SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [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 [NO FEE REQUIRED]
For the transition period from _________ to ________
Commission File No. 0-8282
OSMONICS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0955759
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5951 Clearwater Drive, Minnetonka, Minnesota 55343
(Address of principal executive offices) (Zip Code)
(612) 933-2277
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, par value $0.01 per share New York Stock Exchange
(Title of each class) (Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (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].
As of March 1, 1996, 12,802,582 Common Shares were outstanding.
The aggregate market value of the Common Shares held by non-affiliates
of the Registrant on such date (based upon the closing price of such
shares on the New York Stock Exchange on March 1, 1996) was
$162,774,788.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year
ended December 31, 1995 (the "Annual Report to Shareholders"), are
incorporated by reference into Parts II and IV. Portions of the
definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on May 9, 1996 (the "Proxy Statement"), and to be filed within
120 days after the Registrant's fiscal year ended December 31, 1995, are
incorporated by reference into Part III.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
COMMON STOCK DATA
The Company's common stock trades on the New York Stock Exchange under
the symbol "OSM".
Shareholders of record on February 22, 1996 numbered 2387. The Company
estimates that an additional 2500 shareholders own stock held for their
account at brokerage firms and finanacial institutions.
1995 1994
Quarterly Prices* High Low High Low
First Quarter 16 5/8 13 1/4 16 1/8 14 3/8
Second Quarter 18 1/4 15 1/2 16 5/8 14 1/2
Third Quarter 17 7/8 15 1/2 15 1/2 13 3/4
Fourth Quarter 21 1/4 16 5/8 15 1/4 13 1/2
* Adjusted for splits
"Notes to Consolidated Financial Statements," pages 19-23 of the Annual Report
to Shareholders, are incorporated herein by reference. As of March 14, 1996
there were 2,363 shareholders of record.
The Company has not paid cash dividends on its common shares. The
Board of Directors currently intends to retain its earnings for the
expansion of the Company's business. The Company has issued promissory
notes which contain a covenant limiting the payment of dividends to
shareholders. At December 31, 1995, approximately $24,742,000 of
retained earnings was restricted under this covenant.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
(a) (1) Financial Statement
The consolidated financial statements of the
Registrant and its subsidiaries, included in the
Annual Report to Shareholders, are incorporated by
reference in Item 8, and are also incorporated herein
by reference.
(a) (2) Financial Statement Schedules
Reports of Independent Public Accountants on
Supplemental Schedules to the Consolidated Financial
Statements.
Valuation and qualifying accounts.
Schedules not listed above have been omitted because
they are either not applicable, not material or the
required information has been given in the financial
statements or in the notes to the financial
statements.
(3)A. Certificate of Incorporation of the
Registrant, as amended. (Incorporated herein
by reference to Exhibit 3.1 to Registration
Statement on Form S-2, File No. 33-336.)
Certificate of Amendment. (Incorporated
herein by reference to Exhibit (3)A on Form
10-K for fiscal year ended December 31, 1987,
File No. 0-8282.)
B. By-Laws of the Registrant. (Incorporated
herein by reference to Exhibit 3.2 to
Registration Statement on Form S-2, File
No. 33-336.)
(4)A. Note Purchase Agreement dated July 12, 1991.
(Incorporated herein by reference to Annual
Report on Form 10-K for fiscal year ended
December 31, 1991.)
(10)A.* 1993 Stock Option Plan and related form of
stock option agreement. (Incorporated herein
by reference to Annex C of the Registrant's
Joint Proxy Statement/Prospectus dated
September 10, 1993.)
B. Stock Option Agreement with Michael L. Snow,
Director. (Incorporated herein by reference
to Annual Report on Form 10-K for fiscal year
ended December 31, 1993.)
C.* 1983 Stock Option Plan and related form of
stock option agreement. (Incorporated herein
by reference to Exhibit 10.2 to Registration
Statement on Form S-2, File No. 33-336.)
D. 1995 Employee Stock Purchase Plan.
(Incorporated herein by reference to the
Registrant's Proxy Statement dated
March 27, 1995.)
E.* 1995 Director Stock Option Plan.
(Incorporated herein by reference to the
Registrant's Proxy Statement dated
March 27, 1995.)
* Denotes Executive Compensation Plan.
(13) 1995 Annual Report to Shareholders. (Only
those portions incorporated herein by
reference shall be deemed filed with the
Commission.)
(21) Subsidiaries of the Registrant.
(23) Consent of Deloitte & Touche LLP.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended December 31, 1995.
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.
OSMONICS, INC.
