=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
COMMISSION FILE NO. 1-4474
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OAK INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-1569000
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
BAY COLONY CORPORATE CENTER
1000 WINTER STREET
WALTHAM, MASSACHUSETTS 02154
(Address of principal executive offices) (Zip Code)
</TABLE>
(617) 890-0400
(Registrant's telephone number, including area code)
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 New York Stock Exchange
Par Value $.01 Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(Title of class)
<PAGE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
The aggregate market value of Registrant's Common Stock held by persons
who are not affiliates of Registrant was $408,174,670 on January 31, 1995.
The Registrant had 17,462,018 shares of Common Stock, $0.01 par value,
issued and outstanding on January 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
--------- -------------------
Proxy Statement to be filed no later
than April 3, 1995 Part III, Items 10-13
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<PAGE>
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Oak Industries Inc. (the "Company") was incorporated under the laws of the
State of Delaware in 1960. The predecessor of the Company was incorporated in
1932 under the laws of the State of Illinois. The present corporate name was
adopted in 1972. The Company's executive offices are located at Bay Colony
Corporate Center, 1000 Winter Street, Waltham, Massachusetts 02154, and its
telephone number is (617) 890-0400.
The Company manufactures and sells communications components, including
cable television ("CATV") specialty connectors and frequency control devices,
and control components, including electronic and mechanical controls and
switches for consumer appliances and testing and industrial equipment. In
addition, the Company manufactures and sells railway maintenance-of-way
equipment.
The Company grew rapidly in the early 1980's due primarily to its cable
television equipment, subscription television and other media related
businesses. From 1982 to 1985, the Company sustained severe losses in this
segment as a result of failed product introductions and the collapse of the
subscription television industry. Seeking to arrest this decline, the Company
initiated a series of actions, including the sale of unprofitable or
underutilized assets, cost cutting programs designed to reduce corporate and
divisional overhead costs and the substantial reduction of public debt from
$230.0 million in 1986 to zero as of December 31, 1992. A significant amount
of this public debt was reduced through a series of debt exchanges, the
largest of which involved the 1986 sale of the Company's materials segment to
Allied-Signal Inc. for approximately $152.0 million in cash. These proceeds,
combined with the issuance of common stock, were used to retire approximately
$197.0 million of such debt. As a result of these actions, stockholders'
equity rose from negative $64.2 million at December 31, 1985 to positive $89.0
million at December 31, 1988.
Despite these efforts, the Company continued to incur losses from
continuing operations exclusive of nonrecurring items and, in June 1989, a
proxy contest resulted in the election of a new slate of directors. In late
1989 and early 1990, a new management team with extensive experience in
industrial operations and acquisitions was installed. The charter of this new
management team was and is to: 1) dispose of unprofitable businesses with low
potential; 2) improve the profitability of the remaining operations; and 3)
pursue a well-planned, focused and consistent acquisition strategy. It is the
intention of the Board of Directors that the Company will serve as a holding
company managing a portfolio of companies which will include both existing
operations and other businesses serving markets with good growth and income
potential.
During 1990 the Company completed the sales of two of its operating
businesses: Oak Communications Inc. and Diamond H Controls Ltd. Oak
Communications Inc. designed and manufactured equipment for the cable
television market. Diamond H Controls is a Norwich, England based
manufacturer of electric range components for the British and European
appliance markets. This subsidiary was sold due to the lack of strategic fit
with other Oak subsidiaries and to redeploy the cash proceeds generated by the
transaction into domestic operations with greater growth and earnings
potential. Shortly following the disposition of the assets of Oak
Communications Inc. based in Rancho Bernardo, California, the Company
relocated its corporate headquarters from Rancho Bernardo to Waltham,
Massachusetts to be closer to its operating units and to reduce travel costs.
On January 4, 1991, the Company acquired the assets of Standard Grigsby,
Inc. ("SGI"), a subsidiary of Flint Industries, Inc., including the stock of
SGI de Mexico, S.A. de C.V., for approximately $7.5 million in cash and the
assumption of certain liabilities. SGI manufactured switch products
complementary to those of Oak Switch Systems Inc. During 1991, Company
management combined the businesses of SGI and Oak Switch Systems, forming
OakGrigsby Inc., in order to improve the profitability of each entity.
On September 10, 1992, the Company acquired all of the outstanding common
stock of H.E.S. International, Inc. ("H.E.S.") , a manufacturer of
hermetically-sealed packages used by manufacturers of quartz crystals, for
approximately $2.8 million in net cash and a $0.3 million note, payable
through September 1995. H.E.S. manufactured products complementary to those
of the Houston Electronics division ("Houston") of Oak Crystal Inc. During
1992, Company management combined the operations of Houston into those of
H.E.S. in order to improve the profitability of the combined entity.
On December 23, 1992, the Company, along with Bain Capital, through an
acquisition company, Connector Holding Company ("Connector"), acquired 85
percent of the outstanding stock of Gilbert Engineering Co., Inc. ("Gilbert"),
a Glendale, Arizona manufacturer and supplier of specialty connectors to the
cable television and high-end microwave markets. Management of Gilbert
retained ownership of the remaining 15 percent of Gilbert. The Company has
the right of first refusal should Gilbert management wish to sell their shares
in Gilbert. If the Company refuses the offer, Gilbert management may,
beginning in December 1995 and at its option, exchange its shares of Gilbert
for shares of the Company's common stock. The Company owns 80 percent of
Connector, with Bain Capital owning the other 20 percent. Bain may at any
time after December 22, 1995 require Oak to buy and Oak may at any time after
December 22, 1996 require Bain to sell its outstanding shares in Connector at
a price determined according to the terms of the stockholders agreement
entered into by Oak and Bain at the time of the acquisition. The aggregate
purchase price was approximately $106.9 million, including refinancing of
existing debt of Gilbert and transaction expenses. Gilbert is required to
make mandatory debt payments equal to 90% of annual cash flows from operations
less capital expenditures and other expenditures as specified in the credit
agreement relating to the financing of the acquisition.
On January 12, 1993, the Company acquired the assets of the hybrid
oscillator business of Spectrum Technology Inc. ("Spectrum"), a subsidiary of
Datum Inc., for approximately $1.6 million in cash including consolidation
costs. Spectrum manufactured products complementary to those of
McCoy/Ovenaire. This acquired business was consolidated into the
McCoy/Ovenaire operations during the first quarter of 1993.
Effective May 13, 1993, the Company's shareholders approved a one-for-five
reverse stock split of the Company's common stock (the "Reverse Split"). All
share and earnings per share amounts used herein have been restated to reflect
the Reverse Split.
On June 10, 1994, Gilbert acquired all of the outstanding capital stock of
Cabel-Con A/S ("Cabel-Con"), a Danish manufacturer of connectors for the
worldwide cable television markets, for approximately $9.25 million. The
acquisition was financed by borrowings on Gilbert's revolving credit facility.
Concurrent with the acquisition, Gilbert paid off $2.63 million of Cabel-Con's
bank borrowings.
On November 7, 1994, the Company completed the sale of the assets of its
Carpenter Emergency Lighting business ("Carpenter") for $2.1 million in cash.
Carpenter is located in Charlottesville, Virginia and manufactures and sells
self-powered emergency lights, exit signs, and portable lights. Carpenter was
sold due to the lack of strategic fit with other Oak subsidiaries.
The Company is party to a 1989 agreement with Invesco MIM Management
Limited, formerly MIM Ltd. ("MIM"), an international fund management company
based in the United Kingdom, pursuant to which MIM and its clients together
with their successors in interest (the "MIM Group") purchased 1.4 million
shares of the Company's newly issued common stock at $3.75 per share. The
agreement with MIM contains certain restrictions on the MIM Group's right to
sell, transfer and purchase additional Oak common stock. It also granted the
MIM Group certain rights with respect to the registration of the Oak
securities acquired under the terms of the agreement. In a separate
transaction in 1989, the MIM Group acquired 2 million shares of the Company's
common stock previously held by Itel Corporation. As of December 31, 1994,
the last remaining member of the MIM Group held approximately 1.1 million
shares, or 6% of the Company's outstanding common stock, and all registration
rights pertaining to that member's holdings had been waived.
As of December 31, 1994, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $123.0 million, primarily
expiring from 1999 through 2006. Under federal tax law, certain changes in
ownership of the Company, which may not be within the Company's control, may
operate to restrict future utilization of these carryforwards.
(B) FINANCIAL INFORMATION ABOUT THE INDUSTRY SEGMENTS
The Company's businesses are currently classified into the Components
Segment and the Other Segment. For information regarding sales, operating
income and identifiable assets attributable to each industry segment, see Note
9 of the Notes to Consolidated Financial Statements which is incorporated
herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS
The Company's operations are conducted in two industry segments, the
Components Segment and the Other Segment. The Company's Components Segment
manufactures connectors for CATV systems and other precision applications,
frequency control devices, controls for gas and electric appliances, switches
and other products which generally have the common function of controlling or
regulating the flow of energy. The Other Segment is composed of the Company's
railway maintenance equipment division.
COMPONENTS SEGMENT
The Company operates principally through its Components Segment, which
manufactures and sells communications components and control components.
Communications Components
The Company's communications components include specialty connectors for
use in CATV and other precision applications and devices which control radio
frequencies such as quartz crystals, filters and oscillators and their related
bases and enclosures. The Company has completed several acquisitions of
businesses offering communications components and believes that, over time,
the Company will expand its product offerings to the communications markets
through new product development and the acquisition of businesses which
compete in growing markets and offer strong margin potential. Collectively,
communications components accounted for approximately 55%, 51% and 21% of the
Company's net sales for 1994, 1993 and 1992 respectively.
CATV and Specialty Connectors. On December 23, 1992, the Company, along
with Bain Capital, through an acquisition company, Connector Holding Company
("Connector"), acquired 85 percent of the outstanding stock of Gilbert
Engineering Co., Inc. ("Gilbert"). Management of Gilbert retained ownership
of the remaining 15 percent of Gilbert. The Company owns 80 percent of
Connector, with Bain Capital owning the other 20 percent.
Gilbert manufactures and supplies specialty connectors to the cable
television and high-end microwave markets. Its operations are based in
Glendale, Arizona, Amboise, France and Vordingborg, Denmark.
Domestic and export sales are made directly to cable television system
operators as well as through distributors and manufacturers' representatives.
Gilbert's wholly owned French subsidiary, Societe d'Appareillages
Electroniques, S.A. ("S.A.E."), sells primarily to cable operators in France.
Cabel-Con Denmark sells primarily to customers in Western Europe. Gilbert's
major customers include cable operators such as Tele-Communications, Inc.
(TCI), Sammons Communications, Scripps Howard, Times-Mirror, Continental, and
Time Warner Cable, and distributors such as Antec Corporation. The top ten
customers account for approximately 44% of sales.
The cable industry is experiencing a continuing expansion of channel
capacity in response to the desire of cable operators to provide subscribers
with more programming selections, including pay-per-view and additional
programming services. In addition, rapid developments in fiber optic
technology, digital compression (which allows several channels to be
transmitted within the same bandwidth that a single analog channel currently
requires), computer electronics and mass storage technology have placed the
U.S. cable industry in a position to market and supply a wide array of
communication services. The Company believes that cable operators will
continue to invest capital, including investment in fiber optic trunk lines,
to upgrade the technological capabilities of their systems, provide higher
quality and more reliable signal transmission and increase channel capacity in
order to meet subscriber demand for better picture quality and more
programming services, such as expanded pay-per-view, premium services and
telephony. When a fiber optic "trunk" has replaced or supplemented the
existing coaxial trunk in a cable system, or once digital compression is
utilized in a system, the active electronic components in the shorter "feeder"
lines (which run from the trunk to the home) are generally upgraded to
accommodate the increased information flow. As a general rule, when cable
operators replace the active or passive electronic components in a system, the
connectors must also be replaced. Although connectors of the type
manufactured by Gilbert are not used in fiber optic lines, the Company
believes that most feeder lines will remain coaxial due to the lower cost and
comparable quality of signal transmission provided by coaxial cable relative
to fiber optic cable over short distances.
Gilbert is the leading U.S. manufacturer of aluminum connectors and a major
U.S. manufacturer of brass connectors for the cable television industry.
Although the market for these products is highly competitive with respect to
quality and delivery, the Company believes it competes favorably with respect
to each of these factors. In particular, the Company's aluminum connector
products are engineered to meet stringent reliability requirements. Certain
parties are also attempting to develop technologies which could compete with
those currently employed by Gilbert's customers. If successful, these
developments could have a negative impact on Gilbert's business.
The primary raw materials used in the manufacture of specialty connectors
are aluminum and brass. Gilbert currently purchases all of its aluminum
requirements from a single supplier. Although the Company believes several
alternative sources of supply of aluminum are available, a sudden disruption
of its supply from this supplier could have a temporary adverse effect on the
manufacture and sale of Gilbert's connector products. Gilbert is not
dependent on any single supplier for its other raw materials. Management does
not foresee any problems obtaining the raw materials necessary for the
manufacture of specialty connectors. However, there have been significant
price increases for aluminum, and for copper, which is used to make brass.
Gilbert will attempt to recover this additional expense through corresponding
selling price adjustments.
Gilbert owns a number of patents but does not consider any one patent or
group of patents material to the conduct of the business.
Shipments of Gilbert's products are typically made shortly after the
receipt of the order. Accordingly, the Company does not consider Gilbert's
order backlog at any date to be a significant predictor of Gilbert's future
results of operations.
Frequency Control Devices. Through its frequency control business units,
McCoy/Ovenaire/Spectrum, Croven Crystals and H.E.S. International, the Company
offers its precision frequency control devices to original equipment
manufacturers for both commercial and military applications. For these
products, the Company provides custom design, joint development opportunities,
value-added assembly and low cost component and subsystem manufacturing.
The Company's frequency control products include crystals, crystal
oscillators, and crystal filters for a variety of applications, including key
components made for cellular telephone base stations, telecommunications
switching equipment, global positioning systems, satellite programs,
scientific test and/or measurement equipment, avionics, and computer systems.
Major customers of the Company's frequency control products include Rockwell
International, Hewlett-Packard, Hughes Aircraft, AT&T, ITT, Motorola and
Alcatel Network Systems.
There are many domestic and foreign suppliers of crystal frequency control
devices. In order to compete effectively in this market, the Company places a
strong emphasis on high quality and sophisticated design technology. A large
percentage of the Company's frequency control products are manufactured to
exacting customer specifications, and the Company relies to a large extent on
its engineering staff to design, manufacture, deliver and provide post-
production support to meet customer needs. Sales of the Company's frequency
control products are made through a direct sales force and manufacturers'
representatives.
Manufacturing facilities for the Company's frequency control products are
located in Mt. Holly Springs and Mercersburg, Pennsylvania, and Whitby,
Ontario, Canada. Management believes that recent improvements in each
facility allow the Company to provide superior quality and delivery
performance for such products at competitive prices.
In 1994, sales of frequency control products to military contractors
constituted less than 10% of the Company's total sales. In recent periods,
the Company has reduced the percentage of its sales of frequency control
products attributable to such customers through the introduction of new
products for the commercial telecommunications industry.
