<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-6016
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THE ALLEN GROUP INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 38-0290950
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25101 Chagrin Boulevard, Beachwood, Ohio 44122
---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (216) 765-5818
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
As of March 3, 1995, there were 26,133,073 shares of the Registrant's Common
Stock issued and outstanding, and the aggregate market value (based upon the
last sale price of the Registrant's Common Stock on the New York Stock Exchange
Composite Tape on March 3, 1995) of the Registrant's Common Stock held by
nonaffiliates of the Registrant was $607,593,947.
Exhibit Index is on page 20 to 25 of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for fiscal year ended December 31, 1994
incorporated by reference into Parts I and II hereof.
Proxy Statement dated March 17, 1995 for Annual Meeting of Stockholders to be
held April 27, 1995 incorporated by reference into Part III hereof.
<PAGE> 2
THE ALLEN GROUP INC.
FORM 10-K
(For the fiscal year ended December 31, 1994)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I
Item 1 - Business ................................................. 3
Item 2 - Properties ............................................... 9
Item 3 - Legal Proceedings ........................................ 9
Item 4 - Submission of Matters to a Vote of Security Holders ...... 9
Executive Officers of The Registrant ............................... 10
PART II
Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters ...................................... 12
Item 6 - Selected Financial Data .................................. 12
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 12
Item 8 - Financial Statements and Supplementary Data .............. 12
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 13
PART III
Item 10 - Directors and Executive Officers of the Registrant ....... 14
Item 11 - Executive Compensation ................................... 14
Item 12 - Security Ownership of Certain Beneficial Owners
and Management ........................................... 14
Item 13 - Certain Relationships and Related Transactions ........... 14
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ...................................... 15
SIGNATURES ............................................................ 18
EXHIBIT INDEX ......................................................... 20
</TABLE>
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<PAGE> 3
THE ALLEN GROUP INC.
FORM 10-K
PART I
ITEM 1 - BUSINESS
GENERAL
The Allen Group Inc. ("Allen", the "Company" or the "Registrant") was
incorporated under the laws of the State of Delaware on February 3, 1969. Its
predecessor was Allen Electric and Equipment Company, incorporated under the
laws of the State of Michigan on January 13, 1928, which merged into the
Delaware corporation on May 1, 1969. On May 5, 1972, the name of the Company
was changed to The Allen Group Inc.
The businesses of Allen and its subsidiaries include Mobile
Communications Products, Automotive Test and Service and Truck Products.
On December 15, 1994, the Company acquired a 40% interest in FOR.E.M.
S.p.A. ("FOREM") of Agrate Brianza (Milan), Italy and acquired an additional
40% interest in FOREM on March 17, 1995. The Company has options to acquire
the remaining shares of FOREM during the next five years. FOREM owns 62% of
MIKOM G.m.b.H., ("MIKOM") located in Germany and also has sales and service
offices in the United Kingdom and France. FOREM is one of the leading
suppliers of wireless telecommunications products to the major European
telecommunications equipment manufacturers and wireless operating companies.
Additional information regarding this acquisition is incorporated herein by
reference to "Investments" in Note 3 of the Notes to Consolidated Financial
Statements on page 21 of Allen's 1994 Annual Report to Stockholders, a copy of
which is filed as Exhibit 13 to this Report.
There have been no other significant changes in the business, kinds of
products produced or services rendered or in the markets or methods of
distribution since the beginning of the last fiscal year.
MOBILE COMMUNICATIONS PRODUCTS
Allen's Mobile Communications Products segment is principally comprised
of Allen Telecom Group ("ATG") and Comsearch. ATG's principal product lines
are systems products, including Extend-A-Cells(TM), cellular repeaters,
microcells, wireless PBX systems, paging repeaters and power amplifiers; site
management and base station products, including filters, combiners, duplexers,
isolators and cable; and mobile and base station antennas. The demand for
equipment supplied by ATG is primarily a function of the development of
wireless communications systems throughout the world, and ATG's ability to
develop new products and technologies related to system coverage and capacity.
Comsearch is a leading provider of transmission planning services,
engineering services and software for microwave, satellite, cellular,
Specialized Mobile Radio ("SMR") and Personal Communications Systems ("PCS").
As previously mentioned, the Company purchased an 80% interest in
FOREM, as well as options to acquire the remaining shares of FOREM during the
next five years. The acquisition of FOREM (and its 62% owned subsidiary MIKOM)
enhances ATG's ability to serve more effectively all major customers, both
cellular carriers and original equipment manufacturers, and the expanding
telecommunications technologies throughout the world. In addition, FOREM
should bolster sales of ATG's broad range of products in Europe through FOREM's
and MIKOM's existing customer base and marketing and distribution network.
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<PAGE> 4
In 1994, sales of the Mobile Communications Products segment increased
nearly $30 million, or 16%, over 1993, primarily due to continued strong growth
of the systems products and mobile and base station antenna product lines.
Mobile Communication products are manufactured or assembled by the
Company, and are sold directly or through distributors and sales
representatives to original equipment manufacturers, common carriers and other
large users of telecommunications products.
AUTOMOTIVE TEST AND SERVICE
Allen's Automotive Test and Service segment consists solely of its
wholly owned subsidiary, MARTA Technologies, Inc. ("MARTA"). MARTA designs,
builds and operates centralized automotive emissions testing programs under
long-term contracts with state governments, and is one of only four major
companies that has the necessary capabilities and experience for such programs.
During 1994, MARTA's sole source of sales revenue was its Jacksonville, Florida
emissions testing program which, at $2.8 million, represents less than 1% of
consolidated sales of the Company.
Centralized emissions testing programs are mandated by the Federal
Environmental Protection Agency ("EPA") pursuant to the 1990 Clean Air Act.
Generally, each of these emissions testing programs is structured so that once
awarded, the company awarded the program (such as MARTA) is responsible for
purchasing the land, constructing the testing facilities, equipping the sites
with analytical and computer equipment, hiring and training personnel and
eventually operating the program. It is not until a program begins to operate
(typically under a multi-year sole source contract) that revenue (generally on
a fixed fee, cash per test basis) is generated.
In 1993, MARTA was awarded the programs for the State of Maryland and
the El Paso region of Texas, both of which were scheduled to begin testing on
January 3, 1995; however, both programs were delayed due to computer software
and other problems incurred in bringing this new technology on line. On
February 2, 1995, the Company announced that the State of Texas adopted a 90-
day suspension of its program through May 1, 1995, the purpose of which is to
study and/or develop alternative inspection programs. At this time, there is
no certainty that the Texas program will begin testing on its projected start
day of May 1, 1995. The State of Maryland has notified MARTA to take the
necessary steps to implement MARTA's Maryland program on or about May 1, 1995,
using a combined "tailpipe"/IM 240 inspection program. As a result of the move
to a combined program, the State of Maryland and MARTA are engaged in
discussions regarding the change in scope, and a corresponding change in fees
to be received by MARTA, with respect to the Maryland program. The State also
notified MARTA that its management fee for the operation of its Maryland
program will become effective March 1995.
In addition to the Maryland and El Paso, Texas programs, the Company
was awarded the centralized emissions testing programs in the Cincinnati region
of Ohio and in Northern Kentucky in 1994. The Ohio and Kentucky programs are
scheduled to start on January 1, 1996. However, with respect to MARTA's
Northern Kentucky centralized emissions testing program, the State of Kentucky
has notified MARTA that the State is reviewing the effect of the Federal EPA's
changing mandates on planned and implemented programs in Northern Kentucky. In
light of these developments, the State has requested that MARTA limit its
activities to the search for suitable test station locations, but not enter
into any contractual arrangements to lease or purchase property for these test
stations until the State resolves its issues with the Federal EPA.
Centralized emissions testing programs mandated by the EPA, pursuant to
the 1990 Clean Air Act, have come under increased scrutiny in recent months by
both state and federal officials. Recently, the EPA announced its intent to
provide increased flexibility for state authorities charged with implementing
the federally-mandated programs. Legislation has been proposed or adopted in a
number of states, including Kentucky, Maryland and Texas, to delay, suspend,
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<PAGE> 5
modify or cancel the enhanced IM 240 centralized emissions testing programs
until the EPA clarifies its positions and regulations on these programs. As
discussed above, the Maryland legislature approved a measure which would delay
until July 1, 1996 emissions testing using the new IM 240 technology. Prior to
July 1, 1996, the State would use a combined "tailpipe"/IM 240 inspection
program. The "tailpipe" emissions test had been the prior standard in
Maryland. After this period, the IM 240 test would be mandated for all
vehicles. In addition, the State of Texas has made a request to the EPA to
exempt the El Paso region from the emissions testing requirements; no
determination has yet been made. At this time, it is not possible to predict
the outcome of future federal or state legislation; however, the Company
believes its existing contracts call for appropriate compensation should any of
the programs be substantially changed or canceled.
As of December 31, 1994, the Company's investment in the Maryland
program approximated $.8 million. In 1994, the State of Maryland paid $37.3
million of the stipulated purchase price of $39.2 million, pursuant to the
contract to purchase the buildings and equipment. The land for these
facilities was acquired earlier by Maryland. For the El Paso region of Texas
program, the Company's net capitalized investment approximated $6.5 million at
December 31, 1994, and the Company expects to incur an additional $.6 million
in early 1995 to bring this program on line. The Cincinnati, Ohio program is
expected to proceed as planned with the implementation of centralized emissions
inspection programs as previously awarded. MARTA will lease the land and
buildings from an independent third party developer but will own the testing
equipment.
The outlook for this business regarding future emissions test programs
and the related timing of bids has become much more unpredictable given the
current political climate and certain states' adverse reaction to compliance
with these perceived unfunded Federal mandates. Programs that MARTA has bid
upon, or was expecting to bid upon, have all taken various forms of delays and
continue to remain uncertain.
TRUCK PRODUCTS
Allen manufactures and sells heavy-duty radiators and specialty heat
exchangers for trucks and off-highway equipment through its G & O Manufacturing
Company division. Allen also produces steel parts manufactured primarily to
customers' specifications, such as truck fenders, cabs, specialized interiors
installed in utility trucks and vans, and custom sheet metal fabrications for
the telecommunications market, through its Crown divisions. These products are
sold by Allen's own sales employees and commissioned sales representatives to
major automotive, truck and off-highway equipment manufacturers, major delivery
services and others.
In 1994, sales to The Ford Motor Company, PACCAR Inc. and MACK
accounted for 43%, 13% and 11%, respectively, of sales in the Truck Products
segment.
JOINT VENTURE OPERATIONS
The Company, along with Handy & Harman, participates in a 50/50 joint
venture partnership, GO/DAN Industries, which is accounted for under the equity
method. GO/DAN Industries is engaged in the manufacture and sale of automotive
replacement radiators and other heat transfer products. GO/DAN Industries was
organized on June 1, 1990, at which time Allen and Handy & Harman each
transferred to the joint venture certain assets, net of related liabilities,
relating to such business.
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<PAGE> 6
WORKING CAPITAL
The working capital requirements of the Company vary with its
particular product lines. Truck Products are generally manufactured on an "as
ordered" basis; therefore, large inventories are generally not maintained nor
is the amount of product returned significant. The remaining manufacturing
product lines of the Company consist of standard manufactured products for
which inventory levels are generally based on product demand.
The Mobile Communications segment is expected to absorb almost 70% of
the Company's capital expenditure requirements in 1995 (excluding MARTA). In
addition, the Company acquired an additional 40% interest in FOREM in 1995 for
$8.1 million plus certain contingent payouts. The remaining contingent
payouts, if any, in an amount of up to $8.5 million, may be earned and would be
payable in future years.
The capital requirements with respect to MARTA are, however, less
clear given the uncertainty in the centralized emissions testing industry as
described previously. In 1994, the Company substantially completed the
construction of the Maryland and El Paso region of Texas programs, financing
the cost principally through internally generated funds. In late December, the
Company received $37.3 million against the purchase price of the facilities and
equipment from the State of Maryland. MARTA's programs in the Cincinnati
region of Ohio and Northern Kentucky are anticipated to require approximately
$18.0 million of capital, which the Company presently intends to finance with
internally generated funds. The land and buildings for these two programs will
be acquired, constructed and financed by an independent third party developer
from whom MARTA will lease the facilities under a capital lease arrangement.
COMPETITION
In each of Allen's industry segments, competition is vigorous. In its
centralized emissions testing inspection program product line, the Company
presently has three principal competitors. The primary criteria of competition
and the selection of a contractor by the governmental agency are experience,
technological capability, financial resources and price. The Company believes
that it has established a major market position in the United States for mobile
cellular telephone antennas, where competition is distributed among many
manufacturers. In its other product lines, the Company believes that it is
among the major manufacturers and that competition is widely distributed.
Allen's principal methods of competition include price, service, warranty,
market availability and product research and development, innovation and
performance. In certain of its product lines, the Company has augmented its
own resources through licensing agreements with companies possessing
complementary resources and technologies.
MAJOR CUSTOMERS
Except as noted in the Automotive Test and Service and Truck Products
industry segment descriptions, there is no single customer or group of a few
customers for which the loss of any one or more would have a material adverse
effect on any industry segment or on the Company. Sales of Mobile
Communications products are widely distributed among many customers.
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<PAGE> 7
BACKLOG
The approximate backlog of orders for the Company's continuing
operations by industry segment as of December 31, 1994 and 1993 are as follows
(amounts in thousands):
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<CAPTION>
1994 1993
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<S> <C> <C>
Automotive Test and Service $206,812 $ 67,176
Truck Products 21,657 19,544
Mobile Communications Products 33,791 20,082
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262,260 106,802
Automotive Test and Service
backlog not expected to be filled
within one year (194,112) (64,376)
-------- --------
Backlog expected to be filled in
succeeding fiscal year $ 68,148 $ 42,426
======== ========
</TABLE>
The increase in the Automotive Test and Service backlog represents the award of
two emissions testing contracts to MARTA (the Cincinnati region of Ohio and
Northern Kentucky) in 1994. Centralized emissions testing programs have come
under increased scrutiny by both state and federal officials. Legislation has
been proposed in a number of states, including Kentucky, Maryland and Texas
where MARTA has programs, to amend and/or cancel programs which could impact
the existing Backlog. For additional information, see the "Automotive Test and
Service" sections of "Item I - Business" and "Item 7 - Management's Discussion
and Analysis of Financial Condition and results of Operations" included in this
Form 10-K report. The increase in backlog for Mobile Communications Products
represents increased orders for systems and site management products. With the
exception of Automotive Test and Service, all 1994 backlog is expected to be
completely filled within the 1995 fiscal year.
PRODUCTION, RAW MATERIALS AND SUPPLIES
In addition to manufacturing certain products, Allen also assembles at
its facilities certain components manufactured for it by non-affiliated
companies. The principal materials used in the production of Allen's products
are steel, copper, brass, aluminum, plastics and electronic components. These
materials are purchased regularly from several domestic and foreign producers
and have been generally available in sufficient quantities to meet Allen's
requirements, although occasionally shortages have occurred. A significant
portion of the copper and brass used by the Company in the manufacture of truck
radiators is sourced from a foreign manufacturer; the Company believes that the
risk, if any, inherent in this arrangement is no greater than in any of its
other raw material sources. The Company believes that the supplies of
materials through the end of 1995 will be adequate.
PATENTS, LICENSES AND FRANCHISES
The Company owns a number of patents, trademarks and copyrights and
conducts certain operations under licenses granted by others. Although the
Company does not believe that the expiration or loss of any one of these would
materially affect its business considered as a whole or the operations of any
industry segment, it does consider certain of them to be important to the
conduct of its business in certain product lines. In 1991, a United States
Federal Court found that an overseas manufacturer had willfully infringed the
Company's patent on its On-GlassR cellular telephone antennas. The Company
believes that the court affirmation of the validity of its patent has slowed
the entrance of infringing foreign-manufactured products into the United
States. Business franchises and concessions are not of material importance to
Allen's industry segments.
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<PAGE> 8
RESEARCH AND DEVELOPMENT
The Company is engaged in research and development activities
(substantially all of which are Company-sponsored) as part of its ongoing
business. The Company is continuing to emphasize the development of specialty
products and accessories to serve the cellular telephone and wireless
communications markets. Currently, these development activities are not
expected to require a material investment in assets. For additional
information, see "Research and Development Expenses" in Note 1 of Notes to
Consolidated Financial Statements on page 20 of Allen's 1994 Annual Report to
Stockholders, a copy of which is filed as Exhibit 13 to this Report.
ENVIRONMENTAL CONTROLS
The Company is subject to federal, state and local laws designed to
protect the environment and believes that, as a general matter, its policies,
practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and financial liability to the Company. Additional
information regarding environmental issues is incorporated herein by reference
to the last paragraph of Note 6, "Commitments and Contingencies", of the Notes
to Consolidated Financial Statements on page 24 of Allen's 1994 Annual Report
to Stockholders, a copy of which is filed as Exhibit 13 to this Report.
EMPLOYEES
As of December 31, 1994, Allen had approximately 2,700 employees.
SEASONAL TRENDS
Generally, the Company's sales are not subject to significant seasonal
variations; however, sales and earnings for ATG tend to be lower in the first
fiscal quarter due to lower base station antenna installations. In addition,
earnings typically tend to be lower during the first half of the year due to
the seasonality of the Company's GO/DAN Industries joint venture.
INDUSTRY SEGMENTS, CLASSES OF PRODUCTS, FOREIGN OPERATIONS AND EXPORT SALES
Information relating to the Company's industry segments, classes of
similar products or services, foreign and domestic operations and export sales
is incorporated herein by reference to "Segment Sales and Income" on page 14,
"Industry Segment and Geographic Data" in Note 9 of the Notes to Consolidated
Financial Statements on page 26, and the information presented in the charts on
pages 30 to 33, of the Company's 1994 Annual Report to Stockholders, a copy of
which is filed as Exhibit 13 to this Report.
Except with respect to ATG's Mexican operations which supplies mobile
antennas to ATG, and FOREM and MIKOM's European operations, Allen engages in
no material manufacturing operations in foreign countries, and no material
portion of Allen's sales currently is derived from such operations. The
Company's recent investment in FOREM and MIKOM will result in the Company
having significant manufacturing and sales operations in Italy and Germany in
1995. In addition, the Company's 50/50 joint venture, GO/DAN Industries, has a
manufacturing facility located in Mexico. With the opportunities represented
by the rapid deployment of cellular telephony systems throughout the world, the
Company has seen extensive growth in international markets and export sales
have increased from $57 million in 1993 to over $70 million in 1994. This
growth has encouraged the Company to continue to expand the size and number of
its international sales and service offices. In the opinion of management, any
risks inherent in Allen's existing foreign operations and sales are not
substantially different than the risks inherent in its domestic operations and
sales.
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<PAGE> 9
ITEM 2 - PROPERTIES
At December 31, 1994, Allen's continuing operations were conducted in
42 facilities in 16 states and Mexico. In addition, ATG maintains sales
offices in Australia, Canada, China, Brazil, Germany, the United Kingdom and
Singapore. Allen occupies approximately 1,648,000 square feet of space for
manufacturing, fabrication, assembly, centralized automotive emissions testing,
warehousing, research and development and administrative offices.
Approximately 634,000 square feet are rented under operating leases, and the
remainder is owned. Principal domestic facilities are located in Ohio,
Connecticut, Florida, Kentucky, Mississippi, Texas and Virginia. In Reynosa,
Mexico, Allen owns one building with approximately 59,000 square feet.
Information concerning the Company's properties by industry segment at
December 31, 1994 is as follows (amounts in thousands):
<TABLE>
<CAPTION>
Square Footage
------------------------------------------------
Domestic Foreign
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Owned Leased Owned Leased Total
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<S> <C> <C> <C> <C> <C>
Automotive Test and Service 74 23 - - 97
Truck Products 621 157 - - 778
Mobile Communications Products 260 434 59 7 760
General Corporate - 13 - - 13
--- --- -- - -----
955 627 59 7 1,648
=== === == = =====
</TABLE>
Allen's machinery, plants, warehouses and offices are in good
condition, reasonably suited and adequate for the purposes for which they are
presently used and generally are fully utilized.
In addition to the above, Allen owns three manufacturing facilities
that had been utilized by its discontinued operations and former automotive
replacement radiator businesses. Two of these facilities (totalling 155,000
square feet) are currently under short-term leases, including a facility leased
to the purchaser of the automated manufacturing equipment product line and a
facility leased to GO/DAN Industries (an affiliated joint venture). The
Company has entered into a purchase agreement to sell the third facility
(consisting of 30,600 square feet) subject to the fulfillment of certain terms
and conditions.
