SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
Commission file number
0-12117
VENTURIAN CORP.
(Exact name of registrant as specified in its charter)
Minnesota 41-1460782
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1600 Second Street South, Hopkins, MN 55343
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 612-931-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common stock, $1.00 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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. ___
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 20, 1996 was $4,061,000.
The number of shares outstanding of each of the registrant's classes of common
stock, as of March 20, 1996:
Class Outstanding at March 20, 1996
----- -----------------------------
Common stock, $1.00 par value 747,789
Documents Incorporated by Reference
1995 Annual Report to Shareholders - Part I and Part II
Proxy Statement--Part III
Venturian Corp. and Subsidiaries
FORM 10-K
TABLE OF CONTENTS
For the year ended December 31, 1995
Description Page
----------- ----
Part I
Item 1.-Business 3
Item 2.-Properties 6
Item 3.-Legal Proceedings 8
Item 4.-Submission of Matters to a Vote of Security Holders 8
Part II
Item 5.-Market for Registrant's Common Equity
and Related Stockholder Matters 9
Item 6.-Selected Financial Data 9
Item 7.-Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 8.-Financial Statements and Supplementary Data 10
Item 9.-Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
Part III
Item 10.-Directors and Executive Officers of the Registrant 11
Item 11.-Executive Compensation 11
Item 12.-Security Ownership of Certain
Beneficial Owners and Management 11
Item 13.-Certain Relationships and Transactions 11
Part IV
Item 14.-Exhibits, Financial Statement Schedules
and Reports on Form 8-K 11
Part I
Item 1. Business
Venturian Corp., a Minnesota corporation (the "Company"), was incorporated in
September 1983 as a wholly owned subsidiary of Napco Industries, Inc. Effective
as of the close of business on April 30, 1984, Napco Industries, Inc.
transferred to the Company all of the assets associated with the international
marketing and the U.S. government business which had been conducted by Napco
Industries, Inc. for more than thirty years. As of May 1, 1984, the Company
commenced the active operation of that business under the name of Napco
International Inc.
In June 1987, the Company changed its name to Venturian Corp., and
formed a subsidiary, Napco International Inc., through which the Company
conducts its international marketing and U.S. government business. In October
1992, the Company acquired the capital stock of PC Express, Inc. In July 1995,
the Company discontinued operations of PC Express due to continued losses. In
January 1993, the Company commenced operations of Venturian Software, Inc. The
operations of the parent corporation, Venturian Corp., consist primarily of
investment and management activities.
Napco International Inc.
Napco International Inc. ("Napco") is a distribution, manufacturing and service
business that sells a broad line of defense-related products, primarily to
foreign governments. Typically, Napco's sales are made in United States
currency. However, from time to time Napco may enter into contracts denominated
in foreign currency. Napco has sales offices or representatives located in over
60 countries throughout the world. Napco's operations are conducted through its
various product divisions.
The Ordnance Division markets replacement parts for most U.S.-made
military wheeled and tracked vehicles. Its product line covers a wide variety of
items ranging from power train components to tank track. Ordnance Division sales
comprised 85.8 percent, 85.2 percent and 71.2 percent of Napco's total sales for
the years ended December 31, 1995, 1994 and 1993, respectively.
The Defense Electronics Division designs, manufactures and markets a
broad range of tactical military electronics equipment, including VHF FM
tactical manpack radios, secure handsets, and active noise reduction intercom
systems. Spare parts are supplied for many U.S. manufactured systems at either
the component or assembly level. The division also designs and supplies
transportable shelters for a variety of applications, such as air traffic
control, ground-to-air communications, command air control, electronic warfare
or for mobile repair facilities. The Defense Electronics Division's sales
comprised 9.6 percent, 7.4 percent and 8.4 percent of Napco's total sales for
the years ended December 31, 1995, 1994 and 1993, respectively.
The Tank Automotive Division designs and markets proprietary
modernization kits to improve the reliability, maintainability and performance,
and to increase the capabilities of, a wide variety of U.S. military wheeled and
tracked vehicles. The division provides technical assistance for the
installation and maintenance of these repowering systems as well as continuing
parts support. The Tank Automotive Division also supplies new trucks, vans and
other wheeled and tracked vehicles for military, medical, industrial and
construction applications. Tank Automotive Division sales were 4.1 percent, 6.0
percent and 15.9 percent of Napco's total sales for the years ended December 31,
1995, 1994 and 1993, respectively.
The Aerospace Division supplies spare parts and ground support
equipment for U.S. and foreign manufactured planes and helicopters. Aerospace
Division sales comprised less than one percent of total sales for the year ended
December 31, 1995 and 1994 and 4.2 percent of Napco's total sales for the year
ended December 31, 1993.
The Special Products Division markets a range of light weapons systems,
spare parts and accessories. Sales for the Special Products Division comprised
less than one percent of Napco's total sales in each of the last three years.
Napco's products are either supplied from inventory, manufactured or
purchased from vendors to meet specific customer orders. Napco does not
routinely allow cancellation of customer orders. However, at times Napco may
accommodate cancellation requests from customers in order to preserve goodwill.
Increases in inventory attributable to cancelled orders and returns from
customers have not been material.
Napco generally warrants the products it sells for a period of one
year, agreeing to repair or replace defective items. Warranty expense has not
been material.
Napco markets a broad variety of products and generally has alternate
sources of supply for the items it sells. In those instances where Napco has
only a single source of supply, the suppliers generally are large, financially
stable companies. Napco has not experienced, and management has no reason to
believe that Napco will experience, any interruption in supply.
Substantially all of Napco's foreign shipments are licensed by either
the United States Commerce or State Departments.
The primary risks to which Napco is exposed with respect to its export
sales do not relate to the circumstances of particular customers within foreign
countries, which typically are governments. There is, however, a continuing risk
that decisions made by the United States Government could prevent future sales
to certain foreign nations or that monetary or military policies or economic
problems in customer nations could affect sales by Napco to such nations. As a
result, Napco's principal exposure in foreign countries is of a political
nature. Management believes that these risks are reduced by Napco's wide
geographic and product diversification. In addition, the primary countries to
which Napco sells change from year to year so that Napco is not dependent for
its sales upon any one country. Napco also has some risk of foreign currency
losses when it enters into sales contracts denominated in foreign currency.
Napco's sales by principal geographic area for the last three years
were as follows (thousands of dollars):
1995 1994 1993
---- ---- ----
United States and Canada $ 14,622 $ 8,754 $ 6,888
Europe 5,465 4,378 6,825
Far East 2,583 9,974 3,559
Mediterranean and Middle East 697 618 1,962
Latin America 731 1,110 3,645
-------- ------- -------
$ 24,098 $24,834 $22,879
======== ======= =======
During 1995, no sales to customers in foreign countries accounted for
over 10 percent of Napco's sales. During 1994, sales of $6,789,000 to a customer
in one foreign country accounted for over 10 percent of Napco's sales. During
1993, sales of $3,470,000 and $2,510,000 to customers in two foreign countries
each accounted for over 10 percent of Napco's sales. In general, the company
considers Napco's sales to customers in specific countries to be more relevant
than sales to individual foreign customers because the primary risks with
respect to its export sales relate to political decisions by the U.S. government
which could prevent sales to foreign nations or monetary, military or economic
conditions in certain countries that may affect sales in such countries.
Napco's sales in the United States were $14,024,000, $8,632,000 and $6,442,000
in 1995, 1994 and 1993, respectively, and consisted primarily of sales to
various U.S. government agencies and to a large number of commercial customers.
During 1995 and 1994, sales to one customer in the United States accounted for
38 and 18 percent of Napco sales, respectively. However, historically, there has
not been a reliance on that one customer. Sales to a different customer in the
United States accounted for 14 percent of Napco sales in 1993.
Competition
Napco is one of the major independent suppliers of a broad line of parts and
components for United States military vehicles and other equipment maintained by
foreign governments. Because there are many other suppliers of such parts and
components, the pricing of Napco's products is highly competitive.
Backlog
Napco's backlog of orders at December 31, 1995 was $16,300,000 compared with
$15,025,000 at the end of 1994. Management reasonably expects to fill nearly all
of its current backlog within one year.
Napco's business with the U.S. Government is principally comprised of
firm fixed price contracts and therefore not subject to renegotiation of
profits, nor are they subject to termination at the unilateral election of the
U.S. Government.
