<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
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[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 30, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to ______________
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Commission File No. 1-7744
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PACIFIC SCIENTIFIC COMPANY
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-0744970
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
620 Newport Center Drive, Suite 700 92660
Newport Beach, California (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 714/720-1714
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, par value $1.00 per share New York Stock Exchange
7-3/4% Convertible Subordinated Debentures New York Stock Exchange
due June 15, 2003
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed on the basis of $19.625 per share, which was the last sale
price on the New York Stock Exchange on March 3, 1995, was $215,528,736.
As of the latest practicable date, there were 10,982,356 shares of registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for the fiscal year ended December 30, 1994 (only
specific portions of which are incorporated by reference in Parts I and II);
definitive Proxy Statement to be filed pursuant to Regulation 14A relating to
the 1995 Annual Meeting of Stockholders (incorporated by reference in Part
III).
The Exhibit Index begins on Page 16
<PAGE> 1
ELECTRICAL EQUIPMENT
MOTION TECHNOLOGY
The Motion Technology Division is a leader in motion-control systems. These
systems utilize both brushless and stepper motor technologies. The division
also provides PC-based motion-control solutions for multi-axis applications in
factory automation. Motion technology continues to be a fast-growing business
with sales growth above 20 percent per year and superior earnings.
The Company has become one of the top suppliers to manufacturers of packaging
machinery, semiconductor equipment, electronic assembly equipment and postal
equipment. All of these businesses are going through a period of aggressive
automation, which provides unique opportunities for Pacific Scientific.
As an additional service to our customers, Pacific Scientific will assemble
complete motion-control systems in which controllers, drives, motors, cabinets
and cables are integrated with the mechanical parts of the system. These
systems-integration jobs can run as high as $1 million or more in price. Recent
jobs have involved the application of Pacific Scientific motion technology for
the very high speed packaging of cookies and candy.
Starting in early 1995, the Company will be delivering new lines of brushless
and stepper motor drives. The new brushless drive is all-digital. Both drives
use application-specific integrated circuits to achieve lower costs and higher
levels of performance and reliability.
Pacific Scientific has become the U.S. leader adopting SERCOS (SErialReal-time
COmmunication Systems). This is a European standard which uses fiber optics for
error-free, digital communication between controllers and motor drives; it
replaces bulky, expensive and interference-prone bundles of copper wire. The
new brushless and stepping motor drives and controllers that the Company is
introducing will be SERCOS-compatible.
During 1994, the division's Charlestown, Massachusetts facility received ISO
9001 certification. This certification is expected to assist the sale of our
products within the European Community. ISO certification has become even more
important with the recent acquisition of Bautz, which directly serves the
German market.
1. [PHOTO]
1. In 1995, Pacific Scientific will start to deliver this new
indexer-drive combination for stepper motors. This drive offers lower
cost, smaller size and higher performance than was previously available.
2. [PHOTO]
2. This motion controller based on an industrial PC allows users maximum
flexibility in designing multi-axis, cost-effective motion control solutions.
[PHOTO]
William T. Fejes, President,
Motion Technology Division
8
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[FULL PAGE PHOTO]
9
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ELECTRICAL EQUIPMENT
[FULL PAGE PHOTO]
10
<PAGE> 4
FISHER PIERCE
Last year saw notable achievements at Fisher Pierce, a leading manufacturer of
outdoor lighting controls (OLC) and power-distribution controls for the
electric utility industry. Sales shot up by 30 percent, and Fisher Pierce
returned to profitability in the second half of 1994 after reporting sizable
losses for several consecutive quarters.
Fisher Pierce commands more than half of the U.S. market for rugged, highly
reliable photoelectric street and roadway OLCs. In addition, Fisher Pierce has
established itself in the market for lighting controls aimed at consumer,
commercial and industrial customers. Marketed under the Minuteman(TM) brand
name, these products are now displayed on the shelves of hardware and building
supply stores, and can also be found installed in parking lot lights, yard
lights and security lighting systems.
Early in 1994, we increased our share of the international OLC market by
acquiring Royce Thompson, Ltd., the leading supplier of OLCs in the United
Kingdom. This move reflects our business philosophy of extending our core
technologies to international markets.
Fisher Pierce manufactures its OLCs on a 60-station, automated production line
that can turn out several different models of OLCs concurrently. Production is
now running at more than 1,000 units per hour.
Fisher Pierce also manufactures a range of products that enable utility
companies to distribute electricity more efficiently, thereby reducing the need
for costly new power generation plants.
Patented fault indicators "learn" normal power line conditions and transmit a
signal when a short circuit or over-current condition occurs, enabling power
companies to locate problem sites more rapidly.
In addition, Fisher Pierce is producing a line of metering instruments that let
utility companies determine if their electric meters have been properly
installed, thereby guarding against underbilling for power usage.
1. [PHOTO]
1. A new patented fault indicator will also now be equipped with
a radio transmitter, allowing service personnel to detect
any overload conditions by driving by.
2. [PHOTO]
2. This new electronic OLC consumes less power. It allows street lights
to go ON earlier in the evening when there is heavy traffic,
and OFF earlier in the morning when there is a minimum amount of traffic.
A patented feature also allows street lights to go OFF during
low-traffic hours in the middle of the night and turn ON again before dawn.
[PHOTO]
Steven L. Breitzka, President,
Fisher Pierce Division
11
<PAGE> 5
ELECTRICAL EQUIPMENT
INSTRUMENTS
The Instruments Division, composed of HIAC/ROYCO and High Yield Technology
(HYT), had an excellent year. Sales were up 28 percent and operating profit was
the best ever.
Pacific Scientific is a worldwide leader in particle-detection and
particle-measurement technology. Over 43 percent of the sales in the
Instruments Division are made to customers outside the U.S.
The HIAC/ROYCO product line of liquid particle monitors continues to produce
very favorable returns. This line is sold for use in the semiconductor market
as well as for hydraulic and pharmaceutical applications. The testing of
drinking water has become an important market for the Company's liquid particle
monitors.
During the past few months, HIAC/ROYCO has introduced several new air particle
counters. These products are used in clean rooms to test air filters and in
some food-processing plants.
The area of greatest growth for this division has been in HYT's in situ vacuum
particle-monitoring systems for the semiconductor industry. The Company clearly
has technological leadership in this area, and it has a very large share of the
market. To maintain this leadership, the Company is currently developing
several new products.
Another product exclusive to Pacific Scientific is the Optical Production
Profiler (OPP). The OPP's unique technology nondestructively images defects
located within the silicon wafers. This allows integrated circuit (IC)
manufacturers to detect defects before expensive wafer processing is completed.
IC manufacturers are increasingly using the OPP in new applications. The
increasing number of applications means increased market opportunities for the
OPP as a production tool.
1. [PHOTO]
1. This represents a new generation of external, modular particle sensors,
which significantly expand the market. The sensor's protected optical
elements allow real-time particle monitoring in the harsh environments
found in many semiconductor manufacturing processes.
2. [PHOTO]
2. This vacuum particle sensor monitors particle levels in equipment
used in semiconductor manufacturing. The sensor indicates changes
in process conditions which can reduce manufacturing yield.
[PHOTO]
Joseph R. Monkowski, Ph.D.,
President, Instruments Division
12
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[FULL PAGE PHOTO]
13
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ELECTRICAL EQUIPMENT
[FULL PAGE PHOTO]
14
<PAGE> 8
SOLIUM
At the end of 1994, the Company formed a new subsidiary, Solium Inc., to market
a revolutionary family of electronic lighting controls and fully featured,
low-cost electronic ballasts. This technology, called Solium(TM), is the latest
in an evolving line of products that have made Pacific Scientific the world
leader in outdoor lighting controls. Patents are pending.
The mission of Solium Inc. is to:
o Be the first to provide the industry with low-cost electronic ballasts and
controls that optimize compact fluorescent lighting performance.
o Develop its advanced technologies for a wide variety of lighting
applications.
o Develop strategic alliances that will facilitate the rapid worldwide
distribution of proprietary Solium products.
The first products to be delivered in 1995 will be compact fluorescent wire-in
ballast/controls. These products will be incorporated into standard lighting
fixtures and directly marketed by Pacific Scientific. They can be easily dimmed
from a conventional wall dimmer. They can also be automatically dimmed based on
the level of natural light. No additional control wires are required.
In 1995, Solium Inc. will also produce its screw-in line of compact fluorescent
light systems. These products will be able to directly replace incandescent
bulbs. They feature a built-in dimming device, will provide energy savings in
the range of 80 percent, and will last as much as 13 times longer than an
incandescent light bulb. We believe that over half of the 2.4 billion
incandescent and fluorescent bulbs and lamps sold in the U.S. could eventually
be replaced by CFL units. Because this market is so large, we intend to market
the screw-in product line to consumers through strategic partners who have
major established shares of the world lighting market.
Previously, compact fluorescent lamps could not be dimmed in a conventional
light socket due to the risk of overheating and the potential for fire. The
only commercially available way to safely dim compact fluorescent lamps has
been with costly external systems that require expensive alterations to the
electric wiring of buildings.
The market for Solium Inc.'s current products and evolving technologies is
immense, since Solium technology is leading the way towards significant energy,
environmental and consumer savings.
1. [PHOTO]
1. A screw-in Solium system with a built-in reflector could replace
some now-popular PAR-type lamps and provide energy efficiency.
