FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number 1-8277
ACME ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 16-0324980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 QUAKER ROAD, EAST AURORA, NEW YORK 14052
(Address of principal corporate offices) (Zip Code)
716/655-3800
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock - Par Value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of September 12, 1995.
Common Stock, Par Value $1 Per Share, $54,105,166
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of September 12, 1995.
Common Stock, Par Value $1 Per Share, 5,003,946 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended June 30, 1995, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive proxy statement for the annual meeting
of shareholders to be held on October 27, 1995, are incorporated by reference
into Part III.
PART I
ITEM 1 - BUSINESS
BUSINESS
The Registrant was duly organized and incorporated under the laws of the
State of New York on April 26, 1946. Its sole line of business is the design
and manufacture of power conversion equipment for electronic and electrical
systems. Principal markets encompass the computer, office copier, information
systems, military, aerospace and communications industries and a variety of
industrial, commercial and residential fields for applications that require
conversion of electrical energy from one useable state to another. Products
are distributed to customers through the Registrant's sales force, independent
sales representatives and wholesale distributors. The business of the
Registrant is not seasonal in nature.
COMPETITION
Competitive conditions within the power conversion industry are intense.
The Registrant competes with many other companies, some of which have far
greater resources than the Registrant. The principal methods of competition
within the industry are price, service and product performance. To meet this
competition, the Registrant attempts to maintain high standards of engineering,
manufacturing and customer service. Due to the number and variety of
competitors, reliable data relative to the Registrant's competitive position
within the power conversion industry would be difficult to develop and is not
known nor believed to exist.
CUSTOMERS
Two customers of the Company accounted for 13.4% and 10.6% of fiscal 1995
sales, respectively, one of which also accounted for 10.6% of June 30, 1995,
accounts receivable. In comparison, there was one customer of the Company that
accounted for 10.0% of fiscal 1994 sales and no customers were above the 10%
threshold in 1993.
BACKLOG
The backlog of orders believed to be firm totaled approximately
$20,954,498 at June 30, 1995, compared with approximately $16,697,000 at June
30, 1994. The change in backlog as of June 30, 1995, compared with the backlog
as of June 30, 1994, reflects increased order volume from a major OEM customer
at the Electronics Division, combined with several significant development
contracts received at the Aerospace Division. Backlog orders at June 30, 1995,
are generally expected to be filled during the current fiscal year.
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RAW MATERIALS
The Registrant purchases materials in a semi-finished state from other
manufacturers and distributors. Availability of materials is considered
adequate to maintain current production levels.
PATENTS
The Registrant holds several technical patents and trademarks and is a
party to certain patent applications. The extent of the effect of such patents
and trademarks is, however, in the opinion of management, not material at this
time.
LICENSES
The Registrant is a party to several license agreements. The only
material license, providing for the sale and manufacture of a proprietary fiber
nickel cadmium battery (FNC), is an agreement with Daug-Hoppecke Gesellschaft
Fur Batteriesysteme mbH ("DAHO") of Brilon, Germany. The Company recorded an
impairment loss write-off as of June 30, 1994, assigning zero value to the FNC
license agreement. For further discussion, see attached referenced portions of
the Registrant's Annual Report to Shareholders.
EMPLOYEES
As of June 30, 1995, approximately 821 persons were employed by the Regis-
trant.
RESEARCH AND DEVELOPMENT
Approximately 6% of the Registrant's employees are engaged in engineering
design and product development. Most new products are designed to satisfy
specific customer requirements, and the cost of such development is expensed as
incurred. Since satisfaction of many customers' needs requires advancing
applicable technology, applied research is an integral part of engineering-
design and product-development activities. The cost of such activities during
the fiscal years ended June 30, 1995, 1994 and 1993, was $4,791,000, $5,666,000
and $5,757,000, respectively.
ENVIRONMENTAL MATTERS
The Company was informed by the New York State Department of Environmental
Conservation (DEC) on December 5, 1994, that the Municipal Waste Landfill,
Cuba, NY, has been listed in the New York State Registry of Inactive Hazardous
Waste Disposal Sites as a Class "2" site requiring remediation. Acme Electric
Corporation has been determined by the DEC to be a potentially responsible
party (PRP) by virtue of its disposal of wastes at the site. As a PRP, the
Company may be subject to liability for the cost of site investigation and
remediation. At this time, there is insufficient information available from
which any reasonable estimate of such cost can be made. The Company did have
insurance policies in effect during the period that waste was disposed of at
the site, which the Company believes would provide coverage in the event the
Company is liable.
ITEM 2 - PROPERTIES
The Registrant owns one plant located in Lumberton, North Carolina. The
Registrant concluded the sale of its Cuba, New York, facility in September 1993
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and the sale of its Salt Lake City, Utah, facility in February 1994. The
Registrant, under an operating lease agreement, leases back portions of the
Cuba, New York, facility. The Registrant has completed the construction of a
new 91,000-square-foot facility in Cuba, New York, and moved into it during
fiscal 1995. The Registrant also maintains operating leases for its Corporate
facility in East Aurora, New York, and its plant located in Tempe, Arizona.
The Registrant also owns an idle facility in West Jordan, Utah, vacated in
conjunction with the restructuring of its Utah activities into the Tempe,
Arizona, location. The Registrant believes that these facilities provide
adequate capacity for its current operations.
SQUARE FOOTAGE SQUARE FOOTAGE LEASE EX-
LOCATION OWNED LEASED PIRATION DATE
Cuba, NY (New Plant) - 91,000 April 2017
Cuba, NY (Old Plant) - 68,757 August 1996
East Aurora, NY - 10,000 April 1999
(Exec. Offices)
Lumberton, NC 128,170 - N/A
Tempe, AZ - 40,260 March 2000
West Jordan, UT 23,242 - N/A
ITEM 3 - LEGAL PROCEEDINGS
The Registrant is involved in ordinary routine litigation incidental to
its business, but none is expected to have a material impact upon the financial
condition of the Registrant.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the solicitation
of proxies or otherwise.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Information relating to the market and market prices of the Registrant's
common stock, the approximate number of Registrant's shareholders and its
dividend history for the past two fiscal years appears on page 32 of the
Registrant's Annual Report to Shareholders for the fiscal year ended June 30,
1995, submitted herewith as an exhibit and such information is incorporated by
reference herein.
Information relating to long-term debt for the past two fiscal years
appears on page 27 of the Registrant's Annual Report to Shareholders for the
fiscal year ended June 30, 1995, submitted herewith as an exhibit and such
information is incorporated by reference. The Registrant suspended its
quarterly cash dividend effective the third quarter of fiscal 1991. The loss
in fiscal 1991 resulted in a deficit of retained earnings. The Registrant,
therefore, does not expect to reinstate dividends in the foreseeable future.
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ITEM 6 - SELECTED FINANCIAL DATA
A five-year summary of certain financial information relating to the
financial condition and results of operations of the Registrant appears on page
21 of the Registrant's Annual Report to Shareholders for the fiscal year ended
June 30, 1995, submitted herewith as an exhibit and such summary is
incorporated by reference herein.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations appears on pages 18 and 20 of the Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1995, submitted herewith as an
exhibit and such management's discussion and anaylsis is incorporated by
reference herein.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and its
subsidiaries, appearing on pages 22 through 31 of the Registrant's Annual
Report to Shareholders for the fiscal year ended June 30, 1995, submitted
herewith as an exhibit, are incorporated by reference herein:
Consolidated Statements of Operations - Years Ended June 30, 1995, 1994,
1993
Consolidated Balance Sheets - June 30, 1995 and 1994
Consolidated Statements of Cash Flows - Years Ended June 30, 1995, 1994,
1993
Consolidated Statements of Shareholders' Equity - Years Ended June 30,
1995, 1994, 1993
Notes to Consolidated Financial Statements
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no disagreements with accountants on accounting and
financial disclosure matters.
PART III
ITEM 10 - DIRECTORS AND OFFICERS OF THE REGISTRANT
IDENTIFICATION OF DIRECTORS
Information on directors of the Registrant is contained under the caption
"Election of Directors," presented in the Registrant's Definitive Proxy
Statement filed pursuant to Regulation 14A and used in conjunction with the
Registrant's 1995 Annual Meeting of Shareholders to be held on October 27,
1995, and is incorporated by reference herein.
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IDENTIFICATION OF EXECUTIVE OFFICERS
SUMMARY OF BUSINESS EXPERIENCE
NAME, AGE AND POSITION OVER THE LAST FIVE YEARS
Robert J. McKenna, 47, Chairman, Prior to assuming the position currently
President and Chief Executive Officer held in October 1994, served as
President and Chief Executive Officer
since October 1993. Prior thereto,
served as President and Chief Operating
officer since September 1992. Prior
thereto, served as Group Vice President
of the Diversified Products Group,
Aeroquip Corporation since April 1990.
Prior thereto, Vice President and
General Manager of the Automotive
Connectors Division of Aeroquip
Corporation since July 1989.
Daniel K. Corwin, 48, Prior to assuming the position currently
Senior Vice President held in August 1994, served as Vice
and Chief Financial Officer President of Administration and Chief
Financial Officer since February 1992.
Prior thereto, served as Vice President
and General Manager, Electronics
Division, since November 1990. Prior
thereto, served as Vice President of
Operations since July 1988.
David G. Anderson, 43, Prior to assuming the position currently
Corporate Secretary, Treasurer, held in February 1992, served as
and General Counsel Corporate Secretary, Treasurer,
Controller and General Counsel since
April 1988.
Donald J. Chesner, 51, Prior to assuming the position currently
Vice President and General held in May 1993, served as General
Manager, Acme Transformer Division Manager since February 1992. Prior
thereto, served as National Sales
Manager, Acme Transformer Division,
since March 1987.
John E. Gleason, 48, Prior to assuming the position currently
Vice President and General held in May 1993, served as General
Manager, Electronics Division Manager since February 1992. Prior
thereto, served as Operations Manager,
Cuba Electronics Division, since October
1991, and prior thereto, served as
Operations Manager, Salt Lake City
Electronics Division, since January
1987.
Menahem Anderman, 42, Prior to assuming the position currently
Vice President and General held in April 1994, served as Venture
Manager, Advanced Energy Systems Director since May 1993. Prior thereto,
served as Technical Director since May
1988.
ITEM 11 - MANAGEMENT REMUNERATION AND TRANSACTIONS
Information called for in response to this item is contained under the
captions "Compensation of Executive Officers," "Employment Agreement," "1981
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Incentive Stock Option Plan," "1989 Stock Option Plan," and "Pension Plan,"
presented in the Registrant's definitive proxy statement filed pursuant to
Regulation 14A and used in conjunction with the Registrant's 1995 Annual
Meeting of Shareholders to be held on October 27, 1995, and is incorporated by
reference herein.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners
and management is contained under the captions "Voting Securities and Principal
Holders Thereof" and "Nominees For Election As Directors" in the Registrant's
definitive proxy statement filed pursuant to Regulation 14A and used in
conjunction with the Registrant's 1995 Annual Meeting of Shareholders to be
held on October 27, 1995, and is incorporated by reference herein.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain transactions have been referenced under Item 11. There are no
other applicable relationships or related transactions.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
See the accompanying Index to Financial Statements and Financial
Statement Schedules on page F-1 of this report.
2. FINANCIAL STATEMENT SCHEDULES
See the accompanying Index to Financial Statements and Financial
Statement Schedules on page F-1 of this report.
3. EXHIBITS PAGE NUMBER OR INCORPORATION
-------- BY REFERENCE
----------------------------
3a Certificate of Incorporation, Exhibit (3a) to Report on
as amended to date Form 10-K for fiscal year
ended June 30, 1989.
3b Bylaws, as amended to date Exhibit (3b) to Report on
Form 10-K for fiscal year
ended June 30, 1990.
10 Employment Agreements See Exhibit 10 attached.
11 Statement re. computation of Note (1e) to Consolidated
per share earnings Financial Statements at
page 26 of 1995 Annual
Report to Shareholders.
13 Acme Electric Corporation 1995
Annual Report to Shareholders See Exhibit 13 attached.
21 Subsidiaries of Registrant See Exhibit 21 attached.
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22 1995 Proxy Statement Definitive Proxy Statement filed
under Schedule 14A, September
18, 1995, File No. 001-08277.
23 a,b, Additional Exhibits - Pages F-4 through F-7 on
c,d Undertakings Report on Form 10-K for fiscal
year ended June 30, 1995.
99 Additional Exhibits -
News Release, April 28
1995, announcing
third quarter results. See Exhibit 99-1 attached.
News Release, May 17,
1995, announcing Robert D.
Batting being named to
the board of directors. See Exhibit 99-2 attached.
News Release, May 17,
1995, announcing Randall L.
Clark being named to
the board of directors. See Exhibit 99-3 attached.
News Release, May 26, 1995,
announcing response to
recent stock activity. See Exhibit 99-4 attached.
News Release, June 13, 1995,
announcing response to
recent stock activity. See Exhibit 99-5 attached.
News Release, June 27, 1995,
announcing response to
recent stock activity. See Exhibit 99-6 attached.
News Release, July 12, 1995,
announcing an agreement with
B.A.T. International. See Exhibit 99-7 attached.
