SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
For this fiscal year ended the Last Day of February, 1995
Commission File Number 0-8955
THE CHERRY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2977756
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3600 Sunset Avenue, Waukegan, IL 60087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (708) 662-9200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock
(Title of Class)
Class B Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. (X) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (paragraph 229.405 of this chapter) 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 the form 10-K. (X)
The aggregate market value of the registrant's Class A and Class B Common Stock
on April 28, 1995 held by nonaffiliates was approximately $94 million, based on
a calculation that 54% of the shares are owned by nonaffiliates and are
valued at the closing prices as reported on the NASDAQ National Market System on
April 28, 1995.
Number of common shares outstanding as of May 16, 1995:
7,560,652 shares of Class A Common
4,712,341 shares of Class B Common
DOCUMENTS INCORPORATED BY REFERENCE
Documents Incorporated: Part of Form 10-K
----------------------- -----------------
Various parts of the Company's Proxy All of Part III
Statement for its 1995 Annual Meeting
<PAGE>
THE CHERRY CORPORATION
PART I
ITEM 1. BUSINESS
GENERAL
The Cherry Corporation (`Cherry'', ``Company'' or `Corporation'') was
incorporated in 1953 in the State of Illinois and reincorporated in the State of
Delaware in 1978. The Company and its subsidiaries design, manufacture and sell
over 3,000 types of proprietary and custom electrical, electronic and
semiconductor components used by a broad range of original equipment
manufacturers (OEM's) and distributors in the automotive, computer and consumer
and commercial markets.
Cherry's executive offices are located at the Cherry Electrical Products
division in Waukegan, Illinois. Its wholly owned subsidiary companies operate
in the following locations: Cherry Semiconductor Corporation, Rhode Island;
Cherry Mikroschalter GmbH, the Federal Republic of Germany; Plastech GmbH, the
Federal Republic of Germany; Cherry Electrical Products Ltd., United Kingdom;
Cherry SARL, France; Cherasia Limited, Hong Kong; Cherry SRO, Czech Republic;
Cherry Australia Pty., Ltd., Australia; and Cherry Systems Corporation,
Illinois. Additionally, the Company operates in Japan and India through 50%
owned affiliates, Hirose Cherry Precision Company Limited and TVS Cherry Private
Limited, respectively. The Company also operates a branch sales and engineering
office in Japan under the name Cherry Automotive-Japan.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Refer to the Business Segment and Geographic Area Information contained in Item
8 of this Annual Report on Form 10-K.
NARRATIVE DESCRIPTION OF BUSINESS
Cherry has three major business segments:
The Automotive Market segment designs, manufactures and sells semiconductors,
electronic controls and switch assemblies for the automobile industry.
Automobile special-use switches and switch assemblies are used in a variety of
applications including power windows, central door lock and mirror controls.
The Company's semiconductor devices are integrated circuits used in power train
controls, body electronics, vehicle control and safety, instrumentation and
entertainment electronics. Its electronic control modules are used as controls
for sunroofs, convertible tops and memory power seats. These products are
custom made for major U.S. and European manufacturers, including Japanese
transplants in North America. The Company's automotive customers generally pay
for the tooling and other special manufacturing requirements.
The Computer Market segment designs, manufactures and sells keyboards and
related products, semiconductors and switches for computer applications. Cherry
sells standard and specialty keyboards for use with personal computers; data
entry, point-of-sale and reservation terminals; word processing systems; and
other computer input applications. Specialty keyboards include integrated
magnetic card readers, bar code readers or chip card readers. Semiconductors
are used for power management solutions in the computer market and applications
include uninterruptible power sources, tape backup and distributed power
sources. Selector switches are used in addressing peripherals in computer
networks, among other applications.
The Consumer and Commercial Market segment designs, manufactures and sells
switches, semiconductors and electronic controls and displays used in household
appliances, office equipment and cellular telephones. Snap-action switches are
generally manufactured to customer specifications by modifying the Company's
standard products. Switches are used in various appliances, office equipment
and control and measurement device applications. Semiconductor applications
include cellular communications, off-line power supplies and DC/DC converters.
Plasma display products are primarily sold to the amusement industry as readouts
for electronic games. Electronic interface panels are used in office equipment
and medical instrumentation.
Inflation has not been a material factor in any segment.
MARKETS, MAJOR CUSTOMERS AND SEASONALITY
Virtually all of the Company's sales are made to original equipment
manufacturers and to independent distributors. In fiscal 1995, sales to the
Company's five largest customers accounted for 35.4% of consolidated sales. Of
these five largest customers, sales to General Motors and Ford were 13.9% and
13.8%, respectively.
Within the Company's Automotive Market segment, four customers account for 76%
of the segment sales and include General Motors and Ford mentioned above. The
Consumer and Commercial Market segment has one customer which accounts for 10.9%
of that segment's sales.
The Company normally experiences a slowdown in sales during the summer months
from model changeovers and factory vacation shutdowns by its customers.
DISTRIBUTION
The Company's domestic sales are handled by Cherry sales representatives or
through independent sales representatives and distributors. All are supported
by Company customer service personnel. The independent sales organizations also
sell products for other companies, although generally not those which compete
with Cherry products.
Cherry Mikroschalter GmbH sells through sales representatives and independent
distributors located throughout Europe and the Far East. Cherry Electrical
Products Ltd., United Kingdom, under the direction of Cherry Mikroschalter GmbH,
is responsible for sales efforts in Great Britain and Ireland through sales
representatives and independent distributors. In Japan, the Company's joint
venture sales are directed by Hirose Cherry Precision Co., Ltd. through
distributors. In India, sales are directed by Cherry's new joint venture, TVS
Cherry Private Limited. Cherry SARL sells products in France which are
purchased primarily from Cherry Mikroschalter GmbH. Cherasia Limited sells
Cherry products throughout the Far East. In Australia, Cherry products are sold
through Cherry Australia Pty. Ltd. The Company's automotive sales and
engineering center in Japan coordinates selling activities with Japanese
automotive manufacturers.
COMPETITION
The Company does business in highly competitive markets. The Company believes
that it is the second or third largest manufacturer of snap-action switches and
automotive special use switches in North America. In addition, the Company
believes it has a significant market position in the other two markets it
serves. Competitors include a large number of independent domestic and foreign
suppliers. Certain competitors in each of the Company's markets have
substantially greater manufacturing, sales, research and financial resources
than the Company. The Company believes that the principal competitive factors
in its markets are price, product quality and reliability, and the ability to
meet customer delivery requirements and to custom design products to customer
specifications.
RAW MATERIALS AND ENERGY
In general, raw materials used by the Company are available from several
sources. The Company has not experienced significant shortages of raw materials
and, to date, sales have not been adversely affected by either materials or
energy shortages.
BACKLOG
Current backlog figures are considered to be firm, but, because the Company does
not manufacture pursuant to long-term contracts, purchase orders are generally
cancellable - subject to payment by the customer for charges incurred up to the
date of cancellation. The following figures, therefore, should not be
considered indicative of sales for an ensuing period.
<TABLE>
Backlog as of
The Last Day of February
------------------------
<CAPTION>
(000's Omitted) 1995 1994
--------- ---------
<S> <C> <C>
Automotive Market Segment $ 46,278 $ 23,064
Computer Market Segment 31,912 33,801
Consumer and Commercial Market Segment 37,817 24,812
--------- ---------
$ 116,007 $ 81,677
========= =========
</TABLE>
PATENTS
The Company has numerous United States and foreign patents and patent
applications. As the Company develops products for new markets and uses, it
normally seeks patent protection. Many of the Company's products embody some
patent protection. Although patents are important to the Company, Cherry is not
dependent on any single patent or group of related patents. The Company also
owns various trademarks, trade names and proprietary information, some of which
are considered valuable assets.
PRODUCT DEVELOPMENT
During the fiscal year ended the last day of February 1995, the Company spent
approximately $14,841,000 on product development. The Company spent
approximately $10,424,000 and $9,102,000 on product development in fiscal 1994
and 1993, respectively. The percentage of development expenses reimbursed by
customers was not significant in any of the periods discussed.
EMPLOYEES
As of February 28, 1995, the Company employed 3,986 persons.
ENVIRONMENTAL PROTECTION
The Company believes that its manufacturing operations and properties are in
material compliance with existing federal, state and local provisions enacted or
adopted to regulate the discharge of materials into the environment, or
otherwise protect the environment. Such compliance has been achieved without
material effect on Cherry's earnings or competitive position.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the Company's executive officers, their ages,
business experience, and position and offices as of February 28, 1995.
Term as Business Experience During
Name Age Officer the Past Five Years
Peter B. Cherry 47 21 Chairman of the Board,(1992),
and President, 1982; and Chief
Executive Officer, 1986.
Alfred S. Budnick 57 18 Vice President of the Company
and President of Cherry
Semiconductor Corporation since
1977.