The Company believes there is ready availability of the raw materials,
principally natural and synthetic quartz, required for the production of its
frequency control products. There are multiple suppliers of such raw
materials, and the Company utilizes many of these suppliers. Moreover, the
Company has entered into a strategic alliance with Alfa Quartz C.A. ("Alfa"),
a subsidiary of Sural C.A. Alfa has made significant capital investments in
its Venezuelan operation in order to become a major supplier of synthetic
quartz crystals on the world market. The strategic alliance is intended to
develop Alfa's finishing capabilities and thereby allow it to broaden its
product offerings as well as ensure the Company of a ready supply of high-
quality, low-cost crystal blanks.
The Company also manufactures glass-to-metal hermetically sealed packages
used in a variety of products including frequency controls, semiconductors,
sensors, connectors, and automotive applications. These operations are based
in Kansas City, Kansas. The Company believes it is a leader in four major
types of hermetically sealed packages: cold weld, resistance weld, solder
seal and all-glass induction seal. Approximately 80% of the Company's sales
of hermetic packages are to customers in the United States. These customers
are currently serviced on a factory direct basis. Foreign sales are conducted
through direct sales and distributors. In the sale of hermetic packages, the
Company believes it enjoys a strong competitive position through its
reputation for superior quality and delivery performance, in glass-to-metal
sealing technology, low-cost, value-added contract assembly operations in
Acuna, Mexico, and experience in the custom design of unique packages for
customer needs.
Control Components
The Company's controls products include electronic, electromechanical and
mechanical controls, switches and components sold to various consumer and
industrial manufacturers. The Company provides gas range and outdoor grill
controls, components and replacement parts through its Harper-Wyman Company
("Harper-Wyman") subsidiary, and optical, rotary and appliance switches and
other products through its OakGrigsby Inc. ("OakGrigsby") subsidiary. The
Company expects to expand its product offerings to the market for control
devices through new product development and acquisitions. Collectively,
control components accounted for approximately 37%, 41% and 65% of the
Company's net sales for 1994, 1993 and 1992, respectively.
Appliance Components and Controls. Harper-Wyman manufactures a broad line
of controls and components for gas and electric range appliances for sale to
original equipment manufacturers in the consumer appliance industry. Harper-
Wyman has operations in Aurora and Princeton, Illinois and Ciudad Juarez,
Mexico.
Harper-Wyman's major customers include General Electric Corporation,
Raytheon Company (Caloric and Amana), Maytag Corporation (Magic Chef and Jenn-
Air) and Brown Stove Works Inc.
The sale of Harper-Wyman's products is conducted through its direct sales
force with assistance from a small number of manufacturers' representatives.
Harper-Wyman is dependent on a small number of customers, principally the
major original equipment appliance manufacturers. The loss of any one of
these customers could have a material adverse effect on Harper-Wyman's
business.
The market in which Harper-Wyman participates is very competitive in terms
of price, quality and delivery, with three significant competitors. Harper-
Wyman believes it is a leading supplier to the market for its gas range
products.
Harper-Wyman's domestic control products must conform to Underwriters'
Laboratories and American Gas Association specifications. All such approvals
have been obtained and Harper-Wyman's quality assurance team maintains
compliance with these specifications. Harper-Wyman is not dependent upon any
single supplier for raw materials. Harper-Wyman uses aluminum to manufacture
products, and aluminum prices have increased significantly. Harper-Wyman will
attempt to recover this additional expense through corresponding selling price
adjustments. Harper-Wyman owns a number of patents but does not consider any
one patent or group of patents material to the conduct of business.
Harper-Wyman, through its Harpco Division, manufactures and supplies
replacement parts for the consumer appliance and outdoor grill industries.
The market for Harpco Division's products consists of original equipment
manufacturers and distributors. Sales are made primarily through
manufacturers' representatives.
Switch Devices. OakGrigsby manufactures low-power open frame, enclosed and
encoded rotary switches along with solenoids, lighted pushbutton switches and
appliance switches. OakGrigsby has also developed a line of mechanical and
optical encoders that provide longer product life and more accurate control of
switching operations. These products are sold primarily to original equipment
manufacturers of HVAC, industrial, test and medical equipment. The Company's
manufacturing operations are located in Sugar Grove, Illinois and Ciudad
Juarez, Mexico.
Some of OakGrigsby's top customers include Rockwell International,
Motorola, the U.S. Government, Fluke and Tektronix. The top ten customers are
responsible for approximately 28% of total sales. Open frame rotary switches
account for about 36% of sales. OakGrigsby's marketplace is principally
domestic with some product shipped to Canada and Europe. Product is sold by
manufacturers' representatives directly to customers across the United States
and in Europe, with an increasing amount of product sold through distributors.
OakGrigsby supplies to a highly fragmented market and competes primarily on
the basis of price, technology, innovation and distribution.
OakGrigsby owns a number of patents but does not consider any one patent or
group of patents material to the conduct of business. Management does not
foresee any problems obtaining raw material for use in the production of
OakGrigsby's products. The company is not dependent on any single supplier
for raw materials.
OTHER SEGMENT
The Company's Other Segment accounted for approximately 8%, 8% and 14% of
the Company's net sales for 1994, 1993 and 1992, respectively.
Railway Products. Through its Nordco Inc. subsidiary ("Nordco"), the
Company manufactures, sells and leases products used in the construction,
maintenance and repair of railway tracks. Nordco's products fall into three
general categories: tie renewal equipment, rail renewal equipment and track
inspection equipment. A significant portion of Nordco's business results from
sales of replacement parts for these machines.
The sale of Nordco's products is conducted through a sales and distribution
network throughout North America. Although Nordco has several key
competitors, including Fairmont Tamper, the Company believes that no more than
three competitors sell against Nordco in any particular product line.
Management believes it is well-positioned for this competitive environment.
The Company believes Nordco's strong marketing relationships and the resulting
awareness of customer needs, combined with superior engineering capability,
certain patents, which have remaining lives of 2 to 12 years, and a successful
research and development program, have given Nordco a reputation as a
technological and quality leader in this industry.
Nordco's primary market includes railroads in the United States and Canada
designated as Class I (railroads with revenues in excess of $96.1 million).
Other markets for Nordco's products include Mexico, the Scandinavian countries
and Australia.
Nordco's new equipment and parts customers have distinct seasonal demands.
New equipment shipments are heaviest during early spring when the summer track
maintenance programs commence and parts shipments are heaviest during the
summer work season.
Nordco is primarily an assembler of purchased components from a wide
variety of suppliers, and it is not dependent upon any single supplier.
OTHER INVESTMENTS
Channel 44. The Company owns a 49% interest in TV Station WSNS which, as a
Telemundo affiliate, broadcasts Spanish language programming in the Chicago
metropolitan area.
O/E/N India. The Company owns a 45% interest in O/E/N India Ltd. ("O/E/N
India"), located in Cochin, Kerala, India. O/E/N India assembles and markets
relays, potentiometers and switches for the Indian market. The principal
markets include communications systems, data processing equipment and
industrial applications. O/E/N India and its subsidiaries' products also
include floppy diskettes, terminals and connectors. The operations of O/E/N
India do not have a material impact on the Company's financial condition or
results of operations.
McCoy (Cayman) Ltd. The Company owns a 50% interest in McCoy (Cayman) Ltd.
which markets synthetic quartz crystals to customers outside of the United
States. McCoy (Cayman) Ltd., in turn, is the sole shareholder of Industrias
McCoy de Venezuela C.A., which manufactures synthetic quartz crystals.
McCoy International. The Company owns a 50% interest in McCoy
International, a Delaware partnership, which markets synthetic quartz
crystals to customers in the United States.
EMPLOYEES
At December 31, 1994, the Company had approximately 2,847 employees, 1,726
of whom were located in the United States and 1,121 in foreign countries. Of
these employees, 203 are members of unions. The Company believes its
relationships with its employees are good.
<PAGE>
BACKLOG
The Company's backlog of domestic and foreign orders for each industry
segment at the indicated dates was as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------- -----------------
<S> <C> <C>
Components.................... $56,245 $39,585
Other......................... 884 1,303
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Total $57,129 $40,888
======= =======
</TABLE>
Substantially all orders in each segment's backlog are considered firm and
are expected to be delivered within twelve months of the dates indicated
above. Consistent with practices in the Company's businesses, a portion of
the backlog is unscheduled as to the delivery date. Orders are normally
cancelable subject to payment by the purchaser of charges incurred by the
Company up to the time of cancellation.
<PAGE>
EXECUTIVE OFFICERS
The following table lists the name, age, position and offices of all
executive officers of the Company. The term of office of all executive
officers will expire upon the holding of the first meeting of the Board of
Directors following the 1995 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C>
<S>
William S. Antle III.... 50 President and Chief Executive Officer since
December 1989.
Paul J. Halas........... 38 Senior Vice President, Law & Corporate
Development, General Counsel, & Secretary since
September 1994, and Senior Vice President,
General Counsel, and Secretary since August
1990; Treasurer of Timex Group, Ltd., an
international manufacturer and distributor
of timepieces and other products, from prior to
1990 to July 1990.
John D. Richardson...... 49 Senior Vice President, Human Resources since
August 1990; Corporate Vice President of Human
Resources of Fidelity Investments, a privately-
held mutual fund company, from prior to 1989 to
July 1990.
William C. Weaver....... 53 Senior Vice President and Chief Financial
Officer since January 1990.
<PAGE>
ITEM 2. PROPERTIES
The Company believes that its plants and facilities are suitable and
adequate for its business. They are well maintained, are in sound operating
condition, and are in regular use. The table below sets forth the location
and general character of important properties of the Company as of December
31, 1994. Properties without reference to leases are owned by the Company.
</TABLE>
<TABLE>
<CAPTION>
Floor Space
(approximate
Location / YEAR LEASE EXPIRES Square Feet)
- ----------------------------- ---------------------
<S> <C>
Amboise, France {A,C,D}................................ 34,000 (2 buildings)
Aurora, Illinois (lease expires 11/30/96) {A,C}........ 16,000
Glendale, Arizona (leases expire 12/31/97 and
8/31/06) {A,C,D}.................................. 173,000 (4 buildings)
Juarez, Mexico (lease expires 5/16/98) {A,D}........... 51,000
Kansas City, Kansas {A,C,D} (lease expires 9/30/97).... 19,000
Mercersburg, Pennsylvania {A,D}........................ 34,000 (2 buildings)
Milwaukee, Wisconsin (lease expires 12/31/97) {C,D,E}.. 92,000
Mt. Holly Springs, Pennsylvania {A,C,D}................ 79,000 (2 buildings)
Phoenix, Arizona (lease expires 3/31/98) {A,D}......... 38,000
Princeton, Illinois {A,D}.............................. 235,000 (2 buildings)
Sugar Grove, Illinois (leases expire 3/31/97 and
12/14/01) {A,C,D}................................. 86,000 (2 buildings)
Vordingborg, Denmark {A,C,D}........................... 31,000
Waltham, Massachusetts (lease expires 7/31/00) {B,C}... 12,000
Whitby, Ontario, Canada {A,C,D}........................ 25,000
Zaragosa, Mexico (lease expires 6/30/97) {A,D}......... 97,000
<FN>
{A} Used by the Components Segment.
{B} Corporate Headquarters.
{C} Office Space.
{D} Manufacturing Facilities.
{E} Used by the Other Segment.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Various pending or threatened legal proceedings by or against the Company
or one or more of its subsidiaries involve alleged breaches of contract, torts
and miscellaneous other causes of action arising in the ordinary course of
business. Some of these proceedings involve claims for punitive damages in
addition to other special relief. The Company's management does not consider
any of such proceedings to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1994, no matters were submitted to a vote of
security holders.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The markets on which the common stock of the Company is traded are the New
York Stock Exchange and the Pacific Stock Exchange. As of January 31, 1995,
there were approximately 8,265 stockholders of record of common stock of the
Company.
Information regarding the trading price of the Company's common stock for
each quarterly period during the last two fiscal years is set forth below. No
dividends on the Company's common stock were paid during 1994 or 1993. (See
description of dividend restrictions included in the Revolving Credit Facility
Agreement in Note 4 to the Consolidated Financial Statements.)
<TABLE>
<CAPTION>
PRICE OF COMMON STOCK
--------------------------
1994 1993
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter........... $20 3/4 $15 5/8 $20 $10 5/8
Second Quarter.......... 22 1/4 17 27 1/4 14 3/8
Third Quarter........... 29 7/8 19 3/4 29 17
Fourth Quarter.......... 28 1/4 22 3/8 20 5/8 12 1/2
</TABLE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL RESULTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C>
<S>
Net sales:
Components............... $228,470 $201,593 $123,375 $108,555 $120,635
Other.................... 20,534 17,969 19,874 15,811 18,690
Net sales from
continuing operations.. 249,004 219,562 143,249 124,366 139,325
Interest expense........... 6,611 7,795 1,405 1,798 2,112
Income from continuing
operations before income
taxes and minority
interest................. 43,391 26,267 8,748 1,717 1,802
Income from continuing
operations............... 42,446 26,660 10,388 5,265 1,389
Net income................. 42,446 26,660 14,438 5,570 9,669
Earnings per common share:
Primary:
Continuing operations. 2.31 1.47 .60 .32 .09
Net income............ 2.31 1.47 .83 .34 .59
Fully-diluted:
Continuing operations. 2.31 1.47 .59 .32 .09
Net income............ 2.31 1.47 .82 .34 .59
Cash dividends per
common share............. -- -- -- -- --
FINANCIAL POSITION
Working capital............ $ 72,068 $ 69,324 $ 54,829 $ 61,805 $ 63,476
Plant and equipment, net... 36,573 33,429 32,668 24,658 24,929
Total assets............... 281,641 237,727 228,948 124,512 130,848
Long-term debt............. 34,403 61,549 76,922 11,225 11,255
Stockholders' equity....... 167,150 126,919 98,074 84,182 78,278
GENERAL STATISTICS
Capital expenditures....... $ 6,807 $ 7,018 $ 4,111 $ 4,667 $ 6,461
Depreciation............... $ 6,669 $ 6,142 $ 4,380 $ 4,322 $ 4,609
Average common shares
outstanding:
Primary............... 18,370,768 18,100,104 17,309,489 16,505,446 16,504,892
Fully-diluted......... 18,384,342 18,100,104 17,666,745 16,505,446 16,504,892
Number of recordholders
(at year end)........... 8,346 9,732 12,146 12,113 12,716
Number of employees
(at year end)........... 2,847 2,620 2,253 1,620 1,708
Salaries and wages......... $ 63,162 $ 53,016 $ 40,435 $ 38,544 $ 44,516
<FN>
All prior years data from 1990 to 1993 has been restated to reflect only
continuing operations as of December 31, 1994.
See description of 1992 change in accounting for income taxes in Note 8 to the
Consolidated Financial Statements.
See description of December 23, 1992 acquisition of Gilbert Engineering Co.,
Inc. in Note 2 to the Consolidated Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow remained strong throughout 1994 with cash and cash
equivalents increasing by $10.3 million to $37.6 million at December 31, 1994.