News Release, July 20, 1995,
announcing response to news
report about the Company. See Exhibit 99-8 attached.
News Release, August 14, 1995,
announcing fourth quarter
and year-end results. See Exhibit 99-9 attached.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K
during the fifty-two-week period ending
June 30, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE AND TITLE DATE
/s/ 09/28/95
Robert D. Batting, Director
/s/ 09/28/95
Robert T. Brady, Director
/s/ 09/28/95
Randall L. Clark, Director
____________________________________ 09/28/95
W. Bennett Conner, Director
/s/ 09/28/95
G. Wayne Hawk, Director
/s/ 09/28/95
Terry M. Manon, Director
/s/ 09/28/95
Robert J. McKenna, Director
/s/ 09/28/95
James W. McLaughlin, Director
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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.
ACME ELECTRIC CORPORATION
By: /s/ Date: 09/28/95
Robert J. McKenna
Chairman, President and
Chief Executive Officer
By: /s/ Date: 09/28/95
Daniel K. Corwin
Senior Vice President
and Chief Financial Officer
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ACME ELECTRIC CORPORATION
INDEX TO FINANCIAL STATEMENTS
The financial statements together with the report thereon of Price
Waterhouse LLP dated August 10, 1995, appearing on pages 22 through 31 of the
accompanying 1995 Annual Report to Shareholders, are incorporated by reference
in this Form 10-K Annual Report. With the exception of the aforementioned
information and the information incorporated in Items 5, 6, 7, 8 and 14 of this
Form 10-K, the 1995 Annual Report to Shareholders is not to be deemed filed as
part of this report. The following financial statement schedules should be
read in conjunction with the financial statements in such 1995 Annual Report to
Shareholders. Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
FINANCIAL STATEMENT SCHEDULES
1995 1994 AND 1993
PAGE
Report of independent accountants F-2
Valuation and qualifying accounts and F-3
reserves (Schedule VIII)
Consents of independent accountants F-4, F-5
F-6 and F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Acme Electric Corporation
Our audits of the consolidated financial statements referred to in our report
dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to
Shareholders of Acme Electric Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed in
the Index to Financial Statements and Financial Statement Schedules which
appears on page F-1 of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/s/
PRICE WATERHOUSE LLP
Buffalo, New York
August 10, 1995
F-2
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<TABLE>
<CAPTION>
ACME ELECTRIC CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(000's Omitted)
ADDITIONS ADDITIONS
BALANCE AT (DEDUCTIONS) (DEDUCTIONS) DEDUCTIONS BALANCE
BEGINNING COST AND OTHER FROM AT END
OF YEAR EXPENSE ACCOUNTS RESERVES OF YEAR
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED JUNE 30, 1995
Reserve deducted from assets:
Allowance for doubtful accounts $ 169 $ 331 $ - $ 49 $ 451
Inventory obsolescence and
impairment reserve $ 709 $ - $ - $143 $ 566
Valuation allowance provided on
deferred tax asset (SFAS 109) $ - $ - $ - $ - $ -
Restructuring Cost Reserves $1,292 $ - $ - $893 $ 399
FISCAL YEAR ENDED JUNE 30, 1994
Reserve deducted from assets:
Allowance for doubtful accounts $207 $ 301 $ - $339 $ 169
Inventory obsolescence and
impairment reserve $359 $ 350 $ - $ - $ 709
Valuation allowance provided on
deferred tax asset (SFAS 109) $147 $ - $ - $147 $ -
Restructuring Cost Reserves $ - $1,515 $ - $223 $1,292
FISCAL YEAR ENDED JUNE 30, 1993
Reserve deducted from assets:
Allowance for doubtful accounts $ 80 $ 143 $ - $ 16 $ 207
Inventory obsolescence and
impairment reserve $252 $ 107 $ - $ - $ 359
Valuation allowance provided on
deferred tax asset (SFAS 109) $ - $ 173 $ - $ 26 $ 147
</TABLE>
F-3
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-45985) of Acme Electric Corporation of our report
dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page F-2 of this Form 10-K.
/s/
PRICE WATERHOUSE LLP
Buffalo, New York
September 28, 1995
F-4
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-92825) of Acme Electric Corporation of our report
dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page F-2 of this Form 10-K.
/s/
PRICE WATERHOUSE LLP
Buffalo, New York
September 28, 1995
F-5
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-89587) of Acme Electric Corporation of our report
dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page F-2 of this Form 10-K.
/s/
PRICE WATERHOUSE LLP
Buffalo, New York
September 28, 1995
F-6
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-79488) of Acme Electric Corporation of our report
dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page F-2 of this Form 10-K.
/s/
PRICE WATERHOUSE LLP
Buffalo, New York
September 28, 1995
F-7
EXHIBIT 10
EMPLOYMENT AGREEMENTS
<PAGE>
August 12, 1992
Mr. Robert J. McKenna
4763 Sunwood Drive
Toledo, Ohio 43623
Dear Bob:
I want to encourage you to accept our offer to the position of President and
Chief Operating Officer of Acme Electric Corporation.
In addition to our offer letter of August 11, 1992 I wish to give you assurance
that it is my intent and the intent of the Board of Directors to groom you as
my eventual replacement as Chief Executive Officer.
Since you have expressed some concern with respect to timing I wish to extend
to you the guarantee that in the event you are terminated without just cause
from the Corporation you will paid full salary for a period of six months.
Furthermore in the event you are not promoted to the position of Chief
Executive Officer within a period of three years you will be extended the
option of resigning with six months salary being paid to you by the Corporation
beginning with the date of your resignation letter.
Bob I hope that our offer meets your requirements and look forward to working
with you.
Sincerely,
/s/
G. Wayne Hawk
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 30th day of June 1995 by and between Acme Electric
Corporation, a New York corporation, having an office at 400 Quaker Road, East
Aurora, New York, (the "Company") and Mr. Daniel K. Corwin, residing at 105
Curley Drive, Orchard Park, New York, ("Mr. Corwin").
W I T N E S S E T H:
WHEREAS, Mr. Corwin is Senior Vice President and Chief Financial Officer
("CFO") of the Company; and
WHEREAS, the Company believes that it is in its best interest to assure the
continued services of Mr. Corwin as its Senior Vice President and CFO on the
terms and conditions hereinafter set forth; and
WHEREAS, Mr. Corwin is desirous of receiving assurances that should a
"change in control" hereinafter defined take place at the Company, he will be
provided with security as to his position, compensation and benefits.
NOW, THEREFORE, in consideration of the premises and the mutual agreement
hereinafter contained, the parties hereto agree as follows:
1. The Company hereby employs Mr. Corwin and Mr. Corwin hereby accepts
employment with the Company as its Senior Vice President and CFO upon the terms
and conditions herein contained.
2A. The initial Term shall be for a period commencing on the date hereof
and terminating two years from the date of commencement or two years from its
most recent extension date, whichever is later.
At the end of each month during the Term, the Term shall be automatically
continued and extended for one additional month, unless on or before fifteen
days prior to the end of any month during the Term, the Company shall give to
Mr. Corwin or Mr. Corwin shall give to the Company a notice of intent not to
extend. Then, in such event, the Term as theretofore automatically extended
shall be deemed further extended for one additional month, and thereafter there
shall be no further automatic extensions. (As an example, should the Company
or Mr. Corwin give to the other party a written notice of intent not to extend
on November 15, 1995, the Agreement would be deemed extended to, and would
expire on, December 31, 1997.) "Term" as used in this Agreement shall be
deemed to mean the period of employment from the date hereof through June 30,
1997, or as automatically extended pursuant to this Paragraph 2A.
2B. Should the Company breach this Agreement pursuant to the provisions of
Paragraphs 8A, 8B, 8C or 9 herein, Mr.Corwin shall be entitled to the
following:
a. Payments in an amount equal to the base salary payable over the
then remaining Term of the Agreement, with such base salary to be in an amount
equal to Mr. Corwin's salary in effect prior to such breach, plus bonus. The
bonus amount will be equal to the average of Mr. Corwin's greatest two out of
the previous three years' bonuses, or 20% of base salary, whichever is greater.
b. Full medical insurance benefits and life insurance benefits
comparable to those enjoyed prior to such breach, which shall extend for the
duration of Mr. Corwin's life or until he accepts other full-time employment.
c. Payments made pursuant to this paragraph 2B shall be made monthly
from the date the Company breached this Agreement throughout the then remaining
Term of the Agreement, or at Mr. Corwin's option in a lump sum, within thirty
(30) days of notification of such breach. Such lump sum shall be an amount
equal to the discounted present value of the payments which were to be paid
over the Term specified herein discounted at a rate of 10% per annum.
2C. "Change in control" as used in this Agreement shall mean any one of
the following:
a. An acquisition of 35% or more of the Company's stock, or merger
or consolidation by or with another entity or group;
b. A tender offer or tender offers for the Company's stock, in which
35% or more of the outstanding stock of the Company is tendered or purchased by
a single entity or affiliated group;
c. A reclassification of securities or recapitalization of the
Company which directly or indirectly, disproportionately increases or decreases
the outstanding shares of any class of equity securities of the Company by 35%
or more;
d. A sale, lease, exchange, mortgage, pledge, transfer or other
disposition of substantially all the assets of the Company approved by the
Board of Directors;
e. A change in control shall be deemed to have occurred if at any
time less than 51% of the members of the Board of Directors shall be persons
who were either nominated for election by the Board of Directors or were
elected by the Board of Directors.
3. Except as otherwise provided herein during the Term of the Agreement,
the Company shall employ Mr. Corwin as its Senior Vice President and CFO and he
shall serve the Company in such capacity, performing the normal duties of a
Senior Vice President and CFO of a corporation in the Company's business,
subject at all times to the direction and control of the Board of Directors of
the Company, shall devote his time, attention, skill and energy to the
business, welfare and affairs of the Company, and shall use his best efforts to
promote the interests of the Company, it being understood that the conduct of
such duties does not require his attendance at the offices of the Company
during any particular fixed periods. Mr. Corwin hereby consents to continue to
serve as a Director of any subsidiary of the Company without additional
compensation.
4A. The Company shall pay and Mr. Corwin shall accept as compensation for
all services to be rendered hereunder and during the Term, a base salary
determined by the Board of Directors of the Company pursuant to its normal
procedure for setting yearly salaries for officers of the Company (currently,
$135,000 per annum). Such payments hereunder shall be payable in accordance
with the prevailing salary payroll practices of the Company and subject to such
deductions as are agreed to by Mr. Corwin. Nothing contained in this Agreement
shall be deemed to prevent the Company during the Term hereof from giving
bonuses or other additional consideration to Mr. Corwin from time to time as
determined by the Board of Directors or, except as otherwise specifically
provided herein, prevent Mr. Corwin from receiving benefits in accordance with
any benefit plan or program made available by the Company to its officers or
salaried employees.
4B. The Company shall reimburse Mr. Corwin for all expenses reasonably
incurred by him in connection with his performance of services to the Company,
including entertainment and travel. Mr. Corwin shall be entitled to receive or
participate in all other fringe benefits, such as medical and hospital plans,
profit-sharing plans and pension plans, stock options under the then existing
corporate stock option plan (currently 5,000 shares following each year of
profitable operation), and use and maintenance of an automobile, which the
Company may generally make available to its executive employees.
4C. Notwithstanding anything herein to the contrary, the Company shall not
be obligated to pay any portion of any amount otherwise payable to Mr. Corwin
pursuant to this Agreement if the Company could not reasonably deduct such
portion in accordance with the Internal Revenue Code then in effect.
5A. Mr. Corwin acknowledges that during the course of his employment
hereunder, he will acquire, possess and become exposed to confidential and
proprietary information and materials of the Company. Accordingly, during his
employment hereunder and for a period of two (2) years thereafter, he shall
not, for any reason whatever, except in the regular authorized course of the
Company's business under appropriate secrecy provisions, directly or
indirectly, use or exploit or disclose or divulge to anyone (who is not
authorized to receive the same), without the prior written permission of the
Company, any proprietary information, including, but not limited to, trade
secrets, know-how, data, materials or other knowledge relating to or pertaining
to the business of the Company, unless the same (i) has been published and/or
has become a part of the public domain other than by Acts of Omission by Mr.
Corwin; (ii) has been lawfully furnished or made known to Mr. Corwin by a third
party without restriction on disclosure or use; and (iii) was in Mr. Corwin's
possession at the time he first became associated with the Company and was not
acquired by Mr. Corwin either directly or indirectly from the Company.
5B. All documents, records, prototypes or other tangible embodiments or
evidence of the discoveries, trade secrets, information, know-how, data,
materials or other knowledge previously referred to, which may at any time be
acquired by or come into the possession of Mr. Corwin during his employment
hereunder (except materials excluded in Subparagraph A hereof), are the sole
and exclusive property of the Company and must be surrendered to the Company,
without demand therefor, upon termination of Mr. Corwin's employment hereunder,
or upon the request by the Company at any other time; and, in addition, prior
to such termination of employment or upon the reasonable request by the Company
at any other time, Mr. Corwin will prepare materials to accurately and
adequately describe, set forth or embody any of the foregoing and deliver the
same to the Company in order to accomplish or complete the transfer of any and
all of the foregoing to the Company and shall be reimbursed by the Company for
all of his reasonable out-of-pocket expenses in connection therewith.