2. [PHOTO]
2. Solium wire-in full-feature ballasts will be sold to manufacturers
of new lighting fixtures and to energy-saving contractors
who upgrade less-efficient fluorescent systems.
[PHOTO]
John M. Ossenmacher, President,
Solium Inc.
15
<PAGE> 9
SAFETY EQUIPMENT
Our Safety Equipment divisions (HTL/Kin-Tech and Energy Dynamics) currently
develop and manufacture products mainly for the aerospace and defense markets.
We are extending the core technologies of these divisions, however, to a
variety of nonaerospace applications in areas such as mass transit and oil
drilling. The core products include fire-suppression and fire-detection
devices, aircraft personnel restraints and pyrotechnics. Other products
include flight-control devices, such as cable tension regulators, rudder pedal
adjusters and cable disconnects.
Our crew restraints have an excellent market position in all three segments of
the aviation industry (commercial, general aviation and military aircraft).
Fire-suppression systems are a traditional strength for our Safety Equipment
operations. Our market share in aircraft and military-vehicle fire-suppression
is approximately 50 percent. For this market, Triodide(TM) is our ozone-friendly
replacement for the fire-suppression agent Halon, which has been banned as an
ozone-depleting chemical. We are actively marketing Triodide for aircraft and
other fire-suppression applications.
We have been expanding our fire-detection and fire-suppression markets to
include other modes of transportation. Our patented thermocouple wire is in use
on aircraft and in military fighting vehicles, as well as trains and passenger
service vehicles.
Design engineers choose our pyrotechnic devices when system specifications
call for small, lightweight components that can perform mechanical functions
reliably and rapidly.
1. [PHOTO]
1. Titanium pressure vessel developed to minimize on-board weight
of fire-suppression for the new Boeing 777.
2. [PHOTO]
2. The Company's patented thermocouple wire, other detectors,
controllers and fire-suppression systems supplied to buses
using clean-burning alternative fuels.
[PHOTO]
Left, Robert L. Day, President,
Energy Dynamics Division
[PHOTO]
Right, Richard G. Knoblock, President,
HTL/Kin-Tech Division
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[FULL PAGE PHOTO]
17
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MANAGEMENT'S REPORT
The responsibility for the integrity and objectivity of the financial data
contained in this annual report rests with the Company's management. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and reflect management's best
judgements and estimates.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that assets are safeguarded against loss or
unauthorized use, and that the financial records are adequate and can be relied
upon to produce financial statements in accordance with generally accepted
accounting principles. The system of internal controls consists, in part, of
organizational arrangements with clearly defined lines of responsibility
and delegation of authority to well trained and qualified people. We believe
this structure provides reasonable assurance that transactions are executed in
accordance with management's authorization. An important element of the control
environment is an ongoing quarterly internal audit program.
To assure the effective administration of a system of internal accounting
controls, we disseminate written policies and procedures and develop an
environment conducive to the effective functioning of internal controls. These
policies and procedures are structured in such a manner to foster the highest
ethical standards in the conduct of the Company's business affairs, and to
comply with all laws.
The annual audit by the independent auditors provides an objective, independent
review of management's discharge of its responsibilities as they relate to the
fairness of reported operating results and financial condition. The auditors
obtain and maintain an understanding of the Company's accounting and financial
controls and conduct such tests and related procedures as they deem necessary.
The Company has an Audit Committee of the Board of Directors, which is composed
solely of outside directors. The Audit Committee meets periodically and
privately with the independent accountants, the internal auditors and the
Company management to review accounting and financial reporting practices, the
work of the independent and internal auditors and the structure and
effectiveness of the system of internal accounting controls.
[PHOTO] [SIGNATURE]
Edgar S. Brower
Chairman, President and
Chief Executive Officer
[SIGNATURE]
Richard V. Plat
Executive Vice President
Chief Financial Officer
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<PAGE> 12
FIVE-YEAR FINANCIAL SUMMARY
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
For the Fiscal Years Ended
December 30, 1994, December 31, 1993, (in thousands except ratios, per share and employee data)
December 25, 1992, December 27, 1991 --------------------------------------------------------------
and December 28, 1990 1994 1993 1992 1991 1990
================================================================================================================
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
- ----------------------------------------------------------------------------------------------------------------
Sales:
Electrical Equipment $167,302 $128,830 $114,795 $108,519 $111,197
Safety Equipment 67,435 66,723 57,854 64,451 72,709
- ----------------------------------------------------------------------------------------------------------------
Total sales 234,737 195,553 172,649 172,970 183,906
Operating income from:
Electrical Equipment 16,948 8,924 8,480 5,662 (1,734)
Safety Equipment 6,568 8,305 5,302 4,229 9,287
Sale of product lines/division - - - 9,225 1,293
- ----------------------------------------------------------------------------------------------------------------
Total 23,516 17,229 13,782 19,116 8,846
Less:
Interest Expense 2,666 1,912 1,929 2,966 3,258
Corporate Expense (net of other income) 5,176 4,111 3,766 4,090 3,812
- ----------------------------------------------------------------------------------------------------------------
Income before taxes 15,674 11,206 8,087 12,060 1,776
Taxes on income 6,152 2,911 2,690 4,017 312
- ----------------------------------------------------------------------------------------------------------------
Net income 9,522 8,295 5,397 8,043 1,464
- ----------------------------------------------------------------------------------------------------------------
Depreciation and amortization 11,819 10,535 8,881 8,912 7,821
Average number of common
or common equivalent
shares outstanding* 11,233 10,815 10,690 10,668 11,016
- ----------------------------------------------------------------------------------------------------------------
PER COMMON SHARE*
Net sales $20.90 $18.08 $16.15 $16.21 $16.70
Income before accounting change (primary) .85 .67 .50 .73 .10
Income before accounting change (fully diluted) .83 .66 .50 .73 .10
Accounting change - .10 - - -
- ----------------------------------------------------------------------------------------------------------------
Net income (fully diluted) .83 .76 .50 .73 .10
Dividends .07 .06 .06 .02 -
- ----------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $172,669 $161,257 $134,567 $135,944 $143,364
Net property 31,168 31,450 28,578 28,920 31,302
Long-term debt 42,311 44,106 27,981 32,856 39,031
Stockholders' equity 91,138 80,956 72,359 69,475 63,111
- ----------------------------------------------------------------------------------------------------------------
OTHER DATA
Working capital ratio 2.6 2.6 2.5 2.5 2.2
Long-term debt-to-capitalization 32% 35% 28% 32% 38%
Employees at year-end 1,848 1,597 1,362 1,382 1,588
Net sales per employee $129,000 $126,500 $125,800 $112,600 $101,000
Sales backlog at year-end 83,555 91,774 77,740 78,749 91,608
Capital expenditures 9,495 7,607 7,777 7,509 8,534
================================================================================================================
</TABLE>
(The above summary should be read in conjunction with the consolidated financial
statements)
*Amounts adjusted to reflect a two-for-one stock split in the form of a 100%
stock dividend effective December 16, 1994.
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<PAGE> 13
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS
The financial results for 1994 improved substantially over those for 1993, as
the Company continued to focus on quality, customer service, competitiveness
and cost efficiency in both its segments -- Electrical Equipment and Safety
Equipment. The accompanying graph shows sales over the last five years for each
of these segments, as well as for businesses divested by the Company.
Sales in 1994 totaled $234.7 million, a 20 percent increase from the prior
year. This amount includes $21.6 million from acquisitions occurring during
1993 and 1994. Without the acquisitions, sales would have been up nine percent.
Sales in the Electrical Equipment segment were up 30 percent in 1994, and sales
in the Safety Equipment segment were up one percent. Without acquisitions,
Electrical Equipment sales would have risen 14 percent, and Safety Equipment
sales would have fallen by 3 percent, due primarily to reductions in the
delivery of new commercial aircraft and in U.S. defense spending. A slight
reduction in Safety Equipment sales is anticipated during the coming year. The
Company is continuing its efforts to diversify the markets served by its Safety
Equipment segment from primarily aerospace and defense to mass transportation,
oil drilling and other areas. The Company also intends to increase the
maintenance parts, service and repair portions of the business.
The Company has realized its near-term objective of achieving 20 percent of
sales outside the U.S. In 1994, 21 percent of total sales were made outside the
U.S., compared to 18 percent in 1993 and 17 percent in 1992. Sales under U.S.
defense contracts (as either a prime contractor or a subcontractor), continue
to decline as a percentage of total sales. Such sales fell to 16 percent in
1994 from 19 percent and 22 percent in 1993 and 1992, respectively.
The order backlog at the end of 1994 was $84 million as compared to $92
million and $78 million at the end of 1993 and 1992, respectively. The backlog
of orders for Electrical Equipment increased between 1993 and 1994 and
decreased for Safety Equipment. The Company continues to obtain large orders in
competitive situations -- the result of its demonstrated ability to rapidly
produce and deliver quality products at low prices.
Gross profit margins, as a percentage of sales, are as follows for the past
three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Gross profit margin 32.1% 30.7% 30.7%
- -------------------------------------------------------------------------------
</TABLE>
The improvement in gross profit margin in 1994 is attributable to continuing
gains in productivity, reductions in manufacturing costs and a "right-sizing"
of each operation within the Company. Average gross margin at Fisher Pierce for
1994 was below the Company's average, but reached the Company average at
year-end. The long-range outlook for Fisher Pierce is excellent, as its market
share continues to rise owing both to new products and improved quality.
