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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition period from to
Commission File Number 0-5240
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VERSA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 39-1143618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9301 WASHINGTON AVENUE 53408-5012
P.O. BOX 085012 (Zip Code)
RACINE, WISCONSIN
(Address of principal executive offices)
</TABLE>
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Registrant's telephone number, including area code:
(414) 886-1174
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
TITLE OF EACH CLASS
COMMON STOCK, $.01 PAR VALUE
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least 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 a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
10-K. [X]
Aggregate market value of Versa Technologies, Inc. Common Stock, held by
non-affiliates as of May 30, 1997, was $73,006,612.
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock as of May 30, 1997: 5,580,610 shares of Common Stock, $.01 par
value.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Versa Technologies, Inc. 1997 Annual Report to Shareholders
(Parts I, II and IV of Form 10-K)
2. Portions of Versa Technologies, Inc. Notice of Annual Meeting and Proxy
Statement dated June 16, 1997 (Parts I and III of Form 10-K)
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PART I
ITEM 1 BUSINESS
(a) General Development of Business
Versa Technologies, Inc. (The "Company") was organized under Wisconsin law
in November 1970, as the result of the consolidation of Plastics Corporation of
America, Inc. (a Minnesota corporation formed in 1960) and Milwaukee Cylinder
Corporation (a Wisconsin corporation formed in 1967). In July 1986, the Company
changed its state of incorporation from Wisconsin to Delaware.
The Company comprises three business segments serving diverse markets. The
Electronics Segment designs and manufactures custom electronic and electrical
systems for a broad range of applications. The Engineered Materials Segment
fabricates custom components from elastomers for special applications requiring
a high degree of engineering expertise and product quality. The Fluid Power
Segment manufactures custom engineered cylinders; hydraulic devices that raise,
lower, stabilize, or level semitrailers, trucks, recreational vehicles and a
variety of off-highway vehicles and equipment; and electrically powered systems
that serve as drive mechanisms for slideout rooms on trailers and recreational
vehicles.
(b) Financial Information About Industry Segments
The sales and operating income of each industry segment and the
identifiable assets attributable to each industry segment for the three years
ended March 31, 1997, are set forth in Note 14 of the Notes to Consolidated
Financial Statements on pages 23 and 24 of the Company's 1997 Annual Report to
Stockholders, which note is incorporated herein by reference.
(c) Narrative Description of Business
ENGINEERED MATERIALS SEGMENT
The Company's Engineered Materials Segment is comprised of two silicone
businesses, Mox-Med (medical applications) and Moxness Products (industrial
applications). These businesses share extensive design and process capabilities
for the custom fabrication of silicone rubber components. Abilities in chemical
engineering provide customers with specially formulated materials for unique
applications. Molding capabilities include compression and transfer molding,
injection molding with millable liquid silicones, and liquid injection molding.
Expertise in silicone extrusion includes the production of flat tapes, shapes
and profiles, co-extrusions, and tubing.
Key to the Segment's success is the sophistication of its manufacturing and
quality control facilities, its in-house tooling and compounding capabilities,
and the expertise of its engineering staff who assist customers in product
design and selection of appropriate materials. To enhance its capabilities, the
Company has invested heavily in state-of-the-art manufacturing, research and
testing equipment. The Company completed the installation of a class 100,000
industrial clean room at its East Troy, Wisconsin plant to allow for the
manufacture of parts with higher cleanliness standards for industrial
applications.
Silicone elastomers are a broad family of synthetic polymers that are
partly organic and partly inorganic. These materials are characterized by low
surface tension, chemical inertness, excellent water repellency, good electrical
properties and weatherability, and extreme temperature tolerance. In addition,
the service life of silicone rubber is far superior to other elastomers under
any conditions. These characteristics make silicone the best alternative for a
wide variety of challenging applications in diverse markets.
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MOXNESS PRODUCTS
Since 1952, Moxness has served the industrial marketplace with molded and
extruded parts for the automotive, appliance, aerospace, and business equipment
markets. Automotive applications include diaphragms and seals used in
"under-the-hood" applications and buttons used on remote control transmitters
inside the vehicle. Silicone rollers are used in high volume laser printers and
laminating equipment. Tubing and gaskets are produced for commercial ovens and
refrigeration systems, and are used as seals in computers and business
equipment. Mox-Tape(R), a self-adhering silicone tape, is used in a variety of
applications requiring environmental insulation. It is wrapped around wire
harnesses in aircraft, covers splices and terminations on power cables, and used
to insulate motor and generator coils.
MOX-MED
One of the most significant areas for the application of silicone rubber is
the medical device market. In July 1983, the Company established a separate unit
to expand the marketing of silicone rubber components to the medical device
market. Manufacturers recognize that silicone rubber offers distinct advantages
over other elastomers and polymers. Silicone rubber has many physical properties
critical to the health care industry including biocompatibility, radiation and
heat resistance, chemical and fluid resistance, tear resistance, cohesion and
flexibility. Properly formulated and cured silicone rubber is odorless and
tasteless. It will not support bacterial growth and does not irritate the skin
or other organs. Because of its superior resistance to chemicals and temperature
extremes, silicone rubber can withstand common sterilization methods.
Mox-Med extrudes silicone tubing for a wide range of applications,
including drug delivery systems, peristaltic pumps, surgical and wound drains,
intravenous and enteral feeding lines, dialysis tubes, catheters, and blood
sampling lines. The company produces tubing in an unlimited number of sizes and
configurations. Diameters range from 0.01" to several inches. Other silicone
extrusions include vessel loops and surgical paws used to identify and clamp off
blood vessels during surgery, and tapes used in the manufacture of check valves
for a variety of applications. Molded silicone parts include diaphragms which
provide precise metering or regulation of fluid and air flow in intravenous
pumps, dialysis machines and respirators; duck bills and check valves used to
control fluid or gas in intravenous lines and anesthetic equipment; and infusion
sleeves and test chambers which are used in cataract surgery.
The engineering, manufacturing and marketing of silicone rubber components
for the medical device market requires special expertise to ensure that exacting
regulatory standards, notably those of the Food and Drug Administration, are
met. Careful manufacturing practices must be performed under clean room
conditions to prevent impurities from accidentally contaminating the silicone
product. Mox-Med's manufacturing facility in Portage, Wisconsin has a controlled
manufacturing environment designed to meet the highest standards for
cleanliness.
Mox-Med received ISO 9002 certification early in fiscal 1997. ISO 9002 is
an internationally recognized guide for development of a comprehensive quality
system. ISO 9002 standards related to manufacturing and the associated support
functions. The company is working on certification to ISO 9001, which includes
product design control. This certification will enhance Mox-Med's competitive
position in the medical device market.
MARKETING
Both Moxness and Mox-Med market their capabilities nationwide.
Approximately 90% of sales are by internal sales personnel. The balance of sales
are through independent manufacturers' representative organizations.
The Segment's strategy is to focus its sales and engineering efforts on
those market niches that demand a higher level of product quality and
engineering expertise.
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COMPETITION
The Engineered Materials Segment competes directly with a number of
manufacturers who provide silicone rubber components and competes indirectly
with manufacturers of parts from other elastomers. The major portion of
production is manufactured for specific customers. The Segment differentiates
itself by providing exceptional quality and service and expert assistance in the
design of component parts, production tooling, and material selection and/or
formulation. Silicone rubber is most commonly used in applications where its
unique properties are either essential or afford a significant advantage over
less expensive elastomers. Competition may also take the form of certain
customers developing their own in-house capability to produce silicone rubber
components.
CUSTOMERS
Industrial customers, which represent approximately 50% of this Segment's
sales, are manufacturers who incorporate the components into products they
produce such as business machines, automobiles, and electronic equipment. This
Segment's medical customers are primarily manufacturers of medical devices. This
Segment had no customers which exceeded 10% of the Company's consolidated sales.
ORDER BACKLOG
As of March 31, 1997, the order backlog was $8,741,000 compared to
$12,356,000 one year ago. Included in the backlog figure a year ago was
$3,096,000 related to two plastics businesses which were disposed of during
fiscal 1997. It is anticipated that the order backlog is firm and will be filled
within the current fiscal year.
MISCELLANEOUS DATA
Raw materials for the Engineered Materials Segment are available from a
limited number of non-affiliated suppliers.
The Segment does not have a reliance upon patents, trademarks, licenses,
franchises or concessions in the conduct of their business.
Business is not seasonal and does not require significant amounts of
working capital. Terms of sale are net 30 days. Inventory of raw material not
committed to a specific job is minimal.
Sales to the U.S. Government which could be subject to re-negotiation
represent an immaterial portion of Engineered Materials Segment's business.
FLUID POWER SEGMENT
The Company's Fluid Power Segment is comprised of two operating units.
Milwaukee Cylinder manufactures specially engineered cylinders, pressure
boosters, valves and fluid power products, as well as a standard line of
hydraulic and pneumatic cylinders. Power Gear(R) manufactures hydraulically-and
electrically-powered proprietary systems.
MILWAUKEE CYLINDER
Cylinders convert liquid or air pressure into mechanical force. There are
several variables in cylinder design, such as bore (diameter of the cylinder),
stroke (length of the piston rod in extended and retracted positions) and
pressure application. Milwaukee Cylinder's standard line of cylinders include
bore variables from 1 1/8 inches up to 16 inches, stroke of up to 14 feet, and
pressure capacity of up to 5,000 pounds per square inch. The company stocks
cylinder parts within its standard range of variables allowing for the rapid
assembly and prompt delivery of cylinders to customer specifications.
Approximately 60% of the sales of fluid power components is attributable to
standard hydraulic and pneumatic cylinders and replacement parts. Remaining
sales consist of hydraulic and pneumatic
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cylinders and other fluid power components custom engineered and manufactured to
meet customer specifications.
Cylinders are used in a wide variety of applications including automated
production lines, machine tools, cotton baling machinery, food processing
equipment, boat drives and material handling. Pressure boosters produced by the
company are devices used in conjunction with a cylinder to increase output
force. They are used primarily in testing equipment, special metal working
equipment and specialty presses. Milwaukee Cylinder also designs and
manufactures highly specialized cylinders such as servo-actuators which are high
cycle rate cylinders used in vibration and fatigue life testing.
The company's ability to offer strong engineering assistance, fast and
reliable delivery and high performance products enables it to meet its
customers' specific technological demands. The company has many long-standing
relationships with customers, built on years of service and the quality of its
products.