5C. Mr. Corwin agrees to execute all documents and to take all such other
action as the Company may reasonably require (being reimbursed for all of his
reasonable out-of-pocket expenses in this connection) in order to assign to the
Company any and all rights to any materials prepared by him during and in
connection with his employment hereunder.
6A. Mr. Corwin agrees that, during his employment hereunder for a period
of two (2) years after termination of his employment hereunder for whatever
reason (except in the event such termination is caused by (a) a material breach
of this Agreement by the Company, or (b) the Company's bankruptcy (as defined
in Paragraph 14 hereof), he shall not (without the prior written consent of the
Company) (i) solicit as a client or customer in competition with the Company
any persons or entities which were, during his employment hereunder, clients or
customers of the Company, (ii) enter into any business arrangements with any of
the foregoing which could be reasonably deemed to be materially competitive
with or materially injurious to any business in which the Company is engaged at
the time of such termination, or (iii) solicit, or be instrumental in any way
in causing, any other person to leave the employ of the Company. Mr. Corwin
further agrees that he shall not (without the prior written consent of the
Company) for a period of two (2) years after the termination of his employment
hereunder for any reason, directly or indirectly, individually or as a
director, partner, employee, officer or agent, engage in any employment,
performance of services or other activity on behalf of any company if such
employment, performance of services or other activity can be reasonably deemed
to be materially competitive with or materially injurious to any business in
which the Company is engaged at the time of such termination.
6B. For purposes only of determining whether services by Mr. Corwin during
the aforesaid two-year (2-year) period after his termination of employment
hereunder shall be "materially competitive with or materially injurious to the
Company" within the meaning of this paragraph, either party may initiate
arbitration proceedings to make such determination pursuant to Paragraph 13
hereof.
6C. If Mr. Corwin commits a material breach of any of the provisions of
Paragraph 5A, 5B, 5C, or 6A, the Company shall have the right and remedy to
have such provisions specifically enforced by any court having equity
jurisdiction, since any such breach or threatened breach will cause irreparable
injury to the Company and money damages will not provide an adequate remedy to
the Company.
7. During the Term, Mr. Corwin will not directly or indirectly engage in
the business of, or own or control any interest in (except as a passive
investor owning less than ten percent (10%) of the equity securities of a
publicly owned company) or act as director, officer or employee of, or
consultant to, any individual, partnership, joint venture, corporation or other
business entity directly or indirectly engaged anywhere in the United States in
any business competing with the business carried on by the Company or any of
its subsidiaries.
8A. It is specifically understood and agreed that the Company may
terminate this Agreement and its obligations to Mr. Corwin hereunder prior to a
change in control or upon voluntary retirement by Mr. Corwin from active
employment with the Company. Notwithstanding the foregoing, any breach of this
Agreement by the Company or any notice of termination which is ultimately
determined to have been a breach of this Agreement, within one year of a change
in control, shall be deemed notice of termination, and the provisions of
Paragraph 2B above shall apply so as to have the effect of fixing the Term as
provided herein and terminating Mr. Corwin's employment with the Company.
8B. At any time during the Term of this Agreement, after a change in
control has taken place, should the Company reduce the compensation or benefits
then being paid to Mr. Corwin, it shall be deemed a breach of this Agreement
and a notice of termination, and the provisions of Paragraph 2B above shall
apply so as to have the effect of fixing the Term as provided herein and
terminating Mr. Corwin's employment with the Company.
8C. At any time during the Term of this Agreement, after a change in
control has taken place, should the Company change Mr. Corwin's position or
duties without his written consent, it shall be deemed a breach of this
Agreement and a notice of termination, and the provisions of Paragraph 2B above
shall apply so as to have the effect of fixing the Term as provided herein and
terminating Mr. Corwin's employment with the Company.
9. In the event that during Mr. Corwin's lifetime and during the Term of
this Agreement, after a change in control has taken place, the Company defaults
as to any payment under this Agreement or fails to make any payments provided
for in this Agreement and fails to cure such default or make such payment
within ten (10) days after written notice thereof, or written demand therefor,
or in the event that the Company terminates this Agreement for cause and it is
ultimately determined that such termination was wrongful, Mr. Corwin may elect
to treat such default or wrongful termination as a breach of this Agreement and
shall be entitled to recover all of his expenses, including reasonable
attorneys fees in prosecuting or defending any actions or proceedings arising
out of, or in any other way relating to, the matters referred to in this
paragraph, and the provisions of Paragraph 2B of this Agreement shall apply.
10. Any controversy, claim or dispute arising out of or relating to this
Agreement, including without limitation, any claim for breach of this
Agreement, shall be settled by arbitration in accordance with the Rules of the
American Arbitration Association (AAA) obtaining at the time of such
proceeding, except that the authority of the arbitrators shall be limited to
the interpretation and enforcement of the terms and conditions of this
Agreement and the arbitrators shall set forth in writing the reasons for their
decisions. Judgement upon any award rendered by the arbitrators pursuant
hereto may be entered in any court having jurisdiction thereof and thereafter
enforced. Either party shall have the right to initiate arbitration
proceedings. Any arbitration shall take place at the office of the AAA with
the closest geographical proximity to the Company's executive offices. There
shall be three arbitrators. Each party shall appoint one arbitrator. If
either party fails to appoint an arbitrator within five (5) days from the date
upon which the notice of the initiating party of its intention to arbitrate is
received by the other party to such proceeding, the AAA shall make the
appointment for said party. The two arbitrators appointed in the manner
provided for above shall appoint a third arbitrator, mutually acceptable to
them. If the two arbitrators first appointed cannot, for any reason, agree
upon a third arbitrator, or an acceptable person is unable to act, the AAA
shall appoint the third arbitrator in accordance with its rules.
11. Mr. Corwin may terminate this Agreement prior to the date of
expiration of the Term hereinabove set forth by written notice to the Company
if the Company shall file a petition in bankruptcy, make a voluntary assignment
for the benefit of creditors, file a petition or an answer seeking an
arrangement with creditors or take advantage of any insolvency law, or if the
Company applies for or consents to the appointment of a receiver or trustee of
all or a substantial part of its assets, or an order, judgement or decree shall
be entered in any court of competent jurisdiction appointing a receiver of all
or a substantial part of its assets, and such order, judgement or decree shall
continue unstayed and in effect for any consecutive period of ninety (90) days.
12. This Agreement and all rights hereunder are personal to Mr. Corwin and
shall not be assignable; provided, however, that all of Mr. Corwin's rights
under the Agreement shall inure the benefit of his heirs, distributees,
personal representatives or designees or other legal representatives, as the
case may be. Any person, firm or corporation succeeding to the business of the
Company by merger, purchase, consolidation or otherwise, shall assume by
contract or operations of law the obligations of the Company hereunder;
provided, however, that the Company shall, notwithstanding such assumption or
assignment, remain liable and responsible for fulfilling the obligations of the
Company under this Agreement.
This Agreement supersedes and replaces any and all present written or oral
agreements of employment between the parties hereto, and all such agreements
are hereby deemed cancelled, revoked and of no further for or effect.
13. Without in any way implying that any provisions hereof is invalid or
unenforceable, the invalidity or unenforceability of any provision hereof shall
in not way affect the validity or enforceability of any other provision.
14. This Agreement constitutes the whole agreement between the parties
hereto, and there are no terms other than those stated herein. No variation
hereof shall be deemed valid unless in writing and signed by the parties
hereto, and no discharge of the terms hereof shall be deemed valid unless by
full performance by the parties hereto or by a writing signed by the parties
hereto. No waiver by either party of any provisions or condition of this
Agreement to be performed by them should be deemed a waiver of any other
provisions of this Agreement.
15. Any notice, statement, report, request or demand required or permitted
to be given by this Agreement shall be in writing, and shall be sufficient if
addressed and sent by certified mail, return receipt requested, to the parties
at the addresses set forth above, or at such other place that either party may
designate by notice to the other and shall be deemed given when so mailed.
16. This Agreement has been made in, and shall be interpreted according to
the laws of, the state of New York. The parties hereto submit to the jurisdic-
tion of the courts of the state of New York for the purpose of any actions or
proceedings which may be required to enforce the provisions of this Agreement
or an award made in any arbitration proceeding initiated hereunder.
IN WITNESS WHEREOF, the parties have hereunto set their respective hands
and seals causing these presents to be executed as of the day and year first
above written.
Witnessed:
/s/ /s/
Daniel K. Corwin
Witnessed:
ACME ELECTRIC CORPORATION
/s/ By: /s/
David G. Anderson
Scretary and Treasurer
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 30th day of June 1995 by and between Acme Electric
Corporation, a New York corporation, having an office at 400 Quaker Road, East
Aurora, New York, (the "Company") and Mr. Robert J. McKenna, residing at 5
Hummingbird Court, Orchard Park, New York, ("Mr. McKenna").
W I T N E S S E T H:
WHEREAS, Mr. McKenna is Chief Executive Officer ("CEO"), Chairman and
President of the Company; and
WHEREAS, the Company believes that it is in its best interest to assure the
continued services of Mr. McKenna as its CEO, Chairman and President on the
terms and conditions hereinafter set forth; and
WHEREAS, Mr. McKenna is desirous of receiving assurances that should a
"change in control" hereinafter defined take place at the Company, he will be
provided with security as to his position, compensation and benefits.
NOW, THEREFORE, in consideration of the premises and the mutual agreement
hereinafter contained, the parties hereto agree as follows:
1. The Company hereby employs Mr. McKenna and Mr. McKenna hereby accepts
employment with the Company as its CEO, Chairman and President upon the terms
and conditions herein contained.
2A. The initial Term shall be for a period commencing on the date hereof
and terminating three years from the date of commencement or three years from
its most recent extension date, whichever is later.
At the end of each month during the Term, the Term shall be automatically
continued and extended for one additional month, unless on or before fifteen
days prior to the end of any month during the Term, the Company shall give to
Mr. McKenna or Mr. McKenna shall give to the Company a notice of intent not to
extend. Then, in such event, the Term as theretofore automatically extended
shall be deemed further extended for one additional month, and thereafter there
shall be no further automatic extensions. (As an example, should the Company
or Mr. McKenna give to the other party a written notice of intent not to extend
on November 15, 1995, the Agreement would be deemed extended to, and would
expire on, December 31, 1998.) "Term" as used in this Agreement shall be
deemed to mean the period of employment from the date hereof through June 30,
1998, or as automatically extended pursuant to this Paragraph 2A.
2B. Should the Company breach this Agreement pursuant to the provisions of
Paragraphs 8A, 8B, 8C or 9 herein, Mr.McKenna shall be entitled to the
following:
a. Payments in an amount equal to the base salary payable over the
then remaining Term of the Agreement, with such base salary to be in an amount
equal to Mr. McKenna's salary in effect prior to such breach, plus bonus. The
bonus amount will be equal to the average of Mr. McKenna's greatest two out of
the previous three years' bonuses, or 30% of base salary, whichever is greater.
b. Full medical insurance benefits and life insurance benefits
comparable to those enjoyed prior to such breach, which shall extend for the
duration of Mr. McKenna's life or until he accepts other full-time employment.
c. Payments made pursuant to this paragraph 2B shall be made monthly
from the date the Company breached this Agreement throughout the then remaining
Term of the Agreement, or at Mr. McKenna's option in a lump sum, within thirty
(30) days of notification of such breach. Such lump sum shall be an amount
equal to the discounted present value of the payments which were to be paid
over the Term specified herein discounted at a rate of 10% per annum.
2C. "Change in control" as used in this Agreement shall mean any one of
the following:
a. An acquisition of 35% or more of the Company's stock, or merger
or consolidation by or with another entity or group;
b. A tender offer or tender offers for the Company's stock, in which
35% or more of the outstanding stock of the Company is tendered or purchased by
a single entity or affiliated group;
c. A reclassification of securities or recapitalization of the
Company which directly or indirectly, disproportionately increases or decreases
the outstanding shares of any class of equity securities of the Company by 35%
or more;
d. A sale, lease, exchange, mortgage, pledge, transfer or other
disposition of substantially all the assets of the Company approved by the
Board of Directors to which Mr. McKenna dissented;
e. A change in control shall be deemed to have occurred if at any
time less than 51% of the members of the Board of Directors shall be persons
who were either nominated for election by the Board of Directors or were
elected by the Board of Directors.
3. Except as otherwise herein provided during the Term of the Agreement,
the Company shall employ Mr. McKenna as its CEO, Chairman and President and he
shall serve the Company in such capacity, performing the normal duties of a
CEO, Chairman and President of a corporation in the Company's business, subject
at all times to the direction and control of the Board of Directors of the
Company, shall devote his time, attention, skill and energy to the business,
welfare and affairs of the Company, and shall use his best efforts to promote
the interests of the Company, it being understood that the conduct of such
duties does not require his attendance at the offices of the Company during any
particular fixed periods. Mr. McKenna hereby consents to continue to serve as
a Director of the Company or any subsidiary thereof without additional
compensation.
