SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 31 December 1993
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 1-4400
FISCHER & PORTER COMPANY
(Exact name of registrant as specified in its charter)
125 East County Line Road, Warminster, Pennsylvania 18974
(Address of principal executive offices and zip code)
Pennsylvania 23-0582516
(State of incorporation) (I.R.S. Employer Identification No.)
Registrant's telephone number, including area code: 215-674-6000
________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of Each Exchange on Which Registered
Common Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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)
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
(Insert number of shares outstanding of each class of common stock, as of latest
practicable date and the aggregate market value of the voting stock held by non-
affiliates.)
Outstanding at
Class 28 February 1994
Common Stock 5,295,250 shares
The aggregate market value of the voting stock held by non-affiliates is
$88,018,557 as of 28 February 1994.
PART I
ITEM 1 BUSINESS
(a) General Development of Business
Fischer & Porter Company was founded in 1937 and originally incorporated
in Pennsylvania in 1942. It was re-incorporated in Delaware in 1987 and re-
incorporated in Pennsylvania in 1990. The Company re-incorporated from
Pennsylvania to Delaware in 1987 to make available to the Company the then
more modern and less restrictive financial provisions of the Delaware
Corporation Law. In 1988, Pennsylvania enacted the Business Corporation Law
of 1988 ("1988 BCL"). Since the Company's executive offices and virtually
all of its domestic operations are in Pennsylvania, and the "1988 BCL"
appeared to meet all the objections motivating the 1987 move to Delaware, the
Company re-incorporated in Pennsylvania. There has been no significant
change in the general development of the Company's business during the past
five years. The Company has continued to conduct its business on a worldwide
basis through its United States operations and its Subsidiaries throughout
the world.
(b) Financial Information About Industry Segments
The Company operates principally in one industry: process control
instrumentation. The process control instrumentation industry designs,
engineers, manufactures and sells instruments, systems, maintenance services
and replacement parts for the measurement, recording and control of various
processes. The Company's products are sold to such diverse markets as
municipal and industrial water and wastewater treatment plants, chemical
plants, pulp and paper mills, food and beverage processing facilities,
pharmaceutical plants, metal refineries and mines.
(c) Narrative Description of Business
General
A high degree of technological competence and innovation is involved in
most of the products and services provided. The line of products includes
a multiplicity of items, of which the major ones are flowmeters,
transmitters, process controllers, micro-computers, disinfection equipment
and systems, distributed control systems, and analytical instruments.
In the design and manufacture of special process control systems, the
Company purchases from outside sources advanced computer products modified
to Company specifications. There are a number of suppliers of these computer
products and there have not been any constraints as to their availability.
Markets
The Company's customers include manufacturers who process raw materials;
municipalities and industries requiring water and wastewater treatment and
control. Among the customers which use the Company's products are those in
the chemical, water and waste, and pulp and paper fields. The Company also
serves customers in the food, metal, mining, and pharmaceutical industries.
Distribution
During the twelve months ended 31 December 1993, approximately 32% of
total sales were made to customers in the United States and the balance to
markets outside the United States.
The Company has sales engineering offices in 10 principal cities in the
United States, employing 152 field engineers. A distribution center is also
maintained in Warminster, Pa.
Sales in countries other than the United States are made through field
sales engineers of Fischer & Porter Subsidiaries and sales engineering
representatives.
Competition
The business in which the Company is engaged is highly competitive both
in the United States and in other countries where the Company does business.
There are many other companies which manufacture products that compete with
all portions of the product lines of the Company. The principal factors of
competition are product performance and price. Some of these competitors are
substantially larger than the Company. Reliable figures as to the volume and
relative ranking of the business done by competitors are not available.
Backlog
The backlog of unfilled orders at 31 December 1993 was $55,500,000,
compared to the $58,000,000 backlog at the beginning of the year. Incoming
orders in 1993 amounted to $219,000,000, 5% lower than in 1992.
Approximately 95% of the orders in the backlog at 31 December 1993 are
anticipated to be shipped during 1994.
Patents and Trademarks
The Company owns or controls a number of patents in the United States and
foreign countries. Although, in the aggregate, its patents are of
considerable importance in the operation of its business, it is the opinion
of the Company that there is no one patent or group of patents the loss of
which would materially affect the overall operation of the Company.
The duration of patents applicable to the Company's business varies, as
the Company continually seeks to obtain patents on its inventions (and
licenses on the patents of others.) At this time, the Company does not
believe there is any point in time at which the expiration of its patents (or
the licenses it holds under the patents of others,) will be of material
importance.
The Company uses a number of trademarks with respect to its products; the
important trademarks are registered in the United States and, where deemed
appropriate, in other countries.
Research and Development
The Company maintains an active research and development program for the
design and development of new products and the adaptation of existing
products for new applications.
Total Company sponsored research and development expenditures during 1993,
1992 and 1991 were $10,973,000, $12,396,000, and $12,835,000, respectively.
The research and development program employed 150 people during 1993, 156
people during 1992 and 161 people during 1991 .
Employee Relations
As of 31 December 1993, 2,112 persons were employed on a worldwide basis
and relations with these employees are, and have been, satisfactory. The
Company and its Subsidiaries provide group life insurance, sick pay,
hospitalization, and surgical and medical benefits for its employees. There
are also pension plans, which are described in Note 7 of the Notes to
Consolidated Financial Statements. The Company is party to one collective
bargaining agreement in the United States and three in its International
operations.
Environmental Matters
Compliance with Federal, State and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment has not had a
material effect upon the capital expenditures, earnings or competitive
position of the Company.
(d) Foreign Operations
Financial information relating to foreign and domestic operations for the
three years ended 31 December 1993 is presented in Note 12 (Segments of
Business) of the Notes to the Consolidated Financial Statements. While the
Company is subject to certain risks by operating in foreign countries
(political, currency, export and import regulations), the Company believes
the risks involved are no greater than the normal risks of doing business.
The economic, tariff and trade policies in the countries in which the Company
operates are generally not restrictive such that the Company's ability to do
business is impaired. Tax policies in these countries vary somewhat compared
to the United States and each other, although none of them are overly onerous
or restrictive. Cash flow among the countries within which the Company
operates is not restricted. Currency exchange rate fluctuations can impact
the financial statements via translation of Subsidiary balance sheets and
settlement of foreign currency transactions (mostly intercompany in nature).
Periodically, hedging techniques are used, but not as a general rule.
ITEM 2 PROPERTIES
The Company conducts administrative, sales and manufacturing operations
at the following premises:
Premises Owned
Approximate Area
Location (Square Feet)
Warminster, Pennsylvania 500,000
Vineland, New Jersey 29,000
Toronto, Canada 78,000
Goettingen, Germany 202,000
Milan, Italy 79,000
Antwerp, Belgium 18,000
Mexico City, Mexico 16,000
Workington, England 48,000
Refer to Note 3 (Long-Term Debt and Restrictions) of the Notes to the
Consolidated Financial Statements regarding security interests in certain of
these properties.
Premises Leased
Location Approximate Area Lease
(Square Feet) Expiration Dates
Madrid, Spain 22,000 1996
Melbourne, Australia 45,000 1999
Stockholm, Sweden 2,000 1996
Gorinchem, Netherlands 8,000 1995
Helsinki, Finland 6,000 1996
Clermont-Ferrand, France 100,000 1994
Wiener Neudorf, Austria 3,000 1994
The Company also leases sales offices in 10 U.S. cities which have
expiration dates ranging from 1 to 5 years. See, also, Note 5 (Leases) of
the Notes to the Consolidated Financial Statements.
The Company believes that the facilities utilized by it are adequate and
suitable for the purposes they serve.
ITEM 3 LEGAL PROCEEDINGS
In December of 1991, a class action and shareholders' derivative action
was filed against the Company and certain current and former officers and
directors in the U.S. District Court for the Eastern District of
Pennsylvania, [Weiner, et al. vs. Tolson, et al., (No:91-7822)]. The alleged
wrongdoings have been denied. In March 1993, the parties stipulated to the
dismissal of all class action claims and the dismissal of one of the
plaintiffs, Howard Weiner from the action. A tentative agreement was reached
by the parties in June 1993 to settle the derivative action, which was the
only remaining claim in the lawsuit. However, in August 1993 when the matter
was submitted to the Court for approval, the Court failed to approve the
proposed settlement. In February 1994, a new agreement was reached to settle
the matter, which the Company believes should satisfy all the requirements
of the Court. The new Settlement Agreement has been submitted for Court
approval, but has not yet been approved. The Company's results of operations
or financial condition would not be materially impacted under the terms of
the new Settlement Agreement.
In October of 1993,a class action suit was filed on behalf of the
Company's shareholders against the Company, Jay H. Tolson and E. Joseph
Hochreiter (the Company's two former Class B Stockholders, who are also
directors and executive officers). The suit was filed in the court of Common
Pleas of Bucks County, Pennsylvania, under the caption, Roger Copland vs. Jay
H. Tolson, et al., (No. 93008366). The suit challenged the validity of the
warrants issued to the two named individuals in connection with their
conversion of Class B Stock into Common Stock. The Plaintiff sought to
enjoin the exercise of the warrants, to rescind the warrants and to award
attorneys' fees and costs to Plaintiff's counsel. In March of 1994, the
Company was informed that the Plaintiff will file an Amended Complaint
asserting a class action and a derivative claim against the individual
defendants. The Company will be named only as a Nominal Defendant on the
derivative claims and no claim will be asserted against the Company for any
of the wrongdoings alleged in this action. The Company's results of
operations or financial condition would not be materially impacted by the
outcome of this action, either as currently filed or under the Amended
Complaint.
Refer, also, to Note 10 (Commitments and Contingencies) of the Notes to
the Consolidated Financial Statements.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended 31 December 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an un-numbered Item in Part I of this Report.
Business Experience
Name, Age and Position During Past 5 Years
Jay H. Tolson, 58 Appointed Chairman of the Board of
Chairman of the Board of Directors in 1971 and Chief Executive
Directors and Chief Officer in 1983. Was also President
Executive Officer from 1974 to 1983 and from 1986 to 1991.
Responsible for the formation of overall
Corporate policy.
E. Joseph Hochreiter, 47 Appointed President and Chief Operating
President and Chief Operating Officer in 1991. He was a principal and
Officer founder of HMA, Investments, Inc., a
private investment firm, from 1987 to
1991; prior thereto he was Executive
Vice President of Penn Central
Telecommunications Co. from 1984 to 1987
and held various other senior management
positions with the Penn Central
Corporation from 1972 to 1984. In
addition to serving on the Board of
Fischer & Porter Company, he is a
director of Pennsylvania Pressed
Metals, Inc., and is the Chairman of
the Board of Superior Air Parts, Inc.
Laurence P. Finnegan, Jr., 56 Appointed Chief Financial Officer and
Senior Vice President, Treasurer in 1986. Responsible
Chief Financial Officer and primarily for all the Company's
Treasurer financial, accounting, treasury and
information systems functions.
Previously was President of HMH Design
Group (design and manufacture of
electronic assembly equipment) from 1984
to 1986.
Joseph P. Garay, 44 Appointed in 1989; Chief Legal Officer
Vice President, Secretary and and Secretary responsible for all legal
General Counsel matters worldwide, including patents and
trademarks; also responsible for share-
holders, investors and community
relations. Previously was a partner in
the corporate department of the law firm
of Clark, Ladner, Fortenbaugh & Young
of Philadelphia, Pa., specializing in
corporate finance, acquisitions/
divestitures and general corporate
matters.
Nathan T. Schelle, 48 Appointed in 1987; Corporate Controller/
Vice President-Controller Chief Accounting Officer; and
Assistant Secretary responsible for worldwide financial
reporting and accounting policies and
procedures. Previously was Assistant
Treasurer with essentially the same
duties and responsibilities.
