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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/ x / Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 30, 1999, or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-16115
IMPCO Technologies, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1039211
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(State of Incorporation) (IRS Employer ID. No.)
16804 GRIDLEY PLACE, CERRITOS, CALIFORNIA 90703
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (562) 860-6666
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock;
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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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. / /
Approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 30, 1999 was $45,929,134.
Number of shares outstanding of each of the registrant's classes of common
stock, as of June 30, 1999:
8,281,745 shares of Common Stock
Documents incorporated by reference:
See Item 14
Information required by Part III is incorporated by reference from the
definitive proxy statement to be filed pursuant to Regulation 14A or by an
amendment hereto, in either case, within 120 days of the end of fiscal year
1999.
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ITEM 1 - BUSINESS
IMPCO Technologies, Inc. ("IMPCO" or "the Company"), together with its
subsidiaries, supplies the original equipment manufacturer (OEM) market and
aftermarket with gaseous fuel management and fuel storage systems and components
that allow internal combustion engines to operate on clean burning gaseous fuels
such as propane and natural gas. IMPCO provides gaseous fuel systems for motor
vehicles, forklifts, other material handling equipment, and small portable to
large stationary engines.
ACQUISITIONS
In fiscal year 1997, the Company through its wholly-owned subsidiary, IMPCO
Technologies, Pty. Limited (IMPCO Pty), acquired certain assets of Ateco
Automotive Pty. Limited (Ateco), including a 50 percent ownership interest in
Gas Parts (NSW) Pty., for a purchase price of approximately $6,532,000. In
fiscal year 1998, IMPCO Pty acquired the remaining 50 percent ownership interest
in Gas Parts (NSW) Pty. IMPCO Pty's consolidated revenues totaled approximately
$5,398,000 and $6,893,000 in fiscal year 1999 and 1998, respectively, and
$7,816,000 for 10 months of operations in fiscal year 1997.
In fiscal year 1998, the Company purchased certain manufacturing equipment and
inventory of the Algas Carburetion Division of PGI International at a purchase
price of $2,400,000. On the same day, the Company acquired a 90 percent interest
in Industrias Mexicanas de Productos de Combustibles, S. de R.L. de C.V. at a
purchase price of $961,000. The new company, Grupo IMPCO Mexicano (IMPCO
Mexicano), had revenues of approximately $2,671,000 in fiscal year 1999 and
$823,000 for 5 months of operations in fiscal year 1998.
In fiscal year 1998, the Company purchased from the bankruptcy trustee of EDO
Canada, Ltd. certain development, testing, quality control and manufacturing
equipment used for the manufacture of storage tanks for compressed natural gas.
The purchase price was $790,000. There have been no sales to date.
On May 1, 1998, the Company acquired the remaining 49 percent interest in IMPCO
Technologies, B.V. (IMPCO BV) for a purchase price of $692,000. On January 28,
1999, the Company sold a 49 percent interest in IMPCO BV to BERU
Aktiengesellschaft (BERU), an international OEM and aftermarket supplier of
diesel and automotive engine components and systems, for $3,500,000 in cash. The
Company recorded a pre-tax gain of $2,169,000 and an after-tax gain of
$1,757,000, or $0.20 per diluted share. The new company is operated as
IMPCO-BERU Technologies, B.V. and had revenues of approximately $12,941,000,
$11,588,000, and $9,203,000 in fiscal years 1999, 1998 and 1997, respectively.
On December 4, 1998, the Company acquired certain assets of the Crusader Engine
division of Thermo Power Corporation, a subsidiary of Thermo Power Electron
Corporation, for approximately $3,880,000. The Crusader Engine division provides
engine dressing and related devices for material handling, irrigation and other
industrial engines. The acquisition was accounted for under the purchase method
of accounting and goodwill of approximately $662,000 is being amortized on the
straight-line method over 20 years. Tangible net assets acquired consisted of
$2,500,000 in inventory and $718,000 in fixed assets.
On March 30, 1999, the Company through its wholly-owned subsidiary, IMPCO Tech
Japan K.K. (IMPCO Japan), acquired certain assets of the alternative fuels
division of Mikuni Corporation (Mikuni), headquartered in Tokyo, Japan, for
approximately Y158,629,000 (U.S.$1,325,000). The alternative fuels division,
based in Fukuoka, Japan, is a distributor of alternative fuels products and
systems throughout Asia, with a focus on the Japanese market. Mikuni has
distributed IMPCO products in Japan since 1994. The acquisition was accounted
for under the purchase method of accounting and goodwill of approximately
Y113,016,000 (U.S.$944,000) is being amortized on the straight-line method over
20 years. Tangible net assets acquired consisted of $362,000 in inventory and
$19,000 in fixed and other assets.
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OPERATING SEGMENTS
IMPCO classifies its business into three operating segments: Gaseous Fuel
Products Division (GFPD), Automotive OEM Division (AOD) and Non-U.S. Based
Subsidiary Operations. These operating segments are divisions within the Company
and each division has discrete financial information prepared for internal
reporting to management. Management considered the following factors to be
significant in identifying these operating segments: technology levels, end-use
applications of products, and customer characteristics. Advance research and
development is funded at the corporate level and provides new products and
technology to the operating segments for use in their markets. Each operating
segment conducts its own application engineering and technical support for the
sales and market development of the new products and technology.
GASEOUS FUEL PRODUCTS DIVISION
OVERVIEW. GFPD is a leading supplier of engine components and systems that allow
internal combustion engines to operate on gaseous fuels, primarily propane and
natural gas. GFPD designs, develops, manufacturers and markets components and
systems for engines ranging from 1 to 4,000 horsepower. Approximately 100
products account for 70 percent of the division's revenue. The division sells
its products to the motor vehicle, material handling, small utility engine and
large industrial engine OEMs and aftermarket through a world wide network
encompassing over 400 OEMs, distributors, sub-distributors and dealers in over
30 countries. The distribution network is directed from the division's
headquarters. Sales, application development and technical support to the
aftermarket and OEMs in motor vehicle, material handling, small utility engine
and large industrial engine end uses are conducted through its domestic offices
and its worldwide distributor network. Thirty-nine percent of GFPD's sales are
outside the U.S. and Canada with the trend towards increasing foreign sales
continuing. Additionally, the U.S. motor vehicle aftermarket has transitioned to
an OEM market due to fleet customers' preference for OEM warranty programs and
dealer services. Consequently, the U.S. motor vehicle aftermarket has limited
long term potential.
GFPD has the leading world wide market share in gaseous fuel system and
component sales for forklifts and small industrial engines. This market is
expanding and GFPD is developing new value-added sales. The trend will be
towards electronically controlled engine systems and fully dressed gaseous
fueled engines for direct OEM installation.
PRODUCT LINES. GFPD's broad product lines are designed to support all internal
combustion engine applications for automotive, forklifts, small utility engines
and large industrial engines using gaseous fuels. Products include carburetors,
convertors, engine control devices and fuel lock-offs. Tamper resistant
carburetors and regulators meet California Air Resources Board (CARB) and
Environmental Protection Agency (EPA) requirements for large and small engine
applications. Electronic engine control devices are also available to optimize
engine performance and emissions. The divison's liquid propane gas (LPG)
converters are two stage regulators and vaporizers that regulate the amount of
liquid propane fuel entering the carburetor and then transforms the fuel from a
pressurized liquid state to a gaseous vapor by exposing the LPG to near
atmospheric pressure. The division's vacuum and electro-mechanical fuel lock-off
devices stop the flow of fuel when engines stop running. The products are
marketed worldwide through distributors and to OEMs under the brand names IMPCO
(registered trademark), BEAM (registered trademark), GARRETSON (registered
trademark), J&S Carburetion (registered trademark), and Algas.
IMPCO AND ALGAS PRODUCT LINES
- Fuel delivery systems and components for 15 to 4,000 HP
engines for motor vehicle, material handling, generators,
large industrial engines and other off-road applications.
BEAM, GARRETSON AND J&S CARBURETION PRODUCT LINES
- Fuel delivery systems and components for 1 to 40 HP engines
for material handling, gen-sets and other industrial applications.
During fiscal year 1999, sales of converters and lock-offs represented
approximately 42 percent of consolidated core product sales, carburetors and
mixers represented approximately 31 percent, and other products and sundry
devices approximately 27 percent. The product sales mix during fiscal year 1999
was substantially the same as during the prior two fiscal years.
Products are sold worldwide to distributors, OEMs and foreign subsidiaries as
aftermarket components and/or retrofit systems. In fiscal year 1999, sales in
the United States and Canada represented 61 percent of the division's sales.
GFPD revenues by region are shown below:
<TABLE>
<CAPTION>
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GFPD Revenues FY 1999 FY 1998 FY 1997
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<S> <C> <C> <C>
United States & Canada 61% 66% 73%
Pacific Rim 8% 9% 9%
Europe 11% 12% 4%
Latin America 20% 13% 14%
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</TABLE>
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MARKET DEVELOPMENT. GFPD is focusing on it's two largest markets; material
handling and motor vehicle aftermarket, which on a combined basis accounted for
over 70 percent of the division's consolidated net sales for fiscal year 1999.
Of these two markets, GFPD believes that the foreign motor vehicle aftermarket
has the greatest potential for significant growth. Management anticipates that
growth will occur in countries which have: (1) major metropolitan pollution
problems and governmental pressure to reduce pollution; (2) economics favorable
to gaseous fuels versus liquid fuels; and/or (3) local reserves of gaseous fuels
for energy self reliance.
MOTOR VEHICLE
In the United States, GFPD's products/systems have been and will continue to be
used by fleet operators. The market drivers are the Energy Policy Act, OEM
Corporate Average Fuel Economy credits and fuel cost savings. Over the last
three years the U.S. market has transitioned to an OEM market due to the fleet
customers demand for vehicle OEM quality, warranty and service. AOD is
responsible for the OEM market. As a consequence, the U.S. aftermarket
opportunity of interest is being limited to very large specialized vehicle
fleets such as the U.S. Postal Service and UPS.
The division's focus is to expand its presence in the overseas aftermarket.
GFPD's key motor vehicle geographic markets are Latin America and the Pacific
Rim.
LATIN AMERICA. In 1990, the Mexican Government mandated strict emission controls
in urban areas limiting the use of liquid fuel vehicles during high pollution
days in urban areas, particularly Mexico City. The mandates promoted the use of
clean burning gaseous fuels by providing significant fuel cost savings. As a
result, sales of GFPD products have increased substantially the past three
years. The Company has established IMPCO Mexicano in Mexico City to improve
customer service, technical support and increase our focus on the conversion of
large fleets to gaseous fuels using IMPCO products.