By /s/ D. Dean Spatz
D. Dean Spatz, President
Dated: February 28, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated:
Signatures Title Date
/s/ L. Lee Runzheimer Chief Financial Officer February 27, 1996
L. Lee Runzheimer and Vice President
Administration (Principal
Finance and Accounting Officer)
/s/ Howard W. Dicke Vice President Human February 27, 1996
Howard W. Dicke Resources and Corporate
Development, and Treasurer
/s/ Ruth Carol Spatz Director February 28, 1996
Ruth Carol Spatz
/s/ Michael L. Snow Director February 27, 1996
Michael L. Snow
/s/ Ralph E. Crump Director February 28, 1996
Ralph E. Crump
/s/ Verity C. Smith Director February 28, 1996
Verity C. Smith
Director
Charles W. Palmer
/s/ D. Dean Spatz President, Chairman of February 28, 1996
D. Dean Spatz the Board and Director
(Principal Executive Officer)
<TABLE>
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Sales $111,610 $96,180 $89,043
Cost of sales 63,213 52,841 49,272
Gross profit 48,397 43,339 39,771
Operating expenses:
Selling, general and administrative 26,415 23,480 21,839
Research, development and engineering 7,779 7,174 6,795
Embezzlement recovery (Note 3) - - (562)
Merger and transition expenses - - 1,644
34,194 30,654 29,716
Income from operations 14,203 12,685 10,055
Other income (expense), net (Note 4):
Interest income 1,649 1,543 1,279
Interest expense (1,061) (747) (943)
Other 1,100 142 401
1,688 938 737
Income before income taxes 15,891 13,623 10,792
Income taxes (Note 9) 4,679 3,668 2,897
Net income $ 11,212 $ 9,955 $ 7,895
Net income per share $ 0.88 $ 0.79 $ 0.63
Average shares outstanding 12,745,000 12,668,000 12,624,000
</TABLE>
<TABLE>
OSMONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 4,361 $ 9,453
Marketable securities (Note 4) 26,307 27,623
Trade accounts receivable, net of allowance for doubtful
accounts of $1,127 in 1995 and $1,259 in 1994 20,501 15,536
Inventories (Note 5) 26,227 19,428
Deferred tax assets (Note 10) 3,719 3,284
Other current assets 1,851 1,303
Total current assets 82,966 76,627
Property and equipment, at cost
Land and land improvements 2,310 1,951
Buildings 15,557 12,300
Machinery and equipment 36,645 32,756
Construction in progress 5,970 818
60,482 47,825
Less accumulated depreciation and amortization (27,923) (25,262)
32,559 22,563
Goodwill, net of accumulated amortization of
$289 in 1995 and $170 in 1994 7,655 1,695
Other assets, net of accumulated amortization of
intangible assets of $230 in 1995 and $145 in 1994 1,878 1,150
Total assets $125,058 $102,035
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 12,247 $ 6,459
Notes payable and current portion of long-term debt (Note 7) 1,695 744
Accrued compensation and employee benefits 4,231 4,154
Reserve for discontinued operations 1,957 2,088
Other accrued liabilities (Note 6) 8,612 7,187
Total current liabilities 28,742 20,632
Long-term debt (Note 7) 12,441 14,050
Deferred income taxes (Note 10) 4,954 2,913
Other liabilities 450 689
Commitments and contingencies (Note 12) - -
Shareholders' equity
Common stock, $0.01 par value
Authorized -- 20,000,000
Issued -- 1995: 12,773,184 and 1994: 12,701,041 129 127
Capital in excess of par value 21,709 21,000
Retained earnings 52,620 41,408
Unrealized gain on marketable securities (Note 4) 3,694 1,038
Cumulative effect of foreign currency
translation adjustments 319 178
Total shareholders' equity 78,471 63,751
Total liabilities and shareholders' equity $125,058 $102,035
</TABLE>
<TABLE>
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operations:
Net income $11,212 $ 9,955 $ 7,895
Non-cash items included in net income:
Depreciation and amortization 3,222 3,048 3,080
Deferred income taxes (91) (341) 281
Gain on sale of land and investments (810) - (499)
Changes in assets and liabilities
(net of business acquisitions)
Reserve for VAT tax - (1,605) (1,030)
Accounts receivable (4,232) (1,463) 181
Inventories (6,085) (2,584) 2,785
Other current assets (507) 1,475 (302)
Accounts payable and accrued liabilities 4,292 1,499 209
Reserve for deferred compensation (432) (78) 72
Reserves for losses of discontinued operations - - (471)
Net cash provided (used) by operations 6,569 9,906 12,201
Cash flows from investing activities:
Business acquisitions (net of cash acquired) (5,380) (673)
Purchase of investments (6,633) (17,467) (15,253)
Maturities and sales of investments 13,228 11,225 8,680
Purchase of property and equipment (12,568) (3,435) (3,257)
Proceeds from sale of subsidiary - - 613
Other (315) 190 (111)
Net cash provided (used) for investing
activities (11,668) (10,160) (9,328)
Cash flows from financing activities:
Notes payable and current debt (299) 282 (376)
Reduction of long-term debt (311) (521) (552)
Issuance of common stock 711 680 295
Net cash provided (used) in financing
activities 101 441 (633)
Effect of exchange rate changes on cash (94) (444) 143
Increase (decrease) in cash and cash equivalents (5,092) (257) 2,383
Cash and cash equivalents - beginning of year 9,453 9,710 7,327
Cash and cash equivalents - end of year $ 4,361 $ 9,453 $ 9,710
</TABLE>
<TABLE>
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<CAPTION>
Unrealized
Capital Gain on Cumulative
in Excess Retained Marketable Translation
Common Stock Par Value Earnings Securities Adjustment
Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1993 12,607,707 $126 $20,026 $23,558 $ - $133
Net income - - - 7,895 - -
Translation adjustment - - - - - 37
Employee stock purchase
plans 29,766 - 295 - - -
Balance - December 31, 1993 12,637,473 126 20,321 31,453 - 170
Net income - - - 9,955 - -
Translation adjustment - - - - - 8
Unrealized gain on
marketable securities - - - - 1,038 -