Operations generated $47.4 million of cash during 1994 compared to $31.6
million during 1993. The Company spent $6.8 million for capital equipment and
$8.3 million to acquire Cabel-Con A/S ("Cabel-Con") (see discussion below).
Cash of $21.7 million was used to repay and to retire debt. Cash of $2.1
million was provided by the sale of Oak Crystal Inc.'s subsidiary, Carpenter
Emergency Lighting. The Company paid $3.1 million to acquire its Series E
warrants.
The Company has a revolving credit facility with a group of banks which
provides for available borrowings of $30.0 million. The facility, which is
available through December 1995, is at various interest rates at the Company's
option based on the prime rate or LIBOR. Borrowings under the facility are
secured by the Company's pledge of the outstanding capital stock of certain of
the Company's subsidiaries. The Company is required to meet certain financial
covenants and is prohibited from paying dividends. At December 31, 1994,
there were no borrowings outstanding under this facility.
At December 31, 1994, cash and unused lines of credit totaled $83.4 million
of which $21.6 million was available only to Gilbert Engineering Co., Inc.
("Gilbert") and $61.8 was available for general corporate purposes, including
acquisitions. The maximum amount of borrowing under the line of credit
available only to Gilbert decreases by $2.1 million per quarter for the first
three quarters of 1997 with the facility expiring on December 23, 1997. The
Company believes its current financial resources are sufficient to meet its
continuing operating requirements, service its long-term debt, and provide for
future growth.
On December 23, 1992, the Company, along with certain affiliates of Bain
Capital ("Bain Capital"), through an acquisition company, Connector Holding
Company ("Connector"), acquired 85% of the outstanding stock of Gilbert. The
aggregate purchase price was approximately $106.9 million, including
refinancing of existing debt of Gilbert and transaction expenses. Management
of Gilbert retained ownership of the remaining 15% of Gilbert. The Company
has the right of first refusal should Gilbert management wish to sell their
shares in Gilbert. If the Company refuses the offer, Gilbert management may,
beginning in December 1995 and at its option, exchange its shares of Gilbert
for shares of the Company's common stock. The Company owns 80% of Connector,
with Bain Capital owning the other 20%.
Bain Capital may at any time after December 22, 1995 require the Company to
buy and Oak may at any time after December 22, 1996 require Bain Capital to
sell its outstanding shares in Connector at a price determined according to
the terms of the stockholders agreement entered into by the Company and Bain
Capital at the time of the acquisition (the "Stockholders Agreement"). The
price is the higher of fair market value as determined by an independent
appraisal and a price based upon certain formulas applied to the earnings of
Gilbert in certain periods. The Stockholders Agreement limits the ability of
Connector or Gilbert to take certain fundamental corporate actions without the
prior consent of the Company and Bain Capital. The agreement prohibits the
sale by either the Company or Bain Capital of its equity interests in
Connector. The Company's shares of Connector have been pledged to Bain
Capital to secure the financial obligations of the Company under the
Stockholders Agreement.
The indebtedness of Gilbert, excluding Cabel-Con mortgages of $2.7 million,
is repayable on various dates through 1999. Such indebtedness is
collateralized by the assets and common stock of Gilbert and is non-recourse
to the Company. At December 31, 1994, the principal amount of such
indebtedness, net of original issue discount, was $44.5 million. Such
indebtedness as of December 31, 1994 bears various interest rates from LIBOR
plus 2.75% to prime plus 1.25% per annum (8.75% to 9.75% at December 31,
1994). In January 1995, these interest rates were reduced to LIBOR plus 2.50%
or prime plus 1.00%. In addition to scheduled repayments, Gilbert is required
to make mandatory prepayments on this indebtedness equal to 90% of annual cash
flows from operations less capital expenditures and certain other
expenditures. A portion of this indebtedness is outstanding under Gilbert's
line of credit, and a portion of the scheduled repayments of this indebtedness
account for the scheduled reductions in the maximum borrowings available under
such line of credit described above. In February 1995, Gilbert borrowed $17.7
million under such line of credit in order to make certain mandatory
prepayments as described above.
On June 10, 1994, Gilbert acquired all of the outstanding common stock of
Cabel-Con, a Danish manufacturer of connectors for the worldwide cable
television markets, for $9.25 million. Cabel-Con had cash of $0.9 million at
the time of the acquisition. The acquisition was financed by borrowing on
Gilbert's revolving credit facility. Concurrent with the acquisition, Gilbert
paid off $2.6 million of Cabel-Con's bank borrowings and assumed $2.7 million
of Cabel-Con's mortgages.
In December 1994, Nordco paid off the remaining $4.2 million of its term
loan. A total of $5.6 million was paid during the year on this loan. In
connection with the prepayment, the Company also paid $3.1 million to acquire
its outstanding Series E warrants for the purchase of 150,000 shares of Oak's
common stock.
The Company is involved in certain environmental matters at several of its
operating divisions. Management believes that the ultimate resolution of
these environmental matters will not have a material effect on the Company's
financial position or results of operations. The Company's operations, like
those of similar manufacturing businesses, may involve certain ongoing risks
to the environment.
Various pending or threatened legal proceedings by or against the Company
or one or more of its subsidiaries involve alleged breaches of contract, torts
and miscellaneous other causes of action arising in the course of business.
Some of these proceedings involve claims for punitive damages in addition to
other special relief. The Company's management, based upon advice of legal
counsel representing the Company with respect to each of these proceedings,
does not believe any of these proceedings will have a material effect on the
Company's consolidated financial position.
Although the Company operates internally with several businesses
functioning as profit centers, these businesses are also managed as a group.
That is, if a given business is performing strongly, corporate management may
use this opportunity to invest additional funds in product development and
marketing in another business. Certain agreements applicable to Gilbert limit
Gilbert's ability to make distributions or advances to the Company and
likewise the Company has no obligation to make further advances to, or
investments in, Gilbert.
Consistent with its strategy, the Company will aggressively explore
additional acquisition opportunities in 1995. If consummated, an acquisition
would involve the expenditure of cash and may require borrowing against its
existing revolving credit facility and/or new borrowing arrangements.
Currently, the Company has no commitment, understanding, or arrangement
relating to any material acquisition and there can be no assurance that
additional transactions will be consummated in 1995.
As of December 31, 1994, the Company had net operating loss carryforwards
("NOLs") for federal income tax purposes of approximately $123.0 million,
which will, if unused, expire from 1999 through 2006. Under federal tax law,
certain changes in ownership of the Company, which may not be within the
Company's control, may operate to restrict future utilization of these
carryforwards.
In accordance with FAS 109, the Company has recorded as a deferred tax
asset the expected tax benefit in future periods associated with the
anticipated utilization of these NOLs and credit carryforwards. At December
31, 1994, this deferred tax asset was $42.7 million. In order to realize the
deferred tax asset, the Company must generate domestic pretax profit of
approximately $115 million before the NOLs and credit carryforwards expire.
Management has determined, based on the Company's and Gilbert's history of
prior operating earnings, and the Company's expectations for the future, that
income of the Company will more likely than not be sufficient to utilize $42.7
million of benefit from the utilization of NOLs and credit carryforwards prior
to their expiration.
At December 31, 1994, the Company had a valuation allowance of $11.6
million against its remaining gross deferred tax asset. Approximately $1.2
million of the valuation allowance, when released, will be recorded as a
credit to paid-in capital.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Consolidated sales for 1994 were $249.0 million, an increase of $29.4
million, or 13.4%, over 1993. Components Segment sales increased $26.9
million, or 13.3%, and Other Segment sales increased $2.5 million, or 14.3%.
Net income during 1994 was $42.4 million compared to net income of $26.7
million in 1993. Each period, however, includes certain nonrecurring items
shown in the table below. Income from continuing operations before
nonrecurring items in 1994 increased by $11.4 million, or 53.9%, over 1993.
<PAGE>
NET INCOME ($ MILLIONS)
<TABLE>
<CAPTION>
1994 1993
------ ------
<C> <C>
<S>
Income from continuing operations
before nonrecurring items...................... $32.7 $21.3
Subtract nonrecurring items:
Restructuring charge (a)....................... (2.0) (2.9)
Add nonrecurring items:
Tax gains (b).................................. 0.9 3.9
Adjustment to deferred income tax
valuation reserve (c)........................ 14.0 6.0
Adjustment to minority interest (c)............ (3.2) (1.6)
----- -----
Net income........................................ $42.4 $26.7
===== =====
<FN>
(a) In the fourth quarter of 1994, the Company recorded a $2.0 million charge
related primarily to vacated facilities. In the third quarter of 1993, the
Company recorded a $2.9 million restructuring charge to cover the costs
associated with reorganizing its Mexican manufacturing operations,
consolidating certain U.S. operations and certain other overhead reductions.
(b) In the second quarter of 1994, the Company recorded a gain of $0.9
million resulting from a state income tax law change. In the third quarter of
1993, the Company recorded a gain of $3.9 million resulting from an Internal
Revenue Service refund relating to the settlement of a tax dispute.
(c) During the fourth quarters of 1994 and 1993, the Company adjusted its
deferred income tax valuation reserve in accordance with FAS 109, resulting in
income tax benefits of $14.0 million and $6.0 million, respectively. These
tax benefits caused minority interest in net income of subsidiaries to
increase by $3.2 million in 1994 and $1.6 million in 1993.
</TABLE>
The $11.4 million improvement in income from continuing operations before
nonrecurring items for 1994 resulted primarily from a $13.4 million increase
in segment operating profitability (see discussion under "Segment Data")
offset, in part, by several non-operating items. Interest expense decreased
$1.2 million due to lower debt balances. Minority interest in net income of
subsidiaries increased $2.6 million before the nonrecurring increase of $1.6
million resulting from the FAS 109 adjustment, reflecting higher earnings at
Gilbert. Income tax expense, excluding the nonrecurring tax benefits and
adjustments to the deferred income tax valuation reserve, increased $2.1
million due to higher foreign, state and federal alternative minimum taxes,
reflecting higher earnings levels.
In the first quarter of 1994, the Company adopted FAS 112 "Employers'
Accounting for Postemployment Benefits". This statement changes the past
practice of accounting for the cost of certain postemployment benefits from a
pay-as-you-go (cash) basis to an accrual basis. The effect of the adoption
was not material in 1994.
Also in 1994, the Company adopted FAS 115, "Accounting for Certain
Investments in Debt and Equity Securities", which requires a change in the
method of accounting for certain investments. The adoption of FAS 115 did not
have a material effect on the Company's financial position or results of
operations.
<PAGE>
SEGMENT DATA ($ MILLIONS)
<TABLE>
<CAPTION>
Sales Operating Income
-------------- ----------------
1994 1993 1994 1993
------ ------ ----- -----
<C> <C> <C> <C>
<S>
Components......................... $228.5 $201.6 $51.9 $39.0
Other.............................. 20.5 18.0 2.4 1.9
------ ------ ----- -----
Subtotal........................ $249.0 $219.6 54.3 40.9
====== ======
Restructuring charges.............. (2.0) (2.9)
----- -----
Total........................... $52.3 $38.0
===== =====
</TABLE>
Sales of the Components Segment increased $26.9 million, or 13.3%, in 1994
compared to 1993. Sales of communications products increased $22.9 million,
or 20.3%, due primarily to growth in domestic and international markets as
well as incremental sales resulting from the acquisition of Cabel-Con in June
1994. Sales of controls products increased $4.0 million, or 4.5%, due
primarily to industry growth. Components Segment order backlog was $56.2
million at December 31, 1994, up $16.7 million, or 42.1%, from December 31,
1993.
Excluding the effect of the restructuring charges discussed above,
operating income of the Components Segment increased $12.9 million, or 32.9%,
in 1994 as compared to 1993. This improvement was primarily the result of
additional profits resulting from the sales increases discussed above as well
as cost reductions and productivity enhancements.
Other Segment sales increased $2.5 million, or 14.3%, compared to 1993 due
to increased volume from the Company's railway maintenance equipment division
offset, in part, by decreased sales from the emergency lighting division which
was sold in November 1994. Operating income increased $0.5 million, or 25.1%,
compared to 1993, due to additional profits resulting from the increased
sales. Order backlog for the segment was $0.9 million at December 31, 1994,
down $0.4 million from December 31, 1993.
Consolidated gross profit increased as a percentage of sales in 1994 to
37.5% from 34.1% in 1993 due to higher sales volumes of higher margin
products, cost reduction programs, and productivity enhancements. Selling,
general and administrative expenses increased $4.8 million. As a percentage
of sales, selling, general and administrative expenses decreased from 17.4% to
17.3%.
In 1994 and prior years, the Company has recorded minimal federal income
tax provisions as a result of its net operating loss carryforward ("NOLs").
When the tax benefits from the available NOLs and credit carryforwards are
fully recognized for financial reporting purposes only, the Company will begin
reporting a full income tax provision. Management has estimated, that
approximately $30.0 million of domestic pretax profit subsequent to December
31, 1994, will be necessary to fully recognize the tax benefit of the NOLs for
financial reporting purposes. In 1994 the Company generated approximately
$43.0 million of domestic pretax profits. Despite this accounting for
financial reporting purposes, the Company does not anticipate actually paying
more than alternative minimum tax for federal income tax purposes until the
NOL of $123.0 million is utilized.
1993 COMPARED TO 1992
On December 23, 1992, the Company along with Bain Capital, through their
acquisition company, Connector Holding Company ("Connector"), acquired 85% of
the outstanding stock of Gilbert Engineering Co., Inc. ("Gilbert"), a
Glendale, Arizona manufacturer and supplier of specialty connectors to the
cable television, microwave, and high-end specialty precision markets.
Management of Gilbert retained ownership of the remaining 15% of Gilbert. The
Company owns 80% of Connector, with Bain Capital owning the other 20%. The
acquisition was accounted for as a purchase, and accordingly, the operating
results of Gilbert for the nine days from the date of acquisition through
December 31, 1992 were included in the Company's consolidated statement of
operations. The effect of these operating results on the Company's 1992 sales
and net income was insignificant.
Consolidated sales for 1993 were $219.6 million, an increase of $76.4
million, or 53.3%, over 1992. Components Segment sales increased $78.3
million, or 63.4% and Other Segment sales decreased $1.9 million, or 9.6%.
The increase in consolidated sales is attributable primarily to the
acquisition of Gilbert at the end of 1992.
Net income during 1993 was $26.7 million compared to net income of $14.4
million in 1992. Each period, however, includes certain nonrecurring items
shown in the table below. Income from continuing operations before
nonrecurring items in 1993 increased by $14.6 million, or 217.9% over 1992,
primarily as a result of the inclusion of Gilbert's results of operations in
the 1993 period. Included in income from continuing operations is equity in
net income of affiliated companies of $1.7 million and $2.3 million for 1993
and 1992, respectively.