ITEM 3 - LEGAL PROCEEDINGS
The information required by this Item is incorporated herein by
reference to the fourth paragraph of Note 6, "Commitments and Contingencies",
of the Notes to Consolidated Financial Statements on page 23 of the
Registrant's 1994 Annual Report to Stockholders, a copy of which is filed as
Exhibit 13 to this Report.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following list sets forth the names of the executive officers (as
defined under rules promulgated by the Securities and Exchange Commission) of
Allen, their ages and business experience during at least the last five years.
ROBERT G. PAUL - President and Chief Executive Officer; age 53.
Mr. Paul has been President and Chief Executive Officer of the Company
since February 1991. He was President and Chief Operating Officer of the
Company from December 1989 to February 1991, Senior Vice President - Finance
from April 1987 to December 1989, Vice President-Finance from January 1987 to
April 1987 and a Vice President from 1974 to January 1987. He also was
President of the Antenna Specialists Company division of the Company's
subsidiary, Orion Industries, Inc. (a predecessor of ATG), from 1978 to June
1990. Mr. Paul joined the Company in 1970 as an Assistant to the President and
also served as Assistant Treasurer from 1970 to 1972. He was elected Treasurer
in 1972 and Vice President and Treasurer of Allen in 1974. Mr. Paul was
appointed Vice President- Finance and Administration of the Antenna Specialists
Company division of Allen's subsidiary, Orion Industries, Inc. (a predecessor
of ATG), in 1976, its Vice President-Operations in 1977 and its President in
1978, while continuing as a Vice President of Allen.
ROBERT A. YOUDELMAN - Senior Vice President-Finance and Chief Financial
Officer; age 53.
Mr. Youdelman joined the Company in 1977 as Director of Taxes. In
February 1980 he was elected Vice President-Taxation, and in December 1989 was
elected Senior Vice President-Finance and Chief Financial Officer. Mr.
Youdelman is an attorney.
FRANK J. HYSON - Vice President; age 62.
Mr. Hyson joined Allen in 1973 as Vice President-Finance of the
Company's Crown Divisions and was appointed President of Crown in 1976. He was
elected a Vice President of Allen in September 1987.
ERIK H. VAN DER KAAY - Vice President; age 54.
Mr. van der Kaay joined the Company in 1990 as President of the
Antenna Specialists Company division of Allen's subsidiary, Orion Industries,
Inc. (a predecessor of ATG). He was elected Vice President of Allen in
February 1993. Prior to joining Allen, Mr. van der Kaay was the Chief
Executive Officer of Millitech Corporation, a developer and manufacturer of
milliliter communication components and systems, South Deerfield,
Massachusetts, from 1988 to 1990, and Group Vice President of
Telecommunications at Avantek Inc., a developer and manufacturer of microwave
radios and CATV systems, Santa Clara, California, from 1984 to 1988.
JAMES L. LEPORTE, III - Vice President and Controller; age 40.
Mr. LePorte joined the Company in 1981 as Senior Financial Analyst.
In 1983, he was appointed Manager of Financial Analysis, and, in 1984, was
named Assistant Controller. In April 1988, Mr. LePorte was elected Controller
of the Company, and, in December 1990, was elected a Vice President.
JOHN C. MARTIN, III - Vice President and Treasurer; age 42.
Mr. Martin joined the Company in 1979 as a Senior Business Analyst and
was appointed Manager, International Business Development in 1984 and Director,
Corporate Development in 1987. He was elected Treasurer in April 1988 and a
Vice President in September 1991.
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<PAGE> 11
MCDARA P. FOLAN, III - Vice President, Secretary and General Counsel; age 36.
Mr. Folan joined the Company in August 1992 as Corporate Counsel and
was elected Secretary and General Counsel in September 1992 and Vice President
in December 1994. Prior to joining Allen, Mr. Folan was affiliated with the
law firm of Jones, Day, Reavis and Pogue, Cleveland, Ohio, from September 1987
to August 1992. Mr. Folan is an attorney.
There is no family relationship between any of the foregoing officers. All
officers of Allen hold office until the first meeting of directors following
the annual meeting of stockholders and until their successors have been elected
and qualified.
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<PAGE> 12
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by
reference to the eighth paragraph of Note 2 of the Notes to Consolidated
Financial Statements on page 21, and to "Exchange Listings", "Market Price
Range of Common Stock", "Dividends Declared on Common Stock" and "Stockholders"
on page 35, of the Registrant's 1994 Annual Report to Stockholders, a copy of
which is filed as Exhibit 13 to this Report.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by
reference to "Five Year Summary of Operations" on page 34 of the Registrant's
1994 Annual Report to Stockholders, a copy of which is filed as Exhibit 13 to
this Report. In addition, cash dividends declared per common share is as
follows:
<TABLE>
<S> <C>
1990 -0-
1991 $.046
1992 $.105
1993 $.13
1994 $.17
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by
reference to pages 30 to 33 of the Registrant's 1994 Annual Report to
Stockholders, a copy of which is filed as Exhibit 13 to this Report, as updated
below.
Since the mailing of the Registrant's 1994 Annual Report to
Stockholders on March 17, 1995, the State of Maryland has notified MARTA to
take the necessary steps to implement MARTA's Maryland centralized emissions
testing program on or about May 1, 1995, using a combined "tailpipe"/IM 240
inspection program. Based on the current status of legislation, the combined
program will revert to an IM 240 inspection program on July 1, 1996. As a
result of the move to a combined program, the State and MARTA are engaged in
discussions regarding the change in scope, and a corresponding change in fees
to be received by MARTA, with respect to the Maryland program. The State also
informed MARTA that its management fee for the operation of its Maryland
program will become effective March 1995.
With respect to MARTA's Northern Kentucky centralized emissions
testing program, the State of Kentucky has notified MARTA that the State is
reviewing the effect of the Federal EPA's changing mandates on planned and
implemented programs in Northern Kentucky. In light of these developments, the
State has requested that MARTA limit its activities to the search for suitable
test station locations, but not enter into any contractual arrangements to
lease or purchase property for these test stations until the State resolves its
issues with the Federal EPA.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by
reference to the Consolidated Statements of Income, Consolidated Balance
Sheets, Consolidated Statements of Cash Flows and Consolidated Statements of
Stockholders' Equity on pages 15 to 18, to the Notes to Consolidated Financial
-12-
<PAGE> 13
Statements on pages 19 to 28, and to the "Report of Independent Accountants" on
page 29, of the Registrant's 1994 Annual Report to Stockholders, a copy of
which is filed as Exhibit 13 to this Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-13-
<PAGE> 14
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this Item relating to the Company's
executive officers is included on pages 10 to 11 hereof under "EXECUTIVE
OFFICERS OF ALLEN" and is incorporated herein by reference to "EXECUTIVE
COMPENSATION AND TRANSACTIONS WITH MANAGEMENT - Employment, Termination of
Employment and Change of Control Arrangements" on pages 15 to 16 of the
Registrant's definitive proxy statement dated March 17, 1995 and filed with the
Securities and Exchange Commission pursuant to Section 14(a) of the Securities
Exchange Act of 1934. The other information required by this Item is
incorporated herein by reference to "ELECTION OF DIRECTORS - Information
Regarding Nominees" on pages 1 to 3 of the Registrant's definitive proxy
statement dated March 17, 1995 and filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to "ELECTION OF DIRECTORS - Compensation of Directors" on pages 4 to
5 and to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT on pages 6 to
18 of the Registrant's definitive proxy statement dated March 17, 1995 and
filed with the Securities and Exchange Commission pursuant to Section 14(a) of
the Securities Exchange Act of 1934.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to "STOCK OWNERSHIP" on pages 19 to 21 of the Registrant's definitive
proxy statement dated March 17, 1995 and filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to "EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT -
Transactions with Executive Officers and Directors" on page 18, and to "STOCK
OWNERSHIP - Principal Stockholders" on page 19, of the Registrant's definitive
proxy statement dated March 17, 1995 and filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934.
-14-
<PAGE> 15
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS OF THE REGISTRANT
The Consolidated Financial Statements of the Registrant listed below,
together with the Report of Independent Accountants, dated February 17,
1995, are incorporated herein by reference to pages 15 to 29 of the
Registrant's 1994 Annual Report to Stockholders, a copy of which is filed
as Exhibit 13 to this Report.
Consolidated Statements of Income for the Years Ended December 31,
1994, 1993 and 1992
Consolidated Balance Sheets at December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December
31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Report of Independent Accountants
(2) FINANCIAL STATEMENT SCHEDULES
The following additional information should be read in conjunction with the
Consolidated Financial Statements of the Registrant described in Item
14(a)(1) above:
FINANCIAL STATEMENT SCHEDULES OF THE REGISTRANT
Report of Independent Accountants on page 16 of this Report relating
to the financial statement schedule
Schedule II - Valuation and Qualifying Accounts and Reserves, on
page 17 of this Report
Schedules other than the schedule listed above are omitted because they are
not required or are not applicable, or because the information is furnished
elsewhere in the financial statements or the notes thereto.
(3) EXHIBITS*
The information required by this Item relating to Exhibits to this Report
is included in the Exhibit Index on pages 20 to 25 hereof.
(b) REPORTS ON FORM 8-K
None.
______________
*A copy of any of the Exhibits to this Report will be furnished to persons who
request a copy upon the payment of a fee of $.25 per page to cover the
Company's duplication and handling expenses.
-15-
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The Allen Group Inc.:
Our report on the consolidated financial statements of The Allen Group Inc.
has been incorporated by reference in this Annual Report on Form 10-K from page
29 of the 1994 Annual Report to Stockholders of The Allen Group Inc. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the Index on page 15 of this
Form 10-K Annual Report.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
February 17, 1995
-16-
<PAGE> 17
THE ALLEN GROUP INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
------------------------------- --------- -------------------- ---------- --------
Balance Additions Balance
--------------------
at Charged to Charged Deductions at End
Beginning Costs and to Other from of
Description of Period Expenses Accounts Reserves Period
------------------------------- --------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1994 $ 1,270 417 - 3(1) $1,684
======= ===== ====== ===== ======
1993 $ 3,543 719 - 2,992(1)(2) $1,270
======= ===== ====== ===== ======
1992 $ 1,470 2,416 - 343(1) $3,543
======= ===== ====== ===== ======
</TABLE>
(1) Represents the write-off of uncollectible accounts, less recoveries.
(2) Includes the elimination of related balances for its Allen Testproducts
division and leasing subsidiary sold in 1993.
- 17 -
<PAGE> 18
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.
THE ALLEN GROUP INC.
--------------------
(Registrant)
By /s/ Robert A. Youdelman
-----------------------------
Robert A. Youdelman
Senior Vice President-Finance
Date: March 30, 1995
------------------
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.
<TABLE>
<S> <C>
/s/ Robert G. Paul March 30, 1995
------------------------------------------
Robert G. Paul, President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Robert A. Youdelman March 30, 1995
------------------------------------------
Robert A. Youdelman, Senior Vice President-
Finance (Principal Financial Officer)
/s/ James L. LePorte March 30, 1995
------------------------------------------
James L. LePorte, Vice President and
Controller (Principal Accounting Officer)
March 30, 1995
------------------------------------------
Wade W. Allen, Director
/s/ George A. Chandler March 30, 1995
------------------------------------------
George A. Chandler, Director
/s/ Philip W. Colburn March 30, 1995
------------------------------------------
Philip W. Colburn, Chairman of the Board
and Director
/s/ Jill K. Conway March 30, 1995
------------------------------------------
Jill K. Conway, Director
</TABLE>
-18-
<PAGE> 19
<TABLE>
<S> <C>
/s/ Albert H. Gordon March 30, 1995
------------------------------------------
Albert H. Gordon, Director
/s/ William O. Hunt March 30, 1995
------------------------------------------
William O. Hunt, Director
/s/ J. Chisholm Lyons March 30, 1995
------------------------------------------
J. Chisholm Lyons, Director
/s/ Charles W. Robinson March 30, 1995
------------------------------------------
Charles W. Robinson, Director
/s/ Richard S. Vokey March 30, 1995
------------------------------------------
Richard S. Vokey, Director
/s/ William M. Weaver, Jr. March 30, 1995
------------------------------------------
William M. Weaver, Jr., Director
</TABLE>
-19-
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBERS PAGES
--------------- -----
<S> <C> <C>
(3) Certificate of Incorporation and By Laws -
(a) Restated Certificate of Incorporation (filed as
Exhibit Number 3(a) to Registrant's Form 10-K
Annual Report for the fiscal year ended December
31, 1984 (Commission file number 1-6016) and
incorporated herein by reference)........................ -
(b) Certificate of Designations, Powers, Preferences
and Rights of the $1.75 Convertible Exchangeable
Preferred Stock, Series A (filed as Exhibit Number
3(b) to Registrant's Form 10-K Annual Report for
the fiscal year ended December 31, 1986
(Commission file number 1-6016) and incorporated
herein by reference) .................................... -
(c) Certificate of Amendment of Restated Certificate
of Incorporation (filed as Exhibit Number 3(c) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1987 (Commission file number
1-6016) and incorporated herein by reference) ........... -
(d) Certificate of Designations, Powers, Preferences
and Rights of the Variable Rate Preferred Stock,
Series A (filed as Exhibit Number 3(d) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1987 (Commission file number
1-6016) and incorporated herein by reference) ........... -
(e) Certificate of Designation, Preferences and Rights
of Series B Junior Participating Preferred Stock
(filed as Exhibit Number 3(e) to Registrant's
Form 10-K Annual Report for the fiscal year
ended December 31, 1987 (Commission file number
1-6016) and incorporated herein by reference) ........... -
(f) Certificate Eliminating Variable Rate Preferred
Stock, Series A (filed as Exhibit Number 3(f) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1989 (Commission file
number 1-6016) and incorporated herein by
reference) .............................................. -
(g) Certificate of Amendment of Restated Certificate
of Incorporation (filed as Exhibit Number 3(g) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1993 (Commission file number
1-6016) and incorporated herein by reference)............ -
(h) Certificate Eliminating $1.75 Convertible Exchangeable
Preferred Stock, Series A (filed as Exhibit Number 3(h)
to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1993 (Commission file number
1-6016) and incorporated herein by reference)............ -
(i) By-Laws, as amended through September 10, 1992 (filed
as Exhibit Number 3(g) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1992
(Commission file number 1-6016) and incorporated herein
by reference)............................................. -
</TABLE>
-20-
<PAGE> 21
<TABLE>
<S> <C> <C>
(4) Instruments defining the rights of security holders -
(a) Rights Agreement, dated as of January 7, 1988,
between the Registrant and Manufacturers Hanover
Trust Company (filed as Exhibit Number 4 to
Registrant's Form 8-K Current Report dated
January 7, 1988 (Commission file number 1-6016)
and incorporated herein by reference) ................... -
(b) Credit Agreement, dated as of February 17, 1994,
among the Registrant, the Banks signatory thereto,
and Bank of Montreal, as agent (filed as Exhibit
Number 4(b) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1993 (Commission
file number 1-6016) and incorporated herein by
reference)............................................... -
Additional information concerning Registrant's long-
term debt is set forth in Note 2 of the Notes to
Consolidated Financial Statements on pages 20 to 21 of
Registrant's 1994 Annual Report to Stockholders, a
copy of which is filed as Exhibit 13 to this Report.
Other than the Credit Agreement referred to
above, no instrument defining the rights of holders
of such long-term debt relates to securities
having an aggregate principal amount in excess
of 10% of the consolidated assets of Registrant
and its subsidiaries; therefore, in accordance
with paragraph (iii) of Item 4 of Item 601(b)
of Regulation S-K, the other instruments
defining the rights of holders of long-term debt
are not filed herewith. Registrant hereby agrees
to furnish a copy of any such other instrument to
the Securities and Exchange Commission upon request.
(10) Material contracts (All of the exhibits listed as
material contracts hereunder are management contracts
or compensatory plans or arrangements required to be
filed as exhibits to this Report pursuant to Item 14(c)
of this Report.).......................................... -
(a) The Allen Group Inc. 1970 Non-Qualified Stock Option Plan,
as amended April 25, 1978, June 23, 1981 and February 19,
1985 (revised) (filed as Exhibit Number 10(a) to
Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1985 (Commission
file number 1-6016) and incorporated herein by
reference)................................................ -
(b) Amendment, dated November 3, 1987, to 1970
Non-Qualified Stock Option Plan (filed as Exhibit
Number 10(b) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1987 (Commis-
sion file number 1-6016) and incorporated herein by
reference) ............................................... -
(c) The Allen Group Inc. 1982 Stock Plan, as amended
through November 3, 1987 (filed as Exhibit Number 10(c)
to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1987 (Commission file number
1-6016) and incorporated herein by reference)............. -
(d) Amendment, dated as of December 4, 1990, to 1982 Stock
Plan, as amended (filed as Exhibit Number 10(d) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1990 (Commission file number
1-6016) and incorporated herein by reference) ............ -
</TABLE>
-21-
<PAGE> 22
<TABLE>
<S> <C> <C>
(e) Form of Restricted Stock Agreement pursuant to 1982
Stock Plan, as amended (filed as Exhibit Number 10(e) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1990 (Commission file number
1-6016) and incorporated herein by reference) ............ -
(f) The Allen Group Inc. 1992 Stock Plan (filed as Exhibit
Number 10(f) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1992 (Commission
file number 1-6016) and incorporated herein by reference). -
(g) Amendment to The Allen Group Inc. 1992 Stock Plan, dated
September 13, 1994 (filed as Exhibit Number 10 to the
Registrant's Form 10-Q Quarterly Report for the quarterly
period ended September 30, 1994 (Commission file number
1-6016) and incorporated herein by reference)............. -
(h) Second Amendment to The Allen Group Inc. 1992 Stock Plan,
dated February 23, 1994................................... 26
(i) Third Amendment to The Allen Group Inc. 1992 Stock Plan,
dated February 23, 1994................................... 27
(j) Form of Restricted Stock Agreement pursuant to 1992
Stock Plan (Salary Increase Deferral), dated
November 30, 1993, entered into by the Registrant
with certain executive officers, officers and
division presidents (filed as Exhibit Number 10(g) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1993 (Commission file number
1-6016) and incorporated herein by reference)............. -
(k) Form of Restricted Stock Agreement pursuant to 1992
Stock Plan (Salary Increase Deferral), dated
April 28, 1992, entered into by the Registrant with
certain executive officers, officers and division
presidents (filed as Exhibit Number 10(g) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1992 (Commission file number
1-6016) and incorporated herein by reference)............. -
(l) Amendment to Restricted Stock Agreements pursuant to
1992 Stock Plan (Salary Increase Deferral), dated
February 22, 1995......................................... 29
(m) Form of Non-Qualified Option to Purchase Stock
granted to certain directors of the Registrant
on September 12, 1989 (filed as Exhibit Number
10(e) to Registrant's Form 10-K Annual Report
for the fiscal year ended December 31, 1989
(Commission file number 1-6016) and incorporated
herein by reference) ..................................... -
(n) The Allen Group Inc. 1994 Non-Employee Directors
Stock Option Plan (filed as Exhibit A to Registrant's
Proxy Statement dated March 17, 1994 (Commission file
number 1-6016) and incorporated herein by reference)...... -
(o) Form of Non-Qualified Option to Purchase Stock pursuant
to The Allen Group Inc. 1994 Non-Employee Directors
Stock Option Plan......................................... 31
</TABLE>
-22-
<PAGE> 23
<TABLE>
<S> <C> <C>
(p) The Allen Group Inc. Amended and Restated Key
Management Deferred Bonus Plan (incorporating
all amendments through February 27, 1992) (filed as
Exhibit Number 10(i) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1992
(Commission file number 1-6016) and incorporated
herein by reference)...................................... -
(q) Form of Restricted Stock Agreement pursuant to
1992 Stock Plan and Key Management Deferred
Bonus Plan (filed as Exhibit Number 10(j) to Registrant's
Form 10-K Annual Report for the fiscal year ended
December 31, 1992 (Commission file number 1-6016)
and incorporated herein by reference)..................... -
(r) Form of Severance Agreement, dated as of November
3, 1987, entered into by the Registrant with
certain executive officers, officers and division
presidents (filed as Exhibit Number 10(g) to
Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1987 (Commission
file number 1-6016) and incorporated herein by
reference) ............................................... -
(s) Form of Amendment, dated December 5, 1989, to
Severance Agreement entered into by the Registrant
with certain executive officers, officers and division
presidents (filed as Exhibit Number 10(j) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1989 (Commission file number
1-6016) and incorporated herein by reference) ............ -
(t) The Allen Group Inc. Master Discretionary Severance
Pay Plan, effective January 1, 1993....................... 36
(u) Key Employee Severance Policy adopted by the
Registrant on November 3, 1987 (filed as Exhibit
Number 10(h) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1987
(Commission file number 6-6016) and incorporated
herein by reference) ..................................... -
(v) Amendment, dated May 14, 1991, to Key Employee
Severance Policy adopted by the Registrant on
November 3, 1987 (filed as Exhibit Number 10(n) to
Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1992 (Commission
file number 1-6016) and incorporated herein by
reference)................................................ -
(w) Employment Agreement, dated June 28, 1988, between
the Registrant and Philip Wm. Colburn (filed as
Exhibit Number 10(m) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31,
1988 (Commission file number 1-6016) and incorporated
herein by reference) ..................................... -
(x) Amendment, dated as of February 27, 1992, of Employment
Agreement, dated June 28, 1988, between the Registrant
and Philip Wm. Colburn (filed as Exhibit Number 10(p) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1992 (Commission file number
1-6016) and incorporated herein by reference)............. -
</TABLE>
-23-
<PAGE> 24
<TABLE>
<S> <C> <C>
(y) Amendment, dated as of February 26, 1991, of
Employment Agreement, dated June 28, 1988, between
the Registrant and Philip Wm. Colburn (filed as
Exhibit Number 10(n) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1990
(Commission file number 1-6016) and incorporated herein
by reference) ............................................ -
(z) Amended and Restated Post Employment Consulting
Agreement, dated as of December 20, 1990, between
the Registrant and Philip Wm. Colburn (filed as
Exhibit Number 10(o) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1990
(Commission file number 1-6016) and incorporated herein
by reference) ............................................ -
(aa) Amended and Restated Supplemental Pension Benefit
Agreement, dated as of December 20, 1990, between
the Registrant and Philip Wm. Colburn (filed as
Exhibit Number 10(p) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1990
(Commission file number 1-6016) and incorporated herein
by reference) ............................................ -
(bb) Insured Supplemental Retirement Benefit Agreement,
dated as of September 4, 1985, between the Registrant
and Philip Wm. Colburn (filed as Exhibit Number 10(l)
to Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1987 (Commission file number
1-6016) and incorporated herein by reference) ............ -
(cc) Split Dollar Insurance Agreement, dated as of July 1,
1991, between the Registrant and Philip Wm. Colburn
(filed as Exhibit Number 10(u) to Registrant's Form 10-K
Annual Report for the fiscal year ended December 31,
1992 (Commission file number 1-6016) and incorporated
herein by reference....................................... -
(dd) Supplemental Pension Benefit Agreement, dated
as of December 6, 1983, between the Registrant and
J. Chisholm Lyons (filed as Exhibit Number 10(r) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1983 (Commission file
number 1-6016) and incorporated herein by reference)...... -
(ee) Amendment, dated as of December 20, 1990, of
Supplemental Pension Benefit Agreement, dated as of
December 6, 1983, between the Registrant and
J. Chisholm Lyons (filed as Exhibit Number 10(s)
to Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1990 (Commission file
number 1-6016) and incorporated herein by reference)...... -
(ff) Post Employment Consulting Agreement, dated as of
September 12, 1989, between the Registrant and
J. Chisholm Lyons (filed as Exhibit Number 10(s) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1989 (Commission file number
1-6016) and incorporated herein by reference)............. -
(gg) Amendment, dated as of December 20, 1990, of
Post Employment Consulting Agreement, dated as of
September 12, 1989, between the Registrant and
J. Chisholm Lyons (filed as Exhibit Number 10(u) to
Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1990 (Commission file number
1-6016) and incorporated herein by reference)............. -
</TABLE>
-24-
<PAGE> 25
<TABLE>
<S> <C> <C>
(hh) Employment Agreement, dated June 25, 1991, between
the Registrant and Robert G. Paul (filed as Exhibit
Number 10(x) to Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1991
(Commission file number 1-6016) and incorporated
herein by reference)...................................... -
(ii) Supplemental Pension Benefit Agreement, dated as of
June 25, 1991, between the Registrant and Robert
G. Paul (filed as Exhibit Number 10(y) to Registrant's
Form 10-K Annual Report for the fiscal year ended
December 31, 1991 (Commission file number 1-6016)
and incorporated herein by reference)..................... -
(jj) Form of Split Dollar Insurance Agreement, dated as of
November 1, 1991, entered into by the Registrant with
certain executive officers, officers and division
presidents (filed as Exhibit Number 10(bb) to Registrant's
Form 10-K Annual Report for the fiscal year ended
December 31, 1992 (Commission file number 1-6016) and
incorporated herein by reference.......................... -
(kk) Form of Supplemental Pension Benefit Agreement, dated
as of February 27, 1992, entered into by the Registrant
with certain executive officers, officers and division
presidents (filed as Exhibit Number 10(cc) to Registrant's
Form 10-K Annual Report for the fiscal year ended
December 31, 1992 (Commission file number 1-6016) and
incorporated herein by reference.......................... -
(11) Statement re Computation of Earnings (Loss) Per
Common Share .................................................... 42
(13) 1994 Annual Report to Stockholders*.............................. 43
(21) Subsidiaries of the Registrant .................................. 83
(23) Consent of Independent Accountants .............................. 85
(27) Financial Data Schedule.......................................... 86
</TABLE>
* Furnished for the information of the Securities and Exchange Commission
and not to be deemed "filed" as part of this Report except for the
Consolidated Financial Statements of the Registrant and the Accountants'
Report on pages 15 to 29 of said Annual Report to Stockholders and the
other information incorporated by reference in Items 1 and 3 of Part I
hereof and Items 5 to 8 of Part II hereof.