The South American market consists of the following high growth countries:
Venezuela, Brazil, Argentina, Columbia and Chile. Argentina, Brazil, Chile
and Venezuela have implemented plans to utilize gaseous fuels to reduce their
dependency on liquid fuels and/or to reduce emissions in urban areas.
Argentina, Brazil and Venezuela are growing markets. The strategy for these
countries is to seek out strong local distributors and to focus sales
development efforts on large fleets and on OEM vehicle manufacturers. Active
distributors are being sought in Latin American countries.
PACIFIC RIM. The Australian market is driven by the economics of using gaseous
fuels (propane) and secondarily by emerging regulations. Government supports the
gaseous fuel usage because it displaces the importation of crude oil. For over
ten years, the government has established an energy policy by pricing propane
motor fuel 40-50 percent below gasoline to emphasize the economic benefits.
Primary customers are large national fleets and taxicab operators. The
Australian market expects a 20 percent sales growth rate over the next five
years. Through the Company's subsidiary, IMPCO Australia Pty. Ltd, GFPD has
established a strong technical product and customer service presence.
Use of gaseous fuels in Southeast Asia has high potential due to air pollution
and availability of local sources of energy. The initial market development and
growth is expected in Malaysia and Thailand. The Philippines and Indonesia are
not expected to grow for the next several years due to the recent currency
crisis. The division will continue to monitor the activities in these countries
through the division's local distributors.
The market driver in China and India are governmental mandates to reduce air
pollution in urban areas and favorable economics for gaseous fuels. The division
has plans to continue to support IMPCO distributors with technical and market
development back up during the current early stages of sales growth.
MATERIAL HANDLING
There are four key geographical areas where OEM material handling equipment
is manufactured: North America, Europe, Japan and Korea. The majority of
forklifts being imported to the U.S. arrive from the OEM with partial or
complete IMPCO systems. The division has an exceptionally high market share
on forklifts that are used in the U.S. and Europe and is focused on
maintaining that share.
During recent years, a major shift has begun toward using U.S. manufactured
engines in forklifts due to significant price advantages over Japanese-built
engines. Significant changes will occur in the industry in the next several
years as increased worldwide emphasis on emissions and system certifications
will make it necessary for the engine manufacturer to consider the gaseous fuel
and engine management system together. The division is working closely with OEMs
in order to manage this change and meet these new requirements. GFPD has entered
into joint product development programs with forklift OEMs and engine
manufacturers to address these trends by providing cost effective technology
enhanced systems which also control emissions. During the current fiscal year,
the division expanded its business into value added engine dressing by
purchasing the Crusader Engine Division of Thermo Power Corporation, a
subsidiary of Thermo Power Electron Corporation. The Crusader Engine Division,
which now operates as the
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Industrial Engine Systems sub-division, provides engine dressing and related
devices for material handling and industrial engines.
In March 1999, the Company completed the acquisition of certain assets of the
alternative fuels division of Mikuni Corporation (Mikuni), headquartered in
Tokyo, Japan. That division, based in Fukuoka, Japan, is a distributor of
alternative fuel products and systems throughout Asia, with a focus on material
handling equipment within the Japanese market. Mikuni has distributed IMPCO
products in Japan since 1994. The acquisition provides GFPD, in addition to
other IMPCO divisions through the Company's foreign subsidiaries, with an
organizational base to capitalize on the rapidly growing alternative fuels
market within the Asia Pacific region. Additionally, it will enhance IMPCO's
technical and commercial presence within Japan and enable the Company to better
serve and develop the material handling, automotive and industrial engine
markets worldwide.
LARGE INDUSTRIAL ENGINES
Large industrial engines include stationary engines used for industrial
applications and large mobile engines used in trucks and buses. Most large
engines currently use diesel fuel and operate as compression ignition engines.
Spark ignition natural gas or propane fueled versions of heavy duty diesel
engines have been available for many years and are popular for many industrial
applications where gaseous fuel is readily available. Over the last decade,
spark ignition natural gas fueled heavy duty engines have been developed by a
number of manufacturers for mobile and stationary applications. These engines
offer significant emissions reduction potential, and as a result the development
and commercialization of heavy duty gaseous fueled engines is expected to grow
rapidly.
IMPCO has been developing electronic fuel systems for heavy duty truck and bus
engines known as the HD AFE (advanced fuel electronic) system. HD AFE provides
total air fuel ratio, ignition and engine management control for heavy duty
gaseous fueled engines used in trucks and buses. It is based on IMPCO's patented
air and gas mass sensing technology and advanced electronic engine management
system, and can be used on lean burn engines that are turbocharged or normally
aspirated.
The primary growth potential for the industrial engine and heavy duty mobile
engine business is in the power generation market and the heavy duty mobile gas
engines used in trucks and buses. North American generator set production
continues to increase in response to growing global demand. Many of these sets
are fueled by propane or natural gas. The growth in the heavy duty mobile engine
market will be supported by the increased worldwide government mandates for
clean air, such as the Clean Air Act of 1990, the Energy Policy Act of 1992 and
the EURO 3 European emission standards. The division has been developing
advanced electronic heavy duty fuel systems for a number of OEMs for heavy duty
trucks and buses utilizing compressed natural gas and liquefied natural gas.
For the large stationary engine business, the division's focus is on domestic
and international OEM customers due to the higher volumes associated with OEMs.
In North America, since an infrastructure exists that supports the aftermarket,
the division continues to pursue this market as well. The division will also
continue to market the existing HD AFE system to qualified OEM customers and
develop new co-funded programs with OEMs which lead to production.
SMALL INDUSTRIAL ENGINES
The small industrial engine market exists largely in the U.S. and Canada, with
limited European markets for applications such as gaseous fueled floor sweepers,
buffers, standby generators, commercial agricultural and lawn and garden
equipment and manlifts. GFPD has a significant share of this market. The small
industrial engine market drivers are the environmental emission pressures and
the availability of gaseous fuels for home and small business use. GFPD products
and services are positioned to meet these market needs. Consequently, strong
growth is projected as gaseous fueled engines replace gasoline fueled small
industrial engines.
APPLICATIONS DEVELOPMENT FACILITIES. GFPD has an application development
facility located in Cerritos, California that performs component and subsystem
validation and quality control testing. Additionally, the division has a 10,000
square foot application development facility in Seattle, Washington that has the
capability to fully develop and test heavy duty gaseous fuel systems. The
division has extensive experience and expertise in a broad range of areas
relating to motor vehicle, material handling, generators and heavy duty engines
and provides technical and engineering services including:
- Development, validation and quality control testing
- Extended vibrations, shock loads and accelerations
- Fuel system development for CNG, LPG and LPG HD engines
- Ignition system and engine electronic control unit development
- Optimized engine calibration development
- Engine and vehicle systems integration
- Advanced control system software development
- Advanced adaptive software technologies
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- Air and gas mass sensor development
- Emissions measurement and engine testing
MANUFACTURING. All of the division's products are manufactured or assembled at
the Company's headquarter facilities in Cerritos, California and in Sterling
Heights, Michigan encompassing over 180,000 square feet. Current manufacturing
operations consist largely of mechanical assembly with light machining. The
division places reliance on outside suppliers for parts and components. It
obtains components for products from a variety of domestic automotive and
electronic part suppliers, local diecasters, stamping operations and machine
shops. Approximately 10 suppliers accounted for approximately 74 percent of the
division's raw material purchases.
Material costs, die cast aluminum parts in particular, represent the major
component of cost of sales. Coordination with suppliers for quality control and
timely shipments is a high priority to maximize the division's inventory
management. The division uses a computerized material requirement planning
system to schedule material flow and balance the competing demands of timely
shipments, productivity and inventory management.
The division follows quality processes in accordance with ISO9001 and expects to
be ISO9001 certified by the end of FY00.
The division has not experienced and does not expect to experience any
significant difficulty in complying with environmental regulations applicable to
its manufacturing processes and facilities.
The work force at Cerritos and Sterling Heights is non union.
DISTRIBUTION. During fiscal year 1999, sales to distributors accounted for
approximately 67 percent and sales to OEM customers accounted for approximately
33 percent of sales. This is consistent with fiscal years 1998 and 1997.
Distributors primarily service the aftermarket conversion business and
small-volume OEMs, and are generally specialized and privately owned
enterprises. Many domestic distributors have been customers of IMPCO for more
than 30 years, and most export distributors have been customers for more than 20
years.
OEM customers for vehicle and forklift manufacturers include Clark Material
Handling Co., Ford Motor Company, Generac, Kohler Company, Mitsubishi
Caterpillar Forklift America, Inc., NACCO Material Handling Group, Onan
Corporation, and Toyota Industrial Equipment Mfg. Inc.
OEM customers for heavy duty industrial equipment manufacturers include
Caterpillar, Inc., Cummins Engine Company and Waukesha Engine.
AUTOMOTIVE OEM DIVISION
OVERVIEW. AOD was organized in mid-1996 to develop and manufacture fuel systems
for automotive OEM applications. The division carries out a complete range of
operations aimed at developing cost-effective and efficient gaseous fuel systems
for urban fleet vehicles such as trucks, taxis and passenger vehicles. AOD's
capabilities include: full vehicle engineering and validation; powertrain
controls and validation; advanced manufacturing for engine controls; natural gas
fuel storage; and testing procedures to meet different global emission control
standards and fuel control devices and technology for gaseous fuels and other
gases for subsequent use in internal combustion engines, fuels cells and other
applications requiring metering of gases.
PRODUCTS. The division's fuel management systems are designed to offer several
levels of technology to meet customer needs. The Adaptive Digital Processor
(ADP) uses advanced electronic technology to learn and store key operating
characteristics of the specific vehicle. The ADP enhancer complements the ADP
with diagnostics and spark timing modules. The division's Gas Mass Sensor -
Mixer Control Valve (GMS-MCV) uses mass sensing hot wires to calculate the
engine's air/fuel mixture. During engine operation, an on-board computer adjusts
the mixture to achieve optimum results in engine performance to reduce
emissions. The division is also developing a fuel injection system for ultra low
emission vehicles. These injectors are designed for vaporized natural gas or
vaporized propane for use in the latest engine technologies.
The division continues to improve its current fuel delivery systems and is
developing new systems to meet increasingly stringent vehicle operational and
emission requirements. The division is enhancing its on-board computer utilizing
the vehicle-specific software required for the GMS-MCV product, a mass-sensor
and the necessary hardware for a variety of vehicle types including pickup
trucks, vans and passenger cars.