POWER GEAR(R)
In 1981 Versa/Tek purchased the Power Gear product line. It consisted of a
single device, a hydraulic jack designed to raise and lower a truck trailer to
dock height. This system remains a mainstay in Power Gear's sales mix. However,
Power Gear's expertise in hydraulic systems has since been applied to a broad
range of new applications and new customers.
Power Gear's line of hydraulically powered devices are used to level and
stabilize a variety of on and off-the-road vehicles, as well as rail and cargo
containers. Off-the-road applications include portable cement and asphalt
factories which are set up at the site of major construction projects. Power
Gear is the exclusive supplier to most manufacturers of this type of equipment.
During fiscal 1994, Power Gear entered the recreational vehicle market. Its
initial offering was a specially designed leveling system for the high-end
motorhome market. These fully featured homes on wheels demand leveling to within
3 degrees of fully horizontal to ensure optimal performance of all systems.
Power Gear is the exclusive supplier of these systems to two of the country's
largest manufacturers of upscale motorhomes.
During fiscal 1996, Power Gear introduced its new product line,
"slide-outs," for the RV industry. These electrically-powered systems act as the
drive mechanism for slide-out rooms on trailers and motor homes. Manufacturers
are offering trailers and motor homes with 8' to 16' long rooms that can
automatically telescope outward, expanding the room an additional 3 feet when
the vehicle is parked. This feature has become extremely popular, with
manufacturers now offering more than one slide-out on an individual trailer or
motor home.
MARKETING
Milwaukee Cylinder's fluid power components, which represent approximately
34% of this Group's sales, are marketed primarily in the Midwest where there is
a heavy concentration of machine tool, materials handling and heavy equipment
manufacturing. The balance of the company's sales occur nationwide with a
nominal portion in Canada and the United Kingdom. Milwaukee Cylinder has
representation agreements with 46 active fluid power sales engineering firms
which maintain offices in the United States, Canada and the European Common
Market. Direct sales account for approximately 30% of fluid power component
sales.
Power Gear's product line is marketed directly and through two independent
manufacturers' representative organizations to end users or original equipment
manufacturers in the United States and Canada. Regular advertising is placed in
trade journals.
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COMPETITION
Milwaukee Cylinder has several large competitors for fluid power components
and many competitors of comparable size. In addition, the company also faces
competition from manufacturers of fluid power substitutes. Milwaukee Cylinder's
sales to its diverse customer base remains strong. The company has many
long-term relationships with customers built on its reputation for engineering
expertise, product quality and ability to respond quickly.
The Company is not aware of any other manufacturers of hydraulically
operated Power Gear systems for the transportation industry. There are several
competitors for Power Gear's slide-out systems for the recreational vehicle
market.
CUSTOMERS
There was one significant customer for the Segment's fluid power products
in fiscal 1997, 1996, and 1995. As a percent of total Segment sales, this
customer accounted for 33% in fiscal 1997, 26% in fiscal 1995, and 22% in fiscal
1995.
ORDER BACKLOG
As of March 31, 1997, the order backlog for the Fluid Power Segment was
$4,416,000 compared to $4,392,000 one year earlier. All of the order backlog is
firm and will be filled within the current fiscal year.
MISCELLANEOUS DATA
Raw materials are readily available from several alternate sources.
Business is not seasonal and working capital requirements are not
significant. Terms of sales are net 30 days.
Sales to the U.S. Government which could be subject to negotiation
represent an immaterial portion of the business of the Fluid Power Group.
ELECTRONICS SEGMENT
The Company acquired Eder Industries, Inc. ("Eder") on October 30, 1996.
Eder designs and manufactures electronic systems and wired panel assemblies for
original equipment manufacturers. Broad application experience and expertise in
both electronic and mechanical design give Eder the ability to offer customers
complete system development, from design to product testing to engineering
support.
Eder's electronics are used in a broad range of applications in diverse
markets. Electronic products are used in factory automation and machine control,
systems for fire control, in controls for top-of-the-line whirlpools and
showers, and on material handling equipment. Eder's products are used in flow
monitoring systems used in water purification systems, in controls on packaging
equipment, and in computer-based instruments for medical applications.
The strength of this Segment comes from the strong partnerships Eder has
built with its customers, many of whom are leaders in their respective
industries. Today as large companies are focusing on their core competencies,
they are outsourcing more products and services. As a result, Eder has become
the electronics arm for many of its customers, providing the engineering
expertise and manufacturing capabilities necessary to design and produce their
electronic systems.
Eder's manufacturing capabilities include a high degree of vertical
integration which enables the company to target opportunities where they can add
value. Eder will populate the printed circuit board and add value to the
assembly by producing a complete electronic control system. Sophisticated
equipment for assembling printed circuit boards is used to automate procedures
and improve product
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quality. The company's commitment to a total quality environment is reflected in
its ISO 9001 certification.
MARKETING
Eder's sales and marketing efforts have been primarily in the midwest.
Ninety percent of Eder's sales are generated through direct sales
representatives. A manufacturers' representative organization has been
cultivating opportunities in the midwest. Future sales are expected to bring
this ratio closer to 75% direct sales versus 25% sales by manufacturers'
representatives.
COMPETITION
Eder Industries has several competitors within the midwest that service the
same niche of contract electronics manufacturing. Eder positions itself by
offering a high degree of vertical integration and value-added capabilities that
sets the Company apart from its competitors.
CUSTOMERS
Customers are original equipment manufacturers (OEM's) that incorporate
electronic/electro-mechanical sub-assemblies into applications which require a
high degree of reliability. There were no customers for this Segment which
exceeded 10% of the Company's consolidated sales.
ORDER BACKLOG
As of March 31, 1997, the order backlog for the Electronics Segment was
$17,065,000 compared to $16,703,000 on the date of acquisition. Approximately
$2,500,000 of the backlog at March 31, 1997 was anticipated to be filled after
fiscal 1998.
MISCELLANEOUS DATA
Most electronic components are available from alternate sources. There are,
however certain components which are sourced with a single supplier. A
catastrophic event at a supplier's facility might result in a lack of supply. In
addition, some electronic components have a short product life cycle, which can
result in the discontinuance of production for that component. In each of these
instances Eder engineers work with customers to redesign the electronic system
or to find a substitute component.
Business is not seasonal and working capital requirements are not
significant. Terms of sales are net 30 days. Inventory of raw materials not
committed to a specific job is minimal.
THE BUSINESS IN GENERAL
The Company does maintain a corporate research and development department
specifically related to one product line. The total amount spent during fiscal
1997 was not material. At the business units, research and development
expenditures are a function of the respective engineering departments and are
specific to customer projects. Costs associated with these projects are combined
with the overall engineering department costs.
It is the opinion of management that compliance with Federal, State and
local provisions which regulate the discharge of materials into the environment,
or relate to the protection of the environment, will not require significant
capital expenditures or materially affect future earnings.
The Company had minimal foreign sales and has no foreign operations.
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SIGNIFICANT CUSTOMER
There was one customer which accounted for more than 10% of the Company's
consolidated sales. This customer's percentage of the Company's consolidated
sales during fiscal 1997, 1996 and 1995 were 18%, 14% and 9.6% respectively.
EMPLOYEES
As of March 31, 1997, the Company had 702 active full-time employees.
EXECUTIVE OFFICERS OF THE REGISTRANT
At March 31, 1997, the names and ages of all executive officers of the Company
and all positions and offices held with the Company are listed below. There are
no family relationships between such persons.
<TABLE>
<CAPTION>
FIRST
ELECTED
NAME OFFICES OFFICER AGE
---- ------- ------- ---
<S> <C> <C> <C>
James E. Mohrhauser.................. Chief Executive Officer & Chairman of the Board 1970 74
of Directors of the Company
Thomas J. Magulski................... President & Chief Operating Officer of the 1993 53
Company
Robert M. Sukalich................... Vice President Finance Treasurer & Assistant 1992 38
Secretary of the Company
David J. McKendrey................... President and Chief Operating Officer of the 1982 59
Company's Fluid Power Segment
Richard H. Marks..................... President and Chief Operating Officer of the 1996 59
Company's Electronics Segment
Michael W. Garvey.................... President and Chief Operating Officer of the 1996 52
Company's Engineered Materials Segment
</TABLE>
All officers are elected annually by the Board of Directors at the first
Board meeting following each annual meeting of the stockholders. There are no
agreements between any of the officers and any other person pursuant to election
as an officer.
Mr. Mohrhauser's, Mr. McKendrey's and Mr. Mark's occupations for the past
five years have been stated in the above table. Mr. Magulski was elected
President and Chief Operating Officer of the Company during December 1993. Mr.
Magulski worked as a business consultant for the Company from March 1992 through
September 1993. Prior to his involvement with the Company, he was Vice President
of Intertech Resources, Inc. Mr. Sukalich was elected Vice President of Finance
for the Company during July 1993. From July 1992 to July 1993, Mr. Sukalich was
Treasurer and Assistant Secretary for the Company. From January 1992 to July
1992, Mr. Sukalich was Controller and Assistant Treasurer for the Company. Mr.
Garvey was elected President and Chief Operating Officer of Moxness Products and
Mox-Med during December 1996. From April 1996 to December 1996 Mr. Garvey was
Vice President of Operations for this segment. Prior to his involvement with the
Company he was an Industry Manager with The Tech Group.
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ITEM 2 PROPERTIES
The following table sets forth certain information with respect to the
Company's principal facilities as of March 31, 1997:
<TABLE>
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SQUARE
FEET OF
LOCATION FLOOR SPACE DESCRIPTION AND PRINCIPAL USE
-------- ----------- -----------------------------
<S> <C> <C>
Racine, WI(1).................. 62,000 Sprinklered brick and cement block building located on
approximately three acres of land. Industrial silicone
rubber products manufacturing and general office.
East Troy, WI(1)............... 22,350 Sprinklered steel building on five acres of land.
Industrial silicone rubber products manufacturing.
Wausau, WI(1).................. 21,600 Sprinklered steel building on five acres of land.
Industrial silicone rubber products manufacturing.
Portage, WI(1)................. 50,000 Sprinklered steel and brick building on eleven acres
of land. Medical silicone rubber products
manufacturing.
Cudahy, WI(1).................. 68,250 Sprinklered brick and steel building on five acres of
land. Fluid power products manufacturing and offices.
The Company owns an additional fifteen acres of
adjacent vacant land.
Beaver Dam, WI(1).............. 32,300 Sprinklered steel building located in an industrial
park. Power Gear manufacturing and offices.