A copy of any of these Exhibits will be furnished to persons who request a copy
upon the payment of a fee of $.25 per page to cover the Company's duplication
and handling expenses.
-25-
<PAGE> 1
Exhibit 10(h)
-------------
SECOND AMENDMENT TO
THE ALLEN GROUP INC.
1992 STOCK PLAN
This Second Amendment to The Allen Group Inc. 1992 Stock Plan, as
previously amended by the Board of Directors on September 13, 1994 (the
"Plan"), hereby is adopted this 23rd day of February 1995, to provide as
follows:
1. Section 5(k) hereby is deleted in its entirety.
2. The last sentence of Section 6(d) hereby is deleted in its entirety.
3. A new Section 15 hereby is added to the Plan and shall contain the
following provisions:
"15. WITHHOLDING OF TAXES. To the extent that
the Company is required to withhold or receive federal,
state, local or foreign taxes in connection with any
payment made or benefit realized by an employee or other
person under this Plan, it shall be a condition to the
receipt of any such payment or the realization of any such
benefit that the employee or such other person make
arrangements satisfactory to the Company for payment of
any taxes required to be withheld. At the discretion of
the Committee, any such arrangements may include,
without limitation, relinquishment of a portion of any such
payment or benefit or the surrender of outstanding shares
of Common Stock, and any agreement pertaining to a grant
of options or an award of Restricted Shares under the Plan
may make such relinquishment the elective or mandatory
form of satisfying such taxes. At the discretion of the
Committee, in connection with any payment made or benefit
realized by an employee or other person under this Plan,
the Company and any such employee or other person also
may make similar arrangements with respect to the
payment of any taxes with respect to which withholding is
not required."
All other provisions of the Plan hereby are ratified, confirmed and
approved.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
duly executed in its name by its duly authorized officer this 23rd day of
February, 1995.
THE ALLEN GROUP INC.
By: /s/ Philip Wm. Colburn
----------------------
Philip Wm. Colburn
Chairman of the Board
ATTEST:.
/s/ McDara P. Folan, III
------------------------
McDara P. Folan, III
Secretary
<PAGE> 1
Exhibit 10(i)
-------------
THIRD AMENDMENT TO
THE ALLEN GROUP INC.
1992 STOCK PLAN
Subject to the approval of the stockholders of the Company at its 1995
Annual Meeting of Stockholders to be held on April 27, 1995, this Third
Amendment to The Allen Group Inc. 1992 Stock Plan, as previously amended, is
hereby adopted this 23rd day of February, 1995, to provide as follows:
1. Section 2 of the Plan hereby is amended by deleting Section 2 in its
entirety and inserting in place thereof the following provisions:
"2. SHARES SUBJECT TO PLAN. The total number of
shares of Common Stock with respect to which options may
be granted and Restricted Shares may be awarded under
the Plan shall not exceed 2,000,000. Shares awarded as
Restricted Shares or issued upon exercise of options
granted under the Plan may be authorized and previously
unissued shares, issued shares which have been
reacquired by the Company or a combination thereof. In
the event that any Restricted Shares shall be forfeited or
any option granted under the Plan shall terminate, expire
or, with the consent of the optionee, be canceled as to any
shares of Common Stock, without having been exercised in
full, new awards of Restricted Shares may be made or new
options may be granted with respect to such shares
without again being charged against the maximum share
limitation set forth above in this Section 2. In addition,
upon the full or partial payment of any option price by the
transfer to the Company of shares of Common Stock or
upon satisfaction of tax withholding obligations in
connection with any such exercise or the lapsing of
restrictions on any Restricted Shares or any other
payment made or benefit realized under this Plan by the
transfer or relinquishment of shares of Common Stock,
only the net number of shares of Common Stock actually
issued or transferred by the Company, after subtracting
the number of shares of Common Stock so transferred or
relinquished, shall be charged against the maximum share
limitation set forth above in this Section 2; provided,
however, that the number of shares of Common Stock
actually issued or transferred by the Company upon the
exercise of Incentive Stock Options shall not exceed such
maximum share limitation.
<PAGE> 2
No employee shall be granted options for more than
200,000 shares of Common Stock, or awarded more than
100,000 Restricted Shares, under the Plan in any one
fiscal year of the Company, subject to adjustments as
provided in Section 7 of this Plan."
2. The last sentence of Section 5(a) hereby is deleted in its entirety.
3. Section 6(b) of the Plan hereby is amended by adding the following
sentence after the third sentence of Section 6(b):
"Such conditions may also include performance measures,
which, in the case of any such award of Restricted Shares
to an employee who is a "covered employee" within the
meaning of Section 162(m) of the Code, shall be based on
one or more of the following criteria: earnings per share,
market value per share, return on invested capital, return
on operating assets and return on equity."
All other provisions of the Plan hereby are ratified, confirmed and
approved.
IN WITNESS WHEREOF, the Company has caused this Third Amendment to be
duly executed in its name by its duly authorized officer this 23rd day of
February, 1995.
THE ALLEN GROUP INC.
By: /s/ Philip Wm. Colburn
----------------------
Philip Wm. Colburn
Chairman of the Board
ATTEST:
/s/ McDara P. Folan, II
-----------------------
McDara P. Folan, III
Secretary
<PAGE> 1
Exhibit 10(1)
------------
AMENDMENT TO RESTRICTED STOCK AGREEMENTS
PURSUANT TO 1992 STOCK PLAN
(Salary Increase Deferral)
WHEREAS, the Corporation has entered into certain Restricted Stock
Agreements (the "Agreements") pursuant to The Allen Group Inc. 1992 Stock Plan,
as amended (the "Plan"), with certain key employees of the Corporation and its
subsidiaries ("Key Employees"); and
WHEREAS, the Committee anticipates that some of the restricted shares
of Common Stock of the Corporation ("Restricted Shares") granted to certain of
the Key Employees may vest during 1995; and
WHEREAS, at its meeting to be held on February 23, 1995, the Board of
Directors of the Corporation is expected to consider amendment of the Plan to
provide that an employee realizing a benefit under the Plan may fulfill his or
her obligation to pay any federal, state, local or foreign taxes required to be
withheld through the relinquishment of a portion of such benefit (the "Plan
Amendment"); and
WHEREAS, subject to the adoption of the Plan Amendment by the Board of
Directors, the Committee believes it would benefit the Corporation and be of
assistance to the Key Employees if the Agreements were amended to provide for
the application of a portion of the Restricted Shares that vest during the next
six months to satisfy any federal, state, local or foreign taxes required to be
paid in connection with the vesting of any such Restricted Shares during the
next six months and, with respect to any Restricted Shares vesting after such
six-month period, to provide the Key Employees with the ability to elect to
relinquish to the Company a portion of their Restricted Shares that vest to
satisfy such taxes;
NOW, THEREFORE, BE IT RESOLVED, that the Agreements dated April 28,
1992, between the Corporation and each of Robert G. Paul, Robert A. Youdelman,
James L. LePorte, III, John C. Martin, III, Ed Cohen, Erik van der Kaay, Frank
Hyson and Raymond Scanlon; the Agreements dated November 30, 1993, between the
Corporation and each of Peter Mailandt, Michael Morin, Robert Cameron, John
Burk, McDara P. Folan, III, Alan Amira and Pedro del Cuadro; and the Agreement
dated September 23, 1994, between the Corporation and John P. Kepple, be
amended by deleting Section 3(c) in its entirety and inserting therefor the
following:
"(c) As soon as practicable after the restrictions with respect to
any installment of Restricted Shares lapse (i) at the end of the period
applicable to such installment set forth in paragraph 3(a) above (the
"Restriction Period") or (ii) pursuant to paragraphs 3(b) or 5 hereof,
the Company will deliver to the Employee, or the Employee's legal
representative in case of the Employee's death, promptly after
surrender of the Employee's certificate(s) for the Restricted Shares to
the Treasurer of the Company, the certificate or certificates for such
shares free of any legend or further restrictions together with a new
certificate representing any remaining Restricted Shares. In the event
restrictions with respect to any installment of Restricted Shares lapse
prior to or on September 30, 1995, the Employee shall relinquish to the
Company, and the Company shall withhold from the Employee (or any
person entitled to act under this paragraph 3(c)), that portion of such
<PAGE> 2
Restricted Shares which, when multiplied by the Closing Price on the
date such restrictions lapse, equals in value the estimated amount of
federal, state, local or foreign taxes required to be paid in connection
with the lapsing of restrictions with respect to such Restricted Shares
based on the Employee's estimated maximum marginal tax rates;
provided, however, that the maximum number of Shares that will be
withheld shall not exceed 47 percent of such Restricted Shares. After
September 30, 1995, it shall be a condition to the obligation of the
Company to issue or transfer shares of Common Stock upon the lapse of
restrictions with respect to any installment of Restricted Shares that
the Employee (or any person entitled to act under this paragraph 3(c))
pay to the Company, or elect to relinquish to the Company a portion of
such Restricted Shares equal in value to, such amount as may be
required by the Company for the purpose of satisfying its liability to
withhold federal, state, local or foreign income or other taxes by reason
of such issuance or transfer. Any such election shall be subject to
approval by the Company's Management Compensation Committee, or
any successor thereto. If the amount required is not paid or authorized
to be relinquished and withheld from such Restricted Shares, the
Company may refuse to issue or transfer shares of Common Stock.
Furthermore, subject to the approval of the Company's Management
Compensation Committee, in connection with the vesting of any
Restricted Shares after September 30, 1995, the Employee (or any
person entitled to act under this paragraph 3(c)) may likewise elect to
relinquish to the Company an additional portion of such Restricted
Shares up to an amount equal in value to the estimated amount of
federal, state, local or foreign income or other taxes to be paid in
connection with the lapsing of restrictions on such Restricted Shares
with respect to which withholding by the Company is not required based
on the Employee's estimated maximum marginal tax rates; provided,
however, that the maximum number of Shares that may be withheld shall
not exceed 47 percent of such Restricted Shares. The Company shall
pay to the governmental entities designated by the Employee (or any
person entitled to act under this paragraph 3(c)) the amounts
designated by such Employee (or any person entitled to act under this
paragraph 3(c)) pursuant to this paragraph 3(c)."
FURTHER RESOLVED, that unless and until otherwise determined by this
Committee, all elections provided for in the foregoing amendment are hereby
approved.
FURTHER RESOLVED, that the foregoing amendment to the Agreements shall
be subject to, and effective only upon the adoption of, the Plan Amendment by
the Board of Directors as described in the foregoing resolutions.
FURTHER RESOLVED, that the officers of the Corporation, and each of
them, hereby are authorized to do and perform any and all acts and to execute
and deliver any and all plan documents, amendments, agreements or other
instruments as they may deem necessary or advisable to effectuate the foregoing
resolutions, and any actions taken by the officers of the Corporation, or any
of them, in furtherance of the foregoing resolutions are hereby ratified and
confirmed as the actions of the Corporation.
<PAGE> 1
Exhibit 10(o)
-------------
THE ALLEN GROUP INC.
NON-QUALIFIED OPTION TO PURCHASE STOCK
PURSUANT TO THE ALLEN GROUP INC.
1994 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Number of Shares , 19
THE ALLEN GROUP INC., a Delaware corporation (hereinafter called the
"Company"), pursuant to The Allen Group Inc. 1994 Non-Employee Directors Stock
Option Plan (hereinafter called the "Plan"), a copy of which is attached hereto
as Exhibit A and is incorporated herein by reference, hereby awards unto
(hereinafter called the "Director") a non-qualified option to
purchase shares of Common Stock of the Company, par value $1.00 per share, at a
price of $ per share, on the terms and subject to the conditions
hereinafter set forth:
1. The number of shares and purchase price are subject to adjustment
as provided in Section 7 of the Plan.
2. This option shall expire on the tenth anniversary of the date
hereof and shall be exercisable 50 percent after the second anniversary of the
date hereof, 75 percent after the third anniversary of the date hereby and 100
percent after the fourth anniversary of the date hereof. Notwithstanding the
foregoing, upon the death of the Director at any time prior to the tenth
anniversary of the date hereof, or upon the cessation of the Director's service
as a director of the Company six months or more after the date hereof and prior
to the tenth anniversary of the date hereof, this option shall become
immediately exercisable.
3. (a) If the Director shall cease to serve as a director of the
Company at any time six months or more after the date hereof, for any reason
other than death, this option may be exercised within three months after such
cessation. In the event of the Director's death within such three-month period
or if the cessation of the Director's service as director shall have been due
to his or her death, this option may be exercised at any time within one year
after the Director's death by his or her executor or administrator or by the
distributee to whom this option may have been transferred by will or by the
laws of descent and distribution.
(b) Notwithstanding anything to the contrary contained herein, if
upon the Director's cessation of service the Director is or becomes an employee
or a senior management consultant to the Company and/or its subsidiaries, this
option may be exercised by the Director during the period ending on the
earliest of (i) the ninetieth (90th) day following the date that the Director
permanently ceases to render employment or consulting services to the Company
and/or its subsidiaries, for any reason other than cessation by reason of
death, or (ii) the date that is one year after the date described in clause (i)
if the Director ceases to render employment or consulting services on account
of his or her death (in which case the option may be exercised by the
Director's executor or administrator or by the distributee to whom this option
may have been transferred by will or by the laws of descent and distribution).
<PAGE> 2
(c) Except as permitted by this paragraph 3, no option shall be
exercisable after the date of cessation of the Director's service as a director
of the Company. Anything herein to the contrary notwithstanding, this option
may in no event be exercised after the tenth anniversary of the date hereof.
4. During the lifetime of the Director, this option is exercisable
only by the Director, and neither this option nor any right or privilege
pertaining hereto may be transferred, assigned, pledged or hypothecated in any
way, by operation of law or otherwise, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or any right or privilege
pertaining hereto, otherwise than by will or by the laws of descent and
distribution, or upon the levy of any execution, attachment or similar process
thereupon, this option and all rights and privileges given hereby shall
immediately become null and void.
5. Subject to the conditions set forth herein, this option may be
exercised only by the execution and delivery by the Director (or any person
entitled to act under paragraph 3 hereof), to the Company of a written notice
of exercise in the form attached hereto as Exhibit B (with appropriate changes
in the case of a deceased Director), specifying the number of shares to be
purchased and accompanied by payment in full for the shares purchased, either
(a) in cash; (b) by the delivery of such number of shares of the Company's
Common Stock multiplied by the last sale price of such Common Stock as reported
on the New York Stock Exchange Composite Tape on the day such notice is
received by the Company (or if no sale of such Common Stock shall have been
made on such Exchange on that date, on the next preceding day on which there
was a sale) which equals the option price stated in this option multiplied by
the number of shares subject to that portion of this option in respect of which
such notice shall be given; or (c) any combination of cash and shares of the
Company's Common Stock valued as of the date and in the manner provided in (b)
above. No fractional share of Common Stock shall be issued or transferred, and
any such fractional share resulting from an adjustment pursuant to paragraph 1
hereof and Section 7 of the Plan shall be eliminated.
6. The Company shall, upon payment of the exercise price per share
for the number of shares purchased and paid for, make prompt delivery of a
certificate evidencing such shares to the Director (or his or her executor,
administrator or distributee pursuant to paragraph 3 hereof).
7. It shall be a condition to the obligation of the Company to issue
or transfer shares of Common Stock upon the exercise of this option, whether
such purchase price is paid in shares of Common Stock or cash, that the
Director (or any person entitled to act under paragraph 3 hereof) pay to the
Company, upon its demand, such amount as may be requested by the Company for
the purpose of satisfying its liability, if any, to withhold federal, state or
local income or other taxes incurred by the Company by reason of the exercise
of this option. If the amount requested is not paid, the Company may refuse to
issue or transfer shares of Common Stock upon exercise of this option.