As reported in previous years, the Company learned in 1991 that it did not
comply with all U.S. military testing and certification requirements for
certain of its inertia reels used in military aircraft since the 1950s. This
occurred because the Company had believed that it was supplying a completely
proprietary product and, therefore, was not subject to such certification
requirements.
[SALES OF CONTINUING BUSINESSES CHART]
[SALES BY MARKET AREA CHART]
20
<PAGE> 14
As a result, the delivery of certain inertia reels to the U.S. Air Force has
been suspended since mid-1991. Similar products, however, are being purchased
by the U.S. Navy under a procure-ment waiver. Although the testing and
recertification program has taken much more time than originally expected, the
Company still believes the product will be requalified. The suspension of
inertia reel deliveries has reduced sales by $0.5 million to $1.0 million per
year over the past three years. Since 1991, the Safety Equipment segment has
incurred annual expenses of approximately $0.5 million for testing and related
procedures associated with obtaining recertification and meeting other
requirements of the U.S. military.
Selling and marketing expenses, as a percentage of sales, are as follows for
the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Selling and marketing expense 10.3% 9.9% 10.2%
- -------------------------------------------------------------------------------
</TABLE>
Selling and marketing expenses, as a percentage of sales, increased in 1994,
owing to rapid growth in the sale of instruments. Such growth normally requires
a high level of application assistance, which is recognized as a selling and
marketing expense. It is the Company's objective to fully understand the
customer's needs and to meet those needs with a high-quality product, a
competitive price and a rapid and on-schedule delivery. The Company uses direct
salespeople, licensed representatives and distributors to sell its products.
Some products are "private branded" for distribution by others. Direct
salespeople are employed in both the U.S. and Europe; the trend is toward
direct selling where this practice can be economically justified.
General and administrative expenses, as a percentage of sales, are as follows
for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
General and administrative expense 9.8% 10.6% 10.6%
- -------------------------------------------------------------------------------
</TABLE>
General and administrative expenses, as a percentage of sales, decreased in
1994. Included in these expenses is the amortization of assets such as patents;
of trademarks and other intangibles; and of the excess of cost over net assets
of acquired businesses. Such amortization amounted to $1.9 million, $1.7
million and $1.3 million in 1994, 1993 and 1992, respectively. Excluding these
noncash amortization expenses, general and administrative expenses, as
percentage of sales, would have been 9.0 percent, 9.7 percent and 9.9 percent
for 1994, 1993 and 1992, respectively. The decline in the percentage is due to
effective expense control and economies of scale which spread corporate expense
over a larger sales base.
The 1994 percentages have not been adjusted for a $1.3 million nonrecurring
general and administrative pretax expense arising from the settlement of
litigation and related legal costs. Excluding this expense and the
above-mentioned amortization expense, general and administrative expenses for
1994 would have been reduced to 8.4 percent of sales.
Research and development expenses, as a percentage of sales, are as follows
for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Research and development expense 4.5% 4.4% 4.8%
- -------------------------------------------------------------------------------
</TABLE>
[ALLOCATION OF SALES DOLLAR CHART]
[OPERATING INCOME BEFORE GAINS ON SALE OF PRODUCT LINES CHART]
21
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MANAGEMENT'S DISCUSSION & ANALYSIS
Total spending on research and development was higher in 1994 than in 1993.
Spending for research and development rose during 1994 in the Electrical
Equipment segment, but it declined in the Safety Equipment segment. Research
and development expense amounted to 5.3 percent of sales in Electrical
Equipment and 2.4 percent of sales in Safety Equipment. The ratio of R&D
expense to sales is believed to be at the high end of the range for this
expense at similar companies for similar product lines. The Company invests
heavily in R&D because it intends to remain a leader in the technologies in
which it competes. An estimated 25 percent and 50 percent of current annual
sales are from products developed in the past three and five years,
respectively. Revenues from R&D efforts funded by others are included in net
sales in the accompanying financial statements, and the related expenses are
included in cost of sales.
Net interest expense for the past three years is as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Net interest expense $2.7 $1.9 $1.9
- -------------------------------------------------------------------------------
</TABLE>
The increase in net interest expense in 1994 was due to higher levels of
average net borrowing in 1994 and higher effective interest rates. Average
rates on short-term borrowings at the end of 1994, 1993 and 1992 were 5.3
percent, 4.3 percent and 4.7 percent, respectively.
Income before income taxes and the cumulative effect of a change in
accounting principle in 1993 has been as follows for the past three years:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Pretax income from operations $15.7 $11.2 $8.1
- -------------------------------------------------------------------------------
</TABLE>
Although the Company has been an active acquirer of businesses, it is
important to note that only $0.8 million and $1.5 million of the increase in
pretax income in 1994 and 1993, respectively, originated from acquired
operations. In 1994, there was also a $1.3 million nonrecurring expense for
settlement of litigation and related legal costs. Excluding these amounts,
"same store" pretax income before the effect of a change in accounting
principle increased 44 percent and 21 percent in 1994 and 1993, respectively.
The effective income tax rate, as a percentage of pretax income, is as
follows for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Effective income tax rate 39% 35% 33%
- -------------------------------------------------------------------------------
</TABLE>
The effective tax rates were favorably impacted in both 1993 and 1992 by the
recognition of tax loss carryovers. The 1993 rate also benefitted from a
favorable settlement of certain items questioned by the Internal Revenue
Service in connection with a now-completed examination of the Company's federal
tax returns for 1986, 1987 and 1988.
As further described in Note 4 to the financial statements, in 1993 the
Company adopted a newly issued accounting standard
[RESEARCH AND DEVELOPMENT EXPENSE CHART]
[INVENTORY AS PERCENTAGE OF SALES CHART]
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<PAGE> 16
which changed the Company's previous method of accounting for income taxes.
This change resulted in a nonrecurring benefit equal to $1.1 million. The
Company estimates that its effective tax rate in 1995 will be approximately 37
percent.
Net income, before the cumulative effect of a change in account-ing principle
in 1993, as a percentage of sales, is as follows for the past three years:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Net income before cumulative effect
of change in accounting principle 4.0% 3.7% 3.1%
- -------------------------------------------------------------------------------
</TABLE>
It is the Company's near-term objective to achieve a 5.0 percent net return
on sales. The Company continued to progress toward this goal in 1994,
increasing the return on sales to 4.9 percent in the fourth quarter from 4.1
percent in the same quarter of 1993.
After consideration of the two-for-one stock split effected in the form of a
dividend effective December 16, 1994, common and common-equivalent shares used
in computing primary earnings per share increased by 3.9 percent in 1994. This
increase was due to the exercise of stock options and the dilutive effect of
stock options granted but not exercised, based on the average price of the
Company's common stock traded on the New York Stock Exchange throughout 1994.
The fully diluted earnings per share reflect the maximum extent of dilution
resulting from outstanding stock options based on the closing price of the
Company's common stock traded on the New York Stock Exchange on December 30,
1994. The Company's outstanding convertible debentures were anti-dilutive and
were not considered in the calculation of earnings per share.
Pacific Scientific had 1,848 employees at the end of 1994. Over the past
three years, sales per employee (based on the average number of employees,
including part-time employees) have been as follows:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Sales per employee $129,000 $126,500 $125,800
- -------------------------------------------------------------------------------
</TABLE>
Sales per employee in 1994 increased only slightly because this statistic now
includes a full year of operations of the Company's labor-intensive
motor-winding operation in Mexico. Previously, the Company had subcontracted
the winding of motors. With the Mexican operation excluded, 1994 sales per
employee increased to $143,300 per year.
LIQUIDITY AND CAPITAL RESOURCES
The balance sheet of the Company remained strong at the end of 1994. The
current ratio of the Company has improved, as shown in the following table:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Current Assets $90.4 $79.7 $69.4
Current Liabilities $35.1 $31.1 $27.7
Working Capital $55.3 $48.6 $41.7
Current Ratio 2.6 2.6 2.5
- -------------------------------------------------------------------------------
</TABLE>
The Company's experience in collecting receivables from customers has
improved. At the end of 1994, average collections of accounts receivable took
57 days compared to 59 days in 1993.
[TOTAL ASSETS CHART]
[SALES PER EMPLOYEE CHART]
23
<PAGE> 17
MANAGEMENT'S DISCUSSION & ANALYSIS
Inventories were $37.3 million at the end of 1994 compared to $33.5 million
at the end of 1993, an increase of 11.3 percent compared to a sales increase of
20 percent. Inventory turns were 4.7 times per year at the end of 1994 compared
to 4.5 at the end of 1993.
The Company is continuing environmental remediation at one of its former
plant sites and has been designated as potentially responsible, along with
other companies, for remediation of certain waste disposal sites. The Company
establishes reserves for such costs as are probable and reasonably able to be
estimated, and believes that the ultimate liability incurred will not have a
material adverse effect on the financial position of the Company.
At the end of 1994, the Company had cash and short-term investments of $3.4
million, plus $6.1 million of restricted cash representing the proceeds of
Industrial Revenue Bonds that the Company issued in 1989 in anticipation of
building a new manufacturing facility. Total debt at the end of 1994 --
including both short- and long-term bank debt, convertible subordinated
debt and Industrial Revenue Bonds -- totaled $46.0 million, for a
debt-less-cash balance of $36.5 million. The ratio of long-term debt to
capitalization decreased to 32 percent at the end of 1994 as compared to 35
percent and 28 percent at the end of 1993 and 1992, respectively.