4A. The Company shall pay and Mr. McKenna shall accept as compensation
for all services to be rendered hereunder and during the Term, a base salary
determined by the Board of Directors of the Company pursuant to its normal
procedure for setting yearly salaries for officers of the Company (currently,
$215,000 per annum). Such payments hereunder shall be payable in accordance
with the prevailing salary payroll practices of the Company and subject to such
deductions as are agreed to by Mr. McKenna. Nothing contained in this
Agreement shall be deemed to prevent the Company during the Term hereof from
giving bonuses or other additional consideration to Mr. McKenna from time to
time as determined by the Board of Directors or, except as otherwise
specifically provided herein, prevent Mr. McKenna from receiving benefits in
accordance with any benefit plan or program made available by the Company to
its officers, salaried employees or directors.
4B. The Company shall reimburse Mr. McKenna for all expenses reasonably
incurred by him in connection with his performance of services to the Company,
including entertainment and travel. Mr. McKenna shall be entitled to receive
or participate in all other fringe benefits, such as medical and hospital
plans, profit-sharing plans and pension plans, stock options under the then
existing corporate stock option plan (currently 10,000 shares following each
year of profitable operation), and use and maintenance of an automobile, which
the Company may generally make available to its executive employees.
4C. Notwithstanding anything herein to the contrary, the Company shall
not be obligated to pay any portion of any amount otherwise payable to Mr.
McKenna pursuant to this Agreement if the Company could not reasonably deduct
such portion in accordance with the Internal Revenue Code then in effect.
5A. Mr. McKenna acknowledges that during the course of his employment
hereunder, he will acquire, possess and become exposed to confidential and
proprietary information and materials of the Company. Accordingly, during his
employment hereunder and for a period of two (2) years thereafter, he shall
not, for any reason whatever, except in the regular authorized course of the
Company's business under appropriate secrecy provisions, directly or
indirectly, use or exploit or disclose or divulge to anyone (who is not
authorized to receive the same), without the prior written permission of the
Company, any proprietary information, including, but not limited to, trade
secrets, know-how, data, materials or other knowledge relating to or pertaining
to the business of the Company, unless the same (i) has been published and/or
has become a part of the public domain other than by Acts of Omission by Mr.
McKenna; (ii) has been lawfully furnished or made known to Mr. McKenna by a
third party without restriction on disclosure or use; and (iii) was in Mr.
McKenna's possession at the time he first became associated with the Company
and was not acquired by Mr. McKenna either directly or indirectly from the
Company.
5B. All documents, records, prototypes or other tangible embodiments or
evidence of the discoveries, trade secrets, information, know-how, data,
materials or other knowledge previously referred to, which may at any time be
acquired by or come into the possession of Mr. McKenna during his employment
hereunder (except materials excluded in Subparagraph A hereof), are the sole
and exclusive property of the Company and must be surrendered to the Company,
without demand therefor, upon termination of Mr. McKenna's employment
hereunder, or upon the request by the Company at any other time; and, in
addition, prior to such termination of employment or upon the reasonable
request by the Company at any other time, Mr. McKenna will prepare materials to
accurately and adequately describe, set forth or embody any of the foregoing
and deliver the same to the Company in order to accomplish or complete the
transfer of any and all of the foregoing to the Company and shall be reimbursed
by the Company for all of his reasonable out-of-pocket expenses in connection
therewith.
5C. Mr. McKenna agrees to execute all documents and to take all such other
action as the Company may reasonably require (being reimbursed for all of his
reasonable out-of-pocket expenses in this connection) in order to assign to the
Company any and all rights to any materials prepared by him during and in
connection with his employment hereunder.
6A. Mr. McKenna agrees that, during his employment hereunder for a period
of two (2) years after termination of his employment hereunder for whatever
reason (except in the event such termination is caused by (a) a material breach
of this Agreement by the Company, or (b) the Company's bankruptcy (as defined
in Paragraph 14 hereof), he shall not (without the prior written consent of the
Company) (i) solicit as a client or customer in competition with the Company
any persons or entities which were, during his employment hereunder, clients or
customers of the Company, (ii) enter into any business arrangements with any of
the foregoing which could be reasonably deemed to be materially competitive
with or materially injurious to any business in which the Company is engaged at
the time of such termination, or (iii) solicit, or be instrumental in any way
in causing, any other person to leave the employ of the Company. Mr. McKenna
further agrees that he shall not (without the prior written consent of the
Company) for a period of two (2) years after the termination of his employment
hereunder for any reason, directly or indirectly, individually or as a
director, partner, employee, officer or agent, engage in any employment,
performance of services or other activity on behalf of any company if such
employment, performance of services or other activity can be reasonably deemed
to be materially competitive with or materially injurious to any business in
which the Company is engaged at the time of such termination.
6B. For purposes only of determining whether services by Mr. McKenna
during the aforesaid two-year (2-year) period after his termination of
employment hereunder shall be "materially competitive with or materially
injurious to the Company" within the meaning of this paragraph, either party
may initiate arbitration proceedings to make such determination pursuant to
Paragraph 13 hereof.
6C. If Mr. McKenna commits a material breach of any of the provisions of
Paragraph 5A, 5B, 5C, or 6A, the Company shall have the right and remedy to
have such provisions specifically enforced by any court having equity
jurisdiction, since any such breach or threatened breach will cause irreparable
injury to the Company and money damages will not provide an adequate remedy to
the Company.
7. During the Term, Mr. McKenna will not directly or indirectly engage in
the business of, or own or control any interest in (except as a passive
investor owning less than ten percent (10%) of the equity securities of a
publicly owned company) or act as director, officer or employee of, or
consultant to, any individual, partnership, joint venture, corporation or other
business entity directly or indirectly engaged anywhere in the United States in
any business competing with the business carried on by the Company or any of
its subsidiaries.
8A. It is specifically understood and agreed that the Company may
terminate this Agreement and its obligations to Mr. McKenna hereunder prior to
a change in control or upon voluntary retirement by Mr. McKenna from active
employment with the Company. Notwithstanding the foregoing, any breach of this
Agreement by the Company or any notice of termination which is ultimately
determined to have been a breach of this Agreement, within one year of a change
in control, shall be deemed notice of termination, and the provisions of
Paragraph 2B above shall apply so as to have the effect of fixing the Term as
provided herein and terminating Mr. McKenna's employment with the Company.
8B. At any time during the Term of this Agreement, after a change in
control has taken place, should the Company reduce the compensation or benefits
then being paid to Mr. McKenna, it shall be deemed a breach of this Agreement
and a notice of termination, and the provisions of Paragraph 2B above shall
apply so as to have the effect of fixing the Term as provided herein and
terminating Mr. McKenna's employment with the Company.
8C. At any time during the Term of this Agreement, after a change in
control has taken place, should the Company change Mr. McKenna's position or
duties without his written consent, it shall be deemed a breach of this
Agreement and a notice of termination, and the provisions of Paragraph 2B above
shall apply so as to have the effect of fixing the Term as provided herein and
terminating Mr. McKenna's employment with the Company.
9. In the event that during Mr. McKenna's lifetime and during the Term of
this Agreement, after a change in control has taken place, the Company defaults
as to any payment under this Agreement or fails to make any payments provided
for in this Agreement and fails to cure such default or make such payment
within ten (10) days after written notice thereof, or written demand therefor,
or in the event that the Company terminates this Agreement for cause and it is
ultimately determined that such termination was wrongful, Mr. McKenna may elect
to treat such default or wrongful termination as a breach of this Agreement and
shall be entitled to recover all of his expenses, including reasonable
attorneys fees in prosecuting or defending any actions or proceedings arising
out of, or in any other way relating to, the matters referred to in this
paragraph, and the provisions of Paragraph 2B of this Agreement shall apply.
10. Any controversy, claim or dispute arising out of or relating to this
Agreement, including without limitation, any claim for breach of this
Agreement, shall be settled by arbitration in accordance with the Rules of the
American Arbitration Association (AAA) obtaining at the time of such
proceeding, except that the authority of the arbitrators shall be limited to
the interpretation and enforcement of the terms and conditions of this
Agreement and the arbitrators shall set forth in writing the reasons for their
decisions. Judgement upon any award rendered by the arbitrators pursuant
hereto may be entered in any court having jurisdiction thereof and thereafter
enforced. Either party shall have the right to initiate arbitration
proceedings. Any arbitration shall take place at the office of the AAA with
the closest geographical proximity to the Company's executive offices. There
shall be three arbitrators. Each party shall appoint one arbitrator. If
either party fails to appoint an arbitrator within five (5) days from the date
upon which the notice of the initiating party of its intention to arbitrate is
received by the other party to such proceeding, the AAA shall make the
appointment for said party. The two arbitrators appointed in the manner
provided for above shall appoint a third arbitrator, mutually acceptable to
them. If the two arbitrators first appointed cannot, for any reason, agree
upon a third arbitrator, or an acceptable person is unable to act, the AAA
shall appoint the third arbitrator in accordance with its rules.
11. Mr. McKenna may terminate this Agreement prior to the date of
expiration of the Term hereinabove set forth by written notice to the Company
if the Company shall file a petition in bankruptcy, make a voluntary assignment
for the benefit of creditors, file a petition or an answer seeking an
arrangement with creditors or take advantage of any insolvency law, or if the
Company applies for or consents to the appointment of a receiver or trustee of
all or a substantial part of its assets, or an order, judgement or decree shall
be entered in any court of competent jurisdiction appointing a receiver of all
or a substantial part of its assets, and such order, judgement or decree shall
continue unstayed and in effect for any consecutive period of ninety (90) days.
12. This Agreement and all rights hereunder are personal to Mr. McKenna
and shall not be assignable; provided, however, that all of Mr. McKenna's
rights under the Agreement shall inure the benefit of his heirs, distributees,
personal representatives or designees or other legal representatives, as the
case may be. Any person, firm or corporation succeeding to the business of the
Company by merger, purchase, consolidation or otherwise, shall assume by
contract or operations of law the obligations of the Company hereunder;
provided, however, that the Company shall, notwithstanding such assumption or
assignment, remain liable and responsible for fulfilling the obligations of the
Company under this Agreement.
This Agreement supersedes and replaces any and all present written or oral
agreements of employment between the parties hereto, and all such agreements
are hereby deemed cancelled, revoked and of no further for or effect.
13. Without in any way implying that any provisions hereof is invalid or
unenforceable, the invalidity or unenforceability of any provision hereof shall
in not way affect the validity or enforceability of any other provision.
14. This Agreement constitutes the whole agreement between the parties
hereto, and there are no terms other than those stated herein. No variation
hereof shall be deemed valid unless in writing and signed by the parties
hereto, and no discharge of the terms hereof shall be deemed valid unless by
full performance by the parties hereto or by a writing signed by the parties
hereto. No waiver by either party of any provisions or condition of this
Agreement to be performed by them should be deemed a waiver of any other
provisions of this Agreement.
15. Any notice, statement, report, request or demand required or permitted
to be given by this Agreement shall be in writing, and shall be sufficient if
addressed and sent by certified mail, return receipt requested, to the parties
at the addresses set forth above, or at such other place that either party may
designate by notice to the other and shall be deemed given when so mailed.
16. This Agreement has been made in, and shall be interpreted according to
the laws of, the state of New York. The parties hereto submit to the jurisdic-
tion of the courts of the state of New York for the purpose of any actions or
proceedings which may be required to enforce the provisions of this Agreement
or an award made in any arbitration proceeding initiated hereunder.
IN WITNESS WHEREOF, the parties have hereunto set their respective hands
and seals causing these presents to be executed as of the day and year first
above written.
Witnessed:
/s/ /s/
Robert J. McKenna
Witnessed:
ACME ELECTRIC CORPORATION
/s/ By: /s/
David G. Anderson
Secretary & Treasurer
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
NAME STATE OF INCORPORATION
Acme-URDC, Inc. Utah
doing business as:
Utah Research and Development Company
EXHIBIT 13
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED JUNE 30, 1995, INCORPORATED BY
REFERENCE.
<PAGE>
PAGE 18 OF ANNUAL REPORT
FINANCIAL CONDITION:
The Company has financed its working capital requirements and capital
spending, in part, with cash from operating revenues and the balance coming
primarily from increased bank borrowings. Total debt, including capital lease
obligations, increased approximately $4,800,000 during 1995, primarily
attributable to capital expenditures of approximately $4,100,000.
The working capital of the Company increased by approximately $4,500,000
during 1995, reflecting increases of approximately $6,900,000 in inventory and
$2,000,000 in accounts receivable, which were in part financed with increased
accounts payable of $5,100,000, with the remainder coming from operating
revenues. The growth in inventory is the result of several factors including:
the Company's effort to expand its standard power supply product offering
through distribution, support of the UPS program requirements associated with
AT&T's market entry, to support a new major OEM customer in the transformer
industry, transition effects experienced at the Aerospace Division which
impeded production and shipping efforts through June 30, and the disruption
associated with the Electronics Division's move into its new plant. Accounts
receivable increased in response to the increased sales and shipment activity
experienced in the fourth quarter of 1995.
