 3,500 $ --
Accounts payable .......................................................... 9,843 6,526
Accrued expenses .......................................................... 8,143 11,105
Accrued income taxes ...................................................... 1,303 559
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Total current liabilities ........................................ 22,789 18,190
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OTHER NONCURRENT LIABILITIES ..................................................... 4,666 4,902
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DEFERRED INCOME TAXES ............................................................ 743 611
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SHAREHOLDERS' EQUITY:
Preferred stock $.01 par value -
Authorized - 5,000,000 shares and Issued - None
Common stock $.01 par value -
Authorized - 15,000,000 shares
Issued 7,652,706 shares in 1996 and 7,641,398 shares in 1995 ..... 76 76
Additional paid-in capital ................................................ 29,177 29,083
Retained earnings ......................................................... 44,032 44,313
Treasury stock, 214,200 shares in 1996 and 213,200 shares in 1995 ......... (3,281) (3,266)
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Total shareholders' equity ....................................... 70,004 70,206
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$98,202 $93,909
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The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
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AMTROL INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands, except per share date)
For the Quarter Ended For the Six Months Ended
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June 29, July 1, June 29, July 1,
1996 1995 1996 1995
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NET SALES .............................................. $48,254 $47,628 $89,416 $90,790
COST OF GOODS SOLD ..................................... 34,729 34,259 65,166 65,010
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Gross profit .................................... 13,525 13,369 24,250 25,780
OPERATING EXPENSES:
Selling ......................................... 4,203 3,674 8,057 7,601
General and administrative ...................... 3,407 3,763 7,244 7,645
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Income from operations .......................... 5,915 5,932 8,949 10,534
OTHER INCOME (EXPENSE):
Interest expense ................................ (10) (5) (44) (25)
Interest income ................................. 39 41 160 124
License and distributorship fees ................ 50 58 106 122
Other, net ...................................... 45 45 47 (18)
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Income before provision for income taxes .. 6,039 6,071 9,218 10,737
PROVISION FOR INCOME TAXES ............................. 2,310 2,367 3,549 4,187
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NET INCOME ............................................. $ 3,729 $ 3,704 $ 5,669 $ 6,550
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NET INCOME PER SHARE ................................... $ 0.49 $ 0.49 $ 0.75 $ 0.86
======= ======= ======= =======
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING ............................................ 7,640 7,619 7,563 7,594
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The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
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AMTROL INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Treasury Stock
Additional -------------------
Common Paid-in Retained Number of
Stock Capital Earnings Shares Cost
----- ------- -------- ------ ----
BALANCE, December 31, 1995 .............. $76 $29,083 $44,313 213 ($3,266)
Net income .......................... -- -- 5,669 -- --
Dividend ($.05 per share) .......... -- -- (5,950) -- --
Exercise of stock options ........... -- 94 -- -- --
Repurchase of common stock .......... -- -- -- 1 (15)
--- ------- ------- --- -------
BALANCE, June 29, 1996 .................. $76 $29,177 $44,032 214 ($3,281)
=== ======= ======= === =======
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
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AMTROL INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months Ended
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June 29, July 1,
1996 1995
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net Income ....................................................... $ 5,669 $ 6,550
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Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization ............................... 2,609 2,396
Provision for losses on accounts receivable ................... 109 84
Loss on sale of fixed assets ................................ 30 13
Changes in assets and liabilities -
(Increase) decrease in assets -
Accounts receivable, net .............................. (10,410) (7,068)
Inventory ............................................. (154) (5,224)
Prepaid income taxes .................................. (57) 57
Prepaid expenses and other ............................ (789) (398)
Cash surrender value of officers' life insurance ...... 1,448 (173)
Other Assets .......................................... 252 13
Increase (decrease) in liabilities -
Accounts payable ...................................... 3,317 4,569
Accrued expenses ...................................... (2,962) (1,476)
Accrued income taxes .................................. 744 (263)
Other noncurrent liabilities .......................... (236) 48
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(6,099) (7,422)
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Net cash used by operating activities ............... (430) (872)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets ............................... 1,968 10
Capital expenditures ............................................. (5,145) (3,077)
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Net cash used in investing activities ............... (3,177) (3,067)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends ................................................... (5,950) (752)
Repayment of long-term debt ...................................... -- (3,333)
Issuance of notes payable ........................................ 3,500 1,615
Issuance of common stock - exercise of stock options ............. 94 273
Repurchase of treasury stock ..................................... (15) (631)
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Net cash used in financing activities ............... (2,371) (2,828)
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NET DECREASE IN CASH AND CASH EQUIVALENTS ............................ (5,978) (6,767)
CASH AND CASH EQUIVALENTS, beginning of period ....................... 9,078 9,038
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CASH AND CASH EQUIVALENTS, end of period ............................. $ 3,100 $ 2,271
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CASH PAID FOR:
Interest ...................................................... $ 57 $ 78
Income taxes .................................................. $ 2,733 $ 4,325
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
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AMTROL INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(UNAUDITED)
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1. BASIS OF PRESENTATION
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In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly, in accordance with generally accepted accounting
principles, the Company's financial position, results of operations and
cash flows for the interim periods presented. Such adjustments consisted
of only normal recurring items. The results of operations for the
interim periods shown in this report are not necessarily indicative of
results for any future interim period or for the entire year. These
condensed consolidated financial statements do not include all
disclosures associated with annual financial statements and accordingly
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10K.
