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, 1996
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 13, 1996.
Common Stock, Par Value $1 Per Share, $34,868,374
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of September 13, 1996.
Common Stock, Par Value $1 Per Share, 5,026,072 shares
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1996, 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 31, 1996, 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, as successor to a business founded
in 1917. 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
Power conversion equipment sales encompass markets wherein the demands
of any one customer may vary greatly due to changes in technology and
market strategy. One customer of the Company accounted for 14.8% of fiscal
1996 sales and 8.2% of June 30, 1996, accounts receivable. In comparison,
two customers accounted for 13.4% and 10.6%, respectively, of fiscal 1995
sales, one of which also accounted for 10.6% of June 30, 1995, accounts
receivable. There was one customer that accounted for 10.0% of fiscal 1994
sales.
BACKLOG
The backlog of orders believed to be firm totaled approximately
$14,912,000 at June 30, 1996, compared with approximately $20,954,000 at
June 30, 1995. The reduction in backlog from 1995 to 1996 is primarily due
to the variability of the timing of orders received associated with one
customer of the electronics business, a major original equipment
manufacturer. As manufacture-cycle times have been reduced, customers have
increased the frequency of orders, while, at the same time, reduced the
time periods recovered. Further reduction in the backlog occurred as
certain programs in the electronics business reached maturity, while new
programs were in their infancy.
Backlog orders at June 30, 1996, are generally expected to be filled
during the current fiscal year.
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, 1996, approximately 743 persons were employed by the
Registrant.
RESEARCH AND DEVELOPMENT
Approximately 7% 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, 1996, 1995 and 1994,
was $4,735,000, $4,791,000 and $5,666,000, respectively.
ENVIRONMENTAL MATTERS
The Registrant 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 can
be made of the potential relative costs to the Company. 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 in Lumberton, North Carolina, and leases
a new (1994) plant in Cuba, New York (with an option to purchase in
accordance with a $500,000 20-year industrial revenue bond financing), and
leases facility space at second location in Cuba, New York, and plant and
warehouse locations in Tempe, Arizona. The Registrant further owns an idle
facility located in West Jordan, Utah, vacated and placed for sale in
conjunction with its 1994 aerospace business restructuring. The Registrant
believes that these facilities provide adequate capacity for its current
operations.
SQUARE FOOTAGE SQUARE FOOTAGE LEASE EX-
LOCATION OWNER 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
Tempe, AZ - 1,200 August 1997
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 24 of the Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1996, 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 19 of the Registrant's Annual Report to Shareholders for
the fiscal year ended June 30, 1996, 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.
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 13 of the Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1996, 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 10 through 12 of the Registrant's
Annual Report to Shareholders for the fiscal year ended June 30, 1996,
submitted herewith as an exhibit and such management's discussion and
analysis 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 14 through 24 of the Registrant's
Annual Report to Shareholders for the fiscal year ended June 30, 1996,
submitted herewith as an exhibit, are incorporated by reference herein:
Consolidated Statements of Operations - Years Ended June 30, 1996,
1995, 1994
Consolidated Balance Sheets - June 30, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended June 30, 1996,
1995, 1994
Consolidated Statements of Shareholders' Equity - Years Ended June 30,
1996, 1995, 1994
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 1996 Annual Meeting of Shareholders to be held on
October 31, 1996, and is incorporated by reference herein.
IDENTIFICATION OF EXECUTIVE OFFICERS
SUMMARY OF BUSINESS EXPERIENCE
NAME, AGE AND POSITION OVER THE LAST FIVE YEARS
- ---------------------- ------------------------------
Robert J. McKenna, 48, Chairman, Prior to assuming the position
President and Chief Executive Officer currently 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.
Daniel K. Corwin, 49, Prior to assuming the position
Senior Vice President currently held in August 1994,
and Chief Financial Officer served as Vice President of
Administration and Chief
Financial Officer since
February 1992. Prior thereto,
served as Vice President and
General Manager, Electronics
Division, since November 1990.
David G. Anderson, 44, Prior to February 1992, also
Corporate Secretary, Treasurer, served as Controller since
and General Counsel April 1988
Nicola T. Arena, 47 Prior to assuming the position
Vice President and General currently held in February
Manager, Power Distribution 1996, served as Director of
Products Division Sales and Marketing for
Aeroquip Corporation since
1991.
John E. Gleason, 49, Prior to assuming the position
Vice President and General currently held in May 1993,
Manager, Electronics Division served as General Manager since
Acting General Manager, February 1992. Prior thereto,
Aerospace Division (August 1996) 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, 43, Prior to assuming the position
Vice President and General held through August 1996,
Manager, Aerospace Division served as Venture Director
(through August 1996) since May 1993 through April
1994. 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 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
1996 Annual Meeting of Shareholders to be held on October 31, 1996, 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 1996 Annual Meeting of
Shareholders to be held on October 31, 1996, 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 REFNERECE
----------------------------
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.
11 Statement re. computation of Note (1h) to Consolidated
per share earnings Financial Statements at
page 18 of 1996 Annual
Report to Shareholders.
13 Acme Electric Corporation 1996
Annual Report to Shareholders See Exhibit 13 attached.
21 Subsidiaries of Registrant See Exhibit 21 attached.
22 1996 Proxy Statement Definitive Proxy Statement
filed under Schedule 14A,
September 18, 1996, 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,
1996.