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
Principal Market
Principal market on which Fischer & Porter's Common stock is traded:
American Stock Exchange
Market Price for the Common stock and Dividend Information
1993 1992
High Low High Low
First quarter $10 1/2 $ 8 5/8 $ 8 3/8 $6 1/2
Second quarter $ 9 5/8 $ 8 $ 9 $7 3/8
Third quarter $ 9 1/4 $ 7 5/8 $ 8 5/8 $7
Fourth quarter $17 7/8 $ 11 $11 1/2 $7 1/8
No cash dividends were paid in 1993 or 1992.
A revolving credit agreement contains certain covenants which, among other
things, set limitations on the payment of cash dividends on Common Stock. As of
31 December 1993, no cash dividends can be paid on Common Stock. See Notes 3
and 6 of the Notes to the Consolidated Financial Statements.
At 31 December 1993, approximately $32,000,000 of retained earnings of
International Subsidiaries has not been distributed. Of this amount, $8,200,000
is not currently available for distribution due to local restrictions. See Note
3 of the Notes to the Consolidated Financial Statements with respect to
restrictions on dividends and other related payments.
Approximate Number of Holders of Common Stock
The number of holders of record of Fischer & Porter's
Common stock as of 28 February 1994: 2,920
ITEM 6 SELECTED FINANCIAL DATA
Fischer & Porter Company and Subsidiaries
(dollar amounts in thousands except per share data)
Year Ended 31 December
1993 1992 1991 1990 1989
Summary of Operations
Net sales $221,644 $231,317 $236,976 $237,955 $225,324
Income (loss) from operations 4,223 9,117 (14,817) (1,567) 11,680
Interest expense, net 2,608 2,901 3,189 4,170 1,952
Foreign exchange loss (gain) 366 468 289 (1,250) 38
Other income (2) - - - 2,124 -
Income (loss) before taxes and
accounting change 1,249 5,748 (18,295) (2,363) 9,690
Income taxes 143 4,006 4,236 5,775 6,183
Income (loss) before accounting
change 1,106 1,742 (22,531) (8,138) 3,507
Accounting change (1) - - 2,821 - -
Net income (loss) (2) 1,106 1,742 (25,352) (8,138) 3,507
Depreciation 6,302 6,878 7,082 7,350 5,924
Capital expenditures 4,517 6,997 6,356 9,155 23,079
Year-End Position
Current assets 87,452 86,178 107,329 123,706 125,319
Current liabilities 41,712 40,174 63,668 47,931 50,370
Working capital 45,740 46,004 43,661 75,775 74,949
Current ratio 2.10 2.15 1.69 2.58 2.49
Property, plant and equipment,
net 36,638 39,963 42,039 43,958 46,109
Total assets 131,993 132,969 153,901 174,967 178,604
Asset turnover rate 1.68 1.74 1.54 1.36 1.26
Long-term debt 17,266 19,176 12,297 26,897 26,943
Total debt 28,840 25,697 30,734 31,961 33,963
Preferred stock - 710 1,425 2,140 3,427
Shareholders' equity 38,169 41,986 45,359 71,566 75,328
Total capitalization 67,009 68,393 77,518 105,667 112,718
Debt to shareholders'
equity ratio .76 .61 .68 .45 .45
Debt to total
capitalization ratio .43 .38 .40 .30 .30
Per Share Data (1) (2)
Earnings(loss) before
accounting change .19 .31 (4.36) (1.61) .62
Earnings (loss) per share .19 .31 (4.90) (1.61) .62
Dividends - - - 5% Stock 5% Stock
Shareholders' equity 7.21 8.04 8.69 13.74 14.54
Other Data
Number of employees 2,112 2,207 2,413 2,637 2,675
Number of shareholders 2,971 3,438 3,518 3,577 3,770
Average number of common shares
for primary earnings
(in thousands) 5,484 5,231 5,217 5,209 5,161
Total common shares outstanding
(in thousands) 5,295 5,221 5,221 5,209 5,179
Net sales per employee $104.9 $104.8 $98.2 $90.2 $84.3
(1) In 1991, the Company adopted FASB #106 "Accounting for Postretirement
Benefits other than Pensions."
(2) In 1991, there was an aftertax charge of $17,704,000 for a major
restructuring; in 1990, there was an aftertax charge of $6,000,000 for
personnel reductions and additional inventory reserves and an aftertax gain
of $2,124,000 on the sale of a facility.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Summary - 1993
Sales in 1993 were $9.7 million less than the previous year. Pretax income
declined $4.5 million; however, net income was only $.6 million lower. There
were a number of contrasts and offsetting activities which occurred during the
year: Sales in the United States were down from 1992 while International sales
(excluding currency effects) increased slightly; orders were up in the United
States, yet orders for International units (particularly Europe) were down;
improvement in gross profit margins in the U.S. was negated by lower margins by
International. Economic conditions in Europe continued to be a major drag on
meaningful improvement. The French Subsidiary had a $3.0 million net loss in
1993 due to difficulties in the transition from being a manufacturing
operation. The U.S. Company generated $1.2 million in cash and income
through the sale of a small research operation. The implementation of FASB
#109 (Accounting for Income Taxes) resulted in deferred tax benefits being
recognized. Consolidated cash flow from operations was slightly negative and
International short term debt increased due to generally negative operating
results compared to the prior year.
Results of Operations
1993 Compared to 1992
United States
Orders received in the United States in 1993 were $85.1 million, or $8.0
million more than in 1992; excluding the specialty glass business which was sold
in 1992, the increase in orders was $10.8 million. Orders for systems increased
$7.9 million while instruments were up by $2.9 million. Sales in the United
States were $75.2 million. The decline of $8.4 million from 1992 levels was
$2.6 million in specialty glass sales (business sold in 1992), $3.6 million
in systems and $2.2 million in instruments. The backlog entering 1994 is
$26.3 million compared to $16.4 million at 31 December 1992.
Gross profit margins in the United States increased approximately four
percentage points in 1993 compared to the previous year, mainly due to cost
control and manufacturing improvements. In the third quarter of 1993, the
Company sold a small research operation for cash and the net proceeds of $1.2
million were offset against research and development expenses. Operating
expenses in the United States, including research and development, were 1.9%
higher than in 1992, without the effect of the sale; reported operating expenses
were 1.5% less than the previous year. Income from operations in the United
States was down slightly from 1992.
International
Orders received by International units declined from the previous year's
levels by $18.5 million to $133.9 million. Approximately $13.2 million results
from different currency exchange rates used to translate local currency orders
into dollars in each year. The comparatively stronger U.S. dollar in 1993 has
the effect of producing a lower dollar value for orders which, in local
currency, might be unchanged or even increased. The decline in orders on a
more comparable basis was approximately $5.3 million, principally in the
distributed control system business in Europe. Orders for other
instrumentation, as well, were adversely affected by the European economic
situation. Sales of $146.5 million by International units were $1.3 million
lower than in 1992. As with orders, currency exchange rates impact
comparability. On a comparable basis, sales increased approximately $14.6
million but different exchange rates reduced reported sales by $15.9 million.
The higher sales volume was primarily in the systems business, driven to a
great degree by the level of orders received in 1992 for the new distributed
control system introduced in that year.
Gross profit margins for International units were approximately four and one
half percentage points lower than in 1992. The principal causes were severe
pricing pressures in order to maintain market share and a higher portion of
systems which tend to have lower margins than instrument sales. The French
Subsidiary incurred an operating loss of $1.6 million in 1993 due to
difficulties in the transition from manufacturing. Operating expenses,
including research and development were approximately 3.0% less than the
previous year, although at comparable exchange rates, operating expenses would
have increased approximately 5.0%. Income from operations, as reported,
reflects a decline of $4.6 million, mainly as a consequence of lower gross
profit margins. Currency exchange rate changes reduced sales but also reduced
costs and expenses. Consequently, the impact of currency exchange rate changes
on comparability of International income from operations with 1992 is less than
$.5 million.
Consolidated
Consolidated net interest expense in 1993 was slightly lower than in 1992.
Interest expense in the United States was not significantly different since
rates and debt levels were fairly consistent. International interest expense
was higher due to debt levels but offset somewhat by reduced rates. Interest
income was modestly higher. Foreign exchange losses are primarily a function of
the U.S. dollar compared to other currencies when transactions (mainly
intercompany) are settled. In 1993, the U.S. dollar was strong relative to
other currencies for most of the year.
In 1993, the effective tax rate of 11.5% is unusually low which is due to a
number of factors as shown in the reconciliation table in Note 4 to the
Consolidated Financial Statements. The absolute amount of difference between
the expected and the actual tax provision is not that significant; however, the
difference in relative percentages is substantial. The alternative minimum tax
in 1993 is largely a one-time result (cost) of certain U.S. tax planning
activities. The Company adopted FASB #109 (Accounting for Income Taxes) in
1993. In the fourth quarter, a deferred tax benefit of $1.0 million was
recorded in the U.S. It was not until the fourth quarter that Management was
able to conclude that it was more likely than not that sufficient taxable
income will be available to realize the deferred benefit. There was
insufficient evidence to conclude otherwise prior to the fourth quarter. The
U.S. Company has approximately $21.0 million of deductible temporary differences
at the end of 1993 for which no tax benefit has been reported. Certain U.S. tax
planning techniques have already been implemented whereby taxable income has
been or will be sufficient to allow for realization of the tax benefit
recorded on approximately $3.0 million of deductible temporary differences.
Summary - 1992
The Company reported net income of $1.7 million in 1992 on sales of $231.3
million. Sales were 2.4% lower than in 1991, however, there was a substantial
improvement in earnings. The results for 1991 included $20.5 million of special
charges for restructuring and an accounting change. Exclusive of these charges,
there was an increase of $6.6 million in net income between 1992 and 1991. The
worldwide economic situation continued to be a major obstacle to achievement of
meaningful or significant increases in the level of business. In the United
States and Canada, competition was very intense from both domestic and foreign
businesses. In Europe, the recession has struck very hard and the situation has
been further complicated by the turmoil in currency exchange rates during the
latter part of the year. In general, inflation was not a significant factor in
1992 but there were increases in costs. In light of the circumstances, the
Company has followed the course of managing for cash and continuing to cut costs
wherever possible. Personnel levels have been reduced by over 8% in each of the
past two years. New, lower cost medical plans have been put in place in the
United States. Manufacturing inventories in the U.S. were reduced by $3.0
million. Total Company debt was reduced by $5.0 million in 1992 of which $3.0
was in the United States.
The restructuring activities which were planned in 1991 were essentially
completed in 1992. The French manufacturing Subsidiary has been downsized to a
sales and service company and certain other European sales and service companies
have been reduced to focus on fewer and more profitable products. The specialty
glass business in the U.S. was sold in the fourth quarter of 1992. The Company
also has scaled back its participation in certain U.S. environmental markets.
There are additional personnel still to leave the payrolls in 1993 due to the
restructuring, however, the associated costs were previously accrued in 1991.
Results of Operations
1992 Compared to 1991
United States
Orders received in the United States in 1992 were $77.1 million which was the
same as in 1991. Orders for instruments declined $1.7 million while orders for
systems increased the same amount. The increase in systems reflects the
Company's objective to obtain smaller systems orders in specific markets while
the decline in instrument orders mainly reflects economic conditions. Sales in
the United States of $83.6 million were $4.7 million less than the previous
year, all in the systems business. This reflects the decline in orders,
primarily in the Environmental sector, that was experienced in 1991. Gross
profit margins increased approximately four percentage points in 1992 compared
to the previous year, mainly as a result of cost savings and the impact of
less systems business in the Environmental sector. Operating expenses,
including research and development, were essentially unchanged. Excluding the
special charge in 1991, income from operations improved by $2.1 million in
1992. (Please refer to Note 12 to the Consolidated Financial Statements.)
