SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended August 25, 1995 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 0-10843
CSP Inc.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2441294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Linnell Circle, Billerica, Massachusetts 01821
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508)663-7598
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing selling price as reported on NASDAQ on November
2, 1995, was $23,242,640.
The number of shares outstanding of the registrant's Common Stock, $.01 par
value, was 2,635,220 at November 2, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part II, Items 5, 6, 7 and 8 is incorporated by
reference to the Registrant's 1995 Annual Report to Stockholders. The
information required by Part III, Items 10,11,12 and 13 is incorporated by
reference to the Registrant's Proxy Statement dated November 8, 1995 filed with
respect to the Annual Meeting of Stockholders of the Registrant to be held on
December 12, 1995.
<PAGE>
CSP Inc.
Form 10-K
Year Ended August 25, 1995
Item Number
in Form 10-K Table of Contents Page
Part I
1 Business........................................ 4
2 Properties...................................... 15
3 Legal Proceedings............................... 15
4 Submission of Matters to a Vote
of Security Holders............................ 15
Part II
5 Market for Registrant's Common Equity
and Related Stockholder Matters................ 16
6 Selected Financial Data......................... 16
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 16
8 Financial Statements and Supplementary Data..... 16
9 Change in and Disagreements with Accountants
on Accounting and Financial Disclosure......... 16
Part III
10 Directors and Executive Officers of the
Registrant...................................... 17
11 Executive Compensation........................... 17
12 Security Ownership of Certain Beneficial Owners
and Management.................................. 17
13 Certain Relationships and Related Transactions... 17
Part IV
14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................. 18
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
CSP Inc. (the "Company" or "CSPI") was founded in 1968 and is located in
Billerica, Massachusetts, just off Route 128 in the Boston computer corridor.
CSPI pioneered the concept of attached processors specifically designed to carry
out scientific calculations at very high speeds. The Company had its initial
public offering in 1982. In 1988, the Company established its Scanalytics
division to develop and market imaging systems for molecular and cell biology.
In 1994, the Company established its Vision Systems division to commercialize
technology developed by United Parcel Service (UPS) to automate parcel sortation
capabilities. CSPI sells all products through its own direct sales force in the
U.S., with 14% of total sales outside the U.S. via its French subsidiary and a
worldwide organization of distributors.
CURRENT PRODUCTS
EMBEDDED COMPUTERS
Providing additional computation power for specific signal processing
application problems has been CSPI's core technology since its inception. The
Company's products consist of both hardware and software, each optimized for the
other. A typical OEM/volume end user will employ one or more units in an
embedded system for defense, medical imaging, advanced vision and seismic
applications.
Historically, the Company provided array processors (Mini- MAP and MAP 4000)
for use with Digital Equipment Corporation's Q-Bus based Micro-VAX
minicomputers. These products are still supplied to a small number of OEM
customers and represent $825,000 of embedded computer sales in 1995.
The present products are VME-based boards (called SuperCards) which are
incorporated into customized signal processing systems by OEM customers. Now in
its fourth generation, the SuperCard family is a product line of embedded signal
processors that employ multiple Intel i860 RISC microprocessors. The latest
version, the SuperCard-4SLX, employs eight 40MHz i860's and provides 640 MFLOPS
of computational power with 64 MB of high speed memory and a high bandwidth
interconnection scheme based upon National Semiconductor's QuickRing.
SuperCard-3 utilizes one or two of the 50MHz version of the i860 and is
available for VME, S-Bus and Turbochannel. The earlier Supercard-2 and 1 are
still supplied to a limited number of existing customers.
<PAGE>
New board level products currently in development are designed to employ a
combination of Analog Devices' 21060 DSP chip and the PowerPC RISC processor
from Motorola/IBM. The Company differentiates itself from its major competitors
by its use of standard interfaces and the interoperability this affords its OEM
customers.
All SuperCards are supported by a rich software development environment,
real-time software for multiple board installations and an extensive library of
five hundred commonly employed micro-coded mathematical subroutines. New
products currently in development are to be similarly supported. Third party
software support includes VxWorks (Wind River Systems), Unison (Multiprocessor
Toolsmith), FORTRAN (Lahey Computer Systems) and "C" (Metaware Corp) compilers.
The Company has placed great emphasis on its ability to migrate customer
application code to new generations of its hardware.
SuperCard products are priced from $5,000 to $45,000 (depending upon model
and quantity) and represented $9,527,000 of embedded computer sales in 1995.
SCANALYTICS
CELLSCAN, 3D FLUORESCENCE MICROSCOPY
Based upon technology developed by the University of Massachusetts Medical
Center in over ten years of research, CELLscan is a system designed to allow the
in vivo analysis of the internal workings and structure of living cells. The
system permits cell biologists to study the cell's reaction to external stimuli
and understand the fundamental processes of cell life and death.Fluorescent
probes are infused into the cell and illuminated under a standard microscope.
The resulting images are processed by a SuperCard array to compensate for the
distortions introduced by the measurement and then displayed in three dimensions
on a PC. An alternative, incumbent, technology called con-focal microscopy
employs an expensive optical system to produce similar images.
This technology is licensed exclusively to CSPI for a period of ten years
which commenced in April 1991, providing that the Company maintain certain
royalty levels which Management anticipates will be met.
The Company sells complete systems ($60,000 to $100,000 exclusive of the
microscope) to individual researchers in academia and biopharmaceutical
companies.
CELLscan sales were $573,000 for 1995.
ELECTROPHORESIS PRODUCTS
<PAGE>
Gel electrophoresis is the most widely used separation technique for
proteins and nucleic acids in molecular biology. Radioactively labeled active
components are separated by molecular size and visualized by exposure to
photographic film. The film is scanned and the digital image produced
transferred to a PC for further analysis. The characteristic patterns are
interpreted to produce information concerning the nucleotide sequence of DNA,
the comparison of RFLP fragments (for DNA fingerprinting and other experiments)
and the expression of proteins.
The Scanalytics division markets several shrink-wrapped software packages
for gel electrophoresis analysis that sell from $1,500 to $5,000 and were
developed in association with Dartmouth College and the National Cancer
Institute. These packages are sold directly to individual researchers and via a
number of OEM suppliers of scanner equipment.
The Company acquired the assets of AMBIS, a supplier of radioisotopic
imagers, in March 1994 and has integrated the manufacture of these products into
its Billerica facility. AMBIS imagers eliminate the intermediate step of using
photographic film to determine the pattern generated by gel electrophoresis.
Priced from $25,000 to $50,000, AMBIS imagers appeal particularly to researchers
interested in quantitative measurements.
Sales of Electrophoresis products were $1,609,000 in 1995.
VISION SYSTEMS
This division was founded in 1994 to commercialize technology developed by
United Parcel Service (UPS) to automate UPS's parcel sortation capabilities. The
Danbury R/D facility of UPS had developed a bar-code reader, incorporating the
Company's SuperCard-2, together with a two-dimensional bar-code for use in its
high-speed sortation facilities. The Company supplied UPS with a limited number
of preproduction readers for evaluation in their Grand Rapids, MI experimental
facility in 1993 and then received a order for production quantities to equip a
newly constructed facility in Chicago. These units were shipped in fiscal
1994/1995 and are currently in daily operation.
The Company negotiated a non-exclusive license to the technology and is
marketing the units to other potential customers. The reader has been exhibited
at trade shows in the US, Europe and Japan. Datalogic, based in Bologna, Italy
has been engaged to distribute the reader outside the US. Further, the Company
is continuing to work with UPS's Danbury R/D facility to improve the reader's
performance and reduce its cost. This engineering effort is expected to result
in a product range with varying price and performance capabilities.
<PAGE>
MARKETS, MARKETING AND DEPENDENCE ON CERTAIN CUSTOMERS
Applications for embedded computers include sonar and radar systems and
simulators, medical imaging, seismic data processing, package sortation, and
mathematical biology. The Company is able to address these widely diverse
markets primarily as an OEM supplier to system integrators and high volume
end-users. The current trend has returned to board-level embedded computer
products which has accelerated the movement to higher unit volume, OEM
customers. In the case of both Scanalytics and Vision Systems, the Company has
decided to offer a complete applications solution to individual end-users. The
following table sets forth the amount (in thousands of dollars) and percentage
of sales revenues attributable to OEM-volume and individual end-users during
fiscal years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Year Ended August
1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
OEM-volume sales $13,344 72% $11,264 58% $13,331 74%
End-user sales 5,182 28% 8,196 42% 4,684 26%
$18,526 100% $19,460 100% $18,015 100%
====== ==== ====== ==== ======= ====
</TABLE>
While military markets may be shrinking overall, CSPI's share has increased
as prime contractors are encouraged to seek commercial design solutions rather
than build in-house, custom products. In response to government pressure to
reduce defense expenditures, procurement agencies around the world have embraced
the concept of Commercial-Off-The-Shelf (COTS) based systems. Prime contractors
are being directed to employ relatively inexpensive commercial components
whenever possible, replacing custom, fully militarized designs. A further
benefit is that commercial products are estimated to be several years ahead of
militarized equivalents. The Company continues to win awards for several COTS
based systems and has received volume orders as the systems are deployed. The
most productive program has been sales of SuperCards for use with the U.S.
Navy's DTC-2 and TAC3 computers, which are used to co-ordinate information from
sensor arrays in both ship-based and shore-based installations. However, COTS
products are inappropriate for systems designed for truly hazardous conditions
and, to fill this need, the Company has entered into a license agreement with
Hughes Aircraft Company, Fullerton, CA, which has designed a fully MIL-Spec
version of the SuperCard 2XL.
Medical imaging has enjoyed sustained growth and the variety of non-invasive
technologies (e.g. MRI, PET, Ultrasound, Biomagnetics) employed is still
increasing. SuperCards are sold to several medical imaging equipment suppliers
on an OEM basis.
<PAGE>
Instrumentation for biotechnology is used for both basic research and the
production of bio-pharmaceuticals. Funding for molecular and cell biology
research is a priority for most industrial nations and is predicted to increase.
Biotechnology techniques are now commonplace in all bio-pharmaceutical companies
and are extensively employed in the manufacturing of bio-engineered drugs.
Scanalytics instruments are used for both basic microbiological research and the
quality control of bio-pharmaceutical production. No single customer represents
a significant percentage of the total Scanalytics sales volume.
Barcodes are familiar to anyone shopping at the local supermarket. Designed
simply for product identification or zipcode encryption, these one-dimensional
codes have limited information storage capacity. The trend is towards
high-density, two-dimensional, machine codes capable of carrying sufficient
information for decisions to be made locally. Typical of these modern codes is
MaxiCode, which is designed specifically for high speed sortation tasks.
However, until recently, the widespread use of two- dimensional machine codes
has been limited by the lack of an accurate over-the-belt reader - an essential
element in any automation scheme. The machine-code reader developed by UPS, and
manufactured and marketed by the Company, addresses the need for an accurate,
affordable unit capable of unattended operation.
Besides UPS and its customers and competitors, several national post offices
have shown interest in code readers. The Company believes that there are many
other materials handling code readers as well. Recently, the 2D Symbology
Committee of the Automobile Industry Action Group has recommended MaxiCode for
the high speed sortation and tracking of incoming and outgoing goods.
Sales to individual customers constituting 10% or more of total sales
consisted of sales to UPS of $3,948,000 (21%)in fiscal year 1995. The Company
anticipates that, for the foreseeable future, a significant percentage of its
sales will be dependent upon a relatively small number of customers.
The Company markets its products through sales offices in Billerica, MA,
Laurel, MD, and San Diego, CA, and a French sales company (a wholly-owned
subsidiary) near Paris. Elsewhere in the U.S. and throughout the remainder of
the world, these offices coordinate the activities of independent distributors
and manufacturers representatives who represent other company's product lines
not competitive with CSPI and are either paid a commission on units sold or are
permitted to buy units at a discount for subsequent resale. Geographically,
North America accounts for approximately 86% of total sales due to the dominance
of U.S. based manufacturers in the Company's major markets and the wider
acceptance of the VME standard in the U.S. The following
<PAGE>
table sets forth the amounts (in thousands of dollars) and percentage of sales
by geographical area during fiscal years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Year Ended August
1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
North America $15,992 86% $16,234 83% $14,443 80%
Europe 1,207 6% 1,392 7% 2,362 13%
Middle East 318 2% 535 3% 431 2%
Far East 953 5% 1,299 7% 705 4%
South America 56 1% -- -% 74 1%
------- ---- ------- ---- ------- ----
Total $18,526 100% $19,460 100% $18,015 100%
======= ==== ======= ==== ======= ====
</TABLE>
<PAGE>
COMPETITION
The embedded computer, bar-code reader and bio-instrumentation markets are
very competitive. The Company believes its products to be among the leaders in
performance and price. All the markets are characterized by rapid technological
change, and the introduction of new products with superior capabilities or lower
pricing could adversely affect the Company's business.
The Company's principal direct competitors in the floating-point embedded
computer market are Mercury Computer Inc., Analogic Corp., and Star
Technologies, Inc. New companies enter the field periodically, and larger
companies with greater technical resources and marketing organizations could
decide to compete in the future.
The future growth of the embedded computer market depends upon providing
high speed computation for a specific range of signal processing applications in
a compact, low power, and inexpensive package that can be easily integrated into
an OEM customer's design. Certain competitors may offer products with features
not provided by CSPI today. Other companies may offer embedded computers
designed for particular applications not addressed by the Company or for
attachment to computers incompatible with the Company's products. Since the
majority of sales are to OEM-volume users, the principal barrier to competition
is the reluctance of established users to redesign their product once it is in
production and the strength of the Company's relationships with its customers.
Competitors to Scanalytics products include Molecular Dynamics, Inc.,
BioImage Corp., Fuji Instruments, BioRad Corp., LKB, and Protein Databases, Inc.
The majority of these competitors are small to medium-sized companies, but there
is little barrier to entry for much larger companies should the market grow to
more substantial proportions. The Company's competitive advantages are the use
of its embedded computer in a low-cost, PC compatible environment to accelerate
the interpretation of collected images and the sophistication of its internally
developed software packages.
The only direct competitor to the Company's machine code reader is Accusort
Corp. which has also licensed the relevant technology from UPS. Machine code
readers of conventional laser design, which have some of the same performance
characteristics, are available from Computer Identics, Intermec, LaserData,
Datalogic and Accu-Soft Systems, Inc. The Company's competitive advantage stems
from the use of its SuperCards in the reader, its superior signal processing
expertise and its proven capability as a quality supplier.
<PAGE>
MANUFACTURING, ASSEMBLY AND TESTING
All of the Company's manufacturing is performed at its plant in Billerica,
MA. The primary manufacturing process is the assembly and test of printed
circuit boards and systems, designed by the Company and fabricated by other
vendors. The Company endeavors to build for inventory and supplies its products
in a variety of standard formats. A small percentage of sales reflects products
customized to a particular customer's specification, and even these products are
easily reconfigurable should the customer cancel the order for any reason.