Grant T. Hollett, Jr. 52 3 Vice President since June 1992;
President of Cherry Electrical
Products Division since 1990;
Executive Vice President prior
to 1990.
Klaus D. Lauterbach 52 3 Vice President since June 1992;
General Manager of Cherry Mikro-
schalter GmbH since 1990;
Assistant General Manager prior
to 1990.
Dan A. King 45 7 Secretary (in 1993); Treasurer
and Corporate Controller since
1990; and prior to 1990,
Corporate Controller since 1984.
<PAGE>
ITEM 2. PROPERTIES
Cherry owns and leases manufacturing, warehousing and office space in 15 cities
around the world. The Company owns its major facilities which are located in
Illinois, Rhode Island and Germany and comprise 345,000, 150,000 and 369,000
square feet, respectively. In addition, the Company also owns a 28,000 square
foot facility in England. All owned facilities are used for a combination of
production, warehousing and administrative activities. The Company also leases
facilities totaling 134,000 square feet, with approximately 79% used for
production, assembly and warehousing and the balance primarily for sales
activities. The leases expire at various dates through December 31, 2000.
The total owned and leased facilities noted above are currently used by the
business segments in the following estimated proportion:
Automotive Market 42%
Computer Market 24%
Consumer & Commercial Market 34%
------
100%
======
All facilities are in generally good condition and provide adequate and suitable
space for the operations at each location.
The Company utilizes machinery and equipment necessary to conduct its
operations. Substantially all of such machinery and equipment is owned by the
Company.
Refer to Item 8 of this Annual Report on Form 10-K for information regarding
notes payable secured by real estate.
ITEM 3.LEGAL PROCEEDINGS
The Company is named in various suits and claims which arise in the normal
course of business. Where appropriate, the Company engages legal counsel and
disputes these claims. The Company believes that it has meritorious defenses
and that the final disposition of these matters will not materially affect the
Company's financial position or results of operations.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
No matters were submitted to stockholders during the fourth quarter of the
fiscal year.
<PAGE>
PART II
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Cherry Corporation common stocks are traded on the NASDAQ National Market
System under the NASDAQ symbols CHERA and CHERB. As of May 16, 1995, there were
approximately 2,200 and 1,800 holders of record of the Class A and Class B
common stocks, respectively. The Class A Common Stock did not begin trading on
NASDAQ until July, 1994. The historical sales price for Class B Common Stock
has been restated to reflect the estimated effect of the stock dividend issued
on July 14, 1994. The quarterly high and low prices reported on NASDAQ and the
dividends paid per common share in the last two fiscal years are shown below:
<TABLE>
Class A Common Class B Common
<CAPTION>
Fiscal 1995: High Low Dividend High Low Dividend
Quarters:
<S> <C> <C> <C> <C> <C> <C>
Fourth $16.50 $12.50 $ -- $16.25 $12.00 $ --
Third 17.38 13.25 -- 17.25 13.50 --
Second 15.00 11.75 -- 15.88 11.50 --
First -- -- -- 15.50 12.13 --
<CAPTION>
Fiscal 1994:
Quarters:
<S> <C> <C> <C> <C> <C> <C>
Fourth $-- $-- $ -- $13.25 $10.13 $ --
Third -- -- -- 11.13 6.81 --
Second -- -- -- 10.88 7.00 --
First -- -- -- 17.00 9.13 --
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following summary should be read in conjunction with the consolidated
financial statements and related notes contained in Item 8 of this Annual Report
on Form 10-K:
<TABLE>
(Dollars in thousands except share and employee data)
<CAPTION>
Year Ended the Last Day of February 1995 1994 1993 1992 1991(1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $ 339,237 275,269 266,231 228,631 245,887
Gross margin $ 97,018 80,179 76,521 60,650 68,014
Operating expenses $ 73,620 62,419 59,840 54,002 65,986
Earnings from operations $ 23,398 17,760 16,681 6,648 2,028
Other income, net $ 1,671 1,240 483 2,047 1,130
Earnings before interest and taxes $ 25,069 19,000 17,164 8,695 3,158
Interest expense, net $ 3,218 3,817 5,230 5,740 5,837
Earnings (loss) before income
taxes, extraordinary tax credit
and cumulative effect of
change in accounting principle $ 21,851 15,183 11,934 2,955 (2,679)
Income tax provision (benefit) $ 7,028 5,692 4,216 (819) 3,039
Earnings (loss) before extraordinary
tax credit and cumulative effect
of change in accounting principle $ 14,823 9,491 7,718 3,774 (5,718)
Extraordinary tax credit $ -- -- 2,539 891 --
Cumulative effect of change in
accounting principle $ -- 1,542 -- -- --
Net earnings (loss) $ 14,823 11,033 10,257 4,665 (5,718)
OTHER STATISTICS
Net earnings (loss) as a percent
of sales 4.4% 4.0% 3.9% 2.0% (2.3)%
Average shares outstanding 10,882,950 9,299,848 9,184,228 9,113,490 9,106,442
Earnings (loss) per share:
Earnings (loss) before extraordinary
tax credit and cumulative effect
of change in accounting principle $ 1.36 1.02 .84 .41 (0.63)
Extraordinary tax credit $ -- -- .28 .10 --
Cumulative effect of change in
accounting principle $ -- .17 -- -- --
Net earnings (loss) per share $ 1.36 1.19 1.12 .51 (.63)
Return on average stockholders'
equity 12.3% 12.6% 13.4% 6.7% (8.2)%
Dividends per share $ -- -- -- -- .03
Capital expenditures, net $ 44,736 23,356 19,023 8,247 17,057
Depreciation and amortization $ 18,768 16,720 18,023 16,729 17,325
FINANCIAL POSITION
Working capital $ 46,001 39,395 43,791 33,893 28,027
Current ratio 1.7 1.9 2.2 1.7 1.5
Total assets $ 261,193 193,548 183,219 181,580 193,130
Long-term debt $ 25,863 42,970 50,817 49,808 60,857
Total debt $ 48,658 53,632 58,248 70,180 81,508
Stockholders' equity $ 147,627 93,476 82,014 71,049 68,190
Stockholders' equity per share $ 12.03 10.03 8.83 7.78 7.49
Debt to capital ratio 24.8% 36.5% 41.5% 49.7% 54.4%
Net cash provided by operating
activities $ 23,786 28,347 26,871 17,940 17,113
PER EMPLOYEE DATA
Average number of employees 3,617 3,048 2,765 2,846 3,073
Net sales $ 93,790 90,311 96,286 80,334 80,015
Average assets employed $ 62,862 61,806 65,967 65,831 61,012
<FN>
(1)Operating expenses include a $5,600 provision for restructuring costs.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FISCAL 1995 VS. FISCAL 1994
For fiscal 1995, consolidated sales of $339.2 million and net earnings of
$14.8 million are new records for our third consecutive year.
Consolidated sales of $339.2 million increased 23% over fiscal 1994 sales,
with domestic sales increasing 26% and international sales increasing 19%.
Approximately one fourth of the international sales increase is attributable to
foreign currency translation. The domestic sales growth results primarily from
increased sales to the automotive market together with new sales to a cellular
phone manufacturer. International sales grew from our increasing penetration
into the European automotive market, expanding sales of keyboards and by the
steadily improving European economy.
All business segments recorded increases in current year consolidated sales
compared to the prior year. The Automotive Market led the way with a 40%
increase in sales, while the Consumer and Commercial (C&C) Market and the
Computer Market recorded sales increases of 20% and 8%, respectively. Within
the Automotive Market, sales of switch assemblies increased 48%, semiconductor
devices 36% and electronic controls 14%. The primary contributor to the sales
increase in the C&C Market was semiconductor sales to a new customer that
manufactures cellular phones. The Computer Market sales increases came
primarily from keyboards and related products, which more than offset a decline
from semiconductor sales.
Current year operating profit increased to $23.4 million or 6.9% of sales
from $17.8 million or 6.5% of sales in the prior year. Although the operating
profit margin improved and current operating expenses as a percentage of sales
declined to 21.7% from 22.7%, we did not receive the full benefit from the
increased sales volume. The current year gross margin rate declined to 28.6%
from 29.1% in the prior year. This decline resulted primarily from higher than
anticipated model changeover costs in our domestic automotive power option
control business where 70% of our programs in fiscal 1995 were new. The
significantly higher than anticipated demand also resulted in increased costs
caused by labor inefficiencies, air freight and scrap. The current year
domestic operating profit margin declined to 8.4% from 9.9% for the reasons
noted above. Whereas, the foreign operating profit margin for the current year
improved to 6.6% from 4%, as a result of increased sales volume and ongoing cost
reductions.
Current year operating profit margins by business segment were mixed. The
Automotive Market current year operating profit margins declined to 7.3% from
11.1% primarily as a result of the higher domestic model changeover costs
discussed earlier. The Computer Market operating profit margins for the current
year improved to 9.2% from 5.2% as a result of higher volume, improved product
mix and cost reduction programs. The C&C Market current year operating profit
margins improved to 6.1% from 4.5% primarily from higher sales to a new cellular
phone customer noted above and a better product mix.