The division is also developing improved system technology utilizing injectors,
high and low pressure regulators, on-board diagnostics, high performance 32-bit
engine control modules, fuel lockoffs and related
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components. The division believes that it will continue to satisfy the
differing engine and emission control approaches being used on engines in its
domestic and foreign markets.
Product revenue in fiscal year 1999 represents sales of mid-1998 and 1999 GM
pick-up trucks and GM mid-size automobiles upfit with the Company's bi-fuel
Compressed Natural Gas (CNG) system, and sales of 1998 and 1999 medium-duty
dedicated Liquid Propane Gas (LPG) kits under a cross-license agreement with GM.
PRODUCT AND REGULATORY ENVIRONMENT. The automotive alternative fuel system
market is influenced by environmental laws which regulate emission standards and
energy laws which strive for energy independence. In addition, there are certain
economic advantages to using alternate gaseous fuels in many countries.
Legislation has provided incentives and programs to promote and develop
infrastructures for alternative fueled vehicles, some requiring fleet vehicle
owners to phase in alternative fueled vehicles and impose penalties upon failure
to meet standards and guidelines.
In the United States, the Federal Energy Policy Act of 1992 mandates that 75
percent of the light duty vehicles acquired by the federal, state and municipal
governments by fiscal 2002, and thereafter, be alternative fueled vehicles, and
non-government fleet operators of 20 or more vehicles will be required to
include at least 20 percent alternative fueled light duty vehicles in their
total vehicle purchases by fiscal 2002. Beginning 2005 and thereafter, 70
percent of the vehicles acquired by fleet operators of 20 or more vehicles must
be alternative fueled vehicles.
The economic-driven market is two-fold: fleets that are looking to improve their
costs of operations and countries where alternative fuels are plentiful and
costs are significantly lower than gasoline are seeking to export their oil and
utilize the lower-cost alternative fuel.
The environmental-driven market is primarily driven by severe pollution problems
and pressures by governments to clean their air in Mexico City and Beijing.
Efforts are currently being made to secure Mexico and Chinese governmental
approval and funding to develop fuel systems and convert vehicles in these
markets.
MARKET DEVELOPMENT. The worldwide demand for alternative fueled vehicles is
making it feasible for OEM production. The division has become the preferred OEM
supplier to GM for gaseous fuel automotive systems. During fiscal 1998, the
division signed a five-year teaming agreement with GM to develop clean gaseous
fuel delivery systems for passenger cars and medium and light-duty trucks.
Development programs and the commercialization of OEM vehicles with IMPCO
systems are on-going in the United States, Mexico and China.
The division's acquisition of tank-making equipment and the utilization of is
intended to extend its capabilities of tank testing and research and development
into the next generation of fuel storage systems. Development of fuel storage
technology is an important component of the division's long-term strategy to be
the premier Tier 1 component supplier to automotive OEMs. AOD believes that
product quality and low-cost are essential for OEM recognition and it is
continually upgrading its quality assurance program and seeking low-cost system
solutions.
CERTIFICATIONS. The division must obtain certification from government bodies to
sell certain of its products in the United States and other foreign countries.
Currently, the division has secured the following certifications:
- U.S. Emission Compliance (Environmental Protection Agency, California
Air Resources Board, Colorado Air Quality Control Commission)
- International Emissions Compliance (Canada, Europe, Australia,
Brazil, Mexico, Argentina)
- U.S. Safety & Performance Standards Compliance (DOT, NHTSA, FMVSS,
UL, AGA)
- International Safety & Performance Standards Compliance (Transport
Canada, CGA, German TUV)
ASSEMBLY AND SYSTEM INSTALLATION. The division assembles the majority of its own
components at its facility in Irvine, California. It outsources assembly of
complex electronic components and selects key suppliers for certain components
of developed fuel systems. Approximately 10 suppliers accounted for
approximately 50 percent of raw material purchases. A major supplier of
components on certain programs is the Gaseous Fuel Products Division.
Complete systems are installed on vehicles at the OEM manufacturing facility or
at third-party upfitter sites. The criteria for the sites is proximity to
vehicle manufacturing and delivery points.
The division follows quality processes in accordance with QS9000 and expects to
be QS9000 certified by the end of fiscal year 2000. QS9000 is equivalent to
ISO9000 with additional requirements for the automotive industry.
The division has not experienced and does not expect to experience any
significant difficulty in complying with environmental regulations applicable to
its assembly processes and facilities.
The work force at Irvine is non union.
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NON-U.S. BASED SUBSIDIARY OPERATIONS
OVERVIEW. The Non-U.S. based subsidiary operations (subsidiaries) segment
consists of foreign-based operations located in Europe, Australia, Mexico, and
Japan which are responsible for sales, application and market development,
technical service and profitability in the regional areas. The following
subsidiaries represent GFPD and AOD products and systems and provide sales
support, application development, and technical support to aftermarket and OEM
customers.
IMPCO-BERU TECHNOLOGIES B.V. (IMPCO BV). IMPCO BV, based in the Netherlands with
customer support offices in France, Germany and the United Kingdom, is a
majority-owned subsidiary with a primary focus on the material handling and the
heavy duty mobile engine markets. The subsidiary is strategically targeting the
automotive and heavy duty engine markets through the joint venture with BERU, in
addition to expanding its current significant market share in the material
handling market.
IMPCO BV provides complete services in areas of systems & powertrain controls
engineering, integration & packaging, system build, emissions testing and
validation to aftermarket and OEM customers. The subsidiary provides Europe-wide
service and technical support. IMPCO BV performs modular conversion kit
assembly, fuel storage assembly, and fuel system testing. The subsidiary is
ISO9000 accredited.
IMPCO BV has not experienced and does not expect to experience any significant
difficulty in complying with environmental regulations applicable to its
assembly processes and facilities.
The work force at all European locations is non union.
IMPCO TECHNOLOGIES PTY LTD. (IMPCO PTY). IMPCO Pty, based in Melbourne and
Sydney, Australia, is a wholly owned subsidiary whose primary focus is to serve
and develop the Australian alternative fuels market. Sales and market
development of the Pacific Rim region for expanded growth is also a strategic
objective. IMPCO Pty's major functions are factory distribution of IMPCO
products, market development of OEMs and aftermarket with concentration on motor
vehicle fleets and dealers, application design and development work specific for
the region, and technical training, support and development of authorized
installation network.
Through its Australian entity, IMPCO is able to satisfy the supply, technical
and customer support needs of OEMs, fleets, dealers and general customers in the
region with reliable, efficient, clean and economical performing systems.
IMPCO Pty performs modular conversion kit assembly, fuel storage assembly, and
fuel system testing and has achieved QS9000 and ISO9002 accreditation.
IMPCO Pty has not experienced and does not expect to experience any significant
difficulty in complying with environmental regulations applicable to its
assembly processes and facilities.
The work force at all Australian locations is non union.
GRUPO IMPCO MEXICANO (IMPCO MEXICANO). IMPCO Mexicano, based in Mexico City, is
a majority owned subsidiary whose primary focus is to serve and develop the
Mexican alternative fuels market. Sales and market development of Latin America
for expanded growth is also a strategic objective. IMPCO Mexicano's major
functions are factory distribution of IMPCO products, market development of OEMs
and aftermarket with concentration on motor vehicle fleets and dealers, and
technical training, support and development of authorized installation network.
Through its Mexican subsidiary, IMPCO is able to provide the supply, technical
and customer support needs of OEMs, fleets and general customers in the region
with reliable, efficient, clean and economical performing systems.
IMPCO Mexicano has not experienced and does not expect to experience any
significant difficulty in complying with environmental regulations applicable to
its assembly processes and facilities.
The work force at IMPCO Mexicano is non union.
IMPCO TECHNOLOGIES JAPAN (IMPCO JAPAN). IMPCO Japan, based in Fukuoka, is a
wholly owned subsidiary whose primary focus is to serve and develop the Japanese
and far east alternative fuels markets. IMPCO Japan's major functions are
factory distribution of IMPCO products, market development of OEMs and
aftermarket with concentration on motor vehicle fleets and material handling
equipment dealers, and technical training, support and development of authorized
installation network.
Through its Japanese subsidiary, IMPCO is able to satisfy the supply, technical
and customer support needs of OEMs, fleets, dealers and general customers in the
region with reliable, efficient, clean and economical performing systems.
<PAGE>
IMPCO Japan has not experienced and does not expect to experience any
significant difficulty in complying with environmental regulations applicable to
its assembly processes and facilities.
The work force at IMPCO Japan is non union.
ADVANCED RESEARCH AND PRODUCT DEVELOPMENT
During fiscal year 1998, the Company opened a facility dedicated to the research
and development of systems and products that support the use of clean burning
gaseous fuels in internal combustion engines and fuel cells. The Advanced
Technology Center is located on a five-acre tract of land in Irvine, California.
The center currently employs over 100 employees and has sophisticated
state-of-the-art research laboratories, emissions control equipment and
alternative fuel vehicle assembly and testing facilities.
In support of the operating segments, the Advanced Technology Center sponsors
the development of technology, products and fuel systems for motor vehicles,
heavy duty engines, forklifts, stationary engines and small industrial engines.
The operating segments utilize this technology for the development of new
products for future applications including injectors and catalysts, fuel storage
vessels, fuel acquisition devices and fuel cells.
PRODUCT CERTIFICATION
The Company must obtain certification from the Environmental Protection Agency
(EPA) to sell certain of its products in the United States and from the
California Air Resources Board (CARB) to market certain products in California.
Each car, truck, van or engine sold in the U.S. market must be certified by the
EPA before it can be introduced into commerce. The Company's products must meet
component, subsystem, and system level durability, emission, refueling and
various idle tests.
The Company seeks product approval by Underwriters Laboratories, Inc.
(UL(registered trademark)), the American Gas Association, and international
approval services on certain products. While approval is not always required,
the Company believes such approval enhances the acceptability of products in the
domestic marketplace. Many foreign countries also accept these agency approvals
as satisfying "approval for sale" requirements in their markets.
PATENTS AND TRADEMARKS
The Company holds a number of domestic and foreign patents. While the Company
believes that these patents and patent applications protect certain proprietary
rights and technologies, there can be no assurance that any existing and future
patents will provide such protection. Moreover, the Company believes that its
growth and future success are more dependent upon technical expertise and
marketing skills than on the ownership of patent rights. Also, other technology
exists which performs functions substantially equivalent to the technology
covered by the Company's patents and patent applications, and that technology
may be used by others without infringing upon the Company's patents.