The Company continued to invest in plant and equipment in 1994 as part of its
drive to improve productivity and make its products more competitive. During
1994, 1993 and 1992, the Company invested $9.5 million, $7.6 million and $7.8
million, respectively. Total depreciation and amortization was $11.8 million in
1994 and $10.5 million and $8.9 million in 1993 and 1992, respectively.
At the end of 1994, the Company had unused lines of credit of $36.9 million.
The Company believes that internally generated funds will be sufficient to
finance operations, fund planned capital expenditures, pay interest and
dividends, and further reduce debt.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Pacific Scientific Company:
We have audited the accompanying consolidated balance sheets of Pacific
Scientific Company and subsidiaries as of December 30, 1994, December 31, 1993
and December 25, 1992 and the related consolidated statements of operations,
cash flows and stockholders' equity for each of the fiscal years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Pacific Scientific Company and
subsidiaries as of December 30, 1994, December 31, 1993 and December 25, 1992,
and the results of their operations and their cash flows for each of the fiscal
years then ended, in conformity with generally accepted accounting principles.
[Signature]
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 3, 1995
24
<PAGE> 18
CONSOLIDATED STATEMENTS OF OPERATIONS
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
For the Fiscal Years Ended
December 30, 1994, December 31,
1993, and December 25, 1992 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
NET SALES $234,737,000 $195,553,000 $172,649,000
- -------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 159,409,000 135,487,000 119,702,000
Selling and marketing 24,205,000 19,314,000 17,662,000
General and administrative 23,051,000 20,765,000 18,353,000
Research and development 10,521,000 8,584,000 8,235,000
- -------------------------------------------------------------------------------
Total costs and expenses 217,186,000 184,150,000 163,952,000
- -------------------------------------------------------------------------------
Operating income 17,551,000 11,403,000 8,697,000
- -------------------------------------------------------------------------------
OTHER EXPENSE
Interest expense - net (2,666,000) (1,912,000) (1,929,000)
Other income 789,000 1,715,000 1,319,000
- -------------------------------------------------------------------------------
Net other expense (1,877,000) (197,000) (610,000)
- -------------------------------------------------------------------------------
Income before income taxes and
cumulative effect of change
in accounting principle 15,674,000 11,206,000 8,087,000
Income taxes (6,152,000) (3,971,000) (2,690,000)
- -------------------------------------------------------------------------------
Income before cumulative
effect of change in
accounting principle 9,522,000 7,235,000 5,397,000
Cumulative effect of change
in accounting principle - 1,060,000 -
- -------------------------------------------------------------------------------
Net income $ 9,522,000 $ 8,295,000 $ 5,397,000
===============================================================================
EARNINGS PER SHARE
Primary
Before accounting change $0.85 $0.67 $0.50
Change in method of accounting
for income taxes - 0.10 -
- -------------------------------------------------------------------------------
Primary earnings per share $0.85 $0.77 $0.50
- -------------------------------------------------------------------------------
Fully Diluted
Before accounting change $0.83 $0.66 $0.50
Change in method of accounting
for income taxes - 0.10 -
- -------------------------------------------------------------------------------
Fully diluted earnings per share $0.83 $0.76 $0.50
===============================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
25
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
As of December 30, 1994, December 31, 1993 and December 25, 1992 1994 1993 1992
========================================================================================================================
<S> <C> <C> <C>
ASSETS
Current Assets
Cash $ 1,655,000 $ 2,081,000 $ 4,567,000
Short-term investments 1,758,000 1,962,000 1,466,000
Trade receivables -- net 43,435,000 36,666,000 33,448,000
Inventories 37,280,000 33,493,000 26,298,000
Deferred income taxes 4,205,000 3,733,000 2,560,000
Other current assets 2,100,000 1,797,000 1,063,000
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 90,433,000 79,732,000 69,402,000
Net property 31,168,000 31,450,000 28,578,000
Restricted cash 6,071,000 6,092,000 6,099,000
Note receivable 711,000 4,468,000 4,468,000
Property held for sale 3,300,000 -- --
Other assets -- net 40,986,000 39,515,000 26,020,000
- ------------------------------------------------------------------------------------------------------------------------
Total assets $172,669,000 $161,257,000 $134,567,000
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 3,700,000 $ 5,250,000 $ 3,100,000
Accounts payable 15,826,000 14,426,000 12,985,000
Accrued employee compensation and benefits 5,717,000 4,859,000 3,909,000
Other current liabilities 9,904,000 6,580,000 7,683,000
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 35,147,000 31,115,000 27,677,000
- ------------------------------------------------------------------------------------------------------------------------
Bank borrowings 19,400,000 21,000,000 4,500,000
7-3/4% convertible subordinated debentures 17,286,000 17,481,000 17,481,000
Industrial development bonds 5,625,000 5,625,000 6,000,000
Other long term liabilities 4,073,000 5,080,000 6,550,000
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $1 par value 10,939,000 5,398,000 5,340,000
Additional paid-in capital 727,000 4,791,000 3,904,000
Retained earnings 79,472,000 70,767,000 63,115,000
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 91,138,000 80,956,000 72,359,000
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $172,669,000 $161,257,000 $134,567,000
========================================================================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
26
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
Pacific Scientific Company and Subsidiaries
For the Fiscal Years Ended December 30, 1994,
December 31, 1993 and December 25, 1992
<TABLE>
<CAPTION>
1994 1993 1992
=======================================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,522,000 $ 8,295,000 $ 5,397,000
Depreciation and amortization 11,819,000 10,535,000 8,881,000
Deferred income taxes (170,000) (457,000) (237,000)
Decrease in accrued employee benefit plan liabilities (1,309,000) (546,000) (752,000)
Loss on disposal of property 51,000 531,000 159,000
Cumulative effect of change in accounting principle -- (1,060,000) --
Effect on cash of changes in operating assets and liabilities,
net of the effects of business acquisitions and dispositions:
Trade receivables (5,849,000) 175,000 (5,006,000)
Inventories (3,178,000) (2,147,000) 3,463,000
Other current assets (242,000) (672,000) 1,465,000
Accounts payable 294,000 92,000 3,130,000
Accrued employee compensation and benefits 859,000 530,000 53,000
Other current liabilities 3,358,000 (5,009,000) 1,473,000
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 15,155,000 10,267,000 18,026,000
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property (9,495,000) (7,607,000) (7,777,000)
Payments for business acquisitions, net of cash acquired (3,961,000) (23,687,000) --
Proceeds from disposition of property 227,000 212,000 378,000
Decrease (increase) in short-term investments 204,000 (496,000) 3,617,000
Decrease in restricted cash and other assets 129,000 248,000 96,000
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (12,896,000) (31,330,000) (3,686,000)
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt (1,795,000) (375,000) (4,875,000)
Repayments of short-term debt (1,550,000) -- (4,900,000)
Issuances of common stock 1,477,000 945,000 152,000
Cash dividends on common stock (817,000) (643,000) (640,000)
Debt proceeds -- 18,650,000 --
Repurchases of stock -- -- (1,679,000)
Cash dividends on preferred stock -- -- (124,000)
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (2,685,000) 18,577,000 (12,066,000)
- ------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in Cash (426,000) (2,486,000) 2,274,000
Cash, Beginning of Year 2,081,000 4,567,000 2,293,000
- ------------------------------------------------------------------------------------------------------------------------
Cash, End of Year $ 1,655,000 $ 2,081,000 $ 4,567,000
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION
Interest payments $ 3,210,000 $ 2,603,000 $ 2,817,000
Income tax payments 5,190,000 6,192,000 1,932,000
Assets acquired 5,103,000 29,364,000 --
Liabilities assumed 1,142,000 5,677,000 --
========================================================================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
27
<PAGE> 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
Additional
For the Fiscal Years Ended December 30, 1994, Preferred Common Paid-In Retained
December 31, 1993 and December 25, 1992 Stock Stock Capital Earnings Total
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Stockholders' Equity, December 27, 1991 $ 1,990,000 $ 5,335,000 $ 3,749,000 $58,401,000 $69,475,000
Net Income for the Year -- -- -- 5,397,000 5,397,000
Preferred Stock Dividends -- -- -- (43,000) (43,000)
Common Stock Dividends -- -- -- (640,000) (640,000)
Exercise of Employee Options -- 5,000 52,000 -- 57,000
Repurchase of Preferred Stock (1,990,000) -- 8,000 -- (1,982,000)
Amortization of Restricted Stock Award -- -- 95,000 -- 95,000
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity, December 25, 1992 -- 5,340,000 3,904,000 63,115,000 72,359,000
Net Income for the Year -- -- -- 8,295,000 8,295,000
Common Stock Dividends -- -- -- (643,000) (643,000)
Exercise of Employee Options -- 58,000 793,000 -- 851,000
Amortization of Restricted Stock Award -- -- 94,000 -- 94,000
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity, December 31, 1993 -- 5,398,000 4,791,000 70,767,000 80,956,000
Two-for-One Stock Split -- 5,469,000 (5,469,000) -- --
Net Income for the Year -- -- -- 9,522,000 9,522,000
Common Stock Dividends -- -- -- (817,000)
Exercise of Employee Options -- 67,000 1,120,000 -- 1,187,000
Conversion of Debentures -- 5,000 190,000 -- 195,000
Amortization of Restricted Stock Award -- -- 95,000 -- 95,000
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity, December 30, 1994 -- $10,939,000 $ 727,000 $79,472,000 $91,138,000
===================================================================================================================================
</TABLE>
(See accompanying notes to consolidated financial statements)
28
<PAGE> 22
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Pacific Scientific Company and Subsidiaries
<TABLE>
<CAPTION>
Corporate
Expense
Electrical Safety Net of Net
Consolidated Equipment Equipment Other Income Interest
================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended December 30, 1994
Net Sales $234,737,000 $167,302,000 $67,435,000 -- --
Pretax Income 15,674,000 16,948,000 6,568,000 (5,176,000) (2,666,000)
Depreciation and Amortization 11,819,000 7,939,000 3,751,000 129,000 --
Capital Spending(2) 9,495,000 6,127,000 3,348,000 20,000 --
Identifiable Assets(1) 172,669,000 110,252,000 46,645,000 15,772,000 --
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993
Net Sales 195,553,000 128,830,000 66,723,000 -- --
Pretax Income 11,206,000 8,924,000 8,305,000 (4,111,000) (1,912,000)
Depreciation and Amortization 10,535,000 7,212,000 3,188,000 135,000 --
Capital Spending 7,607,000 4,565,000 3,035,000 7,000 --
Identifiable Assets 161,257,000 98,494,000 50,203,000 12,560,000 --
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 25, 1992
Net Sales 172,649,000 114,795,000 57,854,000 -- --
Pretax Income 8,087,000 8,480,000 5,302,000 (3,766,000) (1,929,000)
Depreciation and Amortization 8,881,000 6,355,000 2,376,000 150,000 --
Capital Spending 7,777,000 6,584,000 1,179,000 14,000 --
Identifiable Assets 134,567,000 78,659,000 44,797,000 11,111,000 --
================================================================================================================
</TABLE>
(1) Identifiable assets are those used by the industry segment involved, or an
allocated portion of assets used jointly by two or more segments. Intangibles
and other assets arising from acquisitions of businesses are allocated to the
related segment. General corporate assets primarily consist of cash and certain
other property.