Beaver Dam, WI(2).............. 14,400 Steel building located in an industrial park. Power
Gear manufacturing.
Oak Creek, WI(1)............... 33,400 Sprinklered steel building on seven acres of land.
Electronics Segment's manufacturing and offices.
Milwaukee, WI(3)............... 22,500 Brick building located in industrial area. Electronics
manufacturing.
Sturtevant, WI(1).............. 6,000 Sprinklered one story brick office building located on
approximately three acres of land. Corporate
headquarters.
Sturtevant, WI(1).............. 6,650 Sprinklered two story block building located on
approximately three acres of land. Silicone research
and development center and Information services.
</TABLE>
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(1) The Company owns these facilities. There are no debts secured by these
properties.
(2) Leased facility. Lease expires in August 1998.
(3) Leased facility. Lease expires in October, 1997.
All facilities are in good condition and, in the opinion of management,
suitable and adequate for their intended uses.
ITEM 3 LEGAL PROCEEDINGS
There are no material proceedings pending to which the Company is a party,
or to which any of its property is subject.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter.
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PART II
All information for this Part is incorporated by reference to the Company's
1997 Annual Report to Shareholders, as follows:
<TABLE>
<CAPTION>
ITEM CAPTION INFORMATION INCORPORATED BY REFERENCE TO:
- ---- ------- -----------------------------------------
<C> <S> <C>
5. MARKET FOR THE COMPANY'S COMMON STOCK AND Annual Report, page 34
RELATED SECURITY HOLDER MATTERS
6. SELECTED FINANCIAL DATA Annual Report, pages 30 and 31
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF Annual Report, pages 26 through 29
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA Annual Report, pages 13 through 25 and 32
9. CHANGES IN AND DISAGREEMENTS WITH Not applicable
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
</TABLE>
PART III
All information for this part, except that set forth under the sub-heading
Executive Officers of the Registrant in Item 1(c) Part I, is incorporated by
reference to the Company's Proxy Statement for the 1997 Annual Meeting of
Shareholders as follows:
<TABLE>
<CAPTION>
ITEM CAPTION INFORMATION INCORPORATED BY REFERENCE TO:
- ---- ------- -----------------------------------------
<C> <S> <C>
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE Proxy Statement, pages 2 through 4; and
REGISTRANT Form 10-K Item 1(c) Part I, page 8
11. EXECUTIVE COMPENSATION Proxy Statement, pages 6 through 10
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners and management is presented on
pages 4 and 5 of the Company's Proxy Statement for the 1997 Annual Meeting of
Shareholders, which data is incorporated herein by reference.
(b) The Company knows of no contractual arrangements which may, at a subsequent date,
result in a change in control of the Company.
13. CERTAIN RELATIONSHIPS AND RELATED Not applicable
TRANSACTIONS
</TABLE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1) The consolidated financial statements together with the report thereon
of Deloitte & Touche LLP presented on pages 13 through 25 of the
Company's 1997 Annual Report to Shareholders, incorporated herein by
reference.
2) Financial Statement Schedules--
Schedule II Valuation and Qualifying Accounts
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Independent Auditors' Report on Financial Statement Schedules
All other schedules are omitted as they are not required, or the
required information is shown in the consolidated financial statements
or notes thereto.
Financial statements of the Registrant are omitted because it is
primarily an operating company and all the subsidiaries included in the
consolidated financial statements are wholly-owned.
3) Exhibits
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of Versa Technologies, Inc. as
amended and in effect on March 31, 1988 (incorporated by
reference to Form 10-K for fiscal year ended March 31,
1988).
3.2 By-Laws of Versa Technologies, Inc., as in effect on March
31, 1992 (incorporated by reference to Form 10-K for fiscal
year ended March 31, 1992).
10.2 Copy of Versa Technologies, Inc. 1982 Employee Incentive
Stock Option Plan as amended (incorporated by reference to
Form 10-K for fiscal year ended March 31, 1988).
10.6 Copy of Supplemental Pension Agreement with Mr. James E.
Mohrhauser, as amended through December 1, 1980
(incorporated by reference to Form 10-K, for fiscal year
ended March 31, 1981).
10.9 Copy of Versa Technologies, Inc. Divisional Executive Bonus
Plan, as amended effective April 1, 1994 (incorporated by
reference to Form 10-K for fiscal year ended March 31,
1994).
10.10 Copy of Versa Technologies, Inc. 1992 Employee Incentive
Stock Option Plan as amended (incorporated by reference to
Form S-8 filed with the SEC on December 2, 1996, file No.
333-17135).
10.12 Copy of Deferred Compensation Plan for Executives which
became effective April 1, 1994 (incorporated by reference to
Form 10-K for fiscal year ended March 31, 1994).
10.15 Copy of Versa Technologies, Inc.'s Stock Purchase and
Dividend Reinvestment Plan (incorporated by reference to
Form 10-K for fiscal year ended March 31, 1996).
10.16 Copy of 1996 Employee Stock Purchase and Payroll Savings
Plan (incorporated by reference to Form S-8 filed with the
SEC on December 2, 1996, file No. 333-17137).
10.17 Copy of Employment Agreement with Mr. Richard H. Marks. The
agreement is for the period December 1, 1996 through
November 30, 1999 (incorporated by reference to Form 10-Q
for quarter ended September 30, 1996 filed with the SEC on
November 13, 1996).
10.18 Copy of Stock Purchase Agreement dated October 30, 1996
between the shareholders of Eder Industries, Inc. and Versa
Technologies, Inc. (incorporated by reference to Form 10-Q
for the quarter ended September 30, 1996, filed with the SEC
in November 13, 1996)
13. Pages from the 1997 Annual Report to Stockholders which were
incorporated by reference to Form 10-K.
21. Subsidiaries of Versa Technologies, Inc.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
A Form 8-K, dated October 30,1996 relating to the acquisition of Eder
Industries, Inc. was filed on January 8, 1997.
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VERSA TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
DEDUCTIONS
ADDITIONS (FOR BAD DEBTS
BALANCE AT CHARGED TO WRITTEN OFF
BEGINNING COSTS AND OR INVENTORY BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DISPOSED OF) END OF PERIOD
- ----------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Deducted from receivables account in the
balance sheets--
Allowance for losses in collection, year
ended:
March 31, 1997............................ $261,501* $ 26,288 $ 56,789 $231,000
March 31, 1996............................ 161,881 91,902 47,282 206,501
March 31, 1995............................ 189,000 51,529 78,648 161,881
Deducted from inventories account in the
balance sheets--
Reserve for obsolete inventory
March 31, 1997............................ $215,000* $160,000 $ -0- $375,000
March 31, 1996............................ 148,000 36,000 184,000 -0-
March 31, 1995............................ 314,000 148,000 314,000 148,000
</TABLE>
- ---------------
* Includes $55,000 and $215,000, related to receivables and inventories
respectively, on Eder Industries, Inc.'s balance sheet at the date of
acquisition, October 30, 1996.
12
<PAGE> 13
DELOITTE & TOUCHE LOGO ----------------------------------------
411 East Wisconsin Avenue Telephone:
(414) 271-3000
Milwaukee, Wisconsin 53202-4496
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of Versa Technologies, Inc.:
We have audited the consolidated financial statements of Versa
Technologies, Inc. and subsidiaries as of March 31, 1997 and 1996, and for each
of the three years in the period ended March 31, 1997, and have issued our
report thereon dated May 9, 1997; such consolidated financial statements and
report are included in your 1997 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Versa Technologies, Inc. and subsidiaries,
listed in Item 14. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE
Deloitte & Touche LLP
May 9, 1997
DELOITTE TOUCHE TOHMATSU INTERNATIONAL LOGO
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, Versa Technologies, Inc. has duly caused this Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized.
Versa Technologies, Inc.
by /s/ JAMES E. MOHRHAUSER
------------------------------------
James E. Mohrhauser
Chairman & Chief Executive Officer
by /s/ ROBERT M. SUKALICH
------------------------------------
Robert M. Sukalich
Vice President, Treasurer &
Assistant Secretary
(Chief Financial Officer)
Date: June 16, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of Versa
Technologies, Inc. and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
/s/ DENIS H. CARROLL /s/ MORRIS W. REID
- ----------------------------- -----------------------------
Denis H. Carroll, Director Morris W. Reid, Director
June 16, 1997 June 16, 1997
/s/ HERMAN B. MCMANAWAY /s/ JAMES E. MOHRHAUSER
- ----------------------------- -----------------------------
Herman B. McManaway, Director James E. Mohrhauser, Director
June 16, 1997 June 16, 1997
/s/ WILLIAM P. KILLIAN /s/ THOMAS J. MAGULSKI
- ---------------------------- -----------------------------
William P. Killian, Director Thomas J. Magulski, Director
June 16, 1997 June 16, 1997
/s/ JOAN R. LLOYD /s/ RICHARD H. MARKS
- --------------------------- -----------------------------
Joan R. Lloyd, Director Richard H. Marks, Director
June 16, 1997 June 16, 1997
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
File No 0-5240
EXHIBIT INDEX
Sequential Page
Designation of Number of Exhibit
Exhibit or Incorporation
(Reg. S-K, Item 601) Exhibit Reference
- -------------------- ------- -----------------
<S> <C> <C>
3.1 Certification of Incorporation (b)
of Versa Technologies, Inc.,
as amended
3.2 By-Laws of Versa Technologies, Inc. (c)
10.2 1982 Employee Incentive Stock (b)
Option Plan, as amended
10.6 Supplemental Pension Agreement (a)
10.9 Divisional Executive Bonus Plan (e)
10.10 1992 Employee Incentive Stock Option Plan (g)
as amended
10.12 Deferred Compensation Plan for Executives (e)
10.15 Versa Technologies, Inc. Stock Purchase and (f)
Dividend Reinvestment Plan
10.16 1996 Employee Stock Purchase and (h)
Payroll Savings Plan
10.17 Employment Agreement with (i)
Mr. Richard H. Marks
10.18 Stock Purchase Agreement between the Shareholders (i)
of Eder Industries, Inc. and Versa Technologies, Inc.
13 Pages from the 1997 Annual Report to Shareholders
which were incorporated by reference to Form 10-K
21 Subsidiaries of Versa Technologies, Inc.
23 Consent of Independent Auditors
27 Financial Data Schedule
</TABLE>
<PAGE> 16
(a) Incorporated by reference to Registrant's Form 10-K for fiscal year
ended March 31, 1981.