The "IMPCO", "BEAM", "GARRETSON" and "CARBURETION J&S" marks are registered as
trademarks on the United States Principal Register. They are also registered in
other countries throughout the world.
YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Software failures, due to processing
errors potentially arising from calculations using the Year 2000, could result
in miscalculations or a complete system failure causing disruptions of
operations, including, among other things, a temporary inability to process
financial transactions, update customer accounts, bill customers, plan
production, or engage in similar normal business activities. The Company has
undertaken various initiatives intended to ensure that its computer equipment
and software will function properly with respect to dates in the year 2000 and
thereafter. It has completed its assessment of the Year 2000 issue through
communication with key customers, suppliers, financial institutions and others
with which it conducts business and review of its current internal computer
systems to identify potential Year 2000 issues. Based on this assessment, the
Company is not aware of any key customer, supplier, or financial institution
with inadequate solutions. Also, it has upgraded all computer hardware to comply
with Year 2000 dates and dates thereafter. Finally, the Company has developed
plans to address system modifications required by December 31, 1999 and these
plans basically require the upgrade to new versions of packaged software. The
Company has completed a majority of these upgrades and plans to have all system
software upgraded prior to December 31, 1999.
<PAGE>
Direct costs associated with addressing the Year 2000 issue have not been
significant and no information technology plans have been deferred due to Year
2000 efforts. The financial impact of making the required systems changes is not
expected to be material to the Company's consolidated financial position,
results of operations or cash flows.
The Company has not yet established a contingency plan to address Year 2000 risk
factors outside the Company's control, but it expects to create such a plan by
September 30, 1999.
The Company's Year 2000 compliance initiatives are ongoing and its ultimate
scope, as well as the consideration of contingency plans, will continue to be
evaluated as new information becomes available. In addition, it is important to
note that the description of the Company's efforts necessarily involves
estimates and projections with respect to activities required in the future.
These estimates and projections are subject to changes as work continues, and
such changes may be substantial.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union (EU)
established fixed conversion rates through the European Central Bank (ECB)
between existing local currencies and the euro, the EU's new single currency.
Following introduction of the euro, local currencies will remain legal tender
until December 31, 2001. During this transition period, goods and services may
be paid for with the euro or the local currency under the EU's "no compulsion,
no prohibition" principle. If cross-border payments are made in a local currency
during this transition period, the amount will be converted into euros and then
converted from euros into the second local currency at rates fixed by the ECB.
No later than December 31, 2001, participating countries will issue new
euro-denominated bills and coins for use in cash transactions. By no later than
July 1, 2002 participating countries will withdraw all bills and coins
denominated in local currencies, making the euro conversion complete.
Europe is a significant market for the Company, contributing 17 percent of
consolidated product sales. As a result, the Company is in the process of
assessing the euro's impact on the Company's business and pricing strategies for
customers and suppliers and ensuring that the Company's business processes and
systems can process transactions in euros and local currencies during the
transition period and achieve the conversion of all relevant local currency data
to the euro by December 31, 2001.
The euro introduction is not expected to have a material impact on the Company's
overall currency risk. The Company anticipates the euro will simplify financial
issues related to cross-border trade in the EU and reduce the transaction costs
and administrative time necessary to manage this trade and related risks. The
Company believes that the associated savings will not be material to
consolidated results.
<PAGE>
ITEM 2 - PROPERTIES
The Company's executive offices are located in Cerritos, California and along
with the GFP division occupy 105,000 square feet in two buildings at a single
4-acre location. The Cerritos site is leased until May 2004, with a five year
renewal option. The Company's Automotive OEM Division and Advanced Technology
Center is located in Irvine, California and occupies 110,000 square feet in one
building at a 3-acre location. The Irvine site is leased until August 2004, with
two five year renewal options. The Company maintains an application development
facility for large stationary and heavy duty engines in a suburb of Seattle,
Washington which occupies approximately 10,000 square feet in a portion of an
office park building. These premises are leased until December 2000. The
Company's Industrial Engine Systems sub-division is located in Sterling Heights,
Michigan and occupies 78,000 square feet. The Sterling Heights facility is
leased until November 1999. The Company believes its facilities are adequate for
its core product manufacturing operations and OEM development programs and
production. The Company's facility in Rijswijk, Holland occupies approximately
16,000 square feet and is leased until October 31, 2000, with a five year
renewal option. The Company's facility in Cheltenham, Australia occupies
approximately 15,000 square feet and is leased until May 31, 2001, with a four
year renewal option. The Company's facility in Mexico City, Mexico occupies
approximately 14,000 square feet and is leased until April 4, 2002. The
Company's facility in Fukuyoko, Japan occupies approximately 4,000 square feet
and is leased until July 31, 2000.
ITEM 3 - LEGAL PROCEEDINGS
The Company is a party to several legal actions, but based on discussions with
legal counsel, management does not believe that any of these actions will have a
material adverse effect on its business or financial condition.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year ended April 30, 1999.
FORWARD-LOOKING STATEMENTS
The statements contained in this Part I that are not historical in nature are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those indicated in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those identified in "Certain
Factors" at the end of Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
<PAGE>
PART II
-------
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on The Nasdaq Stock Market under the symbol
"IMCO". All common stock prices are closing prices quoted by The Nasdaq Stock
Market.
<TABLE>
<CAPTION>
Fiscal year 1999 Fiscal year 1998
-------------------- -------------------
Quarter Ended High Low High Low
------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
July 31 $ 17 3/8 $ 12 1/2 $ 10 $ 6 7/8
October 31 17 1/2 12 12 5/8 9 5/8
January 31 17 12 1/4 12 3/8 9 1/4
April 30 15 8 1/2 13 1/8 11 1/4
</TABLE>
On June 30, 1999, there were 505 holders of record of the Company's common
stock.
The Company has never paid dividends on its common stock. It intends to retain
future earnings to finance the operation and expansion of its business and does
not anticipate paying cash dividends in the foreseeable future.
The holders of the 1993 Series 1 Preferred Stock ("Preferred Stock") were
entitled to cumulative cash dividends in an amount equivalent to interest at an
annual rate per share (based on a deemed value of $1,000 per share) equal to the
Seattle-First National Bank prime rate of interest, plus 1.5%, but not to exceed
$105 per share nor be less than $80 per share annually. On March 31, 1999 each
share of Preferred Stock was converted into approximately 189 shares of common
stock at a $5.29 conversion price per share. As a result, after March 31, 1999
no shares of Preferred Stock were outstanding.
<PAGE>
ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
In thousands, except per share amounts
----------------------------------------------------
Fiscal Years Ended April 30,
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
- ----------------------
Net revenue 1 $86,826 $71,083 $61,828 $51,575 $45,231
Research and
development expense 11,612 12,062 7,725 7,171 6,197
Operating income 6,903 7,118 4,850 4,132 3,540
Interest expense 1,170 935 1,100 504 292
Gain on sale of subsidiary 2,169 - - - -
Net income 2,3 6,331 4,865 3,225 4,671 2,967
Dividends on preferred stock 4 531 595 581 610 548
Net income applicable
to common stock 5,800 4,270 2,644 4,061 2,420
Net income per share 3,4:
Basic .80 .67 .46 .72 .43
Diluted .71 .60 .43 .64 .39
Number of shares used in
per share computation 4:
Basic 7,293 6,334 5,722 5,648 5,620
Diluted 8,976 8,155 6,131 7,300 6,272
Balance sheet data:
- -----------------
Total current assets $52,120 $38,817 $29,904 $24,578 $13,626
Total assets 73,562 58,178 47,113 37,728 22,109
Total current liabilities 16,892 11,417 11,656 9,266 5,111
Long-term obligations 13,894 11,387 12,721 8,823 1,855
Stockholders' equity 41,449 34,305 22,063 19,256 15,143
- -------------------------
See accompanying notes.
</TABLE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
1 Includes contract revenue during fiscal year ended April 30, 1999, 1998,
1997, 1996 and 1995 of $11,006,000, $ 8,874,000, $3,392,000, $3,087,000 and
$1,524,000, respectively. See Note 12 of the "Notes to Consolidated Financial
Statements."
2 Fiscal year 1996 includes an income tax benefit of $1,700,000, due to the
reduction in the valuation allowance for deferred tax assets (equivalent to
$0.30 per basic share and $0.26 per diluted share) and $318,000 net income
from the Company's European subsidiary that was acquired in October 1995.
3 Includes gain on sale of 49 percent interest in IMPCO BV to BERU
Aktiengesellschaft during fiscal year 1999. The Company recorded a pre-tax
gain of $2,169,000 and an after-tax gain of $1,757,000, or $0.20 per diluted
share.
4 During fiscal years 1996 and 1998, shares assumed to be issued upon
conversion of the Company's preferred stock were included in the calculation
since it resulted in a reportable dilution. During fiscal year 1999 preferred
stock was converted to common stock and the diluted Earnings Per Share is
calculated as though the conversion occurred at the beginning of the fiscal
year.
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FORWARD-LOOKING STATEMENTS
The statements contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations that are not historical in nature are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those indicated in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to,
those identified in "Certain Factors" at the end of this discussion and other
factors identified from time to time in the Company's reports filed with the
Securities and Exchange Commission. All period references are to the
Company's fiscal periods ended April 30, 1999, 1998 or 1997, unless otherwise
indicated.
OVERVIEW
IMPCO Technologies, Inc. designs, manufactures and markets equipment that
allows internal combustion engines to operate primarily on alternative
gaseous fuels, mostly propane and natural gas. The Company's products include
fuel management systems and components, and are sold for maintenance,
aftermarket conversions and as original equipment on motor vehicles,
forklifts and small portable to large stationary engines. Worldwide, the
products are marketed through distributors and original equipment
manufacturers. IMPCO Technologies, Inc. classifies its business interests
into three operating segments: Gaseous Fuel Products Division, Automotive OEM
Division, and Non-U.S. Based Subsidiary Operations. Advanced research and
development is funded at the corporate level and provides new products and
technology to the operating segments.
RESULTS OF OPERATIONS
ACQUISITIONS
In fiscal year 1997, the Company through its wholly-owned subsidiary, IMPCO
Technologies, Pty. Limited (IMPCO Pty), acquired certain assets of Ateco
Automotive Pty. Limited (Ateco), including a 50 percent ownership interest in
Gas Parts (NSW) Pty., for a purchase price of approximately $6,532,000. In
fiscal year 1998, IMPCO Pty acquired the remaining 50 percent ownership
interest in Gas Parts (NSW) Pty. IMPCO Pty's consolidated revenues totaled
approximately $5,398,000 and $6,893,000 in fiscal year 1999 and 1998,
respectively, and $7,816,000 for 10 months of operations in fiscal year 1997.