Upon receipt of material by the Company from outside suppliers, products and
components are inspected by the Company's QC/QA technicians. During manufacture
and assembly, both subassemblies and completed systems are subjected to
extensive testing, including burn-in and vibration procedures designed to
minimize equipment failure. The Company also uses diagnostic programs to detect
and isolate potential component failures. A comprehensive log is maintained of
all past failures to monitor quality procedures and improve design standards.
The Company is solely dependent upon Intel Corp. for the i860
micro-processor used in its SuperCard products and Bipolar Integrated Technology
for a processor employed in the MAP-4000. The Company has sufficient quantities
of these components on hand to satisfy anticipated demand and has been assured
by Intel that supplies will continue to be available in any quantities
reasonably necessary. The Company does not consider the risk of interruption of
supply to be significant to meet its projected revenue requirements for the
immediate future.
The Company provides a warranty covering defects arising from products sold
and service performed, which varies from 90 days to one year depending upon the
particular unit. However, warranties of substantially greater scope have been
extended to certain major customers for financial and other considerations. The
Company maintains a reserve for warranty repairs equal approximately to 2% of
product sales for the last 90 days.
CUSTOMER SUPPORT
The Company supports its customers in a number of ways: telephone
assistance, on-site service, installation of systems (primarily in the
Scanalytics division), training and education. Customers are able to call a
support unit and report problems which are reviewed by an analyst. The analyst
will research the problem and will assist the customer, most commonly via
telephone,
<PAGE>
in an effort to correct the problem. Service of this kind is available during
the warranty period, and is also available to report "bugs" in the software.
Customers may purchase software and hardware maintenance and on-site service
contracts after the warranty period.
The Company offers training courses at either corporate headquarters or the
customer site should the customer request it. Field and customer service support
is provided through Billerica, Massachusetts, San Diego, California, Laurel,
Maryland and Paris, France.
ENGINEERING AND DEVELOPMENT
During fiscal 1995, the Company's expenses (including depreciation) for
engineering and development were approximately $3,099,000 (17% of sales)
compared to approximately $2,834,000 (15% of sales) and $3,226,000 (18% of
sales) in fiscal years 1994 and 1993, respectively. Expenditures for engineering
and development are expensed as they are incurred. The Company expects to
continue substantial expenditures, both in additional applications software
development and development of hardware and software for embedded computer and
machine code systems. Additional expenditures may be necessary to complete the
conversion of the embedded computer product line from I860 based to 21060/power
pc based designs. The Company's products and development currently in process
are intended to extend the usefulness and marketability of existing products and
introduce new products into existing market segments.
Of the Company's 103 employees, 27 professional and staff employees were
engaged in software and hardware engineering and development activities as of
August 25, 1995.
The Company does not have any patents that are material to its business.
BACKLOG
The Company's backlog of customer orders and contracts was approximately
$3,055,028 at August 25, 1995 as compared to $6,010,374 at August 26, 1994. The
majority of this backlog is expected to be shipped during the next fiscal year
and primarily in the first quarter. The backlog of the Company has fluctuated
greatly over the last three years at year end. The backlog at the end of fiscal
year 1994 was unusually high due to remaining shipments for the UPS contract
which were completely shipped during the first and second quarters of fiscal
year 1995. Orders for SuperCard products (board-level product) have increased
recently and the Company is able to ship to customers in a
<PAGE>
shorter period of time. Moreover, OEM purchasers are not committing themselves
to orders of the same magnitude as has been the case in the past.
<PAGE>
EMPLOYEES
On August 25, 1995, the Company had 103 employees, including 8 part-time.
There were 27 employees engaged in embedded processor, Vision Systems, and
Scanalytics engineering; 33 employees in marketing, promotion, sales and
customer support; 27 employees in manufacturing, test and field service; and 16
employees in general management and administration.
None of the Company's employees is represented by a labor union and the
Company had no work stoppages. The Company considers relations with its
employees to be good.
EXECUTIVE OFFICERS
Information about the executive officers of the Company is set forth below.
NAME AND AGE BUSINESS AFFILIATIONS
Samuel Ochlis (72)........ Director of CSPI since 1972; Chairman of the
Board from December 1991 tothe present; Chief
Executive Officer from October 1991 to December
1991; President and Chief Executive Officer from
June 1990 to October 1991; President and Chief
Operating Officer from 1978 to June 1990;
Executive Vice President from 1974 to 1978.
David S. Botten (51)...... Director and President of CSPI since October
1991; Chief Executive Officer from December 1991
to the present Chief Operating Officer of CSPI
from October 1991 to December 1991; Business
Development Manager of EG&G Instruments Group
from October 1988 to September 1991; General
Manager of EG&G, Princeton Applied Research from
September 1986 to October 1988.
Michael M. Stern (58)..... Director of CSPI from 1968 to January 1984; Vice
President of Operations and Treasurer of CSPI
since 1968.
<PAGE>
James A. Waggett (58)..... Director of CSPI from 1968 to January 1984; Vice
President of Advanced Development from 1974 to
the present; Business Element Manager of the
Embedded Computing Division from August 1995 to
present; Clerk from 1971 to March 1983;
Assistant Clerk from March 1983 to the present.
James E. Storer (68)...... Director of CSPI from 1974 to August 1984; Chief
Scientist and Vice President from 1975 to the
present.
Gary W. Levine (47)....... Vice President of Finance and Chief Financial
Officer of CSPI since September 1983; Controller
of CSPI from May 1983 to September 1983.
Donald E. Johansen (63)... Vice President of Business Development of CSPI
since July 1992; Vice President of Hardware
Engineering from 1976 to July 1992
ITEM 2. PROPERTIES
The Company owns the land and building at 40 Linnell Circle, Billerica, MA.
The Company owns approximately 2.8 acres of land adjacent to the Company's
current facility. The Company believes space at its current location, combined
with space that will be available if the Company proceeds to build on the new
land, will be sufficient for future growth.
ITEM 3. LEGAL PROCEEDINGS
The Company was notified by the Department of Commerce (DOC) about possible
violations of certain export regulations during the period from September 15,
1990 to July 16, 1991. The Company has reached an agreement with the DOC subject
to final documentation, pursuant to which the Company will incur a penalty of
$160,000, of which $132,000 will be paid and $28,000 will be suspended if the
Company complies with export regulations for a period of one year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from
"Common Stock Data" on page 1 of the Company's 1995 Annual Report to
Stockholders. American Stock Transfer Company is the Transfer Agent and
Registrar for the Company's Common Stock. There were approximately 198
Stockholders of record as of November 2, 1995. The Company believes the number
beneficial owners of shares (including shares held in street name) at that date
were approximately 1,200.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference from
"Selected Financial Data" on page 10 of the Company's 1995 Annual Report to
Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference from
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11-15 of the Company's 1995 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference from
pages 16 to 26 and from "Independent Auditor's Report" on page 27 of the
Company's 1995 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information for Directors required by this Item is incorporated by
reference from the Company's Proxy Statement dated November 8, 1995 filed with
respect to the Annual Meeting of Stockholders of the Company on December 12,
1995.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this Item is incorporated by reference from the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
Proxy Statement.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8K
A) The following are filed as part of this report:
1) Financial Statements (See item 8):
The following financial statements of the Company are included in Part II of
this report through incorporation by reference from the Company's 1995 Annual
Report to Stockholders.
<TABLE>
<CAPTION>
Annual Report
Page
<S> <C>
Independent Auditors' Report...............................27
Consolidated Balance Sheets at August 25, 1995 and
August 26, 1994............................................16
Consolidated Statements of Operations for years
ended August 25, 1995, August 26, 1994 and
August 27, 1993............................................17
Consolidated Statements of Shareholders' Equity for
years ended August 25, 1995, August 26, 1994 and
August 27, 1993............................................18
Consolidated Statements of Cash Flows for years ended
August 25, 1995, August 26, 1994 and August 27, 1993.....19
Notes to Consolidated Financial Statements. .............20-26
</TABLE>
Form 10K
Page
2) Consolidated Financial Statement Schedules
None
3) Exhibits
Certain of the Exhibits listed hereunder have previously been filed with the
Commission and are hereby incorporated by reference pursuant to Rule 12b-32
under the Securities Exchange Act of 1934 and Rule 24 of the Commission's Rules
of Practice. The location of each document so incorporated by reference is noted
parenthetically.
3.1 Articles of Organization and amendments thereto, of the Company as of
the end of Fiscal 1986 (Exhibit 3.1 to the Form 10-K for the year ended
August 31, 1990)
<PAGE>
3.2 By-Laws of the Company, as amended through March 21, 1995
10.1 1981 Incentive Stock Option Plan as amended (Exhibit 10.3 to the Form
S-8, File No. 2-79414, 1987 Registration Statement)
10.2 Mr. Ochlis' Employment and Deferred Compensation Agreement dated January
5, 1987 (Exhibit 10.5 to the Form S-8, File No. 2-79414, 1987
Registration Statement)
10.3 Form of Invention Agreement between the Company and certain of its
employees
10.4 CSPI Supplemental Retirement Income Plan (Exhibit 10.13 to Form 8
amendment 2 to Form 10-K for year ended August 31, 1986, dated February
23, 1987)
10.5 Trust Agreement (between CSP Inc. and Bank of Boston) dated January 5,
1987 as amended (Exhibit 10.11 to Form 10-K for year ended August 31,
1990)
10.6 Amendment to Mr. Ochlis' Employment and Deferred Compensation Agreement
dated March 20, 1989 (Exhibit 10.9 to Form 10-K for year ended August
31, 1991)
10.7 Employment Agreement between CSP Inc. and Mr. Botten dated August 14,
1991 (Exhibit 10.10 to Form 10-K for year ended August 31, 1991)
10.8 1991 Incentive Stock Option Plan (the Plan is included in the Company's
Proxy Statement dated November 10, 1991 with respect to the Annual
Meeting of Stockholders of the Company on December 10, 1991)
10.9 Retirement Agreement for Edmund U. Cohler (Exhibit 10.9 to Form 10-K for
the year ended August 26, 1994)
10.10 Symbology Reader License Agreement between UPS and CSPI (Exhibit 10.9 to
Form 10-K for the year ended August 26, 1994)
10.11 Software License Agreement between UPS and CSPI (Exhibit 10.12 to Form
10-K for the year ended August 26, 1994)
10.12 Patent Agreement between UPS and CSPI (Exhibit 10.13 to Form 10-K for
the year ended August 26, 1994)
10.13 Amendment to Mr. Ochlis' Employment Deferred Compensation Agreement
dated February 6, 1995
<PAGE>
11.0 Computation of Per Share Earnings for the years ended August 25, 1995,
August 26, 1994, and August 27, 1993
13.1 1995 Annual Report to Stockholders
22.1 Subsidiaries of the Registrant (Exhibit 22.1 to Form 10-K for the year
ended August 26, 1994)
23.1 Consent of Independent Certified Public Accountants
27.1 Financial Data Schedule
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit Page
<S> <C> <C>
3.2 By-Laws of the Company, as amended through March 21, 1995 22-30
10.3 Form of Invention Agreement between the Company and certain of its 31-33
employees
10.13 Amendment to Mr. Ochlis' Employment Deferred Compensation Agreement 34-35
dated February 6, 1995
11.0 Computation of Per Share Earnings for the years ended August 25, 1995, 36
August 26, 1994, and August 27, 1993
13.1 1995 Annual Report to Stockholders 37-69
23.1 Consent of Independent Certified Public Accountants 70
27.1 Financial Data Schedule 71
</TABLE>
EXHIBIT 3.2
BY-LAWS
OF
CSP INC.
ARTICLE I
ARTICLES OF ORGANIZATION
The name, location of principal office, and purposes of the corporation
shall be as set forth in the Articles of Organization; and these By-Laws, the
powers of the corporation and of its directors and stockholders, and all matters
concerning the conduct and regulation of the business of the corporation shall
be subject to such provisions in regard thereto, if any, as are set forth in the
Articles of Organization; and the Articles of Organization are hereby made a
part of these By-Laws.
All references in these By-Laws to the Articles of Organization shall be
construed to mean the Articles of Organization of the corporation as from time
to time amended.
ARTICLE II
STOCKHOLDERS
1. Annual Meeting.
The annual meeting of the stockholders shall be held at 10:00 a.m. on the
second Tuesday of December in each year, if it be not a legal holiday, and if it
be a legal holiday, then at the same hour on the next succeeding day not a legal
holiday (the "Specified Annual Meeting Date"). Purposes for which an annual
meeting is to be held, additional to those prescribed by law, by the Articles of
Organization and by these By-Laws, may be specified by the President or the
Directors. If such annual meeting is omitted on the day herein provided
therefor, a special meeting may be held in place thereof, and any business
transacted or elections held at such meeting shall have the same effect as if
transacted or held at the annual meeting. Such special meeting shall be called
in the same manner and as provided for special stockholders' meetings.
2. Special Meetings.
(a) Except as provided in subsection (b) of this paragraph 2, a special
meeting of stockholders may be called at any time by the President or by the
Directors, and shall be called by the Clerk, or in the case of the death,
absence, incapacity or refusal of the Clerk, by another officer, upon written
application of one or more stockholders who hold at least 10% in interest of the
Capital Stock entitled to vote thereat. The call for the meeting shall state the
date, hour and place and the purposes of the meeting.
(b) While a class of voting stock of the corporation is registered under the
Securities Exchange Act of 1934, as amended, a special meeting of the
stockholders may be called at any time by the President or by the Directors and
shall be called by the Clerk, or in case of the death, absence, incapacity or
refusal of the Clerk, by any other officer, upon written application of one or
more stockholders who hold at least 40% in interest of the Capital Stock
entitled to vote thereat. The call for the meeting shall state the date, hour
and place and the purposes of the meeting.
3. Place of Meetings.
All meetings of stockholders shall be held in Massachusetts either at the
principal office of the corporation or at such other place as may be fixed by
the Directors for annual meetings or as may be stated in the call for a special
meeting or, to the extent permitted by the Articles of Organization, at such
other place within the United States as shall be fixed by the Directors,
provided, however, that special meetings called upon shareholders' applications
shall be held in the same county as the principal office of the corporation,
unless some other meeting place in Massachusetts specified in the application
shall be approved by the Directors.
4. Notice of Meetings.
A written notice of each meeting of stockholders, stating the place, day and
hour thereof and the purposes for which the meeting is called, shall be given by
the Clerk, at least seven (7) days before the meeting, to each stockholder
entitled to vote thereat and to each stockholder who by law, by the Articles of
Organization or by the By-Laws is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by mailing
it, postage prepaid and addressed to such stockholder at his address as it
appears upon the books of the corporation. In case of the death, absence,
incapacity or refusal of the Clerk, such notice may be given by any other
officer or by a person designated either by the Clerk or by the person or
persons calling the meeting or by the Board of Directors. No such notice need be
given to any stockholder, if a written waiver of notice, executed before or
after the meeting by the stockholder or his attorney, thereunto authorized, is
filed with the records of the meeting.