(b) Incorporated by reference to Registrant's Form 10-K for fiscal year
ended March 31, 1988.
(c) Incorporated by reference to Registrant's From 10-K for fiscal year
ended March 31, 1992.
(d) Incorporated by reference to Registrant's Form 10-K for fiscal year
ended March 31, 1993.
(e) Incorporated by reference to Registrant's Form 10-K for fiscal year
ended March 31, 1994.
(f) Incorporated by reference to Registrant's Form 10-K filed for
fiscal year ended March 31, 1996.
(g) Incorporated by reference to Registrant's Form S-8 filed with the SEC on
December 2, 1996, file No. 333-17135.
(h) Incorporated by reference to Registrant's Form S-8 filed with the SEC on
December 2, 1996, file No. 333-17137.
(i) Incorporated by reference to Registrant's Form 10-Q for the Quarter ended
September 30, 1996, filed with the SEC on November 13, 1996.
<PAGE> 1
CONSOLIDATED STATEMENTS OF EARNINGS
Versa Technologies, Inc.
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Years Ended March 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $87,596 $70,699 $66,965
Cost of Sales 64,249 51,190 45,180
------------------------------------------------------
Gross Profit 23,347 19,509 21,785
Selling and Administrative Expenses 13,385 11,300 11,793
------------------------------------------------------
Operating Income 9,962 8,209 9,992
------------------------------------------------------
Other Income (Deductions):
Interest expense (160) (35) (9)
Interest income 356 848 753
Miscellaneous, net 163 117 35
Loss on sale of businesses (778)
------------------------------------------------------
(419) 930 779
------------------------------------------------------
Earnings Before Income Taxes 9,543 9,139 10,771
Income Taxes 3,840 3,240 3,965
------------------------------------------------------
Net Earnings $5,703 $5,899 $6,806
======================================================
Net earnings per weighted average common shares
outstanding $1.02 $0.99 $1.13
======================================================
Weighted average common shares outstanding 5,601 5,970 6,039
- --------------------------------------------------------------------======================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
Versa Technologies, Inc.
(Dollars in Thousands, except share and per share amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
March 31 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,127 $ 14,746
Receivables, less allowance of $231 in 1997, and
$207 in 1996 13,203 11,410
Inventories 11,501 7,743
Other current assets 1,467 1,183
---------------------------------
Total current assets 27,298 35,082
---------------------------------
Property, Plant, and Equipment - at cost:
Land 75 591
Buildings 10,159 9,196
Machinery and equipment 38,035 36,286
---------------------------------
48,946 46,073
Less accumulated depreciation 25,570 25,556
---------------------------------
23,376 20,517
Intangibles 11,127 1,530
Other Non-Current Assets 190 309
---------------------------------
$61,991 $57,438
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 2,981 $ -
Accounts payable 3,843 3,691
Accrued expenses 4,682 3,391
Income taxes 31 8
Employee stock purchase and payroll savings plan
---------------------------------
Total current liabilities 11,870 7,169
---------------------------------
Deferred Income Taxes
Deferred Pension, Deferred Compensation and
Postretirement Benefit Expense 2,936 2,465
Shareholders' Equity:
Preferred Shares -- authorized 1,000,000, $.01 par value;
none issued -- --
Common Shares -- authorized, 10,000,000, $.01 par value;
issued 6,063,200 in 1997 and 1996 61 61
Additional paid-in capital 18,648 18,681
Retained earnings 32,968 31,471
---------------------------------
51,677 50,213
Less treasury stock, at cost - 482,667 shares in 1997 and 234,036 in 1996 6,551 3,229
---------------------------------
Total shareholders' equity 45,126 46,984
---------------------------------
$61,991 $57,438
======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Versa Technologies, Inc.
(Dollars in Thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years Ended March 31, 1997, 1996, and 1995 Common Stock Additional
---------------------------- paid in
Shares Amount capital
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at March 31, 1994 6,063 $ 61 $ 18,789
Exercise of stock options - 31,122 treasury shares were reissued -- -- (108)
Tax benefit from exercise of stock options -- -- 29
Purchase of treasury stock -- 42,500 shares -- -- --
Net earnings -- -- --
Cash dividends declared -- $.68 per share* -- -- --
-----------------------------------------------
Balance at March 31, 1995 6,063 61 18,710
Exercise of stock options - 34,542 treasury shares were reissued -- -- (52)
Tax benefit from exercise of stock options -- -- 23
Purchase of treasury stock -- 217,200 shares -- -- --
Net earnings -- -- --
Cash dividends declared -- $.74 per share** -- -- --
-----------------------------------------------
Balance at March 31, 1996 6,063 61 18,681
Exercise of stock options - 13,969 treasury shares were reissued -- -- (50)
Tax benefit from exercise of stock options -- -- 17
Purchase of treasury stock -- 262,600 shares -- -- --
Net earnings -- -- --
Cash dividends declared -- $.75 per share*** -- -- --
-----------------------------------------------
Balance at March 31, 1997 6,063 $ 61 $ 18,648
===============================================
<CAPTION>
Total
Years Ended March 31, 1997, 1996, and 1995 Retained Treasury Shareholders'
earnings stock Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at March 31, 1994 $ 27,300 $ (590) $ 45,560
Exercise of stock options - 31,122 treasury shares were reissued -- 459 351
Tax benefit from exercise of stock options -- -- 29
Purchase of treasury stock -- 42,500 shares -- (569) (569)
Net earnings 6,806 -- 6,806
Cash dividends declared -- $.68 per share* (4,109) -- (4,109)
----------------------------------------------------
Balance at March 31, 1995 29,997 (700) 48,068
Exercise of stock options - 34,542 treasury shares were reissued -- 472 420
Tax benefit from exercise of stock options -- -- 23
Purchase of treasury stock -- 217,200 shares -- (3,001) (3,001)
Net earnings 5,899 -- 5,899
Cash dividends declared -- $.74 per share** (4,425) -- (4,425)
----------------------------------------------------
Balance at March 31, 1996 31,471 (3,229) 46,984
Exercise of stock options - 13,969 treasury shares were reissued -- 187 137
Tax benefit from exercise of stock options -- -- 17
Purchase of treasury stock -- 262,600 shares -- (3,509) (3,509)
Net earnings 5,703 -- 5,703
Cash dividends declared -- $.75 per share*** (4,206) -- (4,206)
----------------------------------------------------
Balance at March 31, 1997 $ 32,968 $ (6,551) $ 45,126
====================================================
</TABLE>
* Includes special cash dividend of $.33 per share.
** Includes special cash dividend of $.35 per share.
*** Includes special cash dividend of $.35 per share.
See notes to consolidated financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASHFLOWS
Versa Technologies, Inc.
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Years Ended March 31 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 5,703 $5,899 $6,806
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 3,437 3,200 2,922
Amortization 223 34 34
Provision for losses on receivables (31) 45 52
Provision for deferred income taxes (92) 402 (119)
(Gain)loss on disposition of plant and equipment (14) (18) 15
Loss on sale of businesses 778
Changes in current assets and liabilities, net of effect
of business acquired:
Receivables (720) (2,051) (221)
Inventories (2,070) 65 (1,064)
Other current assets (68) 483 (427)
Accounts payable (700) 1,941 (483)
Accrued expenses 422 (10) 645
Income taxes payable (1) (408) 59
Employee stock purchase and payroll savings plan 47 (119) 83
Deferred pension, postretirement
benefits and compensation expense 592 3 369
---------------------------------------------------------
Net cash provided by operating activities 7,506 9,466 8,671
---------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from disposition of plant and equipment 39 80 37
Capital expenditures (6,254) (3,836) (6,070)
Proceeds from sale of businesses 4,483
Acquisition of business, net of cash acquired (14,747)
Other 37 52 16
---------------------------------------------------------
Net cash used in investing activities (16,442) (3,704) (6,017)
---------------------------------------------------------
Cash Flows from Financing Activities:
Net borrowings under line of credit agreement 2,877
Proceeds from exercise of common stock options 155 443 380
Purchase of treasury stock (3,509) (3,001) (569)
Dividends paid (4,206) (4,425) (4,109)
---------------------------------------------------------
Net cash used in financing activities (4,683) (6,983) (4,298)
---------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (13,619) (1,221) (1,644)
Cash and Cash Equivalents at Beginning of Year 14,746 15,967 17,611
---------------------------------------------------------
Cash and Cash Equivalents at End of Year $1,127 $14,746 $15,967
=========================================================
Supplemental Cash Flow Information - cash paid
during the year for:
Interest $ 93
Income taxes $ 3,914 $ 3,244 $ 3,997
============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Versa Technologies, Inc.
Years ended March 31, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany items and transactions have been eliminated in consolidation.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents -- The Company considers all temporary investments purchased
with maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments -- The Company believes the carrying amount
of its financial instruments (cash and cash equivalents, accounts receivable,
short-term debt and accounts payable) is a reasonable estimate of the fair
value of these instruments.
Inventories -- Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method for all inventories
excluding the Electronics Segment, which uses first-in-first-out (FIFO) method
to determine cost. At March 31, 1997 approximately 77% of total inventories
were valued under the LIFO method.
Property, Plant and Equipment -- Property, plant and equipment are carried at
cost.
Depreciation is provided over the useful lives of plant and equipment using the
straight-line method for financial reporting purposes. Buildings are being
depreciated over lives ranging from 20 to 30 years. Machinery and equipment
are being depreciated over lives ranging from 3 to 10 years. Accelerated
methods are used for income tax purposes. Provision is made for deferred
income tax applicable to the difference in depreciation charges.
Intangibles -- Intangibles include $797,000 relating to pre-1970 acquisitions
that are not being amortized. Included in intangible assets at March 31, 1997
was $10.3 million which is related to the acquisition of Eder Industries, Inc.
(See Note 2). Goodwill of $8.2 million represented the excess of the
acquisition cost over the fair value of net assets acquired and is amortized on
a straight-line basis over 40 years. Other acquired intangibles (principally
customer or employment related items) were $2.1 million and are being amortized
on a straight-line basis over periods ranging from 3 to 40 years. Amortization
expenses since the date of acquisition (October 30, 1996) to March 31, 1997
for the above items was approximately $206,000. Intangibles are stated net of
accumulated amortization of $234,000 at March 31, 1997 and $233,000 at March
31, 1996.
The Company periodically evaluates the carrying value of intangible assets in
accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of".