Other income of $1.7 million for the current year increased $.4 million
from the prior year primarily from an increase in customer tooling income.
Interest expense for the current year declined to $3.4 million from $3.9
million. The net proceeds from the August 1994 equity offering were used to
reduce domestic borrowings, resulting in the lower interest expense in the
current year. In addition, foreign borrowings in local currencies and related
interest rates also declined and contributed to the lower interest expense.
The effective tax rate for fiscal 1995 was 32.2% versus 37.5% in the prior
year. The lower current year tax rate results primarily from the utilization of
foreign tax credit carryforwards.
Since a significant portion of the Company's sales and manufacturing are
overseas, foreign currency translation can have an impact on future sales,
earnings, and financial position of the Company when translated into U.S.
dollars. The Company engages in insignificant amounts of hedging contracts with
regard to foreign currency transactions and therefore does not have a material
financial derivative exposure.
FISCAL 1994 VS. FISCAL 1993
In fiscal 1994, the Company established new sales and earnings records of
$275.3 million and $11 million, respectively. This is the Company's second
consecutive year of record sales and earnings.
Consolidated current year net sales of $275.3 million increased 3% from the
prior year and domestic sales increased 18% from the prior year, while
international sales decreased 11%. The current year domestic sales growth is
attributable to a stronger overall domestic market, especially in automotive,
and the Company's increased penetration into the domestic automotive market. On
the international front, approximately half of the 11% current year sales
decrease is attributable to foreign currency translation. The remaining foreign
sales decline is attributable to a slow European economy and price pressures in
the computer marketplace.
Fiscal 1994 sales performance from a business segment perspective is mixed.
Current year sales of the Automotive Market increased 20% from the prior year,
as the Company increased penetration into a stronger domestic automotive market.
Electronic controls registered the largest increase at 63% followed by
semiconductor devices at 26% and switch assemblies at 10%. The Consumer and
Commercial (C&C) Market current year sales increased 4% from the prior year,
with semiconductor devices recording the largest increase at 34%. Current year
sales to the Computer Market declined 10% from the prior year. Approximately
38% of this decline is related to foreign currency translation, since the
majority of these products are manufactured and sold in Europe. The remaining
portion of this segment's decline is related to the slow European economy and
the price pressures within that market.
Current year operating profit margins remained virtually unchanged at 6.5%
of sales and consequently the current year $1.1 million increase in operating
profit is the result of increased sales.
By examining the components making up operating profit (gross margin and
operating expenses), it is apparent that both components as a percent of sales
are virtually unchanged from the prior year. This steadiness is evident in both
domestic and international operations. On the international front, gross margin
and operating expenses as a percent of sales remained virtually unchanged
despite slow sales and price pressures. On the domestic front, the gross margin
and operating expenses as a percent of sales were maintained despite start-up
costs associated with increased production levels, higher engineering demands,
and changes in the market and product mix, as the Company moves more into the
automotive market.
Operating profit margins from a business segment perspective varied.
Operating profit margins in the Computer Market declined to 5.2% versus 6.1% in
the prior year. This decline is the result of a 10% current year sales decline
and severe price pressures.
The Automotive Market continues to be the Corporation's leader in sales
growth, operating profit margins and return on investment. In the current year,
operating profit margins reached 11.1% of sales, compared to last year's record
9.9% of sales. High factory utilization and productivity improvements are
largely responsible for these strong results. This segment continues to produce
at close to capacity and is currently expanding its capacity to meet future
demands.
The 4.5% current year operating profit margins for the C&C Market are down
slightly from 5.2% in the prior year.
Other income of $1.3 million in the current year increased $.7 million from
the prior year. This increase is primarily attributable to foreign currency
transaction gains.
Current year interest expense of $3.9 million is down $1.5 million from
last year. This is attributable to lower domestic and foreign borrowing rates
and reduced overall borrowing. Borrowing rates are lower because of the overall
environment and the Corporation's continually improving performance.
The effective tax rate for fiscal 1994 is 37.5%, versus 35.3% for fiscal
1993. The change in rate is primarily due to higher domestic state income
taxes.
In the first quarter of fiscal 1994, the Company adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109) "Accounting for Income Taxes."
In accordance with the provisions of SFAS 109, the Company recognized tax assets
principally related to the expected benefit of future tax deductions for
expenses previously recorded for financial reporting purposes. The resulting
$1.5 million benefit was recorded in the income statement and reported as a
cumulative effect of a change in accounting principle.
The extraordinary tax credit for fiscal 1993 and 1992 resulted from the
utilization of net operating loss carryforwards, primarily from domestic
operations, in accordance with the provisions of Accounting Principles Board
Opinion No. 11.
LIQUIDITY AND CAPITAL RESOURCES
In August 1994, the Company successfully concluded its offering of
2,875,000 shares of Class A common stock to the public. The net proceeds from
the equity offering gave us the financial flexibility to increase our domestic
manufacturing capacities while reducing our domestic debt. This also enabled
the Company to reduce its debt to capital ratio from 36.5% at February 28, 1994
to 24.8% at the end of the current year.
Consolidated operations generated $23.8 million in cash, with an additional
$33.2 million in net proceeds coming from the equity offering and $10.8 million
from short term borrowings. Proceeds from employee stock purchase and stock
option transactions also provided $.5 million.
The Company invested $44.9 million in capital expenditures, with $34
million for domestic operations and $10.9 million for foreign operations. The
domestic revolver and uncommitted credit facilities were reduced by $5.8
million, and $14.9 million of long term debt was repaid.
If currently anticipated sales growth materializes, the Company estimates
that capital expenditures will average 12% of sales over fiscal 1996 and 1997.
A significant portion of these capital expenditures will be to increase capacity
to accommodate growth. Although operations are expected to generate a majority
of the funds needed, debt is expected to increase to fund some of these
production capacity increases.
The translation of foreign assets into U.S. dollars at year end rates of
exchange accounted for approximately 25 percent of the increase in total assets
between fiscal 1994 and 1995.
Subsequent to year end, the Company entered into a new credit facility for
$65 million which is unsecured. The new facility increased borrowing capacity,
reduced interest rates, eliminated collateral requirements and allows $25
million in multicurrency borrowing by the Company's German subsidiary. Interest
is at the prime rate or, depending upon the Company's financial performance,
LIBOR plus .375% to .625%. The facility fee is also dependent upon the
Company's financial performance and ranges from .125% to .2% of the facility
amount. The facility has an initial maturity of May 12, 2000, but may be
extended for an additional year on both the first and second anniversary dates
of the facility upon mutual agreement of the Company and the banks. The
facility has a competitive bid option which can result in interest rates below
the stated rates.
Internationally, the Company has $29 million of short-term ,uncommitted
banks lines.
These credit facilities and bank lines should be sufficient, together with
internally generated cash, to finance the Company's operations.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
The Cherry Corporation:
We have audited the accompanying consolidated balance sheets of The Cherry
Corporation (a Delaware corporation) and subsidiaries as of the last day of
February, 1995 and 1994, and the related consolidated statements of earnings,
cash flows and stockholders' equity for each of the three years ended the last
day of February, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Cherry
Corporation and subsidiaries as of the last day of February, 1995 and 1994, and
the results of their operations and cash flows for each of the three years ended
the last day of February, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note C to the consolidated financial statements, effective March
1, 1993, the Company's changed its method of accounting for income taxes.