<TABLE>
DOLLARS IN THOUSANDS
<CAPTION>
YEARS ENDED JUNE 30 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Working Capital $24,990 $20,465 $24,332
Cash provided from
(used in) operations (605) 4,355 868
Current ratio 2.7:1 3.0:1 4.2:1
Sales to working
capital 3.6:1 3.7:1 3.1:1
Long-term debt
to equity 1.5:1 1.3:1 1.1:1
</TABLE>
Capital expenditures and foreign investment combined were approximately
$4,300,000 in 1995, compared with capital expenditures and license payments of
$7,754,000 and $1,563,000 in 1994 and 1993, respectively. Included in the 1995
capital expenditures is $1,500,000 relating to the Cuba plant construction
compared to $4,710,000 in 1994. The Cuba plant construction was completed
during 1995 with the facility placed in full service in the fourth quarter of
the year.
Subsequent to June 30, 1995, the Company entered into an agreement with
third party contractors to commence implementation of a new business
information system. It is anticipated that the total cost of the system will
approximate $3,500,000 over the next eighteen months, and will be financed
through a five-year capital lease. Capital expenditures, exclusive of the new
business system, are expected to approximate $1,800,000 in 1996. The Company
expects that operating activities in 1996 will produce net cash to fund these
capital expenditures and any increase in working capital caused by increased
sales.
At June 30, 1995, the Company had a secured $6,072,000 term loan at the
lower of prime plus 1.5%, or 3% above the Eurodollar rate, and a secured line
of credit allowing for revolving loans and letters of credit up to $21,000,000
with interest at the lower of prime plus 1.0%, or the London Interbank
Eurodollar rate plus 2.5%, with an outstanding balance of $16,988,000. The
credit agreement, as extended, provides for a maturity date on the line of
credit of December 1, 1996, with an option for a one-year extension, while the
term loan matures January 2, 2000. The agreement contains certain restrictive
covenants including, but not limited to, maintenance of earnings and interest
coverage, and maintenance of minimum working capital and debt-to-worth ratios.
In addition, the Company received in July 1995, the $1,500,000 government loan
proceeds associated with the recently completed Cuba facility. This loan
contains both a three year moratorium on interest and principal and a
preferential interest rate upon commencement of repayment. In July 1995, the
Company negotiated an increase of $2,000,000 in its revolving bank line of
credit to the aforementioned limit of $21,000,000. Management believes that
such financing will provide adequate liquidity.
At June 30, 1995, the Company was in violation of the covenants requiring
maintenance of earnings and debt-to-worth ratios under the loan agreement. A
waiver of these violations was given as of June 30, 1995, and the Company will
be required to maintain the covenants thereafter.
The Company has sought amendments to its License Agreement ("License")
with DAUG-HOPPECKE GESELLSCHAFT FUR BATTERIESYSTEME MBH ("DAHO") and a separate
agreement with DAHO and its affiliate, Hoppecke Battery Systems, Inc. ("HBSI"),
and HBSI's parent company, ACCUMULATORENWERKE HOPPECKE Carl Zoellner & Sohn
GmbH & Co KG ("Hoppecke"), to resolve issues pertaining to, inter alia, minimum
royalties, extension of the License, and repair of products that exhibit
certain defects. Negotiations, to date, have been unsuccessful, and the matter
may eventually be submitted to arbitration for resolution. The Company does
not believe that the outcome of this matter will have a materially adverse
impact on its financial condition.
<PAGE>
PAGES 19 - 20 OF ANNUAL REPORT
RESULTS OF OPERATIONS:
Acme Electric Corporation reported net income of $992,000 or $.20 per
share on record net sales of $91,127,000 for the year ended June 30, 1995,
compared with net losses of $5,659,000 or $1.17 per share and $454,000 or $.09
per share for 1994 and 1993, respectively. The 1994 loss of $5,659,000
included a restructuring and impairment charge of $4,836,000 net of taxes,
associated with the Company's restructuring of its aerospace business. The
Company recorded approximately $896,000 of cash expenditures in 1995 against
the 1994 restructuring reserves. These expenditures included severance and
medical costs of $187,000, relocation costs associated with the consolidation
and moving of the URDC operation to Tempe of $659,000, and miscellaneous costs
of $50,000. At June 30, 1995, the two remaining restructuring reserves
included $307,000 associated with impaired inventory and a $399,000 allowance
related to the sale of the URDC facility. There are no future net cash
requirements associated with the settlement of these reserves. As a result of
the 1994 restructuring, 1995 depreciation and amortization was reduced by
approximately $840,000. Additionally, overhead costs in the general
administrative, selling and engineering areas of the division were reduced
approximately $450,000 as a result of the consolidation. A portion of these
savings was offset by ongoing transition problems in meeting production and
shipment schedules resulting in increased material, labor and manufacturing
overheads. Net losses from normal operations for the aerospace business were
$1,219,000. It is anticipated that the continued transitional difficulties and
their related negative impact on the earnings of the division will be overcome
during fiscal 1996, at which point the benefits of the restructuring will be
more fully realized.
The fourth quarter of fiscal 1995 resulted in a net loss of $434,000 on
record quarterly sales of $24,689,000, or a net loss per share of $.09. The
primary causes of the loss were: significant material price increases,
excessive health care costs incurred in the quarter, continued high
transitional labor and overhead costs experienced by the Aerospace Division, a
higher volume of product sales containing lower profit margins and costs
incurred in moving into the new Cuba facility. It is estimated that the
escalating material prices had a $500,000 net of taxes impact on the quarter.
While the Company anticipates the future recovery of margins through product
price increases, it may take several years for a full recovery. Additionally,
the Company expects to redesign certain product lines for cost reduction and
manufacture several products currently being purchased. Health care costs in
the quarter exceeded normal experience by nearly $260,000 net of taxes, as a
result of several major claims which reached maximum stop loss levels.
Consolidated sales increased significantly ($14.9 million or 19.5%) over
the previous year compared with an increase of 0.6% in 1994 over 1993 levels.
Sales growth associated with several large OEM customers accounted for nearly
$8.4 million of the $14.9 million increase, with the remainder relating to
products sold through the distribution business. While manufacturing costs did
increase (most significantly, material costs), the Company was unable to fully
recover these costs through customer price increases during the year. Volume
accounted for most of the increase in sales. Continued growth in sales will be
dependent upon the continued success of major customer programs in the
communications and computer markets, the pace of Acme's operational improvement
at its Aerospace Division, the more effective utilization of the Company's
current distribution network, and the success of international sales
initiatives.
Cost of sales as a percentage of sales was 74.4% in 1995, 72.2% in 1994
and 70.5% in 1993. The increase from 1994 to 1995 reflects the significant
material price increases experienced in 1995, the short term higher effective
labor costs experienced at the Power Distribution Products Division resulting
from both business growth and interruption caused by implementation of modern
manufacturing programs, high labor and manufacturing overheads in the Aerospace
Division as a result of a prolonged transition, higher health costs primarily
incurred in the fourth quarter of 1995, and costs incurred in moving into the
new electronics facility. When comparing the cost of sales in 1995 with the
cost of sales in 1994, it is important to note that approximately $590,000 of
one-time period charges relating to the write-off of deferred contract costs
(MD-90 program) and $300,000 of product warranty costs were included in 1994
cost of sales. Further, included in the cost of sales in 1995 is approximately
$250,000 of engineering costs used in the support of manufacturing which in
prior years were included in the engineering expense line. The increase from
1993 to 1994 is primarily attributable to the one-time charges noted in the
previous sentence. Future reductions of cost of sales as a percentage of sales
will depend on the Company's ability to pass through to customers the material
cost increases experienced and the success of its manufacturing and material
flow programs implemented to improve customer response capabilities and
associated inventory costs. The Company is also working toward reducing the
product costs associated with the Uninterruptible Power Supply (UPS) product
business, as well as accelerating the pace in working through the transitional
difficulties experienced at the Aerospace Division.
Research and engineering expenses as a percentage of sales were 5.2% in
1995, compared to 7.4% in 1994 and 7.6% in 1993. This net decrease as a
percentage of sales reflects both the overhead reductions made over the past
two years in operations along with the higher sales levels achieved. In
addition, approximately $250,000 of related engineering and quality support
costs were recorded as manufacturing expense, rather than engineering expense,
as in 1994 and 1993.
Selling and administrative expenses as a percentage of sales were 16.5% in
1995, compared with 18.8% in 1994 and 20.3% in 1993. The percentage of sales
decrease from 1994 to 1995 reflects approximately $600,000 of reduced
administrative and selling overhead costs resulting from the 1994 Aerospace
restructuring, including $384,000 of license amortization costs, offset by
increased selling and administrative costs incurred in the Power Distribution
Products Division, (most notably; commission costs) in support of the $8.4
million growth in sales. The primary factor for the percentage decrease is due
to the higher sales level achieved in 1995 as compared to 1994. The net
decrease from 1993 to 1994 reflects staff reductions along with a $243,000
profit recorded against 1994 selling and administrative costs relating to sale
of the consumer automotive battery charger product line.
Total interest expense decreased by approximately $560,000 from 1994 to
1995. However, included in the 1994 interest amount was approximately
$1,160,000 of costs associated with the interest collar instrument. Interest
costs have increased in 1995 over 1994 amounts when the 1994 collar related
amounts are excluded, due primarily to higher interest rates combined with a
higher average outstanding debt balance in 1995. Interest expense was
approximately 8% higher in 1994 than 1993 due primarily to the $550,000 collar
termination payment made in 1994. The Company's long-term debt originates from
financing the aerospace business over the past eight years.
Effective tax (benefit) rates for the last three years were 38.4%, (35.3%),
and (35.7%), respectively. The fluctuations in the effective rates are
generally reflective of the year-to-year variations in the permanent book-to-
tax differences and changes in the state-allocation ratios. As a result, both
1994 and 1993 rates used to record tax benefit were lower than the effective
rate used to record tax expense in 1995.