27 Financial Data Schedule See Exhibit 27 attached.
99 Additional Exhibits -
News Release, August 15, 1996,
announcing fourth quarter
and year-end results. See Exhibit 99 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, 1996.
<PAGE>
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/ 09/27/96
Robert D. Batting Director
/s/ 09/27/96
Robert T. Brady Director
/s/ 09/27/96
Randall L. Clark Director
/s/ 09/27/96
G. Wayne Hawk Director
/s/ 09/27/96
Terry M. Manon Director
/s/ 09/27/96
Robert J. McKenna Director
/s/ 09/27/96
James W. McLaughlin Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ACME ELECTRIC CORPORATION
By: /s/ Date: 09/27/96
Robert J. McKenna
Chairman, President and
Chief Executive Officer
By: /s/ Date: 09/27/96
Daniel K. Corwin
Senior Vice President
and Chief Financial Officer
<PAGE>
ACME ELECTRIC CORPORATION
INDEX TO FINANCIAL STATEMENTS
The financial statements together with the report thereon of Price
Waterhouse LLP dated August 13, 1996, appearing on pages 14 through 23 of
the accompanying 1996 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 1996 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 1996 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
1996, 1995 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 13, 1996 appearing on page 23 of the 1996 Annual Report
to Shareholders of Acme Electric Corporation (which report and consolidated
financial statements are incorporated 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.
PRICE WATERHOUSE LLP
/s/
Buffalo, New York
August 13, 1996
F-2
<PAGE>
<PAGE>
<TABLE>
ACME ELECTRIC CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(000's Omitted)
<CAPTION>
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, 1996
Reserve deducted from assets:
Allowance for doubtful accounts $ 451 $ 493 $ - $555 $ 389
Inventory obsolescence and
impairment reserve $ 566 $ - $ - $167 $ 399
Valuation allowance provided on
deferred tax asset (SFAS 109) $ - $ - $ - $ - $ -
Restructuring Cost Reserves $ 399 $ - $ - $ - $ 399
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
</TABLE>
F-3
<PAGE>
<PAGE>
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 13, 1996 appearing on page 23 of the 1996 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.
PRICE WATERHOUSE LLP
/s/
Buffalo, New York
September 27, 1996
F-4
<PAGE>
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 13, 1996 appearing on page 23 of the 1996 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.
PRICE WATERHOUSE LLP
/s/
Buffalo, New York
September 27, 1996
F-5
<PAGE>
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 13, 1996 appearing on page 23 of the 1996 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.
PRICE WATERHOUSE LLP
/s/
Buffalo, New York
September 27, 1996
F-6
<PAGE>
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 13, 1996 appearing on page 23 of the 1996 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.
PRICE WATERHOUSE LLP
/s/
Buffalo, New York
September 27, 1996
F-7
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, 1996, INCORPORATED BY
REFERENCE.
<PAGE>
PAGE 10 OF ANNUAL REPORT
FINANCIAL CONDITION:
The Company has financed its working capital requirements and capital
spending primarily with cash from operating revenues and the balance coming
from increased borrowings. Total debt, including capital lease
obligations, increased approximately $740,000 in 1996. During fiscal year
1996, the Company was able to reduce its net outstanding bank borrowings by
$3,000,000, primarily due to the receipt of $2,025,000 of governmental
loans and a $200,000 grant, all associated with the new Cuba, New York,
facility.
The working capital of the Company decreased by approximately
$2,633,000 as of June 30, 1996. This reduction in working capital was
primarily due to the Company's success in lowering inventory levels
required to support operations, coupled with the collection of several aged
Aerospace customer receivables and reductions of the unbilled receivables
associated with engineering contracts in the military/aerospace business.
A further contributing factor to the working capital decrease was the
slight decline in June sales of electronics products to Original Equipment
Manufacturers (OEM), compared with the prior year June, resulting in a
lower year-end receivables balance.
____________________________________________________________
Dollars in thousands
____________________________________________________________
Years ended June 30 1996 1995 1994
____________________________________________________________
Working Capital $22,357 $24,990 $20,465
____________________________________________________________
Average Working Capital,
as a percent of sales 24.5% 24.9% 29.4%
____________________________________________________________
Cash provided from
(used in) Operations 3,549 (605) 4,355
____________________________________________________________
Current Ratio 2.7:1 2.7:1 3.0:1
____________________________________________________________
Long-Term Debt to Equity 1.5:1 1.5:1 1.3:1
____________________________________________________________
Capital expenditures and foreign investment combined were $3,963,000
and $4,272,000 for 1996 and 1995, respectively, compared with capital
expenditures and license payments of $7,754,000 in 1994. Included in the
1996 expenditures is approximately $3,000,000, relating to the new business
information system, of which $2,000,000 was financed through a third-party
five-year lease arrangement. The fiscal 1995 and 1994 expenditures
included $1,500,000 and $4,710,000, respectively, of the Cuba, New York,
plant construction costs. The Company anticipates capital expenditures
will approximate $2,700,000 in 1997, inclusive of the new business
information system costs. The Company expects that operating activities in
1997 will produce net cash to fund these capital expenditures and any
increase in working capital caused by increased business.