International
Orders received by International Subsidiaries in 1992 were $152.4 million
compared to $147.9 million in the previous year. While the recession in Europe
adversely affected business in general, orders for the new distributed control
system and other new products, as well, compensated somewhat for the stagnant
conditions experienced in most other products. Sales of $147.7 million were
basically unchanged from the sales levels in 1991. Gross profit margins
improved slightly on a comparable basis with 1991. However, excluding the
impact of restructured operations, gross profit margins increased by
approximately three percentage points. Operating expenses, including research
and development, were 2.2% higher in 1992. Income from operations was $ 9.7
million in 1992 while in 1991, excluding special charges, income from
operations was $5.7 million. (Please refer to Note 12 to the Consolidated
Financial Statements.)
Consolidated
Consolidated interest expense decreased $.3 million compared to 1991. In the
United States interest was $.6 million lower due to rates and generally lower
debt levels. International was $.3 million higher due to generally higher debt
levels. Foreign exchange losses are primarily a function of the U.S. dollar
compared to other currencies when transactions (mainly intercompany) are
settled. In 1992 and 1991, the U.S. dollar was strong relative to other
currencies for part of the year and weak for part of the year.
The unusually high effective tax rate results, primarily, from an absence of
tax benefits on losses in the United States and tax rates in other countries
being generally higher than in the United States. (Please refer to Note 4 to
the Consolidated Financial Statements.)
Cash Flow
In 1993 and 1992, cash was used to satisfy severance and other obligations
stemming from the 1991 restructuring plan. Exclusive of the cash used for these
activities, net cash provided from operating activities was essentially "break-
even" in 1993 compared to $13.3 million in 1992. The principal areas of
substantial change between years were lower net income and receivables. At the
end of 1992, receivables were unusually low as a result of exceptional
collections in the last month of that year. Also in 1992, $3.5 million of
receivables were sold by the French Subsidiary in a non-recourse factoring
arrangement; no similar transaction occurred in 1993. Consolidated days sales
outstanding, on average for the year, were actually one day less in 1993.
Capital expenditures were strictly controlled in 1993. The Company generated
$1.2 million of cash through the sale of a small research operation in September
of 1993.
Liquidity and Capital Resources
(See Notes 2, 3 and 7 to the Consolidated Financial Statements)
In September 1993, the Company announced that its Board of Directors had
engaged an investment banker to advise the Company on possible alternatives to
increase shareholder value, including sale of the Company. Since that time,
potential buyers have met with Management and conducted their due diligence
activities. In March 1994, a definitive merger agreement was reached with
Moorco International Inc. (Moorco). The agreement provides for Moorco to
acquire all of the shares of the Company's common stock, on a fully-diluted
basis, for approximately $150.0 million, or $23.25 per share. The transaction
is conditional upon, among other things, the approval of the Company's
shareholders; it is expected the process will be completed by mid-1994.
Also in September 1993, the Company entered into an agreement with the holders
of its outstanding Class B Capital stock, for the conversion of all of the Class
B shares into shares of Common stock. In exchange for the conversion, the Class
B shareholders were granted warrants, exercisable on or before 31 March 1995, to
purchase 1,128,994 shares of Common stock at $8.625 per share, the closing price
of the stock on the American Stock Exchange on 29 September 1994.
At 31 December 1993, the available credit under the U.S. revolver was $7.6
million of which $6.3 million was outstanding; at 29 March 1994, the available
credit was $13.4 million and the outstanding borrowings were $9.6 million. In
January 1994, an amendment to the agreement was made to revise certain financial
covenants and to modify the asset-based formula to provide for additional
borrowing availability. The additional amount of availability can be up to
$5,000,000, subject to support by the appropriate levels of assets. It was
obtained to have additional financial resources available on an interim basis
until the Company is sold. The additional borrowing capacity is available until
the earlier of (1) the sale of the Company occurs, (2) the Company is no longer
for sale, or (3) 31 December 1994. In exchange, the lender is entitled to a fee
of $750,000 which is payable no later than 31 December 1994.
At 31 December 1993, the U.S. Company has an unfunded accrued pension cost of
$3.4 million and an additional minimum liability of $8.4 million for its defined
benefit pension plan. In 1993, equity was reduced by $3.3 million resulting,
mainly, from a reduction in the discount rate used to determine the projected
benefit obligation. Annual funding requirements vary with interest rates and
asset growth. Contributions are typically in the range of $1.5 million to $2.0
million which is not substantially different than the annual expense. The
Company's largest and most profitable Subsidiary has an unfunded pension
liability of approximately $14.3 million at 31 December 1993. It is not a
trusteed plan and there are no legal funding requirements. Payment of pensions
from this plan in the foreseeable future will not have a significant impact on
overall liquidity since there are very few retirees or employees nearing
retirement age.
Foreign Currency Translation
In 1991, the U.S. dollar strengthened slightly at yearend compared to the
beginning of the year which resulted in a modest decrease in shareholders'
equity. In 1992, there was a more significant strengthening of the dollar at
yearend, which accounted for the substantial reduction in equity. The same
pattern continued into 1993.
"Cumulative translation adjustments" have affected shareholders' equity, as
follows:
Increase (Decrease) in Thousands
1993 1992 1991
Europe $(2,096) $(4,139) $(723)
Other (223) (848) (50)
$(2,319) $(4,987) $(773)
Since 1 January 1981, the date of adoption of FASB #52, the "Cumulative
Translation Adjustments" is a decrease of $2.5 million in shareholders'
equity.
Recent FASB Pronouncements
In November 1992, the FASB issued its Standard #112 (effective in 1994)
concerning the accounting for postemployment benefits (e.g. severance, salary
continuation, job counseling, etc.). The Company already complies with the
requirements of this standard.
In May 1993, the FASB issued its Standard #115 (effective in 1994) concerning
the accounting for investments in debt and equity securities. The Company
typically does not have such investments and does not anticipate having such in
the future.
Other
In December of 1991, a class action and shareholders' derivative action was
filed against the Company and certain current and former officers and directors
in the U.S. District Court for the Eastern District of Pennsylvania, [Weiner, et
al. vs. Tolson, et al., (No:91-7822)]. The alleged wrongdoings have been
denied. In March 1993, the parties stipulated to the dismissal of all class
action claims and the dismissal of one of the plaintiffs, Howard Weiner from
the action. A tentative agreement was reached by the parties in June 1993 to
settle the derivative action, which was the only remaining claim in the lawsuit.
However, in August 1993 when the matter was submitted to the Court for
approval, the Court failed to approve the proposed settlement. In February
1994, a new agreement was reached to settle the matter, which the Company
believes should satisfy all the requirements of the Court. The new Settlement
Agreement has been submitted for Court approval, but has not yet been
approved. The Company's results of operations or financial condition would not
be materially impacted under the terms of the new Settlement Agreement.
In October of 1993,a class action suit was filed on behalf of the Company's
shareholders against the Company, Jay H. Tolson and E. Joseph Hochreiter (the
Company's two former Class B Stockholders, who are also directors and executive
officers). The suit was filed in the court of Common Pleas of Bucks County,
Pennsylvania, under the caption, Roger Copland vs. Jay H. Tolson, et al., (No.
93008366). The suit challenged the validity of the warrants issued to the two
named individuals in connection with their conversion of Class B Stock into
Common Stock. The Plaintiff sought to enjoin the exercise of the warrants, to
rescind the warrants and to award attorneys' fees and costs to Plaintiff's
counsel. In March of 1994, the Company was informed that the Plaintiff will
file an Amended Complaint asserting a class action and a derivative claim
against the individual defendants. The Company will be named only as a Nominal
Defendant on the derivative claims and no claim will be asserted against the
Company for any of the wrongdoings alleged in this action. The Company's
results of operations or financial condition would not be materially impacted
by the outcome of this action, either as currently filed or under the Amended
Complaint.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
Fischer & Porter Company and Subsidiaries
(in thousands of dollars except per share data)
Year Ended 31 December
1993 1992 1991
Net sales $221,644 $231,317 $236,976
Costs and expenses:
Cost of sales 140,177 142,596 154,399
Research and development (Note 1) 10,973 12,396 12,835
Selling, general & administrative expenses 66,271 67,208 66,680
Restructuring charge (Note 9) - - 17,879
217,421 222,200 251,793
Income (loss) from operations 4,223 9,117 (14,817)
Interest expense, net of interest income of
$828 in 1993, $551 in 1992 and $612 in
1991 2,608 2,901 3,189
Foreign exchange losses (Note 1) 366 468 289
Income (loss) before provision for income taxes
and accounting change 1,249 5,748 (18,295)
Provision for income taxes (Note 4) 143 4,006 4,236
Income (loss) before accounting change 1,106 1,742 (22,531)
Accounting change (Note 7) - - 2,821
Net income (loss) $1,106 $1,742 $(25,352)
Earnings (loss) per share (Notes 1 and 9):
Earnings (loss) before accounting change $.19 $.31 $(4.36)
Accounting change - $.31 (.54)
Earnings (loss) per share $.19 $.31 $(4.90)
(See Notes to Consolidated Financial Statements)
CONSOLIDATED BALANCE SHEETS
Fischer & Porter Company and Subsidiaries
(in thousands of dollars except share data)
31 December
1993 1992 1991
Assets
Current assets:
Cash and cash equivalents $5,565 $6,565 $12,585
Receivables, less reserves of $2,359 in
1993, $2,259 in 1992 and $2,268 in 1991 42,114 37,737 51,543
Inventories, at lower of cost (principally
first-in, first-out) or market 37,666 40,109 41,186
Prepaid expenses 2,107 1,767 2,015
Total current assets 87,452 86,178 107,329
Property, plant and equipment, at cost:
Land and land improvements 2,242 2,290 2,435
Buildings 37,760 38,706 39,031
Machinery and equipment 64,428 66,734 65,376
Construction in progress 1,348 972 1,494
105,778 108,702 108,336
Less-accumulated depreciation 69,140 68,739 66,297
36,638 39,963 42,039
Other assets (Notes 7 and 11) 7,903 6,828 4,533
$131,993 $132,969 $153,901
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt
(Note 3) $1,779 $1,456 $1,345
Notes payable (Note 2) 9,795 5,065 17,092
Accounts payable 12,355 10,764 14,479
Accrued salaries and wages 13,674 16,891 19,681
Other accrued expenses 5,053 6,127 8,990
Accrued taxes on income (Note 4) (944) (129) 2,081
Total current liabilities 41,712 40,174 63,668
Long-term debt (Note 3) 17,266 19,176 12,297
Other noncurrent liabilities (Notes 1, 7 & 11) 34,846 30,923 31,152
Commitments and contingencies (Notes 5 & 10) - - -
9% Convertible, Exchangeable Preferred Stock,
$100 par, authorized 50,000 shares; issued
and outstanding 1993 - none; 1992- 7,100
shares; 1991 - 14,250 shares (Note 6) - 710 1,425
Shareholders' equity (Notes 1, 3 and 6):
Series preference stock, $1 par, authorized
1,000,000 shares - - -
Common stock, $1 par, authorized 8,000,000
shares; issued 1993 - 5,295,000 shares;
1992 - 4,657,000 shares; 1991 - 4,657,000
shares 5,295 4,657 4,657
Class B Capital stock, $1 par, authorized
700,000 shares; issued and outstanding
1993 - none; 1992 - 564,000 shares;
1991 - 564,000 shares - 564 564
Paid-in surplus 61,935 61,233 61,233
Accumulated deficit (23,217) (24,260) (25,874)
Pension liability adjustment (3,317) - -
Cumulative translation adjustments (2,527) (208) 4,779
Total shareholders' equity 38,169 41,986 45,359
$131,993 $132,969 $153,901
(See Notes to Consolidated Financial Statements)
Consolidated Statements of Shareholders' Equity