<PAGE>
<PAGE>
PAGE 21 OF ANNUAL REPORT
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
<TABLE>
DOLLARS IN THOUSANDS (EXCEPT PER SHARE, AND PER SQUARE-FOOT AMOUNTS)
<CAPTION>
YEARS ENDED JUNE 30 1995 1994 1993 1992 1991
_____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net Sales $91,127 $76,233 $75,812 $72,715 $79,887
Income (Loss) before cumulative
effect of a change in accounting
principle 992 (5,659) (673) 624 (7,604)
Cumulative effect of a change
in accounting principle -- -- 219 -- --
Net Income (Loss) 992 (5,659) (454) 624 (7,604)
Income (Loss) per common share
before cumulative effect of a
change in accounting principle .20 (1.17) (0.14) 0.13 (1.60)
Cumulative effect of a change
in accounting principle -- -- 0.05 -- --
Net Income (Loss) per common
share .20 (1.17) (0.09) 0.13 (1.60)
Dividends per share
(Common - cash) -- -- -- -- 0.16
- ---------------------------------------------------------------------------------------------
AT END OF YEAR:
Total assets $56,178 $46,505 $50,053 $50,286 $53,573
Working capital 24,990 20,465 24,332 24,501 4,103
Ratio of current assets to
current liabilities 2.7:1 3.0:1 4.2:1 4.5:1 1.1:1
Investment in property, plant
and equipment - net 14,657 12,669 15,561 16,638 16,907
Long-term debt 24,419 19,590 21,293 21,668 1,449
Total shareholders' equity 15,849 14,566 20,108 20,500 19,774
Equity per common share 3.22 3.02 4.19 4.28 4.15
Weighted average number
of shares outstanding used
to compute income (loss)
per common share 4,924,887 4,854,061 4,812,429 4,777,473 4,741,329
- ---------------------------------------------------------------------------------------------
Average number of hourly
employees 505 444 436 456 543
Average number of salaried
employees 251 252 267 307 360
Sales per full time employee
equivalent (000's) $ 120 $ 109 $ 108 $ 95 $ 88
Square footage occupied 361,000 372,000 465,000 533,000 529,000
Sales per square foot $ 252 $ 205 $ 164 $ 137 $ 151
</TABLE>
<PAGE>
<PAGE>
PAGE 22 OF ANNUAL REPORT
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
DOLLARS IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEARS ENDED JUNE 30 1995 1994 1993
<S> <C> <C> <C>
NET SALES $91,127 $76,233 $75,812
COSTS AND EXPENSES
Cost of sales 67,837 55,071 53,418
Research and engineering
expenses 4,791 5,666 5,757
Selling and administrative
expenses 15,023 14,344 15,426
Interest expense 1,866 2,429 2,256
Restructuring costs -- 1,891 --
Impairment charge -- 5,584 --
- -------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 89,517 84,985 76,857
- -------------------------------------------------------------------
Income (Loss) Before
Income Taxes 1,610 (8,752) (1,045)
Income Tax Expense (Benefit) 618 (3,093) (372)
- -------------------------------------------------------------------
Income (Loss) before cumulative
effect of a change in
accounting principle 992 (5,659) (673)
Cumulative effect of a change
in accounting principle -- -- 219
- -------------------------------------------------------------------
NET INCOME (LOSS) $ 992 $ (5,659) $ (454)
Net Income (Loss) per common
share before cumulative effect
of a change in accounting
principle $ .20 $ (1.17) $(0.14)
Cumulative effect of a change
in accounting principle -- -- 0.05
- -------------------------------------------------------------------
NET INCOME (LOSS) PER
Common Share $ .20 $ (1.17) $(0.09)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PAGE 23 OF ANNUAL REPORT
CONSOLIDATED BALANCE SHEET
<TABLE>
DOLLARS IN THOUSANDS
<CAPTION>
JUNE 30, JUNE 30,
1995 1994
- ----------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
- ----------------------------------------------------------
Cash $ 386 $ 160
Accounts receivable, net 17,253 15,246
Inventories, net 17,352 10,492
Income taxes receivable 325 223
Deferred income taxes 1,303 1,618
Other current assets 2,818 2,799
- ----------------------------------------------------------
TOTAL CURRENT ASSETS 39,437 30,538
- ----------------------------------------------------------
Property, plant and equipment, at cost:
Land and buildings 11,224 9,156
Machinery and equipment 19,919 18,101
- ----------------------------------------------------------
Total property, plant and
equipment 31,143 27,257
Less accumulated depreciation
and amortization (17,467) (15,569)
Facilities held for sale, net 981 981
- ----------------------------------------------------------
Property, plant and
equipment, net 14,657 12,669
- ----------------------------------------------------------
Other assets 2,084 3,298
- ----------------------------------------------------------
TOTAL ASSETS $56,178 $46,505
- ----------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
- ----------------------------------------------------------
Accounts payable $ 9,307 $ 4,232
Accrued compensation and other 3,700 4,384
Current portion of long-term debt 1,440 1,457
- ----------------------------------------------------------
TOTAL CURRENT LIABILITIES 14,447 10,073
- ----------------------------------------------------------
Long-term debt 24,419 19,590
Other long-term liabilities 1,463 2,276
- ----------------------------------------------------------
TOTAL LIABILITIES 40,329 31,939
- ----------------------------------------------------------
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------
Common Stock, $1 par value
authorized 8,000,000 shares
issued 5,002,977 and 4,876,491
shares 5,003 4,876
Capital in excess of par value 18,807 18,161
Accumulated deficit (7,072) (8,064)
- ----------------------------------------------------------
Total capital & accumulated deficit 16,738 14,973
Less treasury stock, at cost:
80,551 and 45,716 shares 889 407
- ----------------------------------------------------------
Total shareholders' equity 15,849 14,566
- ----------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $56,178 $46,505
- ----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
PAGE 24 OF ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
Dollars in thousands
<CAPTION>
YEARS ENDED JUNE 30 1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 992 $ (5,659) $ (454)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation and amortization 2,066 2,533 2,592
Cumulative effect of a change in
accounting principle - - (219)
Loss (gain) on sale/retirement of
fixed assets 18 (229) 14
Deferred income taxes 542 (3,102) (209)
Impairment charge - 5,584 -
Change in assets and liabilities:
Accounts receivable, net (2,007) (492) (1,341)
Inventories, net (6,860) 2,756 144
Other assets 1,046 96 (935)
Prepaid and accrued
income taxes (82) 176 1,133
Accounts payable 5,075 857 (30)
Reserves for restructuring, net (896) 632 (428)
Accrued compensation and other (499) 1,203 601
- ----------------------------------------------------------------------
Net cash provided from (used in)
operating activities (605) 4,355 868
- ----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant
and equipment (4,072) (6,238) (1,563)
Intangibles acquired - (1,516) -
Proceeds from dispositions of
fixed assets - 4,138 501
Investment in unconsolidated
subsidiary (200) - -
- ----------------------------------------------------------------------
Net cash used in investing
activities (4,272) (3,616) (1,062)
- ----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase of long-term debt 21,445 11,169 3,070
Proceeds from employee stock
purchase, stock option and
dividend reinvestment plans 773 212 69
Purchase of treasury stock (482) (95) (7)
Reduction of long-term debt (16,633) (12,096) (3,371)
- ----------------------------------------------------------------------
Net cash provided from (used in)
financing activities 5,103 (810) (239)
- ----------------------------------------------------------------------
Net increase (decrease) in cash 226 (71) (433)
- ----------------------------------------------------------------------
Cash at beginning of year 160 231 664
- ----------------------------------------------------------------------
Cash at end of year $ 386 $ 160 $ 231
- ----------------------------------------------------------------------
Supplemental disclosures of cash
flow information:
Cash paid (received) during the
year for:
Interest $ 1,999 $ 2,512 $ 2,305
Income Taxes $ 158 $ (166) $ (1,360)
- ----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PAGE 24 OF ANNUAL REPORT
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
DOLLARS IN THOUSANDS
<CAPTION>
Common Capital in Retained
stock excess earnings Treasury
$1 par of par (accumulated stock,
value value deficit) at cost
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE JUNE 30, 1992 $4,815 $17,892 $(1,951) $256
- ----------------------------------------------------------------------------
Stock options exercised 12 50
- ----------------------------------------------------------------------------
Purchase of treasury shares 56
- ----------------------------------------------------------------------------
Sales of authorized shares
Employee Stock Purchase Plan 3 12
Employee Savings Plan (401[K]) 9 32
- ----------------------------------------------------------------------------
Net Loss (454)
- ----------------------------------------------------------------------------
BALANCE JUNE 30, 1993 4,839 17,986 (2,405) 312
- ----------------------------------------------------------------------------
Stock options exercised 31 138
- ----------------------------------------------------------------------------
Purchase of treasury shares 95
- ----------------------------------------------------------------------------
Sales of authorized shares
Employee Stock Purchase Plan 3 17
Employee Savings Plan (401[K]) 3 20
- ----------------------------------------------------------------------------
Net Loss (5,659)
- ----------------------------------------------------------------------------
BALANCE JUNE 30, 1994 4,876 18,161 (8,064) 407
- ----------------------------------------------------------------------------
Stock options exercised 123 610
- ----------------------------------------------------------------------------
Purchase of treasury shares 482
- ----------------------------------------------------------------------------
Sales of authorized shares
Employee Stock Purchase Plan 1 8
Employee Savings Plan (401[K]) 3 28
- ----------------------------------------------------------------------------
Net Income 992
- ----------------------------------------------------------------------------
BALANCE JUNE 30, 1995 $5,003 $18,807 $(7,072) $889
- ----------------------------------------------------------------------------
</TABLE>
None of the Company's authorized 500,000 shares of $10 par value preference
stock has been issued. The accompanying notes are an integral part of these
financial statements.
<PAGE>
PAGES 26 - 31 OF ANNUAL REPORT
NOTES OF CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES:
a. The consolidated financial statements include the accounts of the
Company and its 100%-owned subsidiaries: Acme-URDC, Inc. and Acme Electric
Corporation of Lumberton, NC. The Company also holds a 50% ownership in Acme
Electric Limited, a Irish-based joint venture, which is accounted for under the
equity method. All significant intercompany transactions and balances have
been eliminated in consolidation. Effective July 11, 1994, Acme-URDC, Inc. was
liquidated into Acme Electric Corporation. On June 30, 1995, Acme Electric
Corporation of Lumberton, NC was liquidated into Acme Electric Corporation.
Certain amounts in the prior years' consolidated financial statements
and notes have been reclassified to conform with current year presentation.
b. The Company and its subsidiaries file a consolidated federal income
tax return and separate state returns. The Company follows the asset and
liability approach in accounting for income taxes. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
financial carrying values and the tax bases of the related assets and
liabilities. The deferred income tax provision for the period is the
difference in the assets and liabilities as of the beginning and end of the
period. Income taxes are more fully described in Note 7.
c. Inventories are costed at the lower of cost or market and determined
principally on a FIFO (first in, first out) basis.
d. The Company utilizes the percentage-of-completion method for long-term
contracts in its Aerospace business. Revenues are recognized on the
percentage-of-completion basis, measured by the percentage of material, labor
and overhead cost incurred to date to total estimated material, labor and
overhead costs for each long-term contract.
e. Except for facilities held for sale, depreciation of property, plant
and equipment is computed on the straight-line and the sum-of-the-years'-digits
methods over the estimated service lives of the assets. At the time of
retirement or other disposition of properties, the cost and accumulated
depreciation are removed from the accounts and any gains or losses are
reflected in income. Maintenance and repairs are charged to expense as
incurred; renewals and betterments are capitalized. The range of lives used as
a basis for calculating depreciation is as follows:
_____________________________________
YEARS
Buildings 20-45
______________________________________
Machinery and equipment 5-12
______________________________________
Furniture and fixtures 8-10
______________________________________
Automobiles and trucks 3-4
______________________________________
f. Net income (loss) per common share computations are based upon the
weighted average number of shares outstanding during each year as adjusted for
outstanding stock options.
2. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Billed $16,439 $13,168
Unbilled 1,265 2,247
- -------------------------------------------------------------
Subtotal 17,704 15,415
- -------------------------------------------------------------
Less allowance for doubtful accounts (451) (169)
- -------------------------------------------------------------
Total accounts receivables, net $17,253 $15,246
- -------------------------------------------------------------
</TABLE>
Unbilled receivables are comprised of revenue amounts on long-term
contracts which have been earned, but not yet billed. Management anticipates
that all unbilled receivables at June 30, 1995, will be substantially billed
and collected in fiscal 1996.
3. INVENTORIES:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Raw Material $ 6,990 $ 3,765
- -------------------------------------------------------------
Work in Process 4,819 2,934
- -------------------------------------------------------------
Finished Goods 5,543 3,793
- -------------------------------------------------------------
Total Inventories $17,352 $10,492
- -------------------------------------------------------------
</TABLE>
Inventories are reported net of reserves for obsolescence of $566,000 and
$709,000 in 1995 and 1994, respectively.
4. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Revolving loans at June 30 $16,988 $10,688
Secured term loan with 18
quarterly principal installments
of $337,360 each, and interest paid
monthly at the lower of prime plus
1.5%, or the Eurodollar (London
Interbank Eurodollar)
rate plus 3.0% 6,072 7,759
Capital lease obligation secured by
related building, machinery and
equipment at the Cuba, New York,
facility payable in quarterly
principal installments of $5,208,
with interest paid monthly on the
unpaid balance at a rate of prime
plus 1.5%, through April 1, 2017. 469 490
Secured loan on the new Cuba
facility payable over 20 years, with
monthly payments for the first four
years of interest only of $6,666,
with monthly payments of $14,120,
consisting of principal and interest
at 4%, commencing Sept. 1, 1997, and
continuing over the remaining
sixteen years. 2,000 2,000
Other debt 330 110
- ------------------------------------------------------------------
Total debt $25,859 $21,047
- ------------------------------------------------------------------
Current portion (1,440) (1,457)
- ------------------------------------------------------------------
Long-term portion $24,419 $19,590
- ------------------------------------------------------------------
</TABLE>
The Company has a credit agreement with a major banking institution, which
provides for borrowings and letters of credit up to a maximum of $27,072,000.
This credit agreement is comprised of a $6,072,000 secured term loan and a
$21,000,000 secured revolving credit line. The revolving loan carries an
interest rate equal to the lower of Prime plus 1.0%, or the London Interbank
Eurodollar rate plus 2.5%, and provided for an initial maturity date of
December 1, 1995, with options for two one-year extensions under which the
Company has exercised and extended the agreement through December 1, 1996. The
Company pays a maximum annual commitment fee on this revolving credit loan of
1/4 of 1% on the unused portion. The credit agreement, as amended, contains
certain restrictive covenants including, but not limited to, maintenance of
earnings and interest coverage, and maintenance of minimum working capital and
debt-to-worth ratios. Borrowings under this agreement are collateralized
primarily by the Company's accounts receivable, inventories, and machinery and
equipment.
At June 30, 1995, the Company was in violation of the covenants requiring
maintenance of earnings and debt to worth ratios under the loan agreement. A
waiver has been extended to cover the defaults as of June 30, 1995, and the
Company will be required to maintain the covenants thereafter.
During the next five years, long-term debt matures as follows: 1996 -
$1,440,000, 1997 - $1,522,000, 1998 - $1,544,000, 1999 - $1,544,000 and 2000 -
$1,506,000. These amounts do not include any maturities relating to the
revolving loan.
5. STOCK OPTION PLANS:
Options were granted under the 1981 Incentive Stock Option Plan at the
fair market value on the day preceding the date of the grant and are
exercisable in varying amounts through 1999. The 1981 Plan expired in October,
1992. Options granted under the 1981 Plan expire in accordance with their
respective terms.
Options are granted under the 1989 Incentive Stock Option Plan at the fair
market value on the day preceding the date of the grant and are exercisable in
varying amounts through 2001. An amendment of the 1989 Stock Option Plan was
approved at the annual meeting of shareholders held on October 28, 1994, to
apply a formula for the award of further options after each year of profitable
operation and to increase the number of shares subject to the Plan from 225,000
to 450,000. Options in accordance with the formula were granted as of
September 1, 1995.
<TABLE>
<CAPTION>
1981 PLAN 1989 PLAN
SHARES SHARES
- --------------------------------------------------------------
<S> <C> <C>
Options outstanding
July 1, 1994 *77,758 110,783
Options granted - -
Options exercised *(58,586) (60,783)
Options cancelled - (3,000)
Options outstanding 19,172 47,000
June 30, 1995
Options exercisable at
June 30, 1995 19,172 42,000
Exercise prices per share $5.72-$8.56 $4.06-$4.88
Shares available for options
at June 30, 1995 - 305,004
- --------------------------------------------------------------
</TABLE>
*Excludes non-qualified options for 3,473 shares exercised during the fiscal
year.