NET INCOME ($ MILLIONS)
<TABLE>
<CAPTION>
1993 1992
------ ------
<C> <C>
<S>
Income from continuing operations
before nonrecurring items..................... $21.3 $ 6.7
Subtract nonrecurring items:
Restructuring charge (a)....................... (2.9) (1.5)
Add nonrecurring items:
Gain on resolution of income tax issue (b)..... 3.9 --
Sale of minority interest investment (c)....... -- 2.7
Adjustment to deferred income tax
valuation reserve (d)........................ 6.0 2.5
Adjustment to minority interest (d)............ (1.6) --
Effect of change in accounting principle (e)... -- 3.5
Income from discontinued operations............ -- 0.5
----- -----
Net income....................................... $26.7 $14.4
===== =====
<FN>
(a) In the third quarter of 1993, the Company recorded a $2.9 million
restructuring charge to cover the costs associated with reorganizing its
Mexican manufacturing operations, consolidating certain U.S. operations, and
certain other overhead reductions. During the fourth quarter of 1992, the
Company recognized a charge of $1.5 million related to the reorganizations and
facilities consolidations at certain divisions.
(b) In the third quarter of 1993, the Company recorded a gain of $3.9 million
resulting from an Internal Revenue Service refund relating to the settlement
of a tax dispute.
(c) During the fourth quarter of 1992, the Company recognized a gain of $2.7
million related to the sale of its investment in ComStream Corporation, in
which the Company held a minority ownership interest.
(d) During the fourth quarters of 1993 and 1992, the Company adjusted its
deferred income tax valuation reserve in accordance with FAS 109, resulting in
income tax benefits of $6.0 million and $2.5 million, respectively. The 1993
income tax benefit caused minority interest in net income of subsidiaries to
increase $1.6 million.
(e) In the first quarter of 1992, the Company adopted FAS 109, which allowed
the Company to recognize a portion of the benefits from its net operating loss
carryforwards. The effect of such adoption was income of $3.5 million in
1992.
</TABLE>
The $14.6 million improvement in income from continuing operations before
nonrecurring items for 1993 resulted primarily from a $31.1 million increase
in segment operating profitability (see discussion under "Segment Data")
offset, in part, by several non-operating items. Interest expense increased
$6.4 million due to higher debt levels resulting from the acquisition of
Gilbert. Minority interest in net income of subsidiaries of $5.8 million,
before the nonrecurring increase of $1.6 million resulting from the FAS 109
adjustment, represents the minority stockholders' proportionate share of the
income of Connector and Gilbert. Interest income decreased $0.5 million due
to lower invested balances and lower interest rates. Equity in net income of
subsidiaries decreased $0.6 million primarily as a result of increased
amortization and interest expense of the Company's 49%-owned Chicago TV
station WSNS as a result of costs incurred and payments made in connection
with the 1992 reacquisition of its license to operate. Income tax expense,
excluding the tax benefit related to the settlement of the tax dispute and
adjustments to the deferred income tax valuation reserve, increased $1.2
million due to higher foreign and state taxes, reflecting higher earnings
levels.
SEGMENT DATA ($ MILLIONS)
<TABLE>
<CAPTION>
Sales Operating Income
-------------- ----------------
1993 1992 1993 1992
------ ------ ----- -----
<C> <C> <C> <C>
<S>
Components......................... $201.6 $123.3 $39.0 $8.7
Other.............................. 18.0 19.9 1.9 1.1
------ ------ ----- ----
Subtotal........................ $219.6 $143.2 40.9 9.8
====== ======
Restructuring charges.............. (2.9) (1.5)
----- ----
Total........................... $38.0 $8.3
===== ====
</TABLE>
Sales of the Components Segment increased $78.3 million, or 63.4%, in 1993
compared to 1992. This increase was due primarily to incremental sales of
Gilbert, which was acquired in December 1992, and to a lesser extent, sales of
two smaller businesses, acquired in January 1993 and September 1992, and to
volume increases in the switch controls business, partially offset by volume
declines in the appliance controls business (from historically high levels in
1992). Components Segment order backlog was $39.6 million at December 31,
1993, up $1.2 million, or 3.2% from December 31, 1992.
Excluding the effect of the restructuring charges discussed above,
operating income of the Components Segment increased $30.3 million, or 347.6%,
in 1993 as compared to 1992. This improvement was primarily the result of the
inclusion of Gilbert's results of operations in 1993.
Other Segment sales decreased $1.9 million, or 9.6%, compared to 1992 due
to decreased volume from the Company's railway maintenance equipment division
offset, in part, by increased sales from the emergency lighting division.
Operating income increased by $0.8 million, or 70.2%, compared to 1992,
however, due to higher gross margins resulting from various cost reduction
programs. Order backlog for the segment was $1.3 million at December 31,
1993, up $1.1 million from December 31, 1992.
Consolidated gross profit increased as a percentage of sales in 1993 to
34.1% from 22.8% in 1992 due to higher sales volumes of higher margin products
and productivity enhancements. Selling, general and administrative expenses
increased $10.3 million primarily as a result of the acquisition of Gilbert.
As a percentage of sales, selling, general and administrative expenses
decreased from 19.5% to 17.4%.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
OAK INDUSTRIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<C>
<S>
REPORT OF INDEPENDENT AUDITORS...................................... XX
FINANCIAL STATEMENTS -
Consolidated Balance Sheet at December 31, 1994 and 1993....... XX
Consolidated Statement of Operations for the years
ended December 31, 1994, 1993 and 1992......................... XX
Consolidated Statement of Stockholders' Equity for
the years ended December 31, 1994, 1993 and 1992............... XX
Consolidated Statement of Cash Flows for the years
ended December 31, 1994, 1993 and 1992......................... XX
Notes to Consolidated Financial Statements..................... XX
SCHEDULES -
VIII - Valuation and Qualifying Accounts....................... XX
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Oak Industries Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Oak Industries Inc. and its subsidiaries at December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1992.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 20, 1995
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1994 1993
-------- --------
<C> <C>
<S>
Current Assets:
Cash and cash equivalents...................... $ 37,648 $ 27,367
Receivables, less reserves of $1,065 and $901.. 31,731 27,502
Inventories.................................... 35,638 31,325
Deferred income taxes.......................... 11,600 6,950
Other current assets........................... 2,950 3,063
-------- --------
Total current assets....................... 119,567 96,207
-------- --------
Plant and Equipment:
Land........................................... 1,004 1,094
Buildings and leasehold improvements........... 17,653 16,934
Machinery and equipment........................ 76,681 68,447
Furniture and fixtures......................... 5,114 4,898
-------- --------
100,452 91,373
Less - Accumulated depreciation................ (63,879) (57,944)
-------- --------
Total plant and equipment.................. 36,573 33,429
-------- --------
Other Assets:
Deferred income taxes.......................... 31,750 22,400
Goodwill and other intangible assets, less
accumulated amortization of $8,374
and $5,839.................................. 75,960 70,999
Investments in affiliates...................... 10,985 9,213
Other assets................................... 6,806 5,479
-------- --------
Total other assets......................... 125,501 108,091
-------- --------
Total Assets............................... $281,641 $237,727
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1994 1993
-------- --------
<C> <C>
<S>
Current Liabilities:
Current portion of long-term debt.............. $ 13,118 $ 1,546
Accounts payable............................... 12,558 8,567
Accrued liabilities............................ 21,823 16,770
-------- --------
Total current liabilities................. 47,499 26,883
-------- --------
Other Liabilities:
Deferred compensation and pensions.......... 5,595 5,461
Other....................................... 463 2,074
-------- --------
Total other liabilities................... 6,058 7,535
-------- --------
Long-term Debt, Less Current Maturities....... 34,403 61,549
-------- --------
Minority Interest............................. 26,531 14,841
-------- --------
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, no par value; authorized
4,834,237 shares; none issued............ -- --
Common stock, par value of $0.01;
authorized 50,000,000 shares;
issued 17,479,198 and 17,202,783 shares.. 175 172
Additional paid-in capital.................. 278,976 280,467
Accumulated deficit......................... (109,404) (151,850)
Cumulative translation adjustment........... (658) (530)
Treasury stock, 50,182, and 12,797 shares... (895) (35)
Other....................................... (1,044) (1,305)
-------- --------
Total stockholders' equity................ 167,150 126,919
-------- --------
Total Liabilities and
Stockholders' Equity.................... $281,641 $237,727
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Net Sales.................................. $249,004 $219,562 $143,249
-------- -------- --------
Costs, Expenses and Other Income (Expense):
Cost of sales............................ (155,638) (144,706) (110,582)
Selling, general and administrative
expenses.............................. (43,025) (38,207) (27,907)
Interest expense......................... (6,611) (7,795) (1,405)
Interest income.......................... 1,351 731 1,248
Equity in net income of affiliated
companies............................. 2,304 1,673 2,296
Other income (expense)................... (3,994) (4,991) 1,849
-------- -------- --------
Total costs, expenses and other
income (expense).................. (205,613) (193,295) (134,501)
-------- -------- --------
Income from Continuing Operations before
Income Taxes and Minority Interest....... 43,391 26,267 8,748
Income Tax Benefit......................... 10,745 7,836 1,640
Minority Interest in Net Income
of Subsidiaries.......................... (11,690) (7,443) --
-------- -------- --------
Income from Continuing Operations.......... 42,446 26,660 10,388
Income from Discontinued Operations........ -- -- 550
Cumulative Effect of Change in
Accounting Principle..................... -- -- 3,500
-------- -------- --------
Net Income................................. $ 42,446 $ 26,660 $ 14,438
======== ======== ========
Income per Common Share:
Primary:
Continuing operations............... $ 2.31 $ 1.47 $ .60
Discontinued operations............. -- -- .03
Cumulative effect of change in
accounting principle.............. -- -- .20
-------- -------- --------
Net Income per Common Share......... $ 2.31 $ 1.47 $ .83
======== ======== ========
Fully-diluted:
Continuing operations............... $ 2.31 $ 1.47 $ .59
Discontinued operations............. -- -- .03
Cumulative effect of change in
accounting principle.............. -- -- .20
-------- -------- --------
Net Income per Common Share......... $ 2.31 $ 1.47 $ .82
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN ACCUMULATED TRANSLATION TREASURY
STOCK CAPITAL DEFICIT ADJUSTMENT STOCK OTHER TOTAL
------- -------- ----------- ----------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
<S>
Balance, December 31, 1991......... $16,518 $260,245 $(192,948) $ 571 $(31) $ (173) $ 84,182
Net income......................... -- -- 14,438 -- -- -- 14,438
Current year translation adjustment -- -- -- (594) -- -- (594)
Reduction of par value............. (16,359) 16,359 -- -- -- -- --
Other.............................. 6 33 -- -- -- 9 48
------- -------- ---------- ------- -------- -------- --------
Balance, December 31, 1992......... 165 276,637 (178,510) (23) (31) (164) 98,074
Net income......................... -- -- 26,660 -- -- -- 26,660
Current year translation adjustment -- -- -- (507) -- -- (507)
Exercise of options and warrants... 7 3,830 -- -- -- -- 3,837
Employee notes receivable.......... -- -- -- -- -- (1,305) (1,305)
Other.............................. -- -- -- -- (4) 164 160
------- -------- ---------- ------- -------- -------- --------
Balance, December 31, 1993......... 172 280,467 (151,850) (530) (35) (1,305) 126,919
Net income......................... -- -- 42,446 -- -- -- 42,446
Current year translation adjustment -- -- -- (128) -- -- (128)
Exercise of options and warrants... 3 1,546 -- -- (418) -- 1,131
Acquisition of warrants............ -- (3,061) -- -- -- -- (3,061)
Other.............................. -- 24 -- -- (442) 261 (157)
------- -------- ---------- ------- -------- -------- --------
Balance, December 31, 1994......... $ 175 $278,976 $(109,404) $(658) $(895) $(1,044) $167,150
======= ======== ========== ======= ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
OAK INDUSTRIES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
OPERATING ACTIVITIES:
Income from continuing operations........ $ 42,446 $ 26,660 $ 10,388
Adjustments to reconcile income
from continuing operations to net
cash provided by operations:
Depreciation and amortization.......... 10,618 10,328 5,322
Change in minority interest............ 11,690 7,443 --
Gain on the sale of minority
interest investment................... -- -- (2,700)
Undistributed earnings of
affiliated companies.................. (1,464) (1,356) (1,865)
Change in assets and liabilities,
net of effects from acquisition
of businesses:
Receivables.......................... (2,347) (901) 1,239
Inventories.......................... (2,392) 1,681 3,391
Accounts payable and accrued
liabilities......................... 7,061 (1,464) (1,255)
Deferred compensation and pensions... 134 (1,984) (1,088)
Deferred income taxes................ (14,979) (6,734) (2,529)
Other................................ (3,389) (2,120) (292)
-------- -------- --------
Net cash provided by
continuing operations.............. 47,378 31,553 10,611
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures..................... (6,807) (7,018) (4,111)
Acquisition of businesses................ (8,309) (1,594) (16,734)
Advances to unconsolidated companies..... (308) (251) --
Disposition of business.................. 2,092 -- --
Minority interest investment............. -- -- (900)
Proceeds from the sale of minority
interest investment..................... -- -- 3,717
Loans to and repayments from employees... 261 (1,360) --
Other.................................... 110 265 499
-------- -------- --------
Net cash used in investing activities (12,961) (9,958) (17,529)
-------- -------- --------
FINANCING ACTIVITIES:
Principal payments on long-term
borrowings.............................. (17,460) (22,655) (1,660)
Retirement of long-term debt............. (4,200) -- (4,071)
Cash restricted for letter of credit..... -- -- (6,000)
Reduction in cash restricted for
letter of credit........................ -- 6,000 --
Exercise of warrants..................... 1,155 3,837 28
Acquisition of warrants.................. (3,061) -- --
Other.................................... (442) 160 (16)
-------- -------- --------
Net cash used for financing
activities........................... (24,008) (12,658) (11,719)
-------- -------- --------
Effect of exchange rate changes............ (128) (507) (594)
-------- -------- --------
Net cash provided by discontinued
operations................................ -- -- 550
-------- -------- --------
Net change during year..................... 10,281 8,430 (18,681)
Balance, beginning of year................. 27,367 18,937 37,618
-------- -------- --------
Balance, end of year....................... $ 37,648 $ 27,367 $ 18,937
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
<PAGE>
(1) STATEMENT OF ACCOUNTING POLICIES:
Following are the significant financial and accounting policies of the
Company:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its majority-owned subsidiaries. All significant transactions
between the Company and its subsidiaries are eliminated.
MINORITY INTEREST
Minority interest represents the minority stockholders' proportionate share
of the equity and the net income of Connector and Gilbert (See Note 2). The
minority interest in the income of these operations was insignificant in 1992.
INVESTMENTS IN AFFILIATES
The Company owns a 49% interest in TV Station WSNS, which broadcasts
Spanish language programming in the Chicago metropolitan area, and a 45%
interest in O/E/N India Ltd., located in Cochin, Kerala, India, which
assembles and markets relays and switches for the Indian market. The Company
also owns a 50% interest in McCoy (Cayman) Ltd. and a 50% interest in McCoy
International. These entities and their subsidiaries manufacture synthetic
quartz crystals in Venezuela and market them to customers worldwide.