Our audit was made for purposes of forming an opinion on the basic consolidated
financial statements taken as a whole. The schedule listed in Item 14(a) 2 is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
Arthur Andersen LLP
-------------------
Arthur Andersen LLP
Chicago, Illinois
April 12, 1995
<PAGE>
<TABLE>
THE CHERRY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands except share data)
<CAPTION>
Year Ended the Last Day of February
1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES AND COSTS
Net sales $ 339,237 $ 275,269 $ 266,231
Cost of products sold 242,219 195,090 189,710
----------- ----------- -----------
Gross margin 97,018 80,179 76,521
----------- ----------- -----------
EXPENSES
Research and engineering 20,567 15,230 14,162
Distribution 26,834 22,843 21,664
Administration 26,219 24,346 24,014
----------- ----------- -----------
Operating expenses 73,620 62,419 59,840
----------- ----------- -----------
EARNINGS
Earnings from operations 23,398 17,760 16,681
Other income, net 1,671 1,240 483
----------- ----------- -----------
Earnings before interest and taxes 25,069 19,000 17,164
Interest expense, net 3,218 3,817 5,230
----------- ----------- -----------
Earnings before income
taxes, extraordinary tax credit and
cumulative effect of change in
accounting principle 21,851 15,183 11,934
Income tax provision - Note C 7,028 5,692 4,216
----------- ----------- -----------
Earnings before extraordinary
tax credit and cumulative
effect of change in accounting
principle 14,823 9,491 7,718
Extraordinary tax credit - Note C -- -- 2,539
Cumulative effect of change in
method of accounting for income
taxes - Note C -- 1,542 --
---------- ----------- ----------
Net earnings $ 14,823 $ 11,033 $ 10,257
=========== =========== ===========
EARNINGS PER SHARE:
Before extraordinary tax credit
and cumulative effect of change in
accounting principle $ 1.36 $ 1.02 $ .84
Extraordinary tax credit -- -- .28
Cumulative effect of change in
accounting principle -- .17 --
---------- ----------- ----------
Net earnings $ 1.36 $ 1.19 $ 1.12
=========== =========== ===========
Average shares outstanding 10,882,950 9,299,848 9,184,228
=========== =========== ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
THE CHERRY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands Except Share Data)
<CAPTION>
The Last Day of February
1995 1994
-----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 5,694 $ 2,697
Receivables, less allowances of $2,780 and
$2,330, respectively 56,247 42,807
Inventories - Note E 48,071 34,481
Income taxes, net 459 1,154
Prepaid expenses and other current assets 4,811 3,140
------- -------
Total Current Assets 115,282 84,279
Land, Buildings & Equipment at Cost:
Land 1,736 1,639
Buildings and improvements 79,924 71,770
Machinery and equipment 202,469 154,564
Construction in progress 15,951 7,974
------- -------
300,080 235,947
Less: accumulated depreciation 168,025 138,271
------- -------
Total Land, Buildings & Equipment, net 132,055 97,676
Other Assets:
Investment in affiliates and other, net - Note A 13,856 11,593
------- -------
Total Assets $261,193 $193,548
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt - Note F $ 18,464 $ 5,736
Accounts payable 21,273 14,243
Payroll related accruals 10,938 8,452
Other accruals 14,275 11,527
Current maturities of long-term debt - Note F 4,331 4,926
------- -------
Total Current Liabilities 69,281 44,884
Long-term debt - Note F 25,863 42,970
Deferred income taxes, net and deferred credits 18,422 12,218
Stockholders' Equity - Note B:
Class A common stock, $1.00 par value
Authorized 20,000,000 shares; issued and
outstanding 7,560,652 in 1995 7,561 --
Class B common stock, $1.00 par value
Authorized 10,000,000 shares; issued and
outstanding 4,712,341 in 1995 and
4,661,099 in 1994 4,712 4,661
Additional paid-in capital 40,924 10,200
Retained earnings 83,192 73,042
Cumulative translation adjustments 11,238 5,573
------- -------
Total Stockholders' Equity 147,627 93,476
------- -------
Total Liabilities and Stockholders' Equity $261,193 $193,548
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
THE CHERRY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Year Ended the Last Day of February
1995 1994 1993
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $14,823 $11,033 $ 10,257
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 18,768 16,720 18,023
Cumulative effect of change in accounting
principle -- (1,542) --
Loss on sale of land, buildings, equipment and
intangibles 127 4 198
Income from unconsolidated affiliates (625) (643) (510)
Changes in assets and liabilities:
(Increase) in receivables (10,472) (2,118) (9,938)
(Increase) in inventories (10,538) (2,989) (1,193)
Increase in accounts payable 7,614 784 4,532
Decrease in income taxes, net 487 654 5,687
Increase in deferred income taxes 2,433 1,335 654
(Increase) decrease in other working capital,
excluding cash and short-term borrowings 1,169 5,109 (839)
------- ------- --------
Total adjustments 8,963 17,314 16,614
------- ------- --------
Net cash provided by operating activities 23,786 28,347 26,871
------- ------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sales of land, buildings and
equipment 806 28 239
Expenditures for land, buildings and equipment (44,865) (23,390) (19,456)
Other (759) (445) 656
------- ------- --------
Net cash used by investing activities (44,818) (23,807) (18,561)
------- ------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt 10,797 4,447 (10,537)
Increase (decrease) in domestic revolver and
uncommitted credit facilities (5,800) 3,651 3,149
Principal payments on long-term debt (14,928) (11,383) (10,269)
Net proceeds from equity offering 33,176 -- --
Proceeds from long-term debt -- -- 5,485
Equity and other transactions 487 238 605
------- ------- --------
Net cash from (used by) financing activities 23,732 (3,047) (11,567)
------- ------- --------
Effect of exchange rate changes on cash flows 297 (127) 42
------- ------- --------
Net increase (decrease) in cash and equivalents 2,997 1,366 (3,215)
Cash and equivalents, at beginning of year 2,697 1,331 4,546
------- ------- --------
Cash and equivalents, at end of year $ 5,694 $ 2,697 $ 1,331
======= ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized) $ 3,314 $ 4,041 $ 5,288
Income taxes (net of refunds) $ 4,108 $ 3,703 $ (4,663)
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
THE CHERRY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Class A Class B Additional Cumulative Total
Common Common Paid-In Retained Translation Stockholders'
Year ended the last day of February Stock Stock Capital Earnings Adjustments Equity
------- -------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, 1992 $ -- $ 4,567 $ 9,452 $ 51,752 $ 5,278 $ 71,049
Employee options and stock
purchase plan -- 77 527 -- -- 604
Net earnings -- -- -- 10,257 -- 10,257
Translation adjustments -- -- -- -- 104 104
------ ------- -------- --------- ----------- ------------
Balance, 1993 -- 4,644 9,979 62,009 5,382 82,014
Employee options and stock
purchase plan -- 17 221 -- -- 238
Net earnings -- -- -- 11,033 -- 11,033
Translation adjustments -- -- -- -- 191 191
------ ------- -------- --------- ----------- ------------
Balance, 1994 -- 4,661 10,200 73,042 5,573 93,476
Employee options and stock
purchase plan 13 51 423 -- -- 487
Net earnings -- -- -- 14,823 -- 14,823
Stock dividend - Note B 4,673 -- -- (4,673) -- --
Public sale of common stock -
Note B 2,875 -- 30,301 -- -- 33,176
Translation adjustments -- -- -- -- 5,665 5,665
------ ------- -------- --------- ----------- ------------
Balance, 1995 $7,561 $ 4,712 $ 40,924 $ 83,192 $ 11,238 $ 147,627
====== ======= ======== ========= =========== ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
THE CHERRY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data and as otherwise stated)
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
INVESTMENT IN AFFILIATES
The Company accounts for its investments in 50% owned affiliates in Japan and
India by the equity method of accounting. Retained earnings at February 28,
1995, include $6,847 which represents the Company's share of the undistributed
earnings of these unconsolidated affiliates.
CASH AND EQUIVALENTS
Cash and equivalents consist of cash and highly liquid securities with original
maturities of three months or less. The carrying amount approximates fair
value.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for approximately 38% and 37% of the
Company's inventories as of the last day of February 1995 and 1994,
respectively. For the remaining inventories, cost is determined by the first-
in, first-out (FIFO) method. Inventory costs include material, labor and
manufacturing overhead.
LAND, BUILDINGS & EQUIPMENT
Land, buildings and equipment are carried at cost or, in the case of capitalized
leases, at the lower of the present value of minimum lease payments or the fair
value of the leased property. For financial reporting purposes, depreciation
expense is provided on a straight-line basis using estimated useful lives of 5
to 50 years for buildings and improvements and 3 to 12 years for machinery and
equipment. Depreciation expense was $18,768, $16,720 and $18,023 for fiscal
1995, 1994 and 1993, respectively. Accelerated depreciation methods are
generally used for tax purposes.
Expenditures for maintenance, repairs and renewals of minor items are charged to
expense as incurred. Major renewals and improvements are capitalized. Upon
disposition, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is reflected in earnings for the period.
INCOME TAXES
Effective March 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes."
The provision for income taxes includes federal, foreign, state and local income
taxes currently payable and those deferred because of temporary differences
between the financial statement and tax bases of assets and liabilities.
The undistributed earnings of the United Kingdom subsidiary and the Japanese
affiliate will continue to be invested indefinitely. Federal income taxes on
distribution of these earnings, if any, would not be significant.
CURRENCY TRANSLATION
Foreign entity financial statements are translated to U.S. dollars in accordance
with SFAS No. 52 "Foreign Currency Translation." Assets and liabilities of
foreign operations are translated into U.S. dollars at year-end rates of
exchange. Profit and loss items are translated at the average exchange rates
prevailing during the year. Resulting translation adjustments are reported
separately in Stockholders' Equity, net of interperiod tax allocations.
FINANCIAL INSTRUMENTS
The Company selectively enters into forward contracts in its management of
foreign currency transaction exposures. Gains or losses on forward contracts
designated to hedge a foreign currency transaction are included in the
measurement of income when the hedged transaction occurs.