6. LEASES:
The Company leases the manufacturing facilities, described in Note 4,
under lease agreements, which have been capitalized, and various equipment
under operating leases. Under the terms of the capital leases, the Company has
included $1,794,000 in the cost of property, plant and equipment at June 30,
1995, and 1994. Accumulated depreciation on such assets was $1,004,000 and
$966,000 at June 30, 1995, and 1994, respectively. Total rental expense under
operating leases, which includes the headquarters facility, was $1,130,000,
$1,026,000 and $690,000 in 1995, 1994 and 1993, respectively. Minimum future
rental commitments under non-cancelable operating leases are approximately
$816,000 in 1996, $702,000 in 1997, $477,000 in 1998, $412,000 in 1999, and
$229,000 in 2000.
7. INCOME TAXES:
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
DOLLARS IN THOUSANDS 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
CURRENT
Federal Expense (Benefit) $ 49 $ -- $ (164)
State Expense (Benefit) 27 9 (1)
- --------------------------------------------------------------
DEFERRED
Federal Expense (Benefit) 518 (2,912) (170)
State Expense (Benefit) 24 (190) (37)
- --------------------------------------------------------------
TOTAL PROVISION (BENEFIT) $ 618 $(3,093) $ (372)
- --------------------------------------------------------------
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES ("SFAS 109"), as of July 1, 1992. The cumulative
effect of this change in accounting method increased fiscal year 1993 net
income $219,000, or $.05 per common share.
Total income tax expense (benefit) for fiscal years 1995, 1994 and 1993
resulted in effective tax (benefit) rates of 38.4%, (35.3%) and (35.7%),
respectively. Differences between the statutory federal income tax rate and
the effective income tax rate are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate (benefit) 34.0% (34.0%) (34.0%)
- ---------------------------------------------------------------
Effect of state income
taxes (benefit), net of
federal tax benefit/expense 2.1% (1.3%) (2.4%)
- ---------------------------------------------------------------
Other 2.3% - .7%
- ---------------------------------------------------------------
Effective tax (benefit) rate 38.4% (35.3%) (35.7%)
- ---------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the impact of "temporary differences"
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. These "temporary
differences" are determined in accordance with SFAS 109. Principal items
making up the net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Inventory $ 285 $ 383 $ 481
Depreciation 330 496 --
Accrued expenses 554 386 303
Restructuring and
impairment charges 1,028 1,537 --
Loss contingencies 224 224 224
Supplemental Executive
Retirement 383 377 50
Other 319 250 153
Loss carry forward 754 679 410
- --------------------------------------------------------------
3,877 4,332 1,621
- --------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Depreciation -- -- 996
Pensions 885 842 413
State taxes 189 241 132
- --------------------------------------------------------------
1,074 1,083 1,541
- --------------------------------------------------------------
NET DEFERRED TAX ASSET $2,803 $3,249 $ 80
- --------------------------------------------------------------
</TABLE>
The Company has certain federal and state loss carry forwards available to
offset future taxable income. The federal tax loss of $1,400,000 has fourteen
years of carry forward period remaining. Portions of the state loss carry
forwards, if not used, will expire in 1996.
The future accumulated undistributed earnings of Acme Electric Limited
(AEL), the Irish-based company in which Acme Electric Corporation currently is
a 50% owner, are intended to be permanently reinvested in that business. At
June 30, 1995, there was an accumulated deficit (through the start up period)
of approximately $318,000, of which Acme Electric Corporation is half owner.
In the event that future earnings were remitted to the Company, income taxes,
based upon the applicable current rates, would be payable after reductions for
any foreign taxes paid on such earnings and subject to applicable limitations.
8. EMPLOYEE BENEFITS
RETIREMENT PLANS:
The Company maintains three noncontributory defined benefit pension plans
covering substantially all employees. The plan covering salaried employees
provides pension benefits based upon the employee's individual yearly
compensation. Plans covering hourly employees provide benefits of stated
amounts for each year of service.
It is the Company's policy to fund for each qualified plan at least an
amount necessary to satisfy the minimum requirements of the Employee Retirement
Income Security Act. The amount to be funded is subject to annual review by
management and its consulting actuary. In recent years, funding contributions
have been restricted due to application of Internal Revenue Code full-funding
limitations to one or more of the plans. The Company also maintains a
nonqualified Supplemental Executive Retirement Plan (SERP) for elected
executive officers of the Company. The SERP provides benefits based upon an
executive's compensation in the last year of service and is reduced by benefits
received from the salaried plan. Six participants of this plan are retired and
receiving payments under the plan.
Approximately 6% of the plans' assets are invested in cash and
equivalents, 67% are invested in equities and the remaining 27% are invested in
fixed-income securities and annuities.
Net periodic pension expense for the three years ended June 30, 1995,
included the following components:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Service cost - Benefits
earned during the period $ 521 $ 562 $ 567
Interest cost on projected
benefit obligation 1,441 1,382 1,282
Actual return on assets (1,398) (1,078) (2,417)
Net amortization, deferral
and curtailment gain (505) (977) 479
Net periodic pension
expense (income) $ 59 $ (111) $ (89)
- --------------------------------------------------------------
</TABLE>
<TABLE>
FOR PLANS WHERE:
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
- ------------------------------------------------------------------
DOLLARS IN THOUSANDS
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT
VALUE OF BENEFIT
OBLIGATIONS:
Vested benefit
obligation $(17,434) $ 0 $(16,674) $(1,137)
Accumulated benefit
obligation (17,530) (1,205) (16,749) (2,413)
Projected benefit
obligation (18,716) (1,313) (18,156) (2,454)
Plan assets at fair
value 23,108 0 22,045 1,129
Funded Status: Assets
in excess of (or
less than) projected
benefit obligation 4,392 (1,313) 3,889 (1,325)
Transition (asset)
or obligation (871) 414 (949) 407
- -----------------------------------------------------------------
Unrecognized prior
service cost 2,832 0 2,756 196
Unrecognized net
gain (4,086) (80) (3,562) (236)
Accrued (prepaid)
pension cost $ (2,267) $ 979 $ (2,134) $ 958
- -----------------------------------------------------------------
</TABLE>
Pursuant to the provisions of Statement of Financial Accounting Standard
No. 87, "Employers' Accounting for Pensions" (SFAS 87), the Company has
recorded $226,000 of additional unfunded accumulated benefit obligation
attributable to the SERP plan at June 30, 1995. These unfunded obligations are
recorded in other long-term liabilities. In addition, an intangible asset of
the same amount has also been recorded. At June 30, 1995, and 1994, the
discount rate for the benefit obligations was 7.5%, the assumed annual rate of
increase in future compensation used in determining the actuarial present value
of projected benefit obligations was 4.5% for plans covering the salaried
employees, and the expected long-term annual rate of return on plan assets was
8.5%.
OTHER POST RETIREMENT BENEFITS:
The Company adopted Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Post-Retirement Benefits Other Than Pensions" (SFAS
106), in 1994. The Company maintains a nonqualified benefit plan to provide
post-retirement health care for elected officers of the Company. Six
participants of this plan are retired and receiving payments under the plan.
The Accumulated Post-Retirement Benefit Obligation at July 1, 1993, was
$433,000, which is being amortized over 20 years.
In addition to the assumed 7.5% discount rate used in the calculation of
the benefit obligations, the assumed annual health care cost increase trend
rate is 6.0%, with claim costs to increase based upon age, ranging from .5% to
6.0% per annum.
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Accumulated Post Retirement
Benefit Obligation:
Retirees $ 450 $ 328
Fully Eligible Active
Plan Participants 0 80
- ---------------------------------------------------------------
Other Active Plan Participants 53 36
- ---------------------------------------------------------------
Total Accumulated Post-
Retirement Benefit Obligation 503 444
Plan Assets at Fair Value 0 0
- ---------------------------------------------------------------
Plan Assets in Excess of
Accumulated Post-Retirement
Benefit Obligation (503) (444)
Unrecognized Transition Obligation 390 412
Unrecognized Net (Gain) Loss 56 6
- ---------------------------------------------------------------
Accrued Post-Retirement
Benefit Cost Recognized
in Statement of Financial Position $ (57) $ (26)
- ---------------------------------------------------------------
NET PERIODIC POST-RETIREMENT
BENEFIT COST:
Service Cost $ 5 $ 4
Interest Cost 36 32
Amortization of Transition
Obligation 22 22
- ---------------------------------------------------------------
Net Periodic Post-Retirement Cost $ 63 $ 58
- ---------------------------------------------------------------
</TABLE>
POST-EMPLOYMENT BENEFITS:
The Company has evaluated the provisions of Statement of Financial
Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for Post-
Employment Benefits." SFAS 112 establishes accounting standards for employers
who provide benefits to former or inactive employees, their beneficiaries, and
covered dependents, after employment but before retirement. The Company
provides post-employment benefits only to employees who are involuntarily
terminated as a result of organizational restructuring or downsizing. This
benefit is not provided to employees who are terminated in the event of
facility closures. These benefits are limited to severance pay based upon
length of service. The Company has not accrued for these post-employment
benefits based upon historical data indicating a relatively stable work force,
the relatively minor amounts paid in past years, and the fact that these costs
cannot be reasonably estimated with any degree of certainty.
9. MAJOR CUSTOMERS:
Power conversion equipment sales encompass markets wherein the demands of
any one customer may vary greatly due to changes in technology and market
strategy. Two customers of the Company accounted for 13.4% and 10.6% of fiscal
1995 sales, respectively, one of which also accounted for 10.6% of June 30,
1995, accounts receivable. In comparison, there was one customer of the
Company that accounted for 10.0% of fiscal 1994 sales and no customers were
above the 10% threshold in 1993.
10. RESTRUCTURING:
In 1994, the Company recognized a pre-tax charge of $7,475,000 against
earnings to establish reserves and record the impairment of assets associated
with the restructuring of its aerospace business to include the closing of the
Acme-URDC, Inc. facility in West Jordan, Utah, and the consolidation of
operations into the facility in Tempe, Arizona.
The 1994 charge included an impairment write-down of assets of $5,584,000,
comprised of a $3,184,000 write-down of equipment and building improvements
pertaining to its FNC battery facility in Tempe, Arizona, and a $2,400,000
write-down of intangible assets relating to the FNC Battery License.
Additionally, restructuring reserves were established for impaired inventory,
the allowance related to the sale of the URDC plant, severance and medical,
relocation of the URDC business into the Tempe facility and miscellaneous
costs. The following table sets forth the Company's restructuring reserves as
reported at June 30, 1995, and 1994. All charges, are cash in nature.
<TABLE>
DOLLARS IN THOUSANDS
<CAPTION>
JUNE 30, 1995 JUNE 30,
1994 1995 (INCOME) 1995
DESCRIPTION BALANCE CHARGES EXPENSE BALANCE
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Impaired inventory $ 310 $ (3) $ 0 $ 307
URDC plant write-down 419 (7) (13) 399
Employee severance and
medical 250 (187) (63) 0
Relocation of the URDC
business into the
Tempe facility 547 (659) 112 0
Miscellaneous 76 (40) (36) 0
- ---------------------------------------------------------------
Totals $1,602 $ (896) $ 0 $ 706
- ---------------------------------------------------------------
</TABLE>
It is the intent of management to physically scrap the impaired inventory
related to the restructuring during fiscal year 1996. The Company anticipates
that it will either complete the sale or enter into a lease arrangement for the
23,000-square-foot facility in West Jordan, Utah, prior to June 30, 1997.
11. SHAREHOLDERS' RIGHTS PLAN:
The Company's Board of Directors has adopted a shareholders' rights plan
(the "Rights Plan") and declared a dividend of one Right for each two shares of
the Company's Common Stock outstanding at December 6, 1993. The Rights do not
become exercisable until the earlier of (i) ten days following the public
announcement that a person or affiliated group (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of the Company's Common Stock, or (ii) ten days
following the commencement of a tender offer, or exchange offer, that would
result in a person or affiliated group becoming an Acquiring Person.
Each Right entitles the registered holder to purchase one share of Common
Stock at a purchase price of $50.00 per share.
In the event that, at any time following the Distribution Date, (i) the
Company is the surviving corporation in a merger with an Acquiring Person and
its Common Stock is not changed or exchanged, (ii) a Person becomes the
beneficial owner of more than 20% of the then outstanding shares of Common
Stock, (iii) an Acquiring Person engages in one or more "self-dealing"
transactions as set forth in the Rights Agreement between the Company and its
transfer agent, or (iv) during such time as there is an Acquiring Person, an
event occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of the
Rights will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Rights.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void.
12. COMMITMENTS AND CONTINGENCIES:
The Company was informed by the New York State Department of Environmental
Conservation (DEC) on December 5, 1994, that the Municipal Waste Landfill,
Cuba, NY, has been listed in the New York State Registry of Inactive Hazardous
Waste Disposal Sites as a Class "2" site requiring remediation. Acme Electric
Corporation has been determined by the DEC to be a potentially responsible
party (PRP) by virtue of its disposal of wastes at the site. As a PRP, the
Company may be subject to liability for the cost of site investigation and
remediation. At this time, there is insufficient information available from
which any reasonable estimate of such cost can be made. The Company did have
insurance policies in effect during the period that waste was disposed of at
the site, which the Company believes would provide coverage in the event the
Company is liable.