Employees
Napco employed 107 people at December 31, 1995.
Venturian Software, Inc.
Venturian Software, Inc. provides high-technology information services in the
Upper Midwest as a Value-Added Dealer of MagicTM software, a highly productive
application development tool for professional programmers. Venturian Software
provides consulting, development and training services for downsizing,
rightsizing and client-server applications development and runs the authorized
regional training center for Magic. Venturian Software also distributes
MulticallTM, an interactive voice response product that offers a cost-effective
solution for CTI (computer telephony integration) technology.
In 1995, approximately 74 percent of Venturian Software sales were
derived from consulting activities, 23 percent from product sales and 3 percent
from training activities. In 1994, approximately 69 percent of Venturian
Software sales were derived from consulting activities, 26 percent from product
sales and 5 percent from training activities. Approximately 48 percent of
Venturian Software sales were derived from consulting activities, 27 percent
from product sales, 16 percent from training activities and the remainder from
other activities in 1993.
Competition
Venturian Software is one of many companies offering solutions to the
information needs of businesses both locally and regionally. Because of the
rapid pace of technological improvements and new software development, Venturian
Software operates in a highly competitive climate.
Employees
Venturian Software employed 7 individuals at December 31, 1995.
Backlog
Backlog for Venturian Software product sales is low, since most product is in
stock or direct shipped to customers from the supplier.
Venturian Corp.
Employees
Venturian Corp. employed 3 individuals at December 31, 1995.
Item 2. Properties
The Company's corporate offices are part of a two building complex located in
Hopkins, Minnesota. Each of the buildings is constructed of steel frame, block
and brick.
The Company's corporate offices consist of approximately 15,000 square
feet leased in July 1994. These offices are principally used in Napco's sales
and administrative activities. The Company previously owned this site, having
acquired it in June 1977. It was sold in July 1994. The Company is involved in
an environmental investigation related to this site. Management has retained a
consultant to determine what, if any, remedial action is required at this site.
Based upon a 1993 study, the consultant has recommended that no further
investigation or remediation at the site is warranted.
Adjacent to the corporate offices is a 123,000 square foot warehouse in
which Napco performs receiving, inspection, packaging, shipping, light
manufacturing and repair and inventory functions.
At December 31, 1995, the Company owned a 382,000 square foot
industrial plant building constructed of steel frame, block and brick. The
building is a multi-tenant building with twenty tenants presently occupying
space. The property is presently for sale. The property contains industrial
contaminants and must be remediated (see Note 4 to the Consolidated Financial
Statements).
At December 31, 1995, the Company owned approximately 24 acres of land
near its corporate office with an average cost of approximately $9,000 per acre.
The Company believes that its facilities, including machinery and
equipment, are well maintained and are more than adequate for its current
volume. The Company is continually re-evaluating the adequacy of its facilities.
The lease for the Company's corporate offices expires in 1996 and, upon
expiration of the lease, management intends to consolidate Napco's sales and
administrative offices and relocate to a smaller area within its warehouse
facility.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information required by this item has been included in the Company's 1995 Annual
Report to Shareholders, incorporated herein by reference. Such information and
the related Annual Report caption and page references are: the high and low bid
prices of the Company's common stock for the period ended December 31, 1995,
under the caption "Quarterly Financial Data," page 21; the number of common
stockholders of record as of December 31, 1995, under the caption "Five-Year
Financial Summary," page 22; the Company's dividend policy, under the caption
"Shareholder Information," page 2; and dividend history information, in the
"Five-Year Financial Summary," page 22.
Item 6. Selected Financial Data
Information required by this item has been included in the Company's 1995 Annual
Report to Shareholders, incorporated herein by reference under the caption
"Five-Year Financial Summary," page 22.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations is contained in the Company's 1995 Annual Report to Shareholders,
incorporated herein by reference, pages 2 to 6.
Item 8. Financial Statements and Supplementary Data
The following pages of the Company's 1995 Annual Report to shareholders are
incorporated herein by reference as follows:
(a) Financial Statements: Page
No(s).
Consolidated Statements of Operations,
three years ended December 31, 1995 7
Consolidated Balance Sheets,
as of December 31, 1995 and 1994 8
Consolidated Statements of Cash Flows,
three years ended December 31, 1995 9
Consolidated Statements of Changes in
Stockholders' Equity, three years ended
December 31, 1995 10
Notes to the Consolidated Financial Statements 11-19
Report of Independent Certified Public Accountants 20
(b) Supplementary Data:
Quarterly Financial Data 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Part III
Items 10, 11, 12 & 13
Item 10 (Directors and Executive Officers of the Registrant), Item 11 (Executive
Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and
Management) and Item 13 (Certain Relationships and Related Transactions),
constituting Part III of Form 10-K, are incorporated herein by reference to the
company's definitive Proxy Statement with respect to its 1996 Meeting of
Shareholders, which will be filed not later than 120 days after the close of the
fiscal year.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on 8-K
Page
(a) Financial Statements and Schedules
(1) Financial Statements - See Part II, Item 8 (a)
for a complete listing of financial statements
incorporated by reference to the company's 1995
Annual Report to Shareholders
(2) Financial Statement Schedules
Report of Independent Certified Public
Accountants on Schedule 12
Schedule II Valuation and Qualifying Accounts,
for each of the three years in the
period ended December 31, 1995 13
(3) Other schedules are omitted because of the absence of the conditions
under which they are required or because the required information is
provided in the financial statements or the notes thereto.
(b) No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1995.
(c) Exhibits
Exhibit (13)
1995 Annual Report to Shareholders, incorporated herein by reference
Exhibit (21)
Subsidiaries of the Registrant
Exhibit (23.1)
Consent of independent certified public accountants to incorporate by
reference on Form S-8 their report dated March 1, 1996
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors
Venturian Corp.
In connection with our audit of the consolidated financial statements of
Venturian Corp. and Subsidiaries referred to in our report dated March 1, 1996
which is included in the Annual Report to shareholders and incorporated by
reference, we have also audited Schedule II for each of the three years in the
period ended December 31, 1995. In our opinion, this schedule presents fairly,
in all material respects, the information required to be set forth therein.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
March 1, 1996
Venturian Corp. and Subsidiaries
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Three years ended December 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------- ------------------ ----------------------------------- ------------- ------------------
Balance at Charged to Charged to Balance
beginning of costs and other at end
Description period expenses accounts Deductions of period
- ------------------------------- ------------------ ---------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts(a):
Year ended
December 31, 1993 $155,000 $111,000 - $123,000 (b) $143,000
Year ended
December 31, 1994 $143,000 $136,000 - $8,000 (b) $271,000
Year ended
December 31, 1995 $271,000 $5,000 - $111,000 (b) $165,000
Inventory obsolesence:
Year ended
December 31, 1993 $1,103,000 $127,000 - $103,000 $1,127,000
Year ended
December 31, 1994 $1,127,000 $73,000 - $98,000 $1,102,000
Year ended
December 31, 1995 $1,102,000 $288,000 - $141,000 $1,249,000
</TABLE>
(a) Restated to reflect discontinued operations of PC Express, Inc. which
was closed effective July 31, 1995.
(b) Write-offs, less recoveries.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
By: /s/ Gary B. Rappaport
Gary B. Rappaport
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securites Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Gary B. Rappaport
Gary B. Rappaport
Chairman of the Board, Director, Chief Executive
Officer and President March 26, 1996
/s/ Morris M. Sherman
Morris M. Sherman
Director March 26, 1996
/s/ Charles B. Langevin
Charles B. Langevin
Director March 26, 1996
/s/ Edward Jay Phillips
Edward Jay Phillips
Director March 26, 1996
/s/ Richard F. McNamara
Richard F. McNamara
Director March 26, 1996
/s/ Mary F. Jensen
Mary F. Jensen
Controller, Treasurer and
Chief Financial Officer March 26, 1996
Management's Discussion and Analysis of Financial Condition
The company's current ratio was 2.1 to one at December 31, 1995, down from 2.4
to one at the end of 1994. Current assets comprised 74 percent of total assets
at year-end and exceeded total liabilities by $5,018,000. Long-term debt at
December 31, 1995 was $271,000 and was just over one percent of total assets at
the end of the year. Cash and cash equivalents at December 31, 1995 increased
slightly to $910,000 compared with $825,000 a year ago.