At June 30, 1996, the Company had two secured term loans with a
combined outstanding balance of $6,723,000, with interest terms of the
lower of prime plus 1.5%, or 3% above the London Interbank 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 $13,288,000. The credit agreement, as amended, provides for a maturity
date on the line of credit of December 1, 1997, while the $4,723,000 and
$2,000,000 term loans have principal payments due through January 2, 2000,
and July 1, 2001, respectively. Pursuant to requirements within the credit
agreement, the Company has purchased an interest-rate protection instrument
that provides for a maximum interest rate of 9.6% on $15,000,000 of
notional principal debt, expiring December 1, 1997. The credit agreement
contains certain restrictive covenants, including, but not limited to,
maintenance of earnings, interest coverage, and debt-to-worth ratios. At
June 30, 1996, the Company was in compliance of the covenants under the
credit agreement. Management believes that current financing will provide
adequate liquidity in the near term, with intentions to negotiate longer
term facility commitments for the future.
During 1996, the Company successfully concluded negotiations
concerning amendments to its License Agreement ("License") with DAUG-
HOPPECKE. Such amendments included issues pertaining to the elimination of
minimum royalties, extension of the License, expansion of eligible market
applications, repair of products that exhibit certain defects, and the
ability to assign the License to third parties. The Company has provided
adequate accruals related to this agreement. The impact on 1997 cash flow
will be less than $400,000.
<PAGE>
PAGES 11 - 12 OF ANNUAL REPORT
RESULTS OF OPERATIONS:
Acme Electric Corporation reported a net loss of $280,000, or $.06
per share, on net sales of $96,551,000 for the year ended June 30, 1996,
compared with net income of $992,000, or $.20 per share, and net loss of
$5,659,000, or $1.17 per share, for 1995 and 1994, 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. Net loss from sales to the military/aerospace market
for 1996 was $1,699,000, compared to losses of $1,219,000 and $2,377,000 in
1995 and 1994, respectively. The Company continues to incur significant
manufacturing inefficiencies and engineering contract overruns in its
Tempe, Arizona, operation, as it strives to improve the product design
processes and production disciplines, while endeavoring to stay current
with customer shipment requirements to the military/aerospace market.
Consolidated sales increased $5,424,000, or 5.9%, over the previous
year, compared with an increase of $14,894,000, or 19.5%, in 1995 over 1994
levels. The increase is primarily the result of increased sales to two
major customers, one in distribution, the second a major OEM customer.
Sales to the military/aerospace market in 1996 were $7,698,000,
approximately a $1,000,000 improvement over the 1995 and 1994 levels of
$6,535,000 and $6,749,000, respectively.
The Company achieved overall record annual sales in 1996, in spite of
major disruptions in production and shipments in the second and third
quarters, as new advanced manufacturing techniques were being introduced.
The Company has continued to gradually recover the 1995 material-cost
increases through increased pricing, though full recovery has not been
realized. A portion of the 1996 sales growth was comprised of a mix of
products with lower margins.
Continued growth in sales will be dependent upon several factors,
including the Company's ability to grow sales of its core line of products
sold through distribution, along with the ability to minimize the short-
term operational disruptions associated with the continued implementation
of advanced manufacturing techniques and the new business system. The
Company's sales progression will further be contingent upon the pace at
which operational improvements at its Tempe, Arizona, manufacturing
facility will be achieved, the success of its international sales efforts,
and its ability to continue to attract new major OEM customer programs.
Cost of sales as a percentage of sales was 77.6% in 1996, 74.4% in
1995, and 72.2% in 1994. The increase from 1995 to 1996 reflects the first
full year at the higher material prices (incurred in 1995), which have
cumulatively outpaced sales-price recovery efforts to date. Other factors
adversely affecting 1996 gross margin (cost of sales) include: significant
manufacturing cost inefficiencies and shipment disruptions in quarters two
and three, as the Company initiated the implementation of new manufacturing
techniques and resized its labor force at its Lumberton, North Carolina,
manufacturing facility; continued operational difficulties with product
design, product assembly processes and material flows experienced at its
Tempe, Arizona, manufacturing facility, resulting in engineering contract-
cost overruns and excessive production costs; and a slightly different mix
of product sold with lower margin. These factors were partially offset by
the $575,000 (Pre-tax) Sealed Lead Acid Battery (SLAB) contract loss
reversal, resulting from the government's termination of the contract. The
Company will continue to increase prices, where possible, in an effort to
recover margins lost to the 1995 surge in material costs. Further, both
the labor-force resizing and progress made in the Demand Flow Technology
(DFT) implementation have favorably affected the commercial/industrial
business during the fourth quarter of fiscal 1996. The Company's
management resources continue to be taxed by the military/aerospace
business in an effort to achieve break-even results in the near term. The
success of these efforts will be contingent on product pricing initiatives,
improvement in the design processes and production activities, and growth
in sales. The cost of sales as a percentage of sales in the fourth quarter
of fiscal 1996 was 77.7%, an improvement from the 81.5% of the second
quarter, in spite of significant engineering contract losses and large
workers' compensation claims charged in the quarter. This improvement
reflects the favorable efforts of the aforementioned Company initiatives.
Research and engineering expenses as a percentage of sales were 4.9%
in 1996, compared to 5.2% in 1995 and 7.4% in 1994. This net decrease as a
percentage of sales is reflective of the higher sales level achieved in
1996 over 1995. Included in the 1994 expenses was approximately $250,000
of engineering and quality support costs, which are included in
manufacturing expense in 1996 and 1995.