8. The exercise of this option, and the Company's obligation to
accept, sell and deliver shares of Common Stock pursuant to any such exercise,
shali be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or government agency as may
be required. The Company shall not be required to issue or deliver any
certificate or certificates for shares of its
-2-
<PAGE> 3
Common Stock prior to (a) the admission of such shares to listing on any stock
exchange on which the stock may then be listed and (b) the completion of any
registration or other qualification of such shares under any state or federal
law or rulings or regulations of any government body, which the Company shall,
in its sole discretion, determine to be necessary or advisable.
9. Except as provided herein, this option may not be amended or
otherwise modified in a manner that is adverse to the interests of the Director
unless evidenced in writing and signed by the Company and the Director.
10. The granting of this option shall in no way constitute or be
evidence of any agreement or understanding, express or implied, that the
Director has a right to continue as a director of the Company for any period of
time, or at any particular rate of compensation.
11. All notices required hereby shall, unless otherwise provided
herein, be mailed or delivered by hand or by recognized overnight delivery
service to the parties at their respective addresses set forth beneath their
names below or at such other address as may be designated in writing by either
of the parties to one another.
THE ALLEN GROUP INC.
By:
-------------------------
The Allen Group Inc.
25101 Chagrin Boulevard
Suite 350
Beachwood, Ohio 44121
Attn: Treasurer
The foregoing option is hereby accepted on the terms and conditions set
forth herein.
--------------------
Director's Signature
---------------------------------
Director's Social Security Number
---------------------------------
---------------------------------
Director's Address
-3-
<PAGE> 4
NON-QUALIFIED OPTION
Exhibit B
---------
, 19
The Allen Group Inc.
25101 Chagrin Boulevard
Suite 350
Beachwood, OH 44122
ATTN: Treasurer
I hereby exercise the non-qualified stock option granted to
under date of to the extent of shares of Common Stock
of The Allen Group Inc. (the "Company") (the"Purchased Shares") at the option
price of $ per share, for a total exercise cost of $ .
In payment of the option price for the Purchased Shares, I am enclosing
the following:
A. Cash represented by a (personal check) (bank cashier's check) (money
order)* payable to the order of the Company in the amount of
$ ** or
B. shares of the Company's Common Stock owned by me having
an aggregate fair market value to be determined by the last sale
price of the Company's Common Stock as reported on the New York Stock
Exchange Composite Tape on the date of receipt at the corporate
office of the Company of this Exhibit B plus cash, if any, required
to complete the full purchase price, represented by a (personal
check) (bank cashier's check) (money order)* payable to the order
of the Company in the amount of $ .
If the aggregate value of the Common Stock tendered herewith plus the
amount of any cash do not constitute the full purchase price for the Purchased
Shares, I agree to deliver additional shares and/or cash represented by a
personal check, bank cashier's check or money order payable to the order of the
Company for the balance due promptly after I am notified by you.
<PAGE> 5
I understand that all shares issuable to me upon the exercise of said
stock option have been registered by the Company with the United States
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, and acknowledge receipt of the current prospectus relating to said
shares. If I am an affiliate of the Company as defined in said Act, I also
hereby agree that any sale of said shares by me will be made only in the manner
set forth in said prospectus.
Very truly yours,
-------------------------------------------
Address:
-------------------------------------------
-------------------------- -------------------------------------------
Witness
* Strike out words that are not applicable
** Payment of the option price may also be made by a transfer of funds or an
irrevocable credit to an authorized bank account of the Company; in such
case, the foregoing exercise of the option will be effective on the date
of such transfer or credit.
-2-
<PAGE> 1
Exhibit 10(t)
-------------
THE ALLEN GROUP INC. MASTER DISCRETIONARY
SEVERANCE PAY PLAN
The Allen Group Inc. hereby amends and completely restates effective
January 1, 1993 its employee benefit plan entitled "The Allen Group Inc. Master
Discretionary Severance Pay Plan."
ARTICLE I
Purpose
Section 1.1. Purpose. The purpose of this Plan is to ease the economic
stress of loss of employment during a period of involuntary unemployment by
providing Eligible Employees with Severance Pay in accordance with the
provisions hereinafter set forth. This Plan document amends and completely
restates all prior severance or termination plans or practices previously
applicable to Eligible Employees as of the Effective Date.
ARTICLE II
Definitions
Section 2.1 Definitions. When used in this Plan, the following words and
phrases have the following respective meanings unless the context clearly
otherwise requires:
(1) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(2) "Company" shall mean The Allen Group Inc.
(3) "Compensation" shall mean an amount determined by the Employer, in
its sole and absolute discretion, for purposes of the limitation on
the amount of Severance Pay under Section 4.1.
(4) "Effective Date" shall mean January 1, 1993.
(5) "Eligible Employee" shall mean any individual who is an employee of
an Employer and who is designated, or is included in a group
employees that is designated, by his Employing Unit as eligible for
participation in the Plan.
(6) "Employer" shall mean (a) the Company or (b) any other entity that is
a member of the Company's controlled group (as such term is defined
in Section 414(b) or
<PAGE> 2
414(c) of the Code) that has adopted the Plan with the consent of the
Company.
(7) "Employing Unit" means any department, division or other local unit
of an Employer with supervisory authority over employees of the
Employer, provided that an Employer may determine that it shall be
considered the Employing Unit of all of its employees for purposes of
the Plan.
(8) "Human Resources Department" shall mean an Employing Unit's human
resources or personnel department, or the department of an Employing
Unit that is responsible for that Employing Unit's human resources
functions.
(9) "Plan" shall mean "The Allen Group Inc. Master Discretionary
Employees Severance Pay Plan".
(10) "Qualifying Termination" shall mean a termination of an Eligible
Employee's employment with his Employer that results in the payment
of Severance Pay.
(11) "Severance Pay" shall mean amounts payable pursuant to Section 4.1
hereof. Severance Pay may consist of cash payments, an extension of
welfare benefits or a combination of both, and may be fixed or
discretionary, all as determined by an Employing Unit pursuant to
Section 4.1 hereof.
Section 2.2. Gender and Number. The masculine gender whenever used herein
shall refer to and include the feminine gender, and the singular number shall
include the plural and vice versa, unless otherwise clear from the context.
ARTICLE III
Funding
Section 3.1. Method of Funding. The Employers shall pay Severance Pay
from their current operating funds. No property of the Employers is or shall
be, by reason of this Plan, held in trust for any employee of an Employer, nor
shall any person have any interest in or any lien or prior claim upon any
property of the Employers, by reason of this Plan or the Employers' obligation
to make payments hereunder. Eligible Employees entitled to Severance Pay
hereunder shall be mere unsecured creditors of their Employers.
<PAGE> 3
ARTICLE IV
Calculation and Payment of Severance Pay
Section 4.1. Severance Pay. The terms and conditions of the Plan, and the
Severance Pay payable hereunder, with respect to various groups of Eligible
Employees, shall be determined by the Employing Units. Any Employing Unit
choosing to provide benefits under the Plan to its Eligible Employees shall
notify the Company in writing of the terms and conditions of the program adopted
by such Employing Unit, the employees eligible therefor and other pertinent
details, and shall provide the Company copies of all relevant documents,
including, without limitation, policy or similar documents and employee
communications adopted or distributed in connection with such program. All of
such documents shall be considered as part of, or as relating to, the Plan as a
whole, notwithstanding any designation or description therein of any such
employing unit's program as a separate "plan," "program," "policy" or similar
arrangement. All Employing Units' programs shall constitute together the Plan.
Notwithstanding the foregoing, an Eligible Employee's receipt of Severance Pay
generally shall be conditioned upon the Eligible Employee's effective execution
and delivery of a written release of all claims that the Eligible Employee may
have against any Employer or Employing Unit, provided, however, that each
Employing Unit shall have the authority, in its discretion, to waive this
requirement of a written release in appropriate circumstances.
ARTICLE V
Administration of Plan
Section 5.1. (a) In General. The Plan administrator shall be the
Company, which also shall be the named fiduciary under the Plan. However, each
Employing Unit shall have sole and absolute discretion to interpret where
necessary all provisions of the Plan relating to its Eligible Employees
(including, without limitation, by supplying omissions from, correcting
deficiencies in, or resolving inconsistencies or ambiguities in, the language of
the Plan), to determine the rights and status under the Plan of its Eligible
Employees, to resolve questions or disputes arising under the Plan relating to
its Eligible Employees and to make any determinations with respect to the
benefits payable hereunder to its Eligible Employees as may be necessary for the
purposes of the Plan. Without limiting the generality of the foregoing, each
Employing Unit is hereby granted the authority (i) to determine whether a
particular employee is an "Eligible Employee" under the Plan, (ii) to determine
whether a particular termination of employment constitutes a Qualifying
Termination, and (iii) to determine the amount, form and duration of an Eligible
Employee's Severance Pay for purposes of the Plan. An Employing Unit's
determination of the rights of any employee or
<PAGE> 4
former employee hereunder shall be final and binding on all persons, subject
only to the claims procedures outlined in Section 5.3 hereof.
(b) Delegation of Duties. Each Employing Unit may delegate any of its
administrative duties, including, without limitation, duties with respect to the
processing, review, investigation, approval and payment of Severance Pay, to a
named administrator or administrators.
Section 5.2. Regulations. Each Employing Unit shall promulgate any rules
and regulations it deems necessary in order to carry out the purposes of the
Plan or to interpret the provisions of the Plan with respect to its Eligible
Employees; provided, however, that no rule, regulation or interpretation shall
be contrary to the provisions of the Plan. The rules, regulations and
interpretations made by an Employing Unit shall, subject only to the claims
procedure outlined in Section 5.3 hereof, be final and binding on all persons.
Section 5.3. Claims Procedure. Each Employing Unit shall determine the
rights of any Eligible Employee or former Eligible Employee of such Employing
Unit to any Severance Pay hereunder. Any Eligible Employee or former Eligible
Employee of an Employing Unit who believes that he is entitled to receive
Severance Pay, including Severance Pay other than that initially determined by
his Employing Unit, may file a claim in writing with the Employing Unit's Human
Resources Department. The Employing Unit shall, no later than 90 days after the
receipt of a claim (plus an additional period of 90 days if required for
processing, provided that notice of the extension of time is given to the
claimant within the first 90 day period), either allow or deny the claim in
writing. If a claimant does not receive written notice of the Employing Unit's
decision on his claim within the above-mentioned period, the claim shall be
deemed to have been denied in full.
A denial of a claim by an Employing Unit, wholly or partially, shall be
written in a manner calculated to be understood by the claimant and shall
include:
(a) the specific reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the denial is
based;
(c) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) an explanation of the claim review procedure.
<PAGE> 5
A claimant whose claim is denied (or his duly authorized representative),
may within 60 days after receipt of denial of his claim file with the Human
Resources Department of his Employing Unit a written request for a review of
this claim. If the claimant does not file a request for review of his claim
within such 60-day period, the claimant shall be deemed to have acquiesced in
the original decision of the Company on his claim. If such an appeal is so
filed within such 60 day period, the Employing Unit shall appoint an officer of
the Employing Unit to conduct a full and fair review of such appeal. During
such review, the claimant shall be given the opportunity to review documents
that are pertinent to his claim and to submit issues and comments in writing
and, if he requests a hearing, to present his case in person at a hearing
scheduled by the officer of the Employing Unit appointed to review the appeal.
The officer of the Employing Unit appointed to review the appeal shall mail
or deliver to the claimant a written decision on the matter based on the facts
and the pertinent provisions of the Plan within 60 days after the receipt of the
request for review (unless special circumstances require an extension of up to
60 additional days, in which case written notice of such extension shall be
given to the claimant prior to the commencement of such extension). Such
decision shall be written in a manner calculated to be understood by the
claimant, shall state the specific reasons for the decision and the specific
Plan provisions on which the decision was based and shall, to the extent
permitted by law, be final and binding on all interested persons. If the
decision on review is not furnished to the claimant within the above-mentioned
time period, the claim shall be deemed to have been denied on review.
Section 5.4 Revocability of Employer Action. Any action taken by an
Employing Unit with respect to the rights or benefits under the Plan of any
Eligible Employee or former Eligible Employee shall be revocable by the
Employing Unit as to payments or distributions not yet made to such person, and
acceptance of any Severance Pay under the Plan constitutes acceptance of and
agreement to the Employing Unit's making any appropriate adjustments in future
payments or distributions to such person to offset any excess or underpayment
previously made to him.
ARTICLE VI
Amendment or Termination of Plan
Section 6.1. Company Right to Amend or Terminate. The Company (by action
of its Board of Directors) reserves the right at any time, without prior or
other approval of any employee or former employee, any other Employer or any
other person, to change, modify, amend or terminate the Plan in any particular
or particulars whatsoever. Any such change, modification, amendment or
termination shall be expressed in a written instrument
<PAGE> 6
executed by an officer of the Company upon the order of the Company's Board of
Directors.
Section 6.2. Employing Unit Right to Amend or Terminate. Each Employing
Unit reserves the right at any time, without the consent of any other person, to
change, modify, amend or terminate the terms and conditions of the Plan adopted
by such Employing Unit for its Eligible Employees. Any such change,
modification, amendment or termination shall be expressed in a written
instrument executed by an officer of the Employing Unit upon the order of the
board of Directors or other governing authority of the Employing Unit, which
written instrument shall be delivered to the Company pursuant to Section 4.1
hereof.
ARTICLE VII
Miscellaneous
Section 7.1. Limitation on Rights. Participation in the Plan shall not
give any employee the right to be retained in the service of any Employing Unit
or any rights to any benefits whatsoever, except to the extent specifically set
forth herein.
Section 7.2. Headings. Headings of Articles and Sections in this
instrument are for convenience only, and do not constitute any part of the Plan.
Section 7.3. Governing Law. The Plan shall be construed and enforced in
accordance with the laws of the State of Ohio, to the extent such laws are not
preempted by applicable Federal law.
Section 7.4. Union Contracts. With respect to an Eligible Employee the
terms and conditions of whose employment are established by a collective
bargaining agreement between an Employer and such Eligible Employee's collective
bargaining representative, in the case of a conflict between any provision of
the Plan and the terms of such collective bargaining agreement, the terms of the
collective bargaining agreement shall control.
IN WITNESS WHEREOF, The Allen Group Inc. has caused this Plan to be
executed this 8th day of December, 1994, to be effective as of January 1, 1993.
THE ALLEN GROUP INC.
By: /s/ McDara P. Folan, III
------------------------
McDara P. Folan, III
Title: General Counsel
<PAGE> 1
EXHIBIT 11
----------
STATEMENT RE COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) and common shares used in calculation of earnings (loss) per
common share for the five years ended December 31, 1994 were computed as follows
(amounts in thousands):
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1990 1991 1992 1993 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings:
Net Income (loss) $(1,262) $17,482 $15,340 $24,127 $29,194
Less preferred stock dividends(1) (4,025) (4,025) (4,025) (2,180) --
------- ------- ------- ------- -------
Net income (loss) applicable to
common stock (primary and
fully diluted) $(5,287) $13,457 $11,315 $21,947 $29,194
======= ======= ======= ======= =======
Common Shares:(2)
Weighted average shares outstanding
during each year 18,364 18,486 19,050 22,147 25,347
Shares issuable upon assumed exer-
cise of options 156 254 630 793 723
------- ------- ------- ------- -------
Common shares - primary 18,520 18,740 19,680 22,940 26,070
Adjustment for full dilution(3) 10 30 30 3,470 390
------- ------- ------- ------- -------
Common shares - assuming full
dilution 18,530 18,770 19,710 26,410 26,460
======= ======= ======= ======= =======
</TABLE>
(1) In 1993, the Company exercised its redemption rights; however, prior to the
planned redemption date, 2,289,615 shares of convertible Preferred Stock
were converted into 2,289,615 shares (4,579,230 on a post stock split basis)
of Common Stock of the Company.
(2) All share amounts have been adjusted to reflect a 10% Common Stock dividend
paid January 17, 1992 to stockholders of record December 23, 1991 and a
two-for-one Common Stock split paid October 18, 1993 to stockholders of
record September 30, 1993.
(3) The assumed conversion of preferred stock and/or outstanding convertible
subordinated debentures into Common Stock resulted in no reportable dilution
for purposes of calculating fully diluted earnings per common share for each
year in the periods ended December 31, 1990 through 1994.
<PAGE> 1
<TABLE>
Exhibit 13
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
<CAPTION>
For the years ended December 31, 1994, 1993, & 1992 1994 1993 1992
Pro Pro
Forma Forma
Actual (Note 1) Actual (Note 1)
<S> <C> <C> <C> <C> <C>
SALES $331,352 $280,031 $280,031 $212,953 $212,953
COST AND EXPENSES:
Cost of Sales 232,006 195,780 195,780 143,831 143,831
Selling, general and administrative expenses 51,755 48,495 48,495 37,824 37,824
EQUITY IN EARNINGS (LOSS)
OF JOINT VENTURES (Note 3) 1,368 407 407 (3,742) (3,742)
INTEREST AND FINANCING EXPENSES:
Interest expense (3,430) (4,482) (4,482) (2,521) (2,521)
Interest income 1,380 1,326 1,326 543 543
------------------------------------------------------------------------
INCOME BEFORE TAXES 46,909 33,007 33,007 25,578 25,578
Effective tax rate 37.8% 10.6% 37.8% 14.7% 37.8%
PROVISION FOR INCOME TAXES (Note 8) 17,715 3,483 12,477 3,751 9,668
------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 29,194 29,524 20,530 21,827 15,910
================================================================================================================================
DISCONTINUED OPERATIONS (Note 10)
Loss from discontinued operations -- (4,563) (2,838) (1,933) (1,202)
Loss on disposal of discontinued operations -- (2,936) (1,826) -- --
------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 29,194 22,025 15,866 19,894 14,708
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES:
Postretirement benefits other than pensions (Note 7) -- -- -- (4,554) (2,833)
Income Taxes (Note 8) -- 2,102 2,102 -- --
================================================================================================================================
NET INCOME $ 29,194 $ 24,127 $ 17,968 $ 15,340 $ 11,875
================================================================================================================================
NET INCOME APPLICABLE TO COMMON STOCK $ 29,194 $ 21,947 $ 15,788 $ 11,315 $ 7,850
================================================================================================================================
EARNINGS PER COMMON SHARE:
Primary and fully diluted:
Income from continuing operations $ 1.12 $ 1.19 $ .80 $ .91 $ .60
Discontinued operations:
Loss from discontinued operations -- (.20) (.12) (.10) (.06)
Loss on sale of discontinued operations -- (.13) (.08) -- --
Cumulative effect of changes in accounting principles:
Postretirement benefits other than pensions -- -- -- (.24) (.14)
Income taxes -- .10 .10 -- --
------------------------------------------------------------------------
Net Income $ 1.12 $ .96 $ .70 $ .57 $ .40
------------------------------------------------------------------------
Average common and common equivalent
shares outstanding 26,070 22,940 22,940 19,680 19,680
================================================================================================================================
<FN>
The Notes are an integral part of these statements.
</TABLE>
15
--
<PAGE> 2
<TABLE>
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
<CAPTION>
December 31, 1994 & 1993 1994 1993
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and equivalents $ 55,240 $ 11,173
Accounts receivable, less allowance for doubtful accounts 1994, $1,684,000; 1993, $1,270,000 63,117 54,721
Receivable from joint venture 857 242
Inventories (Note 1) 58,316 56,828
Prepaid expenses 661 1,021
Current portion of note receivable -- 6,579
----------------------
TOTAL CURRENT ASSETS 178,191 130,564
==================================================================================================================================
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and amortization (Note 1) 56,860 51,898
==================================================================================================================================
OTHER ASSETS:
Net investment in and advances to joint venture (Note 3) 24,411 23,042
Investment in FOR.E.M. S.p.A. (Note 3) 8,458 --
Excess of cost over net assets of businesses acquired 56,525 59,578
Other assests (Note 4) 33,271 59,556
----------------------
TOTAL ASSETS $357,716 $324,638
==================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Notes payable and current maturities of long-term obligations (Note 2) $ 154 $ 839
Accounts payable 26,568 20,180
Accrued expenses (including accrued wages and commissions-
1994, $7,422,000; 1993, $6,540,000) 37,955 32,697
Income taxes payable (Note 8) 2,675 5,040
Deferred federal income taxes (Note 8) 2,899 --
----------------------
TOTAL CURRENT LIABILITIES 70,251 58,756
==============================================================================================================================
LONG-TERM DEBT (Note 2) 44,910 51,758
OTHER LIABILITIES AND DEFERRED CREDITS (Note 4) 18,374 18,963
----------------------
TOTAL LIABILITIES 133,535 129,477
==================================================================================================================================
COMMITMENTS AND CONTINGENCIES (Note 6) -- --
==================================================================================================================================
STOCKHOLDERS' EQUITY (Note 5):
Common stock, par value $1.00; authorized - 50,000,000 shares; issued - 1994, 29,146,000;
1993, 29,058,000; outstanding - 1994, 26,107,000; 1993, 25,964,000 29,146 29,058
Paid-in capital 61,644 159,989
Retained earnings 56,902 32,671
Translation adjustments 23 (90)
Less: Treasury stock-common shares, at cost, 1994, 3,039,000; 1993, 3,094,000 shares (17,479) (17,916)
Unearned compensation (4,310) (6,192)
Minimum pension liability adjustment (1,745) (2,359)
----------------------
TOTAL STOCKHOLDERS' EQUITY 224,181 195,161
==================================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $357,716 $324,638
==================================================================================================================================
<FN>
The Notes are an integral part of these statements.