5. Notice of Stockholder Business at a Meeting of the Stockholders.
The following provisions of this paragraph 5 shall apply to the conduct of
business at any meeting of the stockholders. (As used in this paragraph 5, the
term annual meeting shall include a special meeting in lieu of an annual
meeting.)
(a) At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) pursuant to the
corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the corporation who (x) is a
stockholder of record at the time of giving of the notice provided for in
subparagraph (b) of this paragraph 5, (y) is entitled to vote at such meeting
and (z) complies with the notice procedures set forth in subparagraph (b) of
this paragraph 5.
(b) For business to be properly brought before any meeting of the
stockholders by a stockholder pursuant to clause (iii) of subparagraph (a) of
this paragraph 5, the stockholder must give timely and sufficient notice thereof
in writing to the Clerk of the corporation. To be timely, a stockholder's notice
must be received at the principal executive offices of the corporation (i) in
the case of an annual meeting (or a special meeting in lieu of the annual
meeting), not less than ninety (90) days prior to the date for such annual
meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later date; provided, however, that if the annual meeting of
stockholders or a special meeting in lieu thereof is to be held on a date prior
to the Specified Annual Meeting Date, and if less than one hundred (100) days'
notice or prior public disclosure of the date of such annual or special meeting
is given or made, notice by the stockholder to be timely must be received not
later than the close of business on the tenth (10th) day following the earlier
of the date on which notice of the date of such annual or special meeting was
mailed or the day on which public disclosure was made of the date of such annual
or special meeting; and (ii) in the case of a special meeting (other than a
special meeting in lieu of an annual meeting), not later than the tenth (10th)
day following the earlier of the day on which notice of the date of the
scheduled meeting was mailed or the day on which public disclosure was made of
the date of the scheduled meeting. To be sufficient, a stockholder's notice to
the Clerk must set forth as to each matter the stockholder proposes to bring
before the meeting (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, the name and address of the beneficial
owner, if any, on whose behalf the proposal is made, and the name and address of
any other stockholders or beneficial owners known by such stockholder to be
supporting such proposal, (iii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder of
record, by the beneficial owner, if any, on whose behalf the proposal is made
and by any other stockholders or beneficial owners known by such stockholder to
be supporting such proposal, and (iv) any material interest of such stockholder
of record or of the beneficial owner, if any, on whose behalf the proposal is
made, in such proposed business, and any material interest of any other
stockholders or beneficial owners known by such stockholder to be supporting
such proposal in such proposed business, to the extent known by such
stockholder.
(c) Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Paragraph 5. The person presiding at the meeting shall, if the
facts warrant, determine that business was not properly brought before the
meeting in accordance with the procedures prescribed by these By-Laws, and if
the person presiding should so determine, he or she shall so declare at the
meeting and any such business not properly brought before the meeting shall not
be transacted. Notwithstanding the foregoing provisions of this paragraph 5, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended from time to time (or any successor law), and
the rules and regulations thereunder with respect to the matters set forth in
this paragraph 5.
(d) This provision shall not prevent the consideration and approval or
disapproval at the meeting of reports of officers, Directors and committees of
the Board of Directors, but, in connection with such reports, no new business
shall be acted upon at such meeting unless properly brought before the meeting
as herein provided.
6. Quorum.
At any meeting of stockholders, a majority in interest of all stock issued,
outstanding and entitled to vote upon a question to be considered at such
meeting shall constitute a quorum, but a less interest may adjourn any meeting
from time to time, and the meeting may be held as adjourned without further
notice; for the consideration of such question, except that, if two or more
classes of stock are outstanding and entitled to vote upon such question as
separate classes, then in the case of each such class, a quorum shall consist of
a majority in interest of the stock of that class issued, outstanding and
entitled to vote upon such question.
7. Voting and Proxies.
Each stockholder shall have one vote for each share of stock entitled to
vote held by him of record according to the records of the corporation, unless
otherwise provided by the Articles of Organization. Stockholders may vote either
in person or by written proxy dated not more than six months before the meeting
named therein. Proxies shall be filed with the Clerk of the meeting, or of any
adjournment thereof, before being voted. Except as otherwise limited therein,
proxies shall entitle the persons named therein to vote at any adjournment of
such meeting but shall not be valid after final adjournment of such meeting. A
proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a stockholder shall
be deemed valid unless challenged at or prior to its exercise.
8. Action at Meeting.
When a quorum is present at any meeting, a majority in interest of the stock
present or represented and entitled to vote on a matter, (or if there are two or
more classes of stock entitled to vote as separate classes, then in the case of
each such class, a majority in interest of the stock of that class present or
represented and entitled to vote on a matter) shall decide any matter to be
voted on by the stockholders, except where a larger vote is required by law, the
Articles of Organization or these By-Laws. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders present or
represented at the meeting and entitled to vote at the election. No ballot shall
be required for such election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election The corporation
shall not directly or indirectly vote any share of its stock.
9. Action without Meeting.
Any action to be taken by stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action by a writing
filed with the records of the meetings of stockholders. Such consent shall be
treated for all purposes as a vote at a meeting.
ARTICLE III
DIRECTORS
1. Powers.
The business of the corporation shall be managed by a Board of Directors who
may exercise all the powers of the corporation except as otherwise provided by
law, by the Articles of Organization or by these By-Laws. In particular, and
without limiting the generality of the foregoing, the Directors may at any time
issue all or from time to time any part of the unissued Capital Stock of the
corporation from time to time authorized under the Articles of Organization and
any amendment thereto and may determine, subject to any requirement of law, the
consideration for which stock is to be issued and the manner of allocating such
consideration between capital and surplus. In the event of a vacancy in the
Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2. Election and Enlargement of Board.
(a) The number of Directors shall be determined by majority vote of the
Board of Directors; provided, however, that there shall not be fewer than three
Directors; and provided, further, that in the absence of affirmative
determination, the number of Directors shall be the same as the number last
previously determined. The Board of Directors shall be elected by the
stockholders at the annual meeting or at any meeting held in place thereof as
hereinbefore provided. The Board of Directors may be enlarged by the
stockholders at any meeting or by vote of a majority of the directors then in
office.
(b) Notwithstanding the foregoing, so long as this corporation is a
registered corporation (as that term is defined in paragraph (e) of Section 50A
of Chapter 156B of the General Laws of Massachusetts) to which the provisions of
paragraph (a) of said Section 50A apply, the Directors of this corporation shall
be classified, with respect to the time for which they severally hold office,
into three (3) classes, as nearly equal in number as possible, the term of
office of those of the first class (Class I Directors) to continue until the
first annual meeting following the date (the "Effective Date") this corporation
becomes subject to paragraph (a) of said Section 50A and until their successors
are duly elected and qualified, the term of office of those of the second class
(Class II Directors) to continue until the second annual meeting following the
Effective Date and until their successors are duly elected and qualified, and
the term of those of the third class (Class III Directors) to continue until the
third annual meeting following the Effective Date and until their successors are
duly elected and qualified; and, thereafter, at each annual meeting of this
corporation, the successors to the class of directors whose term expires at that
meeting shall be elected to hold office for a term continuing until the annual
meeting held in the third year following the year of their election and until
their successors are duly elected and qualified. In case the Board of Directors
shall be enlarged at any time, the Directors then in office, by majority vote,
shall designate the class of director to which the person who is elected to fill
the vacancy created by the enlargement shall serve.
3. Vacancies.
Any vacancy in the Board of Directors, including a vacancy resulting from
the enlargement of the Board, may be filled by the stockholders or, in the
absence of stockholder action, by the Directors.
4. Nomination of Directors.
The following provisions of this paragraph 4 shall apply to the nomination
of persons for election to the Board of Directors.
(a) Nominations of persons for election to the Board of Directors of the
corporation may be made (i) by or at the direction of the Board of Directors or
(ii) by any stockholder of the Corporation who (x) is a stockholder of record at
the time of giving of notice provided for in subparagraph (b) of this paragraph
4, (y) is entitled to vote for the election of Directors at the meeting and (z)
complies with the notice procedures set forth in subparagraph (b) of this
paragraph 4.
(b) Nominations by stockholders shall be made pursuant to timely and
sufficient notice in writing to the Clerk of the corporation. To be timely, a
stockholder's notice shall be received at the principal executive offices of the
corporation (i) in the case of an annual meeting (or a special meeting in lieu
of the annual meeting), not less than ninety (90) days prior to the date for
such annual meeting, regardless of any postponements, deferrals or adjournments
of that meeting to a later date; provided, however, that if the annual meeting
of stockholders or a special meeting in lieu thereof is to be held on a date
prior to the Specified Annual Meeting Date, and if less than one hundred (100)
days' notice or prior public disclosure of the date of such annual or special
meeting is given or made, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth (10th) day following
the earlier of the day on which notice of the date of such annual or special
meeting was mailed or the day on which public disclosure was made of the date of
such annual or special meeting; and (ii) in the case of a special meeting (other
than a special meeting in lieu of an annual meeting), not later than the tenth
(10th) day following the earlier of the day on which notice of the date of the
scheduled meeting was mailed or the day on which public disclosure was made of
the date of the scheduled meeting. To be sufficient, such stockholder's notice
must set forth (x) as to each person whom the stockholder proposes to nominate
for election or reelection as a Director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or pursuant to any other then
existing statute, rule or regulation applicable thereto (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a Director if elected); (y) as to the stockholder giving the notice,
(1) the name and address, as they appear on the corporation's books, of such
stockholder and (2) the class and number of shares of the corporation which are
beneficially owned by such stockholder and also the class and number which are
owned of record by such stockholder; and (z) as to the beneficial owner, if any,
on whose behalf the nomination is made, (1) the name and address of such person
and (2) the class and number of shares of the corporation which are beneficially
owned by such person. The corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the corporation
to determine the qualifications and eligibility of such proposed nominee as a
Director. At the request of the Board of Directors, any person nominated by the
Board of Directors for election as a Director shall furnish to the Clerk of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
(c) No person shall be eligible to serve as a Director of the corporation
unless nominated in accordance with the procedures set forth in this paragraph
4. The person presiding at the meeting shall, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed by
these By-Laws, and if the person presiding should so determine, he or she shall
so declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this paragraph 4, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended from time to time (or any successor law), and the rules
and regulations thereunder with respect to the matters set forth in this By-Law.
The provisions of this paragraph 4 shall not be construed as implying any right
to elect persons to the Board of Directors at a special meeting, other than any
right that be otherwise be granted under applicable law, the articles of
incorporation of the corporation or elsewhere under these By-Laws.
5. Tenure.
Except as otherwise provided by law, by the Articles of Organization or by
these By-Laws, Directors shall hold office until the next annual meeting of
stockholders or the special meeting held in place thereof and thereafter until
their successors are chosen and qualified.
6. Meetings.
Regular meetings of the Directors may be held without call or notice at such
places and at such times as the Directors may from time to time determine,
provided that any Director who is absent when such determination is made shall
be given notice of the determination. A regular meeting of the Directors may be
held without a call or notice at the same place as the annual meeting of
stockholders, or the special meeting held in place thereof, following such
meeting of stockholders.
Special meetings of the Directors may be held at any time and place
designated in a call by the President, Treasurer or two or more Directors.
7. Notice of Meetings.
Notice of all special meetings of the Directors shall be given to each
Director by the Clerk, or Assistant Clerk, or in case of the death, absence,
incapacity or refusal of such persons, by the officer or one of the Directors
calling the meeting. Notice shall be given to each Director in person or by
telephone or by telegram sent to his usual or last known business or home
address at least twenty-four hours in advance of the meeting, or by written
notice mailed to either such address at least forty-eight hours in advance of
the meeting. Notice need not be given to any Director if a written waiver of
notice, executed by him before or after the meeting, is filed with the records
of the meeting, or to any Director who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him. A notice or
waiver of notice of a Directors' meeting need not specify the purposes of the
meeting.
8. Quorum.
At any meeting of the Directors, a majority of the Directors then in office
shall constitute a quorum. Less than a quorum may adjourn any meeting from time
to time without further notice.
9. Action at Meeting.
At any meeting of the Directors at which a quorum is present the vote of a
majority of those present, unless a different vote is specified by law, by the
Articles of Organization, or by these By-Laws, shall be sufficient to decide any
question brought before such meeting.
10. Action by Consent.
Any action by the Directors may be taken without a meeting if a written
consent thereto is signed by all the Directors and filed with the records of the
Directors' meetings. Such consent shall be treated as a vote of the Directors
for all purposes.
11. Committees
The Directors may, by vote of a majority of the Directors then in office,
elect from their number an executive or other committees and may by like vote
delegate thereto some or all of their powers except those which by Section 55 of
Chapter 156B of the General Laws of Massachusetts, as amended, or by any other
provision of law or by the Articles of Organization or these By-Laws they are
prohibited from delegating. Except as the Directors may otherwise determine, any
such committee may make rules for the conduct of its business, but unless
otherwise provided by the Directors or in such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these By-Laws
for the Directors.
ARTICLE IV
OFFICERS
1. Enumeration.
The officers of the corporation shall consist of a President, a Treasurer, a
Clerk, and such other officers, including a Chairman of the Board of Directors,
one or more Vice Presidents, Assistant Treasurers, Assistant Clerks and
Secretary as the incorporators at their initial meeting or the directors from
time to time may elect or appoint. The Directors may appoint either the Chairman
of the Board, if any, or the President to be chief executive officer of the
Corporation. In the absence of such appointment, the President shall be chief
executive officer. The chief executive officer shall preside at all meetings of
stockholders.
2. Election.
The President, Treasurer and Clerk shall be elected annually by the
Directors at their first meeting following the annual meeting of stockholders.
Other officers may be chosen by the Directors at such meeting or at any other
time.
3. Vacancies.
If any office becomes vacant by reason of death, resignation, removal,
disqualification or otherwise, the Directors may choose a successor or
successors, who shall hold office for the unexpired term, except as otherwise
provided by law, by the Articles of Organization or by these By-Laws.
4. Qualification.
The President may, but need not be, a Director. No officer need be a
stockholder. Any two or more offices may be held by the same person. The clerk
shall be a resident of Massachusetts unless the corporation shall have appointed
a resident agent. Any officer may be required by the Directors to give bond for
the faithful performance of his duties to the corporation in such amount and
with such sureties as the Directors may determine.
5. Tenure.
Except as otherwise provided by law, by the Articles of Organization or by
these By-Laws, the President, Treasurer and Clerk shall hold office until the
first meeting of the Directors following the annual meeting of stockholders or
the special meeting held in place thereof, and thereafter until his successor is
chosen and qualified; and all other officers shall hold office until the first
meeting of the Directors following the annual meeting of stockholders, unless a
shorter term is specified in the vote choosing or appointing them.