Selling and administrative expenses as a percentage of sales were
15.5% in 1996, compared with 16.5% in 1995 and 18.8% in 1994. The
percentage of sales decrease from 1995 to 1996 is primarily due to the
increased sales levels in 1996 without a corresponding increase in selling
costs, including commissions. The net decrease in the percent of sales
ratio from 1994 to 1995 reflects the nearly $15,000,000 growth in sales in
1995, coupled with the $600,000 reduction in overhead costs resulting from
the 1994 aerospace business restructuring.
Total interest expense increased nearly $400,000 from 1995 to 1996.
This increase is primarily due to a higher average outstanding debt balance
maintained during 1996 to support the working capital requirements of the
Company. 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 had increased in 1995 over 1994 amounts when
the 1994 collar-related amounts are excluded, due primarily to higher
interest rates combined with higher average outstanding debt balances in
1995. The Company's long-term debt originates from financing the
military/aerospace business over the past nine years.
Effective tax (benefit) rates for the most recent three years were
(29.7%), 38.4% and (35.3%), respectively. The fluctuations in the
effective rates are generally reflective of the year-to-year variations in
the permanent book-to-tax differences as a percent of pre-tax earnings
(loss) and the Company's estimations as to the probable realizations of
certain deferred state tax assets and minimum tax effects thereon. The
Company does not record tax benefit for the loss from its 50%-owned foreign
joint-venture and, as such, has generated a lower effective benefit rate.
The fourth quarter of fiscal year 1996 resulted in net income of
$148,000 on quarterly sales of $24,040,000, or a net income per share of
$.03. The pre-tax income for the quarter of $190,000 included a $175,000
reversal of the remaining loss reserve related to the SLAB contract with
the Department of the Navy (terminated for convenience), a $316,000
additional charge for workers' compensation costs, and $480,000 accrued
losses on long-term engineering contracts for the military/aerospace
market. Annual workers' compensation costs were approximately $340,000
higher than normal, primarily due to several major individual case
developments which occurred in the fourth quarter of the year.
The provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting of Stock-Based Compensation," will become effective
for the Company for fiscal year 1997. SFAS No. 123 establishes a fair-
value based method of accounting for stock-based compensation, but does not
require entities to adopt that method in place of the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company is evaluating its alternative with respect to the
adoption of this Statement.
<PAGE>
<PAGE>
PAGE 13 OF ANNUAL REPORT
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
<TABLE>
Dollars in thousands (except per share, employee data and per square-foot amounts)
_______________________________________________________________________________________________
<CAPTION>
Years ended June 30 1996 1995 1994 1993 1992
_______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net Sales $96,551 $91,127 $76,233 $75,812 $72,715
Income (Loss) before cumulative
effect of a change in accounting
principle (280) 992 (5,659) (673) 624
Cumulative effect of a change
in accounting principle -- -- -- 219 --
Net Income (Loss) (280) 992 (5,659) (454) 624
Income (Loss) per common share
before cumulative effect of a
change in accounting principle (.06) .20 (1.17) (.14) .13
Cumulative effect of a change
in accounting principle -- -- -- .05 --
Net Income (Loss) per common share (.06) .20 (1.17) (.09) .13
_______________________________________________________________________________________________
AT END OF YEAR:
Total assets $54,144 $56,178 $46,505 $50,053 $50,286
Working capital 22,357 24,990 20,465 24,332 24,501
Average working capital,
as a percent of sales 24.5% 24.9% 29.4% 32.2% 34.4%
Ratio of current assets to
current liabilities 2.7:1 2.7:1 3.0:1 4.2:1 4.5:1
Investment in property, plant
and equipment - net 16,469 14,657 12,669 15,561 16,638
Long-term debt 24,394 24,419 19,590 21,293 21,668
Total shareholders' equity 15,684 15,849 14,566 20,108 20,500
Equity per common share 3.18 3.22 3.02 4.19 4.28
Weighted average number of shares
outstanding used to compute income
(loss) per common share 4,955,626 4,924,887 4,854,061 4,812,429 4,777,473
_______________________________________________________________________________________________
Average number of hourly employees 534 505 444 436 456
Average number of salaried employees 248 251 252 267 307
Sales per full-time employee
equivalent (000's) $ 123 $ 120 $ 109 $ 108 $ 95
Square footage occupied 339,000 361,000 372,000 465,000 533,000
Sales per square foot (000's) $ 285 $ 252 $ 205 $ 164 $ 137
</TABLE>
<PAGE>
<PAGE>
PAGE 14 OF ANNUAL REPORT
CONSOLIDATED STATEMENT OF OPERATIONS
Dollars in thousands (except per share amounts)
_________________________________________________________________________
Years ended June 30 1996 1995 1994
_________________________________________________________________________
Net Sales $96,551 $91,127 $76,233
Costs and Expenses
Cost of sales 74,964 67,837 55,071
Research and engineering expenses 4,735 4,791 5,666
Selling and administrative expenses 14,992 15,023 14,344
Interest expense 2,258 1,866 2,429
Restructuring costs -- -- 1,891
Impairment charge -- -- 5,584
_________________________________________________________________________
Total Costs and Expenses 96,949 89,517 84,985
_________________________________________________________________________
Income (Loss) Before Income Taxes (398) 1,610 (8,752)
Income Tax Expense (Benefit) (118) 618 (3,093)
_________________________________________________________________________
Net Income (Loss) $ (280) $ 992 $(5,659)
_________________________________________________________________________
Net Income (Loss) per Common Share $ (.06) $ .20 $ (1.17)
_________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
<PAGE>
PAGE 15
CONSOLIDATED BALANCE SHEET
Dollars in thousands
___________________________________________________________________________
JUNE 30, 1996 JUNE 30, 1995
___________________________________________________________________________
ASSETS
Current Assets
___________________________________________________________________________
Cash $ 828 $ 386
Accounts receivable, net 15,445 17,253
Inventories, net 15,008 17,352