</TABLE>
16
--
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<CAPTION>
For the Years Ended December 31, 1994, 1993 & 1992 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from operations:
Continuing operations $29,194 $29,524 $21,827
Discontinued operations -- (10,225) (9,620)
Accounting changes -- 2,102 (4,554)
-------------------------------------------
29,194 21,401 7,653
Adjustments to reconcile income to net cash flow:
Depreciation and amortization of fixed assets 7,477 6,611 6,701
Amortization of goodwill 1,723 1,742 657
Amortization of capitalized software products costs 1,561 1,294 490
Deferred income taxes (2,094) 1,309 (664)
Equity in (earnings) losses of joint ventures (1,368) (407) 3,742
Other amortization 4,008 1,281 1,203
Changes in operating assets and liabilities:
Receivables (6,435) (9,580) (2,393)
Inventories (1,488) (8,560) 947
Accounts payable and accrued expenses 7,786 (6,659) 1,734
Income taxes payable 15,506 1,903 80
Other, net (1,777) (980) 4,287
-------------------------------------------
Cash generated by operating activities 54,093 9,355 24,437
===============================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,922) (10,693) (6,653)
Centralized emissions inspection programs:
Program expenditures (36,746) (4,252) --
Program payment received 37,261 -- --
Capitalized software product costs (2,165) (1,912) (300)
Start-up of manufacturing facility (978) (2,532) --
Investments in and loans to telecommunication ventures (259) (2,838) (622)
Sales and retirements of fixed assets 1,534 628 286
Proceeds from sale of automotive diagnostics and lease financing busines 19,737 21,000 --
Investment in FOR.E.M. S.p.A. (8,458) -- --
Acquisition of businesses, net of cash acquired -- -- (21,841)
Net proceeds from joint ventures -- 750 125
-------------------------------------------
Cash provided (used) by investing activities 1,004 151 (29,005)
===============================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) proceeds of notes payable -- (194) 834)
Repayments of long-term debt (7,533) (3,839) (4,016)
Dividends paid (4,431) (4,023) (6,139)
Dividends received from lease financing -- -- 8,475
Exercise of stock options 80 1,936 1,912
Treasury stock sold to employee benefit plans 854 671 631
-------------------------------------------
Cash (used) provided by financing activities (11,030) (5,449) 1,697
-------------------------------------------
NET CASH PROVIDED (USED) BY MANUFACTURING 44,067 4,057 (2,871)
===============================================================================================================================
Net Cash Provided (Used) by Lease Financing -- 2,691 (185)
===============================================================================================================================
TOTAL COMPANY INCREASE (DECREASE) IN CASH 44,067 6,748 (3,056)
Cash at beginning of year 11,173 4,425 7,481
-------------------------------------------
Cash at end of year $55,240 $11,173 $ 4,425
==============================================================================================================================
<FN>
The Notes are an integral part of these statements.
</TABLE>
17
--
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands)
<CAPTION>
For the Years Ended December 31, 1994, 1993 & 1992
Preferred Common Paid-in Retained Translation Treasury Unearned
Stock Stock Capital Earnings Adjustment Stock Compensation
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1991 $2,300 $11,021 $144,519 $ 4,541 $ (101) $(18,690) $(1,783)
Net Income -- -- -- 15,340 -- -- --
Cash dividends -- -- -- (6,139) --
Common shares issued in acquisition -- 271 5,516 -- -- -- --
Exercise of stock options -- 156 1,795 -- -- (39) --
Treasury stock reissued, 67,852 common shares, at cost -- -- 94 -- -- 537 --
Restricted shares issued, net -- 153 3,586 -- -- -- (3,739)
Remeasurement of restricted shares -- -- 654 -- -- -- (654)
Amortization of unearned compensation -- -- -- -- -- -- 1,203
Adjustment from translating foreign financial
statements into U.S. dollars -- -- -- -- (1,202) -- --
===================================================================================================================================
BALANCE DECEMBER 31, 1992 2,300 11,601 156,164 13,742 (1,303) (18,192) (4,973)
Net Income -- -- -- 24,126 -- -- --
Cash dividends -- -- -- (4,023) -- -- --
Preferred stock redemption (2,300) 2,290 911 (1,174) -- -- --
Two-for-one stock split 14,436 (14,436) -- -- -- --
Conversion of convertible debentures -- 472 11,129 -- -- -- --
Exercise of stock options -- 165 1,883 -- -- (112) --
Treasury stock reissued, 55,088 common shares, at cost -- -- 283 -- -- 388 --
Restricted shares issued, net -- 94 1,636 -- -- -- (1,730)
Remeasurement of restricted shares -- -- 770 -- -- -- (770)
Amortization of unearned compensation -- -- -- -- -- -- 1,281
Stock option tax benefits -- -- 1,649 -- -- -- --
Eliminate translation adjustment from closed operation -- -- -- -- 1,569 -- --
Adjustment from translating foreign financial
statements into U.S. dollars -- -- -- -- (356) -- --
===================================================================================================================================
BALANCE DECEMBER 31, 1993 -- 29,058 159,989 32,671 (90) (17,916) (6,192)
Net Income -- -- -- 29,194 -- -- --
Cash dividends -- -- -- (4,431) -- -- --
Exercise of stock options -- 17 87 (24) --
Treasury stock reissued, 54,504 common shares, at cost -- -- 393 -- -- 461 --
Restricted shares issued, net -- 71 1,089 -- -- -- (1,159)
Remeasurement of restricted shares -- -- 44 -- -- -- (44)
Amortization of unearned compensation -- -- -- -- -- -- 3,085
Stock option tax benefits -- -- 42 -- -- -- --
Adjustment from translating foreign financial
statements into U.S. dollars -- -- -- -- 113 -- --
Other -- -- -- (532) -- -- --
----------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 $ -- $29,146 $161,644 $56,902 $ 23 $(17,479) $(4,310)
===================================================================================================================================
<FN>
The Notes are an integral part of these statements.
</TABLE>
18
--
<PAGE> 5
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies followed by the Company that materially affect the
determination of financial position and results of operations are described
below.
Pro Forma Presentation: In 1993, the Company fully recognized all of
its available U.S. carryforward losses resulting in a higher effective tax rate
(37.8%) in 1994 than in 1993 (10.6%) and 1992 (14.7%). The pro forma results of
operations presented for 1993 and 1992 reflect the results of operations as if
the Company had provided for income taxes at the comparable effective tax rate
recorded in 1994. Such pro forma information is presented for comparative
informational purposes only.
Basis of Consolidation: The Company's consolidated financial
statements include the accounts of all subsidiaries. Investments in and
advances to GO/DAN Industries, a partnership joint venture in which the Company
has a 50% ownership interest, are accounted for using the equity method. The
Company's 40% investment in FOR.E.M. S.p.A. (Note 3) will be accounted for
using the equity method beginning in 1995. Under such method, the Company's
share of net earnings (or losses) are included as a separate item in the
consolidated statement of income.
Cash and Cash Equivalents: The Company classifies as cash equivalents
all highly liquid investments with maturities of three months or less. At
December 31, 1994 and 1993, cash equivalents were composed primarily of
investments in money market funds, bankers acceptances and Dutch auction, tax
exempt securities which were afforded one of the two highest ratings by
nationally recognized ratings firms.
Excess of Cost Over Net Assets of Businesses Acquired (Goodwill): The
excess of investments in consolidated subsidiaries over net asset value at
acquisition is being amortized on a straight-line basis over periods not
exceeding forty years. The Company's policy is to evaluate the excess of cost
over the net assets of businesses acquired based on an assessment of such
factors as the occurrence of a significant adverse event or change in the
environment in which the business operates or if the expected future net cash
flows (undiscounted and without interest) would become less than the carrying
amount of the asset. An impairment loss would be recorded in the period such
determination is made based on the fair value of the related businesses. The
Company's existing goodwill relates to the Company's mobile communications
product line.
Foreign Currency Translation: Assets and liabilities of the Company's
foreign subsidiaries are translated into U.S. dollars at the current rate of
exchange, while revenues and expenses are translated at the average exchange
rate during the year. Adjustments from translating foreign subsidiaries'
financial statements are excluded from the results of operations and are
reported as a separate component of stockholders' equity.
Valuation of Inventories: The Company values inventories including
materials, labor and overhead at the lower of cost (principally first-in,
first-out) or market. Inventories consisted of the following at December 31,
1994 and 1993 (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Raw material $ 29,581 $ 33,541
Work-in-process 19,433 14,191
Finished goods 9,302 9,096
------------------------
$ 58,316 $ 56,828
================================================
</TABLE>
Property, Plant and Equipment: Property, plant and equipment is
recorded at cost, less accumulated depreciation and amortization. Land
improvements, buildings and machinery and equipment are depreciated over their
estimated useful lives under the straight-line method. The provision for
amortization of leasehold improvements is based on the term of the lease or the
estimated useful lives of the improvements, whichever is shorter. Property,
plant and equipment consisted of the following at December 31, 1994 and 1993
(amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land and improvements $ 4,207 $ 3,805
Buildings 30,004 27,916
Machinery and equipment 57,775 52,940
Leasehold improvements 2,670 2,566
----------------------
94,656 87,227
Less accumulated depreciation and amortization (37,796) (35,329)
----------------------
$56,860 $51,898
======================================================================
</TABLE>
Computer Software Costs: The Company's policy is to capitalize costs
incurred in creating computer software products once technological feasibility
is established and to amortize such cost over periods ranging from two to ten
years. The Company also capitalizes costs incurred in the development of
computerized databases which are amortized over periods of ten to twenty years.
In 1994, 1993, and 1992, approximately $2,165,000, $1,912,000, and $300,000,
respectively, of these costs were capitalized and approximately $1,561,000,
$1,294,000, and $490,000, respectively, were amortized.
Software License Revenue: Revenues from software licenses for the
Company's frequency planning, systems design and related services business are
recognized upon delivery of the software if vendor obligations are
insignificant and if collectibility is probable. Revenues from post-contract
support that are significant and/or unbundled with regards to the initial
licensing fee, are recognized ratably over the post-contract period.
19
--
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Start-Up Costs: During the initial phase of major new
programs or development of significant new plant facilities for which
prospective sales and cost recovery are based upon long-term commitments from
customers, start-up costs are deferred and amortized over periods not exceeding
five years. Pre-operating costs incurred in connection with the construction of
centralized automotive emission testing programs under long-term contracts with
governmental agencies are also deferred. Once operations have begun, these
costs are amortized by the straight-line method over the respective lives of
the contracts, which currently range from three to ten years.
Research and Development Expenses: Expenses for current and future
products are expensed currently and such costs were $7,817,000, $5,400,000, and
$2,550,000 in 1994, 1993 and 1992, respectively. In addition, the Company
incurred other engineering expenses relating to new product development (that
do not meet the accounting definition of "Research and Development") in the
amount of $1,780,000, $3,200,000, and $2,470,000 in 1994, 1993 and 1992,
respectively.
Income Taxes: The Company accounts for income taxes in accordance with
the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes." This standard revised and replaced SFAS
No. 96, "Accounting for Income Taxes," under which the Company had previously
accounted for income taxes. SFAS 109 has been applied prospectively from the
January 1, 1993 adoption date, and prior year financial statements have not
been restated. Under SFAS 109, deferred income taxes are recorded to reflect
the tax consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each year-end.
Earnings Per Common Share: The primary earnings per common share
calculations are determined after deducting dividends on outstanding preferred
stock (prior to redemption) and are based upon the weighted average number of
common and common equivalent shares outstanding. The calculations also include,
if dilutive, the incremental number of common shares issuable on a pro forma
basis upon the exercise of employee stock options, assuming the use of the
proceeds of such exercise to repurchase outstanding shares at the average
market price during the year. The higher amount of average primary shares in
1994 and 1993, as compared with 1992, is a result of the conversion of the
Company's convertible preferred stock and a portion of its convertible
debentures into common shares during 1993. Prior to conversion, such securities
were and, to the extent the convertible debentures remain outstanding, are
included only in the computation of fully diluted earnings per common share.
The calculations of fully diluted earnings per common share begin with the
primary calculations but further reflect the pro forma effect, if dilutive, of
the conversion of the then outstanding preferred stock and convertible
debentures into common stock at the beginning of the year or time of issuance,
if later. This calculation resulted in no reportable dilution for the years
1994, 1993 and 1992.
Other: The 1993 and 1992 financial statements have been reclassified
to conform to the 1994 presentation.
NOTE 2: FINANCING
<TABLE>
<CAPTION>
Long-term obligations consisted of the following (amounts in thousands):
1994 1993
<S> <C> <C>
Convertible subordinated debentures $ 4,978 $ 4,978
Industrial revenue bonds:
7.5% due 1995 - 1999 750 900
Floating rate bonds due 2010 - 2025 25,000 25,000
Notes payable to insurance company 15,000 20,000
Other notes payable 326 2,602
Unamortized debt expense (990) (883)
-----------------------
45,064 52,597
Less current maturities (154) (839)
-----------------------
$44,910 $51,758
===============================================================
</TABLE>
The Company has a revolving credit agreement with banks in the amount
of $100,000,000 expiring July 1, 1997. Interest may be determined on a LIBOR
(plus 1/2% to 1-1/2%) or prime rate basis at the Company's option. The Company
has agreed to pay a commitment fee varying from 1/4 - 1/2 of 1% per annum on
the unused portion of the commitment. At December 31, 1994 and 1993, there were
no outstanding borrowings under the agreement.
The Company's wholly-owned subsidiary, MARTA Technologies, Inc.
("MARTA"), has available credit lines with three banks, each in the amount of
$20,000,000. Such lines expire in September 1995. Interest is based on the
prime rate, and MARTA has agreed to pay a commitment fee of 15/100% per annum
on the unused portion. No amounts were outstanding under these lines at
December 31, 1994 and 1993.
The Convertible Subordinated Debentures, Series A and B, due July 30,
1999 (the "Debentures"), are unsecured, subordinated obligations of the
Company. The Debentures (to the extent not converted) are payable in eight
semi-annual installments of principal, commencing January 30, 1996 and bear
interest at the rate of 6% per annum, payable semi-annually on January 30 and
July 30 of each year. The Debentures are convertible at any time prior to their
maturity into Common Stock of the Company. The number of shares of Common Stock
issuable upon conversion of the Debentures equals the principal amount of the
Debentures (or portion thereof) divided
20
--
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
by the conversion price then in effect (which is subject to adjustment upon
the occurrence of certain events). The Conversion Rate at December 31, 1994 is
$13.97.
The floating rate industrial revenue bonds bear interest at rates
based upon a short-term tax exempt bond index, as defined in the bonds, and
which approximated 5.47% at December 31, 1994. The average interest rate for
all industrial revenue borrowings approximated 4.98% during 1994.
At December 31, 1994, the Company had outstanding a $15,000,000
borrowing from an insurance company which bears interest at a fixed rate of
8.13% per annum, and is due in installments of $5,000,000 in each year 2001
through 2003. The Note Agreement contains covenants and restrictions similar to
the Company's revolving credit agreement. The aggregate maturities of
long-term obligations for the years 1995 through 1999 are as follows (amounts
in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1995 1996 1997 1998 1999
$154 $1,603 $1,403 $1,400 $1,399
======================================
</TABLE>
The Company's credit agreements include various restrictive covenants
as to the amount and type of indebtedness, investments and guarantees,
maintenance of working capital and net worth, the purchase or redemption of the
Company's shares and the disposition of the assets of the Company.
NOTE 3: INVESTMENTS
In December 1994, the Company purchased 40% of FOR.E.M. S.p.A., ("FOREM"), a
manufacturer of wireless telecommunications products, located in Agrate Brianza
(Milan), Italy as well as options to acquire the remaining shares of FOREM
during the next five years. FOREM owns 62% of MIKOM G.m.b.H., located in
Germany, and also has sales offices in the United Kingdom and France.
At the closing, the Company paid $8,000,000 for its initial 40%
interest in FOREM. Upon an exercise of its option to purchase an additional 40%
of FOREM's outstanding stock (the "First Option"), the Company has agreed to
pay $8,000,000, plus accrued interest of 5% per annum from the date of the
first closing (December 15, 1994), for these shares. In addition, if the
Company exercises the First Option, the sellers may earn additional purchase
price based upon earnings. On February 28, 1995, the Company indicated its
intention to exercise its First Option. The final 20% of FOREM's outstanding
stock is subject to certain put/call arrangements between the Company and the
sellers. The purchase price for this final 20% ownership is based upon a
formula relative to future earnings.
The Company's investment in joint venture at December 31, 1994 and
1993 represents its interest in GO/DAN Industries ("GO/DAN"), which is engaged
in the manufacture and sale of automotive replacement radiators and other
heat-transfer products.
On October 30, 1992, the Company purchased the remaining 50%
partnership interest in its MARTA Technologies joint venture which operates
centralized automotive emissions inspection programs; subsequent to the
acquisition, MARTA (now a wholly-owned subsidiary) is included on a fully
consolidated basis in the Company's financial statements. In addition, the
Company dissolved and liquidated its G&O/Altec Industries joint venture in
1992.
Summarized financial data for the heat transfer joint ventures GO/DAN
and G&O/Altec Industries (through date of dissolution), and MARTA (prior to its
acquisition), are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
Centralized
Heat Heat Heat Emission
Transfer Transfer Transfer Inspections
<S> <C> <C> <C> <C>
Revenues $125,332 $121,460 $112,206 $2,253
Net income (loss)* 6,963 2,333 893 (193)
Current assets 64,954 67,534 64,607 -
Noncurrent assets 18,870 19,332 20,296 -
Current liabilities 25,059 27,349 46,338 -
Noncurrent liabilities 10,877 18,592 - -
Partners equity 47,888 40,925 38,565 -
==============================================================================
<FN>
*Net income (loss) includes, in 1994, 1993 and 1992, the reimbursement of
certain operating costs and expenses by the partners in the amount of
$2,000,000, $1,500,000 and $9,450,000, respectively.
</TABLE>
NOTE 4: OTHER ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Other assets consisted of the following (amounts in thousands):
1994 1993
<S> <C> <C>
Deferred tax asset (Note 8) $ - $11,548
Installment note, non-current - 13,158
Capitalized computer software and database files 9,985 9,381
Unliquidated assests of discontinued operations 6,571 7,231
Deferred start-up and pre-operating costs 5,238 3,833
Other 11,477 14,405
---------------------
$33,271 $59,556
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Other liabilities and deferred credits consisted of the following
(amounts in thousands):
1994 1993
<S> <C> <C>
Accrued postretirement benefits $ 3,112 $ 4,869
Casualty self insurance reserves 2,334 2,214
Deferred compensation liabilities 763 1,373
Long-term pension liabilities 6,289 5,811
Deferred income taxes 1,596 495
Other 4,280 4,201
---------------------
$18,374 $18,963
=======================================================================
</TABLE>
21
--
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: CAPITAL STOCK
The Company is authorized to issue up to 50,000,000 shares of common stock,
$1.00 par value, and 3,000,000 shares of preferred stock, without par value, in
one or more series. In addition, the Company can fix the powers, designations,
preferences and rights of each of the preferred stock series.
The Company has three stock plans, the 1982 Stock Plan, the 1992 Stock
Plan and the 1994 Non-Employee Directors Stock Option Plan. The 1982 Stock Plan
was terminated in 1992 and was replaced by the 1992 Stock Plan; however,
certain stock options and restricted shares of the Company's Common Stock under
the 1982 Stock Plan were awarded prior to the termination and remain
outstanding. The Company awarded 271,944 restricted shares under the 1982 Stock
Plan, and at December 31, 1994, 193,076 shares have vested. An additional
47,740 shares will vest on April 1, 1995, and the remaining restricted shares
will vest on April 1, 1996 or any year thereafter in which the Company reports
net income per common share, before extraordinary and certain other
nonoperating items, of 10% or more in excess of the net income target for the
most recent preceding year during which restricted shares vested.