Inflation has not adversely affected the company's business and financial
performance. The company is not capital intensive and, therefore, depreciation
on a current cost basis would not significantly affect results. The company had
no material commitments for capital expenditures as of December 31, 1995.
Napco has an agreement with a bank to provide a $4,000,000 line of credit for
international transactions and cash advances. The agreement requires that
letters of credit be collateralized 100 percent with a restricted cash balance.
The agreement also allows for cash advances of up to 90 percent of the cash
surrender value of certain of the company's life insurance policies. The life
insurance policies are assigned as collateral on the line of credit. Advances on
the line bear interest at one percent over the bank's base rate. At December 31,
1995, approximately $2,000,000 was available for cash advances pursuant to this
agreement. There were no cash advances outstanding against this line of credit
at December 31, 1995.
Napco has additional lines of credit from other banks for international
transactions on a transaction basis for which restricted cash balances are
required. Letters of credit issued by financial institutions under all lines of
credit totaled $658,000 and $2,103,000 as of December 31, 1995 and 1994,
respectively. Restricted cash balances were required for all outstanding letters
of credit on these lines.
Management believes that the company's present cash reserves and available
credit should be sufficient to fund its operations and to collateralize all
international transactions. In addition, management has been successful in
obtaining insurance bonds with no collateral requirements for certain of its
international transactions rather than utilizing its traditional bank lines of
credit. The company has sources of funds in the form of additional borrowings
against life insurance policies or other non-current assets.
Shareholder Information
The company paid no dividends in 1995, pursuant to a determination of the Board
of Directors that, presently, available funds should be used to provide working
capital.
Net Sales
Napco sales totaled $24,098,000 in 1995, down 3 percent from sales of
$24,834,000 in 1994. Sales in 1994 increased approximately 9 percent over sales
of $22,879,000 in 1993. Management had expected a decrease in 1995 sales based
on a lower level of backlog at the start of the year. Due to longer lead times
required for many of Napco's orders, backlog can be a good indication of net
sales in the upcoming year (see Backlog). In 1995, order bookings were very
strong, increasing approximately 29 percent over prior year levels. In addition,
the timing and lead time on some of these bookings were such that they were
shipped in the current year, resulting in higher sales than were expected based
on beginning backlog. Sales in 1994 included shipments against a $7.1 million
contract for the upgrade and refurbishment of armored personnel carriers.
Venturian Software sales increased approximately 82 percent in 1995 to $755,000.
Sales were $414,000 in 1994, compared with $237,000 in their first year of
operations in 1993. In 1995, approximately 74 percent of Venturian Software
sales were derived from consulting activities, 23 percent from product sales and
3 percent from training activities. In 1994, approximately 69 percent of
Venturian Software sales were derived from consulting activities, 26 percent
from product sales and 5 percent from training activities. In 1993,
approximately 48 percent of Venturian Software sales were derived from
consulting activities, 27 percent from product sales, 16 percent from training
activities and the remainder from other activities.
Cost of Products Sold
Napco markets a wide variety of defense-related products, and the profit margins
associated with its products vary greatly. In 1995, cost of products sold
decreased to approximately 70 percent of Napco sales. In 1994 and 1993, cost of
products sold as a percent of Napco sales was relatively stable at 73 percent
and 74 percent, respectively.
Venturian Software's cost of products sold as a percent of net revenues is low
because a significant portion of its revenues are derived from consulting
activities and the related expenses are included in operating expenses as
administrative expense. Cost of products sold was 15.2 percent of net sales in
1995, 17.1 percent of net sales in 1994 and 28.3 percent of net sales in 1993.
Operating Expenses
Napco operating expenses were $5,807,000, $6,173,000 and $6,392,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Napco sales and marketing expenses totaled $2,355,000 in 1995, including
commission expense of $378,000, or 1.6 percent of net sales. In 1994, sales and
marketing expenses totaled $2,620,000, including commission expense of $591,000,
or 2.4 percent of sales. In 1993, sales and marketing expenses were $2,776,000,
including commission expense of $710,000, or 3.1 percent of sales. Commission
expense as a percent of net sales decreased in 1995 and 1994, primarily as a
result of an increase in sales in the United States for which no commission is
paid. Napco generally pays commissions only to in-country representatives for
its export sales.
Excluding commission expense, Napco sales and marketing expenses were
$1,977,000, $2,029,000 and $2,066,000 in 1995, 1994 and 1993, respectively. In
1994, marketing expenses included costs of approximately $192,000 related to a
$7.1 million upgrade contract. Excluding these one-time costs, sales and
marketing expenses were $1,837,000 in 1994 and increased by $140,000 in 1995
comparatively and decreased in 1994 by $229,000 compared with 1993. Current year
sales and marketing expenses increased due to several factors, including higher
payroll and related costs, bank charges and late shipment penalty expense. Much
of the decrease in expenses in 1994 from 1993 levels related to reduced travel
expenses, which were higher in 1993 due to a contract in Mexico requiring a
greater than normal amount of in-country assistance. Excluding commission
expense, sales and marketing expenses were 8.2 percent of net sales in each of
the last two years and 9.0 percent of net sales in 1993.
Napco administrative expenses were $1,981,000 in 1995, decreasing approximately
4 percent from $2,063,000 in 1994. Administrative expenses were lower in 1995
primarily due to decreases in amortization of computer software costs and
outside services. Administrative expenses in 1994 decreased approximately 11
percent from $2,306,000 in 1993. Administrative expenses were lower in 1994 for
several reasons. A reduction in professional fees, primarily legal costs,
lowered expense levels by approximately $105,000. Outside consulting expense was
lower in 1994 because of an addition to internal programming staff which
eliminated the need for services provided by outside consultants at a higher
rate. Occupancy costs decreased in 1994 due to the sale of the company's main
office facility.
Napco warehousing expense was $1,471,000, $1,490,000 and $1,310,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. Warehousing expense
was approximately 6 percent of net sales in each of the last three years.
Venturian Software operating expenses were $729,000 in 1995, including sales and
marketing expenses of $257,000 and administrative expenses of $472,000.
Venturian Software operating expenses totaled $439,000 in 1994, including
marketing expenses of $128,000 and administrative expenses of $311,000. Sales
and marketing expenses doubled in 1995, primarily due to the introduction of
MulticallTM, which is an interactive voice response product that offers a
cost-effective solution for CTI (computer telephony integration) technology.
Administrative expenses also increased in 1995, primarily due to the addition of
programming staff as a result of increased demand for consulting services. In
addition, administrative expenses in 1995 included a $27,000 write-off of
accounts receivable. Operating expenses for 1993, the first year of operations,
were $338,000, including marketing expenses of $90,000 and administrative
expenses of $248,000.
Corporate overhead expenses were $482,000, $409,000 and $423,000 for the years
ended December 31, 1995, 1994 and 1993, respectively. Corporate overhead
increased in 1995 primarily due to legal expenses incurred in connection with
the Hopkins Tech Center remediation (see Note 4 to the Consolidated Financial
Statements) and also as a result of higher payroll and related expenses.
Management does not expect that legal fees related to the remediation will
continue at the same level as in 1995.
Operating Profit (Loss)
Napco generated operating profits of $1,490,000 and $651,000 in 1995 and 1994,
respectively, compared with an operating loss of $498,000 in 1993. Low sales
combined with higher expense levels resulted in the 1993 operating loss. Higher
sales led to a turnaround in 1994 and improved profit margins as well as
reductions in operating expenses contributed to a strong operating profit in
1995.
Venturian Software reported operating losses of $89,000, $96,000 and $168,000 in
1995, 1994 and 1993, respectively. Venturian Software was a start-up operation
in 1993 and has seen improvements in operating results each year since its
inception. In 1995, operating results were negatively impacted by a write-off of
accounts receivable as well as expenses incurred due to a new product
introduction (see Operating Expenses).
Other Income (Expense)
Investment income was $114,000, $126,000 and $170,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Investment income has decreased
as a result of lower levels of invested funds.
Rental income, net of expenses, of $456,000 and $376,000 in 1995 and 1994,
respectively, was derived from the acquisition of rental real estate in March
1994 (see Note 4 to the Consolidated Financial Statements).
Interest expense increased to $428,000 in 1995 from $369,000 in 1994 and
$375,000 in 1993, primarily due to higher loans outstanding against life
insurance policies as well as financing from the acquisition of rental real
estate in March of 1994.