Business combinations
(Note 2) 7,000 - 102 - - -
Employee stock purchase
plans 56,568 1 577 - - -
Balance - December 31, 1994 12,701,041 127 21,000 41,408 1,038 178
Net income - - - 11,212 - -
Translation adjustment - - - - - 141
Unrealized gain on
marketable securities - - - - 2,656 -
Employee stock purchase
plans 72,143 2 709 - - -
Balance - December 31, 1995 12,773,184 $129 $21,709 $52,620 $3,694 $319
</TABLE>
<TABLE>
TEN-YEAR RESULTS
(In thousands, except per share amounts)
INCOME DATA: (Restated)
(CAPTION>
Year ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Sales $111,610 $96,180 $89,043 $84,017 $77,253
Income from continuing
operations 11,212 9,955 7,895 3,255 5,371
Income from continuing
operations per share $0.88 $0.79 $0.63 $0.26 $0.43
Average shares
outstanding 12,745 12,668 12,624 12,561 12,491
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: (Restated)
<S> <C> <C> <C> <C> <C>
Total assets $125,058 $102,035 $88,826 $82,874 $81,102
Long-term debt 12,441 14,050 13,913 14,630 15,715
</TABLE>
<TABLE>
INCOME DATA: (As Reported)
<CAPTION>
Year ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $111,610 $96,180 $89,043 $50,541 $46,738 $43,553 $36,223 $31,058 $20,464 $15,472
Gross profit 48,397 43,339 39,771 21,507 19,805 18,985 16,213 13,554 8,384 6,689
Pretax income 15,891 13,623 10,792 5,963 5,804 5,444 6,075 4,420 1,616 1,166
Income taxes 4,679 3,668 2,897 1,855 1,902 1,730 2,028 1,430 465 330
Net income 11,212 9,955 7,895 4,528(F1) 3,902 3,714 4,047 2,990 1,151 836
Net income
per share $0.88 $0.79 $0.63 $0.50(F1) $0.43 $0.40 $0.34 $0.25 $0.10 $0.08
Average shares
outstanding 12,745 12,668 12,624 9,065 8,999 9,246 11,853 11,820 11,801 10,773
<FN>
<F1>
Includes an increase in earnings of $420 ($0.05 per share) as a result of adopting the Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes."
</FN>
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: (As Reported)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets $125,058 $102,035 $88,826 $60,300 $54,931 $54,370 $45,884 $43,430 $37,715 $33,328
Working capital 54,224 55,995 45,281 29,471 25,955 21,692 21,117 15,707 13,836 17,660
Long-term debt 12,441 14,050 13,913 13,221 13,697 13,761 3,788 3,664 3,753 3,618
Shareholders'
equity 78,471 63,751 52,070 33,793 28,891 24,720 33,067 28,909 25,598 24,664
</TABLE>
<TABLE>
QUARTERLY INCOME DATA
(In thousands, except per share amounts)
Quarterly Income Data - 1995
<CAPTION>
Quarter Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Sales $26,870 $26,796 $27,176 $30,768
Gross profit 11,912 11,958 11,484 13,043
Net income 2,800 2,671 2,625 3,116
Net income per share $0.22 $0.21 $0.21 $0.24
</TABLE>
<TABLE>
Quarterly Income Data - 1994
<CAPTION>
Quarter Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Sales $23,534 $24,843 $23,383 $24,420
Gross profit 10,478 10,916 10,499 11,446
Net income 2,371 2,503 2,289 2,792
Net income per share $0.19 $0.20 $0.18 $0.22
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. Summary of Significant Accounting Policies
The Company is a manufacturer and marketer of high technology water
purification, fluid filtration, fluid separation, and fluid transfer
equipment, as well as the replaceable components used in
purification, filtration, and separation equipment. These products
are used by a broad range of industrial, commercial and
institutional customers.
The consolidated financial statements include the accounts of
Osmonics, Inc. and its wholly and majority owned subsidiaries (the
Company). Significant intercompany accounts and transactions have
been eliminated.
Sales are recorded when the product is shipped.
The estimated fair value for cash and cash equivalents, trade
accounts receivable, accounts payable, notes payable, and long-term
debt approximates carrying value due to the relatively short-term
nature of the instruments and/or due to the short-term floating
interest rates on the borrowing. The estimated fair value of notes
receivable approximates the net carrying value, as management
believes the respective interest rates are commensurate with the
credit, interest rate, and prepayment risks involved.
The Company considers highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
Inventories are stated at lower of cost (FIFO method) or market for
all operations except the Autotrol subsidiary domestic operations
which have historically valued inventory on the LIFO method.
Depreciation and amortization of property and equipment are provided
on the straight-line method over estimated lives of 3 to 40 years.
Deferred income taxes have been provided for income and expenses
which are recognized in different accounting periods for financial
reporting purposes than for income tax purposes.
The Company accrues for the estimated cost of warranty and start-up
obligations at the time revenue is recognized.
The excess of cost over the fair market value of assets acquired in
acquisitions is amortized over not more than 40 years, with the
majority at 30 years. The carrying values of these intangibles are
reviewed quarterly based on the sales and profitability of the
acquired assets. Other intangibles are carried at cost and
amortized using the straight-line method over their estimated lives
of 5 to 17 years.
Net income per share is based on the weighted average number of
shares outstanding during each year. The exercise of stock options
would not have a material effect on net income per share.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation." The Company will
evaluate adoption of SFAS 123 in 1996.
Certain reclassifications have been made to prior year amounts to
conform with current year presentations.