Investments in these affiliated companies are recorded at cost plus equity in
undistributed earnings. The cumulative amount of these undistributed earnings
included in consolidated accumulated deficit at December 31, 1994 and 1993 was
approximately $9,756,000 and $8,292,000, respectively. Dividends received
from these affiliated companies were $840,000, $317,000 and $431,000 for 1994,
1993, and 1992, respectively.
TRANSLATION OF FOREIGN CURRENCIES
The financial statements of foreign subsidiaries are translated into U. S.
dollars in accordance with FAS 52. Under this statement, balance sheet
accounts are translated at the current exchange rate and income statement
items are translated at the average exchange rate for the year. Resulting
translation adjustments, if any, are made directly to a separate component of
stockholders' equity. Foreign currency transaction gains and losses are
included in net income when realized.
REVENUE RECOGNITION
Revenues from product sales are recognized at the time products are
shipped.
<PAGE>
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out basis) or
market. Inventory costs, which include material, labor and factory
manufacturing expenses, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<C> <C>
<S>
Raw materials.................... $ 9,652 $ 8,736
Work in process.................. 18,446 15,419
Finished goods................... 7,540 7,170
------- -------
$35,638 $31,325
======= =======
</TABLE>
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Replacements and improvements are
capitalized, while repairs and maintenance costs are charged to expense as
incurred. Depreciation is provided under the straight-line method over the
following useful lives:
Buildings.................. 10 to 40 years
Machinery and equipment.... 3 to 15 years
Furniture and fixtures..... 5 to 15 years
The cost and accumulated depreciation of items sold or retired are removed
from the plant and equipment accounts and any resulting profit or loss is
recognized currently.
INTANGIBLE ASSETS
Goodwill and other intangibles, and the related amortization are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
OTHER
GOODWILL INTANGIBLES TOTAL
-------- ----------- -------
<C> <C> <C>
<S>
Balance, December 31, 1992....... $70,242 $2,172 $72,414
Additions........................ 1,112 16 1,128
Amortization..................... (2,057) (486) (2,543)
------- ------ -------
Balance, December 31, 1993....... 69,297 1,702 70,999
Additions........................ 7,397 99 7,496
Amortization..................... (2,169) (366) (2,535)
------- ------ -------
Balance, December 31, 1994..... $74,525 $1,435 $75,960
======= ====== =======
</TABLE>
Goodwill represents the excess of the cost of acquired businesses over the
fair market value of their net assets. Goodwill is being amortized on the
straight-line method over periods of 15 to 40 years. Other intangibles,
including patents and engineering drawings are stated at cost and amortized on
the straight-line method over periods of 7 to 17 years.
CAPITALIZED DEBT COSTS
The Company capitalizes all costs related to the issuance of debt. The
resulting capitalized debt costs ($1,198,000 and $2,232,000 at December 31,
1994 and 1993, respectively) are classified as "Other assets" on the
consolidated balance sheet. The capitalized debt costs related to each debt
issue are amortized to expense under the interest method over the life of the
respective debt issue. During 1994, 1993 and 1992, the Company amortized
$1,034,000, $1,318,000 and $93,000, respectively, of capitalized debt costs.
INCOME TAXES
Effective January 1, 1992, the Company adopted FAS 109, "Accounting for
Income Taxes". FAS 109 requires the recognition of deferred tax assets and
liabilities for the difference between the financial statement and tax bases
of assets and liabilities utilizing current tax rates. Deferred tax assets
are recognized, net of any valuation allowance, for deductible temporary
differences and operating loss and credit carryforwards that are more likely
than not to be realized. Deferred tax benefit or expense represents the
change in the deferred tax asset or liability balances.
RESEARCH AND DEVELOPMENT
Research and development costs, expensed as incurred, were $3,962,000,
$3,345,000 and $1,361,000 in 1994, 1993 and 1992, respectively. These costs
are included in selling, general and administrative expenses in the
consolidated statement of operations.
EARNINGS PER COMMON SHARE
Earnings per share are based on the weighted average number of shares of
common stock and common stock equivalents outstanding as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<C> <C> <C>
<S>
Primary................................ 18,370,768 18,100,104 17,309,489
Fully-diluted.......................... 18,384,342 18,100,104 17,666,745
</TABLE>
Effective May 13, 1993, the Company's stockholders approved a one-for-five
reverse stock split of the Company's common stock (the "Reverse Split"). All
share amounts and earnings per share amounts have been restated to reflect the
Reverse Split.
CASH EQUIVALENTS
The Company's cash equivalents represent funds invested in a variety of
liquid short-term instruments with maturities of less than three months. The
carrying amount of these instruments approximates fair value.
INVESTMENTS
During 1994, the Company adopted FAS 115, "Accounting for Certain
Investments in Debt and Equity Securities". In accordance with FAS 115, the
Company's short-term investments, which include debt securities, are
classified as held to maturity. Equity securities held by the Company are
classified as held for sale. The recorded value of these investments
approximates fair value.
CONSOLIDATED STATEMENT OF CASH FLOWS
Supplementary information for the consolidated statement of cash flows is
as follows (dollars in thousands):
Cash paid during the year for:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Interest................................... $ 5,050 $ 6,280 $ 1,260
Income taxes............................... $ 1,857 $ 4,890 $ 568
</TABLE>
Details of businesses acquired were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Assets acquired............................ $18,269 $ 1,594 $118,470
Liabilities assumed........................ (3,313) -- (12,364)
Debt assumed............................... (5,706) -- (82,888)
Minority interest cash investment.......... -- -- (3,400)
-------- -------- --------
Cash paid.................................. 9,250 1,594 19,818
Cash acquired.............................. (941) -- (3,084)
-------- -------- --------
Net cash paid.............................. $ 8,309 $ 1,594 $ 16,734
======== ======== ========
</TABLE>
RECLASSIFICATIONS
Certain items in the 1993 and 1992 financial statements have been
reclassified to conform with the 1994 presentation.
(2) ACQUISITIONS:
On June 10, 1994, Gilbert acquired all of the outstanding common stock of
Cabel-Con A/S ("Cabel-Con"), a Danish manufacturer of connectors for the
worldwide cable television markets, for $9,250,000. Cabel-Con had cash of
$941,000 at the time of the acquisition. The acquisition was financed by
borrowing on Gilbert's revolving credit facility. Concurrent with the
acquisition, Gilbert paid off $2,625,250 of Cabel-Con's bank borrowings. The
acquisition was accounted for as a purchase and, accordingly, operating
results of this business subsequent to the date of acquisition were included
in the Company's consolidated statement of operations. Substantially all of
the goodwill resulting from this acquisition, approximately $7,496,000, is
being amortized over 40 years.
On January 12, 1993, the Company acquired the assets of the hybrid
oscillator business of Spectrum Technology Inc., a subsidiary of Datum Inc.,
for approximately $1,594,000 in cash, including consolidation costs. The
acquisition was accounted for as a purchase and, accordingly, operating
results of the business subsequent to the date of acquisition were included in
the Company's consolidated statement of operations. Goodwill resulting from
this acquisition is being amortized over 15 years.
On September 10, 1992, the Company acquired all of the outstanding common
stock of H.E.S. International, Inc. ("H.E.S."), a manufacturer of hermetically
sealed packages used by manufacturers of quartz crystals, for approximately
$2,800,000 in net cash and a $257,000 note. The acquisition was accounted for
as a purchase and, accordingly, operating results of this business subsequent
to the date of acquisition were included in the Company's consolidated
statement of operations. Goodwill resulting from this acquisition is being
amortized over 25 years.
On December 23, 1992, the Company, along with Bain Capital, through their
acquisition company, Connector Holding Company ("Connector"), acquired 85% of
the outstanding stock of Gilbert Engineering Co., Inc. ("Gilbert"), a
Glendale, Arizona and Amboise, France manufacturer and supplier of specialty
connectors to the cable television, local area network, microwave and high-end
specialty precision markets. Management of Gilbert retained ownership of the
remaining 15% of Gilbert. Gilbert management may, beginning in December 1995
and at its option, exchange its shares of Gilbert for up to 94,118 shares of
the Company's common stock (see Note 5 - Exchangeable Shares) each year up to
a maximum of 282,353 shares. The Company has the right of first refusal
should Gilbert management wish to sell their shares in Gilbert. The Company
owns 80% of Connector, with Bain Capital owning the other 20%. Bain may at
any time after December 22, 1995 require Oak to buy and Oak may at any time
after December 22, 1996 require Bain to sell its outstanding shares in
Connector at a price determined according to the terms of the stockholders
agreement entered into by Oak and Bain at the time of the acquisition (the
"Stockholders Agreement"). The price is the higher of fair market value as
determined by an independent appraisal and a price based upon certain formulas
applied to the earnings of Gilbert in certain periods. The Stockholders
Agreement limits the ability of Connector or Gilbert to take certain
fundamental actions without the prior consent of the Company and Bain Capital.
The agreement prohibits the sale by either the Company or Bain Capital of its
equity interest in Connector. The Company's shares of Connector have been
pledged to Bain Capital to secure the financial obligations of the Company
under the Stockholders Agreement.
The aggregate purchase price was approximately $106,900,000, including
refinancing of existing debt of Gilbert and transaction expenses. The
purchase price was financed with (i) a $13,600,000 cash equity investment by
the Company, (ii) a $3,400,000 cash investment by Bain Capital, (iii) a
$3,000,000 junior subordinated note issued by Connector to the Company, (iv)
an aggregate of $10,000,000 of 8% senior subordinated promissory notes issued
by Connector to the selling stockholders of Gilbert, and (v) $76,900,000 of
senior indebtedness of Gilbert provided by General Electric Capital
Corporation. The acquisition was accounted for as a purchase and,
accordingly, operating results of this business subsequent to the date of
acquisition were included in the Company's consolidated statement of
operations. Goodwill resulting from this acquisition of approximately
$59,737,000 in the United States and $2,773,000 in France is being amortized
over 40 and 15 years, respectively. The transaction also resulted in the
recording of a deferred tax asset of approximately $16,200,000 which reflected
the expected future benefit at the time of the acquisition from the
utilization of the Company's net operating loss carryforwards to offset
Gilbert's taxable income (see Note 8).
The following unaudited pro forma summary combines the consolidated results
of operations of the Company and Gilbert as if the acquisition had occurred at
the beginning of 1992, after giving effect to certain adjustments, including
amortization of goodwill, increased interest expense on the acquisition debt,
related income tax effects, and minority interest. The pro forma summary does
not necessarily reflect the results of operations as they would have been if
the Company and Gilbert had constituted a single entity during such period.
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, 1992
(Unaudited)
-----------------
<C>
<S>
Net sales.............................. $211,618
Income from continuing operations...... 19,111
Income from continuing operations
per common share:
Primary........................... 1.10
Fully-diluted..................... 1.08
</TABLE>
(3) DISCONTINUED OPERATIONS:
On November 7, 1994, the Company's subsidiary, Oak Crystal Inc., completed
the sale of the assets of its Carpenter Emergency Lighting business
("Carpenter") for $2,092,000 in cash. Carpenter manufactures and sells self-
powered emergency lights, exit signs, and portable lights. Carpenter was sold
due to the lack of strategic fit with other Oak subsidiaries. Carpenter's
operations have been insignificant for all years presented in relation to the
Company and, thus, the disposition has not been recorded as a discontinued
operation.
In 1990, the Company sold the assets of its wholly-owned Oak Communications
Inc. subsidiary, subject to a post-closing adjustment. During 1992, the
Company and the buyer reached an agreement on the post-closing adjustment.
During 1992, $1,200,000 was received related to these matters. Income from
discontinued operations in 1992 includes $800,000, net of related expenses,
and $400,000 is included in other income. During 1993, a final payment of
$185,000 was received related to these matters and is included in other
income.
<PAGE>
(4) INDEBTEDNESS:
Long-term debt at December 31 is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<C> <C>
<S>
Gilbert Engineering borrowings:
Term Loan A............................. $35,452 $43,334
Term Loan B............................. -- 7,123
Revolving Credit Facility............... 2,278 237
Connector Holding Company Senior
Subordinated Notes...................... 6,630 6,250
Cabel-Con Mortgages....................... 2,702 --
Nordco borrowings......................... -- 5,600
Other..................................... 459 551
------- -------
47,521 63,095
Less -
Current maturities...................... (13,118) (1,546)
------- -------
$34,403 $61,549
======= =======
</TABLE>
In connection with its acquisition by the Company, Gilbert entered into a
credit agreement with General Electric Capital Corporation. The Gilbert
borrowings under this agreement are collateralized by the assets, excluding
some of the common stock of its foreign subsidiaries, and the common stock of
Gilbert and are non-recourse to the Company. Gilbert must meet certain
financial covenants related to fixed charge coverage, interest coverage and
earnings targets. The credit agreement will not allow Gilbert to pay cash
dividends to the Company. Gilbert is required to make mandatory debt payments
equal to 90% of its annual cash flow from operations less capital expenditures
and other expenditures as defined in the credit agreement, as amended.
Accordingly in February of 1995, Gilbert will borrow approximately $17,710,000
on the revolving credit facility to pay down Term Loan A. Term Loan A is
repayable from 1995 through 1997. The revolving credit facility, which
expires and is repayable on December 23, 1997, provides for borrowings up to
$18,250,000 at December 31, 1994 decreasing $2,100,000 at each quarter end for
the first three quarters of 1997. Both Term Loan A and the revolving credit
facility bear interest at LIBOR plus 2.75% or prime plus 1.25% (8.75% and
9.75% at December 31, 1994, respectively). In January 1995, these interest
rates were reduced to LIBOR plus 2.50% or prime plus 1.00%. The book value of
these borrowings approximates fair value.
In connection with the acquisition of Gilbert, Connector issued $10,000,000
of 8.0% senior subordinated notes to the sellers of Gilbert. These notes are
recorded net of original issue discount ($3,370,000 at December 31, 1994)
based on an interest rate of 18.5%. These notes are subordinated to the
Gilbert borrowings described above and mature on December 23, 1999. The net
book value of these borrowings approximates fair value.
In connection with the Cabel-Con acquisition, the Company assumed mortgages
payable through 2009 which bear interest at rates of 7.9% and 8.4%. These
mortgages are secured by the related land, building, machinery and equipment.
In December of 1987, the Nordco Inc. ("Nordco") subsidiary entered into a
$13,000,000 financing agreement. Series E warrants to purchase 150,000 shares
of the Company's common stock were issued in consideration of execution of the
financing agreement (see Note 5). Borrowings under this agreement were at an
interest rate of 12.05%. In December 1994, Nordco retired the outstanding
balance of $4,200,000. Additionally, the Company paid $3,061,000 to acquire
its Series E warrants.
At December 1994, the Company has a revolving credit facility of
$30,000,000 with a group of banks. The facility, which is available through
December 1995, is at various interest rates at the Company's option based on
the prime rate or LIBOR. Borrowings under the facility are secured by the
Company's pledge of the outstanding capital stock of certain of the Company's
subsidiaries. The Company is required to meet certain financial covenants and
is prohibited from paying dividends. At December 31, 1994, there were no
borrowings outstanding under this facility.