6. President and Vice President.
The President shall, subject to the direction of the Directors (and, if the
chairman of the Board is the chief executive officer, subject also to the
direction of the Chairman of the Board), have general supervision and control of
its business. He shall preside, when present and if he is the chief executive
officer, at all meetings of stockholders and, unless otherwise provided by the
Directors, at all meetings of the Directors.
Any Vice President shall have such powers as the Directors may from time to
time designate.
7. Treasurer and Assistant Treasurers.
The Treasurer shall, subject to the direction and under the supervision of
the Directors have general charge of the financial concerns of the corporation
and the care and custody of the funds and valuable papers of the corporation,
except his own bond, and he shall have power to endorse for deposit or
collection all notes, checks, drafts, and other obligations for the payment of
money payable to the corporation or its order, and to accept drafts on behalf of
the corporation. He shall keep, or cause to be kept, accurate books of account,
which shall be the property of the corporation. If required by the board of
directors, he shall give bond for the faithful performance of his duty in such
form, in such sum, and with such sureties as the Directors shall require.
Any Assistant Treasurer shall have such powers as the Directors may from
time to time designate.
8. Clerk and Assistant Clerk.
The Clerk shall keep an attested copy of the Articles of Organization and
the Articles of Amendment thereto, and of these By-Laws, with a reference on the
margin of said By-Laws to all amendments thereof, all of which documents and
books shall be kept at the principal office of the corporation or at the office
of the Clerk. Unless a Transfer Agent is appointed, the Clerk shall keep or
cause to be kept in Massachusetts, at the principal office of the corporation or
at his office, the stock and transfer records of the corporation, in which are
contained the names of all stockholders and the record address, and the amount
of stock held by each.
In case a Secretary is not elected, the Clerk shall keep a record of the
meetings of the Directors.
Any Assistant Clerk shall have such powers as the Directors may from time to
time designate. In the absence of the Clerk from any meeting of stockholders, an
Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by
the person presiding at the meeting, shall perform the duties of the Clerk.
9. Secretary and Assistant Secretaries.
If a Secretary is elected, he shall keep a record of the meetings of the
Directors and in his absence, an Assistant Secretary, if one be elected,
otherwise a Temporary Secretary designated by the person presiding at the
meeting, shall keep a record of the meetings of the Directors.
Any Assistant Secretary shall have such powers as the Directors may from
time to time designate.
10. Other Powers and Duties.
Each officer shall, subject to these By-Laws, have in addition to the duties
and powers specifically set forth in these By-Laws, such duties and powers as
are customarily incident to his office, and such duties and powers as the
Directors may from time to time designate.
ARTICLE V
RESIGNATIONS AND REMOVALS
Any Director or officer may resign at any time by delivering his resignation
in writing to the President, the Treasurer or the Clerk or to a meeting of the
Directors. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. A Director (including persons elected by
Directors to fill vacancies in the Board) may be removed from office (a) with or
without cause by the vote of the holders of a majority of the shares issued and
outstanding and entitled to vote in the election of Directors, provided that the
Directors of a class elected by a particular class of stockholders may be
removed only by the vote of the holders of a majority of the shares of such
class, or (b) for cause by vote of a majority of the Directors then in office.
The Directors may remove any officer elected by them with or without cause by
the vote of a majority of the Directors then in office. A Director or officer
may be removed for cause only after reasonable notice and opportunity to be
heard before the body proposing to remove him. No Director or officer resigning
and (except where a right to receive compensation shall be expressly provided in
a duly authorized written agreement with the corporation) no Director or officer
removed, shall have any right to any compensation as such Director or officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise; unless in the case of a resignation, the Directors, or in the case
of a removal, the body acting on the removal, shall in their or its discretion
provide for compensation.
ARTICLE VI
CAPITAL STOCK
1. Amount Authorized.
The amount of the authorized capital stock and the par value, if any, of the
shares authorized shall be as fixed in the Articles of Organization, as amended
from time to time.
2. Certificates of Stock.
Each stockholder shall be entitled to a certificate of the capital stock of
the corporation in such form as may be prescribed from time to time by the
Directors. The certificate shall be signed by the President or a Vice President,
and by the Treasurer or an Assistant Treasurer, but when a certificate is
countersigned by a transfer agent or a registrar, other than a Director, officer
or employee of the corporation, such signatures may be facsimiles. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the time of its issue.
Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Articles of Organization, the By-Laws or any
agreement to which the corporation is a party, shall have the restriction noted
conspicuously on the certificate and shall also set forth on the face or back
either the full text of the restriction or a statement of the existence of such
restriction and a statement that the corporation will furnish a copy to the
holder of such certificate upon written request and without charge. Every
certificate issued when the corporation is authorized to issue more than one
class or series of stock shall set forth on its face or back either the full
text of the preferences, voting powers, qualifications and special and relative
rights of the shares of each class and series authorized to be issued or a
statement of the existence of such preferences, powers, qualifications, and
rights, and a statement that the corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
3. Transfers.
Subject to the restrictions, if any, stated or noted on the stock
certificates, shares of stock may be transferred on the books of the corporation
by the surrender to the corporation or its transfer agent of the certificate
therefor properly endorsed or accompanied by a written assignment and power of
attorney properly executed, with necessary transfer stamps affixed, and with
such proof of the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Articles of Organization or by these By-Laws, the Corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
4. Record Date.
The Directors may fix in advance a time of not more than sixty (60) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend or the making of any distribution to stockholders, or the last
day on which the consent or dissent of stockholders may be effectively expressed
for any purpose, as the record date for determining the stockholders having the
right to notice of and to vote at such meeting, and any adjournment thereof, or
the right to receive such dividend or distribution or the right to give such
consent or dissent. In such case only stockholders of record on such date shall
have such right, notwithstanding any transfer of stock on the books of the
corporation after the record date. Without fixing such record date the Directors
may for any of such purposes close the transfer books for all or any part of
such period.
5. Replacement of Certificates.
In case of the alleged loss or destruction, or the mutilation of a
certificate of stock, a duplicate certificate may be issued in place thereof,
upon such terms as the Directors may prescribe.
ARTICLE VII
MISCELLANEOUS PROVISIONS
1. Fiscal Year.
Except as from time to time otherwise determined by the Directors, the
fiscal year of the corporation shall end on the last Friday of August in each
year.
2. Seal.
The seal of the corporation shall, subject to alteration by the Directors,
consist of a flat-faced circular die with the word "Massachusetts", together
with the name of the corporation and the year of its organization cut or
engraved thereon.
3. Execution of Instruments.
All deeds, leases, transfers, contracts, bonds, notes and other obligations
authorized to be executed by an officer of the corporation in its behalf shall
be signed by the President or the Treasurer except as the Directors may
generally or in particular cases otherwise determine.
4. Voting of Securities.
Except as the Directors may otherwise designate, the President or Treasurer
may waive notice of, and appoint any person or persons to act as proxy or
attorney in fact for this corporation (with or without power of substitution) at
any meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by this corporation.
5. Inspection of Corporate Records.
The original, or attested copies, of the Articles of Organization, By-Laws
and records of all meetings of the incorporators and stockholders, and the stock
and transfer records, containing the names of all stockholders and the record
address and the amount of stock held by each, shall be kept in Massachusetts at
the principal office of the corporation, or at an office of its transfer agent
or of the Clerk. Said copies and records need not all be kept in the same
office. They shall be available at all reasonable times to the inspection of any
stockholder for any proper purpose but not to secure a list of stockholders for
the purpose of selling said list or copies thereof or of using the same for a
purpose other than in the interest of the applicant, as a stockholder, relative
to the affairs of the corporation.
6. Indemnification.
The corporation shall, to the extent legally permissible, indemnify each of
its Directors and Officers (including persons who serve at its request as
Directors, Officers, or Trustees of another organization in which it has any
interest as a shareholder, creditor or otherwise) against all liabilities and
expenses, including amounts paid in satisfaction of judgments, in compromise or
as fines and penalties, and counsel fees, reasonably incurred by him in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened, while in office or thereafter, by reason of his being or
having been such a Director or Officer, except with respect to any matter as to
which he shall have been adjudicated in any proceeding not to have acted in good
faith in the reasonable belief that his action was in the best interests of the
corporation; provided, however, that as to any matter disposed of by a
compromise payment by such Director or Officer, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless such compromise shall be approved as in the best
interests of the corporation, after notice that it involved such
indemnification, (a) by a disinterested majority of the Directors then in
office; or (b) by a majority of the disinterested Directors then in office or,
if there are no disinterested Directors then in office, by a majority of the
Directors then in office, provided in either case that there has been obtained
an opinion in writing of independent legal counsel appointed by a majority of
such disinterested Directors or a majority of the Directors, as the case may be,
to the effect that the indemnification of such Director or Officer is not
prohibited by law; or (c) by the holders of a majority of the outstanding stock
at the time entitled to vote for Directors, voting as a single class, exclusive
of any stock owned by any interested Director or Officer. The right of
indemnification hereby provided shall not be exclusive of or affect any other
rights to which any Director or Officer may be entitled. As used in this
paragraph, the terms 'Director' and 'Officer' include their respective heirs,
executors and administrators, and an 'interested' Director or Officer is one
against whom in such capacity the proceedings in question or another proceeding
on the same or similar grounds is then pending. Nothing contained in this
Section shall affect any rights to indemnification to which corporate personnel
other than Directors and Officers may be entitled by contract or otherwise under
law.
7. Amendments.
These By-Laws may at any time be amended by vote of the stockholders,
provided that notice of the substance of the proposed amendment is stated in the
notice of the meeting, or may be amended by vote of a majority of the Directors
then in office, except that no amendment may be made by the Directors which
changes the date of the annual meeting of stockholders or which alters the
provisions of these By-Laws with respect to removal of Directors or the election
of committees by Directors and delegation of powers thereto, or amendment of
these By-Laws. No change in the date of the annual meeting may be made within
sixty (60) days before the date fixed in these By-Laws. Not later than the time
of giving notice of the meeting of stockholders next following the making,
amending or repealing by the Directors of any By-Law, notice thereof stating the
substance of such change shall be given to all stockholders entitled to vote on
amending the By-Laws.
8. Provisions Relative to Transactions With Interested Persons.
The corporation may enter into contracts and transact business with one or
more of its directors, officers or stockholders or with any corporation,
organization or other concern in which any one or more of its directors,
officers or stockholders are directors, officers, stockholders partners or
otherwise interested; and, in the absence of fraud, no such contract or
transaction shall be invalidated or in any way affected by the fact that such
directors, officers or stockholders of the corporation have or may have
interests which are or might be adverse to the interest of the corporation even
though the vote or action of directors, officers or stockholders having such
adverse interest may have been necessary to obligate the corporation upon such
contract or transaction. In the absence of fraud, no director, officer or
stockholder having such adverse interest shall be liable to the corporation or
to any stockholder or creditor thereof or to any other person for loss incurred
by it under or by reason of such contract or transaction, nor shall any such
director, officer or stockholder be accountable for any gains or profits
realized thereon.
9. Optional Redemption of Shares Acquired in Control Share Acquisitions
The corporation is authorized pursuant to Chapter 110D of the Massachusetts
General Laws to redeem, at the option of the corporation but without requiring
the agreement of the person who has made a control share acquisition, all but
not less than all shares acquired in such control share acquisition from such
person for the fair value of such shares if:
(i) no control share acquisition statement has been delivered; or
(ii) a control share acquisition statement has been delivered and
voting rights were not authorized for such shares by the
stockholders in accordance with the provisions of section five
of said Chapter 110D.
Notice of such redemption shall be given by the corporation not later than
sixty days after the date on which the stockholders of the corporation voted not
to authorize voting rights for the shares to be redeemed, or if no control share
acquisition statement has been delivered prior to the date on which notice of
redemption is given by the corporation, not later than sixty days after the
first date on which the Board of Directors of the corporation has actual
knowledge of such control share acquisition.
For purposes of this provision, fair value shall be determined as of the
date on which stockholders of the corporation voted not to authorize voting
rights for the shares to be redeemed, or, if no control share acquisition
statement is delivered, as of the date on which the corporation determines to
make a redemption under this provision. Such value shall be determined in
accordance with procedures adopted by the corporation and without regard to the
effect of the denial of voting rights under the provisions of section five of
said Chapter 110D.
* * *
As amended March 21, 1995
Exhibit 10.3
CSP INC.
EMPLOYEE INVENTION AND NON-DISCLOSURE AGREEMENT
In consideration of my employment by CSP Inc., a Massachusetts corporation,
or any parent, subsidiary or successor corporation or organization (hereinafter
collectively called the "Company"), and of the wages and/or salary to be paid
me, I hereby covenant and agree with the Company as follows:
1. DISCLOSURE OF INVENTIONS
I agree that I will forthwith communicate in writing to the Company, or such
individual as the Company may from time to time designate, a full and complete
disclosure of any and all research and other information, inventions,
discoveries and improvements ("Inventions") made, developed and/or conceived
while in the employ of the Company and (ii) during the six (6) month period
following the termination of my employment or other association with the Company
and which are reasonably related to the business of the Company.
2. ASSIGNMENT OF INVENTIONS
I agree to, and hereby do, assign and transfer to the Company, or its
nominee or designee (without any separate renumeration or compensation to me
other than the compensation received or assigned to me from time to time in the
course of my aforesaid employment), all my right, title and interest throughout
the world in and to such Inventions, together with the right to file and/or own
wholly and without restriction applications for United States and foreign
patents and trademarks and any patent and trademark issued or issuing thereon. I
agree to execute all appropriate patent applications for securing all United
States and foreign patents on all Inventions and to do, execute and deliver any
and all acts and instruments that may be necessary or proper to vest all such
Inventions and patents (both United States and foreign) in the Company, or its
nominee or designee, and to enable the Company, or its nominee or designee, to
obtain all such letters patent; and that I will render to the Company, or its
nominee or designee, all such assistance as it may require in the prosecution of
all such patent applications and applications for the reissue of such patents,
but the expense of all such assignments and patent applications, or all other
proceedings referred to hereinabove, shall be borne by the Company or its
nominee or designee. I will execute, upon request, documents which secure to the
Company the interests here conveyed, provided that all fees or payments
connected with the execution of the documents shall not be a charge upon me.
I will assist, upon request, in locating writings and other physical
evidence of the making of my inventions and provide unrecorded information
relating to them, and give testimony in any proceeding in which any of my
inventions or any application or patent directed thereto may be involved,
provided that reasonable compensation shall be paid for such services, except
that no obligation is imposed to renumerate at a higher rate for the giving of
testimony than the rate established by law for the compensation of witnesses in
the court or tribunal where the testimony is given or in the district where the
testimony is taken. To the extent reasonably feasible, the Company will use its
best efforts to request such assistance at times and placed as will least
interfere with any other employment of mine.
Any Invention reasonably related to the Company's business made, developed
and/or reduced to practice by me alone or jointly with others within six (6)
months following the termination of my employment shall be deemed to be a
"Company" invention, unless proved by me to have been conceived after such
termination.