2. Business Acquisitions
Potential Acquisition:
The Company announced in December 1995 the execution of an agreement
in principle to merge with Desalination Systems Inc. (DESAL) in a
stock transaction valued at approximately $30,000. The outstanding
shares of DESAL will be exchanged on a share-for-share basis for the
Company's common stock. The transaction is structured to qualify as
a tax-free exchange and a "pooling-of-interests" for accounting
purposes. The transaction is expected to add over $20,000 to
Osmonics' 1996 sales.
The transaction will require the approval of a definitive merger
agreement by both companies, regulatory approvals, and the
satisfaction of customary closing conditions.
Completed Acquisitions:
On October 4, 1995, the Company acquired the assets and operations
of Western Filter Co., Denver, Colorado. The purchase price was
approximate $7,000 and included $5,780 of intangible assets.
Western Filter products will be sold through the existing Osmonics
distribution channels, offering a more complete line of water and
waste water treatment options. Revenues of Western Filter were less
than $10,000 in 1994 and 1995. The purchase method of accounting
was used.
On November 18, 1994, the Company acquired the assets of Lakewood
Instruments, Inc. The Company also obtained noncompetition
agreements from two previous Lakewood directors. The purchase
method of accounting was used.
On January 1, 1994, the Company acquired the 18% minority
shareholder interest of its majority-owned subsidiary, Poretics.
The Company owns 100% of Poretics' shares after the transaction.
The purchase method of accounting was used.
These acquisitions had no significant pro forma effect on the
Company's sales, net income, or net income per share in 1995 or
1994.
On October 15, 1993, Autotrol Corporation (Autotrol) merged with
Osmonics through an exchange of 0.77 of a share of Osmonics common
stock for each share of Autotrol common stock. The exchange ratio
and share amounts, when revised to reflect Osmonics' 3-for-2 stock
split on March 21, 1994, equate to an exchange of 1.155 shares of
Osmonics common stock for each of the 3.0 million shares of Autotrol
common stock. The transaction was accounted for as a pooling-of-
interests. Autotrol's principal business is the manufacture and
marketing of controls, valves and measuring devices related to water
conditioning.
The historical financial statements of the Company have been
restated to give effect to the acquisition as though the companies
had operated together from the beginning of the earliest period
presented. Before pooling, results for the first nine months of
1993 for Osmonics were net sales of $41,213 and net income of
$3,678, and for Autotrol were sales of $25,272 and net income of
$2,076.
3. Embezzlement
In February 1993, Autotrol, prior to acquisition by Osmonics,
discovered that a former employee of its French subsidiary had been
embezzling funds for several years. The funds were embezzled
through the issuing of fraudulent checks by the former employee and
falsifying of value added tax (VAT) returns and diverting the funds
received from the French government.
Autotrol's investigation of the embezzlement revealed that
approximately $4,750 was embezzled from 1988 to 1992. The prior
years' financial statements reflect embezzlement losses in the year
the embezzlement initially occurred. The Company had net recoveries
of $562 in 1993 from insurance and reductions in VAT payable.
4. Marketable Securities
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standard No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities," which requires
the Company to report certain marketable securities at fair market
value. The Company considers all of its marketable securities
available-for-sale. Marketable securities at December 31, 1995
consisted of the following:
<TABLE>
<CAPTION>
Fair
Amortized Unrealized Unrealized Market
Cost Gain (Loss) Value
<S> <C> <C> <C> <C>
U.S. government securities
0-5 year maturity $ 4,784 $ 60 $ (23) $ 4,821
6 year or greater maturity 648 24 - 672
Municipal bonds
0-5 year maturity 2,320 112 - 2,432
6 year or greater maturity 4,777 211 - 4,988
Corporate debt securities and other
0-5 year maturity 1,505 24 (43) 1,486
6 year or greater maturity 699 16 - 715
Equity securities 5,616 5,681 (104) 11,193
Total before tax effect $20,349 6,128 (170) $26,307
Deferred tax effect of
unrealized (gain) loss (2,329) 65
Unrealized gain (loss) on marketable
securities $3,799 $(105)
</TABLE>
<TABLE>
Marketable securities at December 31, 1994 consisted of the
following:
<CAPTION>
Fair
Amortized Unrealized Unrealized Market
Cost Gain (Loss) Value
<S> <C> <C> <C> <C>
U.S. government securities
0-5 year maturity $ 6,479 $ - $ (318) $ 6,161
6 year or greater maturity 1,748 - (101) 1,647
Municipal bonds
0-5 year maturity 1,977 100 - 2,077
6 year or greater maturity 6,348 28 (374) 6,002
Corporate debt securities and other
0-5 year maturity 3,764 15 - 3,779
6 year or greater maturity 599 - (44) 555
Equity securities 5,104 2,319 (21) 7,402
Total before tax effect $26,019 2,462 (858) $27,623
Deferred tax effect of
unrealized (gain) loss (869) 303
Unrealized gain (loss) on marketable
securities $1,593 $ (555)
Market values are based on quoted market prices.
</TABLE>
In 1995, proceeds from sales of available-for-sale securities were
$7,037. The net gain on these sales was $919, determined on the
specific identification method.
In 1994, proceeds from sales of available-for-sale securities were
$2,846. There were no material gross realized gains or losses on
these sales, as determined on the specific identification method.
5. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Finished goods $ 4,111 $ 2,578
Work in process 6,964 5,312
Raw materials 15,801 12,187
26,876 20,077
Less adjustment to reduce
inventories of $4,728 and $3,475
to last-in, first-out method
(See Note 1) (649) (649)
$26,227 $19,428
</TABLE>
6. Other Accrued Liabilities
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Warranty and start-up $1,688 $1,942
Professional fees and other accruals 3,466 2,377
Customer deposits 1,748 1,007
Accrued property taxes, income
taxes and other taxes 1,710 1,861
$8,612 $7,187
</TABLE>
7. Debt
<TABLE>
<CAPTION>
Long-term debt is as follows:
December 31,
1995 1994
<S> <C> <C>
Promissory Notes; interest payable
quarterly at the three month LIBOR
rate plus 80 b.p.; due 1996 through
2001. The interest rate on
December 31, 1995 was 6.64%. $10,000 $10,000
Industrial revenue bonds (IRB's);
interest payable at LIBOR plus 45 to
95 b.p. depending on collateral
deposited with the lender; due in 1997.
The interest rate on December 31, 1995
was 6.29%. 2,800 2,800
Mortgage notes payable to two French
banks; interest payable monthly at PIBOR
plus 40 b.p. The interest rate on
December 31, 1995 was 5.43%. 928 993
Term notes payable to municipalities
in varying installments through
October 15, 1995. - 421
Notes Payable; interest payable annually
at the prime rate; due 1996 through 1999.
The interest rate on December 31, 1994
was 8.5%. 258 341
Other notes 150 239
14,136 14,794
Less current portion (1,695) (744)
$12,441 $14,050
</TABLE>
The IRB debt and mortgage notes payable to French banks are
collateralized by real and personal property of the Company.
The aggregate maturities of outstanding long-term debt are:
1996 - $1,695; 1997 - $4,459; 1998 - $1,659; 1999 - $1,659;
2000 - $1,600; beyond 2000 - $3,064.
The interest rate on the IRB's is determined in part by the amount
of collateral held by the lender. At December 31, 1995, $2,000 of
collateral was held by the lender, resulting in an interest rate of
LIBOR plus 45 b.p. The $2,000 of collateral is included in
marketable securities.
The Company has a $1,000 line of credit with a bank, with interest
at the bank reference rate (8.5% at December 31, 1995) and which
requires a 5% compensating cash balance. The line of credit was
unused at year end and the $50 compensating balance is included in
the balance of cash and cash equivalents.
The promissory notes contain a covenant which limits the payment of
dividends to shareholders. At December 31, 1995, approximately
$24,742 of retained earnings was restricted under this covenant. In
addition, the promissory notes and IRB debt contain certain
restrictions related to financial ratios, indebtedness, tangible net
worth and capital expenditures.
Cash payments for interest related to all debts of the Company were
$1,021, $735, and $955, for 1995, 1994, and 1993, respectively.
8. Stock Options
At December 31, 1995, the Company had reserved 86,206 common shares
for issuance to key employees under a 1983 stock option plan.
Options are issued at a price not less than market value on date of
grant and become exercisable over a five-year period, after which
they expire. The following is a summary of activity under the 1983
stock option plan. No additional options can be granted under the
1983 plan.
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Options held by employees
at December 31 86,206 121,126 143,850
Exercise price range on $ 6.45 to $ 3.63 to $ 3.63 to
options held at December 31 $13.50 $13.50 $13.50
Number of options exercised
during the year 34,920 22,724 1,875
Price range of options $ 3.63 to $ 3.63 to $10.16 to
exercised during the year $10.16 $10.16 $10.16
Exercisable options held at
December 31 84,330 97,500 83,289
Exercise price range of $ 6.45 to $ 3.63 to $ 3.63 to
exercisable options $13.50 $13.50 $13.50
</TABLE>
The Company also has reserved 299,313 common shares at December 31,
1995 for issuance to key employees under a 1993 Stock Option Plan.
Options are granted at a price not less than market value on the
date of the grant and become exercisable over a period of up to ten
years, after which they expire. The following is a summary of
activity under the 1993 Stock Option Plan.
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Options held by employees
at December 31 34,163 12,633 2,250
Exercise price range on $13.67 to $13.67 to $13.67
options held at December 31 $18.25 $14.50
Number of options exercised
during the year 500 187 0
Price range of options $14.38 to $13.67 to N/A
exercised during the year $14.38 $13.67
Exercisable options held at
December 31 2,463 375 0
Exercise price range of $13.67 to $13.67 to N/A
exercisable options $14.50 $13.67
</TABLE>
The Company also had a 1985 Employee Stock Purchase Plan. No
additional shares may be issued under the 1985 Plan. The following
is a summary of shares issued under this plan:
<TABLE>
<CAPTION>
1985 Plan
1995 1994 1993
<S> <C> <C> <C>
Number of shares 14,548 34,048 23,380
Average price per share $13.58 $12.80 $10.62
</TABLE>
The 1985 Plan was superseded by the 1995 Employee Stock Purchase
Plan, approved by the shareholders at the 1995 Annual Meeting and
effective June 1, 1995. Employees may purchase common shares of the
Company at 85% of market price. In 1995, 22,175 shares were issued
under the 1995 Plan at an average price per share of $14.79. At
December 31, 1995, 377,825 shares remain unissued in the 1995 Plan.
The Company had 500,000 authorized and unissued shares of preferred
stock at December 31, 1995 and 1994.
In 1993, the Company granted a director an option to purchase
45,000 shares of common stock at an exercise price of $12.33 per
share. This option vests over a five-year period.
In 1995, the Board of Directors adopted a 1995 Director Stock Option
Plan. The plan provides that each director of the Company shall
automatically receive, as of the date of each Annual Meeting of
Shareholders, a non-qualified option to purchase 3,000 shares of the
Company's common stock. The options have a ten year term and are
exercisable one year after the grant date at an exercise price equal
to the fair market value of the shares on the grant date. In 1995,
options to purchase 18,000 shares at a price of $17.13 were issued
under this plan. No options were exercisable at December 31, 1995.