Income taxes receivable -- 325
Deferred income taxes 1,093 1,303
Other current assets 2,997 2,818
___________________________________________________________________________
Total Current Assets 35,371 39,437
___________________________________________________________________________
Property, plant and equipment, at cost:
Land and buildings 11,283 11,224
Machinery and equipment 23,700 19,919
___________________________________________________________________________
Total property, plant and equipment 34,983 31,143
Less accumulated depreciation and
amortization (19,495) (17,467)
Facilities held for sale, net 981 981
___________________________________________________________________________
Property, plant and equipment, net 16,469 14,657
___________________________________________________________________________
Other assets 2,304 2,084
___________________________________________________________________________
TOTAL ASSETS $54,144 $56,178
___________________________________________________________________________
___________________________________________________________________________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
___________________________________________________________________________
Accounts payable $ 6,045 $ 9,307
Accrued compensation and other 4,763 3,700
Current portion of long-term debt 2,206 1,440
___________________________________________________________________________
Total Current Liabilities 13,014 14,447
___________________________________________________________________________
Long-term debt 24,394 24,419
Other long-term liabilities 1,052 1,463
___________________________________________________________________________
TOTAL LIABILITIES 38,460 40,329
___________________________________________________________________________
SHAREHOLDERS' EQUITY
___________________________________________________________________________
Common Stock, $1 par value authorized
8,000,000 shares, issued 5,020,153
and 5,002,977 shares 5,020 5,003
Capital in excess of par value 18,910 18,807
Accumulated deficit (7,352) (7,072)
___________________________________________________________________________
Total capital & accumulated deficit 16,578 16,738
Less treasury stock, at cost:
80,699 and 80,551 shares 894 889
___________________________________________________________________________
Total Shareholders' Equity 15,684 15,849
___________________________________________________________________________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $54,144 $56,178
___________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
<PAGE>
PAGE 16 OF ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in thousands
_________________________________________________________________________
Years ended June 30 1996 1995 1994
_________________________________________________________________________
Cash flows from operating activities:
Net Income (Loss) $ (280) $ 992 $(5,659)
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities:
Loss from joint-venture 213 161 --
Depreciation and amortization 2,040 2,066 2,533
Loss (gain) on sale/retirement of
fixed assets -- 18 (229)
Deferred income taxes (134) 542 (3,102)
Impairment charge -- -- 5,584
Change in assets and liabilities:
Accounts receivable, net 1,808 (2,007) (492)
Inventories, net 2,344 (6,860) 2,756
Other assets (4) 885 96
Prepaid and accrued income taxes 294 (82) 176
Accounts payable (3,262) 5,075 857
Reserves for restructuring, net -- (896) 632
Accrued compensation and other 530 (499) 1,203
_________________________________________________________________________
Net cash provided from (used in)
operating activities 3,549 (605) 4,355
_________________________________________________________________________
Cash flows from investing activities:
Additions to property, plant
and equipment (3,852) (4,072) (6,238)
Intangibles acquired -- -- (1,516)
Proceeds from dispositions of
fixed assets -- -- 4,138
Investment in joint-venture (111) (200) --
_________________________________________________________________________
Net cash used in investing
activities (3,963) (4,272) (3,616)
_________________________________________________________________________
Cash flows from financing activities:
Increase of long-term debt 14,984 21,445 11,169
Reduction of long-term debt (14,243) (16,633) (12,096)
Proceeds from employee stock
purchase, stock option and
dividend reinvestment plans 120 773 212
Purchase of treasury stock (5) (482) (95)
_________________________________________________________________________
Net cash provided from (used in)
financing activities 856 5,103 (810)
_________________________________________________________________________
Net increase (decrease) in cash 442 226 (71)
_________________________________________________________________________
Cash at beginning of year 386 160 231
_________________________________________________________________________
Cash at end of year $ 828 $ 386 $ 160
_________________________________________________________________________
Supplemental disclosures of cash
flow information:
Cash paid (received) during the
year for:
Interest $ 2,413 $ 1,999 $ 2,512
Income Taxes $ (278) $ 158 $ (166)
_________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
<PAGE>
PAGE 17 OF ANNUAL REPORT
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Dollars in thousands
___________________________________________________________________________
Capital
Common in
stock excess Treasury
$1 par of par Accumulated stock,
value value deficit at cost
___________________________________________________________________________
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
___________________________________________________________________________
Stock options exercised 6 23
___________________________________________________________________________
Purchase of treasury shares 5
___________________________________________________________________________
Sales of authorized shares
Employee Stock Purchase Plan 2 67
Employee Savings Plan (401[K]) 9 13
___________________________________________________________________________
Net Loss (280)
___________________________________________________________________________
Balance June 30, 1996 $5,020 $18,910 $(7,352) $894
___________________________________________________________________________
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 18 - 23 OF ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES:
a. Acme Electric Corporation designs, manufactures and markets
power conversion equipment for electronic and electrical systems.