Fischer & Porter Company and Subsidiaries
(in thousands of dollars)
Year Ended 31 December
1993 1992 1991
Common stock
Balance, beginning of year $4,657 $4,657 $4,645
Issuance of shares under stock option plans 7 - 12
Conversion of Class B Capital stock 564 - -
Conversion of preferred stock (Note 6) 67 - -
Balance, end of year 5,295 4,657 4,657
Class B Capital stock
Balance, beginning of year 564 564 564
Conversion to common stock (564) - -
Balance, end of year - 564 564
Paid-in surplus
Balance, beginning of year 61,233 61,233 61,135
Issuance of shares under stock option plans 59 - 98
Conversion of preferred stock (Note 6) 643 - -
Balance, end of year 61,935 61,233 61,233
Accumulated deficit
Balance, beginning of year (24,260) (25,874) (330)
Net income (loss) 1,106 1,742 (25,352)
Preferred stock dividend (63) (128) (192)
Balance, end of year (23,217) (24,260) (25,874)
Pension liability adjustment
Balance, beginning of year - - -
Minimum liability adjustment (3,317) - -
Balance, end of year (3,317) - -
Cumulative translation adjustments
Balance, beginning of year (208) 4,779 5,552
Currency translation adjustment (2,319) (4,987) (773)
Balance, end of year (2,527) (208) 4,779
Total shareholders' equity $ 38,169 $41,986 $45,359
(See Notes to Consolidated Financial Statements)
Consolidated Statements of Cash Flows
Fischer & Porter Company and Subsidiaries
(in thousands of dollars)
Year Ended 31 December
1993 1992 1991
Operating Activities:
Net income (loss) $1,106 $1,742 $(25,352)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 6,302 6,878 7,082
Amortization 359 203 49
Deferred income taxes (2,125) (322) 290
Provision for accounts receivable reserves 371 197 390
Provision for inventory reserves 1,667 2,033 3,744
Provision for retirement plans 2,714 2,592 2,148
Restructuring charge (Note 9) - - 17,879
Cash used for restructuring activity (1,392) (6,531) -
Accounting change (Note 7) - - 2,821
Changes in assets and liabilities:
(Increase) decrease in receivables (7,216) 9,394 (405)
(Increase) decrease in inventories (1,133) (2,153) 9,232
(Increase) decrease in prepaid expenses (119) 155 (286)
(Decrease) in accounts payable & accrued
expenses (741) (3,996) (6,512)
(Decrease) increase in income taxes payable
(Note 11) (813) (1,965) 289
Increase (decrease) in noncurrent
liabilities 181 (905) (375)
(Increase) in other assets (533) (566) (297)
Net cash (used for) provided by operating
activities (1,372) 6,756 11,138
Investing Activities:
Capital expenditures (4,517) (6,997) (6,356)
Cash received from property dispositions 252 669 65
Net cash (used for) investing activities (4,265) (6,328) (6,291)
Financing Activities:
Sale of common stock 66 - 110
Cash dividend on preferred stock (63) (128) (192)
Sinking fund payment on preferred stock - (1,287) (286)
Long-term debt borrowings 240 8,760 3,655
Reduction in long-term debt (1,557) (1,355) (7,332)
Net short-term borrowings 6,294 (11,352) 2,506
Net cash provided by (used for) financing
activities 4,980 (5,362) (1,539)
Effect of exchange rate changes on cash (343) (1,086) 632
Net (decrease) increase in cash and cash
equivalents (1,000) (6,020) 3,940
Cash and cash equivalents, beginning of year 6,565 12,585 8,645
Cash and cash equivalents, end of year $5,565 $6,565 $12,585
(See Notes to Consolidated Financial Statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
The Company
On 30 September 1993, the Company announced that its Board of Directors had
engaged an investment banker to advise the Company on possible alternatives to
increase shareholder value, including sale of the Company. Since that time,
potential buyers have met with Management and conducted their due diligence
activities. In March 1994, a definitive merger agreement was reached with
Moorco International Inc. (Moorco). The agreement provides for Moorco to
acquire all of the shares of the Company's common stock, on a fully-diluted
basis, for approximately $150.0 million, or $23.25 per share. The
transaction is conditional upon, among other things, the approval of the
Company's shareholders; it is expected the process will be completed by
mid-1994.
Also in September 1993, the Company entered into an agreement with the holders
of its outstanding Class B Capital stock, for the conversion of all of the Class
B shares into shares of Common stock. In exchange for the conversion, the Class
B shareholders were granted warrants, exercisable on or before 31 March 1995, to
purchase 1,128,994 shares of Common stock at $8.625 per share, the closing
price of the stock on the American Stock Exchange on 29 September 1993.
The consolidated financial statements include the accounts of Fischer & Porter
Company (the Company) and all of its Subsidiaries. All significant intercompany
transactions have been eliminated.
Foreign Currency Translation
The assets and liabilities of International Subsidiaries are translated into
U.S. dollars at the year-end exchange rate; income and expense items are
translated at the average exchange rate for the period. Translation adjustments
are charged or credited to a separate component of shareholders' equity. Gains
and losses on foreign currency transactions are included in the consolidated
statements of income.
Depreciation
Depreciation of plant and equipment is provided using, principally, the
straight-line method based on the estimated useful lives of the assets, which
for buildings, range from 15 to 50 years and for machinery and equipment from
3 to 20 years. Maintenance and repair costs ($4,062,000, $5,362,000 and
$4,321,000 in 1993, 1992 and 1991 respectively) are charged to expense as
incurred, and major renewals and betterments are capitalized. When assets are
retired or disposed of, the asset cost and related reserves are eliminated from
the accounts and any resultant gain or loss is included in net income.
Income Taxes
In January 1993, the Company changed from FASB #96 to FASB #109 for its
accounting for income taxes. Deferred income taxes arise as a result of
differences between amounts reported in the financial statements and their bases
or timing of recognition for income tax purposes. These are referred to as
temporary differences. The principal temporary differences are related to
valuation reserves and accrued liabilities not currently deductible for tax
purposes and tax depreciation in excess of depreciation recognized for financial
reporting purposes. Deferred taxes can also arise from tax loss and tax credit
carryforwards.
The Company's policy is to provide additional estimated U.S. income taxes with
respect to earnings of International Subsidiaries which are expected to be
repatriated. As of 31 December 1993, U.S. income taxes have not been provided
on undistributed earnings of $32,000,000 since they are considered to be
permanently invested. No U.S. income taxes are payable until these earnings are
distributed to the Company. It is not practicable to determine the amount of
unrecognized deferred tax liability associated with these unremitted earnings;
however, foreign tax credits would be available, upon distribution, to eliminate
essentially all additional taxes.
Earnings Per Share
Primary earnings per Common and Class B share are based on the monthly
weighted average number of shares of Common stock, Common stock equivalents, and
Class B Capital stock outstanding during the respective years. Common stock
equivalents are not considered in the calculation of primary loss per Common and
Class B share since they would be antidilutive. The monthly weighted average
number of shares was 5,484,000, 5,231,000 and 5,217,000 for primary earnings per
share in 1993, 1992, and 1991, respectively and 5,710,000, 5,368,000, and
5,351,000 for fully diluted. Primary earnings per share are based on earnings
after payment of the 9% dividend on Preferred stock. Fully diluted earnings per
share assume conversion of Preferred stock and exercise of stock options as of
the beginning of the period. For 1993, warrants to purchase common stock are
assumed exercised from the date of issuance - 30 September 1993 (see Note 6).
Primary and fully diluted earnings per share are the same for all years
presented.
Revenue Recognition
Revenue is recognized when products are shipped or services are rendered. On
longer-term systems contracts, revenue and the related cost of sales are
recognized upon shipment and/or completion of specific services.
Cash Equivalents
The Company considers cash equivalents to be all highly liquid investments
that are readily convertible to known amounts of cash and so near their maturity
that they present insignificant risk of changes in value because of changes in
interest rates.
Research and Development
All research and development costs are expensed, as incurred. In 1993, the
Company sold a small research operation to a third party. The net proceeds of
$1,234,000 have been offset against research and development costs in the
consolidated statement of income.
Note 2 Lines of Credit
At 31 December 1993, the International Subsidiaries had $18,600,000 in total
bank lines of credit of which $9,795,000 was utilized. The weighted average
interest rate of bank borrowings outstanding at 31 December 1993 was 9.5% (10.5%
at 31 December 1992 and 12.5% at 31 December 1991). The maximum amount of
month-end bank borrowings during 1993 was $10,900,000 ($9,800,000 and
$6,100,000 in 1992 and 1991, respectively). Based on month-end balances, the
average amount of bank borrowings in 1993, 1992 and 1991 was $9,200,000,
$6,600,000 and $5,100,000 at weighted average interest rates of 10%, 11% and
13%, respectively.
At 31 December 1991, the U.S. revolving credit was classified as Notes payable
(see Note 3). The weighted average interest rate at 31 December 1991 was 8.5%;
the maximum outstanding at any month-end in 1991 was $15,100,000; and, the
average outstanding during 1991 was $13,800,000.
Note 3 Long-Term Debt and Restrictions
At 31 December, long-term debt consisted of the following:
1993 1992 1991
Revolving credit $ 6,316,000 $ 6,116,000 $ -
Mortgage 7,102,000 7,640,000 8,125,000
Term loan 1,917,000 2,417,000 -
Other 3,710,000 4,459,000 5,517,000
19,045,000 20,632,000 13,642,000
Less current portion 1,779,000 1,456,000 1,345,000
$17,266,000 $19,176,000 $12,297,000
The total revolving credit outstanding at 31 December 1991 was $10,974,000.
Subsequent to 31 December 1991, the revolving credit agreement was amended by
converting the obligation to a demand basis. Consequently, at 31 December 1991,
the revolving credit balance was classified as a current liability (see Note 2).
In the third quarter of 1992, the Company replaced the revolving credit
agreement with a three year, $17,500,000 financing facility which consists of a
$15,000,000 revolving credit and a $2,500,000 term loan. The revolving credit
is an asset-based formula facility with an interest rate of prime plus 1-1/2%;
the term loan bears interest at prime plus 1-3/4%. A commitment fee of 1/2% is
also charged on the revolving credit facility based on the average daily unused
balance. The term loan is repayable in monthly installments of $42,000 with a
final installment of $1,000,000 due in September of 1995. The total facility is
secured by essentially all of the Company's assets. The agreement contains
certain financial covenants which, among other things, provide for maintenance
of specified levels of net worth and cash flows, limitations on indebtedness and
payment of dividends. At 31 December 1993, the available revolving credit was
$7,600,000 of which $6,316,000 was outstanding. In January 1994, an amendment
to the agreement was made to revise certain financial covenants and to modify
the asset-based formula to provide for additional borrowing availability. The
additional amount of availability can be up to $5,000,000, subject to support by
the appropriate levels of assets. It was obtained to have additional financial
resources available on an interim basis until the Company is sold. The
additional borrowing capacity is available until the earlier of (1) the sale of
the Company occurs, (2) the Company is no longer for sale, or (3) 31 December
1994. In exchange, the lender is entitled to a fee of $750,000 which is payable
no later than 31 December 1994.
The mortgage matures in May 2004 and is repayable over fifteen years at an
interest rate of 10% until May 1994. Thereafter, interest will be based on
market rates. The Company may, at its option, repay the mortgage after May 1994
without penalty.
An International Subsidiary's bank loan of $3,142,000, which was due to be
repaid in June of 1993, was converted to a five-year term loan subsequent to 31
December 1992 and, therefore, included in Other long-term debt. Repayment in
equal, annual installments commences in 1994.
At 31 December 1993, retained earnings of International Subsidiaries of
approximately $8,200,000 are not available for distribution due to local
restrictions.