Scheduled maturities of long-term debt at December 31, 1994 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
December 31
--------------
<S> <C>
1995................................... $13,118
1996................................... 14,688
1997................................... 11,050
1998................................... 314
1999................................... 10,340
Thereafter............................. 1,381
</TABLE>
(5) CAPITAL STOCK:
COMMON STOCK
At December 31, 1990, Invesco MIM Management Limited ("MIM"), an
international fund management company based in the United Kingdom, and various
funds that MIM advises held approximately 3,660,000 shares of the Company's
common stock and warrants for the purchase of 600,000 common shares. In 1992,
MIM and its clients sold approximately 520,000 shares of the Company's common
stock. In November 1992, a MIM client was liquidated and an aggregate of
2,275,540 shares and warrants for the purchase of 420,000 shares were
transferred to MIM and a successor fund, Second Consolidated Trust plc
("Second Consolidated"). At December 31, 1992, MIM and its clients held
approximately 1,696,000 shares and warrants for the purchase of 333,000 shares
while Second Consolidated held approximately 1,445,000 shares and warrants for
the purchase of 267,000 shares. In January 1993, a client of MIM for which
one of the Company's directors is the managing director, transferred its
management contract from MIM to another fund management company. As a result,
the holdings managed by MIM decreased by 430,000 common shares and warrants
for the purchase of 60,000 shares. In December 1993, MIM and its clients and
Second Consolidated sold approximately 1,103,000 shares and 693,000 shares,
respectively, including those obtained from the exercise of warrants, in a
secondary offering pursuant to registration rights under a 1989 agreement
between the Company and MIM. In addition, MIM and its clients sold
approximately 345,000 shares during 1993. In 1994, MIM's clients sold their
remaining holdings. At December 31, 1994, Second Consolidated held
approximately 1,019,000 shares.
In connection with the secondary offering in December 1993, the Company
lent $1,305,000 to its corporate officers and certain key divisional managers
for the purchase of 90,000 shares of the Company's stock from the selling
shareholders. The principal amount of such loans is repayable in full in
February 1997, with interest on such loans accruing at prime plus 0.5% per
annum, payable annually in February of each year beginning in 1995 until
maturity. These loans, which are included in stockholders' equity, are
secured by the common stock purchased and certain other amounts owed to such
individuals by the Company. In 1994, $261,000 of principal and $27,000 of
interest was paid to the Company by the borrowers. The principal balance of
these loans at December 31, 1994 is $1,044,000.
Effective May 13, 1993, the Company's stockholders approved a one-for-five
reverse stock split of the Company's common stock (the "Reverse Split"). All
share amounts and earnings per share amounts have been restated to reflect the
Reverse Split.
On June 3, 1992, the Company's stockholders approved an amendment to the
Restated Certificate of Incorporation, as amended, to change the par value of
the Company's common stock from $1.00 per share to $.01 per share resulting in
a reduction of "Common stock" and an increase of "Additional paid-in capital"
of $16,359,000 on the consolidated balance sheet.
WARRANTS
The Company, in conjunction with the 1987 Nordco financing (see Note 4),
issued Series E warrants to purchase 150,000 shares of common stock to the
lender in consideration for execution of the financing agreement. In 1994,
the Company paid the lender $3,061,000 to acquire all of these warrants.
The Company issued Series F warrants in conjunction with the sale of common
stock to MIM (see Common Stock). In December 1993, warrants for the purchase
of 540,000 shares of common stock were exercised. In 1994, the remaining
warrants were exercised.
EXCHANGEABLE SHARES
In connection with the Company's 1992 acquisition of Gilbert, the Company
issued options under the 1992 Non-qualified Stock Option Plan (see Note 6)
pursuant to which Gilbert management may, beginning in December 1995 and at
its option, exchange its shares of Gilbert for up to 94,118 shares of the
Company's common stock each year to a maximum of 282,353 shares.
(6) STOCK OPTIONS AND AWARDS:
1992 STOCK OPTION AND RESTRICTED STOCK PLAN
The 1992 Stock Option and Restricted Stock Plan provides for the issuance
of up to 1,000,000 shares of common stock to non-employee directors,
executives, and key employees of the Company. The options granted under this
plan to date have been granted at the fair market value of the underlying
shares on the date of the grant and vest over a three-year period from the
date the options are granted.
1992 NON-QUALIFIED STOCK OPTION PLAN
The 1992 Non-Qualified Stock Option Plan provides for the issuance of up to
500,000 shares of common stock to employees, consultants and advisors of the
Company but not to officers and directors. Options become exercisable and
terminate as determined by the Compensation Committee and as detailed in the
Stock Option Agreements for each grant. The options granted under this plan
to date have been granted at the market value of the common stock on the date
of grant. In addition to the shares described under "Exchangeable Shares" in
Note 5 above, 160,000 of such options have been granted and vest over a three-
year period from the date of grant.
1988 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The 1988 Stock Option Plan for Non-Employee Directors of Oak Industries Inc.
provides for the issuance of up to 100,000 shares of common stock to non-
employee directors at the fair market value of the stock on the date of the
grant. The options vest over a four-year period from the date the options are
granted.
1986 STOCK OPTION AND RESTRICTED STOCK PLAN
The 1986 Stock Option and Restricted Stock Plan provides for the issuance
of up to 600,000 shares of common stock to executives and key employees of the
Company at not less than 100% of the fair market value of such shares on the
date of the grant. The options generally vest over periods of three to four
years from the date the options are granted.
1982 INCENTIVE STOCK OPTION PLAN
The 1982 Incentive Stock Option Plan provides for the issuance of up to
435,400 shares of common stock to key full-time salaried employees of the
Company at not less than 100% of the fair market value of the stock on the
date of the grant. The options vest over periods of three to five years from
the date the options are granted. This plan expired on May 16, 1992 and no
new options may be granted under this plan.
STOCK OPTION SUMMARY
<TABLE>
<CAPTION>
Shares Option Price
--------- ------------------
<S> <C> <C>
Outstanding at December 31, 1991.... 851,750 $3.15 to $59.40
Granted........................... 755,400 $4.05 to $11.25
Expired or canceled............... (56,300) $4.05 to $59.40
Exercised......................... (10,750) $4.15 to $5.65
---------
Outstanding at December 31, 1992.... 1,540,100 $3.15 to $11.25
Granted........................... 200,665 $16.50 to $17.50
Expired or canceled............... (88,835) $4.06 to $11.25
Exercised......................... (137,751) $3.15 to $11.25
---------
Outstanding at December 31, 1993.... 1,514,719 $4.06 to $17.50
Granted........................... 313,500 $18.38 to $26.63
Expired or canceled............... (32,269) $4.06 to $17.50
Exercised......................... (217,667) $4.06 to $17.50
---------
Outstanding at December 31, 1994.... 1,577,743 $4.06 to $26.63
=========
Exercisable at December 31, 1994.... 1,040,396
=========
Available for grant at
December 31, 1994................. 201,354
=========
</TABLE>
There were 2,061,145 shares of common stock reserved for issuance in
connection with the Company's stock option and award plans at December 31,
1994. Options issued under all option plans, if not exercised, expire ten
years from the date of grant.
<PAGE>
(7) POSTRETIREMENT BENEFITS:
The Company has a number of noncontributory pension plans covering
substantially all of its employees. Benefits under the plans are generally
based on years of service and employees' compensation during the last years of
employment or a specified dollar benefit. It is the Company's policy to fund
at least the minimum amount required by ERISA for each plan.
Net periodic pension cost for all defined benefit plans was comprised of
the following (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Service costs - benefits earned during the period..... $ 535 $ 666 $ 686
Interest cost on projected benefit obligation......... 2,521 2,376 2,328
Actual return on assets............................... 607 (2,700) (1,382)
Net amortization and deferral......................... (2,352) 506 (235)
------ ------ ------
Net periodic pension cost............................. $1,311 $ 848 $1,397
====== ====== ======
</TABLE>
The following table sets forth the funded status of all defined benefit
plans at December 31, 1994 and 1993 (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993
------------------------------- -------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Exceed Accumulated Benefits Exceed
Benefits Assets Benefits Assets
------------- --------------- ------------- ---------------
<C> <C> <C> <C>
<S>
Actuarial present value of benefit obligations:
Vested.......................................... $686 $27,264 $690 $27,961
Nonvested....................................... 8 431 7 580
---- ------- ---- -------
Accumulated benefit obligation.................. $694 $27,695 $697 $28,541
==== ======= ==== =======
Fair value of assets.............................. $799 $21,850 $838 $22,558
Less: Projected benefit obligation................ 947 30,562 930 31,470
---- ------- ---- -------
Underfunded plans................................. (148) (8,712) (92) (8,912)
Unrecognized transition liability................. 9 107 11 176
Unrecognized prior service costs.................. 1 457 1 539
Unrecognized net loss............................. 225 3,204 182 2,717
Additional liability.............................. -- (565) -- (283)
---- ------- ---- -------
Accrued pension cost.............................. $ 87 $(5,509) $102 $(5,763)
==== ======= ==== =======
</TABLE>
In 1994 and 1993, the Company incurred curtailments in several plans as a
result of reduced employment levels and plan design changes. The impact of
these curtailments was a loss of $154,000 in 1994 and a gain of $359,000 in
1993.
The projected benefit obligation was determined using an assumed discount
rate of 8.5% for 1994, 7.5% for 1993 and 8.5% for 1992 and an assumed rate of
compensation increase of 5.0% for 1994 and 1993 and 6.0% for 1992. The
expected long-term rate of return on plan assets was 9.0% for all three years.
The assets of the plans at December 31, 1994 and 1993 consist principally
of common stocks, bonds, cash equivalents and real estate.
The Company has defined contribution plans covering substantially all full-
time employees who meet certain eligibility requirements. Contributions by
the Company and the employees are determined according to salary-based
formulas. The expense recognized by the Company related to these plans was
$1,636,000, $861,000, and $382,000 in 1994, 1993 and 1992, respectively.
In 1993, the Company established a non-qualified supplemental retirement
plan for certain employees. Under the plan, participants may elect to
contribute up to 15% of their annual compensation. The Company is required to
make matching contributions of up to 50 percent of the participants'
contributions. Upon termination, each participant will receive in cash the
fair value of his or her account. Contributions by the employees earn a
stated rate of interest. Company matching contributions are valued based on
the current fair value of the Company's stock. The Company recorded expense
of $288,000 and $154,000 in 1994 and 1993, respectively related to this plan.
The Company allows certain employees aged 55 or older and with 10 or more
years of service to retire and continue their medical and/or dental coverage
until age 65. In most cases, retirees are responsible for paying premiums to
the Company to continue coverage.
In the first quarter of 1993, the Company adopted FAS 106 "Employers'
Accounting for Postretirement Benefits Other than Pensions." This statement
changes the past practice of accounting for the cost of postretirement
benefits from a pay-as-you-go (cash) basis to an accrual basis. Under the new
statement, the expected cost of providing those benefits to an employee, the
employee's beneficiaries, and covered dependents will be recognized in the
years that the employee renders the necessary service. The accumulated
postretirement benefit obligation related to those employees for which the
Company is obligated to pay for continuing medical and/or dental coverage as
of January 1, 1993 was $1,096,000. In determining the present value of the
accumulated postretirement benefit obligation, none of which has been funded,
the Company used a 15% health care cost trend rate for 1993, decreasing 1% per
year until 1998, then decreasing 1/2% per year until leveling off at 5%. A 1%
increase in the trend rate would increase the accumulated postretirement
obligation by approximately 12 percent. The weighted average discount rate
used was 7.5%. The Company has elected to amortize this transition obligation
over 20 years in accordance with the provisions of FAS 106. The effect of the
adoption of this statement has not been material and is not expected to be
material in the future.
The Financial Accounting Standards Board has issued FAS 112 "Employers'
Accounting for Postemployment Benefits". This statement changes the past
practice of accounting for the cost of certain postemployment benefits from a
pay-as-you-go (cash) basis to an accrual basis. The effect of the adoption of
this statement in 1994 was not material to the Company's financial statements.
<PAGE>
(8) INCOME TAXES
Pretax income from continuing operations for the years ended December 31
consists of the following sources (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Domestic.................................. $41,320 $25,284 $7,476
Foreign................................... 2,071 983 1,272
------- ------- ------
$43,391 $26,267 $8,748
======= ======= ======
</TABLE>
The income tax benefit for the years ended December 31 consists of the
following (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Current -
Federal (a)............................. $(1,000) $3,782 $ (203)
Foreign................................. (1,037) (255) (528)
State and local (b)..................... (1,218) (2,156) (129)
------- ------ ------
(3,255) 1,371 (860)
Deferred -
Benefit from federal rate increase...... -- 465 --
Benefit from change in deferred
tax asset valuation allowance......... 14,000 6,000 2,500
------- ------ ------
Total Benefit........................... $10,745 $7,836 $1,640
======= ====== ======
<FN>
(a) The income tax benefit in 1993 includes the receipt of $3,878,000
resulting from the settlement of an Internal Revenue Service tax dispute
relating to periods prior to the generation of the existing net operating loss
carryforwards.
(b) The state and local income tax in 1994 includes a benefit of $900,000 as
a result of a new state income tax law enacted in 1994.
</TABLE>
The Company adopted FAS 109 on a prospective basis in 1992. The adjustment
to the January 1, 1992 balance sheet to adopt FAS 109 amounted to $3,500,000.
This amount is reflected in 1992 net income as the cumulative effect of a
change in accounting principle. It primarily represents the tax benefits of
net operating loss carryforwards that could not be recorded under FAS 96.
Deferred income tax assets (liabilities) at December 31 are comprised of the
following (dollars in thousands):
<PAGE>
<TABLE>
<CAPTION>
1994 1993
------- -------
<C> <C>
<S>
Net operating loss carryforwards.......... $45,500 $59,500
Other..................................... 16,800 19,800
------- -------
Gross deferred tax assets................. 62,300 79,300
Gross deferred tax liabilities............ (8,000) (9,300)
Deferred tax asset valuation allowance.... (11,600) (41,300)
------- -------
Net deferred tax asset.................... $42,700 $28,700
======= =======
</TABLE>
During 1994, 1993 and 1992, the net deferred income tax asset increased by
$14,000,000, $6,465,000 and $2,500,000, respectively, reflecting the increase
in the expected future benefit from the utilization of the Company's net
operating loss carryforwards due to management's improved expectations of
future income and an increase in the federal income tax rate. In addition,
during 1992, the net deferred income tax asset increased by $16,885,000 which
reflected the expected future tax benefits from the utilization of the
Company's net operating loss carryforwards to offset taxable income from the
Gilbert and H.E.S. acquisitions. At December 31, 1994, the Company has
recorded a valuation allowance of $11,600,000. Approximately $1,200,000 of
the valuation allowance, when released, will be recorded as a credit to
additional paid-in capital.