Principal markets encompass computers, test equipment, information systems,
military, aerospace, telecommunications and a variety of industrial,
commercial and residential applications requiring conversion of electrical
energy from one useable state to another.
b. The Company is a 50% owner in the Irish-based joint-venture,
Acme Electric Limited (AEL). This investment is recorded under the equity
method of accounting. As of June 30, 1996, the Company's share of
cumulative losses approximated $375,000.
c. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
The major areas in which the Company utilizes estimates include
deferred tax assets, reserves for insurance and legal claims, environmental
liabilities, product warranty reserves, reserve recognition on long-term
contracts, and the net realizable value of certain assets. The amounts
contained within these financial statements represent management's best
estimate of expected outcomes based on available information. However, the
Company realizes that certain events could occur or fail to occur which
would impact the estimates by a material amount in the future.
d. The Company files a federal income tax return and various 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.
e. Inventories are costed at the lower of cost or market and
determined principally on a FIFO (first in, first out) basis.
f. 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 costs incurred to date to total estimated material,
labor and overhead costs for each long-term contract.
g. 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
______________________________________
h. 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:
_____________________________________________________________
Dollars in thousands 1996 1995
_____________________________________________________________
Billed $14,938 $16,439
Unbilled 896 1,265
_____________________________________________________________
Subtotal $15,834 $17,704
_____________________________________________________________
Less allowance for doubtful accounts (389) (451)
_____________________________________________________________
Accounts receivable, net $15,445 $17,253
_____________________________________________________________
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, 1996, will be
substantially billed and collected in fiscal year 1997.
3. INVENTORIES:
__________________________________________
Dollars in thousands 1996 1995
__________________________________________
Raw Material $ 6,733 $ 6,990
__________________________________________
Work in Process 3,876 4,819
__________________________________________
Finished Goods 4,399 5,543
__________________________________________
Total Inventories $15,008 $17,352
__________________________________________
Inventories are reported net of the reserves for obsolescence of
$399,000 and $566,000 in 1996 and 1995, respectively.
4. LONG-TERM DEBT:
_____________________________________________________
Dollars in thousands 1996 1995
_____________________________________________________
Secured revolving loan $13,288 $16,988
Secured term loan with 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% through January 2, 2000. 4,723 6,072
Secured term loan with quarterly
principal installments of $33,333
each, and interest paid monthly at
the lower of prime plus 1.5%, or
the Eurodollar (LIBOR) rate plus
3.0% through July 1, 2001. 2,000 --
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. 448 469
Secured loan on the 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 September 1, 1997,
and continuing over the remaining
sixteen years. 2,000 2,000
Capital lease obligation secured
by new business information system
equipment and a $900,000 letter of
credit, payable in monthly install-
ments of $42,662, consisting of
principal and interest at 10.09%,
maturing December 2001. 1,818 --
Secured loan on the Cuba facility
payable over 20 years, with no
monthly principal or interest due
for the first 3 years, 36 monthly
principal and interest payments
of $8,680 at 2% due years 4-6 and
168 monthly principal and interest
payments of $10,534 at 5% due
through September 2015. 1,500 --
Other debt 823 330
_____________________________________________________
Total debt 26,600 25,859
_____________________________________________________
Current portion (2,206) (1,440)
_____________________________________________________
Long-term portion $24,394 $24,419
_____________________________________________________
The Company has a credit agreement with a banking institution, which
provides for borrowings and letters of credit up to a maximum of
$27,723,000. This credit agreement is comprised of two secured term loans
in the amount of $4,723,044 and $2,000,000 and a $21,000,000 secured
revolving loan. 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%, with a maturity date of December 1, 1997. The Company maintains
interest rate protection, which allows for a maximum interest rate of 9.6%
on $15,000,000 of notional principal debt. Outstanding borrowings against
the revolving credit facility are limited by formula to specified amounts
of accounts receivable and inventory, reduced by outstanding term debt.
The Company pays a maximum annual commitment fee of 1/4 of 1% per annum on
the unused portion. Under the terms of the credit agreement, the Company
is required to meet certain restrictive covenants with respect to
maintenance of earnings, interest coverage and debt-to-worth ratios. At
June 30, 1996, the Company was in compliance with the covenants under the
credit agreement.
During the next five years, long-term debt matures as follows: 1997 -
$2,206,000, 1998 - $2,281,000, 1999 - $2,318,000, 2000 - $2,322,000, and
2001 - $2,064,000. 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 27, 1995, 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. In accordance with the
formula, no options will be granted for the fiscal year ended June 30,
1996.
___________________________________________________________
1981 Plan 1989 Plan
Shares Shares
___________________________________________________________
Options outstanding
July 1, 1995 19,172 47,000
Options granted - 53,000
Options exercised - (6,500)
Options cancelled (2,625) (2,000)
Options outstanding 16,547 91,500
June 30, 1996
Options exercisable at
June 30, 1996 16,547 38,000
Exercise prices per share $5.72-$8.56 $4.06-$11.25
Shares available for options
at June 30, 1996 - 254,004
___________________________________________________________
6. LEASES:
The Company leases certain manufacturing facilities and equipment,
described in Note 4, under lease agreements which have been capitalized,
and various other equipment under operating leases. Under the terms of the
capital leases, the Company has included $3,797,565 and $1,794,000 in the
cost of property, plant and equipment at June 30, 1996, and 1995,
respectively. Accumulated depreciation on such assets was $1,040,000 and
$1,004,000 at June 30, 1996, and 1995, respectively. Total rental expense
under operating leases, which includes the headquarters facility, was
$1,038,000, $1,130,000 and $1,026,000 in 1996, 1995 and 1994, respectively.