Other income (expense) in 1993 included a gain on the distribution of McKesson
Corp. shares that had been held in escrow until certain contingencies related to
the sale of a former affiliate of Venturian were resolved. The parties to the
escrow arrangement reached an agreement to distribute the shares in settlement
of the arrangement, which resulted in a gain of $291,000, based on the
distribution of 5,639 shares of McKesson stock that had a market value of $51.50
per share on the date of the agreement.
Historically, Napco's sales are in U.S. dollars; however, from time to time,
sales contracts are entered into that are denominated in foreign currency.
During 1995 and 1994, the company entered into forward exchange contracts with a
bank to hedge against exchange rate fluctuations related to a sales contract in
Spanish pesetas. No forward exchange contracts were entered into in 1993. Net
gains (losses) related to foreign currency transactions were included in other
income (expense) and totaled $11,000, ($2,000) and ($254,000) in 1995, 1994 and
1993, respectively.
In February 1994, Napco reached an agreement with the U.S. Justice Department in
settlement of claims brought against Napco in a suit filed in November 1992 (see
Note 6 to the Consolidated Financial Statements). Napco agreed to pay $225,000
in equal installments, plus interest, over five years. While Napco had been
successful in obtaining a partial Summary Judgment dismissing a substantial
portion of the government's claims, the prospect of incurring additional legal
costs in defending against the remaining government claims led to a decision to
negotiate the settlement agreement. The cost of the settlement has been included
in other income (expense).
Income Tax Expense
The company recorded income tax expense of $199,000 and $32,000 for the years
ended December 31, 1995 and 1994, respectively, relating to continuing
operations. This tax expense has been fully offset by a tax benefit relating to
discontinued operations.
The company did not record a net tax benefit for 1995, 1994 and 1993 because no
taxes would have been recoverable from a carryback of net losses in those years,
nor is it more likely than not that net deferred tax assets will be realized in
future years.
Discontinued Operations
On July 31, 1995, the company discontinued operations of its PC Express
subsidiary due to continued losses. PC Express ceased operations effective as of
that date and management proceeded with an orderly liquidation of the
subsidiary. Net losses from operations of PC Express were $1,851,000, net of an
income tax benefit of $336,000, for the seven months ended July 31, 1995, on
sales of $12,202,000. The 1995 loss included a $1,012,000 write-off of goodwill
and non-compete agreements. As of December 31, 1995, management had
substantially completed the liquidation. Based upon the results of the
liquidation, there were insufficient assets to satisfy the obligations of the
subsidiary. Accordingly, the remaining net liabilities of $756,000, net of
income tax expense of $137,000, were written off during 1995. In 1994, PC
Express reported a net loss from operations of $3,235,000, net of an income tax
benefit of $32,000, on sales of $26,070,000. The 1994 loss included a charge to
operations of $1,500,000 recorded to write-down goodwill to an estimated net
realizable value of $600,000. In 1993, PC Express reported net earnings from
operations of $304,000 on sales of $27,230,000. There was no income tax expense
or benefit recognized in connection with the 1993 net earnings of PC Express.
Cumulative Effect of a Change in Accounting Principle
In December 1990, the Financial Accounting Standards Board issued Statement No.
106, entitled "Employers' Accounting for Postretirement Benefits other than
Pensions," which established new standards for employers' accounting for
postretirement benefits other than pensions (postretirement benefits). The
company implemented FAS 106 effective January 1, 1993 and recorded a one-time
charge for the cumulative effect of a change in accounting principle of $571,000
(see Note 8 to the Consolidated Financial Statements).
Backlog
Napco's order backlog was $16,300,000 at the end of 1995, compared with
$15,025,000 a year ago. Backlog was $19,916,000 at the end of 1993. Management
expects that nearly all of its present backlog will be filled within the current
fiscal year.
The higher level of backlog at the end of the 1995 compared to 1994 may suggest
that 1996 Napco sales could increase in comparison to 1995 levels. However, in
1995, new orders totaling $9,073,000 were booked and shipped during the year, in
addition to Napco's backlog at January 1, 1995. Based on historical results
since 1990, Napco has shipped an average of approximately $6,400,000 in sales in
addition to its beginning backlog.
<TABLE>
<CAPTION>
VENTURIAN CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Years ended December 31,
------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 24,845 $ 25,206 $ 23,045
Cost of products sold 16,916 18,081 17,047
-------- -------- --------
Gross profit 7,929 7,125 5,998
Operating expenses
Sales and marketing 2,612 2,748 2,866
Administrative 2,927 2,741 2,911
Warehousing 1,471 1,490 1,310
-------- -------- --------
Total operating expenses 7,010 6,979 7,087
-------- -------- --------
Operating profit (loss) 919 146 (1,089)
Other income (expense)
Investment income 114 126 170
Rental income, net of expenses 456 376 --
Gain on sale of real estate 64 -- --
Interest expense (428) (369) (375)
Foreign currency gain (loss) 11 (2) (254)
Distribution of escrow shares -- -- 291
Settlement of litigation -- -- (225)
Other -- 22 20
-------- -------- --------
217 153 (373)
-------- -------- --------
Earnings (loss) from continuing operations
before income taxes, discontinued operations and cumulative
effect of a change in accounting principle 1,136 299 (1,462)
Income tax expense 199 32 --
-------- -------- --------
Earnings (loss) from continuing operations before discontinued operations
and cumulative effect of a change in accounting principle 937 267 (1,462)
Discontinued operations
Earnings (loss) from discontinued operations,
net of income tax benefit (1,851) (3,235) 304
Write-off net liabilities of PC Express,
net of income tax expense 756 -- --
-------- -------- --------
(1,095) (3,235) 304
-------- -------- --------
Loss before cumulative effect
of a change in accounting principle (158) (2,968) (1,158)
Cumulative effect of a change in accounting
for postretirement benefits other than pensions -- -- (571)
-------- -------- --------
NET LOSS ($ 158) ($ 2,968) ($ 1,729)
======== ======== ========
Earnings (loss) per share
Continuing operations $ 1.25 $ .36 ($ 1.96)
Discontinued operations (1.46) (4.33) .41
Cumulative effect of a change in accounting principle -- -- (.76)
-------- -------- --------
NET LOSS PER SHARE ($ .21) ($ 3.97) ($ 2.31)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
VENTURIAN CORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
December 31,
ASSETS 1995 1994
---------------- ---------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $910 $825
Accounts receivable, less allowance for doubtful
accounts of $165 in 1995 and $271 in 1994 6,666 3,598
Inventories 3,977 4,404
Restricted cash 658 2,103
Rental real estate held for sale 2,592 2,678
Prepaid expenses 243 279
---------------- ---------------
Total current assets 15,046 13,887
PROPERTY AND EQUIPMENT - AT COST
Buildings and improvements 1,741 1,659
Equipment 5,311 5,070
---------------- ---------------
7,052 6,729
Less accumulated depreciation and amortization 5,528 5,199
---------------- ---------------
1,524 1,530
Land 529 529
---------------- ---------------
2,053 2,059
OTHER ASSETS
Cash surrender value of life insurance,
net of policy loans of $750 in 1995 and $631 in 1994 2,721 2,554
Other 496 611
---------------- ---------------
3,217 3,165
---------------- ---------------
$20,316 $19,111
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $395 $317
Current maturities of long-term debt 147 118
Accounts payable 3,243 1,846
Advances from customers 400 407
Accrued liabilities
Payroll and related benefits 700 402
Other 784 718
Net liabilities of discontinued operations - 227
Rental real estate mortgage and related costs 1,640 1,825
---------------- ---------------
Total current liabilities 7,309 5,860
LONG-TERM DEBT, LESS CURRENT MATURITIES 271 322
DEFERRED COMPENSATION AND POSTRETIREMENT BENEFITS 2,448 2,483
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - authorized 30,000,000 shares of $1 par
value, issued 747,789 in 1995 and 1994 748 748
Additional contributed capital 14,661 14,661
Accumulated deficit (5,121) (4,963)
---------------- ---------------
Total stockholders' equity 10,288 10,446
---------------- ---------------
$20,316 $19,111
================ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
VENTURIAN CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years ended December 31,
----------------------------------------------
1995 1994 1993
------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($158) ($2,968) ($1,729)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 534 554 540
Gain on sale of real estate (64) - -
Discontinued operations 923 2,074 (731)
Cumulative effect of a change in
accounting for postretirement benefits - - 571
Settlement of litigation - - 225
Deferred tax expense - - 101
Change in assets and liabilities:
Accounts receivable (3,068) 2,387 390
Inventories 427 (362) 512
Restricted cash 1,445 568 (443)
Prepaid expenses 36 88 (99)
Other (121) (77) 33
Bank overdraft 78 (43) 28
Accounts payable 1,397 (797) (911)
Advances from customers (7) (5,033) 4,644
Accrued liabilities 364 (54) (538)
Deferred compensation and
postretirement benefits 258 262 248