(2) Capital spending is shown exclusive of property purchased in conjunction
with the acquisition of businesses (Note 7).
29
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
For the Fiscal Years Ended December 30, 1994, December 31, 1993 and
December25, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies of Pacific Scientific Company and its subsidiaries (the
Company) conform to generally accepted accounting principles and are summarized
below for the convenience of financial statement readers.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and all its subsidiaries. All material intercompany balances and
transactions have been eliminated. Most foreign subsidiary accounts are stated
as of November 30 of each year.
Fiscal Year
The Company's fiscal year ends on the last Friday in December. References to
1994, 1993 and 1992 in these financial statements refer to the fiscal years
ended December 30, 1994, December 31, 1993 and December 25, 1992, respectively.
Long-Term Contracts
The Company enters into some long-term fixed price contracts for the production
of products. For financial statement purposes, sales are generally recorded as
deliveries are made on the percentage-of-completion basis of accounting.
Unbilled costs on these contracts are included in inventory balances in the
accompanying consolidated financial statements. Progress payments are netted
against work-in-process inventory balances and were $856,000, $2,346,000 and
$1,803,000 at the end of 1994, 1993 and 1992, respectively. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
Fair Value of Financial Instruments
The recorded amounts of cash, trade receivables, accounts payable and short-
and long-term borrowings approximate their fair values.
At December 30, 1994, all of the Company's investments represent short-term
available-for-sale securities and have been recorded at fair value which
approximates historical cost of the investments. These investments are
primarily composed of debt securities of municipalities of the Commonwealth of
Puerto Rico with contractual maturities beginning in 1998 or later.
Fair values are estimated using quoted market prices and other appropriate
valuation techniques based on information available as of December 30, 1994.
Trade Receivables
Trade receivables are presented net of the related allowance for doubtful
accounts, which at year-end totaled $929,000, $668,000 and $629,000 in 1994,
1993 and 1992, respectively. Allowances are determined principally on the basis
of past collection experience.
Inventories
Inventories are stated at the lower of average cost or market and at year-end
consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Finished goods $ 4,263 $ 3,914 $ 3,281
Work-in-process 11,866 13,244 11,237
Raw material and purchased parts 21,151 16,335 11,780
- -------------------------------------------------------------------------------
Total inventories $37,280 $33,493 $26,298
- -------------------------------------------------------------------------------
</TABLE>
Property and Depreciation
Property is recorded at cost. Additions, major renewals and improvements which
extend the useful life of the property are capitalized. Maintenance, repairs
and minor renewals are expensed.
Depreciation of property is computed generally by the straight-line method
over the useful lives of the various classes of assets. Such lives range from 5
to 20 years for buildings and improvements, and from 3 to 10 years for
machinery and equipment. When property is retired or otherwise disposed of, the
cost and accumulated depreciation are removed from the appropriate accounts and
any gain or loss is included in the results of current operations.
Net property at year-end consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Land, building and improvements $13,187 $ 9,160 $ 8,762
Machinery and equipment 70,630 65,967 54,944
- -------------------------------------------------------------------------------
Total 83,817 75,127 63,706
Less accumulated depreciation 52,649 43,677 35,128
- -------------------------------------------------------------------------------
Net property $31,168 $31,450 $28,578
- -------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 24
Other Assets
Other assets at year-end consist of the following, net of accumulated
amortization:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Excess of cost over net assets of
acquired businesses $35,143 $32,936 $20,237
Patents, trademarks, purchased
technology and other intangibles 4,130 4,952 4,253
Notes receivable and other assets 1,713 1,627 1,530
- -------------------------------------------------------------------------------
Total other assets - net $40,986 $39,515 $26,020
- -------------------------------------------------------------------------------
</TABLE>
The excess of cost over net assets of acquired businesses is amortized, using
the straight-line method, over periods not exceeding 40 years. Patents,
trademarks, purchased technology and other intangibles are amortized, using the
straight-line method, over estimated useful lives of 5 to 17 years. The Company
periodically reviews goodwill to assess recoverability, and impairments would
be recognized in operating results if a permanent diminution in value were to
occur. Accumulated amortization of other assets at year-end totaled
$11,815,000, $9,874,000 and $8,126,000 in 1994, 1993 and 1992, respectively.
Earnings per Share
Net income per common and common equivalent share is computed by dividing net
income, adjusted in 1992 for dividends on preferred stock, by the average
number of shares of common stock and dilutive common stock equivalents (stock
options) outstanding each year, totaling 11,233,000 in 1994, 10,815,000 in 1993
and 10,690,000 in 1992. Fully diluted net income per share for 1994 reflects
the maximum dilution, based on the closing price of the Company's common stock
as traded on the New York Stock Exchange on December 30, 1994, and is computed
based on 11,436,000 shares. Shares used for calculating fully diluted earnings
in 1993 and 1992 totaled 11,010,000 and 10,761,000, respectively. The
computation of primary and fully diluted earnings per share does not include
the effect of the potential conversion of the Company's convertible
subordinated debentures, as these securities are not considered common stock
equivalents and were anti-dilutive in the computation of fully diluted earnings
per share.
Other
On December 8, 1994, the Company declared a two-for-one stock split of the
Company's common stock, in the form of a 100% stock dividend, payable on
January 9, 1995 to stockholders of record on December 16, 1994. All share and
per share amounts included in the accompanying consolidated financial
statements and notes have been retroactively adjusted to reflect the
two-for-one stock split.
Reclassifications
Certain amounts previously reported for 1992 and 1993 have been reclassified to
conform to the 1994 financial statement presentation.
2. BORROWINGS
In 1983, the Company issued $30,000,000 of 7 3/4% convertible subordinated
debentures, which are convertible into common stock at any time prior to
maturity at a conversion price of $38 per share. As a result of the two-for-one
stock split, more fully described in Note 1, this conversion price was reduced
to $19 per share. The Company is required to commence annual sinking fund
payments in 2001, sufficient to retire $2,286,000 of the debentures by 2002,
with all remaining debentures becoming due on June 15, 2003. Interest is
payable semiannually on June 15 and December 15. The debentures can be redeemed
by the Company at par. The debentures are subordinated to all of the Company's
existing and future senior debt. The indenture agreement places restrictions on
the aggregate amount of common stock dividends payable and the repurchase of
the Company's common stock. At December 30, 1994, over $60,000,000 of retained
earnings were unrestricted under these provisions.
The Company maintains $60,000,000 of unsecured lines of credit, of which
$23,100,000 was outstanding and an additional $2,500,000 was committed to back
standby letters of credit on December 30, 1994. All $60,000,000 can be borrowed
at rates that do not exceed one percent (1%) over the London Interbank Offered
Rate (LIBOR) or at the bank's prime rate. The average interest rate on borrowed
funds at the end of 1994 was 5.3%. Of the unsecured lines of credit at December
30, 1994, $20,000,000 was classified as a short-term working capital line, of
which $3,700,000 is outstanding; and $40,000,000 was a long-term committed
credit line, of which $19,400,000 was outstanding. The long-term credit lines
expire on July 31, 1996.
31
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
In October 1989, the Company issued $7,500,000 of 30-year industrial
development revenue bonds to finance the construction of an industrial facility
in the city of Oxnard, California, for use by the Company's Electro Kinetics
Division. These bonds have a floating interest rate, adjusted weekly, based on
current market rates for tax-exempt bonds (interest rate at December 30, 1994
was 5.95%). The Company is obligated to pay the remaining principal balance of
$5,625,000 in 2019. The portion of the bond proceeds not yet expended for
construction costs is held in trust and classified as restricted cash of
$6,071,000 in the accompanying consolidated balance sheet at December 30, 1994.