In fiscal year 1998, the Company purchased certain manufacturing equipment
and inventory of the Algas Carburetion Division of PGI International at a
purchase price of $2,400,000. On the same day, the Company acquired a 90
percent interest in Industrias Mexicanas de Productos de Combustibles, S. de
R.L. de C.V. (IMPCO Mexicano) at a purchase price of $961,000. IMPCO Mexicano
had revenues of approximately $2,671,000 in fiscal year 1999 and $823,000 for
5 months of operations in fiscal year 1998.
In fiscal year 1998, the Company purchased from the bankruptcy trustee of EDO
Canada, Ltd. certain development, testing, quality control and manufacturing
equipment used for the manufacture of storage tanks for compressed natural
gas. The purchase price was $790,000. There have been no sales to date.
On May 1, 1998, the Company acquired the remaining 49 percent interest in
IMPCO Technologies, B.V. (IMPCO BV) for a purchase price of $692,000. On
January 28, 1999, the Company sold a 49 percent interest in IMPCO BV to BERU
Aktiengesellschaft (BERU), an international Original Equipment Manufacturer
and aftermarket supplier of diesel and automotive engine components and
systems, for $3,500,000 in cash. The Company recorded a pre-tax gain of
$2,169,000 and an after-tax gain of $1,757,000, or $0.20 per diluted share.
The new company is operated as IMPCO-BERU Technologies, B.V. and had revenues
of approximately $12,941,000, $11,588,000, and $9,203,000 in fiscal years
1999, 1998 and 1997, respectively.
On December 4, 1998, the Company acquired certain assets of the Crusader
Engine division of Thermo Power Corporation, a subsidiary of Thermo Power
Electron Corporation, for approximately $3,880,000. The Crusader Engine
division provides engine dressing and related devices for material handling
engines. The acquisition was accounted for under the purchase method of
accounting and goodwill of approximately $662,000 is being amortized on the
straight-line method over 20 years. Tangible net assets acquired consisted of
$2,500,000 in inventory and $718,000 in fixed assets.
On March 30, 1999, the Company through its wholly-owned subsidiary, IMPCO
Tech Japan K.K. (IMPCO Japan), acquired certain assets of the alternative
fuels division of Mikuni Corporation, headquartered in Tokyo, Japan, for
approximately Y158,629,000 (U.S.$1,325,000). The alternative fuels division,
based in Fukuoka, Japan, is a distributor of alternative fuels products and
systems throughout Asia, with a focus on the Japanese market. Mikuni has
distributed IMPCO products in Japan since 1994. The acquisition was accounted
for under the purchase method of accounting and goodwill of approximately
Y113,016,000
<PAGE>
(U.S.$944,000) is being amortized on the straight-line method over 20 years.
Tangible net assets acquired consisted of $362,000 in inventory and $19,000
in fixed and other assets.
FISCAL YEAR 1999 VS. FISCAL YEAR 1998
Revenues and operating income for IMPCO's business segments in fiscal year
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------- ----------------------- -------------------------
Revenues Operating Income
- ---------------------------------------- ----------------------- -------------------------
(IN THOUSANDS) FY 1999 FY 1998 FY 1999 FY 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Gaseous Fuels Products Division $52,632 $48,277 $14,284 $14,749
Automotive OEM Division 24,469 12,328 (27) (1,451)
Non-U.S. Based Subsidiaries 21,188 19,304 1,504 1,772
Corporate Expenses - - (5,516) (4,996)
Advanced Research & Product Develop. - - (3,053) (2,523)
Intersegment Elimination (11,463) (8,826) (289) (433)
- ---------------------------------------- ------------ ----------- ------------ -----------
Total $86,826 $71,083 $6,903 $7,118
- ---------------------------------------- ------------ ----------- ------------ -----------
</TABLE>
The Company's net revenue for fiscal year 1999 increased by $15.7 million, or
22 percent, compared to the prior fiscal year. The Automotive OEM Division
accounted for $12.1 million of this increase, of which $9.7 million resulted
from increased OEM motor vehicle upfit sales. Contract revenues, primarily
from the GM program, increased $2.4 million. Product sales from the Gaseous
Fuel Products Division increased by approximately $4.4 million, or 9 percent,
compared to the prior fiscal year. The following table sets forth the
Company's product revenues, including upfit revenue, by application across
all business segments:
<TABLE>
<CAPTION>
- --------------------------------------------------------- ---------------- ----------------
(IN THOUSANDS) FY 1999 FY 1998
- --------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Motor vehicle products $32,748 $21,870
Forklifts and other material handling equipment 31,822 29,493
Small portable to large stationary engines 11,251 10,846
- --------------------------------------------------------- ---------------- ----------------
Total product sales $75,821 $62,209
- --------------------------------------------------------- ---------------- ----------------
</TABLE>
<PAGE>
During fiscal year 1999 and 1998 the Company's product revenue, including
upfit revenue, was generated in the following geographic regions:
<TABLE>
<CAPTION>
- --------------------------------------------------------- ---------------- ----------------
Fiscal Years Ended April 30, 1999 1998
- --------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
United States and Canada 60% 57%
Pacific Rim 9% 13%
Europe 17% 19%
Latin America 14% 11%
- --------------------------------------------------------- ---------------- ----------------
</TABLE>
GASEOUS FUELS PRODUCTS DIVISION. Net revenues increased to $52.6 million,
compared to $48.3 million in fiscal year 1998. This increase was primarily a
result of the current year addition of the Industrial Engine Systems
Division, higher revenues from the small engine market and higher transfer
sales to support the increased sales levels of the subsidiaries. For the
current year, the increase in the small engine market resulted from higher
demand for small portable engines - primarily generators - as consumers and
small business prepare for the Year 2000. These increases were partially
offset by lower revenues from the large stationary engine market where net
revenues decreased from $3.3 million in fiscal year 1998 to $2.3 million in
fiscal year 1999. This decrease is primarily a result of reduced demand for
large power generation units used in power replacement and recreational
applications and other heavy duty applications, particularly in the Far East.
Management anticipates that overall revenues generated by GFPD during fiscal
year 2000 will be higher than fiscal year 1999, primarily due to a full year
reporting of the Industrial Engine Systems (IES) sales and higher motor
vehicle component sales to the Latin America markets. This is a
forward-looking statement. See "Risk Factors".
Operating income decreased approximately $465,000 in fiscal year 1999. This
decrease was a result of higher sales and administrative expenses, primarily
from additional marketing and technical support expenses to support the
higher sales. Additionally, division funded product application development
costs increased from $1,254,000 in fiscal 1998 to $1,539,000 in fiscal 1999.
These amounts were partially offset by higher gross profits as a result of
higher sales volumes, although the percent margin decreased from 38.9 percent
to 37.1 percent as a result of anticipated lower margins realized on the
system sales from IES. Additionally, customer funded R&D expense decreased by
$263,000 in fiscal 1999. Management anticipates that divisional operating
income will be higher in fiscal year 2000, compared to fiscal year 1999, as a
result of higher sales and gross margin amounts. However, management is
expecting the gross margin percent to decrease as the percent mix of IES
sales increases during fiscal year 2000. These are forward-looking
statements. See "Risk Factors".
AUTOMOTIVE OEM DIVISION. Net revenues increased to $24.5 million, compared to
$12.3 million in fiscal year 1998. This increase is a result of higher motor
vehicle upfit revenue, which increased to $13.5 million compared to $3.7
during the prior fiscal year. This represents an approximate 262 percent
increase in upfit revenue. During fiscal year 1999, the upfit revenue
represented 3,300 units consisting of mid-size automobiles upfit with the
division's bi-fuel compressed natural gas fuel system, medium-duty dedicated
Liquid Propane Gas (LPG) kits under a cross license agreement with General
Motors, and GM pick-ups upfit with the division's bi-fuel compressed natural
gas fuel system. During fiscal year 1998, the upfit revenue represented sales
of 1,320 units consisting of GM pick-ups upfit with the division's bi-fuel
natural gas fuel system and medium-duty dedicated Liquid Propane Gas (LPG)
kits under a cross license agreement with General Motors. Management expects
upfit revenues to be significantly higher during fiscal year 2000 compared to
fiscal year 1999 due to higher customer orders for the Company's systems on
GM vehicles. This is a forward-looking statement. See "Risk Factors".
During 1999, contract revenues increased $2.4 million, or 28 percent, as
compared to fiscal year 1998. This increase was due to the addition of
several vehicle platforms and additional future model years for existing
platforms under the GM development contract and development contracts funded
by the Southern California Air Quality Management District. Contract revenue
is principally recognized by the percentage of completion method. Profits
expected to be realized on contracts are based on the Company's estimates of
total contract sales value and costs at completion. These estimates are
reviewed and revised periodically throughout the lives of the contract.
Management anticipates, based on new contracts negotiated with GM and
expected levels of contract completion in fiscal year 2000, that contract
revenue for the next fiscal year will be lower than levels experienced during
fiscal year 1999. Additionally, profit levels expected on the contracts in
fiscal year 2000 will be substantially lower than levels realized during
fiscal year 1999 due to the new contracts. These are forward-looking
statements. See "Risk Factors".
Operating losses decreased approximately $1.4 million in fiscal year 1999.
This decrease was a result of higher contract revenues, primarily from the GM
program, and associated lower product application development costs for new
products being commercialized. Product application development expense is
primarily for system development and application engineering of the Company's
products under the funded General Motors contract and other funded contract
R&D work with the Southern California Air Quality Management District and
other agencies, and for internally funded product and component application
development work. R&D expense directly related to externally funded product
application development work decreased from $7.4 million in fiscal year 1998
to $6.1 million in fiscal year 1999. These decreases are a result of improved
productiveness resulting from knowledge transfer over multiple platforms and
application of knowledge to non-GM funded contracts. R&D expense directly
related to internally funded product application development work decreased
approximately $200,000 compared to fiscal year 1998.
<PAGE>
This decrease is a result of efficiencies realized in developing new advanced
technology and products. Management believes the division's future success
depends on its ability to design, develop and market new products that
interface successfully with new engine electronic technology, and which meet
mandated emission standards and advanced fuel storage technology. Management
anticipates that R&D expense in fiscal year 2000 will be higher than levels
experienced during fiscal year 1999. This is a forward-looking statement. See
"Risk Factors".