Payments on deferred compensation
and postretirement benefits (293) (257) (225)
------------- ------------- --------------
Total adjustments 1,909 (690) 4,345
------------- ------------- --------------
Net cash provided by (used in) operating activities 1,751 (3,658) 2,616
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (323) (426) (406)
Purchase of rental real estate - (400) -
Purchase of other assets (286) (268) (257)
Proceeds from the sale of real estate 102 1,312 -
Other 14 14 14
------------- ------------- --------------
Net cash provided by (used in) investing activities (493) 232 (649)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and rental real estate mortgage (355) (587) (60)
Proceeds from long-term debt 213 72 251
Proceeds from life insurance loans 119 - 1,735
Payments on life insurance loans - - (2,735)
Payments of dividends - - (210)
Discontinued operations, net (1,150) 892 (407)
------------- ------------- --------------
Net cash provided by (used in) financing activities (1,173) 377 (1,426)
------------- ------------- --------------
Net increase (decrease) in cash and cash equivalents 85 (3,049) 541
Beginning cash and cash equivalents 825 3,874 3,333
------------- ------------- --------------
Ending cash and cash equivalents $910 $825 $3,874
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
VENTURIAN CORP AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands, except per share data)
ADDITIONAL
COMMON CONTRIBUTED ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------- ----------------- ------------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1993 $748 $14,661 ($56) $15,353
Net loss for 1993 - - (1,729) (1,729)
Dividends at $28 per share - - (210) (210)
-------------- ----------------- ------------------ -------------
Balance at December 31, 1993 748 14,661 (1,995) 13,414
Net loss for 1994 - - (2,968) (2,968)
-------------- ----------------- ------------------ -------------
Balance at December 31, 1994 748 14,661 (4,963) 10,446
Net loss for 1995 - - (158) (158)
-------------- ----------------- ------------------ -------------
Balance at December 31, 1995 $748 $14,661 ($5,121) $10,288
============== ================= ================== =============
</TABLE>
The accompanying notes are an integral part of these statements.
VENTURIAN CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Venturian Corp.
and its wholly-owned subsidiaries, Napco International Inc. (Napco) and Napco
International Foreign Sales Corporation, Venturian's majority-owned subsidiary,
Venturian Software, Inc. and the accounts of its wholly-owned subsidiary, PC
Express, Inc., which have been reflected as discontinued operations
(collectively, the "company"). Significant intercompany accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A summary of the company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows:
Cash and Cash Equivalents - The company considers its investments with an
original maturity of three months or less to be cash equivalents. The company
invests excess funds in reverse repurchase agreements for U.S. government
securities. At December 31, 1995 and 1994, the company had purchased $500,000 of
U.S. government securities under agreements to resell. Generally, the maturity
date of the company's reverse repurchase agreements is the next day of business.
Due to the short-term nature of the agreements, the company does not take
possession of the securities, which are instead held at the bank from which it
purchases the securities. The carrying value of the agreements approximates fair
market value because of the short maturity of the investments and the company
believes that it is not exposed to any significant risk on its investments in
reverse repurchase agreements. Exclusive of the reverse repurchase agreement,
substantially all the cash and cash equivalents were held at one financial
institution in Minnesota at December 31, 1995 and 1994.
Supplemental disclosures of cash flow information for the Statements of Cash
Flows are as follows (thousands of dollars):
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Cash paid during the year for:
Interest.................................. $188 $270 $202
Income taxes.............................. 12 94 17
During 1994, the company acquired rental real estate for $2,108,000, consisting
of $400,000 cash and a $1,708,000 note payable. The company also recorded and
capitalized $607,000 for the estimated costs to remediate the property (see Note
4).
Accounts receivable - The company grants credit to customers in the normal
course of business, but generally does not require collateral or any other
security to support amounts due. Management performs on-going credit evaluations
of customers. The company maintains allowances for potential credit losses
which, when realized, have been within management expectations.
Inventories - Inventories are stated at the lower of cost or market, principally
using the specific identification method. A portion of Napco's inventory is
acquired on a speculative basis in varying quantities when it becomes available
for purchase. Napco's sales of this inventory may vary from the current period
to several years. It is the company's practice to classify this inventory, which
totaled $1,757,000 and $1,956,000, net of reserves, at December 31, 1995 and
1994, respectively, within current assets. The company's obsolescence policy
requires that purchases of this inventory be written off if not sold after four
years. The four year period was selected after a review of customers' historical
buying patterns and is reviewed annually to determine whether the period
continues to be appropriate. The company had a reserve for obsolescence and
lower of cost or market valuation of $1,249,000 and $1,102,000 at December 31,
1995 and 1994, respectively.
Property and Equipment - Depreciation and amortization are provided in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives. Depreciation is computed for financial reporting and
tax purposes using both accelerated and straight-line depreciation methods.
Estimated lives used in the calculation of depreciation for financial statement
purposes are:
Buildings and improvements......... 17-40 years
Equipment.......................... 3-15 years
Warranties - The company records a warranty accrual at the time of sale for
estimated claims based on actual claims experience. The warranty for Napco's
products generally is for defects in material and workmanship for a period of
one year.
Foreign Currency - From time to time Napco enters into sales contracts
denominated in foreign currency. During 1995 and 1994, Napco also entered into
forward exchange contracts with a bank to hedge against exchange rate
fluctuations related to such sales. Gains and losses on transactions in foreign
currency and forward exchange contracts are included in results of operations
for the years ended December 31, 1995, 1994 and 1993. At December 31, 1995, the
company had a foreign exchange contract maturing in February 1996 for the
delivery of 24,048,000 Spanish pesetas and accounts receivable from a foreign
customer totaling 32,074,000 Spanish pesetas. The fair value of these amounts
were $198,000 and $264,000, respectively, at December 31, 1995. At December 31,
1994, the company had a foreign exchange contract maturing in January 1995 for
the delivery of 24,048,000 Spanish pesetas and accounts receivable from a
foreign customer totaling 29,389,000 Spanish pesetas. The fair value of these
amounts were $182,000 and $223,000, respectively, at December 31, 1994.
Income Taxes - The company follows the liability method of computing deferred
income taxes. The liability method provides that deferred tax assets and
liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax expense (benefit) is the result of changes in deferred
tax assets and liabilities.
Revenue Recognition - The company recognizes revenue when goods are shipped or
services are rendered.
Net Earnings (Loss) Per Share - Net earnings (loss) per share are computed based
on the weighted average outstanding common shares and common share equivalents,
when dilutive. Weighted average shares outstanding were 747,789 for each of the
years ended December 31, 1995, 1994 and 1993.
Future Effect of Recently Issued Accounting Pronouncements - The Financial
Accounting Standards Board (FASB) has issued Statement of Financial Accounting
Standard (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which establishes guidance for when to
recognize and how to measure impairment losses of long-lived assets and certain
identifiable intangibles, and how to value long-lived assets to be disposed of.
SFAS 121 is effective for fiscal years beginning after December 15, 1995.
Management believes the adoption of this Statement will not have a material
effect on the company's financial position or results of operations.
Additionally, the FASB has issued SFAS 123, "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting standards
for stock-based employee compensation plans. This Statement defines and
encourages the use of a fair value based method of accounting for an employee
stock option or similar equity instrument. The Statement allows the use of the
intrinsic value based method of accounting as prescribed by current existing
accounting standards for options issued to employees; however, there is a
requirement to disclose the pro forma net income as if the fair value based
method had been used. SFAS 123 is effective for fiscal years beginning after
December 15, 1995. The disclosures must include awards granted in fiscal years
beginning after December 15, 1994. Management has determined that the company
will utilize the intrinsic value based method of accounting for stock-based
compensation.