The income tax benefit differs from the amount of income tax determined by
applying the applicable U.S. statutory federal income tax rate to income from
continuing operations before income taxes and minority interest as a result of
the following differences (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----------------- ---------------- ----------------
Amount Percent Amount Percent Amount Percent
------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C>
<S>
Computed statutory tax................................ $(15,187) (35.0) $(9,194) (35.0) $(2,974) (34.0)
Increase (decrease) in tax benefit resulting from -
Operating loss carryforward which resulted in
current tax benefit.............................. 14,462 33.3 8,849 33.7 2,541 29.0
Change in deferred tax asset valuation allowance.... 14,000 32.3 6,000 22.8 2,500 28.6
Resolution of tax issues............................ -- -- 3,878 14.8 -- --
State income taxes.................................. (1,218) (2.8) (2,156) (8.2) (129) (1.5)
Alternate minimum tax............................... (1,000) (2.3) (96) (.4) (203) (2.3)
Enacted federal rate change benefit................. -- -- 465 1.7 -- --
Other............................................... (312) (.7) 90 .4 (95) (1.1)
-------- ------ ------- ------ ------- ------
Income tax benefit.................................... $ 10,745 24.8 $ 7,836 29.8 $ 1,640 18.7
======== ====== ======= ====== ======= ======
</TABLE>
At December 31, 1994, the Company has net operating loss carryforwards of
approximately $123,000,000 for tax reporting purposes, which will, if unused,
expire from 1999 to 2006. The Company has an alternative minimum tax credit
carryforward of approximately $1,720,000 as of December 31, 1994, which may be
carried forward indefinitely. The Company has investment tax credit
carryforwards of approximately $3,298,000 at December 31, 1994 which, if
unused, will expire from 1996 to 2001. The Company also has a research and
development tax credit carryforward of approximately $809,000 at December 31,
1994 which will, if unused, expire from 1998 to 2000. The use of the
carryforwards is limited to future taxable earnings of the Company. Under
federal tax law, certain potential changes in ownership of the Company, which
may not be within the Company's control, may operate to restrict future
utilization of these carryforwards.
<PAGE>
(9) SEGMENT INFORMATION:
The Company's industry and geographic data for continuing operations for
the years ended December 31 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
INDUSTRY SEGMENTS (a)
SALES
Components (b)................................. $228,470 $201,593 $123,375
Other.......................................... 20,534 17,969 19,874
-------- -------- --------
Consolidated sales........................... $249,004 $219,562 $143,249
======== ======== ========
OPERATING INCOME
Components (c)................................. $ 49,897 $ 36,151 $ 7,225
Other.......................................... 2,361 1,888 1,109
-------- -------- --------
Operating income............................. 52,258 38,039 8,334
Corporate expense (d).......................... (5,911) (6,381) (1,725)
Interest income (expense), net................. (5,260) (7,064) (157)
Equity income.................................. 2,304 1,673 2,296
-------- -------- --------
Income before taxes and minority interest.... $ 43,391 $ 26,267 $ 8,748
======== ======== ========
IDENTIFIABLE ASSETS
Components..................................... $220,771 $192,019 $180,690
Other.......................................... 11,201 13,104 12,024
-------- -------- --------
231,972 205,123 192,714
Corporate assets............................... 49,669 32,604 36,234
-------- -------- --------
Consolidated assets.......................... $281,641 $237,727 $228,948
======== ======== ========
DEPRECIATION AND AMORTIZATION
Components..................................... $ 9,962 $ 9,770 $ 4,840
Other.......................................... 419 309 281
-------- -------- --------
10,381 10,079 5,121
Corporate...................................... 237 249 201
-------- -------- --------
Consolidated depreciation and amortization... $ 10,618 $ 10,328 $ 5,322
======== ======== ========
CAPITAL EXPENDITURES
Components..................................... $ 6,678 $ 6,905 $ 3,904
Other.......................................... 93 83 166
-------- -------- --------
6,771 6,988 4,070
Corporate...................................... 36 30 41
-------- -------- --------
Consolidated capital expenditures............ $ 6,807 $ 7,018 $ 4,111
======== ======== ========
<PAGE>
GEOGRAPHIC AREAS
SALES(e)
United States:
Unaffiliated................................. $227,833 $207,410 $136,188
To foreign affiliates........................ 396 274 220
Foreign:
Unaffiliated................................. 21,171 12,152 7,061
To United States affiliates.................. 810 426 147
Total sales between geographic areas........... (1,206) (700) (367)
-------- -------- --------
Consolidated sales........................... $249,004 $219,562 $143,249
======== ======== ========
OPERATING INCOME
United States.................................. $ 48,868 $ 36,822 $ 7,070
Foreign........................................ 3,390 1,217 1,264
-------- -------- --------
Operating income............................. $ 52,258 $ 38,039 $ 8,334
======== ======== ========
IDENTIFIABLE ASSETS
United States.................................. $203,382 $192,153 $175,171
Foreign........................................ 28,590 12,970 17,543
-------- -------- --------
Identifiable assets.......................... $231,972 $205,123 $192,714
======== ======== ========
<FN>
(a) The Company's operations serving the Components Segment manufacture
connectors for CATV systems and other precision applications, frequency
control devices, controls for gas and electric appliances, switches and other
products which generally have the common function of controlling or regulating
the flow of energy. The Other Segment represents the railway maintenance
equipment division.
(b) Sales to one customer in the Components Segment amounted to $28,090,000,
$23,241,000 and $28,199,000, in 1994, 1993 and 1992, respectively. Sales to
another customer in the Components Segment amounted to $18,695,000 in 1992.
(c) The Components Segment's 1994 operating income includes a $2,000,000
charge to cover writedowns of vacated facilities.
The Components Segment's 1993 operating income includes a $2,900,000
charge to cover the costs associated with reorganizing its Mexican
manufacturing operations, consolidating certain U.S. operations, and certain
other overhead reductions.
The Components Segment's 1992 operating income includes a $1,500,000
charge for costs related to reorganizations and facilities consolidations at
certain divisions.
(d) Corporate expense for 1992 includes a gain of $2,700,000 related to the
sale of the Company's investment in ComStream Corporation, in which the
Company held a minority ownership interest.
(e) Export sales were $50,276,000, $36,440,000, and $29,282,000 for 1994,
1993, and 1992, respectively. These sales were principally to customers in
North America and Europe.
</TABLE>
<PAGE>
(10) ACCRUED LIABILITIES:
Accrued liabilities at December 31 are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<C> <C>
<S>
Wages, bonuses, commissions, vacation, and severance.... $ 6,167 $ 5,260
Insurance............................................... 3,485 3,574
Contribution to employees' retirement income plans...... 2,404 1,957
Income taxes............................................ 4,127 1,529
Other................................................... 5,640 4,450
------- -------
$21,823 $16,770
======= =======
</TABLE>
(11) COMMITMENTS AND CONTINGENCIES:
Rent expense for facilities and office equipment was $3,601,000,
$3,249,000, and $1,721,000 in 1994, 1993, and 1992, respectively. At December
31, 1994, the Company was committed under non-cancelable operating leases for
minimum annual rentals for the next five years as follows: 1995 - $3,438,000;
1996 - $3,278,000; 1997 - $2,543,000; 1998 - $1,500,000 ; 1999 - $1,359,000;
thereafter - $5,593,000.
Various pending or threatened legal proceedings by or against the Company
or one or more of its subsidiaries involve alleged breaches of contract, torts
and miscellaneous other causes of action arising in the course of business.
Some of these proceedings involve claims for punitive damages in addition to
other special relief. The Company's management, based upon advice of legal
counsel representing the Company with respect to each of these proceedings,
does not believe any of these proceedings will have a significant impact on
the Company's consolidated financial position.
(12) OTHER INCOME (EXPENSE):
Other income (expense) for the years ended December 31 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<C> <C> <C>
<S>
Reorganizations and facility consolidation charges.... $(2,000) $(2,900) $(1,500)
Amortization of intangibles........................... (2,535) (2,543) (849)
Royalty income........................................ 665 686 1,026
Sale of minority interest investment.................. -- -- 2,700
Other................................................. (124) (234) 472
-------- -------- --------
$(3,994) $(4,991) $ 1,849
======== ======== ========
</TABLE>
<PAGE>
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The following is a summary of the unaudited quarterly results of operations
for 1994 and 1993 (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------
March 31 June 30 September 30 December 31 Full Year
---------- ---------- ------------ ----------- ---------
<C> <C> <C> <C> <C>
<S>
1994
Net sales.............................. $61,785 $65,681 $58,400 $63,138 $249,004
======= ======= ======= ======= ========
Gross margin........................... $22,565 $25,009 $21,803 $23,989 $ 93,366
======= ======= ======= ======= ========
Income from continuing operations...... $ 7,392 $10,286 $ 7,366 $17,402 $ 42,446
======= ======= ======= ======= ========
Net income............................. $ 7,392 $10,286 $ 7,366 $17,402 $ 42,446
======= ======= ======= ======= ========
Income per common share:
Primary and fully diluted:
Continuing operations.............. $ .40 $ .56 $ .40 $ .94 $ 2.31
======= ======= ======= ======= ========
Net income......................... $ .40 $ .56 $ .40 $ .94 $ 2.31
======= ======= ======= ======= ========
1993
Net sales.............................. $59,223 $58,223 $51,578 $50,538 $219,562
======= ======= ======= ======= ========
Gross margin........................... $19,131 $19,792 $18,395 $17,538 $ 74,856
======= ======= ======= ======= ========
Income from continuing operations...... $ 5,015 $ 5,565 $ 6,450 $ 9,630 $ 26,660
======= ======= ======= ======= ========
Net income............................. $ 5,015 $ 5,565 $ 6,450 $ 9,630 $ 26,660
======= ======= ======= ======= ========
Income per common share:
Primary:
Continuing operations.............. $ .28 $ .31 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
Net income......................... $ .28 $ .31 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
Fully-diluted:
Continuing operations.............. $ .28 $ .30 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
Net income......................... $ .28 $ .30 $ .35 $ .53 $ 1.47
======= ======= ======= ======= ========
</TABLE>
CONTINUING OPERATIONS
Fourth Quarter - 1994
The Company recognized an income tax benefit of $14,000,000 resulting from
an adjustment to its deferred income tax valuation reserve in accordance with
FAS 109. This benefit caused minority interest in net income of subsidiaries
to increase $3,200,000.
The Company recognized a restructuring charge of $2,000,000 relating
primarily to vacated facilities.
Second Quarter - 1994
The Company recorded a gain of $900,000 resulting from a state income tax
law change.
Fourth Quarter - 1993
The Company recognized an income tax benefit of $6,000,000 resulting from
an adjustment to its deferred income tax valuation reserve in accordance with
FAS 109. This benefit caused minority interest in net income of subsidiaries
to increase $1,600,000.
Third Quarter - 1993
The Company recognized a gain of $3,878,000 resulting from an Internal
Revenue Service refund relating to the settlement of a tax dispute.
The Company recognized a restructuring charge of $2,900,000 to cover the
costs associated with reorganizing its Mexican manufacturing operations,
consolidating certain U.S. operations, and certain other overhead reductions.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the executive officers of the registrant,
see "Executive Officers" at the end of Part I of this report. For information
with respect to the Directors of the registrant, see "Election of Directors"
in the Proxy Statement to be filed no later than April 3, 1995 for the Annual
Meeting of Stockholders to be held on May 3, 1995 which is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Compensation of Executive
Officers" and "Compensation of Directors" in the Proxy Statement to be filed
no later than April 3, 1995 for the Annual Meeting of Stockholders to be held
on May 3, 1995 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Stock Ownership" and "Election
of Directors" in the Proxy Statement to be filed no later than April 3, 1995
for the Annual Meeting of Stockholders to be held on May 3, 1995 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Relationships and
Transactions" in the Proxy Statement to be filed no later than April 3, 1995
for the Annual Meeting of Stockholders to be held on May 3, 1995 is
incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of the report:
1. Financial Statements
Consolidated balance sheet at December 31, 1994 and 1993
Consolidated statement of operations for the years ended December 31,
1994, 1993 and 1992
Consolidated statement of stockholders' equity for the years ended
December 31, 1994, 1993 and 1992
Consolidated statement of cash flows for the years ended December 31,
1994, 1993 and 1992
Notes to consolidated financial statements
2. Schedules
VIII - Valuation and qualifying accounts
All other schedules have been omitted since the information is either
not applicable, not required or is included in the financial statements
or notes thereto.
3. Exhibit Index
(2)(a) Stockholders Agreement dated as of December 22, 1992 by and
among Connector Holding Company, Oak Industries Inc., Tyler
Capital Fund, L.P., Tyler Massachusetts, L.P., Tyler
International, L.P.-II, BCIP Associates, BCIP Trust Associates,
and, solely as to Sections 1.5 and 11 thereof, Bain Venture
Capital, a California limited partnership, filed as Exhibit 2.1
to the Company's Amendment No. 2 to Form S-3 dated December 16,
1993 is incorporated herein by this reference.
(3)(a) Restated Certificate of Incorporation of Oak Industries Inc.
dated October 28, 1980; Certificate of Amendment of Restated
Certificate of Incorporation dated May 1, 1981; Certificate of
Amendment of Restated Certificate of Incorporation, as Amended
dated August 14, 1985; Certificate of Amendment of Restated
Certificate of Incorporation, as Amended dated September 30,
1986; Certificate of Amendment of Certificate of Incorporation,
as Amended dated July 15, 1987; Certificate of Amendment of
Certificate of Incorporation, as Amended dated June 3, 1992;
and Certificate of Amendment of Restated Certificate of
Incorporation, as Amended dated May 7, 1993 all filed as
Exhibit 3.1 to the Company's Amendment No. 1 to Form S-3 dated
November 24, 1993 are incorporated herein by this reference.
(3)(b) Bylaws of Oak Industries Inc. as amended through February 3,
1993, filed as Exhibit (3)(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993 are incorporated
herein by this reference.
(4)(a) $3,000,000 Junior Subordinated Note due 2000 issued by
Connector Holding Company to the Company, filed as Exhibit (4)-
2 to the Company's Form 8-K dated January 6, 1993 is
incorporated herein by this reference.
(4)(b) Form of Senior Subordinated Note issued by Connector Holding
Company, filed as Exhibit (4)-3 to the Company's Form 8-K dated
January 6, 1993 is incorporated herein by this reference.
(10)(a) 1982 Incentive Stock Option Plan filed as Exhibit (A) to the
Company's 1982 Proxy Statement is incorporated herein by this
reference.
(10)(b) 1986 Stock Option and Restricted Stock Plan for Executive and
Key Employees of Oak Industries Inc. filed as Annex III to the
Proxy Statement dated February 14, 1986 for a Special Meeting
of Stockholders is incorporated herein by this reference.
(10)(c) 1988 Stock Option Plan for Non-Employee Directors of Oak
Industries Inc. filed as Exhibit A to the Company's Proxy
Statement in connection with 1988 Annual Meeting of
Stockholders filed with the Commission on April 6, 1988 is
incorporated herein by this reference.
(10)(d) 1992 Stock Option and Restricted Stock Plan filed as Exhibit A
to the Company's Proxy Statement in connection with the 1992
Annual Meeting of Stockholders is incorporated herein by this
reference.