3. UNAUTHORIZED DISCLOSURE
I agree that I will not, without first obtaining the written approval of the
Company, or of such individual as the Company may from time to time designate,
divulge or disclose to anyone outside of the Company, whether by private
communication or by public address or publication, or otherwise, any information
not already lawfully available to the public concerning any inventions,
developments, specifications, technical and engineering data, methods or reports
relating to the business of the Company, or any corporation, firm or person for
whom the Company is conducting or shall conduct research services or is
providing or shall provide other services, whether supplied by the Company, or
such corporation, firm or person, or whether made, developed and/or conceived by
me or by others in the employ of the Company. All originals and copies of any
such specifications, technical and engineering data, methods or reports, or
other written materials relating to the business of the Company, however and
whenever produced, shall be the sole property of the Company, not to be removed
from the premises or custody of the Company without in each instance first
obtaining written consent or authorization of the individual as the Company may
from time to time designate, and shall be surrendered to the Company upon
termination of my employment. For purposes of Sections 3 and 5 of this
Agreement, information and/or trade secrets which pass into the public domain
shall, after the time of such passing, no longer be considered as confidential
or secret.
In addition, I agree that I will not directly or indirectly publish or cause
to be purblished any article containing or disclosing any information about the
Company or reported or received by the Company from any corporation, firm or
person with whom or for whom the Company shall be under contract to provide
research service, without the prior written authorization of the Company or of
such individual as the Company may from time to time designate.
4. COPYRIGHT
I will promptly disclose to the Company all copyrightable material which I
produce, compose or write, individually or in collaboration with others, which
arises out of work delegated to me by the Company; and, at the expense of the
Company, I will assign to it all my interest in such copyrightable material and
will sign all papers and do all other acts necessary to assist the Company to
obtain copyrights on such material in any and all countries.
5. TRADE SECRETS
I will not, during my employment by the Company or afterwards, disclose to
others or use for my own benefit any trade secrets acquired by me from the
Company, its customers, suppliers, consultants or affiliates, except to the
extent that the disclosure of such trade secrets is necessary to perform my
duties and fulfill my responsibilities as an employee of the Company. (A trade
secret is information not generally known to the trade which gives the Company
an advantage over its competitors. Trade secrets can include, by way of example,
products under development, production methods and processes, sources of supply,
materials used in manufacture, customer lists, cost of parts and materials,
marketing plans, and information concerning the filing or pendency of patent
applications.)
6. COMPANY PROPERTY; TERMINATION CERTIFICATION
Upon the termination of my employment with the Company, I will turn over to
the Company all models, prototypes, notes, memoranda, notebooks, drawings,
specifications, records, customer lists, proposals, business plans, and other
documents or materials, tools, equipment or other property in my possession or
under my control, relating to any work done for or otherwise belonging to, the
Company, it being acknowledged that all such items are the sole property of the
Company, and I agree to sign the following "Termination Certificate":
"This is to certify that I do not have in my possession or custody nor have
I failed to return, any models, prototypes, notes, memoranda, notebooks,
drawings, records, specifications, customer lists, proposals, business plans, or
copies of them, or other documents or materials, tools, equipment or other
property belonging to the Company."
7. GOVERNING LAW
The laws of the Commonwealth of Massachusetts shall govern this Agreement.
8. GENERAL PROVISION
(a) I further agree that this Agreement shall be binding upon me
irrespective of the duration of my employment or other association with the
Company, the reasons for the sessation of my employment or other association by
the Company, or the amount of my wages and/or salary.
(b) This Agreement is the whole agreement, and no modification or variation
shall be deemed valid unless in writing signed by the Company.
(c) In the event of any inconsistency with respect to the subject matter of
this Agreement and any contract of employment which I may enter into with the
Company, the provisions herein shall prevail.
(d) This Agreement shall be binding upon my heirs, executors, administrators
and legal representatives, and shall inure to the benefit of the successors and
assigns of the Company.
(e) I represent and warrant to the Company that I am not under any
obligations to any person, firm or corporation; and have no other interest which
is inconsistent or in conflict with this Agreement, or which would prevent,
limit or impair, in any way, the performance by me of any of the covenants
hereunder or my duties in my said employment.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _______ day of
___________________ 19___ at Billerica, Massachusetts.
WITNESS:
- - - - - - ----------------------------------- ---------------------------------
Print Name
- - - - - - -----------------------------------
Signature
Address
- - - - - - -----------------------------------
- - - - - - -----------------------------------
- - - - - - -----------------------------------
Exhibit 10.13
February 6, 1995
(As of September 27, 1994)
Samuel Ochlis
6786 Willow Wood Drive
#1003 Boca West
Boca Raton, FL 33434
Dear Sam:
This letter, when signed by you and returned to CSP Inc. ("CSPI" or the
"Company"), will constitute an amendment of the Employment and Deferred
Compensation Agreement dated as of January 5, 1987 between you and CSPI, as
previously amended (your "Employment Agreement"). As you know, the terms of this
amendment, as set forth below, were authorized by CSPI's Board of Directors at
its meeting on September 27, 1994.
This will confirm that you and CSPI have agreed as follows:
1. TERM OF PART-TIME EMPLOYMENT. You are now serving as a part-time employee
of the Company. The Part-Time Term, as defined in the Employment Agreement,
shall end, unless sooner terminated under Section 4 of the Employment Agreement
for cause or by reason of your disability or death, on September 1, 1995, which
is the last day of the Company's fiscal year.
2. BENEFICIARY OF DEFERRED COMPENSATION: TIMING OF PAYMENTS. Under Section 6
of the Employment Agreement any deferred compensation that would otherwise be
payable to you shall, in the event of your death prior to the termination of the
10-year Deferred Compensation Period described in Section 6, be payable to
Samuel Ochlis and H. Kenneth Fish, or their successors, as Trustees of the
Samuel Ochlis Trust - 1991, dated December 23, 1991 (the "Trust"), and not to
your surviving spouse. Annual amounts payable to you or to the Trust each year
as deferred compensation under Section 6 shall be paid in twelve monthly
installments.
3. OPTION TO PURCHASE COMPANY AUTOMOBILE. The Company agrees to sell you, at
your option, the Company-owned automobile currently in your care, for cash. The
cash purchase price shall be the net book value of the automobile on the books
of the Company at September 1, 1995. You agree to notify the Company on or
before August 18, 1995 if you intend to exercise this option to purchase. If you
do not exercise this option to purchase, then you agree to return the automobile
to the Company on or before September 1, 1995.
4. MEDICAL INSURANCE. Following the termination of your employment with the
Company other than for cause, the Company will provide health and dental
insurance benefits to you as follows:
(a) For the period commencing on September 2, 1995 and continuing through
the last day of fiscal 1996 (August 30, 1996), you shall be entitled to continue
as a participant, on an individual basis, in the health and dental insurance
plans regularly maintained by the Company as the same may, from time to time, be
in force and effect for its employees generally ("Health and Dental Plans").
(b) Continued participation in the Health and Dental Plans, or either of
them, shall be subject to the payment by you of your allocable portion of the
premiums for the type of coverage elected under the Health and Dental Plans.
Your allocable portion of the premiums shall be determined according to the same
formula as is, from time to time, applicable to Company employees generally.
Although subject to change, the current formula generally applicable to Company
employees requires each employee to pay 14 percent of total premium costs and
the Company pays 86 percent of total premium costs. The Company will deduct the
allocable portion of the monthly premium from the monthly payments of deferred
compensation made to you under the Employment Agreement.
(c) Benefits payable to you, or for your benefit, under the Health and
Dental Plans shall be secondary to any similar benefits payable to you, or for
your benefit, under Medicare. In other words, any benefits otherwise payable
under the Health and Dental Plans shall be reduced to the extent, and only to
the extent, paid under any Medicare coverage as from time to time in force and
effect.
(d) Although the Company has no present plans to do so, the Company reserves
the right to change insurance carriers and to add to, modify or terminate its
medical and dental insurance plans and policies on the same basis as the
Company's employees generally, subject to the conditions and limitations of, and
for the period of time provided in, this paragraph 4.
5. ENTIRE AGREEMENT. All of the terms and provisions of the Employment
Agreement other than those amended hereby shall continue in full force and
effect. The Employment Agrement, as amended hereby, contains the entire
understanding between you and the Company with respect to the subject matter of
the Employment Agreement and supersedes all prior understandings and agreements,
written or oral, relating to the subject matter of the Employment Agreement. No
waiver, alteration or modification of the terms and provisions of the Employment
Agreement may be made except by a writing signed by you and by an authorized
representative of CSPI.
If the foregoing correctly sets forth our understanding, please indicate
your agreement by countersigning the enclosed extra copy of this letter in the
space provided below and returning that copy to me.
CSP INC.
By:____________________________
David S. Botten, President
ACCEPTED AND AGREED TO:
- - - - - - ---------------------------
Samuel Ochlis
EXHIBIT 11.0
CSP, INC. AND SUBSIDIARIES
EXHIBIT 11.0 - COMPUTATION OF PER SHARE EARNINGS
For the years ended August 25, 1995, August 26, 1994 and August 27, 1993
(in thousands except for per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1995 1994 1993
---------------- ---------------------------------
Net Income Per Common Share - ( Primary )
- - - - - - --------------------------------------------------
Net Income $385 $1,719 $1,957
================ =================================
Average common shares outstanding 2,747 2,746 2,703
Add: Net additional common shares upon
exercise of stock options 48 77 86
---------------- ---------------------------------
Adjusted average common shares outstanding 2,795 2,823 2,789
================ =================================
Net income per common share - ( Full Dilution ) $0.14 $0.61 $0.70
================ =================================
Net Income Per Common Share - ( Full Dilution )
- - - - - - --------------------------------------------------
Net Income $385 $1,719 $1,957
================ =================================
Average common shares outstanding 2,747 2,746 2,703
Add: Net additional common shares upon
exercise of stock options 48 77 86
---------------- ---------------------------------
Adjusted average common shares outstanding 2,795 2,823 2,789
================ =================================
Net income per common share - ( Full Dilution ) $0.14 $0.61 $0.70
================ =================================
</TABLE>
{COVER}
CSPI ANNUAL REPORT 1995
{4-COLOR PICTURE}
[OUR ROLE IS TO TRANSLATE
TECHNOLOGY INTO USABLE
APPLICATIONS WITH PRODUCTS
AND SERVICES OF THE HIGH-
EST QUALITY.]
<PAGE>
[CSPI is a global supplier of computing systems and instruments for defense,
medical, industrial and research applications requiring maximum MFLOPs. Advances
in microprocessor speed are only valuable to our customers when conveniently
packaged and supported by a rich software environment. Our role is to translate
technology into usable applications.]
COMPANY HIGHLIGHTS
CSPI was founded in 1968 by four young entrepeneurs who wanted to build the
world's fastest compute engine. This vision became the array processor,
accelerators for general purpose computers to enhance their scientific
computational capabilities. Early products were geared to Digital Equipment
Corporation systems and gained acceptance for specific military and seismic
applications. In recent years the company repackaged its technology to the VME
form factor and entered the board business. It was the first to ship an array
processor based upon the Intel i860 microprocessor and greatly expanded its
customer base. The SuperCard family of products its now in its fourth generation
and many thousands of units are in use around the world. These boards, together
with a complete array of supporting software, are sold to OEM system integrators
who supply military electronic systems and a variety of commercial medical
imaging and test equipment manufacturers.
The company has vertically integrated into two end-user businesses that make
use of its core technology. Scanalytics provides image analysis systems to
molecular and cell biologists and Vision Systems manufacturers high-speed,
over-the-belt, readers for one and two-dimensional bar-codes.
The company owns its facility in Billerica, MA close to Boston's Rte 128;
staffed by approximately one hundred employees. Sales are made via a direct
sales force in the US and a chain of local distributors throughout the rest of
the world. A public company since 1982, CSPI has enjoyed fifteen consecutive
years of profitability.
<PAGE>
Financial Highlights
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
AUGUST 25, AUGUST 26,
1995 1994
<S> <C> <C>
OPERATING STATEMENT DATA:
Sales $18,526 $19,460
Net income 385 1,719
Number of primary shares 2,795 2,823
Earnings per share $ 0.14 $ 0.61
BALANCE SHEET DATA:
Working capital $22,862 $23,085
Total assets 29,279 29,936
Total liabilities 3,554 3,695
Shareholders' equity 25,725 26,241
</TABLE>
COMMON STOCK DATA
The Common Stock of the Company is traded in the over-the-counter market and is
quoted on NASDAQ System under the symbol "CSPI". The following table sets forth
the range of closing high and low selling prices for the Common Stock as
reported by NASDAQ.
<TABLE>
<CAPTION>
FISCAL YEAR: 1995 1994
HIGH LOW HIGH LOW
<C> <C> <C> <C> <C>
1st Quarter $9 3/8 $8 1/4 $11 $8 1/2
2nd Quarter 8 3/4 7 1/8 10 1/2 8 3/4
3rd Quarter 8 3/4 7 9 27/32 8 3/4
4th Quarter 9 1/8 7 3/8 10 1/2 8 3/4
</TABLE>
The Company has never paid cash dividends on its Common Stock. It is the policy
of the Company to retain any earnings to finance and expand operations and the
Company does not currently anticipate any change in this policy.
ANNUAL SALES ($ IN MILLIONS)
{FIGURES BELOW ARE USED IN A LINE GRAPH SHOWING ANNUAL SALES}
1969 0.10
1970 0.30
1971 0.95
1972 1.06
1973 1.65
1974 1.63
1975 2.11
1976 2.07
1977 3.09
1978 4.60
1979 4.01
1980 4.40
1981 7.13
1982 10.12
1983 10.96
1984 9.65
1985 14.63
1986 14.04
1987 9.39
1988 9.56
1989 12.04
1990 11.30
1991 13.09
1992 16.03
1993 18.01
1994 19.46
1995 18.53
NET INCOME ($000'S)
{FIGURES BELOW ARE USED IN A LINE GRAPH SHOWING NET INCOME}
1969 -375
1970 -568
1971 201
1972 -124
1973 177
1974 -48
1975 67
1976 -74
1977 179
1978 185
1979 43
1980 -191
1981 779
1982 1400
1983 1824
1984 815
1985 1961
1986 1702
1987 496
1988 260
1989 869
1990 839
1991 1057
1992 1678
1993 1957
1994 1719
1995 385
<PAGE>
DEAR FELLOW SHAREHOLDERS
[SAM'S LEGACY LIES IN OUR
CORPORATE VALUES OF PRUDENT
EXPENDITURE AND CONSERVATIVE
PLANNING, AND HAS RESULTED IN
THE STRENGTH OF OUR BALANCE
SHEET TODAY.]