NOTE 3 - DISCONTINUED OPERATIONS
On July 31, 1995, the company discontinued operations of its PC Express
subsidiary due to continued losses. PC Express ceased operations effective as of
that date and management proceeded with an orderly liquidation of the
subsidiary. Net losses from operations of PC Express were $1,851,000, net of an
income tax benefit of $336,000, for the seven months ended July 31, 1995, on
sales of $12,202,000. The 1995 loss included a $1,012,000 write-off of goodwill
and non-compete agreements. As of December 31, 1995, management had
substantially completed the liquidation. Based upon the results of the
liquidation, there were insufficient assets to satisfy the remaining obligations
of the subsidiary. Accordingly, the remaining net liabilities of $756,000, net
of income tax expense of $137,000, were written off during 1995, including net
liabilities of $427,000, which were written off during the fourth quarter. In
1994, PC Express reported a net loss from operations of $3,235,000, net of an
income tax benefit of $32,000, on sales of $26,070,000. The 1994 loss included a
charge to operations of $1,500,000 recorded to write-down goodwill to an
estimated net realizable value of $600,000. In 1993, PC Express reported net
earnings from operations of $304,000 on sales of $27,230,000. There was no
income tax expense or benefit recognized in connection with the 1993 net
earnings of PC Express.
The accounts of PC Express have been reclassified to discontinued operations in
the consolidated financial statements. The net liabilities of discontinued
operations consisted of the following at December 31, 1994:
Accounts receivable....................... $2,593
Inventory................................. 1,426
Goodwill and non-compete agreements....... 1,210
Furniture and equipment, net.............. 277
Accounts payable.......................... (1,854)
Notes payable to bank..................... (1,150)
Accrued liabilities....................... (2,729)
-----
$ (227)
======
NOTE 4 - RENTAL REAL ESTATE
In February 1994, the company signed an agreement to settle a lawsuit by
agreeing to reacquire previously sold property at a cost of $2,108,000 and by
also agreeing to formulate a plan for the environmental remediation of the
property that is acceptable to both the Minnesota Pollution Control Agency
(MPCA) and the company.
In connection with the lawsuit and settlement negotiations, management retained
a consultant to prepare a preliminary cost estimate related to the remediation
at the property. At the time of settlement, the most likely alternative for the
site included remediation efforts over five years at an estimated discounted
cost of $607,000, using a ten percent discount rate.
The property was transferred to the company in March 1994. The company recorded
the acquisition cost for the property at $2,715,000, which included $400,000
paid at closing, estimated costs at the time of settlement of $607,000 to
remediate any contamination at the site and a $1,708,000 note payable. The note
payable is due in monthly installments of $16,000, including interest at 8.875
percent per annum, through May 2004 and is collateralized by a mortgage on the
property, all company equipment and all capital stock of the company's
subsidiaries. Aggregate future payments of the real estate mortgage are $97,000
in 1996, $105,000 in 1997, $114,000 in 1998, $125,000 in 1999, $136,000 in 2000
and $556,000 thereafter. Based upon an independent appraisal of the expected
value of the property once remediation has been completed, management believes
the $2,715,000 cost is recoverable. Since the acquired property is held for
sale, the acquisition cost has been recorded as a current asset under the
caption "Rental real estate held for sale" and the related liability for the
mortgage and remediation costs is reflected as a current liability under the
caption "Rental real estate mortgage and related costs."
The property is a 382,000 square foot multi-tenant building with twenty-three
tenants presently occupying space. Minimum rental commitments receivable in
future years under non cancelable long-term leases at the property are $926,000
in 1996, $819,000 in 1997, $689,000 in 1998, and $145,000 in 1999.
In 1994, the company commenced negotiations with the MPCA to formulate a plan
for remediation of the property. In February 1995, a Phase II Investigation
Report and remedial alternatives were submitted for approval to the MPCA. In
connection with the report, management's consultant prepared revised cost
estimates with respect to remediation of the property. Two remedial alternatives
were prepared and the range of associated costs were estimated based on each
alternative. The first alternative, which includes groundwater monitoring and
soil remediation, is considered to be the most likely alternative by the
consultant. This alternative includes remediation efforts over a period of five
years and has a range of estimated costs from $332,000 to $1,257,000. Within
this range, the consultant believes that the original estimate of $607,000
represents the most likely cost of remediation. The second alternative includes
costs associated with groundwater extraction and treatment along with
groundwater monitoring and soil remediation. This alternative includes
remediation efforts over a period of five years and has a range of estimated
costs from $625,000 to $1,709,000. The cost estimates are contingent upon MPCA
approval of the remedial alternatives and may vary due to unforeseen
circumstances which could affect the technologies implemented or the magnitude
of the remediation required.
Estimated remediation costs include capital costs associated with the remedial
activity as well as annual costs over a period of five years. Annual costs
included in the previous cost estimates were calculated using a ten percent
discount rate. Not discounted, the estimated cost of remediation has a range
from $348,000 to $1,290,000 under the first alternative and a range of $695,000
to $1,824,000 under the second alternative.
Because a remediation plan has not been agreed to, management cannot reasonably
estimate the timing of expected payments towards the cost of remediation.
However, depending on the final remediation options approved by the MPCA, the
remediation could commence in mid to late Spring 1996 and, with the exception of
annual cost items, be completed during 1996.
NOTE 5 - LINES OF CREDIT
Napco has an agreement with a bank to provide a $4,000,000 line of credit for
international transactions and cash advances. The agreement requires that
letters of credit be collateralized 100 percent with a restricted cash balance.
The agreement allows for cash advances of up to 90 percent of the cash surrender
value of certain of the company's life insurance policies. The life insurance
policies are also assigned as collateral on the line of credit. Advances on the
line bear interest at one percent over the bank's base rate. At December 31,
1995, approximately $2,000,000 was available for cash advances pursuant to this
agreement. There were no cash advances outstanding against this line of credit
at December 31, 1995 and 1994.
Napco has additional lines of credit available for international transactions
such as letters of credit and bid, performance and advance payment guarantees on
a transaction basis for which restricted cash balances are required.
Letters of credit issued by financial institutions under all lines of credit
totaled $658,000 and $2,103,000 as of December 31, 1995 and 1994, respectively,
and were collateralized by a restricted cash balance.
NOTE 6 - LONG-TERM DEBT
Long-term debt consisted of the following at December 31 (thousands of dollars):
1995 1994
---- ----
Obligation to U.S. government (a)............... $ 135 $ 180
Other (b)....................................... 283 260
---- ----
418 440
Less current maturities......................... 147 118
---- ----
$ 271 $ 322
==== ====
(a) The obligation is payable to the U.S. government pursuant to the terms of a
settlement agreement reached in February 1994 and is collateralized by real
estate. Payments are due in annual installments of $45,000 through 1998, plus
interest at the 52-week United States Treasury bill auction rate, adjusted
annually (weighted average effective rate of 6.59 percent and 3.59 percent for
1995 and 1994, respectively, and at December 31, 1995 and 1994, respectively).
The settlement agreement related to a civil suit brought against Napco by the
U.S. Justice Department in 1992 claiming that certain merchandise supplied to a
foreign government was not of U.S. origin as required by the Foreign Military
Sales Program and as certified by Napco. A substantial portion of the Justice
Department claims were dismissed in 1993 and in February 1994 the company signed
a settlement agreement related to the remaining claims.
(b) These obligations are collateralized by certain equipment.
Aggregate future maturities of long-term debt are $147,000 in 1996, $139,000 in
1996, $113,000 in 1998 and $19,000 in 1999.
Based upon the borrowing rates currently available to the company for loans with
similar terms and average maturities, the carrying amount of long-term debt
approximates fair market value.
NOTE 7 - DEFERRED COMPENSATION
The company has deferred compensation agreements with certain present and former
key employees. The agreements provide for monthly retirement benefit payments
for 15 years following an employee's retirement. The company has purchased life
insurance policies to fund the deferred compensation agreements. Deferred
compensation expense was $12,000 in 1994 and 1993. There was no deferred
compensation expense in 1995. Interest expense related to the deferred
compensation agreements was $217,000, $210,000 and $206,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
NOTE 8 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company implemented Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits other than Pensions," ("SFAS
106") effective January 1, 1993. SFAS 106 establishes standards for employers'
accounting for postretirement benefits other than pensions (postretirement
benefits). SFAS 106 significantly changed the prevalent past practice of
accounting for postretirement benefits on a pay-as-you-go (cash) basis by
requiring accrual, during the year that the employee renders the necessary
service, of the expected cost of providing those benefits.