9. Income taxes
Income tax expense consists of:
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
Current:
<S> <C> <C> <C>
Federal $3,975 $3,506 $2,632
State 423 354 134
Foreign 372 156 (250)
Deferred:
Depreciation 30 (229) (157)
Valuation allowance adjustment (197) 0 0
Allowance for doubtful
accounts, start-up, warranty,
inventory and other accruals 310 (247) 10
Discontinued operations 228 350 524
Other (462) (222) 4
$4,679 $3,668 $2,897
</TABLE>
Cash payments for income taxes were $5,079, $3,062, and $2,935, for
1995, 1994, and 1993, respectively.
A reconciliation of the income taxes computed at the Federal
statutory rate to the Company's income tax expense is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Taxes at Federal rate (35% in
1995 and 1994 and 34% in 1993) $5,562 $4,768 $3,670
Increase (decrease) resulting from:
Valuation allowance adjustment (471) (608) (350)
State taxes, net of Federal tax
benefit 203 220 66
Foreign Sales Corp. benefit (190) (167) (159)
Tax credits (271) (272) (209)
Tax exempt interest/dividend
deduction (200) (193) (176)
Effect of foreign affiliates with
different tax rates or net losses 245 (324) (446)
Nondeductibility of merger costs - - 363
Other (199) 244 138
$4,679 $3,668 $2,897
</TABLE>
During 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 109, "Accounting for
Income Taxes," which requires the Company to adjust its deferred tax
assets and liabilities to reflect current tax rates. Osmonics, Inc.
and its subsidiaries adopted the provision of SFAS 109 in reporting
its financial results for 1992, prior to the merger of Osmonics,
Inc. and Autotrol Corporation.
Autotrol Corporation and its subsidiaries adopted SFAS 109 in 1993,
prior to the merger of Osmonics, Inc. and Autotrol Corporation. As
a result of the adoption of SFAS 109, Autotrol Corp. increased its
current deferred tax assets from $0 to $4,328 and its long-term
deferred tax assets from $0 to $14. These increases in deferred tax
assets were accompanied by increases in offsetting valuation
reserves for the same amounts, thus creating no increase or decrease
in income for the year ended December 31, 1993.
As a result of the merger between Osmonics, Inc., and Autotrol Corp.
in 1993, value was created for the deferred tax assets of Autotrol
Corp., due to the deductibility of Autotrol expenses on future
consolidated tax returns. This increased Autotrol Corp.'s equity
value by $2,081 above its previously stated book value prior to the
merger. The combination of adopting SFAS 109, and the merger in
1993, resulted in increased tax expense from continuing operations
for Autotrol Corporation of $384 for the year ended December 31,
1993.
10. Deferred Tax Assets and Liabilities
Temporary differences which give rise to Deferred Tax Assets and
Liabilities are as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
Current assets:
<S> <C> <C>
Allowance for doubtful
accounts, start-up, warranty,
inventory and other accruals $3,674 $3,506
Net operating loss and credit
carryforwards 61 335
Other (16) (30)
Less valuation allowance - (527)
Total current deferred assets $3,719 $3,284
Noncurrent liabilities:
Depreciation $2,360 $2,395
Unrealized gain on marketable
securities 2,264 566
Other 330 (48)
Total non-current deferred
tax liabilities $4,954 $2,913
</TABLE>
The Company had outstanding net operating loss carryforwards and tax
credit carryforwards of $61 and $633 at December 31, 1995 and 1994,
respectively. The carryforwards will expire in the years of 2008 to
2009.
The valuation reserve decreased by $527 to $0 during the year ended
December 31, 1995. This decrease was due to the use of net
operating loss carryforwards and credits during the year, as offsets
against taxable income, and to the determination that the remaining
deferred tax assets are more likely than not to confer future tax
benefits to the Company. The carryforwards outstanding at December
31, 1994 have been fully offset by valuation reserves.
11. Sales and Segment Information
All continuing operations for which geographic data is presented
below are in one principal industry (design, manufacture and
marketing of machines, systems, and components used in the
processing of fluids).
<TABLE>
<CAPTION>
1995 1994 1993
Sales to unaffiliated customers from:
<S> <C> <C> <C>
United States $ 97,791 $ 83,904 $ 77,212
Foreign operations 13,819 12,276 11,831
Transfers from (to) geographic areas:
United States 7,936 6,699 7,139
Foreign operations (7,936) (6,699) (7,139)
$111,610 $ 96,180 $ 89,043
Pretax income from continuing operations:
United States $ 15,248 $ 12,311 $ 10,273
Foreign operations 643 1,312 519
$ 15,891 $ 13,623 $ 10,792
Identifiable assets:
United States $117,047 $ 94,504 $ 79,457
Foreign operations 8,011 7,531 9,369
$125,058 $102,035 $ 88,826
</TABLE>
NOTE: Transfers are made at market value.
Sales by United States operations to unaffiliated customers in
foreign geographic areas are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Asia/Pacific $ 8,745 $ 7,460 $ 6,488
Europe 3,100 3,193 2,611
Rest of the World 8,403 6,211 6,470
$20,248 $16,864 $15,569
</TABLE>
Total international sales for the Company were as follows: 1995 -
$34,067; 1994 - $29,140; and 1993 - $27,400.