The bank agreement and industrial development bonds have loan covenants which
require the Company to maintain certain financial statement ratios. The Company
is in compliance with all required ratios at December 30, 1994.
Debt, including the short-term portion at December 30, 1994, matures as
follows: 1995, $3,700,000; 1996, $19,400,000; 1997, 1998 and 1999, none; later
years, $22,911,000.
3. EMPLOYEE RETIREMENT BENEFIT PLANS
The Company has noncontributory defined benefit pension plans covering
substantially all of its U.S. employees. Non-U.S. subsidiaries have separate
plans. Benefits are generally determined by a formula based on years of
service, final average salary and estimated social security benefits. In
addition, the Company has a non-qualified supplemental defined benefit plan
applicable to certain senior executives and a directors retirement plan, both
of which provide unfunded benefits. Pension expense for the qualified plan
totaled $1,116,000, $728,000 and $549,000 in 1994, 1993 and 1992, respectively.
Pension expense consists of the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992 / N
===============================================================================
<S> <C> <C> <C>
Benefits earned during the year $ 1,792 $ 1,486 $ 1,522
Interest on projected benefit obligation 3,555 3,468 3,372
Gain on plan assets (4,132) (4,189) (4,292)
Net amortization and deferral (99) (37) (53)
- -------------------------------------------------------------------------------
Net pension expense $ 1,116 $ 728 $ 549
- -------------------------------------------------------------------------------
</TABLE>
The following is a reconciliation of the funded status of the qualified
plans, including the amount included in current and non-current employee
benefit plan liabilities in the accompanying consolidated balance sheets.
Pension plan assets consist of corporate equity and debt securities,
unallocated insurance contracts, real estate and short-term investments. The
amounts shown for 1994 are estimates made by the plans' actuary, while the
amounts for 1993 and 1992 have been adjusted to amounts based on final
calculations performed by the plans' actuary.
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
=========================================================================================
<S> <C> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested $ 42,759 $ 42,720 $ 36,629
Non-vested 1,407 1,549 1,206
- -----------------------------------------------------------------------------------------
Total 44,166 44,269 37,835
Effect of estimated future salary increase 4,584 4,586 4,365
- -----------------------------------------------------------------------------------------
Projected benefit obligation 48,750 48,855 42,200
Plan assets at fair market value (48,486) (45,094) (42,060)
- -----------------------------------------------------------------------------------------
Projected benefit obligation over plan assets 264 3,761 140
Unrecognized transition asset 757 1,072 1,387
Unrecognized net actuarial experience gain (loss) 584 (2,319) 1,637
- -----------------------------------------------------------------------------------------
Recorded pension liabilities $ 1,605 $ 2,514 $ 3,164
- -----------------------------------------------------------------------------------------
</TABLE>
Significant assumptions used in the determination of pension expense at the
beginning of each fiscal year consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Discount rate on projected benefit obligation 7.5% 8.5% 8.5%
- -------------------------------------------------------------------------------
Long-term rate of return on plan assets 8.75% 9.25% 10.0%
- -------------------------------------------------------------------------------
Rate of future salary increases 4.5% 5.0% 5.0%
- -------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 26
During 1994, the Company changed the expected rate of return on pension
assets from 9.25% to 8.75%. The effect of this change was an increase in 1994
pension expense of $225,000. At the end of 1994, the Company changed the
assumed discount rate from 7.5% to 8.5%, and revised its demographic
assumptions. These changes caused a net decrease in the projected bene-fit
obligation of $2,600,000.
The Company uses the projected unit credit method for determining both
pension expense and the annual contribution to the plans. The Company's funding
policy is to contribute an amount subject to the minimum and maximum
contributions allowed for federal income tax purposes. Cumulative contributions
to the plans have in total been less than recorded pension expense, due to
Internal Revenue Service limitations on contributions to plans which have been
defined by income tax regulations as being overfunded. The difference between
cumulative pension expense and contributions has been classified in current and
non-current liabilities in the accompanying consolidated balance sheets, based
on expected contribution funding dates.
The Company also has a defined contribution employee savings plan available
to substantially all of its U.S. employees. For participating employees, the
Company makes a matching contribution up to a percentage of employee
contributions, as defined. Matching contribution expense for the plan totaled
$906,000, $718,000 and $639,000 in 1994, 1993 and 1992, respectively.
4. INCOME TAXES
The income tax provision consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Current
Federal income taxes $4,840 $3,416 $2,341
State and foreign income taxes 1,482 1,012 586
- -------------------------------------------------------------------------------
Total current tax provision 6,322 4,428 2,927
Deferred (170) (457) (237)
- -------------------------------------------------------------------------------
Total income tax provision $6,152 $3,971 $2,690
- -------------------------------------------------------------------------------
</TABLE>
The differences between the income tax provision and income taxes computed
using the U.S. Federal statutory income tax rates (35% in 1994 and 1993 and 34%
in 1992) consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Tax at U.S. Federal rate $5,486 $3,922 $2,748
State income taxes, net of Federal tax benefit 709 571 380
Amortization of certain other assets 330 253 202
Tax benefit of foreign sales corporation (200) (220) (166)
Effect of foreign operations 187 193 273
Tax benefit of research and development credits (100) (465) (222)
Tax benefit of IRS examination settlement - (264) -
Tax benefit of loss and credit carryforwards - - (674)
- -------------------------------------------------------------------------------
Other (260) (19) 149
- -------------------------------------------------------------------------------
Income tax provision $6,152 $3,971 $2,690
- -------------------------------------------------------------------------------
</TABLE>
Effective as of the beginning of fiscal year 1993, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The adoption of this standard allowed the Company to recognize
income tax benefits from loss carryforwards and certain temporary differences
(primarily accrued employee benefit plan liabilities) for which tax benefits
had not previously been recorded. The Company's adoption of SFAS 109, recorded
as the cumulative effect of a change in accounting principle, increased the net
deferred tax asset at December 26, 1992 by approximately $1,060,000 with a
corresponding increase to net income.
Additionally, in connection with the adoption of SFAS 109, the Company's net
deferred tax asset was increased by approximately $580,000 to record the
benefit of net operating losses related to the acquisition of High Yield
Technology, Inc. with a corresponding decrease to previously recognized
intangible assets. The decrease resulted in an immaterial reduction of
amortization expenses in 1994 and 1993.
The Company has available tax net operating losses, subject to certain
limitations, of approximately $2,500,000 which expire at various dates through
2009.
33
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
Net deferred taxes of $2,370,000 at December 30, 1994 and $2,200,000 at
December 31, 1993 were related to:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- -------------------------------------------------------------------------------
Current Long-Term Current Long-Term
===============================================================================
<S> <C> <C> <C> <C>
ASSETS
Inventory $2,007 - $2,027 -
Employee Benefits - $ 877 - $1,156
Accrued Liabilities 1,138 - 820 -
Net Operating Losses 347 585 - 800
Warranty Liabilities 502 - 523 -
Environmental Liabilities - 301 - 403
Receivables 337 - 242 -
Other 101 - 203 84
Valuation Allowance (227) (332) - (272)
LIABILITIES
Property - (2,615) - (2,897)
Patents/Trademarks - (633) - (807)
Other - (18) (82) -
- -------------------------------------------------------------------------------
Net Deferred Tax Asset
(Liability) $4,205 ($1,835) $3,733 ($1,533)
- -------------------------------------------------------------------------------
</TABLE>
The valuation allowance was increased by $287,000 during 1994.
5. STOCKHOLDERS' EQUITY
The Company has authorized 2,000,000 shares of preferred stock and 15,000,000
shares of common stock, of which 10,939,000 shares of common stock were
outstanding at December 30, 1994.
The Company maintains a stock option plan which provides for the granting of
options for the purchase of common stock to the officers and certain other key
employees. No compensation expense has been recorded, since the options have
exercise prices which are equal to the fair market value of the stock on the
respective dates of grant. Stock options outstanding represent cumulative
grants of options from the 1992 plan and two predecessor plans. The 1992 plan
limits options available for grant to 637,574 shares of common stock and
additionally provides for options canceled to become available for future
grants. Stock option activity during 1994, 1993 and 1992 consists of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
Stock options outstanding,
beginning of year 832,312 657,002 789,602
Options granted
(per share: $5.125 to $17.50) 324,800 345,960 5,000
Options canceled
(per share: $4.375 to $8.00) (30,750) (54,650) (127,600)
Options exercised
(per share: $4.375 to $8.00) (133,590) (116,000) (10,000)
- -------------------------------------------------------------------------------
Stock options outstanding, end of year 992,772 832,312 657,002
- -------------------------------------------------------------------------------
Stock options exercisable, end of year 385,058 449,252 545,252
- -------------------------------------------------------------------------------
Options available for grant, end of year 6,214 300,264 637,574
- -------------------------------------------------------------------------------
</TABLE>
In November 1988, the Company adopted a Stockholder Protection Plan and
declared a dividend distribution of one Right for each outstanding share of
common stock. Under certain conditions, each Right may be exercised to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock
at a purchase price of $45, subject to adjustment. The Rights will become
exercisable 20 days after a person or group has acquired, or obtained the right
to acquire, 20% or more of the outstanding shares of common stock, or following
the commencement of a tender or exchange offer for 35% or more of such
outstanding shares of common stock (except pursuant to an offer which the
independent members of the Company's Board of Directors determine to be fair
and otherwise in the best interests of the Company and its stockholders).