The company sponsors an unfunded defined benefit postretirement plan that covers
a limited number of former employees and dependents of former employees who
retired prior to February 1988. The plan provides for medical and dental
benefits as well as limited life insurance benefits. In connection with the
implementation of SFAS 106, the company recorded the cumulative effect of a
change in accounting principle of $571,000. At December 31, 1995 and 1994, the
company had recorded $577,000 and $573,000, respectively, for the accumulated
postretirement benefit obligation under this plan.
Interest cost on the accumulated postretirement benefit obligation was $40,000
for the year ended December 31, 1995 and $38,000 for each of the years ended
December 31, 1994 and 1993.
For measurement purposes, a 7 percent annual rate of increase in the per capita
cost of covered medical benefits was assumed for 1996, decreasing gradually to 5
percent in 1998 and thereafter. A 4 percent annual rate of increase in the per
capita cost of covered dental benefits was assumed for all years. The health
care cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rate by
one percentage point in each year would increase the accumulated postretirement
benefit obligation at December 31, 1995 by $45,000. The effect of a one percent
increase in the health care cost trend rate would not have a significant effect
on interest cost included in the net periodic postretirement benefit cost for
the years ended December 31, 1995, 1994 and 1993.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7 percent.
NOTE 9 - PENSION AND PROFIT SHARING PLANS
The company has retirement plans, in the form of pension or profit sharing
plans, that are provided for substantially all employees of the company. No
contributions to the profit sharing plan were made for the years ended December
31, 1995, 1994 or 1993.
Benefits under the defined benefit pension plan are provided pursuant to the
terms of a collective bargaining agreement covering approximately one-third of
the company's employees. The agreement expires in August 1998. Benefits under
the plan are based on years of service. Net pension expense includes the
following components (thousands of dollars):
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Service cost - benefits
earned during the year................ $ 11 $ 11 $18
Interest cost on projected
benefit obligation.................... 55 51 51
Actual return on plan assets............ (71) (10) (41)
Net amortization and deferral........... 17 (49) (19)
---- --- ----
Net pension expense .................... $ 12 $ 3 $ 9
===== === ===
Assumptions used in the accounting were:
Discount rate.................................. 7% 7% 7%
Expected long-term
return on assets............................. 7.5% 7.5% 7.5%
Increase in compensation level................. N/A N/A N/A
The following sets forth the plan's funded status and amounts recognized in the
consolidated balance sheet as of December 31 (thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of $848 and
$752 at December 31, 1995 and
1994, respectively................................................... $ 852 $ 767
==== ====
Plan assets at fair value, invested
in fixed income securities........................................... $ 787 $ 772
Projected benefit obligations for
participants' service rendered to date............................... 852 767
---- ----
Difference............................................................. (65) 5
Unrecognized prior service cost........................................ 134 101
Unrecognized net gain.................................................. (43) (64)
Unrecognized net transition asset...................................... (65) (69)
Adjustments to recognize minimum liability............................. (25) -
---- ----
Pension liability recognized in
the consolidated balance sheet....................................... $ (64) $ (27)
==== ====
</TABLE>
The company's funding policy for the defined benefit plan has been to contribute
such amounts as necessary, computed on an actuarial basis, to provide the plan
with assets sufficient to meet the benefit payment requirements.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the company had performance and advance payment guarantees
outstanding on various sales contracts totaling $685,000. These guarantees were
backed by insurance bonds, which do not require cash collateral.
The company has guaranteed certain indebtedness of Mass Merchandisers, Inc., a
former affiliate. At December 31, 1995, this indebtedness was $662,000. The
indebtedness is secured by a first mortgage lien against certain real estate
owned and operated by Mass Merchandisers, Inc., a wholly-owned subsidiary of
McKesson Corp.
The company owns rental real estate that contains industrial contaminants and
must be remediated (see Note 4).
The company is involved in an environmental investigation related to its former
office headquarters location. Management has retained a consultant to determine
what, if any, remedial action is required at this site. Based upon a 1993 study,
the consultant has recommended that no further investigation or remediation at
the site is needed. This recommendation is subject to the approval of the
Minnesota Pollution Control Property Transfer Unit. Management believes that the
ultimate liability to be incurred as a result of this investigation, if any,
will not have a material adverse effect on the company's financial position or
results of operations.
NOTE 11 - EMPLOYEE STOCK PLANS
The company has a stock option plan that provides participating employees the
right to purchase common stock of the company through incentive and
non-qualified stock options. The options are exercisable over a ten-year period
from the date of the original grant. Since the number of shares under option
were fixed and the option price was at the fair market value at the date of
grant, no compensation expense was recorded by the company. Shares available for
grant under this stock option plan expired in 1994.
In April 1995, the company adopted a new stock option plan which provides for
the granting of options to purchase up to an aggregate of 125,000 shares of the
company's common stock. The adoption of the stock option plan was approved by
shareholders in May 1995. At December 31, 1995, 125,000 shares were available
for grant under the new plan and 49,000 options previously granted under the
earlier plan were exercisable.
A summary of stock option transactions for the years ended December 31, 1993,
1994 and 1995 is as follows:
<TABLE>
<CAPTION>
Option
Number price per
of shares share
--------- -----
<S> <C> <C>
Stock options outstanding
Balance at January 1, 1993..................................... 78,630 $6.00-16.63
Granted...................................................... 7,000 $8.00- 9.75
Cancelled.................................................... (17,010) $7.75-15.00
------
Balance at December 31, 1993................................... 68,620 $6.00-16.63
Cancelled.................................................... (5,000) $8.00-15.00
------
Balance at December 31, 1994................................... 63,620 $6.00-16.63
Cancelled.................................................... (12,620) $8.00-15.00
------
Balance at December 31, 1995.................................. 51,000 $6.00-16.63
======
</TABLE>
The company has a Key Employee Stock Purchase Plan for its officers and key
employees under which the company provides loans for the employees to purchase
shares of Venturian common stock on the open market. The company has agreed to
repurchase the shares covered by the plan at the purchase price, adjusted for a
proportionate increase or decrease in the book value per share since the date of
purchase. The company has also agreed to purchase the covered shares at the book
value per share at the normal retirement age of the plan participant. The plan
authorizes the purchase of 100,000 shares of common stock. Of the authorized
shares, 53,635 shares have been purchased through December 31, 1995, and loans
totaling $192,000 were outstanding from key employees under the plan. The loans
are interest bearing at 8 percent per annum and are collateralized by Venturian
shares which had a market value of $100,000 at December 31, 1995. The company's
obligation to repurchase the outstanding shares under the plan at December 31,
1995 was approximately $141,000.
NOTE 12 - NET SALES
Napco International Inc. manufactures and supplies a wide variety of
defense-related products to governments and commercial customers around the
world. A substantial portion of Napco's sales are replacement parts for U.S.
made military and tracked vehicles. Napco's sales by geographic region for the
last three years were as follows (thousands of dollars):
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
United States
and Canada......................... $14,622 $ 8,754 $ 6,888
Europe.................................. 5,465 4,378 6,825
Far East................................ 2,583 9,974 3,559
Mediterranean and
Middle East........................ 697 618 1,962
Latin America........................... 731 1,110 3,645
------- ------- -------
$24,098 $24,834 $22,879
======= ======= =======
During 1995, no sales to customers in foreign countries accounted for over 10
percent of Napco's sales. During 1994, sales of $6,789,000 to a customer in one
foreign country accounted for over 10 percent of Napco's sales. During 1993,
sales of $3,470,000 and $2,510,000 to customers in two foreign countries each
accounted for over 10 percent of Napco's sales. In general, the company
considers Napco's sales to customers in specific countries to be more relevant
than sales to individual foreign customers because the primary risks with
respect to its export sales relate to political decisions by the U.S. government
which could prevent future sales to foreign nations or monetary, military or
economic conditions in certain countries that may affect sales in such
countries.
Napco's sales in the United States were $14,024,000, $8,632,000 and $6,442,000
in 1995, 1994, and 1993 and consisted primarily of sales to various U.S.
government agencies and to a large number of commercial customers. During 1995
and 1994, sales to one customer in the United States accounted for 38 and 18
percent of Napco sales, respectively. However, historically there has not been a
reliance on that one customer. Sales to a different customer in the United
States accounted for 14 percent of Napco sales in 1993.