Minimum future rental commitments under non-cancelable operating leases are
approximately $766,000 in 1997; $522,000 in 1998; $425,000 in 1999;
$235,000 in 2000; and $0 in 2001.
7. INCOME TAXES:
The provision for income taxes includes the following:
Years Ended June 30
____________________________________________________________
Dollars in thousands 1996 1995 1994
____________________________________________________________
Current
Federal Expense $ -- $ 49 $ --
State Expense 16 27 9
____________________________________________________________
Deferred
Federal Expense (Benefit) (117) 518 (2,912)
State Expense (Benefit) (17) 24 (190)
____________________________________________________________
Total Provision (Benefit) $ (118) $ 618 $(3,093)
____________________________________________________________
Total income tax expense (benefit) for fiscal years 1996, 1995 and
1994 resulted in effective tax (benefit) rates of (29.7%), 38.4% and
(35.3%), respectively. Differences between the statutory federal income
tax rate and the effective income tax rate are as follows:
_____________________________________________________________
1996 1995 1994
_____________________________________________________________
Statutory rate (benefit) (34.0%) 34.0% (34.0%)
_____________________________________________________________
Foreign losses not tax effected 18.2% 3.4% --
_____________________________________________________________
Reduction of accumulated reserve (17.0%) -- --
_____________________________________________________________
Other 3.1% 1.0% (1.3%)
_____________________________________________________________
Effective tax (benefit) rate (29.7%) 38.4% (35.3%)
_____________________________________________________________
At June 30, the deferred tax assets (liabilities) were comprised of
the following:
_____________________________________________________________
Dollars in thousands 1996 1995 1994
_____________________________________________________________
Deferred tax assets:
Inventory $ 376 $ 285 $ 383
Property, plant & equipment 186 330 496
Accrued expenses 744 554 386
Restructuring and
impairment charges 779 1,028 1,537
Loss contingencies -- 224 224
Supplemental Executive
Retirement 402 383 377
Other 245 319 250
Loss carry forward 1,111 754 679
_____________________________________________________________
3,843 3,877 4,332
_____________________________________________________________
Deferred tax liabilities:
Pensions (915) (885) (842)
State taxes (195) (189) (241)
_____________________________________________________________
(1,110) (1,074) (1,083)
_____________________________________________________________
Net deferred tax asset $2,733 $2,803 $3,249
_____________________________________________________________
The Company has certain federal and state loss carry forwards
available to offset future taxable income. The federal tax loss carry
forward of $3,000,000 will have portions expire, if unused, in 2009.
Portions of the state loss carry forwards, if not used, will expire in
1997.
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 3% of the plans' assets are invested in cash and
equivalents, 50% are invested in equities, and the remaining 47% are
invested in fixed-income securities and annuities.
Net periodic pension expense for the three years ended June 30, 1996,
included the following components:
_________________________________________________________________
Dollars in thousands 1996 1995 1994
_________________________________________________________________
Service cost - Benefits
earned during the period $ 518 $ 521 $ 562
Interest cost on projected
benefit obligation 1,521 1,441 1,382
Actual return on assets (4,666) (1,398) (1,078)
Net amortization, deferral
and curtailment gain 2,885 (505) (977)
Net periodic pension
expense (income) $ 258 $ 59 $ (111)
_________________________________________________________________
For plans where:
June 30, 1996 June 30, 1995
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
_________________________________________________________________
Actuarial present
value of benefit
obligations:
Vested benefit
obligation $(18,568) $(1,359) $(17,434) $ 0
Accumulated benefit
obligation (18,718) (2,751) (17,530) (1,205)
Projected benefit
obligation (20,082) (2,771) (18,716) (1,313)
Plan assets at fair
value 25,173 1,350 23,108 0
Funded Status: Assets
in excess of (or
less than) projected
benefit obligation 5,090 (1,421) 4,392 (1,313)
Transition (asset)
or obligation (645) 273 (871) 414
_________________________________________________________________
Unrecognized prior
service cost 2,947 161 2,832 0
Unrecognized net
gain (5,107) (73) (4,086) (80)
Accrued (prepaid)
pension cost $ (2,285) $ 1,060 $ (2,267) $ 979
_________________________________________________________________
Pursuant to the provisions of Statement of Financial Accounting
Standard No. 87, "Employers' Accounting for Pensions" (SFAS 87), the
Company has recorded $382,000 of additional unfunded accumulated benefit
obligation attributable to the SERP plan at June 30, 1996. 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, 1996, and 1995, the discount rates for the benefit
obligations were 7.0% and 7.5%, respectively, 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 for both years, and the expected long-term annual rate
of return on plan assets was 8.5% for plan years 1996 and 1995.
OTHER POST-RETIREMENT BENEFITS:
The Company adopted Statement of Financial Accounting Standards No.