The Company's 1992 Stock Plan provides for the granting of options and
restricted shares of Common Stock to key employees. The total number of shares
for which the Company may grant options and award restricted shares of the
Company's Common Stock can not exceed 1,000,000 shares subject to certain
adjustments. Options are awarded at a price not less than the fair market value
on the date the option is granted. Options may contain stock appreciation
rights under which the Company, upon request of the optionee, may, at its
discretion, purchase the exercisable portion of an option for cash and/or
shares at a price equal to the difference between the option price and the
market price of the shares covered by such portion of the option in lieu of
issuing shares upon exercise. The Company made no charges to income in
connection with the exercise of stock appreciation rights in 1994, 1993 and
1992.
Restricted stock awards made to date under the 1992 Stock Plan were
issued at no cost to the recipients; however, such employees agreed to forego
salary increases and new stock option grants for a period of two years, other
than for exceptional promotions. Generally, these restricted shares vest in 25%
increments in the seventh, eighth, ninth and tenth year from the year of award.
An accelerated vesting schedule may be triggered if certain performance targets
are achieved. Specifically, the vesting of 50% of such shares may be
accelerated (but not sooner than three years from the award year) based upon
the average sale price of the Company's stock price during a period of 91
consecutive calendar days exceeding specified target levels. The vesting of the
remaining 50% of such shares may be accelerated based on average earnings per
common share over three consecutive fiscal years exceeding specified target
levels beginning with the award year. At December 31, 1994, the Company had
awarded 416,600 restricted shares, including 31,202 shares awarded in 1994. To
date, the Company has recognized on a pro rata basis, the vesting of 96,302
restricted shares. Certain restricted shares have become eligible for
accelerated vesting in accordance with stock price targets set forth in the
restricted stock agreements under the 1992 Stock Plan. The base price required
for accelerated vesting for some restricted shares begins at $18.50 and
increases to $24.50 per common share and is based upon the average sale price
of the Company's common stock on the New York Stock Exchange Composite Tape
during any period of 91 consecutive calendar days commencing on or after
January 1, 1995. As a result, the Company expects to vest between 65,935 and
100,335 restricted shares on an accelerated basis in 1995.
Restricted shares are subject to forfeiture in certain circumstances
as defined in the Plans. Unearned compensation, with respect to the 1992 Stock
Plan awards, representing the fair value of the restricted shares at date of
award, is charged to income over a ten year period or over the period of actual
vesting of such shares, whichever period is shorter. The amount of unearned
compensation expense for the restricted stock awarded under the 1982 Plan is
charged to income based on the fair market value of such shares at the time the
net income targets are met. Compensation expense with respect to all restricted
shares amounted to $3,085,000 in 1994, $1,281,000 in 1993 and $1,203,000 in
1992.
In 1994, the stockholders of the Company approved the adoption of the
1994 Non-Employee Directors Stock Option Plan. The total number of shares to be
issued under this plan may not exceed 250,000 shares. Each year, each
Non-Employee Director who previously has not been employed by the Company will
automatically receive an option to purchase 1,000 shares of Common stock
("Formula Awards"). No Non-Employee Director who previously has been employed
by the Company is eligible to receive Formula Awards. However, Non-Employee
Directors who have been previously employed by the Company may be eligible to
receive an option to purchase shares of common stock defined in the plan as a
Discretionary Award. At December 31, 1994, the Company granted options for
208,000 shares under this Plan and has 42,000 shares reserved for future grants
of stock options. In addition to the 1994 Non-Employee Directors Stock Option
Plan, the Board of Directors granted to non-employee directors in 1989 options
to purchase 83,600 shares of common stock held in treasury at $5.85 per share.
During 1994 and 1993, 2,000 options and 17,600 options, respectively, were
exercised. At December 31, 1994, options for 64,000 shares remain outstanding
and are all exercisable. These options expire in 1999.
22
--
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Options to purchase 502,539 shares were exercisable on December 31,
1994, and 229,523 shares were available for grant of future options. Options
outstanding at December 31, 1994 are exercisable at various dates through the
year 2004. Option activity for the three years ended December 31, 1994 is
summarized as follows:
<TABLE>
<CAPTION>
Number Option
of Shares Price Range
<S> <C> <C>
Balance outstanding December 31, 1991 1,296,178 $ 4.08 to $11.93
Granted 71,000 $ 10.00 to $12.57
Exercised (312,466) $ 4.08 to $ 8.98
Terminated and canceled (23,650) $ 4.66 to $ 7.84
---------------------------------
Balance outstanding December 31, 1992 1,031,062 $ 4.08 to $12.57
Granted 38,000 $ 15.13 to $25.81
Exercised (345,710) $ 4.66 to $11.93
Terminated and canceled (18,150) $ 5.45 to $ 7.84
---------------------------------
Balance outstanding December 31, 1993 705,202 $ 4.08 to $25.81
Granted 415,500 $ 15.75 to $21.88
Exercised (19,301) $ 4.66 to $ 7.84
Terminated and canceled (4,000) $12.00
---------------------------------
Balance outstanding December 31, 1994 1,097,401 $ 4.08 to $25.81
=========================================================================
</TABLE>
At December 31, 1994, and 1993, 1,368,924 common shares and 1,124,006
common shares, respectively, were reserved for outstanding stock options and
restricted shares. Further, 356,337 common shares were reserved for conversion
of Debentures. In addition, 125,000 shares of Series B Junior Participating
Preferred Stock are authorized for issuance under the Company's Stockholder
Rights Plan.
NOTE 6: COMMITMENTS AND CONTINGENCIES
The Company's leases consist primarily of manufacturing facilities and
equipment and expire principally between 1995 and 2004. A number of leases
require that the Company pay certain executory costs (taxes, insurance and
maintenance) and contain renewal and purchase options. Annual rental expense
for operating leases included in results from continuing operations
approximated $3,900,000 in 1994, $4,900,000 in 1993, and $3,300,000 in 1992.
Future minimum payments under noncancelable leases as of December 31, 1994 were
as follows (amounts in thousands):
<TABLE>
<CAPTION>
Operating Leases
<S> <C>
1995 $ 4,230
1996 3,590
1997 2,840
1998 2,510
1999 2,110
Thereafter 5,660
-------
Total minimum lease payments $20,940
=======================================
</TABLE>
The Company is self-insured for health care, workers compensation,
general liability and product liability up to predetermined amounts above which
third party insurance applies. The Company is contingently liable to insurance
carriers under its workers compensation and liability policies and has reserved
$3.5 million to pay such claims. As a condition of insurability, the Company
has provided letters of credit totalling $4,653,000.
In connection with the sale of its former specialty rubber products
operations, the Company remains as guarantor under certain long-term leases
assigned to the purchasing company.
Various legal actions are pending against or involve the Company and
its subsidiaries with respect to such matters as product liability and casualty
claims. In the opinion of management, after review and consultation with
counsel, the aggregate liability, if any, that ultimately may be incurred in
excess of amounts already provided should not have a material adverse effect on
the consolidated financial position or results of operations of the Company.
The Company has a Key Employee Severance Policy and has entered into
severance agreements with senior key employees in order to provide financial
assistance if employment with the Company is terminated under the circumstances
set forth in the policy and the agreements. The policy and agreements provide
for formalized severance benefits in the event of non-voluntary termination
(other than for "Cause" or "Disability") before or after a "Change in Control"
of the Company or voluntary termination for "Good Reason" after a "Change in
Control," all as defined therein.
In connection with the centralized automobile emissions testing
programs, the Company is contractually committed to construction and start-up
costs in the amount of approximately $64,000,000, of which $37,965,000 had been
expended as of December 31, 1994. In addition, the Company has entered into an
agreement to lease land and buildings to be used as inspection facilities for
its Ohio program in the approximate amount of $2,400,000 per year for ten years
and is expected to commence in January of 1996. This lease will be accounted
for as a "capital lease". The Company has accounted for its contract with the
State of Maryland under the percentage of completion method of accounting based
on costs incurred to date to total estimated costs at December 31, 1994. In
this connection the Company recorded a gain of $1,118,000 at December 31, 1994.
Centralized emissions testing programs have come under increasing scrutiny by
state and Federal officials in recent months. Further, the Company's programs
in Maryland and Texas have been delayed beyond the scheduled January 3, 1995
start-up date. For the current status of these programs see the "Automotive
Test and Service" section of the "Management Discussion and Analysis of
Financial Conditions and Results of Operations" on page 31 of this Annual
Report.
23
--
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company is subject to federal, state and local laws designed to
protect the environment and believes that, as a general matter, its policies,
practices, and procedures are properly designed to reasonably prevent risk of
environmental damage and financial liability to the Company. The Company has
been named as a potentially responsible party under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") with
respect to alleged environmental conditions at two sites. The Company expects
to negotiate a settlement with the EPA for each of these locations as a de
minimus settling party. In addition, the Company settled two previous
outstanding environmental matters for minimal amounts in 1994. The Company
believes it is reasonably possible that environmental related liabilities may
exist with respect to three industrial sites formerly occupied by the Company.
Based upon Environmental Site Assessments, the Company believes that the cost
of any potential remediation for which the Company may ultimately be
responsible will not have a material adverse effect on the financial position,
results of operations, or liquidity of the Company.
NOTE 7: PENSION AND EMPLOYEE BENEFIT PLANS
The Company has noncontributory pension plans covering the majority of its
full-time employees. Plans covering salaried employees provide benefits that
are based on years of service and compensation during the ten-year period prior
to retirement, while plans covering hourly employees provide benefits of
specified amounts for each year of service. Domestic pension costs are funded
in compliance with the requirements of the Employee Retirement Income Security
Act of 1974, as amended, as employees become eligible to participate, generally
upon employment.
Net periodic pension cost of continuing operations for the Company's
funded plans included the following components (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost benefits earned during the year $1,311 $1,610 $1,567
Interest cost on the projected benefit obligation 3,282 3,196 3,207
Actual income on plan assets (1,469) (7,650) (3,452)
Settlement costs 35 549 -
Net amortization and deferral (2,050) 4,642 578
------------------------
Net periodic pension cost 1,109 2,347 1,900
Less allocated to discontinued operations - (202) (665)
------------------------
$1,109 $2,145 $1,235
================================================================================
</TABLE>
Plan assets consist principally of equity securities (including
120,000 common shares of the Company) and investments in the separate accounts
and general funds of insurance companies. The following tables set forth the
plans' combined funded status, principally at December 31, 1994 and 1993
(amounts in thousands):
<TABLE>
Plans Whose Plans Whose
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
<S> <C> <C>
1994:
Actuarial present value of benefit obligations:
Vested benefits $22,922 $15,783
Nonvested benefits 451 314
------------------------
Accumulated benefit obligation 23,373 16,097
Effect of projected future compensation levels 1,930 -
------------------------
Projected benefit obligations 25,303 16,097
Plan assets at fair market value 27,677 10,577
------------------------
Projected benefit obligation
in excess of plan assets 2,374 (5,520)
Loss (income) due to actual experience
varying from actuarial assumptions (959) 2,608
Prior service cost not yet recognized in pension cost (185) 549
Transition liability (asset)on adoption
of new accounting standard to
be recognized in the future (611) 76
Adjustment required to recognize minimum liability - (3,233)
------------------------
Prepaid (accrued) pension cost $ 619 $(5,520)
===============================================================================
1993:
Actuarial present value of benefit obligations:
Vested benefits $27,173 $15,232
Nonvested benefits 259 238
------------------------
Accumulated benefit obligation 27,432 15,470
Effect of projected future compensation levels 3,058 -
------------------------
Projected benefit obligations 30,490 15,470
Plan assets at fair market value 30,722 9,487
------------------------
Projected benefit obligation
in excess of plan assets 232 (5,983)
Loss due to actual experience
varying from actuarial assumptions 1,643 2,682
Prior service cost not yet recognized in pension cost 274 513
Transition liability (asset)on adoption
of new accounting standard to
be recognized in the future (725) 119
Adjustment required to recognize minimum liability - (3,314)
------------------------
Prepaid (accrued) pension cost $ 1,424 $(5,983)
===============================================================================
</TABLE>
24
--
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Assumptions used in determining pension cost for the plans are:
<CAPTION>
1994 1993
<S> <C> <C>
Discount rate 7 1/2%-10% 7 1/4 - 8%
Expected rate of increase in compensation 5 1/2% 5 1/2%
Expected long-term rate of return on plan assets 9% 9 1/2%
==============================================================================
</TABLE>
The discount rates used by the Company in 1994 are 8-1/4% for all U.S.
pension plans and 7-1/2% and 10% (the termination rates) for its Canadian
plans, which will be terminated in 1995.
Effective as of January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires that the Company
accrue for such postretirement benefits based on actuarially determined costs
recognized over the period from the date of hire to the full eligibility date
of employees who are expected to qualify for these benefits. In accordance with
the provisions of SFAS 106, the Company elected to recognize this change in
accounting on the immediate recognition basis. The cumulative impact of
adopting SFAS 106 as of January 1, 1992 amounted to $4,554,000 ($.24 per common
share).
The Company provides health care and life insurance benefits for
certain retired employees who reach retirement age while working for the
Company. The components of the expense for postretirement health care and life
benefits from continuing operations are as follows (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net periodic cost:
Service cost benefits attributed
to service during period $182 $222 $222
Interest cost on accumulated
postretirement benefit obligation 348 417 402
Amortization of losses 51 - -
-----------------
Net postretirement health care cost $581 $639 $624
======================================================================
</TABLE>
The components of the accumulated postretirement benefit obligation (all of
which are unfunded) are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Retirees $1,742 $1,562 $1,704
Fully eligible active plan participants 123 286 239
Other active plan participants 1,346 3,965 3,663
Unrecognized net loss (99) (944) -
-------------------------
Accumulated postretirement
benefit obligation $3,112 $4,869 $5,606
======================================================================
</TABLE>
The actuarial calculation assumes a 14.1% increase in the health care
cost trend rate for 1994 (14.6% in 1993 and 15% in 1992). The assumed rate
decreases approximately .5% per year through the 20th year to 6.5% and remains
constant beyond that point. The health care cost trend rate has a significant
effect on the amounts reported. For example, a one percentage point increase in
the health care cost trend rate would increase the accumulated postretirement
benefit obligation by $196,000 and increase net periodic cost by $27,000. The
weighted average discount used in determining the accumulated postretirement
benefit obligation was 8.25% in 1994, 7.25% in 1993 and 8% in 1992,
respectively. In 1994 and 1993, the Company negotiated and modified certain
postretirement pension obligations which resulted in actuarially based net
gains of $1,855,000 and $580,000 in each year, respectively.
The Company also has a deferred bonus plan for select key management
employees, including officers. Bonuses under the plan may be awarded for any
year in which a certain minimum return on equity is attained. Payments are made
ratably over the succeeding five years in cash, restricted shares of the
Company's Common Stock, pursuant to the 1992 Stock Plan, or a combination
thereof, at the discretion of the Management Compensation Committee, whereby
such cash and/or shares vest over the succeeding five years, subject to
forfeiture in certain circumstances. The bonus awards accrued for 1994, 1993
and 1992 were $620,000, $560,000 and $370,000, respectively. Bonus awards for
1994 are to be paid 50% in restricted shares and 50% in cash. Bonus awards for
1993 and 1992 are to be paid 60% in restricted shares and 40% in cash.
Effective in 1995, the Company is terminating the deferred bonus plan but will
continue to pay the remaining award balances in accordance with the terms of
the plan.
NOTE 8: INCOME TAXES
Information with respect to income taxes in continuing operations is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Provision (Benefit) for income taxes:
Current: Federal $17,737 $ - $ 501
Foreign (28) 349 2,774
State and local 2,100 1,825 1,140
------------------------------
19,809 2,174 4,415
------------------------------
Deferred: Federal (2,380) (1,050) 13
Foreign 286 2,234 (577)
State and local - 125 (100)
------------------------------
(2,094) 1,309 (664)
------------------------------
$17,715 $ 3,483 $ 3,751
======================================================================
Income before taxes:
Domestic $50,095 $31,180 $21,758
Foreign (3,186) 1,827 3,820
------------------------------
$46,909 $33,007 $25,578
======================================================================
</TABLE>
25
--
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the provisions for income taxes at the Federal
statutory rates (35% in 1994 and 1993 and 34% in 1992) to the reported tax
provisions is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Provision computed at the
Federal statutory rate $16,419 $11,553 $ 8,697
State and local income
taxes, net of Federal
income tax benefit 1,365 1,268 686
Net higher tax rates on foreign
income net of Puerto Rico
tax exemption benefit (226) 1,533 398
Tax benefit from utilization
of U.S. net operating loss
carryforward to reduce
income tax expense - (9,821) (6,544)
Tax benefit from recognition
of future benefit of U.S.net
operating loss carry-forward - (1,050) -
Other 157 - 514
---------------------------------------
$17,715 $ 3,483 $ 3,751
===============================================================================
</TABLE>
The components of deferred tax assets (liabilities) are comprised of
the following as of December 31, 1994 and 1993 (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Gross deferred tax assets:
Inventory $ 3,545 $ 2,066
Pensions and deferred compensation 4,523 2,713
Plant closings and costs of discontinued operations 72 2,109
Tax credit carryforwards 2,907 3,992
Product warranty claims 1,696 1,416
Other 1,913 6,991
---------------------
14,656 19,287
---------------------
Gross deferred tax liabilities:
Intangible Assets (4,981) -
Depreciation (2,989) (2,517)
Unremitted foreign earnings (4,721) (3,570)
Other (6,460) (1,652)
---------------------
(19,151) (7,739)
---------------------
Net deferred tax assets (liabilities) $(4,495) $11,548
=============================================================================
</TABLE>
At December 31, 1994, the Company has available investment, jobs and
research and experimentation tax credits in the aggregate amount of
approximately $2,900,000 to reduce future federal income tax liabilities; such
tax credits expire during the period 1995 through 2009. The Company also has
alternative minimum tax credits in the amount of $604,000 available to reduce
future federal income tax liabilities.
The last completed audit of the Company's U.S. tax return by the
Internal Revenue Service covered income tax returns through 1980.
NOTE 9: INDUSTRY SEGMENT AND GEOGRAPHIC DATA
Segment sales and income, identifiable assets, capital expenditures and
depreciation and amortization by industry segment are presented in the charts
on pages 30 to 33 of this Annual Report and are an integral part of these
statements. The distribution of the Company's geographic operations is as
follows (amount in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
SALES AND INCOME
Sales:
United States $325,771 $248,023 $186,593
Canada 2,573 26,165 24,245
Europe 3,008 5,843 2,115
----------------------------------------
$331,352 $280,031 $212,953
========================================================================
Operating Income:
United States $ 55,813 $ 38,936 $ 28,259
Canada (137) 4,490 6,839
Europe (256) (95) (98)
----------------------------------------
55,420 43,331 35,000
Financing costs (2,050) (3,156) (1,978)
General corporate expenses (6,461) (7,168) (7,444)
----------------------------------------
$ 46,909 $ 33,007 $ 25,578
========================================================================
ASSETS
United States, including
Mexican Maquiladora
and Puerto Rico $339,135 $311,726 $372,286
Canada 8,835 10,225 12,955
Europe 9,746 2,687 2,681
----------------------------------------
$357,716 $324,638 $387,922
========================================================================
</TABLE>
-26-
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Export sales of continuing operations were $69,750,000, $57,200,000
and $32,900,000 in 1994, 1993 and 1992, respectively. Sales and transfers among
industry segments of the Company were not significant in any year presented.
Sales from continuing operations to The Ford Motor Company approximated
$49,600,000, $34,900,000, and $25,500,000, or 43%, 37%, and 30%, of Truck
Products segment sales in 1994, 1993, and 1992, respectively.
The aggregate net currency transaction and translation amounts
included in income from continuing operations were losses of $32,000,
$1,072,000 and $136,000 in 1994, 1993 and 1992, respectively.
NOTE 10: ACQUISITIONS AND DISPOSITIONS
On June 11, 1993, the Company sold its Allen Testproducts division and its
wholly-owned leasing subsidiary, The Allen Group Leasing Corp. ("Leasing"), to
SPX Corporation ("SPX"). Allen Testproducts manufactured and sold automotive
engine diagnostic and test equipment for the automotive service industry and
provided product financing through Leasing.
At the closing, the Company received $21,000,000 and an 8%
Subordinated Note of SPX dated June 11, 1993. The Note, in the amount of
$19,737,000, was paid in full on May 4, 1994 pursuant to a prepayment option.
The Company also will receive non-competition payments for a three-year period
based upon a sliding scale from 1% to 3.5% of sales of the newly combined
automotive engine diagnostic businesses of Allen Testproducts and SPX's Bear
division. Such payments are recorded by the Company when earned and amounted to
$1,760,000 and $880,000 in 1994 and 1993, respectively.