2. INVENTORIES
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Inventories are stated at the lower of cost or market and were as follows:
June 29, 1996 December 31, 1995
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(in thousands)
Raw Materials and Work in Process $ 9,222 $ 9,822
Finished Goods 12,247 11,493
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$21,469 $21,315
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Inventories valued under the last-in, first-out (LIFO) cost method
comprised of approximately 65.9% of the June 29, 1996 totals and 57.0%
of the 1995 totals.
3. COMMON STOCK
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During December 1994, the Board of Directors authorized a program to
purchase up to 500,000 shares of the Company's common stock. Through
June 29, 1996, the Company purchased 214,200 shares at an approximate
cost of $3.3 million.
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AMTROL INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(UNAUDITED)
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4. PROVISION FOR INCOME TAXES
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The effective income tax rates used in the interim financial statements
are estimates of the full year's rates. The estimated effective income
tax rate is 38.5% for 1996 and 39.0% for 1995. The Company's estimated
effective income tax rates are higher than the statutory U. S. Federal
income tax rates primarily due to state income taxes.
5. COMMITMENTS AND CONTINGENCIES
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On June 20, 1996, the Company entered into a compensation arrangement
with its Vice Chairman which provides for certain payments in return for
services provided during the next twelve months in assisting the Company
in its exploration of alternatives to enhance shareholder value.
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AMTROL INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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RESULTS OF OPERATIONS
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The following table sets forth, for the periods indicated, the percentages
of the Company's net sales represented by certain income and expense items
in the Company's Condensed Consolidated Statements of Income.
For the Quarter Ended For the Six Months Ended
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June 29, July 1, June 29, July 1,
1996 1995 1996 1995
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Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Good Sold 72.0 71.9 72.9 71.6
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Gross Profit 28.0 28.1 27.1 28.4
Operating Expenses 15.7 15.6 17.1 16.8
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Income from Operations 12.3 12.5 10.0 11.6
Interest Expense -- -- -- --
Interest Income .1 -- .2 .1
Other Income, net .1 .2 .1 .1
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Income before provision
for income taxes 12.5 12.7 10.3 11.8
Provision for Income Taxes 4.8 4.9 4.0 4.6
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Net Income 7.7% 7.8% 6.3% 7.2%
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Net sales for the second quarter of 1996 increased by $.6 million, or
1.3%, from the same period in 1995. The net sales increase for the
quarter resulted from a $2.4 million increase in water systems sales
from domestic sales of water well accumulators in both the wholesale
and retail channels. This increase was partially offset by decreased
HVAC sales of $1.7 million primarily due to decreased sales of hot
water makers and chemical containers. Export sales for the second
quarter 1996 decreased $.5 million or 8% compared to same quarter in
1995 due principally to decreased sales of reverse osmosis
accumulators. Net sales for the six months decreased by $1.4 million or
1.5% when compared to the first six months of 1995 due principally to
decreased sales of chemical containers of $2.2 million as compared to
1995 which reflected an unanticipated pre-buy of domestic disposable
containers in 1995. The decline in domestic container sales also
reflects the continued transition from CFCs to new alternative
refrigerants which is expected to continue until the aftermarket
service demand for new refrigerant grows to previous CFC levels.