The decrease in operating losses as a result of higher contract revenues was
nearly offset by lower gross margins on the upfit product sales, compared to
the prior fiscal year. During fiscal 1999, the division experienced negative
material usage variances and increased fixed overhead costs not covered by
production volumes for several new start-up OEM programs. Management
anticipates that gross margins will be higher in fiscal year 2000 due to
lower material costs and lower per unit overhead costs as a result of higher
volumes. See "Risk Factors".
NON-U.S. BASED SUBSIDIARIES. Net revenues increased to $21.2 million in
fiscal year 1999, compared to $19.3 million in fiscal year 1998. Non-U.S.
based subsidiary revenues would have increased an additional $1.1 million if
not for the strengthening U.S. Dollar. The weakening of foreign currencies
versus the U.S. Dollar negatively impacts the conversion of foreign currency
denominated sales. During fiscal year 1999, the Company realized increased
revenues of $1.4 million from its European operation which primarily sells
material handling components. Additionally, the Mexican operation, acquired
in December 1997, reported a full year of revenues at $2.7 million compared
to $.8 million in revenues for the five month period in fiscal year 1998.
These increases were partially offset by a $1.4 million decrease in revenues
from the Australian operation which primarily sells motor vehicle components.
Without the strengthening U.S. Dollar, revenues from Australian operations
would have decreased less than half this amount in fiscal year 1999. The
lower product sales from the Australian operation are a result of a continued
general economic slowdown in the Far East, a decrease in component sales to
OEMs and unfavorable price differentials between propane and gasoline caused
by the major disruption of natural gas supply in Australia in 1999 which
increased demand for propane for household use and resulted in increased
propane prices. Management anticipates that revenues in fiscal year 1999 will
be higher than fiscal year 1998 as a result of the addition of IMPCO Japan
and higher motor vehicle sales in Mexico and Australia. This is a
forward-looking statement. See "Risk Factors".
Operating income decreased approximately $268,000 in fiscal year 1999,
compared to the prior year, primarily as a result of lower product margins.
The Company's gross profit margin on subsidiary based product sales decreased
from 34 percent in fiscal year 1998 to 32 percent during fiscal year 1999.
During fiscal year 1999, the Company's gross profit margin on subsidiary
based product sales decreased as a result of higher material costs at the
Australian and Mexico subsidiaries due to a strengthening U.S. Dollar against
those country's foreign currencies. Also, this decrease is a result of higher
material costs at the European subsidiary due to higher transfer pricing
between the U.S. parent and the subsidiary. Management anticipates that gross
profit percentages and operating income levels at the foreign operations
could be lower in the future as a result of the strengthening U.S. Dollar
versus foreign currencies and higher material costs as a result of
adjustments to transfer pricing. This is a forward-looking statement. See
"Risk Factors".
CORPORATE EXPENSES. Corporate expenses consist of general and administrative
expenses at the corporate level to support the divisions and the corporation
in areas such as executive management, finance, human resources, management
information systems, legal services and investor relations. Additionally,
amortization of goodwill and other intangible assets is recorded as a
corporate expense. During fiscal year 1999, corporate expenses increased
approximately $520,000 primarily due to increases in administrative personnel
and administrative salaries and benefits to support the Company's growth and
international operations and additional amortization of goodwill from
acquisitions. Management anticipates that corporate expenses during fiscal
year 2000 will be comparable to levels in fiscal 1999. This is a
forward-looking statement. See "Risk Factors".
ADVANCED RESEARCH AND PRODUCT DEVELOPMENT. Advanced research & product
development consists of projects that support multiple divisions and are
therefore funded at the corporate level. In fiscal year 1999, advanced R&D
increased approximately $530,000. This increase is a result of additional R&D
efforts on the development of fuel storage technology and other advanced
technologies. Management believes the Company's future success depends on its
ability to design, develop and market new products that interface
successfully with new engine electronic technology, and which meet mandated
emission standards and advanced fuel storage technology. Management
anticipates that advanced research and product development during fiscal year
2000 will be comparable to levels in fiscal 1999. This is a forward-looking
statement. See "Risk Factors".
INTEREST EXPENSE. Interest expense for fiscal year 1999 increased by
$235,000, or 25 percent, as compared to the prior fiscal year. For fiscal
year 1999, the increase is a result of higher borrowings on the Company's
lines of credit as compared to the prior year and as a result of higher
long-term borrowings to fund the Algas Carburetion acquisition (December
1997), the purchase of the remaining 49 percent interest of IMPCO BV (May
1998), the purchase of the Crusader Engine Division (December 1998), and the
purchase of IMPCO Japan (March 1999). The higher interest expense was
partially offset by lower interest rates on the Company's credit facility
with Bank of America and prepayments on certain long-term borrowings from
funds received from the Company's redemption of its common stock purchase
warrants during the third quarter of fiscal year 1998. Management anticipates
that financing charges for fiscal year 2000 will be lower as compared to the
current fiscal year. This is a forward-looking statement. See "Risk Factors".
<PAGE>
PROVISION FOR INCOME TAXES. The Company's effective income tax rate for
fiscal years 1999 and 1998 was 19 percent and 14.7 percent, respectively. The
provision for income taxes consists primarily of federal, state and foreign
taxes which are computed using statutory rates. The effective tax rate
represents the statutory income tax rate reduced by the use of net operating
loss carryforwards, R&D tax credits and other items. During fiscal year 1999,
the deferred tax asset increased by $967,000 to $2,646,000 at April 30, 1999
due to research and development credits. For federal income tax purposes, the
Company utilized all net operating loss carryforwards at the end of the 1998
fiscal year. Management has determined, based on the Company's history of
prior operating earnings and its expectations for the future, that operating
income of the Company will more likely than not be sufficient to recognize
fully these net deferred tax assets and that the estimated effective annual
rate in the future years will approximate the statutory rate. This is a
forward-looking statement. See "Risk Factors".
<PAGE>
FISCAL YEAR 1998 VS. FISCAL YEAR 1997
Revenues and operating income for Impco's business segments in fiscal year 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------ ---------------------------------- ----------------------------------
Revenues Operating Income
- ------------------------------------------------ ---------------------------------- ----------------------------------
(IN THOUSANDS) FY 1998 FY 1997 FY 1998 FY 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Gaseous Fuels Products Division $48,277 $43,010 $14,749 $11,093
Automotive OEM Division 12,328 6,154 (1,451) (1,801)
Non-U.S. Based Subsidiaries 19,304 17,018 1,772 1,266
Corporate Expenses - - (4,996) (4,315)
Advanced Research & Product Develop. - - (2,523) (1,314)
Intersegment Elimination (8,826) (4,354) (433) (79)
- ------------------------------------------------ ---------------- ----------------- --------------- ------------------
Total $71,083 $61,828 $7,118 $4,850
- ------------------------------------------------ ---------------- ----------------- --------------- ------------------
</TABLE>
The Company's net revenue for fiscal year 1998 increased by $9,255,000, or 15
percent, compared to the prior fiscal year. Contract revenues, primarily from
the GM program, represented $5,482,000 of this increase. Product sales for
fiscal year 1998 increased by approximately $3,772,000, or 6 percent, which was
unfavorably reduced by $2,326,000, or 4 percent, as a result of the negative
effects from a strengthening U.S. Dollar against foreign currencies. The
following table sets forth the Company's product revenues, including upfit
revenue, by application across all business segments:
<TABLE>
<CAPTION>
- --------------------------------------------------------- ---------------- ----------------
(IN THOUSANDS) FY 1998 FY 1997
- --------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Motor vehicle products $21,870 $23,784
Forklifts and other material handling equipment 29,493 23,291
Small portable to large stationary engines 10,846 11,362
- --------------------------------------------------------- ---------------- ----------------
Total product sales $62,209 $58,437
- --------------------------------------------------------- ---------------- ----------------
</TABLE>
During fiscal year 1998 and 1997 the Company's product revenue, including upfit
revenue, was generated in the following geographic regions:
<TABLE>
<CAPTION>
- --------------------------------------------------------- ---------------- ----------------
Fiscal Years Ended April 30, 1998 1997
- --------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
United States and Canada 57% 66%
Pacific Rim 13% 11%
Europe 19% 12%
Latin America 11% 11%
- --------------------------------------------------------- ---------------- ----------------
</TABLE>
GASEOUS FUELS PRODUCTS DIVISION. Net revenues increased to $48.3 million,
compared to $43.0 million in fiscal year 1997. This increase was primarily a
result of higher material handling related revenues, both domestically and
internationally. The increase in domestic and international revenues was a
result of the general upswing in economic conditions which increases the
demand for forklift related equipment. Additionally, net revenues from large
industrial engines increased to $3.3 million, compared to $2.6 million in
fiscal year 1997. This increase is primarily a result of higher demand for
large power generation units used in power replacement and recreational
applications. Also, the division increased contract revenues in fiscal year
1998 under the VarietyPerkins development contract. These increases in
revenues were partially offset by decreases in revenues from the motor
vehicle product and small portable engine markets. The lower motor vehicle
related revenues resulted from lower product sales for aftermarket
conversions in the U.S. market due to new regulatory requirements shifting
the automotive conversion market to direct OEM upfits. The reduction in small
portable engine revenues was related to new EPA regulations affecting the
small engine aftermarket.
Operating income increased approximately $3.7 million in fiscal year 1998. This
increase was primarily realized from higher gross profit margins as a result of
higher sales volumes and lower material costs. The increase in gross profit
margins was partially offset by higher R&D expenses in 1998. Customer funded R&D
expense increased from $157,000 in fiscal 1997 to $263,000 in fiscal 1998.
Division funded R&D expense increased from $1,224,000 in fiscal 1997 to
$1,254,000 in fiscal 1998.
AUTOMOTIVE OEM DIVISION. Net revenues increased to $12.3 million, compared to
$6.2 million in fiscal year 1997. This increase is a result of higher contract
revenues, primarily from the GM program, and higher motor vehicle upfit
revenues. During 1998, contract revenues increased $5.4 million, or 166 percent,
as compared to 1997. This increase was due to the addition of several gaseous
fuel vehicle platforms for development under the contract with GM and to
development contracts obtained from various federal and state agencies.
<PAGE>
During fiscal year 1998, revenue attributable to upfitting motor vehicles with
the division's systems increased by $798,000, or 27 percent, compared to the
previous fiscal year. This upfit revenue represented sales of 440 mid-year 1997
GM pick-ups upfit with the division's bi-fuel natural gas fuel system and sales
of 880 1998 medium-duty dedicated Liquid Propane Gas (LPG) kits under a cross
license agreement with General Motors. During fiscal year 1997, a portion of
revenue attributable to upfitting vehicles for aftermarket fleet use in 1997
resulted from a program with Ford Motor Company in which the division's bi-fuel
propane system was utilized in 1996 model year F-150 and F-250 pickup trucks.