EARNINGS PER SHARE (DOLLARS)
{FIGURES BELOW ARE USED IN A LINE GRAPH SHOWING EARNINGS PER SHARE}
1969 -2.13
1970 -2.21
1971 0.08
1972 -0.05
1973 0.07
1974 -0.18
1975 0.26
1976 -0.03
1977 0.12
1978 0.13
1979 0.03
1980 -0.14
1981 0.48
1982 0.78
1983 0.67
1984 0.29
1985 0.69
1986 0.60
1987 0.18
1988 0.10
1989 0.32
1990 0.31
1991 0.39
1992 0.61
1993 0.70
1994 0.61
1995 0.14
ANNUAL PERFORMANCE
Sales of $18.526 million, while below last year, are the second highest in your
Company's history. The contribution from our new businesses, Scanalytics and
Vision Systems, reached one third of the total, which we feel is early
justification for our strategy of diversification into end-user applications.
While earnings per share of $0.14 is below recent levels, this has been an
unusually demanding year. We began with considerable uncertainty in our embedded
computing business due to the timing of defense procurements and restructured
the Company in November to reduce our expense profile. Bookings subsequently
improved and, after a loss in the first quarter, each subsequent quarter has
been increasingly profitable - leading to our 15th consecutive profitable year.
RETURNING TO GROWTH
CSPI's role is to translate technology into usable applications. Sales growth
will come from vertical integration into applications solutions and continued
expansion of our base business. The end-user application markets we have chosen
have been carefully selected so as to avoid competing with our existing OEM
customers. Both Scanalytics and Vision Systems are significant growth
opportunities and derive their competitive advantage from our core signal
processing expertise. In addition, COTS (commercial-off-the-shelf) based
military procurements are now the norm and have fueled new growth opportunities
for our traditional products. Careful navigation through a complex product
transition in our base business and prudent investment in our new ventures will
put us back on a growth track.
The key to renewed success is to remain focused on a few critical issues:
o Integrate the new Motorola Power PC and Analog Devices 21060 into our signal
processing product line [Sam's legacy lies in our corporate values of prudent
expenditure and conservative planning, and has resulted in the strength of
our balance sheet today.] to complement the aging Intel i860.
o Take advantage of a growing market acceptance for our CELLscan products.
o Exploit the leadership position gained by licensing bar-code technology from
United Parcel Service (UPS).
{4-COLOR PICTURE SHOWING DAVID BOTTEN AND SAM OCHLIS}
David Botten and Sam Ochlis
<PAGE>
SIGNIFICANT NEW PRODUCTS
During the year we installed the first units of a new CELLscan configuration.
Incorporating the latest SuperCard technology, the new restoration server
removes the last objection to wider CELLscan adoption - speed. Image analysis
can now begin within minutes of acquisition, rather than in hours. When
installed on a facility network the server also provides the most cost effective
approach to multi-user operation.
Beta shipments of the flagship SuperCard-4SLX (with SuperLink interconnect)
commenced, despite delays introduced by the manufacturer of the QuickRing
technology on which it is based. SuperLink is still the only non-proprietary,
high speed, interconnect for VME boards.
The first round of shipments of machine code readers to UPS (United Parcel
Service) was completed and our units are in daily operation in UPS's new
automated sortation facility near Chicago, IL.
OPTIMIZING SHAREHOLDER RETURN
The best basis for sustained growth in the value of the Company's stock is
consistent improvement in revenues and earnings. In the past few years some $5
million has been reinvested in order to build our capabilities in Scanalytics
and Vision Systems. This investment is beginning to show return as revenues from
these activities become a meaningful fraction of the total. We firmly believe
that the best utilization of our cash is to grow the Company by internal
development and strategic acquisitions, of which AMBIS (completed in March 1994)
is a typical - though small example. We are actively working with First Albany
Corporation, a local investment bank, to identify target acquisitions and
structure competitive offers. Recognizing that the depressed price of the
company's stock represented an investment opportunity, management (under a prior
authorization) used its discretion to make limited stock repurchases throughout
the year.
SAM OCHLIS RETIRES
Another era in CSPI history closed with the retirement of Samuel Ochlis in
August, 1995. Sam joined the Company in 1974 and served as President for
fourteen years until 1991. He is credited with the introduction of the modern
array processor in 1976 which rapidly became the Company's signature product,
and Cellscan in 1992. He is rightly proud of having steered CSPI through many
difficult periods and product transitions. Sam's legacy lies in our corporate
values of fiscal prudence and conservative planning, which have resulted in the
strength of our balance sheet today. Fortunately we will still benefit from
Sam's wisdom and experience as he continues to serve CSPI as Chairman of the
Board of Directors.
Sincerely,
/s/Sam Ochlis
Sam Ochlis
Chairman of the Board
/s/David Botten
David Botten
President, CEO
<PAGE>
{3 4-COLOR PICTURES -- 1 LARGE ROUND, 2 SMALL RECTANGULAR}
Despite overall reductions
in military spending, com-
mercial-off-the-shelf (COTS)
procurements are increasing
rapidly-effectively a change
from make to buy at the prime
contractor level.
<PAGE>
[COTS HAS BECOME THE NORM; A
CONTRACTOR MUST NOW ASK FOR AN
EXEMPTION (RARELY GRANTED) TO USE
CUSTOM PARTS.]
EXPLOITING MARKET TRENDS
OUTSOURCING
As product life cycles shorten, product development times must shrink. All of
our commercial OEM customers (e.g. medical imaging manufacturers) outsource
their signal processing needs, purchasing pre-existing products and adapting the
system design accordingly. In military procurement the trend is to contract for
proof of system design without production commitments. Since all of the expense
is in design, prime contractors are forced to reduce risk and cost by
outsourcing all but the system integration and application software. In
addition, military procurement agencies around the world are demanding that
prime contractors employ commercial (COTS) sub-assemblies. They have proven cost
effective, reliable, easier to procure rapidly and significantly higher in
performance. COTS has become the norm; a contractor must now ask for an
exemption (rarely granted) to use custom parts. System designs may have to be
reused in a variety of hazardous environments and a pathway to both ruggedized
(ROTS) and militarized (MOTS) versions is mandatory. Hughes Aircraft Corporation
has licensed the SuperCard design and manufactures a militarized version.
SOFTWARE REUSE
Our customers biggest investment is their applications software. We have
provided a performance upgrade path through four generations of SuperCard, and
our choice of VxWorks as a development environment assures compatibility across
different platforms for future programs.
AUTOMATION
Coming regulations will require that every bag be checked for explosives before
loading onto a commercial aircraft. Present manual systems are inadequate to
meet this requirement and automated examination demands SuperCard levels of
signal processing expertise. In a different field, the interpretation of the
complex electrophoresis patterns produced in DNA fragment analysis (e.g. for DNA
fingerprinting) is repetitive and subjective. Our RFLPscan software
automatically cans the output, compares the pattern to stored standards and
provides a statistically based match.
<PAGE>
[AS HARDWARE BECOMES MORE OF A
COMMODITY, SOFTWARE IS EMERGING AS
THE CORE OF OUR ADDED VALUE.]
RIDING TECHNOLOGY ADVANCES
STANDARDIZATION DRIVES MARKETS
We embrace standards as a strategy, working closely with industry groups and
market leaders. All of our OEM customers rely on the field-proven VME form
factor to ensure hardware compatibility. We are also adopting PCI which is
rapidly gaining popularity due to improved performance and lower cost. For data
distribution, where still higher bandwidths are necessary, we have pioneered the
introduction of National Semiconductor's QuickRing into the VME/PCI community.
In the software arena, VxWorks, from Wind River Systems, is the dominant
development environment. CSPI has ported VxWorks to the Intel i860 for existing
SuperCard-4 users, enhanced its multiprocessor capabilities and will carry it
forward to new platforms.
NEW GENERATION OF MICROPROCESSORS
The floating point performance of RISC microprocessors continues to improve,
with multiple vendors and ever higher clock speeds. CSPI has selected Motorola's
Power PC, supported by Analog Devices' 21060, as replacement for the Intel i860.
High density, multiple processor designs mandate the use of low voltage
components and custom ASICs. We are investing heavily into VHDL, the latest
generation of ASIC development tools, to standardize design and simulation
procedures. The majority of our R/D resources are allocated to software
development, both tools and end-user applications. As hardware becomes more of a
commodity, software is emerging as the core of our added value.
A REVOLUTION IN AUTOMATIC IDENTIFICATION
The bar-code world is moving towards the adoption of two-dimensional codes.
Increases in information content, lower printing costs and higher read rates are
just some of the predicted improvements. While many different codes have been
proposed, only those with a substantial installed base will survive as
standards. Maxicode - developed by and already deployed within UPS - is the
leading contender for high-speed sortation applications. Forward looking users
are insisting that new readers have dual (on and two-dimensional) capability,
which today's laser scanners lack. Maxicode, and other similar codes, demands
the inherently higher bandwidth of CCD readers like our Lightning 500.
<PAGE>
{3 4-COLOR PICTURES -- 1 LARGE ROUND, 2 SMALL RECTANGULAR}
By embracing standards we
provide our customers the
optimal flexibility and a guar-
antee of continuous product
enhancement.
<PAGE>
{3 4-COLOR PICTURES -- 1 LARGE ROUND, 2 SMALL RECTANGULAR}
Our competitive advantage
stems from the engineering
expertise to blend multi-
processor design, data man-
agement, input/output flexibility
and software tools to create win-
ning solutions.
<PAGE>
[THIS TOTAL SYSTEM SOLUTION IS SUP-
PORTED BY DEDICATED SPECIALISTS WHO
GUIDE CUSTOMERS THROUGH EVALUATION,
OPTIMIZATION AND INSTALLATION.]
TRANSFORMING TECHNOLOGY INTO TOOLS
SOURCES OF TECHNICAL ADVANTAGE
CSPI has been very successful in importing technology. Scanalytics stems from
academia, under licensing agreements from the University of Massachusetts
Medical Center and the National Cancer Institute. Vision Systems grew from UPS's
internal research and the products that subsequently evolved to meet their
needs. The underlying microprocessor technology that drives our business
advances relentlessly, and maintaining a hardware performance advantage requires
a multi-processor architecture, large memories and distributed data management.
The biggest differentiator lies in software, either a rich development
environment for an OEM's applications engineer or dedicated packages for the
molecular and cell biologist. This total system solution is supported by
dedicated specialists who guide customers through evaluation, optimization and
installation.
SOME EXAMPLES OF OUR STRATEGIES IN ACTION
COTS procurement: CSPI's SuperCard-4 has been selected by the prime contractor,
Loral Federal Systems, for the USY-1 sonar signal processor upgrade. They will
provide a VME based solution that is less expensive than its custom predecessor
and forty times faster, yet fits within the same physical space. Use of COTS
hardware and the popular VxWorks development software led the way to the winning
bid.
Automated sortation: UPS's new Chicago Area Central Hub is the largest and most
automated package sortation facility in the world. CSPI supplied bar-code
readers to control the flow of parcels through the building using
two-dimensional Maxicode to direct them to the correct loading dock.
Visualizing the barely detectable: Fluorescence microscopy provides insight into
the structure and internal activity of living cells. CELLscan's novel approach
to the technique is the least invasive and most sensitive. Researchers at the
University of Connecticut are even able to make quantitative measurements within
the mitochondrial substructures of cells.
<PAGE>
CSP INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Sales $18,526 $19,460 $18,015 $16,035 $13,089
Costs and expenses 18,725 17,425 15,544 14,531 12,548
Operating income (loss) (199) 2,035 2,471 1,504 541
Other income 821 478 426 719 855
Income before income taxes 622 2,513 2,897 2,223 1,396
Income taxes 237 794 940 545 339
Net income $385 $1,719 $1,957 $1,678 $1,057
EARNINGS PER SHARE $0.14 $0.61 $0.70 $0.61 $0.39
Weighted average number of
common shares 2,795 2,823 2,789 2,753 2,685
BALANCE SHEET DATA:
Working capital $22,862 $23,085 $21,873 $19,831 $17,856
Total assets 29,279 29,936 27,853 24,973 22,937
Long term obligations 1,943 1,804 1,746 1,524 1,295
Total liabilities 3,554 3,695 3,539 2,777 2,563
Retained earnings 17,224 16,839 15,120 13,163 11,485
Shareholders equity 25,725 26,241 24,314 22,196 20,374
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The following table sets forth certain information which is based on Operating
Statement Data:
<TABLE>
<CAPTION>
PERIOD TO PERI0D
DOLLAR CHANGES
(IN THOUSANDS)
1995 1994
PERCENTAGE OF SALES FISCAL YEAR ENDED AUGUST COMPARED TO COMPARED TO
1995 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
SALES 100.0% 100.0% 100.0% ($934) $1,445
COSTS AND EXPENSES:
Cost of sales 44.1% 40.0% 33.7% 381 1,701
Engineering and development 16.7% 14.5% 17.9% 265 (392)
Marketing and sales 27.0% 24.4% 23.4% 246 538
General and administrative 11.1% 10.6% 11.3% (8) 34
Restructuring 2.2% - - 416 -
Total costs and expenses 101.1% 89.5% 86.3% 1,300 1,881
Operating income (loss) (1.1%) 10.5% 13.7% (2,234) (436)
Other income 4.5% 2.4% 2.4% 343 52
Income before taxes 3.4% 12.9% 16.1% (1,891) (384)
Provision for income taxes 1.3% 4.1% 5.2% (557) (146)
Net income 2.1% 8.8% 10.9% ($1,334) ($238)
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS-1995 COMPARED TO 1994:
Sales of $18,526,000 were the second highest in the Company's history. Sales for
the Embedded Computing Division represented two thirds of the total with the
SuperCard family of products accounting for 51% of total sales, a decrease of
24% from the prior fiscal year. The decrease in sales was due in part to delays
in procurement of SC-4/4XL and SC-3/3XL, and to lower sales of COTS
(commercial-off-the-shelf) programs to the United States military, primarily the
Department of the Navy. COTS programs continue to be a major source of revenue,
accounting for approximately 35% of total sales for 1995. Shipments of the older
SuperCards (models SC-1 and SC-2/2XL) declined with the completion of prior COTS
programs, and also accounted for part of the reduced sales volume. SuperCards
continue to be used in many other applications in the signal processing and
medical imaging areas.
RTS-860 real-time systems represented approximately 7% of sales, an increase of
73% over the prior year. The RTS-860 is a development system used by either
end-users or developers/integrators to develop applications software. One of a
number of large system sales included equipment used to analyze data from a
Doppler radar detecting wind shear anomalies at the new Osaka airport in Japan.
Combined sales of the older products MAP-4000, and MiniMAP represented 4% of
total sales. The units are shipped only to existing OEMs and volume end-users.
Vision Systems Division sales of machine code readers for United Parcel
Service(UPS) represented 21% of total sales for the year. These shipments
represented the balance of the procurement received from UPS in 1994 for their
recently completed automated sorting hub in Chicago, IL.