The aggregate maturities of long-term debt during each of the five years
subsequent to 31 December 1993 follow: 1994 - $1,779,000; 1995 - $8,934,000;
1996 - $1,148,000; 1997 - $1,164,000; 1988 - $1,207,000.
Note 4 Income Taxes
Effective 1 January 1993, FASB #109 (Accounting for Income Taxes) was adopted.
Previous years financial statements have not been restated. The cumulative
effect on retained earnings of adoption of the new principle at 31 December
1992 was an increase in net income of $94,000 in 1993 and related entirely
to International.
Pretax income (loss) and the related income tax provisions follow:
Year Ended 31 December
1993 1992 1991
Income (loss) before taxes
and accounting change:
United States $ 298,000 $(2,307,000) $(11,029,000)
International 951,000 8,055,000 (7,266,000)
Total $1,249,000 $ 5,748,000 $(18,295,000)
Provision (benefit) for income taxes:
Current
United States $ 501,000 $ 182,000 $ (69,000)
International 1,767,000 4,146,000 4,015,000
Deferred
United States (1,020,000) - -
International (1,105,000) (322,000) 290,000
Total $ 143,000 $4,006,000 $4,236,000
The significant components of deferred tax liabilities and assets at 31 December
1993 are as follows:
Deferred tax liabilities:
Tax vs. book depreciation $3,169,000
Employee retirement plans 586,000
Other 826,000
$4,581,000
Deferred tax assets:
Postretirement benefits $1,056,000
Employee benefit and retirement
plans 2,392,000
Valuation reserves 2,414,000
Net operating loss carryforwards 6,007,000
Tax credit carryforwards 2,118,000
Other 3,337,000
17,324,000
Valuation allowance (15,328,000)
$1,996,000
Net deferred tax liabilities $2,585,000
In 1993, the valuation allowance was reduced $4,782,000 from the amount
established as of 1 January 1993 and gross deferred tax assets were reduced
$3,782,000. Approximately $400,000 of the deferred tax benefit in 1993 was due
to a reduction in tax rates for several International Subsidiaries. The
majority of deferred tax assets have been reduced by a valuation allowance.
The net deferred tax assets are considered to be realizable due to a history of
earnings or sufficient future taxable income at the appropriate companies.
The U.S. Company has recorded net deferred tax assets of $1,020,000 at 31
December 1993 since Management considers it more likely than not that
sufficient taxable income will be available to realize the benefits. At 31
December 1993, approximately $21,000,000 of deductible temporary differences are
available in the U.S. and have not been given any deferred tax benefit.
Year Ended 31 December
1993 1992 1991
Reconciliation:
Expected U.S. Federal
provision (benefit) $425,000 $1,954,000 $(6,220,000)
Alternative minimum tax 879,000 - -
Absence of tax benefit in the U.S. - 966,000 3,681,000
Absence of tax benefit (provision)
at International Subsidiaries 983,000 (77,000) 5,350,000
Absence of U.S. tax benefit on
dividend withholding tax 172,000 318,000 455,000
Difference between U.S. and
International tax rates (591,000) 845,000 957,000
Adjustment of tax accruals (604,000) - -
Utilization of NOL carryforward (101,000) - -
Deferred tax benefit
in the U.S. (1,020,000) - -
Other - - 13,000
Actual provision $143,000 $4,006,000 $4,236,000
Certain International Subsidiaries have net operating losses of approximately
$18,000,000 available to reduce future taxable income, which expire in various
years through 1998. The Company has AMT credit carryforwards of $1,100,000 and
general business credits of $930,000 of which $620,000 expire between 1995 and
2001; the balance expire between 2002 and 2006. The accounting change
implemented in 1991 (See Note 7) does not reflect any tax benefit.
Note 5 Leases
Substantially all leases are operating leases. Rental expense was $5,538,000,
$6,346,000, and $5,856,000 in 1993, 1992 and 1991, respectively. Certain of
the leases contain renewal options for periods from one to five years. No
leases have contingent rentals nor do any leases impose restrictions on
dividends, additional leasing or additional debt. Minimum net rental
commitments under noncancellable leases (principally for plant, office space,
and equipment) outstanding at 31 December 1993 amounted to approximately
$9,400,000 including annual payments of $3,900,000 due in 1994, $2,600,000 in
1995, $1,400,000 in 1996, $900,000 in 1997 and $200,000 in 1998.
Assets recorded under capital leases as well as any related debt obligations
and future minimum rentals are not significant.
Note 6 Shareholders' Equity and Preferred Stock
Common shareholders are entitled to one vote per share and holders of Class
B Capital Stock are entitled to ten votes per share. No cash dividends may be
paid on the Class B shares. Class B shares are convertible at the holder's
option, on a share-for-share basis, into Common shares. In September 1993, the
holders of all of the Class B Capital Stock converted their stock into Common
shares. The same shareholders were granted warrants to purchase 1,128,994
shares of Common at $8.625 per share which was the market price on the date of
the transaction. The warrants expire on 31 March 1995.
Annual dividends of 9% on the Convertible, Exchangeable Preferred Stock were
cumulative and payable quarterly. This stock was convertible into Common stock
at a price of $10.66 per Common share. The Preferred stock had a liquidation
value of $100 per share and required an annual sinking fund payment of
$715,000. Subsequent to 31 December 1990, $143,000 of the sinking fund
requirement for 1990 was paid. In January 1992, $572,000 of the sinking fund
requirement for 1991 was paid. In December 1993, the outstanding Preferred
Stock was converted to Common stock.
Under one of the Company's nonqualified stock option plans, certain employees
can be granted options to purchase Common stock at prices equal to at least 80%
of market value at the time of grant. These options become exercisable as the
Board of Directors may determine. Additional options for 9,952 shares may be
granted until 1 June 1996. Unexercised options expire ten years after the date
of grant.
The Company's Incentive Stock Option Plan provides that certain employees may
be granted options to purchase Common stock at market value on the date of
grant. Options become exercisable from six months to one year after they are
granted. For certain individuals they are exercisable in cumulative groups of
20% each year. Unexercised options expire ten years after the date of grant.
As of 1 May 1992, no additional options may be granted under this Plan.
The "Non-Qualified Stock Option Plan (1991)" provides that certain employees
may be granted options to purchase Common stock at a price not less than the
market value on the date of grant. A total of 230,000 shares were initially
authorized. This plan was amended in February 1992 to increase to 750,000 the
total number of shares authorized to be issued under the plan.
As a result of the conversion of Class B Capital Stock into Common shares, any
stock options related to the "Non-Qualified Stock Option Plan (1991)" which were
not exercisable by their terms became exercisable as of 30 September 1993.
Activity for shares under options:
1993 1992
Non- Non-
Non- Qualified Non- Qualified
Incentive Qualified Stock Incentive Qualified Stock
Stock Stock Options Stock Stock Options
Options Options (1991) Options Options (1991)
Balance at
1 January 62,687 31,834 441,410 60,687 13,039 152,910
Options granted - - 203,500 2,000 23,900 288,500
Options exercised 5,965 1,341 500 - - -
Options canceled/
expired 10,410 - - - 5,105 -
Balance at
31 December 46,312 30,493 644,410 62,687 31,834 441,410
Exercisable at
31 December 44,712 11,373 644,410 60,687 7,934 30,582
Average price of
exercisable options $11.05 $9.86 $8.93 $10.50 $10.99 $11.00
As of 31 December 1993, there were 2,110,000 Common shares reserved for
issuance under stock option plans and for warrants.
Note 7 Retirement Plans and Benefits
The Company has a noncontributory, defined benefit pension plan (Pension Plan)
for all U.S. employees and three contributory, defined contribution retirement
plans for U.S. employees who meet certain eligibility requirements.
The annual retirement benefits of the Pension Plan are based on the number of
years of credited service. Beginning in 1993, the pension benefits earned by
salaried employees will be accumulated in a Cash Account Plan and based on a
percent of salary. The Company funds its contribution annually based on an
actuarial determination. The net periodic pension cost for 1993, 1992 and 1991
included the following components:
1993 1992 1991
Service cost $ 607,000 $562,000 $ 520,000
Interest cost 3,204,000 3,032,000 2,846,000
Actual return on assets (3,974,000) (2,240,000) (4,939,000)
Amortization and deferral 1,723,000 20,000 3,108,000
$1,560,000 $1,374,000 $1,535,000
The Company also has a Supplemental Retirement (defined benefit) Plan for key
executives. The annual retirement benefit is based upon an average of the last
five years' salaries before normal retirement at age 65. The periodic pension
cost related to this Plan was $394,000 in 1993, $364,000 in 1992, and $314,000
in 1991.
The assets of the Pension Plan are held by a Trustee and consist of both
equity and fixed income securities. The following table sets forth the funded
status of the U.S. defined benefit plans and amounts included in the
consolidated balance sheets at 31 December 1993, 1992 and 1991:
Actuarial present value of benefit obligations (in 000's of dollars):
1993 1992 1991
Pension Supp. Pension Supp. Pension Supp.
Plan Plan Plan Plan Plan Plan
Vested $44,220 $2,176 $37,900 $1,898 $35,044 $1,755
Non-vested 184 269 134 199 139 172
Total accumulated
benefit obligation $44,404 $2,445 $38,124 $2,097 $35,183 $1,927
Projected benefit
obligation $44,404 $2,992 $38,124 $2,482 $35,183 $2,216
Fair value of Plan assets (32,555) - (30,197) - (28,596) -
Projected benefit obliga-
tion in excess of
Plan assets 11,849 2,992 7,927 2,482 6,587 2,216
Unrecognized cumulative
net (loss) gain (3,318) (82) 42 204 1,558 265
Unrecognized implemen-
tation pension liability (2,581) (81) (2,897) (92) (3,212) (102)
Prior service cost not yet
recognized (2,548) (468) (2,069) (535) (1,422) (602)
Unfunded accrued
pension cost 3,402 2,361 3,003 2,059 3,511 1,777
Additional minimum
liability 8,447 84 4,924 38 3,076 150
Net pension liability $11,849 $2,445 $7,927 $2,097 $6,587 $1,927
The discount rates used in determining the actuarial present value of the
projected benefit obligations were 7.35% in 1993, 8.35% in 1992 and 8.5% in
1991. The assumed long-term rate of return on assets was 9.5% in all three
years presented.
The defined contribution plans are 401K plans which are available to
essentially all the employees of the Company. Employee contributions are
matched by the Company up to 2% or 3% of the employee's salary. The cost of
these plans was $664,000 in 1993, $519,000 in 1992, and $515,000 in 1991.
Certain of the International Subsidiaries participate in government mandated
retirement programs requiring employee and employer contributions. Total
pension expense for all International Subsidiaries was $3,281,000, $3,549,000,
$3,046,000 in 1993, 1992 and 1991, respectively. Accrued pension expense for
the International Subsidiaries is included in noncurrent liabilities. The
Company's International pension plans are not required to report to
governmental agencies and do not otherwise determine the actuarial value of
accumulated benefits or net assets, except as discussed below.
The Company follows FASB #87 for those International Subsidiaries which have
defined benefit pension plans. Annual retirement benefits are based on years of
service and salary. Some of the plans are funded on a current basis based on
actuarial calculations. The net periodic pension cost in 1993, 1992 and 1991
for these Subsidiaries included the following components:
1993 1992 1991
Service cost $1,118,000 $1,007,000 $793,000
Interest cost 1,816,000 1,821,000 1,637,000
Actual return on assets (2,395,000) (1,583,000) (1,212,000)
Amortization and deferral 1,549,000 712,000 332,000
$2,088,000 $1,957,000 $1,550,000
The assets of funded plans are held by Trustees. The following table sets forth
the funded status of the Plans and the amounts included in noncurrent
liabilities at 31 December 1993, 1992 and 1991.