Premiums paid for interest rate cap agreements are amortized to interest expense
over the term of the agreements. Unamortized premiums are included in other
assets in the consolidated balance sheet.
RESEARCH AND DEVELOPMENT
Research and development (R&D) costs are expensed as incurred. R&D expense was
$14,841, $10,424 and $9,102 for fiscal 1995, 1994 and 1993, respectively.
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of common
(Class A and Class B) shares outstanding during the year. Stock options are not
materially dilutive and therefore are excluded from the computation of earnings
per share. On June 16, 1994, the Board of Directors authorized a stock dividend
of one share of Class A Common for each share of Prior Common Stock outstanding
on July 11, 1994. The stock dividend had the same effect on the total number of
shares of common stock outstanding as a two-for-one stock split. Historical
earnings per share and average shares outstanding have been restated to reflect
the stock dividend. See Note B.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE B: CAPITAL STOCK
On July 12, 1994, the Company filed with the Delaware Secretary of State an
amended and restated certificate of incorporation which (i) increased the number
of authorized shares of common stock of the Company from 10,000,000 to
30,000,000 consisting of 20,000,000 shares of Class A Common Stock and
10,000,000 shares of Class B Common Stock, (ii) reclassified the Prior Common
Stock as Class B Common Stock, (iii) authorized a new class of non-voting stock
designated as Class A Common Stock, and (iv) established the rights, powers and
limitations of the Class A Common Stock and the Class B Common Stock. On June
16, 1994, the Board of Directors authorized a stock dividend of one share of
Class A Common Stock for each share of Prior Common Stock outstanding on July
11, 1994. The stock dividend had the same effect on the total number of shares
of Common Stock outstanding as a two-for-one stock split. The historical
earnings per share, average shares outstanding, stock option and employee stock
purchase transactions have been restated to reflect the stock dividend.
On July 12, 1994, the Company made a Form S-2 Filing with the Securities and
Exchange Commission to offer 2,500,000 shares of Class A Common Stock to the
public. The Company also granted the underwriters an option to purchase an
additional 375,000 shares to cover over-allotments. The offering commenced on
August 12, 1994, and concluded on August 19 with the entire 2,875,000 shares
sold. The $33.2 million of net proceeds was used to repay domestic debt.
On an unaudited, pro-forma basis, earnings per share for the year ended February
28, 1995, would have been $1.26 had the equity offering been made on March 1,
1994, and the domestic debt repaid at that time.
<PAGE>
NOTE C: INCOME TAXES
Effective March 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes," which requires the use
of the liability method of accounting for deferred income taxes. As of March 1,
1993, the cumulative effect of the change was to record a deferred tax benefit
of $1,542, or $.17 per share, related primarily to recognition of the benefit of
net operating loss carryforwards.
<TABLE>
The sources of earnings before income taxes are as follows:
<CAPTION>
Year ended the last day of February 1995 1994 1993
--------- ------- --------
<S> <C> <C> <C>
Earnings before income taxes,
extraordinary tax credit and
cumulative effect of accounting
change:
United States $ 13,631 $10,683 $ 7,613
Foreign 8,220 4,500 4,321
</TABLE>
<TABLE>
PROVISIONS FOR INCOME TAXES:
<CAPTION>
Year ended the last day of February 1995 1994 1993
--------- ------- --------
<S> <C> <C> <C>
Current: Federal and state $ 2,196 $ 3,648 $ 1,151
Foreign 2,206 1,219 851
--------- ------- --------
Current provision 4,402 4,867 2,002
--------- ------- --------
Deferred: Federal and state 1,605 536 (794)
Foreign 1,021 289 469
--------- ------- --------
Deferred provision (benefit) 2,626 825 (325)
Utilization of operating loss
carryforwards -- -- 2,539
--------- ------- --------
Total income tax provision $ 7,028 $ 5,692 $ 4,216
========= ======= ========
</TABLE>
<PAGE>
<TABLE>
PROVISIONS FOR DEFERRED INCOME TAXES:
<CAPTION>
Year ended the last day of February 1995 1994 1993
--------- ------- ---------
<S> <C> <C> <C>
Tax in excess of book depreciation $ 1,419 $ 599 $ 149
Accruals and valuation reserves 176 (254) (269)
Foreign tax on undistributed earnings 313 (35) (18)
Inventory reserves 387 (147) (157)
Utilization of tax credits 1,223 1,051 340
Reinstatement of deferred taxes -- -- 341
Change in valuation allowances (1,249) (301) --
Other items, net 357 (88) (711)
--------- -------- ---------
Deferred provision (benefit) $ 2,626 $ 825 $ (325)
========= ======= =========
</TABLE>
<TABLE>
Reconciliations of the differences between income taxes computed at federal
statutory tax rates and the consolidated provisions for income taxes are as
follows:
<CAPTION>
Year ended the last day of February 1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Income taxes computed at federal
statutory tax rates $ 7,429 $ 5,162 $ 4,058
Equity in earnings of unconsolidated
affiliates (213) (217) (173)
Foreign tax rate differentials 558 194 296
Current taxation of foreign earnings,
net of foreign tax credit (1,348) (170) (340)
State tax provisions, net of federal
benefits 538 663 381
Other, net 64 60 (6)
-------- ------- ---------
Consolidated provisions $ 7,028 $ 5,692 $ 4,216
======== ======= ========
</TABLE>
The income tax provision for the year ended the last day of February 1993
represents the charge for income taxes that would have been required had the
Company not been able to utilize operating loss carryforwards. The tax benefit
of $2,539 for 1993 resulting from utilizing loss carryforwards, is presented as
an extraordinary item.
At February 28, 1995, the Company has pre-merger U.S. NOL carryforwards of
$2,142 which expire in 1999 and 2000.
<PAGE>
<TABLE>
The net current and noncurrent components of deferred income taxes recognized in
the balance sheet follows:
<CAPTION>
Year ended the last day of February 1995 1994
-------- --------
<S> <C> <C>
Net noncurrent liabilities $17,214 $ 10,846
Net current assets 3,132 3,732
------- ---------
Net liability $14,082 $ 7,114
======= =========
</TABLE>
The amounts above include a valuation allowance of $997 relating primarily to
noncurrent tax assets for net operating loss carryforwards due to the
uncertainty of realizing the benefit of the carryforwards. The net change in
the valuation allowance for deferred tax assets was a decrease of $1,256. Of
this amount, $1,249 resulted from the utilization of foreign tax credit
carryforwards.
<TABLE>
The tax effects of the significant temporary differences which comprise the
deferred tax liabilities and assets follows:
<CAPTION>
Year ended the last day of February 1995 1994
-------- ---------
<S> <C> <C>
Liabilities:
Book versus tax basis of depreciable assets $ 9,920 $ 7,607
Foreign currency translation 6,051 2,942
Other 1,859 1,723
-------- ---------
Gross deferred tax liabilities 17,830 12,272
-------- ---------
Assets:
Reserves and nondeductible accruals 1,225 1,232
Undistributed earnings of foreign subsidiaries 1,239 1,349
Book versus tax basis of inventory 147 911
Compensation related accruals 842 881
Pre-merger U.S. NOL carryforward 734 728
Foreign tax credit carryforward 26 1,250
Other 532 1,060
Valuation allowance for deferred tax assets (997) (2,253)
--------- ----------
Net deferred tax assets 3,748 5,158
-------- ---------
Net deferred tax liability $ 14,082 $ 7,114
======== =========
</TABLE>
<PAGE>
NOTE D: SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Year ended the last day of February 1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Other Income (Expense)
Earnings of affiliates $ 625 $ 643 $ 510
Investment grants 426 539 472
Tooling income 450 44 36
Foreign exchange (182) 46 (457)
Other, net 352 (32) (78)
-------- -------- ---------
Total other income, net $ 1,671 $ 1,240 $ 483
======== ======= ========
Interest expense $ 3,396 $ 3,919 $ 5,383
Interest income (178) (102) (153)
-------- ------- --------
Interest expense, net $ 3,218 $ 3,817 $ 5,230
======== ======= ========
----------------------------------------------------------------------
</TABLE>
NOTE E: INVENTORIES
<TABLE>
<CAPTION>
The last day of February 1995 1994
------- --------
<S> <C> <C>
Inventories
Raw materials $ 5,581 $ 3,270
Component parts 11,787 7,627
Work-in-process 16,670 12,114
Finished goods 14,033 11,470
------- --------
Total inventories $48,071 $ 34,481
======= ========
Excess of replacement cost over the stated
value of LIFO inventories $ 5,159 $ 4,270
</TABLE>
<PAGE>
NOTE F: DEBT
<TABLE>
<CAPTION>
The last day of February 1995 1994
------- --------
<S> <C> <C>
SHORT-TERM DEBT
(With foreign banks)
Bank loans outstanding $18,464 $ 5,736
Weighted average interest rate 5.7% 6.6%
LONG-TERM DEBT
Foreign obligations:
Construction, mortgage and equipment loans (at
4% to 9%, secured by real estate in the
amount of $14,558 in the Federal Republic
of Germany) due in periodic installments
through December 31, 2000 $12,015 $ 22,403
Capital lease obligations payable in installments
through fiscal 1997 with a weighted average
interest rate of 12% 2,117 2,641
Domestic obligations:
Borrowings under revolving credit agreement with
interest at LIBOR plus .75% to 1.25% or prime
rate -- 1,800
Borrowings under uncommitted, unsecured credit
facilities with a weighted average interest of
6.76% at February 28, 1995 16,000 20,000
Capital lease obligations payable in installments
through 1996 with a weighted average interest
rate of 7.4% at February 28, 1995 62 1,052
------- --------
30,194 47,896
Less current maturities 4,331 4,926
------- --------
Long-term debt $25,863 $ 42,970
======= ========
</TABLE>
The following payments, exclusive of capitalized lease payments, are required
during the next five fiscal years: 1996 - $3,172; 1997 - $3,026; 1998 -
$17,666; 1999 - $1,666; 2000 - $1,668.