106, "Employees' Accounting for Post-Retirement Benefits Other Than
Pensions," in 1994. The Company maintains a nonqualified benefits plan to
include 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 June 30, 1996,
and 1995, was comprised of $453,000 and $450,000, respectively,
attributable to retirees, and $57,000 and $53,000, respectively,
attributable to eligible and other active plan participants, for combined
totals of $510,000 and $503,000, respectively. At June 30, 1996, and 1995,
the unrecognized amount of the Accumulated Post-Retirement Benefit
Obligation was $368,000 and $226,000, respectively. The fiscal 1996 Net
Periodic Post-Retirement Benefit Cost associated with the plan was $68,000,
comprised of $6,000 service costs, $38,000 interest costs, $22,000
amortization of the transition obligations, and $2,000 amortization of
unrecognized net loss. The fiscal 1995 Net Periodic Post-Retirement
Benefit Cost associated with the plan was $63,000, comprised of $5,000
services costs, $36,000 interest costs, and $22,000 of amortization of the
transition obligation. The accrued Post-Retirement Benefit Cost recognized
in the balance sheet as June 30, 1996, was $86,000, as compared to June 30,
1995, of $57,000. At June 30, 1996, and 1995, the assumed discount rates
were 7.0% and 7.5%, respectively, used in the calculation of the benefit
obligations, assumed annual health-care trend rate is 6.0% for both years,
with claim costs to increase based upon age, ranging from .5% to 6.0% per
annum.
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. Excluded from this benefit is 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. One customer of the Company accounted for 14.8% of fiscal
1996 sales and 8.2% of June 30, 1996, accounts receivable. In comparison,
two customers accounted for 13.4% and 10.6%, respectively, of fiscal 1995
sales, one of which also accounted for 10.6% of June 30, 1995, accounts
receivable. There was one customer that accounted for 10.0% of fiscal 1994
sales.
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 only remaining restructing-related reserve at June 30, 1996, is
the reserve for the URDC plant write-down of $399,000. The Company
continues to actively market, for sale or lease, the idle 23,000-square-
foot facility in West Jordan, Utah.
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 share 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 can
be made of the potential relative costs to the Company. 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 23 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, 1996, and
1995, and the results of their operations and their cash flows for each of
the three years in the period ended June 30, 1996, in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/
Price Waterhouse LLP
Buffalo, New York
August 13, 1996
<PAGE>
PAGE 24 OF ANNUAL REPORT
COMMON STOCK PRICES AND DIVIDEND INFORMATION
Stock price
_________________________________________________________________
Year Ended June 30, 1996 High Low Dividends Paid
_________________________________________________________________
Fourth Quarter 12 7/8 6 1/8 --
Third Quarter 9 1/4 6 --
Second Quarter 9 7/8 7 3/8 --
First Quarter 32 1/4 9 1/4 --
_________________________________________________________________
Year Ended June 30, 1995
_________________________________________________________________
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 --
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, 1996, was 1,311.
EXHIBIT 99
FOR IMMEDIATE RELEASE
ACME ELECTRIC REPORTS FOURTH QUARTER RESULTS
EAST AURORA, N.Y., August 15, 1996 -- Acme Electric Corporation (NYSE:
ACE) today reported that the results of consolidated operations for the
thirteen-week period ended June 30, 1996, were net sales of $24,040,000 and
net income of $148,000, or $.03 per share, compared with net sales of
$24,689,000 and a net loss of $434,000, or $.09 per share, during the
comparable period of the prior year.
Results for the full fiscal year ended June 30, 1996, were record net
sales of $96,551,000 with a net loss of $.06 per share, compared with net
sales of $91,127,000 and net income of $992,000, or $.20 per share, during
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 continue our recovery from losses incurred in the second
quarter due to the costs of implementing Demand Flow Technology (DFT) in
manufacturing operations and due to unusually high material cost
increases."
Mr. McKenna added that, "We look forward to improved performance in
future periods as DFT yields operating gains and margins improve as prices
are increased in selected markets."
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.
# # # #
<PAGE>
<PAGE>
<TABLE>
ACME ELECTRIC CORPORATION
Comparative Analysis
(in thousands, except for per share data)
<CAPTION>
FOR THE YEAR ENDED FOR THE 13 WEEKS ENDED
06/30/96 06/30/95 06/30/96 06/30/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $96,551 $91,127 $24,040 $24,689
Net Income (Loss) (280) 992 148 (434)
Earnings (Loss) Per Share $(.06) $.20 $.03 $(.09)
Weighted Number of Shares
Outstanding Used to Compute
Income Per Common Share 4,955,626 4,924,887 4,962,196 4,960,048
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 828
<SECURITIES> 0
<RECEIVABLES> 15,834
<ALLOWANCES> 389
<INVENTORY> 15,008
<CURRENT-ASSETS> 35,371
<PP&E> 36,274
<DEPRECIATION> 19,805
<TOTAL-ASSETS> 54,144
<CURRENT-LIABILITIES> 13,014
<BONDS> 24,394
0
0
<COMMON> 23,930
<OTHER-SE> (8,246)
<TOTAL-LIABILITY-AND-EQUITY> 54,144
<SALES> 96,551
<TOTAL-REVENUES> 96,551
<CGS> 74,964
<TOTAL-COSTS> 94,478
<OTHER-EXPENSES> 213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,258
<INCOME-PRETAX> (398)
<INCOME-TAX> (118)
<INCOME-CONTINUING> (280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