Actuarial present value of benefit obligations (in thousands of dollars):
1993 1992 1991
Funded Unfunded Funded Unfunded Funded Unfunded
Plans Plans Plans Plans Plans Plans
Vested $7,202 $12,524 $6,210 $10,881 $5,184 $9,309
Non-vested - 1,554 - 1,298 - 1,062
Total accumulated
benefit obligations $7,202 $14,078 $6,210 $12,179 $5,184 $10,371
Projected benefit
obligations $8,466 $17,258 $7,616 $15,375 $7,625 $13,187
Fair value of
Plans' assets (11,944) - (9,887) - (10,238) -
Projected benefit
obligations (less
than) in excess of
Plans' assets (3,478) 17,258 (2,271) 15,375 (2,613) 13,187
Unrecognized
cumulative net
gain (loss) 1,560 (2,128) 260 (565) 177 1,369
Prior service cost
not yet recognized (597) (94) (686) (113) (928) (184)
Unrecognized
implementation
asset (liability) 1,124 (768) 1,287 (886) 1,688 (1,013)
(Prepaid) accrued
pension cost $(1,391) $14,268 $(1,410) $13,811 $(1,676) $13,359
The discount rates used in determining the actuarial present value of the
projected benefit obligations range from 7.0% to 9.0% in 1993, 7.5% to 9.5% in
1992 and 8.5% to 10.5% in 1991. The assumed long-term rates of return on assets
range from 8.0% to 9.0%, 8.0% to 9.5% and 9.5% to 10.5% in 1993, 1992 and 1991,
respectively while salary assumptions range from 2.5% to 7.5%, 3.5% to 8.0% and
3.75% to 9.0%, respectively.
In 1991, the Company adopted FASB #106 for a life insurance program for U.S.
employees who retire from the Company. This is the only such postretirement
plan other than pensions and it provides a flat death benefit regardless of
years of service, final pay, etc. In previous years, the Company accounted for
this cost on a pay-as-you-go-basis. The Company chose immediate recognition of
the accumulated postretirement benefit obligation (the plan is not separately
funded) and reported $2,821,000 as the cumulative effect of a change in
accounting principle (accounting change) in the consolidated statement of
income. The net periodic postretirement benefit cost in 1993 was $281,000,
including $20,000 for service and $261,000 for interest; in 1992, the cost was
$300,000 of which $39,000 was for service and $261,000 was for interest and, in
1991 the cost was $267,000 ($34,000 for service and $233,000 for interest). At
31 December, the accumulated postretirement benefit obligation status was as
follows:
1993 1992 1991
Accumulated postretirement
benefit obligation:
Retirees $2,556,000 $2,135,000 $1,989,000
Actives 966,000 1,038,000 832,000
$3,522,000 $3,173,000 $2,821,000
There was an unrecognized loss of $417,000 at 31 December 1993 and $237,000 at
31 December 1992 but no unrecognized prior service cost or unrecognized net
transition obligation at 31 December 1993, 1992 or 1991. The assumed discount
rate used was 7.35% in 1993, 8.35% in 1992, and 8.75% in 1991.
Note 8 Quarterly Data (Unaudited)
Summarized quarterly unaudited financial data for 1993 and 1992 is presented
below, in thousands of dollars, except per share data:
1993
4th 3rd 2nd 1st
Year Quarter Quarter Quarter Quarter
Net sales $221,644 $ 54,612 $53,995 $59,229 $ 53,808
Gross profit 81,467 18,158 20,716 21,991 20,602
Net income (loss) 1,106 (319) 617 734 74
Earnings (loss)
per share .19 (.07) .11 .14 .01
1992
4th 3rd 2nd 1st
Year Quarter Quarter Quarter Quarter
Net sales $231,317 $ 56,865 $64,663 $56,415 $ 53,374
Gross profit 88,721 22,209 23,302 21,799 21,411
Net income 1,742 475 611 383 273
Earnings per share .31 .09 .11 .06 .05
Fully diluted earnings per share are the same as primary for all periods
presented. The third quarter of 1993 includes net proceeds of $1,234,000 from
the sale of a small research operation. The fourth quarter of 1993 includes
$422,000 of deferred tax benefits for changes in tax rates in certain countries
and $1,020,000 of deferred tax benefits in the United States.
Note 9 Restructuring Charge
In 1991, the Company recorded a pretax charge of $17,879,000. The charge
related primarily to restructuring activities in certain European subsidiaries
and in the United States, increased inventory reserves resulting from a
narrowing of the Company's focus in certain U.S. environmental markets and
the estimated loss resulting from a decision to dispose of an unrelated
specialty glass business in the U.S.
In 1992, the majority of the restructuring activities were concluded and the
specialty glass business was sold. The reserves established in 1991 were
utilized to absorb the impact of these activities.
Note 10 Commitments and Contingencies
In December of 1991, a class action and shareholders' derivative action was
filed against the Company and certain current and former officers and directors
in the U.S. District Court for the Eastern District of Pennsylvania, [Weiner, et
al. vs. Tolson, et al., (No:91-7822)]. The alleged wrongdoings have been
denied. In March 1993, the parties stipulated to the dismissal of all class
action claims and the dismissal of one of the plaintiffs, Howard Weiner from the
action. A tentative agreement was reached by the parties in June 1993 to
settle the derivative action, which was the only remaining claim in the lawsuit.
However, in August 1993 when the matter was submitted to the Court for
approval, the Court failed to approve the proposed settlement. In February
1994, a new agreement was reached to settle the matter, which the Company
believes should satisfy all the requirements of the Court. The new Settlement
Agreement has been submitted for Court approval, but has not yet been
approved. The Company's results of operations or financial condition would not
be materially impacted under the terms of the new Settlement Agreement.
In October of 1993, a class action suit was filed on behalf of the Company's
shareholders against the Company, Jay H. Tolson and E. Joseph Hochreiter (the
Company's two former Class B Stockholders, who are also directors and executive
officers). The suit was filed in the court of Common Pleas of Bucks County,
Pennsylvania, under the caption, Roger Copland vs. Jay H. Tolson, et al., (No.
93008366). The suit challenged the validity of the warrants issued to the two
named individuals in connection with their conversion of Class B Stock into
Common Stock. The Plaintiff sought to enjoin the exercise of the warrants, to
rescind the warrants and to award attorneys' fees and costs to Plaintiff's
counsel. In March of 1994, the Company was informed that the Plaintiff will
file an Amended Complaint asserting a class action and a derivative claim
against the individual defendants. The Company will be named only as a Nominal
Defendant on the derivative claims and no claim will be asserted against the
Company for any of the wrongdoings alleged in this action. The Company's
results of operations or financial condition would not be materially impacted by
the outcome of this action, either as currently filed or under the Amended
Complaint.
The Company is party to certain other claims and litigation arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the outcome of such matters will not materially affect the
Company's financial position or the results of its operations.
The Company has agreements with nine executives and certain other key
employees which provide for separation pay and other related expenses if there
is a change in control of the Company and the individual is terminated or duties
are changed materially within two years after such a change. If all parties
were compensated under these arrangements, payments would be required in the
range of $5.0 to $5.5 million.
Note 11 Supplementary Financial Information
1993 1992 1991
The following amounts were paid during the years indicated:
Interest $3,429,000 $3,724,000 $4,067,000
Income taxes $3,127,000 $6,216,000 $3,142,000
Other noncurrent liabilities consist of the following:
Deferred income taxes $3,826,000 $4,981,000 $5,536,000
Unfunded accrued postretirement
benefits 3,105,000 2,936,000 2,821,000
Noncurrent pensions and other
liabilities 27,915,000 23,006,000 22,795,000
Total $34,846,000 $30,923,000 $31,152,000
Other assets consist of the following:
Pension intangible asset $5,214,000 $4,962,000 $3,226,000
Deferred debt expense 354,000 488,000 136,000
Deferred income taxes 962,000 - -
Other 1,373,000 1,378,000 1,171,000
Total $7,903,000 $6,828,000 $4,533,000
Advertising expense $2,771,000 $2,961,000 $2,368,000
Note 12 Segments of Business
The Company operates principally in one industry, process control
instrumentation. The process control instrumentation industry designs,
manufactures and sells process control instruments, equipment and systems.
Income from operations represents total revenue less operating expenses. In
computing income from operations, none of the following items has been added or
deducted: interest expense, foreign exchange and income taxes. In 1991, income
from operations includes a restructuring charge of $17,879,000 ($6,079,000 U.S.,
$10,842,000 Europe, $958,000 Other). Transfers between geographic areas are
accounted for principally at current market value adjusted for quantity and
operating efficiencies. Identifiable assets are those assets that are used in
the Company's operations in each geographic area.
Geographic Areas (in thousands of dollars)
Year Ended 31 December
1993 1992 1991
Sales to Unaffiliated Customers
United States $75,178 $83,590 $88,257
Europe 127,419 129,369 128,766
Other International 19,047 18,358 19,953
Consolidated $221,644 $231,317 $236,976
Transfers Between Geographic Areas
United States $16,988 $17,784 $15,996
Europe 4,901 5,546 4,806
Other International 449 811 939
Consolidated $22,338 $24,141 $21,741
Net Sales
United States $92,166 $101,374 $104,253
Europe 132,320 134,915 133,572
Other International 19,496 19,169 20,892
Eliminations (22,338) (24,141) (21,741)
Consolidated $221,644 $231,317 $236,976
Income (Loss) From Operations
United States $(902) $(616) $(8,760)
Europe 5,514 10,217 (5,366)
Other International (389) (484) (691)
Consolidated 4,223 9,117 (14,817)
Interest Expense, net (2,608) (2,901) (3,189)
Foreign Exchange (366) (468) (289)
Consolidated Income (Loss)
Before Income Taxes and
Accounting Change $1,249 $5,748 $(18,295)
Identifiable Assets
United States $50,594 $48,891 $52,080
Europe 71,107 74,201 91,465
Other International 15,802 15,055 15,624
Corporate 6,371 6,211 4,177
Eliminations (11,881) (11,389) (9,445)
Consolidated $131,993 $132,969 $153,901
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders and The Board of Directors,
Fischer & Porter Company:
We have audited the accompanying consolidated balance sheets of Fischer &
Porter Company (a Pennsylvania corporation) and subsidiaries as of 31 December
1993, 1992 and 1991, and the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fischer & Porter Company and
subsidiaries as of 31 December 1993, 1992 and 1991, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 4 to the consolidated financial statements,
effective 1 January 1993, the Company changed its method of accounting for
income taxes. Also, as discussed in Note 7, effective 1 January 1991, the
Company changed its method of accounting for postretirement benefits other than
pensions.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)2 of
the Form 10-K are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/S/ Arthur Andersen & Co.
Philadelphia, Pa.,
25 March 1994
ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
The required information with respect to each director will be included as an
amendment to this Form 10-K Annual Report under cover of Form 8 to be filed
on or before 30 April 1994.
(b) Executive Officers of the Registrant
The required information with respect to each executive officer is contained
at the end of Part I of this Form 10-K.
(c) Family Relationships
There are no family relationships between any of the directors or executive
officers of the Company.