12. Commitments and Contingencies
The Company leases facilities for sales, service or manufacturing
purposes in Minnesota, Wisconsin, Massachusetts, California, Iowa,
Arizona, Switzerland, Hong Kong, Japan, Singapore, Indonesia, and
Thailand.
Future minimum lease payments on all operating leases of $3,245 are
as follows: 1996 - $1,064; 1997 - $539; 1998 - $378; 1999 - $281;
2000 - $256; and beyond 2000 - $727. Rent expense for the past
three years was: 1995 - $1,322; 1994 - $1,262; and 1993 - $1,463.
The Company is involved in certain legal actions arising in the
ordinary course of business. In the opinion of management, based on
the advice of legal counsel, such litigation and claims will be
resolved without a material effect on the Company's financial
position or results of operations.
The Company may be required to make additional payments of up to
$2,000 over the period ending December 1998, contingent upon the
sales and gross margins of Western Filter Co.
13. Stock Split
On February 18, 1994, the Company approved a three-for-two stock
split in the form of a 50% stock dividend for shareholders of record
March 4, 1994. All share and per share amounts have been restated
to reflect the stock split.
14. Employee Benefit Plans
The Company has a noncontributory discretionary profit sharing plan
covering certain employees meeting age and length of service
requirements. The Company contributes annually to the plan an
amount established at the discretion of the Board of Directors.
Total expense recognized by the Company under these plans amounted
to $846, $982, and $816 in 1995, 1994, and 1993, respectively.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Osmonics, Inc. Minnetonka, Minnesota
We have audited the consolidated balance sheets of Osmonics, Inc. and
subsidiaries (the Company) as of December 31, 1995 and 1994 and the related
consolidated statements of income, changes in shareholders' 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 the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Osmonics, Inc. and
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their 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 4 to the financial statements, in 1994 the Company adopted
Statment of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
February 9, 1996
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
(Dollars in thousands, except per share amounts)
As an aid to understanding the Company's operating
results, the following table indicates the percentage of
sales that each income statement item represents, and the
percentage increase or decrease in such items for the
years indicated.
<CAPTION>
Year ended December 31, (Decrease)
1995 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 16.0% 8.0%
Cost of sales 56.6 54.9 55.3 19.6 7.2
Gross profit 43.4 45.1 44.7 11.7 9.0
Operating expenses:
Selling, general and administrative 23.7 24.4 24.5 12.5 7.5
Research, development and engineering 7.0 7.5 7.6 8.4 5.6
Embezzlement recovery - - (0.6) - -
Merger & transition expenses - - 1.9 - -
30.7 31.9 33.4 11.5 3.2
Income from operations 12.7 13.2 11.3 12.0 26.2
Other income (expense), net:
Interest income 1.5 1.6 1.4 6.9 20.6
Interest expense (1.0) (0.8) (1.1) 42.0 (20.8)
Other income (expense) 1.0 0.1 0.5 674.7 (64.6)
1.5 1.0 0.8 80.0 27.3
Income from continuing operations
before income taxes 14.2 14.2 12.1 16.6 26.2
Income taxes 4.2 3.8 3.3 27.6 26.6
Net income 10.0% 10.4% 8.9% 12.6% 26.1%
</TABLE>
RESULTS OF OPERATIONS
Sales:
Sales for 1995 increased by 16% over 1994 and sales for 1994 increased
by 8% over 1993. The Company's sales are composed of capital equipment
and replaceable components. The ratio of equipment sales compared to
replaceable component sales as a percent of total sales was at 56% in
1995 compared to 60% for both 1994 and 1993. International sales
increased at the same rate as domestic sales in 1995, due to improved
markets and selling efforts in the Asia/Pacific and Americas areas. The
1995 sales growth also benefited from the October 1995 acquisition of
Western Filter and the November 1994 acquisition of Lakewood
Instruments.
The increase in sales for 1994 was strongly influenced by an increase in
crossflow filtration equipment and systems activity, with lesser
influence from growth in the sales of certain replaceable component
product lines. Osmonics' core product lines showed sales increases of
13% for the year, while Autotrol product sales were flat with 1993. In
1995, Autotrol began selling Osmonics' products through their existing
sales organization.
The dollar amount of the Company's backlog of orders considered to be
firm at December 31, 1995 was $20,600. The comparable backlog at
December 31, 1994 was $15,700. The Company believes that its backlog at
any time is not necessarily indicative of annual sales. The business of
the Company is not subject to significant seasonal variations.
Selective price increases averaged less than 1% from 1994 to 1995, and
less than 1% from 1993 to 1994.
Gross Margins:
Gross margins for 1995 decreased to 43.4% of sales, due to an increased
mix of sales of lower margin products, increased material costs, and
more aggressive pricing. Gross margins for 1994 had increased to 45.1%
of sales compared to 44.7% in 1993 as a result of better management of
costs on system sales, value engineering of equipment, reduced
manufacturing costs on replaceable products and improved plant
utilization rates on the higher sales volume.
Operating Expenses:
Selling, general and administrative expenses in both 1995 and 1994
increased in dollars from the preceding year's level. Increases were
attributable to increased marketing programs and expanded domestic and
international selling efforts. As a percent of sales, the ratio
declined slightly in 1995, as a result of continued cost savings in the
administrative area as recent acquisitions into Osmonics are
assimilated.