Scanalytics Division (bio-instrumentation for molecular and cell biology) sales
represented approximately 12% of total revenues, a 50% increase over the prior
fiscal year. The improvement in sales was due to the increased shipments of
AMBIS, CELLscan and applications specific software packages (respectively 48%,
26%, and 19% of the total Scanalytics sales). The sales of application specific
software modules (DNAScan, RFLPScan etc.) increased by 67% and CELLscan sales
were approximately 64% higher than the prior year.
North American sales represented 86% of total sales, a 3% increase over the
prior year. The other geographic areas experienced decreases in sales due to the
decline in military procurement and slow economic recovery in foreign markets.
Whilst there has been some improvement in the economy of our international
markets, it is important to note that the procurement cycles for our products
are much longer than in the North American market.
The Company restructured and consolidated its operations in November 1994. The
restructuring was necessitated by the change in mix of the Company's business to
lower margin products sold by the Vision Systems and Scanalytics Divisions. The
Company reduced its work force by thirteen percent, relocated its French
subsidiary and closed its San Diego manufacturing operation. The Company
estimated the costs of restructuring to be $409,000 and expensed this amount in
the first fiscal quarter of 1995. The actual costs were $416,000, of which
$288,000 represented severance costs and the remaining $128,000 was due to the
closure of the San Diego manufacturing operation. The restructuring reduced the
annual operating expenses of the Company by over $1,000,000.
<PAGE>
Cost of sales as a percentage of sales increased to 44%. The increase of 4% over
1994 was due primarily to product mix. Both the Vision Systems and Scanalytics
businesses have higher, per unit, costs of goods sold. Continuing competitive
pressure in the Embedded Computing business required larger discounts to secure
the successful award of some contracts with both new and existing customers.
Approximately $167,000 of obsolete inventory was written off. Other costs
included six months of running the San Diego AMBIS manufacturing operation,
which was closed down in February 1995 as part of an overall restructuring. The
Company continues to take steps to lower its manufacturing overhead and improve
the overall efficiency in order to lower the cost of goods sold. The outlook
going forward is that the cost of sales, as a percent of sales, will probably
not increase significantly from what we have experienced this fiscal year unless
there are further changes in product mix (if, for example, a large portion of
the future business comes directly from additional orders from UPS for machine
code readers).
Engineering and development expenditures increased by approximately 9% from the
prior fiscal year. The major portion of the increase being for outside services
and the purchase of new equipment and software for the development of our ASIC
(Application Specific Integrated Circuit) capability for the Embedded Computing
Division. Other increases included expenses incurred in the improvement of the
machine code reader for the Vision Systems Division. Scanalytics Division
expenses declined by 8% from the prior year, primarily due to a minor reduction
in staff.
Sales and marketing expenses increased by 5% from the previous fiscal year. The
Scanalytics Division expenses increased 40% over the prior year and the Vision
Systems Division, in its initial year of operation, represented 11% of overall
sales and marketing expenses. The major portion of the Vision Systems increase
was due to the transfer of personnel from the Embedded Computer Division and
start up expenses, which included literature, advertising, trade shows and other
normal operating expenses. The Scanalytics Division increase in expenses was due
in part to the addition of the four employees for customer support, sales and
marketing personnel added as part of the AMBIS purchase for a complete fiscal
year, additional sales commissions for the increased sales, and advertising and
promotional programs for the CELLscan and modular software packages. The
Embedded Computer Division expenses declined by approximately 19% from the prior
year. Reduced expenses were due to reorganizing the French sales office, staff
reductions in marketing and field operations (both from attrition and
restructuring), decreased advertising and lower commissions due to the reduced
sales volume.
General and administrative expenses were flat compared to the prior fiscal year.
They included expenses related to a settlement reached with the Department of
Commerce concerning the alleged violation of export regulations in 1990/1991.
The settlement resulted in an $82,000 expense in this fiscal year (an additional
$50,000 was accrued in the prior year) and additional legal fees. Other expenses
included a merger and acquisition program, with costs for advisor and consulting
services, and additional consulting services in the implementation of a new
manufacturing and accounting system. These incremental expenses were offset by a
reduction in bonus payments.
Other income increased by 72% over the prior year, due primarily to an increase
in interest income. The Company invested a larger percentage of its cash in
taxable instruments during the year, due to lower anticipated operating income.
The taxable securities have a higher rate of return on a pre-tax basis than our
prior year non-taxable investments and thus increase the yield. The Company
continues its conservative investment strategy of maintaining a short-term
liquid position while maximizing return on an after-tax basis with as limited
exposure of principal as possible. As a result of maintaining a liquid position,
the Company believes that it has been able to avoid borrowing for capital needs,
has been able to augment its operating results and is well-positioned to make an
acquisition or a joint venture if appropriate opportunities arise.
<PAGE>
The Company's effective tax rate was greater than the statutory rates for both
federal and state taxes since the loss of $202,000 from its French subsidiary
operation (a French corporation) could not be deducted from either federal or
state taxes. There were some benefits against statutory rates for tax-exempt
investment income, the foreign sales corporation and research and development
credits.
RESULTS OF OPERATIONS-1994 COMPARED TO 1993:
Sales of $19,460,000 were a record high for the Company. It was also the fifth
year of increased revenues. The SuperCard family of products represents the
major source of revenue, accounting for 65% of total sales. SuperCard sales
increased by 8% over 1993 due to the shipment of SC-2/2XL and SC-3/3XL which
represented 45% of total sales. The new SC-4/4XL represented 20% of the total
sales. Sales of COTS program represented approximately 45% of sales.
The Company received a $6.2 million order from United Parcel Service (UPS) for
production of machine code readers. Sales to UPS represented 13% of total sales
for the year, representing only a portion of the overall procurement.
Sales of the older products MAP-4000 and MiniMAP continued to decline, and
represented only 4% of total sales. RTS-860 real-time systems represented
approximately 4% of sales.
Scanalytics Division sales represented approximately 9% of total revenues with a
30% increase over the prior fiscal year. The increase in sales was due in part
to the acquisition of certain assets of AMBIS Inc. of San Diego, California (a
manufacturer of radio-isotopic imaging instruments) in March, 1994. The sales of
AMBIS products represented approximately 19% of Scanalytics sales. MasterScan
sales were down by 38% compared to the prior year due to a change in focus from
selling commodity hardware with our software to that of selling application
specific software modules. CELLscan sales were at approximately the same level
as the prior year.
North American sales represented 83% of total sales. This was due to the
continued success of SuperCards and the UPS shipments. Another geographic area
with increased sales was the Far East, with increased SuperCards and RTS-860
sales and continued success of Scanalytics products in Japan. Middle East sales
also grew due to shipments to a large OEM. European sales continued to decline
due to continuing poor economic conditions.
Cost of sales as a percentage of sales increased to 40%. This was an increase of
6.3% over the prior fiscal year and was due to increased competition,
introductory pricing on the new SuperCard-4/4XL products, the addition of the
AMBIS manufacturing operation and lower prices on specially manufactured units
for UPS. The continuing competitive pressures in the Embedded Computing business
required larger discounts to secure the successful award of some business with
both new and existing customers. The purchase of AMBIS products required the
hiring of three AMBIS employees responsible for the manufacturing of products
and setting up a small manufacturing facility in San Diego, California.
<PAGE>
Engineering and development expenditures decreased by approximately 12% from
the prior fiscal year. The major portion of the reduction (60%) was in
Scanalytics labor costs while the Embedded Computer division had a large
reduction in the procurement of materials and outside service costs.
Sales and marketing expenses increased by 13% from the previous fiscal year. The
Embedded Computer division accounted for 55% of the increase. The major portion
of the increase was due to the expansion of the Marketing and Sales staff by
three employees and additional commissions. The Scanalytics Division represented
45% of the total increase in expenses from redeployment of staff (represented
30% of the increase) and the additional four employees added as part of the
AMBIS asset purchase. There was increased advertising and promotional expenses
related to the announcement of new software and AMBIS products.
General and administrative expenses were approximately at the same level as the
prior fiscal year. There were increased expenses related to the merger and
acquisition program and other outside services which were offset by a reduction
in bonus expenses and personnel.
Other income increased by 12% over the prior year due to reductions in the loss
on foreign exchange from our French operation.
The Company's effective tax rate has been reduced from the statutory rates for
both federal and state taxes due to benefits from tax-exempt investment income,
the foreign sales corporation and research and development credits.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY:
The Company's solid financial position continued into fiscal year 1995. During
the fiscal year the Company repurchased 117,900 shares of its own common stock
for $952,000, leading to a decrease in working capital of $223,000 from the
prior fiscal year. Working capital had increased by $1.2 million to $23.1
million on August 26, 1994, from $21.9 million on August 27, 1993. The Company's
accounts receivable decreased by $1.2 million to a more typical level of $3.9
million at August 25, 1995. Inventory decreased to $2.1 million from $3.2
million due to completion of the UPS order, AMBIS consolidation, inventory write
off and improved just-in-time inventory procurement. The inventory levels are
expected to remain more in line with typical industry norms and we expect to
continue to improve inventory turns.
The Company's cash and marketable securities increased by approximately $1.9
million.
The Company spent $988,000, $771,000 and $833,000 respectively on capital
improvements during the years 1995, 1994 and 1993.
Management believes that all the Company's current and foreseeable needs can be
met through working capital generated by operations and investments.
INFLATION AND CHANGING PRICES:
Management does not believe that inflation and changing prices had a significant
impact on sales or operating income for 1995, 1994 and 1993. There is no
assurance, however, that the Company's business will not be materially and
adversely affected by inflation and changing prices in the future.
<PAGE>
CSP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
August 25, 1995 and August 26, 1994
(dollars in thousands, except for par value)
<TABLE>
<CAPTION>
AUGUST 25, AUGUST 26,
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $11,069 $8,556
Marketable securities (Note 2) 6,482 7,055
Accounts receivable, net 3,933 5,084
Inventories (Note 3) 2,150 3,192
Deferred income taxes (Note 4) 368 381
Prepaid expenses 471 708
Total current assets 24,473 24,976
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET (NOTE 5) 3,470 3,276
OTHER ASSETS:
Land held for future development 163 163
Deferred income taxes (Note 4) 355 323
Other assets 818 1,198
Total other assets 1,336 1,684
Total assets $29,279 $29,936
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note 6) $1,461 $1,689
Income taxes payable 150 202
Total current liabilities 1,611 1,891
DEFERRED COMPENSATION AND RETIREMENT PLANS (NOTE 8) 1,943 1,804
COMMITMENTS AND CONTINGENCIES (NOTE 9)
SHAREHOLDERS' EQUITY: (NOTES 7 AND 9)
Common stock, $.01 par; authorized, 7,500,000
shares; issued 2,922,034 and 2,912,409 shares 29 29
Additional paid-in capital 10,187 10,136
Retained earnings 17,224 16,839
Equity adjustment from foreign currency translation 65 65
27,505 27,069
Less treasury stock, at cost, 273,314 and 155,414 shares (Note 9) 1,780 828
Total shareholders' equity 25,725 26,241
Total liabilities and shareholders' equity $29,279 $29,936
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended August 25, 1995, August 26, 1994 and August 27, 1993
(Amounts in thousands, except for per share data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SALES (NOTE 10) $18,526 $19,460 $18,015
COSTS AND EXPENSES:
Cost of sales 8,157 7,776 6,075
Engineering and development 3,099 2,834 3,226
Marketing and sales 4,993 4,747 4,209
General and administrative 2,060 2,068 2,034
Restructuring (Note 11) 416 --- ---
Total costs and expenses 18,725 17,425 15,544
OPERATING INCOME (LOSS) (199) 2,035 2,471
OTHER INCOME (EXPENSE):
Dividend income 13 25 66
Interest income 804 475 464
Interest expense (50) (31) (36)
Other 54 9 (68)
Total other income 821 478 426
Income before income taxes 622 2,513 2,897
INCOME TAXES (NOTE 4) 237 794 940
Net income $385 $1,719 $1,957
EARNINGS PER SHARE $0.14 $0.61 $0.70
WEIGHTED AVERAGE SHARES OUTSTANDING 2,795 2,823 2,789
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year Ended August 25, 1995, August 26, 1994 and August 27, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
FROM FOREIGN TOTAL
COMMON STOCK PAID-IN RETAINED CURRENCY TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS TRANSLATION STOCK EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 28, 1992 2,850,984 $29 $9,767 $13,163 $65 ($828) $22,196
Net income -- -- -- 1,957 -- -- 1,957
Exercise of stock options 26,625 -- 161 -- -- -- 161
BALANCE, AUGUST 27, 1993 2,877,609 29 9,928 15,120 65 (828) 24,314
Net income -- -- -- 1,719 -- -- 1,719
Exercise of stock options 34,800 -- 208 -- -- -- 208
BALANCE, AUGUST 26, 1994 2,912,409 29 10,136 16,839 65 (828) 26,241
Net income -- -- -- 385 -- -- 385
Exercise of stock options 9,625 -- 51 -- -- -- 51
Purchase of Treasury Stock -- -- -- -- -- (952) (952)
BALANCE, AUGUST 25, 1995 2,922,034 $29 $10,187 $17,224 $65 ($1,780) $25,725
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended August 25, 1995, August 26, 1994 and August 27, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $385 $1,719 $1,957
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 792 658 651
Deferred compensation and retirement plans 139 58 222
Deferred income taxes (19) (109) (81)
Other -- (13) (67)
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable, net 1,151 (2,232) (1,393)
(Increase) decrease in inventories 1,042 (1,291) (367)
Decrease in refundable income taxes -- -- 193
(Increase) decrease in prepaid expenses 237 (314) (56)
Increase (decrease) in accounts payable and accrued expenses (228) (120) 491
Increase (decrease) in income taxes payable (52) 70 49
Net cash from operating activities 3,447 (1,574) 1,599
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (159,099) (130,013) (104,807)
Sales of marketable securities 159,674 129,519 105,611
Business acquired -- (496) --
Property, equipment and improvements (988) (771) (833)
Other 380 (738) (15)
Net cash used in investing activities (33) (2,499) (44)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options 51 208 161
Purchase of treasury stock (952) -- --
Net cash provided by (used in) financing activities (901) 208 161
Net increase (decrease) in cash 2,513 (3,865) 1,716
Cash and cash equivalents, beginning of year 8,556 12,421 10,705
Cash and cash equivalents, end of year $11,069 $8,556 $12,421
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes, net $323 $893 $747
Cash paid for interest $50 $31 $36
Business acquired $645
Less liabilities assumed 149
Cash paid $496
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For years ended August 25, 1995, August 26, 1994, and August 27, 1993
ORGANIZATION AND BUSINESS
The Company designs, manufactures and markets embedded processors which are
small, low power special-purpose computers which enhance a system's ability to
perform high-speed arithmetic. The Company also develops and markets turnkey
image analysis workstations targeted toward the biological sciences and
industrial bar-code readers.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR:
The Company's fiscal year end is on the last Friday in August.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant inter-company accounts and transactions have
been eliminated.