<PAGE>
PAGE 31 OF ANNUAL REPORT
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Acme Electric Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of Acme
Electric Corporation and its subsidiaries at June 30, 1995, and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/
Price Waterhouse LLP
Buffalo, New York
August 10, 1995
<PAGE>
PAGE 32 OF ANNUAL REPORT
COMMON STOCK PRICES AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Stock price
- ------------------------------------------------------------
Year Ended June 30, 1995 High Low Dividends Paid
- ------------------------------------------------------------
<S> <C> <C> <C>
Fourth Quarter 38 3/4 18 3/4 --
Third Quarter 21 1/2 12 3/8 --
Second Quarter 14 8 3/4 --
First Quarter 9 7/8 7 1/2 --
- ------------------------------------------------------------
Year Ended June 30, 1994
- ------------------------------------------------------------
Fourth Quarter 9 1/4 6 1/2 --
Third Quarter 8 1/2 7 1/4 --
Second Quarter 11 3/8 6 3/8 --
First Quarter 8 5/8 6 3/8 --
</TABLE>
Acme Electric Corporation's Common Stock is traded on the New York,
Chicago, and Philadelphia Stock Exchanges. The approximate number of
shareholders of record at June 30, 1995, was 1,351.
EXHIBIT 99-1
FOR IMMEDIATE RELEASE
ACME ELECTRIC REPORTS THIRD QUARTER RESULTS
EAST AURORA, N.Y., April 28, 1995 -- Acme Electric Corporation (NYSE:ACE)
today reported that the thirteen-week-period ending March 31, 1995, produced
record sales of $24,184,000. Net income for the quarter was of $334,000, or
$.07 per share, compared to sales of $18,250,000 and a net loss of $5,827,000,
or $1.20 per share, for the comparable period of last year. Included in the
quarter net loss of the prior year were one-time charges net of tax totaling
$4,836,000.
Sales for the thirty-nine-week period ending March 31, 1995, totaled
$66,438,000, with net income of $1,426,000, or $.29 per share, compared to
sales of $56,611,000, with a net loss of $6,219,000, or $1.28 per share, for
the comparable period of the prior year.
Robert J. McKenna, Chairman and CEO, stated that, "Sales in our commercial
businesses are strong, and we expect continued improvement will occur. The
restructured Aerospace Division continues to struggle with meeting its
commitments effectively, and we are providing added resources from our other
divisions to rectify this situation."
Mr. McKenna also reported that, "The Electronics Division began shipping
production quantities of a new power supply for Honeywell, and the alliance
with AT&T for the marketing of uninterruptible power supplies continues to
develop as planned. The Acme Transformer Division has launched a Latin
American market-development initiative to identify new opportunities in that
market, and its program to provide private-branded transformers to Siemens has
commenced. Margins remain pressured because of escalating material costs."
Mr. McKenna also announced that the Company has formed a joint venture
named Acme Electric Limited with Qualtron, a Dublin, Ireland, based electronics
company, to manufacture and sell uninterruptible power supplies to the European
market. He stated that, "We are excited about this opportunity to apply our
experience in the design and manufacture of these products to a market that
offers us such great potential."
Founded in 1917, Acme Electric Corporation is a leader in the design and
manufacture of power conversion products for electronic and electric systems
for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with operations
in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz.
# # # # #
<PAGE>
<PAGE>
<TABLE>
ACME ELECTRIC CORPORATION
Comparative Analysis
(in thousands, except for per share data)
<CAPTION>
13 WEEKS 13 WEEKS 39 WEEKS 39 WEEKS
ENDED ENDED ENDED ENDED
MAR. 31, 1995 APR. 1, 1994 MAR. 31, 1995 APR. 1, 1994
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net Sales $24,184 $18,250 $66,438 $56,611
Net Income (Loss) 334 (5,827) 1,426 (6,219)
Earnings (Loss) per share $.07 $(1.20) $.29 $(1.28)
Weighted Number of Shares
Outstanding Used to Compute
Income Per Common Share 4,937,221 4,858,906 4,913,167 4,853,104
</TABLE>
EXHIBIT 99-2
FOR IMMEDIATE RELEASE
ACME ELECTRIC NAMES ROBERT BATTING TO BOARD
EAST AURORA, N.Y., May 17, 1994 -- Acme Electric Corporation (NYSE: ACE)
today announced that Robert D. Batting has been elected to its board of
directors. Mr. Batting has been President of Clearing/Niagara, a manufacturer
of industrial press equipment, since 1991. He joined Clearing/Niagara after
seven years as Group Vice President of Textron, where he was responsible for
nine of Textron's thirty-five divisions. Mr. Batting is a graduate of
Allegheny College in Meadville, Pennsylvania, and lives in Orchard Park, New
York.
Founded in 1917, Acme Electric Corporation is a leader in the design and
manufacture of power conversion equipment for electronic and electrical systems
for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with operations
in Cuba, N.Y., Lumberton, N.C. and Tempe, Ariz.
# # # #
EXHIBIT 99-3
FOR IMMEDIATE RELEASE
ACME ELECTRIC NAMES RANDALL CLARK TO BOARD
EAST AURORA, N.Y., May 17, 1994 -- Acme Electric Corporation (NYSE: ACE)
today announced that Randall L. Clark has been elected to its board of
directors. Mr. Clark is Executive Vice President of Pratt & Lambert, where he
heads the Consumer Products Group and oversees corporate administration. He
joined Pratt & Lambert in 1992 after a lengthy career in the tire industry,
culminating as Chairman and Chief Executive Officer of Dunlop Tire. Mr. Clark
is a native of Syracuse, New York, and earned Bachelor of Arts and Master of
Business Administration degrees at the University of Pennsylvania.
Founded in 1917, Acme Electric Corporation is a leader in the design and
manufacture of power conversion equipment for electronic and electrical systems
for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with operations
in Cuba, N.Y., Lumberton, N.C. and Tempe, Ariz.
# # # #
EXHIBIT 99-4
FOR IMMEDIATE RELEASE
ACME ELECTRIC RESPONDS TO RECENT STOCK ACTIVITY
EAST AURORA, N.Y., May 26, 1995 -- Acme Electric Corporation (NYSE: ACE)
today issued a response to the recent trading activity in their stock. Daniel
K. Corwin, Senior Vice President said that, "The Company knows of no recent
development which would yield the above-normal trading. The Company will
release its annual report in August after the close of its fiscal year on June
30, 1995. The Company continues to progress as has been discussed in previous
public releases, the most recent being May 1, 1995."
# # # #
EXHIBIT 99-5
FOR IMMEDIATE RELEASE
ACME ELECTRIC RESPONDS TO RECENT STOCK ACTIVITY
EAST AURORA, N.Y., June 13, 1995 -- Acme Electric Corporation (NYSE: ACE)
today issued a response to the recent trading activity in their stock. Daniel
K. Corwin, Senior Vice President said that, "The Company knows of no
development which would yield the recent above-normal trading. The Company
will release year-end results in August after the close of its fiscal year on
June 30, 1995. The Company continues to progress as has been discussed in
previous public releases, the most recent being May 1, 1995."
# # # #
EXHIBIT 99-6
FOR IMMEDIATE RELEASE
ACME ELECTRIC RESPONDS TO RECENT STOCK ACTIVITY
EAST AURORA, N.Y., June 27, 1995 -- Acme Electric Corporation (NYSE: ACE)
reported that the New York Stock Exchange had contacted the Company regarding
recent trading activity in its stock. Daniel K. Corwin, Senior Vice President
and Chief Financial Officer stated that, "The Company is not aware of any
developments that would explain such trading activity. The Company will
release year-end results in August after the close of its fiscal year on June
30, 1995. The Company continues to progress as has been discussed in previous
reports."
# # # #
EXHIBIT 99-7
FOR IMMEDIATE RELEASE
ACME ELECTRIC RESPONDS TO RECENT DEVELOPMENTS
EAST AURORA, N.Y., July 12, 1995 -- Acme Electric Corporation (NYSE: ACE)
responded today to a report by Reuter News Service of an agreement with BAT
International to provide a new battery system for electric vehicles. Robert J.
McKenna, Chairman and chief executive officer, noted that the agreement is the
culmination of an extensive effort by the Company to bring its Common Vessel
Monoblock (CVM) technology to market. "We spent nearly a year seeking a
strategic partner for our battery business. This new agreement will help take
our CVM battery system from the laboratory to the highway," McKenna said.
BAT International, located in Burbank, Calif., was founded in 1991 and
presently manufactures three lines of vehicles at the CALSTART facility.
CALSTART is an organization that has supported BAT and provides funding for
various electric vehicle development projects. BAT will evaluate a small CVM
prototype before Acme provides a full scale model for actual vehicle testing.
Acme Electric Corporation has licensed proprietary technology from Daug
Hoppecke Gesellschaft fur Batteriesysteme mbH (DAHO) of Germany to manufacture
and market fiber nickel cadmium cells for the military and aerospace markets.
The CVM battery systems for BAT will utilize this technology, but the CVM
concept is expected to work with other battery chemistries as well.
McKenna stated that, "Our experience with fiber nickel cadmium batteries
under our license with DAHO, followed by our new CVM technology, prepares us to
address the challenges of electric vehicle applications. The agreement with
BAT International will enable us to advance this technology to the next level."
Founded in 1917, Acme Electric Corporation is a leader in the design and
manufacture of power conversion equipment for electronic and electrical systems
for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with operations
in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz.
# # # #
EXHIBIT 99-8
FOR IMMEDIATE RELEASE
ACME ELECTRIC RESPONDS TO RECENT NEWS REPORTS
EAST AURORA, N.Y., July 20, 1995 -- Acme Electric Corporation (NYSE: ACE)
responded today to a report on CNBC by financial correspondent Dan Dorfman.
Robert J. McKenna, Chairman and CEO, stated that, "The CNBC report failed to
note that our sales have increased through this fiscal year to record levels
reflecting the continued progress of our major programs providing leading
products to growing markets." Mr. McKenna went on to say that, "Margins remain
under pressure, however, due to escalating material costs, and our Aerospace
Division continues to struggle with meeting delivery commitments to customers,
which will adversely affect our fourth quarter." The Company has previously
disclosed the effect of material price increases and difficulties encountered
in the consolidation of its military and aerospace business. Mr. McKenna added
that, "Long-term opportunities look excellent, but, in the short term, much
work remains to be done." The Company reported on its financial condition and
plans to seek further financing following its third quarter ending March 31,
1995.
The Company reported record sales of $24,184,000 and net income of
$334,000 for the third quarter, and expects in August to report its results for
the fourth quarter and full fiscal year ending June 30, 1995. On five separate
occasions since October of 1994, the Company has responded to unusual trading
activity in its stock by reporting that it knew of no developments that would
explain such activity. Further information is available from the Company's
previous reports.
Founded in 1917, Acme Electric Corporation is a leader in the design and
manufacture of power conversion equipment for electronic and electrical systems
for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with operations
in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz.
# # # #
EXHIBIT 99-9
FOR IMMEDIATE RELEASE
ACME ELECTRIC REPORTS FOURTH QUARTER RESULTS
EAST AURORA, N.Y., August 14, 1995 -- Acme Electric Corporation (NYSE:
ACE) today reported that the results of consolidated operations for the full
fiscal year ended June 30, 1995, were record net sales of $91,127,000 with net
profit of $.20 per share, compared with net sales of $76,233,000 and a net loss
of $5,659,000, or $1.17 per share, during the prior year.
Results for the thirteen-week period ended June 30, 1995, were net sales
of $24,689,000 and a net loss of $494,000, or $.09 per share, compared with net
sales of $19,621,000 and net profit of $560,000, or $.11 per share, during the
comparable period of the prior year.
Robert J. McKenna, Chairman and Chief Executive Officer, stated that, "We
are gratified by continued sales increases resulting in record sales for the
year. We are working hard to overcome our immediate difficulties and to enjoy
the full benefit of the growth that we have realized."
Mr. McKenna added that, "Extraordinary material price increases and
excessive health care costs combined to adversely affect fourth quarter
margins. Although we incurred significant temporary expenses to enable our
Aerospace Division to overcome difficulties encountered in the consolidation of
its military and aerospace business into one facility, we look forward to
improved performance in future periods." Acme had previously reported on its
status in July.
Founded in 1917, Acme Electric Corporation is a leader in the design and
manufacture of power conversion equipment for electronic and electrical systems
for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with operations
in Cuba, N.Y., Lumberton, N.C. and Tempe, Ariz.
# # # #
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ACME ELECTRIC CORPORATION
Comparative Analysis
<CAPTION>
FOR THE YEAR ENDED FOR THE 13 WEEKS ENDED
06/30/95 06/30/94 06/30/95 06/30/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $91,127 $76,233 $24,689 $19,621
Net Income (Loss) 992 (5,659) (494) 560
Earnings (Loss) Per Share $.20 $(1.17) $(.09) $.11
Weighted Number of Shares
Outstanding Used to Compute
Income Per Common Share 4,924,887 4,854,061 4,960,048 4,866,454
</TABLE>