Research, development and engineering expense increased in each of the
past three years at a rate lower than the increase in sales. For 1995,
RD&E was $7,779 or 7.0% of sales, RD&E expense was $7,174 or 7.5% of
sales, and $6,795 and 7.6% of sales in 1994 and 1993, respectively.
During 1993, the Company incurred $1,644 of merger and transition
expenses related to the acquisition of Autotrol which are non-recurring
in nature, and were not capitalizable in a pooling-of-interests merger.
During late 1993, the Company obtained $562 net recovery of embezzlement
losses incurred at Autotrol's French subsidiary in years prior to the
acquisition by the Company.
Other Income (Expense):
During 1995 and 1994, interest income increased due to increasing
interest rates. Other Income in 1995 includes $104 of currency
translation and exchange losses, compared to $325 of such gains in 1994.
Other income in 1993 includes a $295 gain on the sale of land claimed by
a municipality. Other income was also affected in 1995 and 1993 by the
sale of certain investments at net pretax gains of $919 and $204,
respectively. No such net gains occurred in 1994.
Income Taxes:
The Company's effective tax rates during 1995, 1994, and 1993, were 29%,
27%, and 27%, respectively. The increase in the effective tax rate in
1995 as compared to 1994 and 1993, is primarily due to the deduction of
French embezzlement losses in 1993 and the use of loss carryforwards and
credits at Autotrol and its subsidiaries in 1993 and 1994. These tax
benefits were not repeated in 1995. R&D tax credits and Foreign Sales
Corporation (FSC) tax benefits have increased in 1994 and 1995.
Liquidity and Capital Resources:
At December 31, 1995, the Company had cash and cash equivalents of
$4,361 and marketable securities of $26,307 versus $9,453 and $27,623,
respectively, at December 31, 1994. The net decrease in cash, cash
equivalents and marketable securities resulted primarily from capital
expenditures and acquisitions increases exceeding the cash flows
generated from operations in 1995. The current ratio decreased to 2.9
as of December 31, 1995 from 3.7 as of December 31, 1994.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standard No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." The effect of SFAS 115 was
to increase marketable securities by $1,604 on investment with a cost of
$26,019 in 1994. The current ratio increased to 3.7 as of December 31,
1994 compared to 3.3 as of December 31, 1993, primarily due to the
increased levels of cash and marketable securities.
Net cash provided from operations in 1995, 1994, and 1993 amounted to
$6,569, $9,906, and $12,201, respectively.
The Company's capital expenditures in 1995 were $12,568 compared to
$3,435 in 1994 and $3,257 in 1993. During 1995, the Company purchased
its previously-leased Milwaukee facility for $3,100 and invested $4,557
in the expansion of its Minnetonka facility.
The Company believes that its current cash and investment position, its
cash flow from operations, and amounts available from bank credit will
be adequate to meet its anticipated cash needs for working capital,
capital expenditures, and potential acquisitions during 1996 and 1997.
The Company has not paid cash dividends on its common shares. The Board
of Directors currently intends to retain its earnings for the expansion
of the Company's business.
Factors Affecting Future Performance:
The Company announced in December of 1995, an agreement in principle to
merge with Desalination Systems, Inc. (DESAL) in a stock transaction
valued at $30,000. The transaction is expected to add over $20,000 to
Osmonics' 1996 sales.
The Company believes that in most cases it has been and will be able to
increase selling prices in response to increases in the cost of raw
materials on a timely basis.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." The Company will evaluate adaption of SFAS
123 in 1996.
INDEPENDENT AUDITORS' REPORT
Osmonics, Inc.
We have audited the consolidated financial statements of Osmonics, Inc.
(the Company) as of December 31, 1995 and 1994 and for each of the three
years in the period ended December 31, 1995 and have issued our report
thereon dated February 9, 1996. Such financial statments and report are
included in the Company's 1995 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of the Company, listed in Item 14. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
<TABLE>
OSMONICS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance Charged Charged Balance
at to to at
Beginning Cost and Other End of
Description of Period Expensed Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Current Operations:
Allowance for Doubtful Accounts $1,213 $ 21 $109<F3> $ 216<F1> $1,127
Warranty and Start-up Reserve $1,942 $1,002 $1,256<F2> $1,688
Discontinued Operations:
Allowance for Doubtful Accounts $ 46 $ 46<F1> $ 0
Warranty Reserve $1,961 $ 4<F2> $1,957
Reserve for Discontinued Operations $ 127 $ 127 $ 0
Year Ended December 31, 1994:
Current Operations:
Allowance for Doubtful Accounts $1,195 $ 50 $ 32<F1> $1,213
Warranty and Start-up Reserve $1,921 $1,023 $1,002<F2> $1,942
Discontinued Operations:
Allowance for Doubtful Accounts $ 87 $ 41<F1> $ 46
Warranty Reserve $1,972 $ 10<F2> $1,961
Reserve for Discontinued Operations $ 240 $ 113 $ 127
Year Ended December 31, 1993:
Current Operations:
Allowance for Doubtful Accounts $ 707 $ 501 $ 13<F1> $1,195
Warranty and Start-up Reserve $1,773 $1,018 $ 870<F2> $1,921
Discontinued Operations:
Allowance for Doubtful Accounts $ 149 $ 62<F1> $ 87
Warranty Reserve $2,134 $ 162<F2> $1,972
Reserve for Discontinued Operations $ 549 $ 309 $ 240
<FN>
<F1>
Uncollectible accounts charged against allowance.
<F2>
Actual warranty claims and start-up costs charged against reserve.
<F3>
Addition due to acquisition.
</TABLE>