FOREIGN CURRENCY TRANSLATION:
Monetary assets and liabilities of the Company's foreign subsidiary are
translated into U.S. dollars using the exchange rate in effect at each balance
sheet date. Non monetary assets and liabilities are translated into U.S. dollars
using historical exchange rates. Sales and expenses for each year are translated
using weighted average exchange rates.
MARKETABLE SECURITIES:
Investments consist of corporate bonds and notes, government agency bonds, and
money market funds. Most investments mature within a two year period. The
Company classifies its marketable securities as held-to-maturity based on its
ability and intent to hold these securities until maturity. Held-to-maturity
securities are recorded at amortized cost, which approximates market value.
Interest income is accrued as earned. Dividend income is recognized as income on
the date the stock trades "ex-dividend". The cost of marketable securities sold
is determined on the specific identification method and realized gains or losses
are reflected in income.
INVENTORIES:
Inventories are stated at the lower of cost or market; cost is determined
principally by use of the average-cost method.
PROPERTY, EQUIPMENT AND IMPROVEMENTS:
The components of property, equipment and improvements are stated at cost. The
Company provides for depreciation by use of the straight-line method over the
estimated useful lives of the related assets.
PRODUCT WARRANTY:
The Company ordinarily provides a one year warranty. In addition, certain major
customers are granted extended warranties. The Company accrues estimated costs,
which in the opinion of management, are adequate to cover such warranty
obligations.
REVENUE RECOGNITION:
Revenues from product sales are recognized at the time of shipment.
ENGINEERING AND DEVELOPMENT EXPENSES:
Engineering and development expenditures for company- sponsored projects are
charged to expenses as incurred.
<PAGE>
INCOME TAXES:
As of August 28, 1993, the Company changed its method of accounting for income
taxes from the deferred method to the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. There
was no cumulative effect of the change in the method of accounting for income
taxes.
Under the deferred method of accounting for income taxes, which was applied in
1993 and prior years, deferred income taxes were recognized for income and
expense items that were reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable in the year of
the calculation.
EARNINGS PER SHARE:
Earnings per share are calculated based upon the weighted average number of
common shares outstanding, adjusted when dilutive, for the number of shares
issuable upon the exercise of stock options after the assumed purchase of shares
with the related proceeds.
2. MARKETABLE SECURITIES
At August 25, 1995 and August 26, 1994, marketable securities consist of the
following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Marketable equity securities,
at cost $296 $294
Less valuation allowance 9 7
Marketable equity securities,
at market 287 287
Bonds and municipal revenue
notes, at cost 5,787 6,395
Money market funds and
commercial paper 118 126
U.S. treasury bills 290 247
Total $6,482 $7,055
</TABLE>
Assets of $686,000 and $638,000 at August 25, 1995 and August 26, 1994,
respectively, are held in a rabbi trust and generally are available only to pay
certain retirement benefits of a key employee.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Raw materials $ 851 $1,248
Work-in-process 822 1,272
Finished goods 477 672
Total $2,150 $3,192
</TABLE>
<PAGE>
4. INCOME TAXES
Reconciliations of expected income tax expense to actual income tax expense are
as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $211 34.0% $854 34.0% $985 34.0%
Increases (reductions) in taxes resulting from:
Dividend exclusion (42) (6.8) -- -- (16) (0.6)
Tax exempt interest (74) (11.9) (133) (5.3) (119) (4.1)
Research and experimentation and
investment tax credits (37) (5.9) (89) (3.5) (115) (4.0)
State income taxes, net of federal tax benefit 47 7.6 148 5.9 152 5.3
Non-taxable FSC earnings (26) (4.2) (29) (1.2) (31) (1.1)
Other items 158 25.4 43 1.7 84 2.9
Income tax expense $237 38.1% $794 31.6% $940 32.4%
</TABLE>
For the years ended 1995 and 1994 temporary differences which give rise to a
significant portion of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
DEFERRED TAX ASSETS:
Deferred compensation $834 $748
Other accruals 118 98
Bad debt reserves 41 41
Inventory capitalization and reserves 192 176
Unrealized loss on securities 43 41
Gross deferred tax assets $1,228 $1,104
Less valuation allowance (317) (285)
Deferred tax asset less valuation allowance $911 819
DEFERRED TAX LIABILITY:
Depreciation (188) (115)
Net deferred tax asset $723 $704
</TABLE>
The valuation allowance was $317,000 and $285,000 at August 25, 1995 and August
26, 1994. The valuation allowance was established due to the long-term nature of
certain deferred compensation and retirement obligations for which the tax
benefit will be realized over an extended period of time. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance at August 25, 1995.
<PAGE>
The provisions for income taxes are comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
CURRENT:
Federal $232 $695 $788
State 24 208 233
$256 $903 $1,021
DEFERRED:
Federal (15) (85) (63)
State (4) (24) (18)
(19) (109) (81)
$237 $794 $940
</TABLE>
5. PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET
Property, equipment and improvements, net consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Land $587 $587
Building and improvements 1,334 1,303
Equipment 9,375 8,353
Automotive equipment 79 79
11,375 10,322
Less accumulated
depreciation and amortization 7,905 7,046
Property, equipment and
improvements, net $3,470 $3,276
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Accounts payable $606 $513
Commissions 113 143
Compensation and fringe benefits 341 535
Customer advances 163 205
Professional fees and shareholders'
reporting services 108 135
Taxes, other than income 36 65
Other, individually less than 5%
of current liabilities 94 93
$1,461 $1,689
</TABLE>
During 1994 the Company was notified by the Department of Commerce (DOC) about
possible violations of certain export regulations during the period September
15, 1990 to July 6, 1991. The Company has reached an agreement with the DOC
subject to final documentation, pursuant to which the Company will incur a
penalty of $160,000 of which $132,000 will be paid and $28,000 will be suspended
if the Company complies with export regulations for a period of one year. The
Company has accrued the amount to be paid in the agreed upon settlement at
August 25, 1995 ($50,000 of which had been accrued as of August 26, 1994).
<PAGE>
7. STOCK OPTIONS
In 1991, the Company adopted the 1991 Stock Option Plan covering 250,000 shares
of common stock. Under the Plan, both incentive stock options and non-qualified
stock options may be granted to officers, key employees and other persons
providing services to the Company. In addition, up to 20,000 shares are
allocated for annual non-discretionary grants of 1,000 shares each to
non-employee directors of the Company who are serving on the last business day
of January in each year.
The 1991 Plan supersedes three earlier plans, each of which was terminated in
1991.
The following is a summary of common stock option activity for the three years
ended August 25, 1995:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OPTION 1991 1987 1981 1979
PRICES PLAN PLAN PLAN PLAN TOTAL
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING AUGUST 28, 1992 $5.00-$9.75 76,500 9,000 175,800 12,000 273,300
Granted $9.13-$10.75 29,025 -- -- -- 29,025
Exercised $5.00-$6.63 -- (3,000) (23,625) -- (26,625)
Expired & terminated $5.38-$5.63 -- -- (1,750) (12,000) (13,750)
OUTSTANDING AUGUST 27, 1993 $5.00-$10.75 105,525 6,000 150,425 -- 261,950
Granted $9.50 4,000 -- -- -- 4,000
Exercised $5.00-$9.00 (500) -- (34,300) -- (34,800)
Expired & terminated $9.00-$9.125 (2,000) -- -- -- (2,000)
OUTSTANDING AUGUST 26,1994 $5.00-$10.75 107,025 6,000 116,125 -- 229,150
Granted $7.625-$8.50 49,000 -- -- -- 49,000
Exercised $5.00-$6.625 -- -- (9,625) -- (9,625)
Expired & terminated $5.00-$10.75 (17,975) (6,000) (2,375) -- (26,350)
OUTSTANDING AUGUST 25,1995 $5.00-$10.75 138,050 -- 104,125 -- 242,175
Available for future grants -- 111,450 -- -- -- 111,450
Exercisable $5.00-$10.75 76,900 -- 104,125 -- 181,025
</TABLE>
<PAGE>
8. DEFERRED COMPENSATION AND RETIREMENT PLANS
The Company has a 401(k) Retirement Plan under which the Company matches a
portion of the employee's salary reduction contributions and may make
discretionary contributions to the plan. All employees with one year of
continuous service are eligible for the plan. All Company contributions are
fully vested. Contributions by the Company were $122,000, $167,000, and $175,000
for 1995, 1994 and 1993, respectively. The Company has a Supplemental Retirement
Plan for certain employees that provides for payments (generally over 15 years)
upon retirement, death or disability. The annual benefit is based upon a
percentage of salary at the inception of the plan, plus an annual percentage
increase, plus interest. In addition, the Company adopted deferred compensation
plans for key executives that provide for payments, over a ten-year period, upon
retirement, death or disability based upon a percentage of salary at that time.
The charge to expense for the plans for 1995, 1994 and 1993 amounted to
$207,000, $160,000 and $222,000 respectively.
9. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company occupies office space under lease agreements expiring at various
dates during the next two years. The leases are classified as operating leases
and provide for the payment of real estate taxes, insurance, utilities and
maintenance.
At August 25, 1995, the Company is obligated under noncancelable operating
leases (net of minor amounts of sublease income) as follows:
<TABLE>
<CAPTION>
(In thousands)
Fiscal year ending August: OPERATING LEASES
<C> <C>
1996 $40
1997 $14
</TABLE>
Occupancy costs under the operating leases approximated $76,000 in 1995, $76,000
in 1994, and $75,000 in 1993.
STOCK REPURCHASE:
On October 9, 1986 the Board of Directors authorized the Company to repurchase
up to 282,723 of the outstanding stock at market prices. The timing of stock
purchases are made at the discretion of management. Through August 25, 1995, the
Company has repurchased 268,950 shares or 95% of the total authorized.
On September 28, 1995 the Board of Directors authorized the Company to
repurchase up to an additional 150,000 shares of the outstanding stock at market
prices.
<PAGE>
10. SALES BY MAJOR CUSTOMERS AND GEOGRAPHIC AREAS
Sales (in thousands of dollars) to individual customers constituting 10% or more
of total sales were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Customer A -- -- -- -- $4,769 26%
Customer B -- -- $3,348 17% -- --
Customer C $3,948 21% $2,639 14% -- --
</TABLE>
The Company anticipates that, for the foreseeable future, a significant
percentage of its sales will be dependent upon a relatively small number of
customers.
The Company's sales by geographic area are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
North America $15,992 $16,234 $14,443
Europe 1,207 1,392 2,362
Middle East 318 535 431
Far East 953 1,299 705
South America 56 -- 74
$18,526 $19,460 $18,015
</TABLE>
11. RESTRUCTURING EXPENSES
In November 1994 the Company accrued approximately $409,000 of the estimated
costs to be incurred in consolidating its manufacturing operations and reducing
its workforce. Actual costs incurred of approximately $416,000 are comprised of
severance costs of $288,000,and $128,000 for closing the San Diego manufacturing
operation.
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS CSP INC.:
We have audited the accompanying consolidated balance sheets of CSP Inc. and
subsidiaries as of August 25, 1995 and August 26, 1994 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three year period ended August 25, 1995. 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
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CSP Inc. and
subsidiaries as of August 25, 1995 and August 26, 1994, and the results of their
operations and their cash flows for each of the years in the three year period
ended August 25, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick
September 28, 1995
Boston, Massachusetts
<PAGE>
CORPORATE INFORMATION
DIRECTORS
Samuel Ochlis
Chairman of the Board
CSP Inc.
David S. Botten
President and
Chief Executive Officer
CSP Inc.
Boruch B. Frustajer
President
BBF Corp.
Stanford A. Fingerhood
Senior Vice President
Laidlaw Holdings, Inc.
John Ingram, PhD
Research Fellow
Schlumberger Limited
C. Shelton James
President
Fundamental Management Corp.
Sandford Smith
President and CEO
Repligen Corp.
OFFICERS
Samuel Ochlis
Chairman of the Board
David S. Botten
President and
Chief Executive Officer
Michael M. Stern
Vice President of Operations
and Treasurer
Gary W. Levine
Vice President of Finance
and Chief Financial Officer
James A. Waggett
Vice President of Advanced
Development
James E. Storer
Chief Scientist and
Vice President
Donald E. Johansen
Vice President of Business
Development
Dean Hanley
Clerk
Foley, Hoag & Eliot
CORPORATE OFFICE
CSP, Inc.
40 Linnell Circle
Billerica, Massachusets 01821
508 663-7598
508 663-0150 fax
GENERAL INFORMATION
General Counsel
Foley, Hoag & Eliot
Boston, Massachusetts
Transfer Agent
American Stock Transfer Co.
New York, New York
Auditors
KPMG-Peat Marwick LLP
Boston, Massachusetts
Stock Information
Stock Traded Over the Counter
NASDAQ Symbol: CSPI
FORM 10-K
A copy of the Company's Annual Report on Form 10-K for fiscal 1995 as filed with
the Securities and Exchange Commission will be furnished without charge to any
stockholder upon written request to the Vice President of Finance, CSP Inc. 40
Linnell Circle, Billerica, Massachusetts 01821.
<PAGE>
(Back Cover)
CSPI
40 Linnell Circle
Billerica, Massachusetts 01821
508 663-7598
508 663-0150 fax
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
CSP Inc.
We consent to incorporation by reference in the registration statements
(Nos. 2-79414 and 33-11815) on Forms S-8 of CSP Inc. of our reports dated
September 28, 1995, relating to the consolidated balance sheets of CSP Inc. and
subsidiaries as of August 25, 1995 and August 26, 1994, and the related
consolidated statements of operations, shareholder's equity and cash flows and
related schedules for each of the years in the three-year period ended August
25, 1995, which reports appear or are incorporated by reference in the August
25, 1995 annual report on Form 10-K of CSP Inc.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
November 21, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AUGUST 25, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> AUG-25-1995 AUG-25-1995
<PERIOD-START> MAY-27-1995 AUG-27-1994
<PERIOD-END> AUG-25-1995 AUG-25-1995
<CASH> 11,069 11,069
<SECURITIES> 6,482 6,482
<RECEIVABLES> 3,933 3,933
<ALLOWANCES> 103 103
<INVENTORY> 2,150 2,150
<CURRENT-ASSETS> 24,473 24,473
<PP&E> 11,375 11,375
<DEPRECIATION> 7,905 7,905
<TOTAL-ASSETS> 29,279 29,279
<CURRENT-LIABILITIES> 1,611 1,611
<BONDS> 0 0
<COMMON> 29 29
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 29,279 29,279
<SALES> 4,384 18,526
<TOTAL-REVENUES> 4,384 18,526
<CGS> 1,764 8,157
<TOTAL-COSTS> 4,147 18,725
<OTHER-EXPENSES> (247) (880)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15 58
<INCOME-PRETAX> 468 622
<INCOME-TAX> 111 237
<INCOME-CONTINUING> 357 385
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 357 385
<EPS-PRIMARY> .13 .14
<EPS-DILUTED> .13 .14
</TABLE>