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AMTROL INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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The gross profit in the second quarter increased by $.2 million or 1.2%
from the previous year and the margin percentage decreased to 28.0% of
net sales in 1996 from 28.1% in 1995. The gross profit percentage was
unfavorably affected by inefficiencies associated with assimilating
production requirements from the two manufacturing facilities closed
during the past nine months which was partially offset by a higher mix
of domestic water systems sales which provide higher gross profit
margins. For the six months, gross profit decreased by $1.5 million or
5.9% as compared to the same period in 1995, and the gross margin
decreased to 27.1% of net sales in 1996 from 28.4% of net sales in
1995. This decrease resulted primarily from the cost of production
interruptions associated with plant closings and inclement weather.
Selling, General and Administrative Expenses in the second quarter of
1996 increased by $.2 million to $7.6 million and increased as a
percentage of net sales to 15.7% in 1996 from 15.6% in 1995. Selling,
General and Administrative Expenses increased $0.5 million during the
quarter due to increased selling costs associated with DIY channel and
certain increased promotional expenses partially offset by reduced
administrative expenses associated with the Chairman's office. For the
first six months 1996, Selling General and Administrative Expenses
increased by $.1 million and increased to 17.1% of net sales in 1996
from 16.8% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
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Working Capital at June 29, 1996 was $42.1 million and the ratio of
current assets to current liabilities was 2.8 to 1.0. This compares with
working capital of $43.3 million and a current ratio of 3.4 to 1.0 at
December 31, 1995.
The Company experienced an increase in its Accounts Receivable balance
due to the increased level of sales activity when compared to the fourth
quarter of 1995 and the increase in export sales of chemical containers
and sales to the retail channel both of which generally carry extended
payment terms.
During the six months ended June 29, 1996, the Company used cash flows
from operating activities of $0.4 million. During this same period, the
Company invested $3.2 million, net, in machinery and equipment and paid
dividends of $6.0 million. Also, the Company received cash from issuing
common stock related to the exercise of stock options of $0.1 million
and borrowed $3.5 million against its Revolving Line of Credit facility.
As a result of the foregoing, the Company's cash balance decreased by
$6.0 million.
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AMTROL INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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The Company's total capital expenditures for 1996 are projected to be
$10.5 million.
The Company's Board also declared a special cash dividend of 70 cents
per share, in addition to a regular quarterly dividend of five cents per
share of common stock, both payable May 15, 1996 to shareholders of
record May 6, 1996. The special dividend represents the proceeds from
the completed and planned sales of real estate and other non-operating
sources.
The Company believes that its operating cash flow and available lines of
credit will be adequate to fund its anticipated future capital
commitments and working capital requirements.
On April 24, 1996, the Company announced that its Board of Directors has
retained Smith Barney Inc. and HSBC Securities, Inc. as financial
advisors to help the Company explore strategic alternatives to enhance
shareholder value, including a possible business combination, the sale
of all or a portion of the Company, potential acquisitions or any other
similar transactions. The Company said there can be no assurance that
any transaction will result from the exploration process.
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AMTROL INC. AND SUBSIDIARIES
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PART II - OTHER INFORMATION
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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On June 19, 1996, the Company held its Annual Meeting of Shareholders.
Kenneth L. Kirk, David Beretta, Stephen J. Carlotti, Herbert H.
Jacobi, Albert W. Ondis, Lorne R. Waxlax and Hanns H. Winkhaus were
elected to be the Directors of the Company. Nominee Vincent Sarni did
not stand for reelection to the Board. Set forth below are the
results of each matter voted upon at the Annual Meeting.
1. Election of Directors:
For Withheld
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(a) David Beretta 6,471,572 12,696
(c) Stephen J. Carlotti 6,475,068 9,200
(c) Herbert H. Jacobi 6,474,968 9,300
(d) Kenneth L. Kirk 6,475,068 9,200
(e) Albert W. Ondis 6,475,068 9,200
(f) Lorne R. Waxlax 6,474,968 9,300
(g) Hanns H. Winkhaus 6,475,068 9,200
2. Ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the Company for
the year ending December 31, 1996.
For Against Absentions Broker Non-Votes
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6,477,349 4,746 2,173
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.3(a) Letter Agreement dated June 20, 1996 between
Amtrol Inc. and Stephen J. Carlotti
(b) Reports on Form 8-K
None
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AMTROL INC. AND SUBSIDIARIES
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMTROL INC.
Date: August 9, 1996 By: /s/ Kenneth L. Kirk
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Kenneth L. Kirk
Chairman of the Board
Date: August 9, 1996 By: /s/ Edward J. Cooney
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Edward J. Cooney
Senior Vice President
Chief Financial Officer
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