Terms of the German long-term debt agreements contain certain provisions
restricting payment of dividends to the parent. Included in retained earnings
are $30,501 of undistributed earnings of the German subsidiaries.
Subsequent to year end, the Company entered into a new credit facility for $65
million. The facility is unsecured. The interest rate on this agreement is the
prime rate or, depending upon the Company's financial performance, LIBOR plus
.375% to .625%. The facility fee is also dependent upon the Company's financial
performance and ranges from 1/8 of 1% to 2/10 of 1% of the facility amount. The
facility has an initial maturity of May 12, 2000, but may be extended for an
additional year on both the first and second anniversary dates of the facility
upon mutual agreement of the Company and the banks. The facility has a
competitive bid option which can result in interest rates below the stated
facility rates.
The covenants for this credit facility pertain to consolidated net worth,
leverage, cash flow coverage and cash flow to debt levels, among others. The
Company was in compliance with all covenants under all credit agreements at
February 28, 1995.
The Company has three uncommitted, unsecured credit facilities totaling $45
million. These facilities are utilized when the borrowing rates available under
them are below those available under the committed facility. Borrowings under
these facilities, which by their terms are due within one year, have been
classified as long-term. These obligations are supported by unused commitments
under the domestic credit facility, and it is the Company's intent to maintain
them as long-term.
As of February 28, 1995, the Company had unused lines of credit available for
working capital of approximately $12.1 million for U.S. operations and $10.9
million for foreign operations.
<PAGE>
NOTE G: DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-
defined interest rate and foreign exchange price risks.
The Company selectively enters into forward contracts to hedge certain firm
purchase commitments denominated in foreign currency (principally German marks).
Gains or losses on forward contracts designated to hedge a foreign currency
transaction are included in the measurement of income when the hedged
transaction occurs. At February 28, 1995, the U. S dollar equivalent of forward
contracts outstanding approximated $2.2 million. There were no forward
contracts at February 28, 1994.
The Company uses variable rate credit lines to finance a portion of its working
capital requirements. Borrowings under those credit lines fluctuate throughout
the year. Interest rate cap agreements are used to reduce the potential impact
of increases in interest rates on these borrowings. The Company is party to
five separate interest rate cap agreements. Under two agreements, the Company
is protected against interest rate increases above 5.5% LIBOR on $15 million of
floating rate debt through November 1997. Under two other agreements, the
Company is protected against interest rate increases above 6.0% LIBOR on $10
million of floating rate debt through March 1998. Under another agreement, the
Company is protected against interest rate increases above 7.0% deutschemark
LIBOR on DM 20 million of floating rate debt through December 1999. At February
28, 1995, and 1994, unamortized premium amounted to $922 and $303, respectively.
Counterparties to all of these financial instruments are major financial
institutions. Credit loss from counterparty nonperformance is not anticipated.
NOTE H: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values of
the Company's financial instruments at February 28, 1995 and 1994.
<TABLE>
<CAPTION>
The last day of February 1995 1994
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ -------- ------ -------
<S> <C> <C> <C> <C>
Financial Assets
Other assets $ 922 $ 1,249 $ 303 $ 303
Currency contracts -- 95 -- --
Financial Liabilities
Long-term debt $28,015 $ 27,565 $ 44,203 $43,792
</TABLE>
The carrying amounts shown above are included in the consolidated balance sheet
under the indicated captions.
The following methods and assumptions were used to estimate fair value of each
class of financial instrument:
Other assets: The amounts reported relate to the interest rate caps reported in
Note G. The carrying amount represents the unamortized premiums paid for the
contracts. The fair value is based on its quoted market price as provided by
the financial institutions which are counterparty to the caps.
Currency contracts: The fair value of foreign currency contracts (used for
hedging) is estimated by obtaining quotes from the financial institution which
is counterparty to the contacts.
Long-term debt: The fair value of the Company's long-term debt excludes
capitalized leases. The estimated fair value is based on the current rates
available to the Company for debt on the same remaining maturities, using the
discounted cash flow method.
<PAGE>
NOTE I: LEASES
The Company leases automobiles and machinery and equipment under noncancelable
operating leases which expire over the next eight years. Renewal and escalation
clauses are not significant. Rent expense was $2,229, $1,782 and $2,087 for
fiscal 1995, 1994 and 1993, respectively.
During fiscal 1993, the Company's German subsidiary entered into a capital
lease agreement for substantially all of its computer equipment valued at
$5,337.
Land, buildings and equipment include capitalized leases of $6,279 and
$7,419 less accumulated amortization of $4,148 and $3,244 as of the last
day of February 1995 and 1994, respectively.
Future minimum lease payments under capitalized and long-term noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
----------- ------------
<S> <C> <C>
1996 $ 1,356 $ 1,943
1997 1,077 1,338
1998 0 917
1999 0 327
2000 0 94
Thereafter 0 126
--------- ---------
Total minimum lease payments $ 2,433 $ 4,745
=========
Less amount representing interest 254
---------
Total obligations under capitalized leases $ 2,179
=========
</TABLE>
NOTE J: CONTINGENCIES
The Company is named in various suits and claims which arise in the normal
course of business. Where appropriate, the Company engages legal counsel and
disputes these claims. The Company believes that it has meritorious defenses,
and, although the ultimate outcomes cannot be determined at the present time, it
believes the final disposition of these matters will not materially affect the
Company's financial position or results of operations. The Company has no
material off-balance-sheet financial risks.
<PAGE>
NOTE K: EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
The Company's existing incentive stock option plan was established in June 1982
by stockholder approval and reserved 450,000 shares for distribution. Under
United States tax law, this plan's capability to grant new incentive stock
options has expired. As a result, this plan may grant only non-qualified stock
options after June 1992. Prior to the expiration of the incentive option
granting capability, 57,400 options were granted at $7.50 in fiscal 1993. As of
February 28, 1995, 131,226 shares are available for grant.
The following table summarizes the transactions pursuant to the Company's stock
option plan for the three-year period ended February 28, 1995:
<TABLE>
<CAPTION>
Number
of Shares Option Prices
--------- -------------
<S> <C> <C>
Options outstanding at February 29, 1992 258,850 $3.75 to $9.13
Granted 57,400 7.50
Cancelled (6,000) 4.13 to 9.13
Expired (9,550) 7.38
Exercised (117,646) 3.75 to 9.13
----------
Options outstanding at February 28, 1993 183,054 3.75 to 9.13
Cancelled (8,734) 3.75 to 4.37
Expired (500) 9.13
Exercised (17,934) 3.75 to 7.50
----------
Options outstanding at February 28, 1994 155,886 3.75 to 7.50
Exercised (49,106) 3.75 to 7.50
----------
Options outstanding at February 28, 1995 106,780 3.75 to 7.50
=========
Exercisable at February 28, 1995 88,653 3.75 to 7.50
=======
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Full-time domestic employees as of December 1 of the preceding calendar year are
eligible to contribute 10% of their calendar year base pay up to a maximum of
five thousand dollars towards the purchase of the Company's common stock. The
purchase price is equal to the lower of 95% of the beginning or end-of-calendar-
year quoted NASDAQ price. Under the plan, 26,689, 15,360 and 37,436 shares were
issued at $9.98, $9.98 and $2.73 per share during fiscal 1995, 1994 and 1993,
respectively. At February 28, 1995, 97,941 shares are available for issuance
under the plan.
BONUS, PROFIT SHARING AND RETIREMENT PLANS
The Company and its operating entities have various bonus, profit sharing and
retirement plans. The Company's bonus plans cover qualified management
employees. The payouts of these bonus plans are based on attainment of
operating results and other key performance goals. The established Company
profit sharing plan covers substantially all employees for the domestic
operating entities and is qualified under Section 401(k) of the Internal Revenue
Code. It allows for employee contributions and employer contributions. Certain
key foreign employees are eligible for a one-time lump sum payment on retirement
or involuntary termination, the amounts of which are accrued over the employee's
estimated service. During fiscal 1995, 1994 and 1993, the expenses for these
plans were $4,075, $3,654 and $2,717, respectively.