(d) Other
There have been no events under any bankruptcy act, no criminal proceedings
and no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
ITEM 11 EXECUTIVE COMPENSATION
The required information with respect to executive compensation will be
included as an amendment to this Form 10-K Annual Report under cover of Form 8
to be filed on or before 30 April 1994.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information with respect to security ownership of certain
beneficial owners and Management will be included as an amendment to this
Form 10-K Annual Report under cover of Form 8 to be filed on or before 30 April
1994.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The required information with respect to certain relationships and related
transactions will be included as an amendment to this Form 10-K Annual Report
under cover of Form 8 to be filed on or before 30 April 1994.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Page
Number
Herein
Consolidated Statements of Income 12
for the years ended 31 December
1993, 1992 and 1991
Consolidated Balance Sheets at 13
31 December 1993, 1992 and 1991
Consolidated Statements of Share- 14
holders' Equity for the years ended
31 December 1993, 1992 and 1991
Consolidated Statements of Cash Flows 15
for the years ended 31 December 1993,
1992 and 1991
Notes to Consolidated Financial 16-25
Statements
Report of Independent Public 26
Accountants
(a) 2. Financial Statement Schedules
Consent of Independent Public 33
Accountants
Schedule for years ended
31 December 1993, 1992 and 1991:
II - Amounts Receivable from 34
Related Parties
V - Property, Plant and Equipment 35
VI - Accumulated Depreciation of 36
Property, Plant and Equipment
VIII - Valuation and Qualifying 37
Accounts and Reserves
Schedules other than those listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown
in the financial statements or notes thereto.
(a) 3. Exhibits
Exhibits identified below by an asterisk (*) are Management Contracts and
Compensatory Plans and Arrangements.
Page
Exhibit Number
No. Herein
2.1 Agreement and Plan of Merger
(incorporated by reference to
Exhibit 2.01 to Form 8-K dated
2 July 1990).
3.1 Articles of Incorporation
(incorporated by reference to
Exhibit 3.01 to Form 8-K dated
2 July 1990).
3.2 By-Laws
(incorporated by reference to
Exhibit 3.02 to Form 8-K dated
2 July 1990).
4.1 Not applicable.
4.1.1.1 $10,000,000 mortgage note payable
to Continental Bank (incorporated by
reference to Exhibit 4.1.5 to Form 10-Q
for first quarter 1989).
4.1.1.2 First mortgage issued to Continental Bank
(incorporated by reference to Exhibit 4.1.6
to Form 10-Q for first quarter 1989).
4.2 The Company hereby agrees to fur-
nish to the Securities and Exchange
Commission, upon request, copies
of other instruments defining the
rights of holders of long-term debt of
the Company and its subsidiaries.
10.1 *Supplemental Executive Benefit
Agreement with Jay H. Tolson dated
1 January 1989. (In addition to Mr. Tolson,
Messrs. Hochreiter, Finnegan and one other
key employee have received essentially the
same benefits provided and described in the
aforementioned agreement with Jay H. Tolson).
Page
Exhibit Number
No. Herein
10.1.1 *Change in Control Agreement Form
(incorporated by reference to Exhibit
10.4.1 to Form 10-Q for third quarter 1991).
10.1.2 *Employment Agreement, dated 23 October
1991, with E. Joseph Hochreiter (incorporated
by reference to Exhibit 10.4.2 to Form 10-Q
for third quarter 1991).
10.2 Not applicable.
10.3 *Nonqualified Stock Option Plan
(incorporated by reference to
Post-Effective Amendment No. 1
to Form S-8 Registration Statement
No. 2-73222, sequentially-
numbered pages 12 to 18).
10.3.1 *Nonqualified Stock Option Plan (1991)
(incorporated by reference to Exhibit
10.5.1 to Form 10-Q for third quarter 1991;
Registration Statement No. 33-48498).
10.3.2 *Amendment to Nonqualified Stock Option
Plan (1991), adopted 24 February 1992
(incorporated by reference to Exhibit 10.5.2
to Form 10-K for fiscal year 1991; Registration
Statement No. 33-48498).
10.4 *1982 Incentive Stock Option Plan
(incorporated by reference to
Form S-8 Registration Statement
No. 2-99944, sequentially
numbered pages 10-14).
10.4.1 *Amendment to 1982 Incentive Stock
Option Plan, adopted 24 February 1987
(incorporated by reference to Exhibit 10.6.1
to Form 10-K for fiscal year 1991).
10.4.2 *Amendment to 1982 Incentive Stock Option
Plan, adopted 30 July 1991 (incorporated by
reference to Exhibit 10.6.2 to Form 10-Q for
third quarter 1991).
10.5 *Grant of Appreciation Rights (incorporated
by reference to Exhibit 10.8 to Form
10-K for fiscal year 1990).
10.6 Loan and Security Agreement, dated
14 September 1992 (incorporated by
reference to Exhibit 10.9 to Form 10-Q
for third quarter 1992).
Page
Exhibit Number
No. Herein
10.6.1 Waiver No. 1 to Loan and Security
Agreement, dated 14 September 1992
(incorporated by reference to Exhibit 10.6.1
to Form 10-K for fiscal year 1992).
10.6.2 Waiver No. 2 to Loan and Security Agreement,
dated 14 September 1992 (incorporated by
reference to Exhibit 10.6.2 to Form 10-Q for
first quarter 1993).
10.6.3 Waiver No. 3 to Loan and Security Agreement,
dated 14 September 1992 (incorporated by
reference to Exhibit 10.6.3 to Form 10-Q for
second quarter 1993).
10.6.4 Waiver No. 4 to Loan and Security Agreement,
dated 14 September 1992 (incorporated by
reference to Exhibit 10.6.4 to Form 10-Q for
third quarter 1993).
10.6.5 Waiver No. 5 to Loan and Security Agreement,
dated 14 September 1992 (incorporated by
reference to Exhibit 10.6.5 to Form 10-Q for
third quarter 1993).
10.6.6 Waiver No. 6 to Loan and Security Agreement,
dated 14 September 1992 (incorporated by
reference to Exhibit 10.6.6 to Form 10-Q for
third quarter 1993).
10.6.7 Amendment and Waiver No. 7 to Loan and
Security Agreement, dated 14 September 1992.
10.7 *Corporate Officer Variable Compensation Plan
(incorporated by reference to Exhibit 10.7 to
Form 10-K for fiscal year 1992).
10.7.1 *Management Variable Compensation Plan
(incorporated by reference to Exhibit 10.7.1 to
Form 10-K for fiscal year 1992).
10.7.2 *U.S. Operations Variable Compensation Plan
(incorporated by reference to Exhibit 10.7.2 to
Form 10-K for fiscal year 1992).
10.8 Conversion Agreement, dated 30 September 1993
(incorporated by reference to Exhibit 7(c)(1)
to Form 8-K dated 13 October 1993).
10.8.1 Warrant Agreement, dated 30 September 1993
(incorporated by reference to Exhibit 7(c)(2)
to Form 8-K dated 13 October 1993).
11. Not applicable.
12. Not applicable.
13. Not applicable.
18. Not applicable.
19. Not applicable.
Page
Exhibit Number
No. Herein
22. Subsidiaries of the Registrant. 38
23. Not applicable.
24. Consent of Independent Public 33
Accountants.
25. Not applicable.
28. Not applicable.
Copies of these exhibits are available from the Company's Corporate Secretary
upon request at a cost of 25 cents per page.
(b) Reports on Form 8-K
In a report filed on Form 8-K dated 13 October 1993, the Company reported
that all Class B Capital Stock was converted into an equal number of Common
shares. In addition, the Class B shareholders were granted warrants to
purchase 1,128,994 shares of Common stock at $8.625 per share which was the
market price on the date of the transaction. The warrants expire on 31
March 1995.
Refer, also, to Note 6 of the Notes to the Consolidated Financial Statements.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Fischer & Porter Company:
As independent public accountants, we hereby consent to the incorporation of
our report dated 25 March 1994 included in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (File No. 2-99944, File
No. 2-73222 and File No. 33-48498) and on Form S-3 (File No. 2-90493).
/S/ Arthur Andersen & Co.
Philadelphia, Pa.,
25 March 1994
FISCHER & PORTER COMPANY AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
Balance Balance
Beginning End
Name of Debtor of Year Additions Deductions of Year
For the year ended
31 December 1993:
Jay H. Tolson $212,908 $ - $ - $212,908 (1)
For the year ended
31 December 1992:
Jay H. Tolson $212,908 $ - $ - $212,908
For the year ended
31 December 1991:
Jay H. Tolson $212,908 $ - $ - $212,908
(1) Represents a non-interest bearing demand note for purposes of split-
funding a life insurance policy for the named individual; collateralized by
a portion of the death benefit value of said policy.
FISCHER & PORTER COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance Additions Balance
Beginning at Retire. Other End
Classification of Year Cost or Sales Transfers Changes* of Year
For the year ended
31 December 1993:
Land and land
improvements $2,290 $47 $- $- $(95) $ 2,242
Buildings 38,706 282 305 - (923) 37,760
Machinery and
equipment 66,734 3,728 3,994 - (2,040) 64,428
Construction in
progress 972 460 16 - (68) 1,348
$108,702 $4,517 $4,315 $- $(3,126) $105,778
For the year ended
31 December 1992:
Land and land
improvements $2,435 $5 $- $- $(150) $2,290
Buildings 39,031 1,258 - - (1,583) 38,706
Machinery and
equipment 65,376 6,147 2,004 214 (2,999) 66,734
Construction in
progress 1,494 (413) 12 - (97) 972
$108,336 $6,997 $2,016 $214 $(4,829) $108,702
For the year ended
31 December 1991:
Land and land
improvements $2,421 $33 $- $- $(19) $2,435
Buildings 36,260 2,710 - - 61 39,031
Machinery and
equipment 60,172 4,647 510 1,291 (224) 65,376
Construction in
progress 2,670 (1,034) 9 - (133) 1,494
$101,523 $6,356 $519 $1,291 $(315) $108,336
*Translation adjustments.
FISCHER & PORTER COMPANY AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
Balance Additions Balance
Beginning Charged to Retire. Other End
Classification of Year Expense or Sales Transfers Changes* of Year
For the year ended
31 December 1993:
Land improve-
ments $580 $30 $- $- $(22) $588
Buildings 14,003 1,562 224 - (546) 15,237
Machinery and
equipment 54,156 4,710 3,834 - (1,275) 53,315
$68,739 $6,302 $4,058 $- $(1,843) $69,140
For the year ended
31 December 1992:
Land improve-
ments $578 $32 $- $- $(30) $580
Buildings 12,970 1,621 - (20) (568) 14,003
Machinery and
equipment 52,749 5,225 1,417 (26) (2,375) 54,156
$66,297 $6,878 $1,417 $(46) $(2,973) $68,739
For the year ended
31 December 1991:
Land improve-
ments $548 $31 $- $- $(1) $578
Buildings 11,663 1,318 - - (11) 12,970
Machinery and
equipment 45,354 5,733 452 376 1,738 52,749
$57,565 $7,082 $452 $376 $1,726 $66,297
*Translation and other adjustments (In 1991, includes $1,865,000 of
restructuring charges).
FISCHER & PORTER COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS & RESERVES
Charged
Balance Charged (Credited) Deductions Balance
Beginning to to Other from End
of Year Income Accounts Reserves of Year
Deducted on the
balance sheet from
the asset to which
it applies:
For the year ended
31 December 1993:
Reserve for
bad debts $2,259,000 $371,000 $(12,000) $259,000 $2,359,000
For the year ended
31 December 1992:
Reserve for
bad debts $2,268,000 $197,000 $211,000 $417,000 $2,259,000
For the year ended
31 December 1991:
Reserve for
bad debts $2,184,000 $390,000 $ 24,000 $330,000 $2,268,000
EXHIBIT 22 SUBSIDIARIES OF THE REGISTRANT
The Subsidiaries of Fischer & Porter Company, all of which are included in the
consolidated financial statements, are listed below:
Percentage of Stock
Jurisdiction Owned Directly or
of Indirectly by the
Name Incorporation by the Company
F&P Holding, Inc. Delaware 100%
Fispo, S. A. Mexico 100%
Fischer & Porter Proprietary, Limited Australia 100%
Fischer & Porter (Canada) Limited Canada 100%
Fischer & Porter Ltd. England 100%
Otic-Fischer & Porter France 100%
Fischer & Porter GmbH Germany 100%
Fischer & Porter Produktiontechnik GmbH Germany 100%
Fischer & Porter Systemstechnik GmbH Germany 100%
Fischer & Porter Holding GmbH Germany 100%
Fischer & Porter Ges.m.b.H Austria 100%
Fischer & Porter Italiana, S.p.A. Italy 100%
Fischer & Porter Iberica, S.A. Spain 100%
Fischer & Porter B.V. Netherlands 100%
Fischer & Porter N.V. Belgium 100%
Fischer & Porter AB Sweden 100%
Fischer & Porter Oy Finland 100%
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FISCHER & PORTER COMPANY
(Registrant)
By: /S/ Jay H. Tolson
Jay H. Tolson
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
By: /S/ Nathan T. Schelle By:/S/ Laurence P. Finnegan, Jr.