Pension Plans -- Pension expense recorded under the plans includes normal cost
and amortization of past service cost in accordance with Financial Accounting
Standards Statement No. 87 "Employers' Accounting for Pensions".
Revenue Recognition -- The Company recognizes revenue on the accrual basis of
accounting, upon the shipment of products.
Product Waranties -- The estimated cost for product warranties are accrued for
and charged to operations as the related products are shipped.
Accounting Pronouncements -- In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128 "Earnings per Share". The Company is
currently in the process of evaluating the accounting and disclosure effects of
the statement, which is required to be adopted during the third quarter of
fiscal 1998.
<PAGE> 6
2. ACQUISITION
On October 30, 1996, the Company acquired 100% of the capital stock of Eder
Industries, Inc. ("Eder") for $15,382,000. The funds used to acquire Eder were
borrowed ($4.8 million) under a revolving business note agreement, with the
balance ($10.6 million) coming from the sale of short term cash investments.
The acquisition was accounted for by the purchase method and, accordingly,
Eder's results of operations have been included with the Company's results
since the acquisition date. The fair value of assets acquired and liabilities
assumed totaled $7.6 million (of which $700,000 was cash) and $2.2 million,
respectively. The excess of the purchase price over the fair value of net
assets acquired ($8.2 million) is being amortized on a straight-line basis over
40 years.
The unaudited pro forma information below represents combined results of
operations as if the acquisition had occurred at the beginning of the
respective years presented. The unaudited pro forma information is not
necessarily indicative of the results of operations of the combined Company had
the acquisition occurred at the beginning of the years presented, nor is it
necessarily indicative of future results.
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
(In thousands, except per share data)
- -------------------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $97,977 $87,826
Net Earnings (1) 5,870 5,873
Earnings per share (1) 1.05 .98
</TABLE>
(1) The 1997 period includes a $652,000, or $.115 per share, after-tax loss
on the disposition of Moxness Thermoplastics, Inc. and Lovdahl
Manufacturing.
3. SALE OF BUSINESSES
During fiscal 1997, the Company sold its two plastic molding operations. The
two units, Moxness Thermoplastics, Inc. ("Thermo") and Lovdahl Manufacturing
("Lovdahl") were part of the Engineered Materials Segment. Effective September
1, 1996, 100% of the stock of Thermo was acquired by General Plastics
Corporation for $3.4 million. Based on asset values on the effective date of
the sale, the sale resulted in an after-tax loss of $498,000 or $0.088 per
share, which was recorded in the second quarter. On March 31, 1997, all the
assets of Lovdahl were sold to Kurz-Kasch for $1.47 million. Based on asset
values on the effective date of the sale, the sale resulted in an after-tax
loss of $154,000 or $0.027 per share, which was recorded in the fourth quarter.
The decision to divest of both units is consistent with management's strategy
to concentrate on the Company's core businesses, moving away from commodity
products and focusing on more profitable niche markets.
Combined sales and operating losses for Thermo and Lovdahl for fiscal 1997 were
$3.9 million and $240,000 respectively. These results include a full year of
operations for Lovdahl and five months for Thermo. For fiscal 1996 the
combined sales and operating losses were $5.3 million and $498,000,
respectively.
4. INVENTORIES
Inventories at March 31 consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
------- -------
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw Materials $ 7,692 $ 5,348
Work in Process 4,527 2,965
Finished Goods 1,201 1,399
------- -------
FIFO Inventories (approximates current cost) 13,420 9,712
LIFO Reserve (Electronics Segment excluded) (1,919) (1,969)
------- -------
LIFO Inventories $11,501 $ 7,743
======= =======
</TABLE>
<PAGE> 7
5. SHORT-TERM DEBT
At March 31, 1997, the Company's borrowings under a $15 million unsecured line
of credit agreement were $3.0 million. The line bears interest at a variable
rate based on the current thirty-day LIBOR rate plus 75 basis points. The rate
at March 31, 1997 was 6.18%. The line of credit renews annually on July 31.
6. CAPITAL STOCK
The Company's Board of Directors has the authority to determine the relative
rights and preferences of any series it may establish with respect to the
1,000,000 shares of $.01 par value authorized preferred shares. No preferred
stock is issued or outstanding.
On December 13, 1988, the Board of Directors adopted a common stock shareholder
rights plan ("Rights") which entitles each shareholder of record on December
21, 1988 to purchase Series A Junior Participating Preferred Stock
("Preferred") upon the occurrence of certain events. The Rights will be
exercisable the twentieth business day after a person or group acquires 20% of
the Company's common stock, or makes an offer to acquire 30% or more of the
Company's common stock. When exercisable, each right entitles the holder to
purchase for $60 one one-hundredth of a share of Preferred for each share of
common stock owned. Each share of Preferred will be entitled to a minimum
preferential quarterly dividend of $5.00 per share, but not less than an
aggregate dividend of 100 times the common stock dividend. Each share will
have 100 votes, voting together with the common stock. In the event of any
merger, each share of Preferred will be entitled to receive 100 times the
amount received per share of common stock. The Rights expire on December 21,
1998.
The Company has adopted a program to repurchase up to 900,000 shares or 15% of
its common stock.. The shares will be held for issuance under the Company's
various stock plans. As of March 31, 1997, 522,300 shares had been repurchased
at a cost of $7,080,000.
7. STOCK OPTIONS
Under the Company's 1982 Incentive Stock Option Plan no further options will be
granted. However, options previously granted under this Plan will remain
outstanding until they are exercised or canceled.
Under the 1992 Versa Technologies, Inc. Employee Incentive Stock Option Plan,
options granted have an exercise price equal to 100% of the fair market value
at the date of grant. Options granted become exercisable in 25% annual
increments beginning one year from the date of grant and have a maximum term of
ten years. At the Company's annual shareholders' meeting on July 23, 1996,
shareholders ratified an amendment to the plan increasing the number of shares
available for grant by 200,000 shares to a total of 500,000 shares.
The Company grants non-qualified stock options to the Company's non-employee
directors and secretary. Options granted have an exercise price equal to 100%
of the fair market value at the date of grant. Options become exercisable in
annual increments of 25% and expire the earlier of ten years from the date of
grant or termination as an officer or director of the Company.
<PAGE> 8
A combined summary of changes in options is as follows:
<TABLE>
<CAPTION>
Shares
---------------
Weighted-average
Incentive Non-Qualified exercise price
--------- ------------- ----------------
<S> <C> <C> <C>
Outstanding at March 31, 1994 217,294 25,500 $12.53
Granted 184,500 35,000 14.05
Exercised (14,550) (20,300) 11.73
Canceled (17,400) (100) 12.96
-------- --------
Outstanding at March 31, 1995 369,844 40,100 13.43
Granted 17,500 13.64
Exercised (23,450) 11.86
Canceled (48,000) (5,000) 13.97
-------- --------
Outstanding at March 31, 1996 315,894 35,100 13.46
Granted 62,500 13.01
Exercised (13,869) 9.87
Canceled (10,000) (5,100) 14.13
-------- --------
Outstanding at March 31, 1997 354,525 30,000 13.49
======== ========
Exercisable at March 31, 1997 187,703 15,000 13.36
======== ========
Shares available for future grants
at March 31, 1997 214,000
========
</TABLE>
The options outstanding at March 31, 1997 have exercise prices between $12.50 -
$16.00.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-based Compensation" encourages, but does not require companies to record
compensation for stock-based employee compensation plans at fair value. The
Company accounts for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. No compensation cost has been recognized with respect to the issuance
of stock options.
If the fair value method of accounting for stock options prescribed by SFAS No.
123 had been used, the expense relating to the stock options would have been
$40,000 for 1997 and none for 1996. The change to pro forma net earnings would
have been immaterial and there would not have been a change in pro forma
earnings per share. The pro forma effect on net earnings is not representative
of the pro forma effect on net earnings that will be disclosed in future years
because it does not take into consideration pro forma compensation expense
relating to grants made prior to 1996. The fair value of each option grant was
estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions: risk-free interest rate of 6.5%; expected
dividend yield of 3%; expected lives of 4.2 years and 6 years, respectively for
1997 and 1996; and expected volatility of 30%.
<PAGE> 9
8. EMPLOYEE STOCK PURCHASE AND PAYROLL SAVINGS PLAN
Under the 1993 Employee Stock Purchase and Payroll Savings Plan, 11,092 shares
of the Company's common stock at $12.83 per share were issued to employees in
the fiscal year ended March 31, 1996. The Plan terminated in January 1996.
At the Company's annual shareholders' meeting on July 23, 1996, shareholders
ratified the adoption of the Versa Technologies, Inc. 1996 Employee Stock
Purchase and Payroll Savings Plan.
Under the 1996 Stock Purchase and Payroll Savings Plan, options for 35,367
shares of the Company's common stock were subscribed to in December 1996 at a
price of $12.27 per share, which was 90% of the closing price of the common
stock on May 17, 1996. Payroll savings equal to the total option price will be
accumulated over a two-year period ending in December 1998. Interest at an
annual rate of 3%, compounded quarterly, is credited to each participant's
payroll savings account. Subject to certain restrictions, the Plan permits
participants to exercise their option to the extent of accumulated funds in
their payroll savings accounts during January 1998 and January 1999, or upon
termination of employment. Payroll savings and interest not applied to the
purchase of shares by a participant will be paid in cash. A participant may
withdraw from the Plan at any time.
As of March 31, 1997, options for 34,328 shares were outstanding to 235
participants in the Plan. (These options are not included in the table in Note
7.)
9. EMPLOYEE BENEFIT PLANS
The Company maintains two qualified defined contribution plans, which in total
cover virtually all employees. Both plans provide for discretionary matching
contributions. The expense under these plans for 1997 was $128,000. There was
no expense for 1996 of 1995.
The Company has four non-contributory, defined benefit pension plans covering
approximately 70% of all employees. (The Electronics Segment employees do not
participate.) Three of the plans cover hourly production employees and provide
benefits of stated amounts for specific periods of service. The other plan
covers all salaried, administrative and clerical employees and provides
benefits based on years of service and compensation.
The Company makes actuarially determined contributions to a trust fund for
these plans which represents the maximum allowable for deduction in
determination of Federal taxable income. Trust assets consist primarily of
participating units in common stock and bond funds.