<PAGE>
NOTE L: SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION
The Company designs and manufactures a wide range of electrical, electronic and
semiconductor components which it sells to original equipment manufacturers and
distributors in three market segments: Automotive, Computer, and Consumer and
Commercial (C&C). Principal products include, but are not limited to, snap-
action switches and switch assemblies, semiconductor devices, keyboards and
related products, and electronic assemblies and displays.
Principal products sold by business segment are summarized as follows:
Automotive Computer C&C
---------- --------- ---
Switches X X X
Semiconductors X X X
Keyboards and Related Products X
Electronic assemblies and displays X X
Two automotive market customers individually account for 13.9% and 13.8% of
consolidated net sales in fiscal 1995. Prior to fiscal 1995, no customer
accounted for more than 10% of net sales.
Identifiable assets report only the assets used in the operation of that
business segment. All other assets are shown separately as corporate assets.
Corporate assets include cash, other current and noncurrent assets and the
Company's investment in unconsolidated affiliates.
<PAGE>
<TABLE>
<CAPTION>
Consumer & Eliminations
Fiscal Year Automotive Computer Commercial & Corporate Consolidated
---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
Sales to unaffiliated customers $ 145,768 $ 107,347 $ 86,122 $ -- $ 339,237
Intersegment sales 1,620 16,133 5,014 (22,767) --
Total net sales 147,388 123,480 91,136 (22,767) 339,237
Earnings from operations 10,687 9,865 5,284 (2,438) 23,398
Identifiable assets 105,924 77,036 58,702 19,531 261,193
Capital expenditures, net 25,928 9,026 9,782 -- 44,736
Depreciation 7,493 6,733 4,499 43 18,768
1994
Sales to unaffiliated customers $ 104,018 $ 99,346 $ 71,905 $ -- $ 275,269
Intersegment sales 2,420 12,630 4,198 (19,248) --
Total net sales 106,438 111,976 76,103 (19,248) 275,269
Earnings from operations 11,582 5,161 3,241 (2,224) 17,760
Identifiable assets 64,317 67,884 44,444 16,903 193,548
Capital expenditures, net 16,713 5,665 978 -- 23,356
Depreciation 7,371 6,929 2,357 63 16,720
1993
Sales to unaffiliated customers $ 86,866 $ 110,455 $ 68,910 $ -- $ 266,231
Intersegment sales 2,553 12,047 4,418 (19,018) --
Total net sales 89,419 122,502 73,328 (19,018) 266,231
Earnings from operations 8,575 6,748 3,561 (2,203) 16,681
Identifiable assets 52,220 71,262 45,954 13,783 183,219
Capital expenditures, etc. 5,968 8,641 4,668 (254) 19,023
Depreciation 4,616 8,598 4,746 63 18,023
</TABLE>
<PAGE>
GEOGRAPHIC AREA INFORMATION
Intercompany sales between geographic areas are made at prices approximating
market and are eliminated from total net sales. The Company's international
operations are conducted primarily in Western Europe through wholly owned
subsidiaries and in Hong Kong and Australia through sales offices.
<TABLE>
<CAPTION>
United Eliminations
Fiscal Year States International & Corporate Consolidated
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
1995
Sales to unaffiliated customers $ 196,633 $ 142,604 $ -- $ 339,237
Transfers between areas 3,035 19,732 (22,767) --
Total net sales 199,668 162,336 (22,767) 339,237
Earnings from operations 16,446 9,380 (2,428) 23,398
Identifiable assets 127,311 114,161 19,721 261,193
1994
Sales to unaffiliated customers $ 155,647 $ 119,622 $ -- $ 275,269
Transfers between areas 1,714 17,534 (19,248) --
Total net sales 157,361 137,156 (19,248) 275,269
Earnings from operations 15,451 4,814 (2,505) 17,760
Identifiable assets 83,957 92,336 17,255 193,548
1993
Sales to unaffiliated customers $ 131,477 $ 134,754 $ -- $ 266,231
Transfers between areas 1,803 17,215 (19,018) --
Total net sales 133,280 151,969 (19,018) 266,231
Earnings from operations 11,908 6,914 (2,141) 16,681
Identifiable assets 70,005 99,092 14,122 183,219
<FN>
Net assets, including intercompany balances, of foreign subsidiaries and
affiliates were $70,147 (1995), $56,007 (1994), and $54,081 (1993) at each
respective year end.
</TABLE>
<PAGE>
<TABLE>
QUARTERLY DATA (UNAUDITED)
----------------------------------------------------------------------------
<CAPTION>
GROSS NET EARNINGS
FISCAL YEAR NET SALES MARGIN EARNINGS PER SHARE*
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $ 339,237 $ 97,018 $ 14,823 $ 1.36
----------------------------------------------------------------------------
QUARTERS
Fourth 93,859 26,017 4,917 .40
Third 91,490 25,284 4,277 .35
Second 74,241 20,814 1,712 .18
First 79,647 24,903 3,917 .42
----------------------------------------------------------------------------
1994 $ 275,269 $ 80,179 $ 11,033 $ 1.19
----------------------------------------------------------------------------
QUARTERS
Fourth 70,879 22,589 3,738 .40
Third 72,954 21,321 3,057 .33
Second 61,805 16,166 461 .05
First 69,631 20,103 3,777 .41
----------------------------------------------------------------------------
<FN>
*Restated to reflect stock dividend in July 1994.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification and information as to Directors is incorporated herein by
reference to the information under the caption "Election of Directors" in the
Company's Proxy Statement for its 1995 Annual Meeting of Stockholders.
Information concerning the executive officers is set forth at the end of Item 1
in Part I hereof under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information concerning executive compensation under the caption
"Compensation" in the Company's Proxy Statement for its 1995 Annual Meeting of
Stockholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners and
management is set forth under the caption "Stock Ownership Information" in the
Company's Proxy Statement for its 1995 Annual Meeting of Stockholders and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Peter B. Cherry, the Chairman of the Board and President, is the son of Mr. and
Mrs. Walter L. Cherry. There are no other family relationships.
The information set forth under the captions "Employment Contracts and Change
of Control Agreements" and "Compensation Committee Interlocks and Insider
Participation" in the Company's Proxy Statement for its 1995 Annual Meeting of
Stockholders is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
(a) 1. FINANCIAL STATEMENTS See Part II
(a) 2. FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants See Part II
II. Valuation and Qualifying Accounts S-1
All other schedules are omitted because they are not applicable, not required
under the instructions, or the information is included in the financial
statements or notes thereto.
Separate financial statements for the Registrant's unconsolidated fifty percent
owned affiliates, accounted for by the equity method, have been omitted because
the affiliates do not constitute significant subsidiaries.
(a) 3. EXHIBITS See Index to Exhibits
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed in the last quarter of the
Registrant's fiscal year ended the last day of February 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE CHERRY CORPORATION
By Peter B. Cherry By Dan A. King
------------------------ ------------------------
Peter B. Cherry Dan A. King
Chairman of the Board, Treasurer, Secretary and
President and Director Corporate Controller
By Walter L. Cherry By Thomas L. Martin, Jr.
------------------------ ------------------------
Walter L. Cherry Dr. Thomas L. Martin, Jr.
Director Director
By Alfred S. Budnick By Robert McDermott
------------------------ -----------------------
Alfred S. Budnick Robert McDermott
Vice President, President Director
Cherry Semiconductor Corporation
and Director
By Peter A. Guglielmi By Charles W. Denny
------------------------ -----------------------
Peter A. Guglielmi Charles W. Denny
Director Director
Dated May 22, 1995
--------------------
<PAGE>
</TABLE>
<TABLE>
THE CHERRY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 AND 1993
(Dollars in Thousands)
<CAPTION>
Balance (A) Balance
Beginning Charged to Additions Close of
of Period Expense (Deductions) Period
--------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Allowance for Doubtful
Accounts:
1995 $ 2,330 $ 293 $ 157 $ 2,780
======= ======= ====== =======
1994 $ 2,339 $ 255 $ (264) $ 2,330
======= ======= ====== =======
1993 $ 1,938 $ 736 $ (335) $ 2,339
======= ======= ====== =======
<FN>
(A) Additions (deductions) include the currency translation effects resulting
from applying SFAS No. 52 to our financial statements for all three years in
this schedule.
</TABLE>
S-1
<PAGE>
THE CHERRY CORPORATION
INDEX TO EXHIBITS
3. a. Amended and restated Certificate of Incorporation (incorporated by
reference to 3(a) to Form 8-K dated July 13, 1994).
b. Amended and restated By-laws (incorporated by reference to 3(b) to
Form 8-K dated July 6, 1994).