Nathan T. Schelle Laurence P. Finnegan, Jr.
Vice President-Controller Senior Vice President, Chief
(Principal Accounting Officer) Financial Officer and Treasurer
(Principal Financial Officer)
Date: 31 March 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ Gloria T. Chisum /S/ John J. Manion, Jr.
Gloria T. Chisum (Director) John J. Manion, Jr. (Director)
Date: 31 March 1994 Date: 31 March 1994
/S/ E. Joseph Hochreiter
E. Joseph Hochreiter (Director) Frank J. Ryan (Director)
Date: 31 March 1994 Date: 31 March 1994
/S/ William E. Learnard /S/ Jay H. Tolson
William E. Learnard (Director) Jay H. Tolson (Director)
Date: 31 March 1994 Date: 31 March 1994
/S/ Robert G. Williams
Robert G. Williams (Director)
Date: 31 March 1994
EXHIBIT 10.6.7
AMENDMENT AND WAIVER NO. 7
TO
LOAN AND SECURITY AGREEMENT
AMENDMENT AND WAIVER NO. 7, dated as of January 14, 1994, between FISCHER &
PORTER COMPANY, a Pennsylvania corporation (the "Borrower"), and BANKAMERICA
BUSINESS CREDIT, INC. (f/k/a/ BA Business Credit, Inc.), a Delaware
corporation (the "Lender").
WHEREAS, the Borrower and the Lender are parties to a certain Loan and
Security Agreement, dated as of September 14, 1992 (as amended, supplemented
or modified from time to time in accordance with its terms, the "Loan
Agreement"), pursuant to which the Lender has agreed, subject to the terms
and conditions therein set forth, to provide certain financial accommodations
to the Borrower;
WHEREAS, the Borrower desires that the Lender waive compliance with and amend
certain provisions of the Loan agreement to increase availability and to
allow the Borrower to make certain intercompany loans, and the Lender is
willing, subject to the terms and conditions hereinafter set forth, to do so:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Borrower and Lender hereby agree as
follows:
SECTION 1. CAPITALIZED TERMS. Capitalized terms used but not defined herein
shall have the meanings given such terms in the Loan Agreement.
SECTION 2. AMENDMENTS TO THE LOAN AGREEMENT.
2.1 The definition of "Adjusted Borrower Tangible Net Worth" contained in
Section 1.1 is amended by adding the following clause at the end thereof:
"but excluding from liabilities those amounts of additional pension liability
which have resulted in a non-cash reduction of shareholders' equity under
FASB 87."
2.2 The definition of "Adjusted Consolidated Tangible Net Worth"
contained in Section 1.1 is amended by adding the following clause at the
end of the first sentence thereof:
"but excluding from liabilities those amounts of additional pension liability
which have resulted in a non-cash reduction of shareholders' equity under FASB
87."
2.3 The definition of "Availability" contained in Section 1.1 is amended
by adding the following sentence at the end thereof:
"Notwithstanding the foregoing, during the Availability Increase Period
(and only during such period), (i) clause (a)(ii)(A) of this definition
shall not be in effect and in lieu thereof the Receivables Availability
Increase Formula shall be in effect, (ii) the number "5,000,000" in clause
(a)(ii)(B)91) of this definition shall not be in effect and in lieu thereof
the number "6,000,000" shall be in effect and (iii) the phase "(fifty percent
(50%) with respect to any such Eligible Inventory under this cause (y) which
is owned by the Instrument Business Unit)" shall be added to clause
(a)(ii)(B)(2)(y) of this definition immediately after the defined term
"Storeroom Inventory"; provided, that in no event shall the amount of
Availability (with Availability determined as if the amount of the
Revolving Loans were zero) at any time resulting from the effect of this
sentence be in excess of $5,000,000 above the amount of Availability
(determined as aforesaid) at such time if this sentence were not then in
effect."
2.4 The definition of "Eligible Accounts" contained in Section 1.1 is
amended by adding the following at the end of clause (h) thereof immediately
before the semicolon:
"(except that during the Availability Increase Period and only during this
period, this clause (h) shall not be in effect with respect to Accounts of the
Instrument Business Unit)"
2.5 Section 1.1 is amended by adding the following definitions thereto:
a) "Availability Increase Period" means the period commencing
January __, 1994 and ending on the earlier to occur of (i) December 31, 1994,
(ii) the Sale of the Borrower, (iii) an Availability Reduction Event, and
(iv) the termination of this Agreement.
b) "Availability Reduction Event" means such time as either (i) The
First Boston Corporation shall no longer be engaged by the Borrower to pursue
a Sale of the Borrower and the Borrower shall no longer be diligently and
actively pursuing a Sale of the Borrower or (ii) Jay H. Tolson or E. Joseph
Hochreiter or any relative or affiliate thereof or any trust established for
any such Persons shall sell, assign or transfer any interest (including,
without limitation, any beneficial interest) in any shares of capital stock
of the Borrower.
c) "Foreign Account Debtor" means an Account Debtor which: (i) does not
maintain its chief executive office in the United States; or (ii) is not
organized under the laws of the United states or any state thereof; or (iii)
is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof.
d) "Receivables Availability Increase Formula" means: (A) the sum of (w)
eighty-five percent (85%) of the Net Amount of Eligible Accounts for those
Eligible Accounts of the Instrument Business Unit which are not owed by
Foreign Account Debtors or which are owed by foreign Account Debtors and secured
in full or payable in full by a letter of credit or acceptance on terms
acceptable to the Lender, (x) forty percent (40%) of the Net Amount of
Eligible Accounts for those Eligible Accounts of the Instrument Business Unit
which are owed by Foreign Account Debtors (other than those which are
described in clause (w) above), (y) forty percent (40%) of the Net Amount of
Eligible Accounts for those Eligible Accounts of the Systems Business Unit
and (z) $500,000.
e) "Sale of the Borrower" means any of (i) any Person or
group of Persons acting as a group shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of fifty percent (50%) or more of the capital stock of the
Borrower, whether through a stock purchase, merger, consolidation or other
transaction, or (ii) all or substantially all of the assets of the Borrower
shall have been sold, transferred or conveyed, whether in a single transaction
or in a series of related transactions, or (iii) the B consummated a
transaction otherwise prohibited under Section 9.5.
2.6 Section 9.25(b) is amended in its entirety to read as follows:
"(b) The Borrower will not permit Adjusted Consolidated Tangible Net Worth
on any of the dates set forth in the schedule below to be less than the
following amounts set forth opposite such dates:
Date Amount
September 30, 1992 $46,784,000
December 31, 1992 47,000,000
March 31, 1993 47,400,000
June 30, 1993 48,200,000
September 30, 1993 48,400,000
December 31, 1993 42,000,000
March 31, 1994 42,000,000
June 30, 1994 42,000,000
September 30, 1994 42,000,000
December 31, 1994 42,000,000
March 1995 52,400,000
June 30, 1995 and the 53,300,000
last day of each calendar
quarter thereafter
2.7 Section 9.27 is amended by deleting the phase "(a) $8,000,000,
effective from July 1, 1993 through August 30, 1993; (b) $7,000,000 plus the
amount of net cash proceeds from the sale of the Quanta technology, during
the period from August 31, 1993 through December 31, 1993; and (c) $6,000,000
thereafter," where it appears therein and substituting in its place the phase
"$13,000,000 in the aggregate at any time outstanding during the Availability
Increase Period and $6,000,000 thereafter". Further, clause (ii) of Section
9.27 shall not be effective during the Availability Increase Period (and only
during such period).
SECTION 3. WAIVER OF COMPLIANCE WITH CERTAIN PROVISIONS OF LOAN AGREEMENT.
Subject to the terms and conditions set forth herein, the Lender waives
compliance with the terms and provisions of the Loan Agreement solely with
respect and to the extent necessary to allow the Borrower or F&P Holding, Inc.
to (i) purchase at face value or less from Fischer & Porter GmbH or Fischer &
Porter Holding GmbH, $1,100,000 of intercompany accounts receivable owing by
Otic Fischer & Porter to Fischer & Porter GmbH, (ii) make up to a total of
$1,000,000 in loans to Fischer & Porter GmbH and/or Fischer & Porter Holding
GmbH and (iii) use proceeds of Revolving Loans to make the aforesaid purchase
and loans. The foregoing waiver under clause (i) above shall be deemed
revoked if, (x) within ten Business Days after the aforesaid purchase,
the Borrower shall not have received from F&P Holding, Inc. a cash dividend
or a loan in the amount of such purchase (such dividend or loan by F&P
Holding, Inc. to have been made from a cash dividend paid to F&P Holding, Inc.
by Fischer & Porter Holding GmbH in the same amount), or (y) the Borrower
repays, during the Availability Increase Period, any loan it received from
F&P Holding, Inc. pursuant to the foregoing clause (x).
SECTION 4. AMENDMENT AND WAIVER FEE. The Borrower agrees to pay to the
Lender an amendment and waiver fee in the amount of $750,000, such fee to be
payable on the earlier of (i) the Sale of the borrower, (ii) December 31, 1994
and (iii) the termination of this Agreement. Such fee may be charged to the
Borrower's account with the Lender.
SECTION 5. EFFECTIVENESS. The amendments and waivers made herein shall
become effective when the Lender shall have duly executed and delivered
this Agreement and counterparts herewith shall have been duly executed and
delivered by the Borrower to the Lender.
SECTION 6. COUNTERPARTS AND GOVERNING LAW. This Agreement may be executed in
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute a single instrument. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 7. NO DEFAULT OR EVENT OF DEFAULT. The Borrower acknowledges that
there exists on the date hereof no Default or Event of Default.
SECTION 8. REFERENCES TO LOAN AGREEMENT. From and after the effectiveness of
this Agreement and the waivers and agreements contemplated hereby, all
references in the Loan Agreement to "This Agreement", "hereof", "herein",
and similar terms shall mean and refer to the Loan Agreement as certain
provisions thereof are waived or supplemented by this Agreement, and all
references in other documents to the Loan Agreement shall mean such agreement as
certain provisions thereof are waived or supplemented by this Agreement.
SECTION 9. INVALIDITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under all
applicable laws and regulations. If, however, any provision of this Agreement
shall be prohibited by or invalid under any such law or regulation, it shall
be deemed modified to conform to the minimum requirements of such law or
regulation or, if for any reason it is not deemed so modified, it shall be
ineffective and invalid only to the extent of such prohibition or invalidity
without the remainder thereof or any of the remaining provisions of this
Agreement being prohibited or invalid.
SECTION 10. RATIFICATION AND CONFIRMATION. The Loan Agreement is hereby
ratified and confirmed and, except as herein waived or otherwise agreed,
remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
FISCHER & PORTER COMPANY
By:Laurence P. Finnegan, Jr.
Laurence P. Finnegan, Jr.
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
BANKAMERICA BUSINESS CREDIT, INC.
By: /S/ G. Markowsky
G. Markowsky
Vice President