Net pension costs for fiscals 1997, 1996, and 1995 for the defined benefit
plans consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs - benefits earned during the period $ 503 $ 414 $ 482
Interest on projected benefit obligation 793 710 660
Return on plan assets (939) (1,491) (451)
Amortization and deferral of unrecognized amounts 39 685 (279)
----- ------ -----
Net pension cost $ 396 $ 318 $ 412
===== ====== =====
</TABLE>
<PAGE> 10
The defined benefit plans' funded status at March 31, 1997 and March 31, 1996
was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 8,498 $ 7,312
======= =======
Accumulated benefit obligation $ 9,046 $ 8,450
======= =======
Projected benefit obligation $10,850 $10,279
Plan assets at fair value 11,185 10,592
------- -------
Plan assets in excess of projected benefits (335) (312)
Unrecognized obligations (75) (78)
Unrecognized prior service cost (36) (27)
Unrecognized net gain 1,840 1,459
------- -------
Accrued pension cost $ 1,394 $ 1,041
======= =======
</TABLE>
The projected benefit obligations assume a 7.75% actuarial discount rates and
(for the compensation based plan) 5% average annual salary increases. The
expected long term rate of return on plan assets was 8.5%.
In place of participation in any of the above defined benefit pension plans for
tool makers employed at one of the Company's manufacturing facilities, the
Company makes cash contributions to a labor management (union) multi-employer
pension fund based on hours worked, in accordance with a negotiated labor
contract.
The Company also has an unfunded supplemental pension agreement with a key
executive officer. Actuarially computed provisions for this agreement were
$50,000, $48,000 and $48,000 in fiscal 1997, 1996 and 1995, respectively.
The Company provides limited pre-Medicare-eligibility health insurance and
minimal life insurance benefits to a small group of retired employees who
attain specified age and years of service requirements. The periodic expense
for postretirement benefits was $33,000 and $27,000 for the years ended March
31, 1997 and 1996, respectively. The Company's policy is to fully accrue for
its postretirement benefits. This accrual was $531,000 and $499,000 at March
31, 1997 and 1996, respectively.
10. INCOME TAXES
Income tax expense consists of the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $3,190 $2,234 $3,364
State 742 604 720
------ ------ ------
3,932 2,838 4,084
------ ------ ------
Deferred:
Federal (78) 322 (104)
State (14) 80 (15)
------ ------ ------
(92) 402 (119)
------ ------ ------
$3,840 $3,240 $3,965
====== ====== ======
</TABLE>
<PAGE> 11
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred tax liability as of March 31, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Vacation pay reserve $ 301 $ 250
Pension accrual 740 610
Inventory related 355 217
Postretirement benefits 199 185
Health insurance reserve 222 161
Deferred compensation 340 191
Other 290 284
------ -----
2,447 1,898
------ -----
Deferred tax liabilities:
Property plant and equipement 2,463 1,848
Intangible assets 826 -0-
Other 40 50
------ -----
3,329 1,898
------ -----
Net deferred tax liability $ (882) $ -0-
====== =====
</TABLE>
Total income tax expense differs from the amounts computed by applying the
Federal income tax rate to earnings before income taxes for the following
reasons:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory Federal rate 34.0% 34.0% 34.0%
State income taxes, net of
Federal income tax benefit 5.2 4.9 4.3
Capital loss on sale of businesses 1.6 -- --
Foreign Sales Corporation
(FSC) earnings (0.4) (0.3) (0.3)
Federal tax-exempt bond interest (0.9) (2.2) (1.7)
Research & development credit -- (1.3) --
Other 0.7 0.4 0.5
----- ----- -----
40.2% 35.5% 36.8%
===== ===== =====
</TABLE>
<PAGE> 12
11. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Wages & commissions $1,522 $ 800
Vacations 992 818
Taxes, other than income taxes 326 277
Employee benefits 1,121 717
Other accruals 721 779
------ ------
Totals $4,682 $3,391
====== ======
</TABLE>
12. EARNINGS PER SHARE CALCULATION
Weighted average shares outstanding exclude common stock equivalents because
their dilutive effect is not significant.
13. SIGNIFICANT CUSTOMERS
One customer accounted for approximately 18%, 14% and 9.6% of consolidated
revenues during fiscal 1997, 1996 and 1995, respectively.
14. INDUSTRY SEGMENT INFORMATION
The Company comprised three business segments serving diverse markets. The
Electronics Segment designs and manufactures custom electronic and electrical
systems for a broad range of applications. The Engineered Materials Segment
fabricates custom components from elastomers for special applications requiring
a high degree of engineering expertise and product quality. The Fluid Power
Segment manufactures custom engineered cylinders; hydraulic devices that raise,
lower, stabilize, or level semitrailers, trucks, recreational vehicles and a
variety of off-highway vehicles and equipment; and electrically powered systems
that serve as drive mechanisms for slideout rooms on trailers and recreational
vehicles. Certain previously reported segment information has been
reclassified to conform with the current presentation.
<PAGE> 13
Selected segment information is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES:
Fluid Power $48,038 $36,186 $29,055
Engineered Materials 32,195 35,463 39,064
Electronics 8,509(1) -- --
Intersegment* (1,146) (950) (1,154)
------- ------- -------
Sales to unaffiliated customers $87,596 $70,699 $66,965
======= ======= =======
OPERATING INCOME:
Fluid Power $ 9,946 $ 7,620 $ 5,874
Engineered Materials 271 1,361 4,975
Electronics 653(1) -- --
Unallocated Corp. expenses & consolidating adj. -- net (908) (772) (857)
------- ------- -------
Total operating income 9,962 8,209 9,992
OTHER INCOME (EXPENSE)--NET (419) 930 779
------- ------- -------
INCOME BEFORE INCOME TAXES $ 9,543 $ 9,139 $10,771
======= ======= =======
IDENTIFIABLE ASSETS:
Fluid Power $18,846 $14,790 $11,651
Engineered Materials 20,322 24,581 25,763
Electronics 18,944 -- --
Corporate 3,879 18,067 19,366
------- ------- -------
$61,991 $57,438 $56,780
======= ======= =======
DEPRECIATION & AMORTIZATION:
Fluid Power $ 702 $ 595 $ 550
Engineered Materials 2,466 2,496 2,270
Electronics 340(1) -- --
Corporate 152 143 136
------- ------- -------
$ 3,660 $ 3,234 $ 2,956
======= ======= =======
CAPITAL EXPENDITURES:
Fluid Power $ 2,069 $ 901 $ 1,113
Engineered Materials 3,743 2,766 4,591
Electronics 135(1) -- --
Corporate 307 169 366
------- ------- -------
$ 6,254 $ 3,836 $ 6,070
======= ======= =======
</TABLE>
(1) Amounts are for the 5 month period October 30, 1996 to March 31, 1997.
* Intersegment sales are priced on a negotiated basis not in excess of
competitive market value.
Corporate assets consist primarily of headquarters property and equipment at
March 31, 1997. Prior years included cash and cash equivalents.
The Company has no foreign operations and export sales were not significant.
<PAGE> 14
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Company is responsible for the objectivity of the accompanying consolidated
financial statements, which have been prepared in conformity with generally
accepted accounting principles. The financial statements of necessity include
the Company's estimates and judgments relating to matters not concluded by
year-end. Financial information contained elsewhere in the Annual Report is
consistent with that included in the financial statements.
The Company maintains a system of internal accounting controls that includes
careful selection and development of employees, division of duties and
established accounting and operating policies and procedures. Although there
are inherent limitations to the effectiveness of any system of accounting
controls, the Company believes that its system provides reasonable, but not
absolute, assurance that its assets are safeguarded from unauthorized use for
disposition and that its accounting records are sufficiently reliable to permit
the preparation of financial statements that conform in all material respects
with generally accepted accounting principles. Deloitte & Touche LLP,
independent auditors, are engaged to render an independent opinion regarding
the fair presentation in the financial statements of the Company's financial
condition and operating results. Their report appears below. Their
examination was made in accordance with generally accepted auditing standards
and included a review of the system of internal accounting controls to the
extent they considered necessary to determine the audit procedures required to
support their opinion.
The Audit Committee of the Board of Directors is composed solely of directors
who are not employees of the Company. The Committee meets periodically and
privately with the independent auditors, and with the chief financial officer
of the Company to review matters relating to the quality of the financial
reporting of the Company, the internal accounting controls and the scope and
results of audit examinations. The Committee also reviews compliance with the
Company's statement of policy as to the conduct of its business, including
proper accounting and dealing with auditors. In addition, it is responsible
for recommending the appointment of the Company's independent auditors, subject
to shareholder ratification.
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
VERSA TECHNOLOGIES, INC.
RACINE, WISCONSIN
We have audited the consolidated balance sheets of Versa Technologies, Inc. and
subsidiaries as of March 31, 1997 and 1996 and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
three years in the period ended March 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Versa Technologies, Inc. and
subsidiaries as of March 31, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
May 9, 1997
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
VERSA TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS YEAR ENDED MARCH 31 PERCENTAGE OF NET SALES
- ---------------------------------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $87,596 $70,699 $66,965 100.0% 100.0% 100.0%
Gross Profit 23,347 19,509 21,785 26.7% 27.6% 32.5%
Selling and Administrative 13,385 11,300 11,793 15.3% 16.0% 17.6%
Operating Income 9,962 8,209 9,992 11.4% 11.6% 14.9%
Other Income 359 930 779 0.4% 1.3% 1.2%
Loss on Sale of Businesses (778) -0.9%
Earnings Before Taxes 9,543 9,139 10,771 10.9% 12.9% 16.1%
Income Taxes 3,840 3,240 3,965 4.4% 4.6% 5.9%
Net Earnings as Reported $5,703 $ 5,899 $ 6,806 6.5% 8.3% 10.2%
Earnings Per Share as Reported $1.02 $ 0.99 $ 1.13
Net Earnings excluding the
Loss on Sale of Businesses $6,355 $ 5,899 $ 6,806 7.3% 8.3% 10.2%
Earnings Per Share excluding
the Loss on Sale of
Businesses $1.13 $ 0.99 $ 1.13
</TABLE>
The above table sets forth, for the fiscal years indicated, the results of
operations of the Company along with the relative percentages of sales in those
items from year to year.
ACQUISITION/SALES OF BUSINESSES
During fiscal 1997, the Company sold its two plastic molding operations. The
two units, Moxness Thermoplastics, Inc. ("Thermo") and Lovdahl Manufacturing
("Lovdahl") were part of the Engineered Materials Segment. Effective September
1,1996, 100% of the stock of Thermo was acquired by General Plastics
Corporation for $3.4 million. Based on asset values on the effective date of
the sale, the sale resulted in an after-tax loss of $498,000, or $0.088 per
share, which was recorded in the second quarter. On March 31,1997, all the
assets of Lovdahl were sold to Kurz-Kasch for $1.47 million. Based on asset
values on the effective date of the sale, the sale resulted in an after-tax
loss of $154,000 or $0.027 per share, which was recorded in the fourth quarter.