4. a. Multicurrency Credit Agreement as of May 12, 1995 among The Cherry
Corporation, the banks party thereto and Harris Trust and Savings Bank
as agent, filed as Exhibit 4 to Form 8-K dated May 19, 1995 and is
incorporated herein by reference.
b. Other instruments defining the rights of holders of other long-term debt
of the Registrant are not filed as exhibits because the debt
authorized under any such instrument does not exceed 10% of
consolidated total assets as of the last day of February, 1995.
Copies of debt instruments for which the related debt is less than 10%
of consolidated total assets will be furnished to the Commission upon
request.
10. a. Employee Stock Purchase Plan, filed as Exhibit A to the Registrant's
Proxy Statement for 1980 Annual Meeting of Stockholders is
incorporated herein by reference. (1)
b. 1982 Stock Option Plan, filed as Exhibit A to the Registrant's Proxy
Statement for 1982 Annual Meeting of Stockholders is incorporated
herein by reference. (1)
c. Release and final settlement agreement dated May 4, 1992 on agreement
for purchase and sale of assets dated May 31, 1991 filed as Exhibit
10.c. to 1992 Form 10-K is incorporated herein by reference. (1)
d. Executive agreement dated May 26, 1992, between Cherry Semiconductor
Corporation and Alfred S. Budnick filed as Exhibit 4d to 1993 Form 10-
K is incorporated herein by reference (1).
e. 1995 Stock Incentive Plan, filed as Exhibit A to the Registrant's
Proxy Statement for 1995 Annual Meeting of Stockholders is
incorporated herein by reference. (1)
f. 1995 Nonemployee Director Stock Option Plan, filed as Exhibit B to the
Registrant's Proxy Statement for 1995 Annual Meeting of Stockholders
is incorporated herein by reference. (1)
11. Statement of Computation of earnings per share. (2)
21. Table of Subsidiaries of the Registrant. (2)
23. Consent of independent public accountants. (2)
27. Article 5 Financial Data Schedule (2)
(1) Each exhibit marked constitutes a management contract or compensatory
plan contract or arrangement filed pursuant to Item 601(b)(10)(iii)(A)
of Regulation S-K.
(2) Filed herewith.
<PAGE>
<TABLE>
THE CHERRY CORPORATION Exhibit 11
COMPUTATION OF EARNINGS PER SHARE Page 1 of 2
(In Thousands, except Per Share Information)
<CAPTION>
Year Ended Last Day of February
PRIMARY EARNINGS PER SHARE 1995 1994 1993
<S> <C> <C> <C>
Earnings before extraordinary tax credit
and cumulative effect of change in
accounting principle $ 14,823 $ 9,491 $ 7,718
Extraordinary tax credit -- -- 2,539
Cumulative effect of change in accounting
for income taxes -- 1,542 --
--------- --------- ---------
Net earnings $ 14,823 $ 11,033 $ 10,257
========= ========= =========
Weighted average number of shares
outstanding 10,882,950 9,299,848 9,184,228
Primary Earnings per Share:
Before extraordinary tax credit and
cumulative effect of change in
accounting principle $ 1.36 $ 1.02 $ .84
Extraordinary tax credit -- -- .28
Cumulative effect of change in accounting
principle -- .17 --
--------- --------- ---------
Net earnings $ 1.36 $ 1.19 $ 1.12
========= ========= =========
Additional Primary Computation:
Weighted average shares outstanding
per primary computation above 10,882,950 9,299,848 9,184,228
Add dilutive effect of stock options
determined by the treasury stock
method 80,970 89,802 111,950
--------- --------- ---------
Weighted average shares outstanding as
adjusted 10,963,920 9,389,650 9,296,178
========== ========= =========
Primary earnings per share, as adjusted:
Before extraordinary tax credit and
cumulative effect of change in
accounting principle $ 1.35 $ 1.01 $ .83
Extraordinary tax credit -- -- .27
Cumulative effect of change in
accounting principle -- .16 --
--------- --------- ---------
Net earnings (a) $ 1.35 $ 1.17 $ 1.10
========= ========= =========
<FN>
(a) This calculation is submitted in accordance with Regulation S-K, item 601
(b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
The historical earnings per share and average shares outstanding have been
restated to reflect the 4,672,568 share stock dividend on July 11, 1994. The
weighted average shares outstanding include both Class A and Class B Common
Stock.
</TABLE>
<PAGE>
<TABLE>
THE CHERRY CORPORATION Exhibit 11
COMPUTATION OF EARNINGS PER SHARE Page 2 of 2
(In Thousands, except Per Share Information)
<CAPTION>
Year Ended Last Day of February
FULLY DILUTED EARNINGS PER SHARE 1995 1994 1993
<S> <C> <C> <C>
Earnings before extraordinary tax credit
and cumulative effect of change in
accounting principle $ 14,823 $ 9,491 $ 7,718
Extraordinary tax credit -- -- 2,539
Cumulative effect of change in accounting
for income taxes -- 1,542 --
--------- --------- ---------
Net earnings $ 14,823 $ 11,033 $ 10,257
========= ========= =========
Weighted average number of shares
outstanding 10,882,950 9,299,848 9,184,228
Fully Diluted Earnings per Share:
Before extraordinary tax credit and
cumulative effect of change in
accounting principle $ 1.36 $ 1.02 $ .84
Extraordinary tax credit -- -- .28
Cumulative effect of change in accounting
principle -- .17 --
--------- --------- ---------
Net earnings $ 1.36 $ 1.19 $ 1.12
========= ========= =========
Additional Fully Diluted Computation:
Weighted average shares outstanding per
fully diluted computation above 10,882,950 9,299,848 9,184,228
Add dilutive effect of stock options
determined by the treasury stock
method 81,394 91,902 125,794
--------- --------- ---------
Weighted average shares outstanding as
adjusted 10,964,344 9,391,750 9,310,022
========== ========= =========
Primary earnings per share, as adjusted:
Before extraordinary tax credit and
cumulative effect of change in
accounting principle $ 1.35 $ 1.01 $ .83
Extraordinary tax credit -- -- .27
Cumulative effect of change in
accounting principle -- .16 --
--------- --------- ---------
Net earnings (a) $ 1.35 $ 1.17 $ 1.10
========= ========= =========
<FN>
(a) This calculation is submitted in accordance with Regulation S-K, item 601
(b) (11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
The historical earnings per share and average shares outstanding have been
restated to reflect the 4,672,568 share stock dividend on July 11, 1994. The
weighted average shares outstanding include both Class A and Class B Common
Stock.
</TABLE>
<PAGE>
THE CHERRY CORPORATION Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
STATE OR COUNTRY
NAME OF SUBSIDIARY/DIVISION(1) OF ORGANIZATION
------------------------------ ----------------
Cherry Electrical Products
Waukegan, Illinois State of Delaware
Cherry Semiconductor Corporation
East Greenwich, Rhode Island State of Rhode Island
Cherry Mikroschalter GmbH
Auerbach, Germany Federal Republic of Germany
Cherry Electrical Products Limited
Harpenden, England United Kingdom
Plastech GmbH
Bayreuth, Germany Federal Republic of Germany
Cherry SARL
Paris, France France
Cherry SRO
Ostrov, Czech Republic Czech Republic
Cherasia Limited
North Point, Hong Kong Hong Kong
Cherry Australia Pty., Ltd.
Victoria, Australia Australia
Cherry Systems Corporation
Waukegan, Illinois State of Texas
(1) Cherry Electrical Products is the only division of The Cherry Corporation.
The remaining company's listed above are subsidiaries. All entities conduct
business in the name indicated.
<PAGE>
Consent of Independent Public Accountants Exhibit 23
As independent public accountants, we hereby consent to the incorporation of our
report, included in this Form 10-K, into The Cherry Corporation's previously
filed Registration Statements, File Nos. 2-93004 and 2-68204.
Arthur Andersen LLP
-------------------
Arthur Andersen LLP
Chicago, Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated statement of income and condensed consolidated balance
sheet and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> FEB-28-1995
<CASH> 5,694
<SECURITIES> 0
<RECEIVABLES> 56,247
<ALLOWANCES> 0
<INVENTORY> 48,071
<CURRENT-ASSETS> 115,282
<PP&E> 300,080
<DEPRECIATION> 168,025
<TOTAL-ASSETS> 261,193
<CURRENT-LIABILITIES> 69,281
<BONDS> 25,863
<COMMON> 12,273
0
0
<OTHER-SE> 135,354
<TOTAL-LIABILITY-AND-EQUITY> 261,193
<SALES> 339,237
<TOTAL-REVENUES> 339,237
<CGS> 242,219
<TOTAL-COSTS> 242,219
<OTHER-EXPENSES> 73,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,396
<INCOME-PRETAX> 21,851
<INCOME-TAX> 7,028
<INCOME-CONTINUING> 14,823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,823
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 0
</TABLE>