Venturian Software, Inc. provides high-technology information services in the
Upper Midwest as a Value-Added Dealer of MagicTM software, providing consulting,
training and custom applications development. Venturian Software also
distributes MulticallTM, an interactive voice response product that offers a
cost-effective solution for CTI (computer telephony integration) technology.
Venturian Software's sales were $755,000, $414,000 and $237,000 for the years
ended December 31, 1995, 1994 and 1993, respectively.
NOTE 13 - INCOME TAXES
The components of income tax expense were as follows (thousands of dollars):
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Current expense (benefit).............. $ 199 $ 32 $(101)
Deferred expense....................... - - 101
----- ---- -----
Total expense..................... $ 199 $ 32 $ -
===== ==== =====
Additionally, current income tax benefits of $199,000 in 1995 and $32,000 in
1994 were recorded relating to discontinued operations. The 1995 current income
tax benefit consists of $336,000 relating to the loss from discontinued
operations net of a current tax expense of $137,000 relating to the write-off of
net liabilities of PC Express.
Income tax expense for each of the last three years differed from the expected
amount computed by applying the statutory federal income tax rate to pretax
earnings (loss) due to the following (thousands of dollars):
Years ended December 31,
-----------------------------
1995 1994 1993
------ ------ ------
Expected income tax expense
(benefit) at statutory rate................... $ 386 $ 102 $(497)
Difference in tax resulting from:
Change in valuation allowance............... (169) (36) 534
State income taxes, net
of federal tax benefit.................... 3 3 3
Nontaxable dividends........................ - - (5)
Net change in cash surrender
value of life insurance policies.......... (46) (40) (38)
Other....................................... 25 3 3
------ ----- -----
Actual income tax expense....................... $ 199 $ 32 $ -
====== ===== =====
Actual income tax expense
percentage.................................... 17.5% 10.7% N/A
Deferred income tax assets and liabilities were as follows at December 31
(thousands of dollars):
1995 1994
------ ------
Deferred tax assets:
Deferred compensation and
retirement benefits................................. $ 928 $ 941
Inventory write-off
and capitalization.................................. 699 676
Alternative minimum tax
credit carryforwards................................ 127 32
Net operating loss carryforwards...................... 46 241
Other................................................. 349 408
------ ------
2,149 2,298
Valuation allowance................................... (2,025) (2,194)
------ ------
124 104
Deferred tax liabilities:
Depreciation.......................................... (124) (104)
------ ------
$ - $ -
====== ======
At December 31, 1995 the company had approximately $2,583,000 of federal net
operating loss carryforwards and $1,551,000 of state net operating loss
carryforwards, both of which expire through the year 2010. These carryforward
amounts include net operating loss carryforwards generated from discontinued
operations.
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Venturian Corp.
We have audited the accompanying consolidated balance sheets of
Venturian Corp. (a Minnesota corporation) and Subsidiaries as of December 31,
1995 and 1994 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Venturian Corp. and Subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements,
effective January 1, 1993 the company changed its method of accounting for
postretirement benefits other than pensions.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
March 1, 1996
VENTURIAN CORP. AND SUBSIDIARIES
Quarterly Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
1995 1994 1995(a) 1994 1995(b) 1994 1995(b) 1994(c)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 5,818 $ 6,953 $ 5,470 $ 5,565 $ 5,621 $ 6,106 $ 7,936 $ 6,582
Gross profit 1,922 1,893 1,544 1,548 1,719 1,728 2,744 1,956
Earnings (loss) from continuing
operations 314 218 (32) (68) 96 46 559 71
Discontinued operations (248) (40) (1,520) (238) 149 16 524 (2,973)
Net earnings (loss) 66 178 (1,552) (306) 245 62 1,083 (2,902)
Earnings (loss) per share
Continuing operations $ .42 $ .29 $ (.04) $ (.09) $ .13 $ .06 $ .75 $ .10
Discontinued operations (.33) (.05) (2.03) (.32) .20 .02 .70 (3.98)
Net earnings (loss) per share $ .09 $ .24 $ (2.07) $ (.41) $ .33 $ .08 $ 1.45 $ (3.88)
</TABLE>
(a) Discontinued operations includes a $1,012,000 write-off of goodwill and
noncompete agreements.
(b) Discontinued operations includes the write-off of net liabilities of PC
Express of $466,000 and $427,000 in the third and fourth quarters,
respectively. An additional net income tax benefit of $97,000 was
recorded in the fourth quarter.
(c) Discontinued operations includes a $1,500,000 write-down of goodwill, a
$500,000 increase in the warranty reserve and a $148,000 write-down of
inventory.
Quarterly data has been restated to reflect the discontinued operations of PC
Express, Inc. which ceased operations effective July 31, 1995.
Stock prices are based upon the high and low sales prices of Venturian Corp.
(VENT) as quoted on NASDAQ's National Market. Market quotations reflect
interdealer prices, without retail mark-up, mark-down or commission and may not
necessarily reflect actual market transactions.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $ 8.25 $ 8.25 $ 9.25 $ 9.75 $ 6.50 $ 9.00 $ 6.25 $ 7.00
Low 5.75 7.00 5.50 6.75 4.00 7.00 4.50 5.75
</TABLE>
VENTURIAN CORP. AND SUBSIDIARIES
Five-Year Financial Summary
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 24,845 $ 25,206 $ 23,045 $ 34,010 $ 24,973
Earnings (loss) from continuing
operations before discontinued operations
and cumulative effect of a change
in accounting principle 937 267 (1,462) 765 (441)
Discontinued operations (1,095) (3,235) 304 (84) --
Cumuative effect of a change
in accounting principle -- -- (571) -- --
Net earnings (loss) (158) (2,968) (1,729) 681 (441)
PER SHARE DATA
Earnings (loss) from continuing
operations before discontinued operations
and cumulative effect of a change
in accounting principle $ 1.25 $ .36 $ (1.96) $ 1.02 $ (.56)
Discontinued operations (1.46) (4.33) .41 (.11) --
Cumuative effect of a change
in accounting principle -- -- (.76) -- --
Net earnings (loss) (.21) (3.97) (2.31) .91 (.56)
Dividends per share -- -- .28 .28 .28
Common stockholders' equity per share 13.76 13.97 17.94 20.53 19.74
Year end stock price 5.00 5.75 7.25 9.75 6.50
Stockholders of record at year end 724 591 724 694 741
FINANCIAL POSITION
Working capital 7,737 8,027 9,965 12,032 10,916
Current ratio 2.1 2.4 2.4 3.5 3.3
Total assets 20,316 19,111 23,243 22,087 21,616
Long-term liabilities at year end 2,719 2,805 2,855 1,907 1,958
</TABLE>
Exhibit (21)
Venturian Corp. and Subsidiaries
SUBSIDIARIES OF THE REGISTRANT
December 31, 1995
The Company's significant subsidiaries are:
State or Other
Jurisdiction in which
Name Incorporated or Organized
---- -------------------------
Napco International Inc. Minnesota
PC Express, Inc. Minnesota
Venturian Software, Inc. Minnesota
Napco International Foreign Sales Corporation U.S. Virgin Islands
Exhibit 23.1
Venturian Corp. and Subsidiaries
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated March 1, 1996 accompanying the consolidated
financial statements and schedule incorporated by reference or included in the
Annual Report of Venturian Corp. on Form 10-K for the year ended December 31,
1995. We hereby consent to the incorporation by reference of said reports in the
Registration Statement of Venturian Corp. on Form S-8 (File No. 2-93660
effective October 29, 1984).
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
March 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 910
<SECURITIES> 0
<RECEIVABLES> 6,831
<ALLOWANCES> 165
<INVENTORY> 3,977
<CURRENT-ASSETS> 15,046
<PP&E> 7,581
<DEPRECIATION> 5,528
<TOTAL-ASSETS> 20,316
<CURRENT-LIABILITIES> 7,309
<BONDS> 0
0
0
<COMMON> 748
<OTHER-SE> 9,540
<TOTAL-LIABILITY-AND-EQUITY> 20,316
<SALES> 24,845
<TOTAL-REVENUES> 24,845
<CGS> 16,916
<TOTAL-COSTS> 16,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 428
<INCOME-PRETAX> 1,136
<INCOME-TAX> 199
<INCOME-CONTINUING> 937
<DISCONTINUED> (1,095)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> 0
</TABLE>