Prior to becoming exercisable, the Rights are attached to and trade together
with the common stock. Each share of Series A junior participating preferred
stock issued under this Plan will entitle its holder to receive dividends equal
to the greater of $4 or 100 times the dividend on common stock, a liquidation
preference of $100, and voting rights approximately 100 times greater than the
voting rights of one share of common stock. The Company will be entitled to
redeem the Rights at $0.01 per Right at any time prior to the earlier of the
expiration of the Rights in November 1998, or the time that the Rights become
exercisable. The Rights do not have voting, liquidation or dividend rights and,
until they become exercisable, have no dilutive effect on the earnings per
share of the Company.
34
<PAGE> 28
6. BUSINESS ACQUISITIONS
In April 1994, the Company purchased the business and assets of Royce Thompson
Electric Limited for $1,500,000. The acquisition extends the Company's
participation into the outdoor lighting control market in the United Kingdom.
The purchase price exceeded the fair market value of the net tangible assets
acquired by approximately $400,000. Had the acquisition occurred at the
beginning of 1993, there would have been no material impact upon the Company's
results of operations in either 1993 or 1994.
In August 1993, the Company purchased all the outstanding shares of capital
stock of Automation Intelligence, Inc. for $3,400,000 plus contingent
considerations dependent on the sales growth of the acquired company over a
three-year period. Contingent consideration for the year ended December 30,
1994 amounted to $255,000 and was accounted for as an addition to the excess of
costs over net assets acquired. This acquisition was made to acquire the
capability to develop automation software and systems using the Company's
motors. The purchase price exceeded the fair market value of the net tangible
assets acquired by approximately $3,600,000. Had the acquisition occurred at
the beginning of 1992, there would have been no material impact upon the
Company's results of operation in either 1992 or 1993.
In July 1993, the Company purchased all the outstanding shares of capital
stock of Powertec Industrial Corporation (Powertec) for $14,100,000. The
Company also paid $600,000 to the founder of Powertec in exchange for a
five-year non-competition agreement. The acquisition was made to extend the
power range of the Company's product line of brushless motors and controls. The
purchase price exceeded the fair market value of the net tangible assets
acquired by approximately $10,800,000.
In April 1993, the Company purchased certain operating assets, excluding real
estate, of Unidynamics/Phoenix, Inc. for approximately $6,000,000 which
approximated the fair value of the assets acquired.
Had the acquisitions of Powertec and Unidynamics/Phoenix occurred as of the
beginning of fiscal year 1992, unaudited pro forma net sales, income from
operations before taxes and cumulative effect of a change in accounting
principle, net income and net income per common and common equivalent share
would have been as follows:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1993 1992
===============================================================================
<S> <C> <C>
Net sales $208,400 $199,619
Income from operations before taxes and cumulative
effect of a change in accounting principle 11,395 7,763
Net income 7,348 5,204
Net income per common and common equivalent share
before accounting change 0.67 0.48
- --------------------------------------------------------------------------------
</TABLE>
The pro forma operating results include the results of operations of the
acquired companies for fiscal years 1993 and 1992 with estimated increased
depreciation and amortization of property and excess cost over net assets
acquired along with other relevant adjustments to reflect the fair value of the
acquired assets and pro forma interest expense on the assumed acquisition
borrowings.
The results of operations reflected in the pro forma information above are
not necessarily indicative of the results which would have been reported if the
acquisitions had been effected at the beginning of fiscal 1992.
In October 1990, the Company acquired all of the outstanding stock of High
Yield Technology, Inc. (HYT) for $2,900,000 plus contingent considerations
dependent on HYT's sales growth over the following five years. During 1993, the
first of the two contingency payments was made. This payment of $193,000 was
accounted for as an addition to the excess of cost over net assets acquired.
The final contingent payment is due in 1995 and is computed as a percentage of
net sales, as defined, of fiscal year 1994. Amounts accrued for this payment
are approximately $2,500,000 and are accounted for as an addition to the
excess of cost over net assets acquired.
35
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pacific Scientific Company and Subsidiaries
7. SALE OF REAL ESTATE
In December 1989, the Company sold real property in Anaheim, California for
$6,375,000, of which $2,000,000 was received in cash and $4,375,000 was
received in the form of a note secured by a first trust deed covering the
property.
In September 1991, the maker of the note, a real estate developer, alleged
various matters and filed an action in the Superior Court of the State of
California naming the Company as a defendant.
In November 1993, the California Superior Court, as a result of a jury
decision, found in favor of the Company and ordered a judicial foreclosure on
the property in satisfaction of the unpaid principal and interest on the note.
The court also awarded damages to the Company.
In August 1994, the Company acquired the property at an auction in exchange
for a reduction in the note receivable of $2,800,000, and paid approximately
$500,000 in delinquent property taxes and related expenses. The real estate is
now recorded as a "property held for sale" at $3,300,000, which approximates
fair value based on current appraisals. The unpaid interest and principal on
the note was reduced by the value of the reacquired property.
The Company is seeking full recovery of the amounts awarded by the Court.
8. OPERATING LEASES
The Company leases certain facilities and equipment under non-cancelable
operating leases which require the following minimum future rental payments:
1995, $4,584,000; 1996, $3,823,000; 1997, $3,436,000; 1998, $2,576,000; 1999,
$1,769,000; later years, $1,868,000. Rental expense was $5,719,000, $5,061,000
and $4,612,000 in 1994, 1993 and 1992, respectively.
9. INFORMATION BY INDUSTRY SEGMENT
Financial information by industry segment for fiscal years 1994, 1993 and 1992
is summarized on page 29 of this report.
Export sales of $49,321,000 in 1994, $34,483,000 in 1993 and $29,317,000 in
1992 were primarily to customers in Europe and Asia.
The Company's net sales under prime contracts to defense agencies of the U.S.
Government were $8,096,000 in 1994, $9,471,000 in 1993 and $12,367,000 in 1992.
10. SUBSEQUENT EVENT
On December 31, 1994, the first day of the 1995 fiscal year, the Company
purchased all the outstanding common shares of Eduard Bautz GmbH, a German
manufacturer of high performance motors and controls, for approximately
$15,000,000. The acquisition was made to increase the participation of the
Company in the market for electric motors and related products in Germany. The
acquisition, which will be accounted for using the purchase method of
accounting, is expected to result in approximately $7,500,000 in excess of cost
over net tangible assets acquired.
11. DIVIDEND AND QUARTERLY INFORMATION (Unaudited )
In October 1991, the Company resumed its policy of paying regular quarterly
cash dividends on its outstanding common stock. The first dividend of $0.015
per share was paid January 6, 1992 to shareholders of record as of December 20,
1991. Cash dividends of $0.015 per share continued to be paid each quarter
until December 1994 when, concurrent with the two-for-one stock split, the
dividend was raised to $0.03 per share payable January 2, 1995.
The annual dividend rate on the Company's previously outstanding Series B,
10% Non-Convertible Preferred Stock was $1.00 per share. Dividends earned were
$43,000 in 1992. In 1992, the Company redeemed all the remaining shares of this
issue of Preferred Stock.
Selected quarterly information for fiscal years 1994, 1993 and 1992 follows
on page 37.
36
<PAGE> 30
Dividend and Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) Q-1 Q-2 Q-3 Q-4 Year
=====================================================================================================
<S> <C> <C> <C> <C> <C>
1994
Net sales $51,585 $57,188 $59,840 $66,124 $234,737
Gross profit 15,945 18,504 19,807 21,072 75,328
Net income 1,674 2,243 2,282 3,323 9,522
Net income per common share (fully diluted) 0.15 0.20 0.21 0.29 0.83
- -----------------------------------------------------------------------------------------------------
Stock Price
High $ 13.32 $ 14.25 $ 13.94 $ 23.75 $ 23.75
Low 10.69 10.88 11.19 14.00 10.69
Close 11.19 12.50 13.82 20.25 20.25
- -----------------------------------------------------------------------------------------------------
1993
Net sales 41,379 49,927 47,931 56,316 195,553
Gross profit 12,610 14,831 15,171 17,454 60,066
Income before accounting change 1,128 1,633 2,167 2,307 7,235
Accounting change 1,060 -- -- -- 1,060
- -----------------------------------------------------------------------------------------------------
Net income 2,188 1,633 2,167 2,307 8,295
Net income per common share
Before accounting change .11 .15 .20 .21 .66
Accounting change .10 -- -- -- .10
- -----------------------------------------------------------------------------------------------------
Total net income per common share (fully diluted) .21 .15 .20 .21 .76
- -----------------------------------------------------------------------------------------------------
Stock Price
High $ 8.00 $ 7.75 $ 8.82 $ 11.94 $ 11.94
Low 7.00 6.07 7.32 8.44 6.07
Close 7.63 7.44 8.82 11.07 11.07
- -----------------------------------------------------------------------------------------------------
1992
Net sales 40,983 43,362 42,062 46,242 172,649
Gross profit 12,874 13,468 12,873 13,732 52,947
Net income 1,111 1,219 1,457 1,610 5,397
Net income per common share (fully diluted) .10 .12 .14 .15 .50
- -----------------------------------------------------------------------------------------------------
Stock Price
High $ 5.94 $ 6.69 $ 6.88 $ 7.81 $ 7.81
Low 4.63 5.69 6.13 6.00 4.63
Close 5.75 6.19 6.50 7.81 7.81
- -----------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 31
CORPORATE INFORMATION
BOARD OF DIRECTORS
(Listed in order of election)
William A. Preston (1979)
Chairman
APM, Inc.