The decision to divest of both units is consistent with management's strategy
to concentrate on the Company's core businesses, moving away from commodity
products and focusing on more profitable niche markets.
The combined sales and operating losses for Thermo and Lovdahl for fiscal 1997
were $3.9 million and $240,000, respectively. These results include a full year
of operations for Lovdahl and five months for Thermo. For fiscal 1996, the
combined sales and operating losses were $5.3 million and $498,000,
respectively.
On October 30, 1996, the Company acquired 100% of the capital stock of Eder
Industries, Inc. ("Eder") for $15,382,000. The funds used to acquire Eder were
borrowed ($4.8 million) under a revolving business note agreement, with the
balance ($10.6 million) coming from the sale of short term cash investments.
The acquisition was accounted
<PAGE> 17
for by the purchase method and, accordingly, Eder's results of operations have
been included with the Company's results since the acquisition date. Sales and
operating income for the period October 30, 1996 to March 31, 1997 were $8.5
million and $653,000, respectively. The fair value of assets acquired and
liabilities assumed totaled $7.6 million (of which $700,000 was cash) and $2.2
million, respectively. The excess of the purchase price over the fair value of
net assets acquired ($8.2 million) is being amortized on a straight-line basis
over 40 years.
In recognition of the changing nature and structure of the businesses, the
Company revised its segment reporting as of December 31,1996. The transactions
noted above, combined with the significant growth of its Fluid Power Segment,
has moved the Company more toward the manufacture of higher value-added
engineered systems versus components. Additionally, both Moxness Products and
Mox-Med (silicone businesses) have been placed under common leadership and
there is now a greater sharing of technical and administrative support
functions. The Company's three business segments include Fluid Power (Milwaukee
Cylinder and Power Gear), Engineered Materials (Moxness Products, Inc. and
Mox-Med, Inc.), and Electronics (Eder Industries, Inc.)
NET SALES
Sales for fiscal 1997 increased $16.9 million, or 24% over 1996, to
$87.6 million. Our Fluid Power Segment, was again the largest contributor
to the growth due to increased sales at Power Gear. Fluid Power's sales
increased $11.8 million or 33% over the prior year. The growth came from Power
Gear's slide-out and leveling systems for recreational vehicles. During the
year Power Gear entered into an agreement with a leading manufacturer of
recreational vehicles to supply slide-out room mechanisms for travel trailers.
Sales under this agreement were $4.0 million during fiscal 1997, with estimated
annual sales for next year in excess of $7.0 million. Total sales of
slide-outs and leveling systems to the recreational vehicle market accounted
for approximately 28% of consolidated sales. Sales for our Engineered Materials
Segment declined $3.3 million or 9.2%. The sale of Thermo effective September
1, 1996 accounted for $1.7 million of the decline. The balance related to a
drop in shipments of infusion sleeves used in ophthalmic surgery to three
medical silicone customers. Sales for the Electronics Segment were $8.5
million for the five month period ended March 31, 1997. As the Company looks
to fiscal 1998, continued penetration into the recreational vehicle market by
Power Gear will be balanced against a full year of sales for Eder, thus keeping
the dependence on any one market consistent with fiscal 1997.
Sales for fiscal 1996 increased $3.7 million, or 5.6% over 1995, to $70.7
million. Our Fluid Power Segment, specifically our Power Gear Division, was
the largest contributor to the increase. Fluid Power's sales increased $7.1
million or 25% over the prior year. The introduction of Power Gear's slide-out
system for recreational vehicles during the first quarter was the primary
factor fueling the growth. The slide-out product was well received with demand
growing throughout the year. Total sales of slide-outs and leveling systems to
the recreational vehicle market accounted for approximately 20% of consolidated
sales. Engineered Materials' sales decreased $3.6 million, or 9.2%. Growth
with the Company's medical silicone customers was more than offset by a $6.7
million decline in industrial silicone sales. Industrial silicones' sales
decreased primarily due to three factors: first, automotive related business
was down $3.7 million; second, a project for the business machine market which
ended during the third quarter of fiscal 1995 had shipments of $1.3 million
during fiscal 1995; and third, sales for our thermoplastics division were down
$450,000. The decline in automotive volume was due to the loss of several
end-of-life projects.
<PAGE> 18
GROSS PROFIT
Gross profit for fiscal 1997 increased by $3.8 million, or 20%. Gross profit
as a percentage of sales decreased from 27.6% to 26.7%. The Fluid Power
Segment's gross profits were up $3.5 million, or 28%. Consistent with last
year, gross profit dollars increased , while gross margin as a percentage of
sales dropped slightly, primarily due to a shift in product mix to more Power
Gear systems. Gross margins at Power Gear, while up slightly this year, are
below those of Milwaukee Cylinder. Engineered Materials' gross profit
declined $1.9 million. The primary reason for the decrease was a reduction in
volume of medical silicones products and the resulting under absorption of
costs. Gross margins for our medical silicone unit declined six percentage
points. For the five month period the Electronics Segment contributed gross
profit of $2.0 million.
Gross profit for fiscal 1996 decreased by $2.3 million, or 10%. Gross profit
as a percentage of sales decreased from 32.5% to 27.6%. The Fluid Power
Segment's gross profits were up $2.0 million, or 19%. While gross profit
dollars increased, gross margin as a percentage of sales was down slightly,
primarily due to a shift in product mix to more Power Gear systems. Volume at
Power Gear grew more rapidly than at Milwaukee Cylinder. Power Gear accounted
for approximately 55% of Fluid Power's total sales. Engineered Materials'
gross profit declined $4.3 million, more than offsetting the progress made at
the Fluid Power Segment. The primary reason for the decrease was a reduction
in volume at industrial silicones and the resulting under absorption of costs.
SELLING AND ADMINISTRATIVE
Selling and administrative expenses increased $2.1 million during fiscal 1997.
This increase was due primarily to two factors: first, cost at Fluid Power's
Power Gear unit increased $1.0 million, however as a percent of sales, cost was
unchanged; and second, the Electronics Segment's selling and administration
cost for the five months ended March 31, 1997 was $985,000. The increase at
Power Gear was due primarily to two factors. First, commissions were up
$300,000 and second, salaries and benefits cost was up $354,000. These
increases were directly tied to this unit's increase in sales. Consolidated
selling and administrative as a percent of sales declined from 16.0% in fiscal
1996 to 15.3% in fiscal 1997.
Selling and administrative expenses decreased $500,000 during fiscal 1996.
Selling and administrative as a percent of sales declined from 17.6% in fiscal
1995 to 16.0% in fiscal 1996. Administrative expenses declined at both the
Engineered Materials Segment and Corporate headquarters. Reductions in bonus
of $200,000 at Corporate and $350,000 in salaries and benefits at Engineered
Materials were the significant factors. The drop in salaries and benefits was
due to savings associated with the realignment of the silicone divisions
announced on November 14, 1994. Our Fluid Power Segment's selling and
administrative expenses increased $500,000. This increase was almost entirely
at the Power Gear unit, where sales commissions increased $250,000.
OPERATING INCOME
Operating income for fiscal 1997 increased $1.8 million or 21%. Operating
income as a percent of sales decreased from 11.6% in fiscal 1996 to 11.4% in
fiscal 1997. Increased operating income at Fluid Power combined with the
contribution of five months of operations for Electronics more than offset a
$1.1 million drop at Engineered Materials.
<PAGE> 19
OTHER INCOME (EXPENSE)
Other income (expense) declined by $1.3 million, going from income of
$930,000 for fiscal 1996 to expense of $419,000 this year. Historically, the
largest component of other income was interest income which for the fiscal
years 1996 and 1995, was $848,000 and $753,000, respectively. With the
acquisition of Eder Industries for $15.4 million effective October 30, 1996,
the Company's cash position changed from cash and short-term investments
totaling $10.6 million to short-term debt of $4.8 million, resulting in
interest expense from that time forward. Additionally, this caption also
includes the pre-tax loss of $778,000 on the sale of the Company's two plastics
units.
INCOME TAXES
The effective tax rate for the Company increased from 35.5% in fiscal 1996 to
40.2% this year. This increase was due to four factors: first, last year's rate
was reduced by 1.3 percentage points due to the favorable impact of a $120,000
research and development tax credit claimed which related to fiscal years 1992
through 1995; second, moving from a net cash position to a net debt position
resulted in a loss of the benefits of investing in Federal tax-exempt bonds;
third, the amortization of the goodwill associated with the acquisition of Eder
Industries is not tax deductible; and fourth, the loss incurred on the sale of
Thermo was a capital loss with no associated tax benefit.
CASH FLOWS AND LIQUIDITY
While net earnings decreased slightly, cash provided from operating activities
decreased $2.0 million. The most significant changes in the current sections
of the balance sheet were increases in accounts receivable and inventory of
$720,000 and $2.1 million respectively and a $700,000 decrease in accounts
payable. These changes, year over year, are net of the impact of the
acquisition of Eder and the disposition of Lovdahl and Thermo. The increases
in accounts receivable and inventory are due to higher volume at both Fluid
Power for fiscal 1997 and Eder since the date of acquisition. The decline in
accounts payable from a year ago was due to an uncharacteristically high
balance at March 31, 1996 at Fluid Power.
Cash used in investing activities increased from $3.7 million during fiscal
1996 to $16.4 million for the current year. The net impact of the acquisition
of Eder offset by the dispositions of Lovdahl and Thermo was a $10.3 million
use of cash, eliminating the Company's short-term investments. Capital
expenditures of $6.3 million included an upgrade in the Company's aviation
department. A turbo prop aircraft valued at $850,000 was traded in along with
a $2.3 million cash payment for the purchase of a used jet aircraft. The
purchase of this aircraft expands the range within which Company sales and
engineering personnel can quickly service customers from the midwest to the
continental United States and Canada. Expenditures for fiscal 1998 are planned
to be approximately $5.0 million, which includes a $2.5 million expansion
project at Eder. This project will add additional automated equipment and
40,000 square feet of space to Eder's main plant. This will enable Eder to
consolidate manufacturing into one location and provide capacity for future
growth.