(10)(e) Oak Industries Inc. Non-Qualified Stock Option Plan, filed as
Exhibit 10(e) to the Company's 1992 Annual Report on Form 10-K
dated March 15, 1993 is incorporated herein by this reference.
(10)(f) Agreement between the Company and MIM Ltd. dated January 25,
1989, filed as Exhibit 10(g) to the Company's 1989 Annual
Report on Form 10-K dated March 28, 1990, is incorporated
herein by this reference.
(10)(g) Amended and Restated Revolving Credit Agreement between the
Company and The First National Bank of Boston dated as of
September 1, 1993, filed as Exhibit (10)(g) to the Company's
1993 Annual Report on Form 10-K dated February 28, 1994 is
incorporated herein by this reference.
(10)(h) First Amendment to the Amended and Restated Revolving Credit
Agreement dated as of November 1, 1993 between the Company and
The First National Bank of Boston, filed as Exhibit (10)(h) to
the Company's 1993 Annual Report on Form 10-K dated February
28, 1994 is incorporated herein by this reference.
(10)(i) Credit Agreement dated as of December 23, 1992 among General
Electric Capital Corporation, Heller Financial, Inc., Gilbert
Engineering Co., Inc. and Connector Holding Company, filed as
Exhibit (4)-1 to the Company's Form 8-K dated January 6, 1993
is incorporated herein by this reference.
(10)(j) Amendment No. 1 dated as of December 23, 1992 to Credit
Agreement dated as of December 23, 1992 among General Electric
Capital Corporation, Heller Financial, Inc., Gilbert
Engineering Co., Inc. and Connector Holding Company, filed as
Exhibit 10(j) to the Company's 1992 Annual Report on Form 10-K
dated March 15, 1993 is incorporated herein by this reference.
(10)(k) Amendment No. 2 dated as of February 24, 1993 to Credit
Agreement dated as of December 23, 1992 among General Electric
Capital Corporation, Heller Financial, Inc., Gilbert
Engineering Co., Inc. and Connector Holding Company, filed as
Exhibit 10(k) to the Company's 1992 Annual Report on Form 10-K
dated March 15, 1993 is incorporated herein by this reference.
(10)(l) Amendment No. 3 dated as of April 1, 1993 to Credit Agreement
dated as of December 23, 1993 among General Electric Capital
Corporation, Heller Financial, Inc., Gilbert Engineering Co.,
Inc. and Connector Holding Company filed as Exhibit 10.1 to the
Company's Amendment No. 2 to Form S-3 dated December 16, 1993
is incorporated herein by this reference.
(10)(m) Second Amendment to the Amended and Restated Revolving Credit
Agreement dated as of December 22, 1994 among the Company, The
First National Bank of Boston and the National Bank of Detroit,
filed herewith.
(10)(n) Amendment No. 4 and Waiver to the Credit Agreement dated as of
August 31, 1993 by and among Connector Holding Company, Gilbert
Engineering Co., Inc. and General Electric Capital Corporation
as agent for certain lenders, filed as Exhibit (10)-(a) to the
Company's Quarterly Report on Form 10-Q dated August 2, 1994,
is incorporated herein by this reference.
(10)(o) Amendment No. 5 to Credit Agreement dated June 10, 1994 by and
among Connector Holding Company, Gilbert Engineering Co. Inc.
and General Electric Capital Corporation as agent for certain
lenders, filed as Exhibit (10)-(b) to the Company's Quarterly
Report on Form 10-Q dated August 2, 1994, is incorporated
herein by this reference.
(11) Statement regarding computation of per share earnings, filed
herewith.
(13) 1994 Annual Report to be provided no later than March 31, 1995
for the information of the Commission and not deemed "filed" as
a part of the filing.
(21) Subsidiaries of the Company, filed herewith.
(27) Financial Data Schedule (Submitted only to the Securities and
Exchange Commission in electronic format for its information
only).
(99)(a) Financial Statements and Financial Statement Schedules of Video
44 for the years ended December 31, 1992, 1991 and 1990, filed
as Exhibit (28)(a) to the Company's 1992 Annual Report on Form
10-K dated March 15, 1993, is incorporated herein by this
reference.
(b) Reports on Form 8-K:
None.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS TO INCORPORATION
BY REFERENCE INTO FORM S-8 FILING
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (File Nos. 33-
14708, 2-71969, 33-32104, 2-83639, 33-53012, and 33-58878) of Oak Industries
Inc. of our report dated January 20, 1995 appearing on page 21 of this Form
10-K.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 13, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OAK INDUSTRIES INC.
Dated: February 13, 1995 By WILLIAM S. ANTLE III
(WILLIAM S. ANTLE III)
President and
Chief Executive Officer
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 COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C>
<S>
WILLIAM S. ANTLE III President and February 13,1995
(WILLIAM S. ANTLE III) Chief Executive Officer
WILLIAM C. WEAVER Senior Vice President and February 13, 1995
(WILLIAM C. WEAVER) Chief Financial Officer
LORD STEVENS OF LUDGATE Chairman of the Board February 13, 1995
(LORD STEVENS OF LUDGATE)
RODERICK M. HILLS Vice Chairman of the Board February 13, 1995
(RODERICK M. HILLS)
DANIEL W. DERBES Director February 13, 1995
(DANIEL W. DERBES)
GEORGE W. LEISZ Director February 13, 1995
(GEORGE W. LEISZ)
GILBERT E. MATTHEWS Director February 13, 1995
(GILBERT E. MATTHEWS)
CHRISTOPHER H.B. MILLS Director February 13, 1995
(CHRISTOPHER H.B. MILLS)
ELLIOT L. RICHARDSON Director February 13, 1995
(ELLIOT L. RICHARDSON)
</TABLE>
<PAGE>
OAK INDUSTRIES INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
ALLOWANCE FOR LOSSES IN COLLECTION
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<C> <C> <C>
<S>
Balance, beginning of year............. $ 901 $1,030 $ 674
Provision charged to selling, general,
and administrative expenses.......... 426 312 219
Recoveries of accounts previously
written off.......................... 10 7 35
Less write-off of uncollectible
accounts............................. (314) (448) (291)
Acquisition and disposition
of businesses........................ 42 -- 393
------ ------ ------
Balance, end of year................... $1,065 $ 901 $1,030
====== ====== ======
</TABLE>
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 10M
SECOND AMENDMENT
TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
is entered into as of December 22, 1994, by and among OAK INDUSTRIES INC., a
Delaware corporation (the "Company"), THE FIRST NATIONAL BANK OF BOSTON and
NBD BANK, N.A. (each individually, a "Bank", and collectively, the "Banks"),
and THE FIRST NATIONAL BANK OF BOSTON, as Agent for the Banks under the Credit
Agreement (the "Agent"). Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Credit Agreement
referred to below.
WHEREAS, the Company, the Bank and the Agent entered into that certain
Amended and Restated Revolving Credit Agreement dated as of September 1, 1993
(as amended from time to time, the "Credit Agreement"); and
WHEREAS, the Company has requested that the Bank consent to repayment by
the Company of the entire outstanding balance of the Nordco Note; and
WHEREAS, the Company, the Bank and the Agent desire to amend certain
provisions of the Credit Agreement to, among other things, allow such
repayment.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Section 1.1 of the Credit Agreement is hereby amended, as of the date
of this Amendment, (i) by deleting the definition "Nordco Payable" in its
entirety, and (ii) by adding thereto, in the appropriate alphabetical order,
the following new defined term:
"Second Amendment Date" shall mean December 22, 1994."
2. Section 5.7 of the Credit Agreement is hereby amended, as of the date
of this Amendment, by deleting such Section in its entirety and substituting
the following therefor:
"Section 5.7. The Nordco Note. The Company shall
provide evidence to the Banks of the cancellation of the
Nordco Note within thirty (30) Business Days after the
Second Amendment Date."
3. Section 7.8 of the Credit Agreement is hereby amended, as of the date
of the Amendment, by deleting subsection (f) thereof in its entirety and
substituting therefor the following:
"(f) notwithstanding paragraph (h) of this section 7.8, Investments
by the Company and its Subsidiaries in Oak Omega, Inc., Oak Crystal
(Cayman), Ltd., McCoy (Cayman), Ltd. and Industrias McCoy de
Venezuela, C.A. in an aggregate amount of up to $1,500,000;"
4. The Credit Agreement is hereby amended, as of the date of this
Amendment, by deleting the phrase "; or" appearing at the end of Section
8.1(j) thereof and substituting a period therefor; and by deleting Section
8.1(k) in its entirety.
5. Except as expressly amended by this Amendment the Credit Agreement is
in all respects ratified and confirmed and remains in full force and effect as
of the date of this Amendment.
IN WITNESS WHEREOF, parties have caused this Amendment to be executed by
their duly authorized officers as of the date and year first above written.
OAK INDUSTRIES INC.
By: /S/ THOMAS F. SHEEHAN
Name: Thomas F. Sheehan
Title: Vice President, Controller
& Treasurer
THE FIRST NATIONAL BANK
OF BOSTON
By: /S/ THOMAS F. FARLEY, JR.
Name: Thomas F. Farley, Jr.
Title: Vice President
NBD BANK, B.A.
By: /S/ KARL I. BELL
Name: Karl I. Bell
Title: Vice President
THE FIRST NATIONAL BANK
OF BOSTON, as Agent
By: /S/ THOMAS F. FARLEY, JR
Name: Thomas F. Farley, Jr.
Title: Vice President
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<C> <C> <C>
<S>
EARNINGS:
Income from continuing operations........................ $ 42,446 $ 26,660 $ 10,388
Income from discontinued operations...................... -- -- 550
Cumulative effect of change in accounting principle...... -- -- 3,500
---------- ---------- ----------
Net income............................................... $ 42,446 $ 26,660 $ 14,438
========== ========== ==========
PRIMARY EARNINGS PER SHARE
SHARES:
Weighted average number of common shares outstanding..... 17,281,718 16,605,160 16,510,159
Additional dilutive effect of outstanding options (as
determined by the application of the treasury stock
method)................................................ 955,446 994,516 563,616
Additional dilutive effect of outstanding warrants (as
determined by the application of the treasury
stock method).......................................... 133,604 500,428 235,714
---------- ---------- ----------
Weighted average number of common shares outstanding
as adjusted............................................ 18,370,768 18,100,104 17,309,489
========== ========== ==========
PRIMARY EARNINGS PER COMMON SHARE:
Income from continuing operations........................ $ 2.31 $ 1.47 $ .60
Income from discontinued operations...................... -- -- .03
Cumulative effect of change in accounting principle...... -- -- .20
---------- ---------- ----------
Net income............................................... $ 2.31 $ 1.47 $ .83
========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE
SHARES:
Weighted average number of common shares outstanding..... 17,281,718 16,605,160 16,510,159
Additional dilutive effect of outstanding options (as
determined by the application of the treasury stock
method)................................................ 963,652 994,516 785,533
Additional dilutive effect of outstanding warrants (as
determined by the application of the treasury
stock method).......................................... 138,972 500,428 371,053
---------- ---------- ----------
Weighted average number of common shares outstanding
as adjusted............................................ 18,384,342 18,100,104 17,666,745
========== ========== ==========
FULLY DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations........................ $ 2.31 $ 1.47 $ .59
Income from discontinued operations...................... -- -- .03
Cumulative effect of change in accounting principle...... -- -- .20
---------- ---------- ----------
Net income............................................... $ 2.31 $ 1.47 $ .82
========== ========== ==========
</TABLE>
<PAGE>
OAK INDUSTRIES INC.
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction Percent
in which of Voting
Incorporated Securities Owned
------------ ----------------
<S> <C> <C>
Cabel-Con A/S......................... Denmark 100 (1)
Cabel-Con, Inc. USA................... Arizona 100 (2)
Connector Holding Company............. Delaware 80
Croven Crystals Ltd................... Ontario, Canada 100 (3)(4)
Electronic Technologies, Inc.......... Delaware 100
Gilbert Engineering Co., Inc.......... Delaware 85 (5)
Gilbert Engineering (Denmark) ApS..... Denmark 100 (6)
Gilbert Engineering France, S.A....... France 100 (6)
Harper-Wyman Company.................. Delaware 100
H.E.S. International, Inc............. Kansas 100 (7)
Industrias McCoy de Venezuela......... Venezuela 100 (8)
McCoy (Cayman) Ltd.................... Cayman Islands 50 (9)
McCoy International Holding Company... Delaware 100 (10)
National Subscription Television
of Chicago Inc..................... Illinois 100 (11)
Nordco Inc............................ Delaware 100
Oak Communications Inc................ Delaware 100
Oak Crystal (Cayman) Ltd.............. Cayman Islands 100 (12)
Oak Crystal Inc....................... Delaware 100 (13)
Oak Enclosures Inc.................... Delaware 100
Oak Investment Corporation............ Delaware 100
Oak Omega Inc......................... Delaware 100 (14)
Oak Overseas Manufacturing Corporation Delaware 100
Oak Systems Inc....................... Delaware 100 (15)
OakGrigsby Inc........................ Delaware 100
SGI de Mexico, S.A. de C.V............ Mexico 100 (16)
Societe d'Appareillages
Electroniques, S.A................. France 100 (17)
<FN>
(1) Owned by Gilbert Engineering (Denmark) ApS.
(2) Owned by Cabel-Con A/S.
(3) Owned by Electronic Technologies Inc.
(4) Doing business as Oak Frequency Control Group.
(5) 85% owned by Connector Holding Company.
(6) Owned by Gilbert Engineering Co., Inc.
(7) Owned by Oak Enclosures Inc.
(8) 100% owned by McCoy (Cayman) Ltd.
(9) Owned by Oak Crystal (Cayman) Ltd.
(10) 50% owned by Electronic Technologies Inc. and 50% owned by
Oak Crystal Inc.
(11) Owned by Oak Systems Inc.
(12) Owned by Oak Omega Inc.
(13) Doing business as Oak Frequency Control Group, McCoy/Ovenaire/Spectrum.
(14) Owned by Oak Crystal Inc.
(15) Owned by Oak Investment Corporation.
(16) Owned by OakGrigsby Inc.
(17) Owned by Gilbert Engineering, France, S.A.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<CASH> 37,648
<SECURITIES> 0
<RECEIVABLES> 32,795
<ALLOWANCES> 1,065
<INVENTORY> 35,638
<CURRENT-ASSETS> 119,567
<PP&E> 100,452
<DEPRECIATION> 63,879
<TOTAL-ASSETS> 281,641
<CURRENT-LIABILITIES> 47,499
<BONDS> 0
<COMMON> 175
0
0
<OTHER-SE> 166,975
<TOTAL-LIABILITY-AND-EQUITY> 281,641
<SALES> 249,004
<TOTAL-REVENUES> 249,004
<CGS> 155,638
<TOTAL-COSTS> 155,638
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,611
<INCOME-PRETAX> 43,391
<INCOME-TAX> (10,745)
<INCOME-CONTINUING> 42,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,446
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 2.31
</TABLE>