The Company has accounted for this transaction as a discontinued
operation. Net manufacturing sales and lease finance revenues of the sold
businesses were $25,879,000 and $6,845,000, respectively, through June 10,
1993, and $66,612,000 and $7,687,000, respectively, in 1992. Results of
discontinued operations are net of allocated interest (based upon the
proportion of net assets sold, excluding the separately financed leasing
operations, to total Company net assets) of $253,000 through June 10, 1993 and
$536,000 in 1992. Results of discontinued operations also include allocated
income tax expense of $35,000 through June 10, 1993 and an income tax benefit
of $40,000 in 1992. The loss on sale of this business of $2,936,000 includes
$850,000 of foreign currency translation adjustments, previously included as a
component of stockholders' equity, as well as transaction costs related to the
sale.
In 1992, the Company acquired Alliance Telecommunications Corporation
("Alliance") for a purchase price of approximately $44,000,000 consisting of
$21,600,000 in cash, 270,877 shares of the Company's common stock with a value
of $5,800,000 and $16,431,000 of Debentures. Pursuant to the terms of the
acquisition agreement, the former shareholders of Alliance could have earned
additional purchase price consideration in the form of new debentures; however,
no additional consideration was earned. This acquisition was been accounted for
under the Purchase Method of accounting; accordingly, Alliance's results of
operations have been included in the Company's consolidated financial
statements subsequent to the July 30, 1992 acquisition date.
NOTE 11: UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly financial data are summarized as follows (amounts in thousands,
except per share amounts):
<TABLE>
<CAPTION>
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1994
Sales $76,942 $81,774 $84,480 $88,156
----------------------------------------
Gross profit $22,693 $24,335 $26,009 $26,309
----------------------------------------
Income from continuing operations $ 5,390 $ 6,472 $ 8,568 $ 8,764
----------------------------------------
Net income $ 5,390 $ 6,472 $ 8,568 $ 8,764
----------------------------------------
Earnings per common share:
Primary and fully diluted:
Continuing operations $ .21 $ .25 $ .33 $ .33
--------------------------------------
Net Income $ .21 $ .25 $ .33 $ .33
--------------------------------------
==============================================================================
1993
Sales $66,027 $69,410 $65,595 $78,999
----------------------------------------
Gross profit $20,947 $21,804 $20,290 $21,210
----------------------------------------
Income from continuing operations $ 6,769 $ 6,945 $ 7,559 $ 8,251
----------------------------------------
Net income* $ 7,125 $ 1,192 $ 7,559 $ 8,251
----------------------------------------
Earnings per common share:
Primary:
Continuing operations $ .29 $ .29 $ .30 $ .32
--------------------------------------
Net income $ .31 $ .01 $ .30 $ .32
--------------------------------------
Fully diluted $ .28 $ .01 $ .30 $ .32
==============================================================================
<FN>
*Results of operations in the fourth quarter of 1993 include a reduction of
income tax expense in the amount of $1,050,000 ($.04 per common share)
representing a tax benefit on the Company's remaining U.S. net operating loss
carryforwards. Results of operations for the first quarter of 1993 include the
impact of the Company's adoption of SFAS No. 109 in the first quarter of 1993.
The Company reported as a "cumulative adjustment from a change in accounting
principle," income in the amount of $2,102,000, or $.10 per common share.
</TABLE>
-27-
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board ("FASB") Statements No. 107, "Disclosure
about Fair Value of Financial Instruments," and No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments," are
part of a continuing process by the FASB to improve information regarding
financial instruments. The following methods and assumptions were used by the
Company in estimating its fair value disclosures for such financial instruments
as defined by the Statements:
Cash and Short-Term Investments: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair value.
Long-Term Investments: It is not practicable to estimate the fair
value of the Company's 8% investment in the common stock of its former
specialty rubber products business, and its 50% interest in the GO/DAN joint
venture, because of the lack of quoted market prices and the inability to
estimate fair value without incurring excessive costs. However, management
believes that the carrying amounts as recorded at December 31, 1994 are not
impaired and reflect their corresponding fair values. No dividends have been
paid on these investments.
Long-Term Debt: The fair values of the Company's long-term debt either
approximate fair value or are estimated using discounted cash flow analyses
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
Off-balance-sheet instruments: During 1994, the Company paid off its
interest rate swap agreement which pertained to certain borrowings of MARTA
which were outstanding at December 31, 1993. The Company computed the fair
value of the interest rate swap based on quoted market prices of comparable
instruments or fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the counterparties'
credit standing.
Letters of Credit: The Company utilizes letters of credit to back
certain financing instruments and insurance policies. The letters of credit
reflect fair value as a condition of their underlying purpose and are subject
to fees competitively determined in the market place.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1994 and 1993 are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Carrying
Amount Fair Value
<S> <C> <C>
1994
Cash and cash equivalents $55,240 $55,240
Investment securities:
Non-current investment 4,344 4,344
Investment in joint venture 24,411 24,411
Other long-term debt 46,054 46,054
Off-balance sheet financial instruments:
Letters of credit 6,938 6,938
1993
Cash and cash equivalents $11,173 $11,173
Investment securities:
Non-current investment 4,344 4,344
Investment in joint venture 23,042 23,042
Other long-term debt 53,480 53,404
Off-balance sheet financial instruments:
Interest rate Swaps 2,265 2,341
Letters of credit 7,385 7,385
==========================================================================
</TABLE>
NOTE 13: SUPPLEMENTAL CASH FLOW DISCLOSURE
During 1993, the following non-cash transactions were effected and are not
reflected in the Consolidated Statement of Cash Flows:
On June 11, 1993, the Company sold its Allen Testproducts and Lease
Financing operations. In conjunction with the sale, the Company received an
installment note receivable of $19,737,000 (fully paid in 1994), and the
purchaser assumed $56,300,000 of Leasing indebtedness.
Approximately $11,453,000 of the Company's convertible debentures were
converted into 877,269 shares of the Company's Common Stock.
The Company declared a two-for-one stock split, which was paid on
October 18, 1993.
The Company exercised its redemption rights on its convertible
Preferred Stock prior to the planned redemption date in July, 1993. This action
resulted in the conversion of 2,289,615 shares of Preferred Stock into
4,579,230 shares of the Company's Common Stock.
Information with respect to cash paid during the year for interest and
taxes is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Interest paid $3,600,000 $4,210,000 $6,340,000
Interest capitalized 970,000 - -
Income taxes paid 240,000 2,930,000 4,300,000
==========================================================================
</TABLE>
-28-
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The Allen Group Inc.
We have audited the accompanying consolidated balance sheets of The
Allen Group Inc. as of December 31, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. 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 consolidated financial position of
The Allen Group Inc. as of December 31, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
As described in Note 8 to the Consolidated Financial Statements,
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," in 1993 and, as described in
Note 7, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employees' Accounting for Postretirement Benefits Other
Than Pensions," in 1992.
/s/ Coopers & Lybrand L.L.P.
Cleveland, Ohio
February 17, 1995
REPORT OF MANAGEMENT
To the Board of Directors and Stockholders of
The Allen Group Inc.
The Company maintains accounting and related internal control systems
which are intended to provide reasonable assurance that assets are safeguarded
from loss or unauthorized use and to produce records necessary for the
preparation of financial information. There are limits inherent in all systems
of internal control, and the cost of the systems should not exceed the expected
benefits. Through the use of a program of internal audits and discussions with
and recommendations from its independent accountants, the Company periodically
reviews these systems and controls and compliance therewith.
The Audit Committee of the Board of Directors, comprised entirely of
nonemployee directors, meets regularly with management, the internal auditors
and the independent accountants to review the results of their work and to
satisfy itself that their responsibilities are being properly discharged. The
internal auditors and independent accountants have full and free access to the
Audit Committee and may have discussions regarding appropriate matters, with
and without the presence of management.
The primary responsibility for the integrity of financial information
rests with management. Certain valuations contained herein result, of
necessity, from estimates and judgments of management. The accompanying
consolidated financial statements, notes thereto and other related information
were prepared in conformity with generally accepted accounting principles
applied on a consistent basis.
/s/ Robert G. Paul
Robert G. Paul
President and Chief Executive Officer
/s/ Robert A. Youdelman
Robert A. Youdelman
Senior Vice President - Finance, Chief Financial Officer
/s/ James L. LePorte, III
James L. LePorte, III
Vice President and Controller, Chief Accounting Officer
-29-
<PAGE> 16
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Overview
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Sales $331.4 $280.0 $213.0
Income before taxes 46.9 33.0 25.6
Income from continuing operations 29.2 29.5 21.8
Total assets 357.7 324.6 387.9
Capital expenditures 14.8 11.4 6.7
Depreciation 7.5 6.6 6.7
--------------------------------------------------------------------------
</TABLE>
Sales and income before taxes increased 18.3% and 42.1%,respectively, in 1994
over 1993 levels, due principally to improved performance of the Mobile
Communications and Truck Products business segments. Although the Company
continued to experience improved operational performance, this was more than
offset by a significantly higher provision for income taxes. This increase in
income tax expense is a result of the recognition, in 1993, of the Company's
remaining U.S. tax loss carryforwards and resultant accrual of a full effective
income tax rate in 1994. As a result of the higher tax provision, income from
continuing operations in 1994 of $29.2 million ($1.12 per common share) was
essentially flat with 1993 earnings of $29.5 million ($1.19 per common share).
The higher proportionate decline in earnings per common share than otherwise
indicated by the slight decline in income from continuing operations is due to
higher average common and common equivalent shares outstanding. This is a
result of the conversion of the Company's convertible preferred stock and a
portion of its convertible debentures into common shares during the latter part
of 1993.
In order to demonstrate the impact of this increase in effective
income tax rate, the Company has included a pro forma presentation of results
of operations for the years ended December 31, 1993 and 1992 (see page 15 of
this Annual Report) as if the Company had provided for income taxes at the
comparable effective tax rate of 37.8% recorded in 1994. Under this pro forma
presentation, income from continuing operations for 1993 and 1992 are $20.5
million ($.80 per common share) and $15.9 million ($.60 per common share) as
compared with the 1994 results of $29.2 million ($1.12 per common share). Such
pro forma information is presented for comparative informational purposes only.
The growth in income from continuing operations in 1993, when compared
with 1992, is attributable to improved earnings in the Truck Products segment
as well as the improved performance of the Company's GO/DAN Industries ("GDI")
joint venture. These improvements were offset, in part, by higher interest
costs and losses from the Centralized Automotive Emissions Inspections
business. Although earnings for the Mobile Communications segment were strong,
they were essentially unchanged from 1992 due to increased engineering and
international marketing development costs.
The increase in sales in 1994 as compared with 1993 was due primarily
to the continued strong growth of the Systems Products and Mobile and Base
Antennas product lines of the Mobile Communications segment and higher sales of
truck cabs within the Truck Products segment. The sales growth in 1993,
compared with 1992, was due primarily to the full year impact of the
acquisition of Alliance Telecommunications Corporation ("Alliance") in July
1992, sustained growth from the Company's existing telecommunications products
and increased sales of Truck Products.
<TABLE>
<CAPTION>
MOBILE COMMUNICATIONS
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Sales $213.6 $183.6 $128.7
Operating income 39.3 34.1 34.3
Identifiable assets 195.1 184.7 151.5
Capital expenditures 6.5 6.4 3.5
Depreciation 3.6 2.7 1.6
--------------------------------------------------------------------------
</TABLE>
Sales of Systems Products grew $13.8 million (22%), continuing the trend in
recent years which has seen sales in this product line rise from $10.4 million
in 1990 to $76.2 million in 1994. Sales of Microcells and Extend-A-Cells(R)
increased in both the domestic and international markets. The domestic market
continues to experience a strong build-out of cellular systems, particularly in
rural areas, although there is some indication that this has or will soon peak.
International sales reflect the Company's investment in recent years to better
develop an international sales presence through the addition of several new
sales offices and the rapid deployment of cellular infrastructure outside the
U.S. Sales of the Systems Products line grew $11.1 million (22%) in 1993 over
1992. Extend-A-Cell(R) sales were modestly higher in 1993, when compared with
1992, due to significantly higher sales in international markets, which
partially offset the weaker demand in metropolitan service areas of the
domestic market.
Site Management and Other Non-Antenna Products sales increased $3.9
million (8%) in 1994 compared with a sales increase of $19.8 million (68%) in
1993 over 1992. Although the Company achieved some success with new customers,
sales were negatively impacted by price reductions taken on certain of its
filter products in 1994. In 1993, Site Management Products sales increased as a
result of the strong demand for the Company's new generation of ceramic
filters.
The Mobile and Base Antennas business continued its growth as sales
increased $11.5 million (20%) in 1994 compared with a $14.8 million (35%)
increase in 1993 over 1992. In 1994, this product line benefitted from the
continued build-out and upgrading of wireless telephony systems. The
significant growth in 1993 was due in large measure to the full year impact of
the acquisition of Alliance in July 1992, but was offset, in part, by a decline
in mobile antenna sales due to intense price competition and loss of market
share.
The Frequency Planning, Systems Design and Related Services product
line had a modest sales increase of $.8 million (5%) in 1994 based on higher
frequency planning services pertaining to the build-out of rural cellular
systems. The increase in sales in 1993 over 1992 ($14.9 million compared with
$5.7 million) primarily relates to the acquisition of Alliance.
Operating income of the Mobile Communications segment remained strong
in 1994 at $39.3 million as compared with $34.1 million in 1993. The increase
in operating income reflects the growth in sales and would have been higher
except that this segment incurred charges in the amount of approximately $2.0
million relating to certain telecommunication venture investments. The Company
intends to continue to invest and support these and other such ventures in 1995
when felt to be economically justified.
-30-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Operating income for this segment in 1993, as compared with 1992, did
not keep pace with the significant increase in sales principally due to a $7.8
million investment made in new product engineering costs, as well as costs
incurred to penetrate international markets, integrate Alliance with existing
telecommunications product lines and upgrade manufacturing facilities.
In December 1994, the Company acquired a 40% interest in FOR.E.M.
S.p.A. ("FOREM") of Agrate Brianza (Milan), Italy. FOREM owns 62% of MIKOM
G.m.b.H., located in Germany and also has sales and service offices in the
United Kingdom and France. The Company has options to acquire the remaining
shares of FOREM during the next five years, and on February 28, 1995 indicated
its intention to exercise its option to acquire an additional 40% interest.
FOREM is one of the leading suppliers of wireless telecommunications products
to the major European telecommunications equipment manufacturers and wireless
operating companies. The Company views this acquisition as a significant
opportunity to achieve market expansion throughout Europe. (For additional
information see Note 3 to the Consolidated Financial Statements.)
<TABLE>
<CAPTION>
AUTOMOTIVE TEST AND SERVICE
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Sales $2.8 $2.7 $.4
Operating loss (1.2) (1.0) -
Identifiable assets 14.8 9.1 56.4
Capital expenditures 5.9 .7 .8
Depreciation .6 .5 1.4
-------------------------------------------------------------------------
</TABLE>
This segment is solely comprised of the Company's Centralized Automotive
Emissions Inspections business operated by its MARTA Technologies, Inc.
("MARTA") subsidiary. In the 1992 through 1994 period, MARTA's sole source of
sales revenue was its Jacksonville, Florida emissions testing program which, at
$2.8 million in 1994, represents less than 1% of consolidated sales of the
Company. In 1993, MARTA was awarded the programs for the State of Maryland and
the El Paso region of Texas, both of which were scheduled to begin testing on
January 3, 1995; however, both programs were delayed due to computer software
and other problems incurred in bringing this new technology on line. In 1994,
the Company was awarded the centralized emissions testing programs in the
Cincinnati region of Ohio and Northern Kentucky. A summary of existing programs
is as follows:
<TABLE>
<CAPTION>
Projected
Approximate Program Primary
Program Annual Revenue Start Date Term
(In Millions)
<S> <C> <C> <C>
Jacksonville, Florida $ 2.8 April 1, 1991 7 Years
El Paso, Texas 3.8 May 1, 1995 7 Years
Maryland 9.8 Indeterminate 3 Years
Cincinnati, Ohio 11.0 January 1, 1996 10 Years
Northern Kentucky 2.5 January 1, 1996 10 Years
-------------------------------------------------------------------------
</TABLE>
On February 1, 1995, the Company announced that the State of Texas
adopted a 90-day suspension of its program through May 1, 1995, the purpose of
which is to study and/or develop alternative inspection programs. Further, in
Maryland, the program has been delayed by state officials until all facilities
and analytical equipment were certified for inspection testing, and the state
has passed legislation modifying the program. There is no certainty at this
time that the Texas program will begin testing at the above noted projected
program start date.
Centralized emissions testing programs mandated by the Federal
Environmental Protection Agency ("EPA") pursuant to the 1990 Clean Air Act have
come under increasing scrutiny in recent months by both state and Federal
officials. Recently, the EPA announced its intent to provide increased
flexibility for state authorities charged with implementing the federally
mandated programs. Legislation has been proposed in a number of states,
including Maryland and Texas, to delay, suspend, modify or cancel the enhanced
IM 240 centralized emissions testing programs until the EPA clarifies its
positions and regulations on these programs. The Maryland House of
Respresentatives approved a measure which would delay through July 1, 1996
emissions testing using the new IM 240 technology in favor of resuming
"tailpipe" emissions testing in the centralized facilities which had been the
prior standard in Maryland. After this period the IM 240 test would be mandated
for all vehicles. Further, the State of Texas has made a request to the EPA to
exempt the El Paso region altogether from the emissions testing requirements,
however, no determination has as yet been made. It is not possible to predict
the outcome of future legislation; however, the Company believes its existing
contracts call for appropriate compensation should any of the programs be
substantially changed or cancelled.
As of December 31, 1994, the Company's investment in the Maryland
program approximated $.8 million. In 1994, the State of Maryland paid $37.3
million of the stipulated purchase price of $39.2 million, pursuant to the
contract to purchase the buildings and equipment (the land having been earlier
acquired by the state). In regard to the El Paso program, the Company's net
capitalized investment approximated $6.5 million at December 31, 1994, and the
Company expects to incur an additional $.6 million in early 1995 to bring this
program on line. In the Cincinnati, Ohio and Northern Kentucky programs, the
respective states continue, at this time, to proceed as planned with the
implementation of centralized emissions inspection programs as previously
awarded. In these latter two programs, MARTA will lease the land and buildings
from an independent third party developer, but will own the equipment.
MARTA's operating losses in 1994 and 1993 continue to reflect the
incurrence of bidding costs and build-up in organizational structure for future
programs. In 1994, the loss is offset, in part, by a $1.1 million gain from the
Maryland project, relating primarily to the interest savings from financing the
design and construction of facilities. The profitability of MARTA in 1995 is
dependent upon both the timing of the start-ups of the El Paso and Maryland
programs and the changes, if any, which are made to the type of emissions test
program by the States, which have not yet been defined.
The outlook for this business regarding future emissions test programs
and the related timing of bids has become much more unpredictable given the
current political climate and certain states' adverse reaction to compliance
with these perceived unfunded federal mandates. Programs that MARTA has bid on,
or was expecting to bid on, have all taken various forms of delays and continue
to remain uncertain.
The decline in identifiable assets in 1993, from 1992, reflects the
sale of the Company's Allen Testproducts division in 1993.
-31-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
<TABLE>
<CAPTION>
TRUCK PRODUCTS
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Sales $115.0 $93.7 $83.9
Operating income 16.0 9.9 4.4
Identifiable assets 49.0 51.7 47.0
Capital expenditures 2.4 4.2 1.6
Depreciation 3.1 3.1 3.2
-----------------------------------------------------------------------------
</TABLE>
Sales in this segment (comprised principally of truck cabs and radiators) are
directly related to the rate of truck production by original equipment
manufacturers, which form the major customer base of this business. The
increase in sales in both 1994 and 1993, each when compared with the immediate
preceding year, is due to increased unit sales of its crew cab and dual rear
wheel fenders, which are sold to The Ford Motor Company as part of its family
of pick-up trucks, which continue to experience broad retail market acceptance.
The Company also continues to see strengthening sales of radiators, which are
sold to heavy duty truck manufacturers (Class 8 Truck sales were at their
highest level in many years), and off-highway equipment. The revenues in this
segment are dependent upon contractual sales relationships with a limited
number of large companies; the loss of any one of these contracts could have a
material adverse impact upon results of operations of this segment.
Although operating margins in this segment generally correlate closely
with sales activity, the earnings of this segment were further benefitted by
improved margins in the Truck Radiator and OEM Products line as a result of
cost reductions, productivity improvements and lower purchased material costs.
The decline in identifiable assets relates, in part, to the disposal
of this segment's fiberglass manufacturing operations in 1994.