Harry W. Todd (1983)
Managing Partner
Carlisle Enterprises L.P.
Ralph O. Briscoe (1985)
Business Consultant
Edgar S. Brower (1985)
Chairman of the Board
Thomas S. Stafford (1987)
Chairman
Omega Watch Corporation of America
Walter F. Beran (1987)
Chairman
Pacific Alliance Group
Millard H. Pryor, Jr. (1992)
Managing Director
Pryor & Clark Company
Ralph D. Ketchum (1994)
President
RDK Capital, Inc.
OFFICERS
Edgar S. Brower
President and Chief Executive Officer
Richard V. Plat
Executive Vice President
Chief Financial Officer and Secretary
William L. Nothwang
Controller
Peer A. Swan
Treasurer
Steven L. Breitzka
Vice President
Robert L. Day
Vice President
William T. Fejes
Vice President
Richard G. Knoblock
Vice President
Joseph R. Monkowski
Vice President
Ronald B. Nelson
Vice President
John M. Ossenmacher
Vice President
DIVISIONS AND SUBSIDIARIES
Divisions
Electro Kinetics
Santa Barbara, California
Energy Dynamics
Chandler, Arizona
Fisher Pierce
Weymouth, Massachusetts
HTL/Kin-Tech
Duarte, California
Yorba Linda, California
HIAC/ROYCO
Silver Spring, Maryland
Motion Technology
Charlestown, Massachusetts
Motor & Control
Rockford, Illinois
Broomfield, Colorado
Subsidiaries
Automation Intelligence, Inc.
Duluth, Georgia
Eduard Bautz GmbH
Weiterstadt, Germany
High Yield Technology, Inc.
Sunnyvale, California
Pacific Scientific International
Sales Corporation
St. Thomas, U.S. Virgin Islands
Pacific Scientific GmbH
Leonberg, Germany
Pacific Scientific Ltd.
Buckinghamshire, England
Pacific Scientific S.A.R.L.
Palaiseau, France
Powertec Industrial Corporation
Rock Hill, South Carolina
Royce Thompson Ltd.
Birmingham, England
Solium Inc.
Randolph, Massachusetts
38
<PAGE> 32
STOCKHOLDER INFORMATION
Form 10-K Report
The Company, on written request, will provide free of charge to each
stockholder, a copy of the Form 10-K as filed with the Securities and Exchange
Commission. In addition, the Company will furnish a requesting stockholder any
exhibit not contained in the Form 10-K upon payment of a fee. All written
requests should be directed to:
Investor Relations Department
Pacific Scientific Company
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
Transfer Agent and Registrar
Chemical Trust Company of California
Los Angeles, California
(800) 356-2017
Annual Meeting
Wednesday, April 26, 1995, 10:00 AM
Newport Center Conference Center
610 Newport Center Drive, Suite 130
Newport Beach, California 92660
Market
New York Stock Exchange
Stock Symbol
PSX
Dividend Payment
Dividends on the Company's common stock are expected to be paid on or about:
April 3, July 3, October 2, 1995 and January 2, 1996.
Legal Counsel
Paul, Hastings, Janofsky & Walker
Los Angeles, California
Independent Accountants
Deloitte & Touche LLP
Costa Mesa, California
Corporate Headquarters
Pacific Scientific Company
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
Telephone (714) 720-1714
Telefax (714) 720-1083
Design and production: BLOCH+COULTER Santa Monica, California
Entire annual report is printed on recycled paper
<PAGE> 33
[PACIFIC SCIENTIFIC LOGO]
620 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
<PAGE> 34
PACIFIC SCIENTIFIC COMPANY
APPENDIX
FORM 10-K
FISCAL HIGHLIGHTS
PAGE 1
Graph 1 Bar Chart showing Sales (Dollars in Millions) for the years
1992 through 1994.
<TABLE>
<S> <C>
1992 172.7
1993 195.6
1994 234.7
</TABLE>
Graph 2 Bar Chart showing Earnings per Share (Fully Diluted - Cents
per Share) for the years 1992 through 1994.
<TABLE>
<S> <C> <C> <C>
1992 1993 1994
---- ---- ----
Operations .50 .66 .83
Cumulative effect of
Accounting Change - .10 -
</TABLE>
Graph 3 Bar Chart showing Year End Closing Price of Stock (Dollars per
Share) for years 1992 through 1994.
<TABLE>
<S> <C>
1992 7.82
1993 11.07
1994 20.25
</TABLE>
LETTER TO THE STOCKHOLDERS
PAGE 2
Photo Photo of Edgar S. Brower, Chairman, President and CEO.
ELECTRICAL EQUIPMENT
PAGE 4
Photo Full page photo showing various types and sizes of motors and
controls manufactured by the Motor & Control Division.
PAGE 5
Photo 1 Photo of a low-cost brushless DC motor.
Photo 2 Photo of a 2-inch stepper motor.
Photo 3 Photo of Ronald B. Nelson, President, Motor & Control Division
<PAGE> 35
PAGE 6
Photo Full page photo of various types of motors and controls
manufactured by Motor & Control Division.
PAGE 7
Photo 1 Photo of a "The Millennium(TM) Drive", a brushless DC motor
drive.
Photo 2 Photo of a 35kw high-speed starter-generator.
PAGE 8
Photo 1 Photo of an Indexer-Drive Combination.
Photo 2 Photo of a motion controller.
Photo 3 Photo of William T. Fejes, President, Motion Technology
Division
PAGE 9
Photo Full page photo of drives and controls manufactured by the
Motion Technology Division.
PAGE 10
Photo Full page photo showing various types of outdoor lighting
controls and power-distribution controls.
PAGE 11
Photo 1 Photo of a fault indicator equipped with a radio transmitter.
Photo 2 Photo of an outdoor lighting control.
Photo 3 Photo of Steven L. Breitzka, President, Fisher Pierce Division
PAGE 12
Photo 1 Photo of an external modular particle sensor.
Photo 2 Photo of a vacuum particle sensor.
Photo 3 Photo of Joseph R. Monkowski, Ph.D., President, Instruments
Division
PAGE 13
Photo Full page photo showing various particle monitors and sensors.
PAGE 14
Photo Full page photo showing various SoliumTM products.
-2-
<PAGE> 36
PAGE 15
Photo 1 Photo of a Solium dimmable fluorescent light bulb
Photo 2 Photo of a Solium wire-in ballast.
Photo 3 Photo of John M. Ossenmacher, President, Solium Inc.
SAFETY EQUIPMENT
PAGE 16
Photo 1 Photo of a titanium pressure vessel.
Photo 2 Photo showing a thermocouple wire, detectors, controllers, and
a fire suppression system.
Photo 3 Photo of Robert L. Day, President, Energy Dynamics Division
and Richard G. Knoblock, President, HTL/Kin-Tech Division.
PAGE 17
Photo Full page photo showing various fire suppression and detection
devices, personnel restraints and flight control devices.
MANAGEMENT'S REPORT
PAGE 18
Photo Photo of Edgar S. Brower, Chairman, President & CEO and
Richard V. Plat, Executive Vice President and Chief Financial
Officer.
MANAGEMENT'S DISCUSSION & ANALYSIS
PAGE 20
Graph 1 Bar Chart showing Sales of Continuing Businesses (Dollars in
Millions) for years 1990 through 1994.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Electrical Equipment: 111.2 108.5 114.8 128.8 167.3
Safety Equipment: 72.7 64.5 57.9 66.7 67.4
Divested Businesses: 11.0 7.6 -- -- --
</TABLE>
Graph 2 Pie Chart showing Sales by Market Area (By Percentage)
<TABLE>
<S> <C>
Export 21%
U.S. and Canada 63%
Defense Trades 16%
</TABLE>
-3-
<PAGE> 37
PAGE 21
Graph 1 Pie Chart showing Allocation of Sales Dollars (in cents).
<TABLE>
<S> <C>
Material .33
Net Income .04
Taxes .03
Depreciation
& Amortization .05
Services & Supplies .23
Wages & Salaries .32
</TABLE>
Graph 2 Bar Chart showing Operating Income before Gains on Sale of
Product Lines (Dollars in Millions) for years 1990 through
1994.
<TABLE>
<S> <C>
1990 2.994
1991 5.042
1992 8.697
1993 11.403
1994 17.551
</TABLE>
PAGE 22
Graph 1 Bar Chart showing Research and Development Expense (Dollars in
Millions) for years 1990 through 1994.
<TABLE>
<S> <C>
1990 6.9
1991 8.4
1992 8.2
1993 8.6
1994 10.5
</TABLE>
Graph 2 Bar Chart showing Inventory as Percentage of Sales for years
1990 through 1994.
<TABLE>
<S> <C>
1990 15.2%
1991 15.9%
1992 17.1%
1993 17.2%
1994 19.2%
</TABLE>
PAGE 23
Graph 1 Bar Chart showing Total Assets (Dollars in Millions) for the
years 1990 through 1994.
<TABLE>
<S> <C>
1990 143.4
1991 135.9
1992 134.6
1993 161.3
1994 172.7
</TABLE>
Graph 2 Bar Chart showing Sales per Employee (Dollars in Thousands)
for the years 1990 through 1994.
<TABLE>
<S> <C>
1990 101.0
1991 112.6
1992 125.8
1993 126.5
1994 129.0
</TABLE>
-4-