During fiscal 1997, the Company paid $4.2 million in dividends or $.75 per
share (included a special $.35 per share dividend). The Company has adopted a
program to repurchase up to 900,000, shares or 15%, of its outstanding common
stock. As of March 31, 1997, 522,300 shares had been repurchased at a cost of
$7.1 million ($3.5 million during the current year). If the Company were to
repurchase the remaining 377,700 shares under the repurchase program it would
require $5.2 million (based on the 5/23/97 price of $13.75 per share). In
conjunction with the acquisition of Eder, the Company entered into a $15
million line of credit agreement with a local bank. The line bears interest at
a variable rate based on the current thirty day LIBOR rate plus 75 basis
points. The agreement contains no restrictive covenants. Borrowings under this
agreement were initially $4.8 million and were reduced to $3.0 million at March
31, 1997. Subsequent to year end the balance was reduced to zero, in-part by
utilizing the proceeds from the sale of Lovdahl.
At March 31, 1997 the Company's current ratio was 2.3 to 1. The Company's
strong cash flow from operations combined with the available funds under the
line of credit gives management significant latitude in dealing with future
opportunities and commitments, including the stock repurchase program.
<PAGE> 20
INFLATION
Inflation and price adjustments were of minor significance.
ENVIRONMENTAL MATTERS
The Company continually monitors its compliance with environmental regulations.
This is accomplished by in house staff supplemented by outside consultants.
At March 31, 1997 the Company had reserves of $190,000 for environmental
cleanup at its plants. These reserves, which were established during fiscal
1994 and 1993, relate specifically to our Wausau and Cudahy manufacturing
facilities. These reserves did not change during the current year. Management
believes that future earnings will not be impacted in a significant manner.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report constitute forward looking statements
within the meaning of federal securities laws. Although Versa Technologies,
Inc. believes that expectations reflected in such forward-looking statements
are based on reasonable assumptions, the Company can give no assurances that
its expectations will be achieved. Factors that could cause actual results to
differ from expectations include general economic conditions or changes in
competition which could impact any of the Company's business units.
ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share". The Company is currently evaluating the accounting and
disclosure effects of this statement which is required to be adopted during the
third quarter of fiscal 1998.
<PAGE> 21
SUMMARY OF SELECTED FINANCIAL DATA
Versa Technologies, Inc.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands,
except share and per share amounts)
Fiscal Year Ended March 31 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings
Net sales $87,596 $70,699 $66,965 $61,837 $52,848
Cost of sales 64,249 51,190 45,180 42,073 34,806
Selling and administrative expenses 13,385 11,300 11,793 10,938 10,322
Operating income 9,962 8,209 9,992 8,826 7,720
Other income (expense) - net (419) 930 779 750 787
Earnings before income taxes 9,543 9,139 10,771 9,576 8,507
Pre-tax earnings as % of net sales 10.9% 12.9% 16.1% 15.5% 16.1%
Income taxes 3,840 3,240 3,965 3,580 3,090
Net earnings 5,703 ** 5,899 6,806 6,105 * 5,417
Net earnings as % of net sales 6.5% 8.3% 10.2% 9.9% 10.3%
Per Common Share(1)
Net earnings 1.02 ** 0.99 1.13 1.01 * 0.90
Dividends declared and paid 0.75(6) 0.74(6) 0.68(5) 0.61(4) 0.52(3)
Book value 8.08 8.06 8.00 7.56 7.21
Year end market value 13.63 14.00 13.75 15.00 13.25
At Year End
Working capital 15,428 27,913 29,147 29,286 29,545
Working capital ratio 2.3 to 1 4.9 to 1 6.1 to 1 6.4 to 1 8.3 to 1
Property and equipment - net 23,376 20,517 19,945 16,849 14,262
Total assets 61,991 57,438 56,780 53,569 49,739
Long-term obligations -- -- -- -- --
Shareholders' equity 45,126 46,984 48,068 45,560 43,686
Shares outstanding (000)(1) 5,581 5,829 6,012 6,023 6,059
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands,
except share and per share amounts)
Fiscal Year Ended March 31 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Net sales $48,935 $51,898 $53,122 $47,941 $45,587 $41,215
Cost of sales 31,908 33,410 34,803 29,778 28,131 25,271
Selling and administrative expenses 9,621 9,550 9,238 8,713 8,093 7,617
Operating income 7,406 8,938 9,081 9,450 9,363 8,327
Other income (expense) - net 740 1,004 697 620 346 (99)
Earnings before income taxes 8,146 9,942 9,778 10,070 9,709 8,228
Pre-tax earnings as % of net sales 16.6% 19.2% 18.4% 21.0% 21.3% 20.0%
Income taxes 3,020 3,750 3,742 3,820 3,951 3,997
Net earnings 5,126 6,192 6,036 6,250 5,758 4,231
Net earnings as % of net sales 10.5% 11.9% 11.4% 13.0% 12.6% 10.3%
Per Common Share(1)
Net earnings 0.86 1.04 1.02 1.07 0.99 0.73
Dividends declared and paid 0.24 0.23 0.184 0.15 0.253 (2) 0.101
Book value 6.80 6.15 5.34 4.45 3.50 2.73
Year end market value 15.00 14.00 12.50 14.58 13.83 10.27
At Year End
Working capital 26,985 22,549 18,420 14,668 12,103 7,747
Working capital ratio 8.1 to 1 6.4 to 1 4.4 to 1 4.3 to 1 3.7 to 1 2.8 to 1
Property and equipment - net 14,122 14,077 13,195 12,395 10,449 10,210
Total assets 46,884 42,707 39,101 33,736 27,912 23,285
Long-term obligations -- -- -- 1,065 1,210 1,375
Shareholders' equity 40,897 36,501 31,633 26,168 20,410 15,804
Shares outstanding (000)(1) 6,013 5,935 5,928 5,879 5,831 5,781
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shares outstanding and per share data have been adjusted to reflect stock
splits
(2) Includes special cash dividend of $.133 per share.
(3) Includes special cash dividend of $.25 per share.
(4) Includes special cash dividend of $.30 per share.
(5) Includes special cash dividend of $.33 per share.
(6) Includes special cash dividend of $.35 per share.
* Includes the cumulative effect of accounting changes, which increased Net
Earnings by $109,000 or $.02 per share.
** The 1997 period includes a $652,000, or $.115 per share, after-tax loss on
the disposition of Moxness Thermoplastics, Inc. and Lovdahl Manufacturing.
<PAGE> 22
QUARTERLY FINANCIAL DATA (UNAUDITED)
Versa Technologies, Inc.
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Net Earnings
Quarterly Results Net Sales Gross Profit Earnings Per Share
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal Year Ended March 31, 1997
First Quarter $ 19,365 $ 5,365 $ 1,644 $ 0.29
Second Quarter 19,612 5,321 993 0.18(1)
Third Quarter 22,088 5,463 1,249 0.22
Fourth Quarter 26,531 7,198 1,817 0.33(2)
----------------------------------------------------------
$ 87,596 $23,347 $ 5,703 $ 1.02
==========================================================
</TABLE>
(1) - Includes the loss on sale of Moxness Thermoplastics of $498,000 after tax
or $.088 per share.
(1) - Includes the loss on sale of Lovdahl Manufacturing of $154,000 after tax
or $.027 per share.
<TABLE>
<C> <C> <C> <C> <C>
Fiscal Year Ended March 31, 1996
First Quarter $ 16,989 $ 5,227 $ 1,548 $0.26
Second Quarter 17,365 4,740 1,477 $0.25
Third Quarter 16,486 4,331 1,258 $0.21
Fourth Quarter 19,859 5,211 1,616 $0.27
----------------------------------------------------------
$ 70,699 $19,509 $ 5,899 $0.99
==========================================================
</TABLE>
<PAGE> 23
Per Share Common Stock Data
Versa Technologies, Inc.
(Amounts in Dollars)
<TABLE>
<CAPTION>
Year Ended March 31, 1997
Market Price (a) Dividends
Fiscal ----------------- ---------
Quarter High Low Close High
- ------- ---- --- ----- ----
<S> <C> <C> <C> <C> <C>
1st 14-1/4 13-1/4 13-1/2 0.10 15
2nd 14-1/4 13-1/8 13-1/4 0.45 (b) 15-3/4
3rd 14-1/4 12-1/2 13 0.10 18
4th 13-5/8 13-1/8 13-5/8 0.10 16-1/4
<CAPTION>
Year Ended March 31, 1996
Market Price (a) Dividends
---------------- ---------
Low Close
--- -----
<C> <C> <C>
13-3/4 14-1/2 0.09
13-3/4 15-1/4 .45 (b)
13-1/2 15-1/4 0.10
13-1/4 14 0.10
</TABLE>
(a) NASD's reporting of Versa Technologies Common Stock on their National
Market System (NASDAQ/NMS). Prices do not include retail markup, markdown
or commission.
(b) Includes special cash dividend of $.35 per share.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF VERSA TECHNOLOGIES, INC.
MARCH 31, 1996
Moxness Products, Inc. Wisconsin 100%
Versa Medical Technologies, Inc. Wisconsin 100%
Mox-Med, Inc. Wisconsin 100%
Versa/Tek Export Company, Inc. U.S. Virgin Islands 100%
Eder Industries, Inc. Wisconsin 100%
<PAGE> 1
EXHIBIT 23
FORM 10-K
VERSA TECHNOLOGIES, INC.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-49024, 33-86446, 333-17135 and 333-17137 and File No. 2-87421 of Versa
Technologies, Inc. and subsidiaries on Forms S-3 and S-8 of our reports dated
May 9, 1997, appearing in and incorporated by reference in the Annual Report on
Form 10-K of Versa Technologies, Inc. for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
June 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,127
<SECURITIES> 0
<RECEIVABLES> 13,379
<ALLOWANCES> 176
<INVENTORY> 11,501
<CURRENT-ASSETS> 27,298
<PP&E> 48,946
<DEPRECIATION> 25,570
<TOTAL-ASSETS> 61,991
<CURRENT-LIABILITIES> 11,870
<BONDS> 0
0
0
<COMMON> 61
<OTHER-SE> 51,616
<TOTAL-LIABILITY-AND-EQUITY> 61,991
<SALES> 87,596
<TOTAL-REVENUES> 87,596
<CGS> 64,249
<TOTAL-COSTS> 64,249
<OTHER-EXPENSES> 13,385
<LOSS-PROVISION> (31)
<INTEREST-EXPENSE> 160
<INCOME-PRETAX> 9,543
<INCOME-TAX> 3,840
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,703
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