<TABLE>
<CAPTION>
JOINT VENTURE OPERATIONS
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Equity in earnings (losses) of joint venture $ 1.4 $ .4 $(3.7)
Investments and advances in joint venture 25.3 23.3 23.5)
-----------------------------------------------------------------------------
</TABLE>
The equity in earnings from joint venture in 1994 and 1993 is entirely
attributable to the Company's investment in GDI, which manufactures radiators
for sale in the automotive aftermarket. The increase in earnings in both 1994
and 1993 is attributable to an increase in sales, lower material costs and
continued emphasis on cost reductions. The significant loss in 1992
(principally due to GDI) was due to lower gross profit margins, weaknesses in
the economy and slower realization of the expected benefits from cost
reductions and efficiencies anticipated when the GDI joint venture was formed.
<TABLE>
<CAPTION>
FINANCING COSTS
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Interest and financing expense:
Interest Expense $(3.4) $(4.5) $(2.5)
Interest Income 1.4 1.3 .5
Average borrowing rate 5.0% 6.0% 5.9%
-----------------------------------------------------------------------------
</TABLE>
Interest expense declined in 1994, compared with 1993, due to the conversion of
the Company's convertible subordinated debentures into common stock during the
third quarter of 1993 and lower interest rates. The increase in interest income
in 1994 reflects an increase in investment income pertaining to the generation
of cash from operations offset, in part, by lower interest income earned on the
proceeds of a note received in the sale of the Company's automotive diagnostic
equipment product line in 1993. This note (which was prepaid in May 1994) bore
interest at a higher rate than subsequent investment yields. During 1994, a
majority of the Company's cash was invested in tax exempt securities which has
the impact of lowering the net interest yield as compared with comparable
pretax instruments. Higher interest expense in 1993, compared with 1992, is
attributable to higher borrowing levels relating to the Alliance acquisition
and the Company's decision to borrow $20 million in early 1993 at a long-term
interest rate of 8.13%. The higher interest income in 1993 reflects earnings on
the aforementioned note receivable.
<TABLE>
<CAPTION>
GENERAL CORPORATE
(In millions) 1994 1993 1992
<S> <C> <C> <C>
General corporate expenses, net $ 6.5 $ 7.2 $ 7.4
Corporate identifiable assets 73.5 55.9 25.7
-----------------------------------------------------------------------------
</TABLE>
Lower general corporate expenses reflect generally lower corporate headquarter
costs and higher royalty income ($1.8 million in 1994 versus $.9 million in
1993) offset, in part, by higher amortization of unearned compensation relating
to restricted stock plans ($3.1 million in 1994 versus $1.3 million in 1993).
In 1993, lower general corporate expenses reflect lower costs attributable to
the full year impact of the move of the Company's corporate headquarters from
New York to Ohio.
Corporate identifiable assets consist generally of cash, unliquidated
assets remaining from the sale of businesses and other general corporate
assets. The increase in Corporate identifiable assets in 1994, compared with
1993, relates principally to increased cash generated from profitable
operations. The increase in cash as set forth in the consolidated balance sheet
from $11.2 to $55.2 million includes not only cash generated from earnings but
also the payment of the outstanding $19.7 million note received from the sale
of its automated diagnostic equipment product line in 1993, which was the
primary reason for the increase in these assets in 1993 compared with 1992.
<TABLE>
<CAPTION>
INCOME TAXES
(In millions) 1994 1993 1992
<S> <C> <C> <C>
Provision for income taxes $17.7 $ 3.5 $ 3.8
Effective tax rate 37.8% 10.6% 14.7%
-----------------------------------------------------------------------------
</TABLE>
In 1994, the Company began accruing U.S. Federal income taxes at the full
statutory rate of 35%, plus applicable state and local taxes, as a result of
having recognized all of its remaining tax loss carryforwards in 1993. The
effective tax rate in 1993 and 1992 was lower than the 1994 rate due to the
benefit of utilizing its U.S. net operating loss carryforwards to reduce U.S.
income tax expense, offset, in part, by the impact of state and local taxes and
higher tax rates on Canadian income. The 1993 tax provision was further reduced
by approximately $1.1 million ($.04 per common share), representing the tax
benefit of the Company's remaining financial reporting U.S. net operating loss
carryforwards. Such benefit was subsequently realized in 1994.
-32-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition, the Company has recorded certain other deferred tax
assets which were offset against the excess of cost over the net assets of
businesses acquired (aggregating $7.5 million, including $1.3 million recorded
in 1994) and other deferred tax assets relating to the bargain purchase element
of employee stock option exercises which were credited to stockholders' equity
(approximately $1.6 million in 1993).
Since the Company has fully utilized the tax benefits of all of its
U.S. tax loss carryforwards, it is expected that the effective tax rate in
future years will more closely approximate the 1994 rate. (See Note 8 of the
Notes to Consolidated Financial Statements for additional information.)
OTHER INFORMATION
Inflation
Certain raw materials, such as copper and other primary metals, used in the
Company's heat transfer, truck cabs and metal fabrication product lines can be
subject to significant price movements; however, the overall impact of the low
rate of inflation in recent years has resulted in no significant impact on the
Company. In recent months the price of copper and brass has accelerated. Copper
and brass are significant components of the manufacturing operations of the
Company's Truck Radiator and OEM Products line and GDI joint venture. These
higher material costs could adversely effect profit margins in 1995 in these
businesses, subject to the ability to pass along price increases to its
customers.
Divestiture
In June 1993, the Company sold its automotive diagnostic equipment product line
and related Lease Finance operations, which resulted in a loss of $2.9 million
($.13 per common share). Such loss is exclusive of any U.S. tax benefit due to
the Company's U.S. tax loss carryforward available in 1993. See Note 10 to the
consolidated financial statements for additional information.
Environmental
The Company is subject to federal, state and local laws designed to protect the
environment and believes that, as a general matter, its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and financial liability to the Company. See Note 6 to the consolidated
financial statements for additional information.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<S> <C> <C> <C>
(In millions) 1994 1993 1992
Total Debt: Manufacturing $ 45.1 $ 52.6 $ 68.1
Lease financing -- -- 63.2
Debt-to-equity ratio: Manufacturing .2:1 .3:1 .5:1
Lease financing -- -- 4.9:1
Total company .2:1 .3:1 .8:1
====================================================================
</TABLE>
In 1994, the Company generated $54.1 million in cash from operations
as compared with $9.4 million and $24.4 million in 1993 and 1992, respectively.
The significant cash generation in 1994 reflects the strength of earnings of
$29.2 million, as well as the one-time cash savings attributable to the
utilization of remaining U.S. net operating loss carryforwards to reduce cash
tax payments. These loss carryforwards contributed approximately $15.5 million
to cash flow. Further, the Company received $19.7 million of proceeds from a
note received in connection with the sale of the Company's automotive
diagnostic business in 1993. The payment of this note and the realization of
deferred tax assets recorded in 1993 are the principal reasons for the
reduction in "Other Assets" in 1994 as set forth in the Company's consolidated
balance sheet.
The significantly lower cash flow from operations in 1993, despite
strong income from operations of $21.4 million, was due to a $24.8 million
investment in working capital needs principally to support growth in the Mobile
Communications segment.
The future liquidity and capital needs of the Company in the near term
are anticipated to center around its continuing investment into the expanding
wireless communications industry, financing the growth in the centralized
automotive emissions testing business (MARTA) and, to a lesser degree, in
support of maintaining and improving productive capacity in the Truck Products
segment.
The Mobile Communications segment is expected to absorb almost 70% of
the Company's capital expenditure requirements in 1995 (excluding MARTA).
Further, the Company has indicated its intent to exercise its option to acquire
an additional 40% interest in FOREM, which could require approximately $12.0
million of cash in 1995 including a portion of certain contingent payouts. The
remaining contingent payout, if any, in an amount of up to $5.0 million, may be
earned and would be payable in future years.
The capital requirement with respect to MARTA is, however, less clear
given the uncertainty in the centralized emissions testing industry as
described previously. In 1994, the Company substantially completed the
construction of the Maryland and El Paso, Texas programs, financing the cost
principally through internally generated funds. In late December, the Company
received $37.3 million against the purchase price of the facilities and
equipment from the State of Maryland. MARTA's programs in the Cincinnati region
of Ohio and Northern Kentucky are anticipated to require approximately $18.0
million of capital, which the Company presently intends to finance with
internally generated funds. The land and buildings for these two programs will
be acquired, constructed and financed by an independent third party developer
from whom MARTA will lease the facilities under a capital lease arrangement.
The Company believes that continued profitability, cash and short-term
investments of $55.2 million and available unused credit lines of $93.1 million
(expiring July 1, 1997) provide sufficient liquidity to fund future growth,
expansion and acquisitions.
The Company estimates that capital expenditures (excluding MARTA) will
approximate $14.0 million in 1995 of which approximately $2.2 million was
committed at December 31, 1994.
-33-
<PAGE> 20
<TABLE>
FIVE-YEAR SUMMARY OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
FIVE YEARS ENDED DECEMBER 31, 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales $331,352 $280,031 $212,953 $151,532 $173,364
Cost of sales 232,006 195,780 143,831 109,812 130,508
Selling, general and administrative expenses 51,755 48,495 37,824 31,457 33,838
Interest and financing expense 2,050 3,156 1,978 1,463 2,133
Equity in earnings (losses) of joint ventures 1,368 407 (3,742) (1,399) 717
-------- -------- -------- -------- --------
Operating income 46,909 33,007 25,578 7,401 7,602
Patent litigation charge -- -- -- -- (18,554)
-------- -------- -------- -------- --------
Income (Loss) Before Taxes 46,909 33,007 25,578 7,401 (10,952)
Provision for income taxes 17,715 3,483 3,751 1,543 4,053
-------- -------- -------- -------- --------
Income (Loss) from Continuing Operations 29,194 29,524 21,827 5,858 (15,005)
Discontinued Operations:
Income (loss) from discontinued operations -- (4,563) (1,933) 11,583 13,743
Gain (loss) on sale of discontinued businesses -- (2,936) -- 41 --
Cumulative Effect of Accounting Changes -- 2,102 (4,554) -- --
-------- -------- -------- -------- --------
Net Income (Loss) $ 29,194 $ 24,127 $ 15,340 $ 17,482 $ (1,262)
-------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 29,194 $ 21,947 $ 11,315 $ 13,457 $ (5,287)
-------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Common Share
(Primary and Fully Diluted):
From continuing operations $1.12 $1.19 $.91 $.10 $(1.03)
Discontinued operations:
Income (loss) from discontinued operations -- (.20) (.10) .62 .74
Gain (loss) on sale of discontinued businesses -- (.13) -- -- --
Cumulative effect of accounting changes -- .10 (.24) -- --
-------- -------- -------- -------- --------
Net inccome (loss) per share $1.12 $.96 $ .57 $ .72 $ (.29)
-------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
Total assets: Manufacturing $357,716 $324,638 $304,111 $217,291 $257,913
Lease financing -- -- 83,811 90,661 76,764
Total company 357,716 324,638 387,922 307,952 334,677
Working capital - Manufacturing 107,940 71,808 67,013 84,112 97,837
Current ratio - Manufacturing 2.54 2.22 1.96 2.71 2.46
Total debt: Manufacturing 45,064 52,597 68,083 25,398 64,039
Lease financing -- -- 63,151 67,943 54,057
Total company 45,064 52,597 128,177 85,127 118,096
Stockholder equity 224,181 195,161 159,339 141,807 128,000
Debt to equity ratio: Manufacturing .20 .27 .47 .20 .56
Lease financing -- -- 4.90 5.17 5.02
Total company .20 .27 .81 .60 .92
Book value per common share 8.59 7.52 5.08 4.48 3.78
Shares outstanding at year end 26,107 25,964 20,058 18,832 18,630
Return on stockholders' equity 14.1% 12.6% 13.5% 13.0% (1.0%)
Capital expenditures 14,833 11,360 6,653 4,976 6,578
Depreciation 7,477 6,611 6,701 6,325 6,716
Number of employees 2,700 2,500 3,000 2,400 2,800
-------------------------------------------------------------------------------------------------------------------------
<FN>
ALL PER SHARE DATA HAVE BEEN RESTATED TO REFLECT STOCK DIVIDENDS AND STOCK SPLITS.
</TABLE>
<PAGE> 21
SHAREHOLDER INFORMATION
EXCHANGE LISTINGS
Common Stock
(Ticker Symbol - ALN)
New York Stock Exchange
Pacific Stock Exchange
TRANSFER AGENT AND REGISTRAR
Harris Trust Company of New York
P.O. Box 755
Chicago, Illinois 60690
<TABLE>
MARKET PRICE RANGE OF COMMON STOCK
1994 1993 1992
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 18-3/4 13-1/2 17-1/16 2-11/16 15 9-1/4
2nd Quarter 18-3/8 14 23-1/16 16 14-1/16 9-7/16
3rd Quarter 22-1/4 15-3/4 29-1/16 20-1/4 12-7/16 9-7/16
4th Quarter 25-3/4 19-3/8 29 15-1/4 14-5/16 11
</TABLE>
<TABLE>
DIVIDENDS DECLARED ON COMMON STOCK
1994 1993 1992
<S> <C> <C> <C>
1st Quarter $.04 $.03 $.025
2nd Quarter $.04 $.03 $.025
3rd Quarter $.04 $.03 $.025
4th Quarter $.05 $.04 $ .03
</TABLE>
AUDITORS
Coopers & Lybrand L.L.P.
Cleveland, Ohio
ANNUAL REPORT DESIGN
Epstein, Gutzwiller, Schultz and Partners Inc.,
Cleveland, Ohio
FORM 10-K OR ADDITIONAL INFORMATION ABOUT THE COMPANY
Stockholders and others interested in obtaining additional information about
the Company may do so by writing or calling The Allen Group Inc. 25101 Chagrin
Blvd., Beachwood, Ohio, 44122-5619, (216) 765-5822, The Form 10-K Annual
Report, including financial statements and schedules, will be furnished without
charge.
AFFIRMATIVE ACTION POLICY
It is the policy of Allen Gorup Inc. that all employees will be judged on the
basis of qualifications and ability, without regard to age, sex, race, creed,
color or national origin, in all personnel actions. No employee or applicant
for employment will recieve discriminatory treatment because of physical or
mental handicap in regard to any position for which the employee or applicant
for employment is qualified.
STOCKHOLDERS
As of February 16, 1995, The Allen Group Inc. had outstanding 26,114,221 shares
of Common Stock owned by 2,339 holders of record.
ANNUAL STOCKHOLDERS' MEETING
The Annual Meeting of Stockholders will be held at the Cleveland Marriott
Society Center, 127 Public Square, Cleveland, Ohio on Thursday, April 27, 1995
ay 9:30 a.m.
<PAGE> 1
Exhibit 21
----------
SUBSIDIARIES OF THE ALLEN GROUP INC.
------------------------------------
The following is a list of the subsidiaries of The Allen Group Inc.
(Delaware, 02-03-69), and indented, subsidiaries of such subsidiaries,
including in each case the state or other jurisdiction in which each
subsidiary was incorporated or organized, and indicating in each case the
percentage of voting securities owned by the immediate parent. All
such subsidiaries are consolidated subsidiaries, except GO/DAN Industries.
<TABLE>
<CAPTION>
State/Country
Name of Corporation of Incorporation Date %
------------------- ---------------- ---- -
<S> <C> <C> <C>
The Allen Group Canada Limited Ontario, Canada 04-19-72 100
The Allen Group International, Inc. Delaware 07-19-73 100
The Allen Group GmbH (2) West Germany 09-29-70 100
The Allen Group Internat'l Sales Corp. Barbados 09-15-94 100
Allen Heat Transfer Products Inc. Delaware 05-22-90 100
GO/DAN Industries (4) New York 05-24-90 50
Allen Indus. Ltd. Mauritius 01-23-95 100
Allen Telecom Canada, Inc. (5) Ontario 04-14-93 80
Allen Telecom Group, Inc. Delaware 10-26-88 100
Alven Capital Corporation (3) Delaware 11-10-93 57.26
Antenna Specialists Co., Inc. Delaware 10-07-88 100
Antespec, S.A. de C.V. Mexico 11-14-88 100
Decibel Mobilcom GmbH (1) Germany 07-28-90 100
Decibel Mobilcom Limited (1) England 01-31-91 100
Grayson Electronics Company (6) Virginia 09-03-86 80
Orion Far East Management Inc. (1) Delaware 07-16-81 100
Orion Industries, Inc., Limited (1) Hong Kong 06-01-71 100
Orion Imports & Exports Limited (1) Hong Kong 09-07-73 100
Orion Industries, Inc. Japan (1) Japan 09-73 100
Orion Industries Taiwan Limited (1) Taiwan 10-73 100
Allen Telecom Group (Italia) S.r.l. Italy 11-14-94 100
FOR.E.M. S.p.A. (7) Italy 10-10-72 80
FOREM France S.a.r.l. (8) France 1993 96
FOREM U.K. Ltd. (9) U.K. 1988 65
MIKOM G.m.b.H. (10) Germany 05-07-85 62
Mitras Ltd. (11) Hungary 1992 60
Allen Telecom Group Limited (1) U.K. 05-08-72 100
MARTA Technologies, Inc. Delaware 10-14-92 100
276017 Ontario Limited (1) Ontario, Canada 09-11-73 100
</TABLE>
<PAGE> 2
(1) These subsidiaries are not significant in the aggregate and are no
longer active.
(2) 95% of the outstanding capital stock of this subsidiary is
owned by The Allen Group International, Inc. and the remaining 5% is
owned by The Allen Group Inc.
(3) On a fully diluted basis, 57.26% of the outstanding capital stock is
owned by ATG, 19.35% is owned by Rose Investors and 23.39% is owned by
Philadelphia Ventures.
(4) A 50% owned general partnership joint venture accounted for under
the equity method of accounting.
(5) 80% of the outstanding capital stock of this subsidiary is owned by
The Allen Group Inc. and the remaining 20% is owned by senior management
of Allen Telecom Canada, Inc.
(6) 80% of the outstanding capital stock of this subsidiary is owned by
The Allen Group Inc. and the remaining 20% is owned by senior
management of Grayson Electronics Company.
(7) 40% of the outstanding capital stock of this subsidiary is owned
by Allen Telecom Group (Italia) S.r.l., which also owns options to
acquire the remaining 60%.
(8) 96% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.p.A. and the remaining 4% is owned by senior management of
FOREM France S.a.r.l.
(9) 65% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.p.A. and the remaining 35% is owned by senior management of
FOREM U.K. Ltd.
(10) 62% of the outstanding capital stock of this subsidiary is owned by
FOR.E.M. S.p.A. and the remaining 38% is owned by the managing director
of MIKOM G.m.b.H.
(11) 60% of the outstanding capital stock of this subsidiary is owned by
MIKOM G.m.b.H. and the remaining 40% is owned by senior management of
Mitras Ltd.
<PAGE> 1
Exhibit 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 (File No. 33-48545) and on the Registration Statements on
Form S-8 (File Nos. 33-53499, 33-53487, 33-52420, 33-8658 and 2-99919) and the
related Prospectuses of The Allen Group Inc. of (a) our report dated February
17, 1995 on our audits of the consolidated financial statements of The Allen
Group Inc. as of December 31, 1994 and 1993 and for the years ended December 31,
1994, 1993, 1992, which report has been incorporated by reference in this Annual
Report on Form 10-K from the 1994 Annual Report to Stockholders of The Allen
Group Inc. (a copy of which is filed as Exhibit 13 to this Report) and appears
on page 29 therein, and (b) our report dated February 17, 1995 on our audits of
the financial statement schedule for the years ended December 31, 1994, 1993 and
1992 of The Allen Group Inc., which report appears on page 16 in this Annual
Report on Form 10-K. We also consent to the references to our firm in the
above-mentioned Prospectuses under the caption "EXPERTS".
COOPERS & LYBRAND L.L.P.
Cleveland, Ohio
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 55,240
<SECURITIES> 0
<RECEIVABLES> 63,974
<ALLOWANCES> (1,684)
<INVENTORY> 58,316
<CURRENT-ASSETS> 178,191
<PP&E> 94,656
<DEPRECIATION> (37,796)
<TOTAL-ASSETS> 357,716
<CURRENT-LIABILITIES> 70,251
<BONDS> 44,910
<COMMON> 29,146
0
0
<OTHER-SE> 195,035
<TOTAL-LIABILITY-AND-EQUITY> 357,716
<SALES> 331,352
<TOTAL-REVENUES> 331,352
<CGS> 232,006
<TOTAL-COSTS> 232,006
<OTHER-EXPENSES> 51,338
<LOSS-PROVISION> 417
<INTEREST-EXPENSE> 2,050
<INCOME-PRETAX> 46,909
<INCOME-TAX> 17,759
<INCOME-CONTINUING> 29,194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,194
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 0<F1>
<FN>
<F1>There was no reportable dilution for the perios persented.
</FN>
</TABLE>