The Ford program was materially completed during the first quarter of fiscal
year 1997.
Operating losses decreased approximately $350,000 in fiscal year 1998. This
decrease was a result of higher contract revenues, but nearly completely offset
by higher research and development expenses and higher general and
administrative expenses. Externally funded R&D expense increased from $3.0
million in fiscal 1997 to $7.4 million in fiscal 1998. The increase in
externally funded R&D was a result of additional gaseous fuel vehicle platforms
for development under the contract with GM and development contracts obtained
from various federal and state agencies. Division funded R&D expense decreased
by $1.3 million in fiscal 1998, compared to fiscal 1997 as a result of efforts
placed on the externally funded R&D work.
NON-U.S. BASED SUBSIDIARIES. Net revenues increased to $19.3 million, compared
to $17.0 million in fiscal year 1997. During fiscal year 1998, the Company
realized increased revenues of $2.4 million from its European operations which
primarily sells material handling components. Without the strengthening U.S.
Dollar, revenues from European operations would have increased $3.9 million for
fiscal year 1998. Additionally, the Mexican operation, acquired in December
1997, added $823,000 in revenues for fiscal year 1998. These increases in
revenue were partially offset by $922,000 in lower product sales from the
Australian operation as a result of a general economic slowdown and unfavorable
price differentials between petroleum and propane which unfavorably impacted the
Company's component sales.
Operating income increased approximately $506,000 in fiscal year 1998 primarily
as a result of the European operation. The increase in operating income for the
European operation is primarily due to additional gross profit from higher sales
volumes.
CORPORATE EXPENSES. Corporate expenses consist of general and administrative
expenses at the corporate level to support the divisions and the corporation in
areas such as executive management, finance, human resources, management
information systems, legal services, and investor relations. Additionally,
amortization of goodwill and other intangible assets is recorded as a corporate
expense. In fiscal year 1998, corporate expenses increased approximately
$681,000 primarily due to legal expenses, incentive compensation, and increases
in administrative salaries.
ADVANCED RESEARCH AND PRODUCT DEVELOPMENT. Advanced research & product
development consists of projects that support multiple divisions and are
therefore funded at the corporate level. In fiscal year 1998, advanced R&D
increased $1.2 million primarily as a result of the start-up of new projects
relating to the development of next generation technologies. Management believes
the Company's future success depends on its ability to design, develop and
market new products that interface successfully with new engine electronic
technology, and which meet mandated emission standards and advanced fuel storage
technology.
INTEREST EXPENSE. Interest expense for fiscal year 1998 decreased by
approximately 15 percent as compared to 1997. The decrease is attributable to
lower borrowings on the Company's line of credit as compared to the prior year
and prepayments on long-term borrowings primarily from funds received from the
Company's redemption of its common stock purchase warrants.
PROVISION FOR INCOME TAXES. The Company's effective income tax rate for fiscal
years 1998 and 1997 was 14.7 percent and 7.0 percent, respectively. The
provision for income taxes consist primarily of federal, state and foreign taxes
which are computed using statutory rates. The effective tax rate represents the
statutory income tax rate reduced by the use of net operating loss
carryforwards, R&D tax credits and other items. During fiscal year 1997, the
deferred tax asset increased by $273,000 to $1,973,000 at April 30, 1997. During
fiscal year 1998, the deferred tax asset decreased by $373,000 to $1,600,000 at
April 30, 1998. For federal income tax purposes, the Company has utilized all
net operating loss carryforwards as of the end of the 1998 fiscal year.
FINANCIAL CONDITION AND LIQUIDITY AT APRIL 30, 1999
The Company uses cash generated from its operations and external financing to
fund capital expenditures and invest in and operate its existing operations and
new businesses. These sources are sufficient to meet all current obligations on
a timely basis. Management believes that such sources of funds will be
sufficient to meet the needs of its business for the foreseeable future. This is
a forward-looking statement. See "Risk Factors".
The Company's financial condition remains strong. The ratio of current assets to
current liabilities was 3.09:1 at April 30, 1999, as compared to 3.40:1 at April
30, 1998. During fiscal year 1999, the total amount of working capital increased
by approximately $7.8 million to $35.2 million at April 30, 1999. Net cash
provided by operating activities was $.4 million during fiscal year 1999,
compared to $1.5 million net cash provided by operating activities for the
previous year. The decrease in cash provided by operating activities
<PAGE>
during fiscal year 1999 compared to the prior year resulted primarily from an
increase in accounts receivable and the gain on sale of 49 percent of IMPCO
BV, partially offset by an increase in accounts payable, a decrease in
inventory build-up compared to the prior year and higher net income. The
increase in accounts receivable was mostly due to increased billings on the
GM contract and shipments of OEM upfit vehicles. The decrease in inventory
build-up is primarily due to higher turnover of component part inventory
during fiscal 1999 compared to fiscal 1998. Additionally, the working capital
was impacted by an increase in other current assets which was primarily a
short-term and long-term reclassification of the deferred tax asset.
Net cash used in investing activities in fiscal year 1999 was approximately $4.5
million, compared to $5.8 million in the prior year. The primary investing
activities during fiscal 1999 were the purchase of tangible and intangible
assets from Crusader Engine, the investment in IMPCO Japan and associated
acquisition of tangible and intangible assets from Mikuni, the investment in the
remaining 49 percent interest in IMPCO BV, and normal capital expenditures.
These investments were partially offset by the receipt of $3.5 million from the
sale of 49 percent of IMPCO BV. The primary investing activities during the same
period in the prior year were the acquisition of tangible and intangible assets
from Algas Carburetion, the investment in IMPCO Mexicano, and normal capital
expenditures. Management projects capital expenditures during fiscal year 2000,
primarily relating to equipment enhancements and facilities for the development
and production of new products, to be comparable to expenditures during fiscal
year 1999. The Company expects to fund a major portion of these expenditures
from cash generated from operations and/or by use of its bank credit facility.
These are forward-looking statements. See "Risk Factors".
Net cash provided by financing activities during fiscal year 1999 was
approximately $3.5 million, compared to $5.1 million in the prior year. The
Company borrowed $2.5 million on the operating line of credit and borrowed $6.6
million on bank term loans to fund the 49 percent acquisition of IMPCO BV, the
acquisition of the Crusader Engine division, and the acquisition of Mikuni.
Additionally, during fiscal 1999, the Company received approximately $1.4
million from the issuance of common stock from the exercise of stock options,
partially offset by the purchase of shares held in trust. Payments made on term
loans, including the retirement of the DEPA Holding BV term loan as part of the
May 1998 acquisition of IMPCO BV and a partial prepayment on the Crusader
acquisition term loan, were approximately $5.5 million.
The Company has a $12,000,000 revolving line of credit, $2,810,000 of available
credit on the acquisition facility, and approximately $1,274,000 of available
credit under a capital lease facility with Bank of America. At April 30, 1999,
approximately $5,551,000 and $2,946,000 were outstanding under the revolving
line of credit and the capital lease facility, respectively. The revolving line
of credit expires on August 31, 2000, the acquisition facility expires on August
31, 1999, and the capital lease facility expires on September 1, 2004. In
addition, the Company's subsidiary in the Netherlands has a fl. 3,000,000
(U.S.$1,600,000) credit facility with Mees Pierson, a financial institution in
the Netherlands. At April 30, 1999, there was no outstanding balance on the Mees
Pierson credit facility. The Company's subsidiary in Japan has a Y60,000,000
(U.S.$503,000) revolving term loan facility with the Hongkong and Shanghai
Banking Corporation Ltd., Osaka Branch. At April 30, 1999, there was an
outstanding loan balance of Y10,000,000 (U.S.$84,000).
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments for the purpose of reducing
its exposure to adverse fluctuations in interest and foreign exchange rates.
While these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged. The Company is not a party to leveraged derivatives and does not hold or
issue financial instruments for speculative purposes.
FOREIGN CURRENCY MANAGEMENT. The results and financial condition of the
Company's international operations are affected by changes in exchange rates
between certain foreign currencies and the U.S. Dollar. The Company's exposure
to fluctuations in currency exchange rates has increased as a result of the
growth of its international subsidiaries. The functional currency for all of the
Company's international subsidiaries is the local currency of the subsidiary. An
increase in the value of the U.S. Dollar increases costs incurred by the
subsidiaries because most of their inventory purchases are U.S. Dollar
denominated. The Company monitors this risk and attempts to minimize the
exposure through forward currency contracts and the management of cash
disbursements in local currencies. The Company uses forward currency contracts,
which typically expire within one year, to hedge payments related to the
purchase of goods by its international subsidiaries. Realized gains and losses
on these contracts are recognized as part of cost of sales in the same period as
the hedged transactions. At April 30, 1999, the Company had forward currency
contracts protecting U.S.$2,400,000 in inventory purchases. At April 30, 1999
the fair value of forward currency contracts was ($99,000).
The Company seeks to hedge its foreign currency economic risk by minimizing its
U.S. Dollar investment in foreign operations using foreign currency term loans
and lines of credit to finance the operations of its foreign subsidiaries. The
term loans and lines of credit are denominated in local currencies and
translated to U.S. Dollars at period end exchange rates.
<PAGE>
INTEREST RATE MANAGEMENT. The Company uses interest rate swap agreements with
Bank of America NT&SA to manage its exposure to interest rate changes and
stabilize the cost of borrowed funds. When an agreement is executed, the
interest rate swap is matched as a hedge to a specific debt instrument and has
the same notional amount and tenor as the related debt instrument principal.
Since the interest rate instruments effectively hedge the underlying interest
rate exposure, the net cash amounts paid or received on the agreements are
accrued and recognized as an adjustment to interest expense. At April 30, 1999,
the Company had $5,555,000 secured under fixed interest rate agreements at a
weighted-average fixed interest rate of 7.97 percent. Absent these fixed rate
agreements, the weighted-average variable rate for this debt at April 30, 1999
would have been 6.84 percent. Fair value of these instruments is based on
estimated current settlement cost. At April 30, 1999 the fair value of interest
rate swap agreements was approximately ($59,000).
YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Software failures, due to processing
errors potentially arising from calculations using the year 2000, could result
in miscalculations or a complete system failure causing disruptions of
operations, including, among other things, a temporary inability to process
financial transactions, update customer accounts, bill customers, plan
production, or engage in similar normal business activities. The Company has
undertaken various initiatives intended to ensure that its computer equipment
and software will function properly with respect to dates in the year 2000 and
thereafter. It has completed its assessment of the Year 2000 issue through
communication with key customers, suppliers, financial institutions and others
with which it conducts business and review of its current internal computer
systems to identify potential Year 2000 issues. Based on this assessment, the
Company is not aware of any key customer, supplier, or financial institution
with inadequate solutions. Also, it has upgraded all computer hardware to comply
with year 2000 dates and dates thereafter. Finally, the Company has developed
plans to address system modifications required by December 31, 1999 and these
plans basically require the upgrade to new versions of packaged software. The
Company has completed a majority of these upgrades and plans to have all system
software upgraded prior to December 31, 1999.
Direct costs associated with addressing the Year 2000 issue have not been
significant and no information technology plans have been deferred due to Year
2000 efforts. The financial impact of Year 2000 issues is not expected to be
material to the Company's consolidated financial position, results of operations
or cash flows. This is a forward looking statement. See "Risk Factors".
The Company has not yet established a contingency plan to address Year 2000 risk
factors outside the Company's control, but it expects to create such a plan by
September 30, 1999.
The Company's Year 2000 compliance initiatives are ongoing and its ultimate
scope, as well as the consideration of contingency plans, will continue to be
evaluated, as new information becomes available. In addition, it is important to
note that the description of the Company's efforts necessarily involves
estimates and projections with respect to activities required in the future.
These estimates and projections are subject to changes as work continues, and
such changes may be substantial.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union (EU)
established fixed conversion rates through the European Central Bank (ECB)
between existing local currencies and the euro, the EU's new single currency.
Following introduction of the euro, local currencies will remain legal tender
until December 31, 2001. During this transition period, goods and services may
be paid for with the euro or the local currency under the EU's "no compulsion,
no prohibition" principle. If cross-border payments are made in a local currency
during this transition period, the amount will be converted into euros and then
converted from euros into the second local currency at rates fixed by the ECB.
By no later than December 31, 2001, the participating countries will issue new
euro-denominated bills and coins for use in cash transactions. By no later than
July 1, 2002 participating countries will withdraw all bills and coins
denominated in local currencies, making the euro conversion complete.
Europe is a significant market for the Company, contributing 17 percent of
consolidated product sales. As a result, the Company is in the process of
assessing the euro's impact on the Company's business and pricing strategies for
customers and suppliers, and ensuring that the Company's business processes and
systems can process transactions in euros and local currencies during the
transition period and achieve the conversion of all relevant local currency data
to the euro by December 31, 2001.
The euro introduction is not expected to have a material impact on the Company's
overall currency risk. The Company anticipates the euro will simplify financial
issues related to cross-border trade in the EU and reduce the transaction costs
and administrative time necessary to manage this trade and related risks. The
Company believes that the associated savings will not be material to
consolidated results.
RISK FACTORS
<PAGE>
The preceding discussion contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company faces a number of risks
and uncertainties which could cause actual results or events to differ
materially from those contained in any forward-looking statement. Factors that
could cause or contribute to such differences include, but are not limited to,
the following:
DELAY IN IMPLEMENTATION OF GOVERNMENT REGULATIONS
The market for alternative fueled vehicles and the demand for the Company's
products are, to a significant degree, driven by local, state and federal
regulations in the United States related to air quality and requiring conversion
of motor vehicles to alternative fuels. The Company's international business is
also affected by similar foreign governmental regulations. Timing in the
implementation of these regulations could have an unfavorable impact on the
Company's financial performance.
DEPENDENCE ON GASEOUS ALTERNATIVE FUEL MARKET
Although the Company believes that there will be substantial growth in the
market for gaseous alternative fueled engines, especially among fleet vehicle
owners, there can be no assurance that such growth will materialize or, if such
growth does occur, that it will result in increased sales of the Company's
products. The Company's products are designed for gaseous alternative fueled
vehicles which are driven by internal combustion engines or fuel cells, but not
for alternative fuels such as electricity, methanol and ethanol. If the major
growth in the alternative fuel market is solely for such fuels, the Company will
be adversely affected. At present, the lack of a well-developed infrastructure
for the supply of alternative fuels is limiting growth in the alternative fuel
engine market. Such an infrastructure is necessary for widespread use of all
alternate fuels.
DEPENDENCE ON NEW PRODUCTS
The Company believes that its future success is dependent upon its ability to
design and market new fuel management products as well as enhance its existing
products. It believes that the markets for its products will be characterized by
rapidly changing technology, new product introductions and the entry of new
competitors. The Company's ability to enhance existing products in a timely
manner and to develop and introduce new products that incorporate new
technologies, conform to increasingly stringent emission standards and achieve
market acceptance in a timely manner will significantly affect its future
performance.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results are subject to annual and quarterly fluctuations
as a result of a variety of factors, including without limitation, budget cycles
and funding arrangements of governmental agencies, purchasing cycles of fleet
operators, the uncertainty of timing of deliveries of vehicles to be upfitted,
the timing of implementation of government regulations promoting alternative
fuel vehicles, as well as general economic factors.
RISK OF INTERNATIONAL OPERATIONS
The Company operates in Europe, Australia, Mexico, and Japan and markets its
products and technologies in other international markets, including both
industrialized and developing countries. The Company's international operations
are subject to various risks common to international activities, such as
exposure to currency fluctuations, the inherent difficulty of administering
business abroad and the need to comply with a wide variety of foreign import and
United States export laws. The Company's competitiveness in overseas markets may
be negatively impacted when there is a significant increase in the value of the
dollar against foreign currencies where the Company does business.
COMPETITION
The Company believes that competition in the alternative fuel engine marketplace
is increasing, particularly in the growing market for propane and natural gas
fueled vehicle products. Some of the current competitors and potential future
competitors are large, well-financed companies, with financial and marketing
resources and research and development capabilities that are substantially
larger than those of the Company.
ENTRY OF ORIGINAL EQUIPMENT MANUFACTURERS INTO MARKET
As the market for alternative fueled vehicles increases, original equipment
manufacturers may find it advantageous to develop and produce their own fuel
management equipment rather than purchasing such equipment from suppliers such
as the Company. If this occurs, the total potential demand for the Company's
products could be adversely impacted.
ABILITY TO MEET OEM SPECIFICATIONS
In 1995 the Company began to offer complete alternative fuel systems, which
include tanks, brackets, electronics and all other under-hood components
required to convert a motor vehicle to alternative fuels. Customers for such
systems require that they meet OEM standards. These requirements have resulted
in increased development, manufacturing, warranty and administrative costs. If
these costs increase significantly, the Company's profitability could be
adversely affected.
DEPENDENCE ON QUALIFIED PERSONNEL
The Company is dependent upon a limited number of key management and technical
personnel. In addition, as products become complex, the Company's future success
will depend in part upon its ability to attract and retain highly qualified
personnel.
<PAGE>
INCREASED WARRANTY CLAIMS
Vehicle manufacturers are, in response to consumer demand, providing
increasingly longer warranty periods for their products. Suppliers, such as the
Company, are required to provide correspondingly longer product warranties.
Consequently, the Company could incur substantially greater warranty claims in
the future.
NEED TO COMPLY WITH GOVERNMENTAL REGULATIONS
The Company must obtain product certification from governmental agencies such as
the Environmental Protection Agency and the California Air Resources Board to
sell certain of its products in the United States automotive markets. A
substantial portion of the Company's future sales will depend upon sales of fuel
management products that are certified to meet existing and future air quality
and energy standards. Although the Company believes its technologies will permit
its existing and new products to meet these standards, there can be no assurance
that this will occur.
ABILITY TO SECURE FUTURE DEVELOPMENT CONTRACTS
The Company has obtained funding under development contracts with original
equipment manufacturers (OEMs) and governmental agencies to develop specified
products. There can be no assurance that such funding will be obtainable in the
future, the lack of which may significantly impact the Company's ability to
develop and market new products and technologies.
PRODUCT LIABILITY & RECALL
Although the Company carries and plans to continue to carry product liability
and recall insurance, there can be no assurance that such coverage is adequate
or that adequate coverage will continue to be available or, if available, that
it will be available at an acceptable cost.
LABOR DISPUTES AT OEM FACILITIES
As the Company enhances its automotive upfit programs with OEMs, the Company is
becoming increasingly dependent on OEM production and the associated labor
forces at OEM sites. Most of the labor force at OEM facilities are represented
by labor unions. There can be no assurance that labor disputes will not occur.
In the event of a dispute, upfit sales may be adversely impacted.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this Item is indexed in Part IV in Item 14.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
--------
The information required in Part III (Items 10, 11, 12 and 13) is incorporated
by reference from the Company's definitive proxy statement to be filed pursuant
to Regulation 14A or by an amendment hereto, in either case, no later than 120
days after the end of the fiscal year covered by this Form 10-K.
<PAGE>
PART IV
-------
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
--------------------------------------------------
(1) CONSOLIDATED FINANCIAL STATEMENTS:
-------------------------------------------
Report of independent auditors
Consolidated balance sheets as of April 30, 1999 and 1998
Consolidated statements of income for the years ended April 30,
1999, 1998 and 1997
Consolidated statements of stockholders' equity for the years
ended April 30, 1999, 1998 and 1997
Consolidated statements of cash flows for the years ended April
30, 1999, 1998 and 1997
Notes to consolidated financial statements
(2) SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES:
--------------------------------------------------------
Schedule II - Valuation accounts
All other schedules are omitted because the information is not
applicable or is not material, or because the information is included
in the consolidated financial statements or the notes thereto.
(3) EXHIBITS:
---------
3.5 Bylaws adopted July 22, 1998.
10.14 Amendment to lease between Klein Investments, Family Limited
Partnership, as lessor, and IMPCO Technologies, Inc., as
lessee, dated March 9, 1999.
10.15 Loan Agreement between IMPCO Tech Japan KK. as borrower, and,
Hongkong and Shanghai Banking Corporation Ltd., Osaka
Branch., as lender, dated as of March 29, 1999.
10.16 Employment Agreement dated April 1, 1999, between IMPCO
Technologies, Inc., as the Company, and Robert M.
Stemmler, as the Employee.
22.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
(a) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS.
- ----------------------------------------------------------------------------
Employment Agreement dated April 1, 1999, between
IMPCO Technologies, Inc., as the Company, and Robert M.
Stemmler, as the Employee - Exhibit 10.16.
1991 Executive Stock Option Plan dated November 5,
1991 among IMPCO Technologies, Inc., as the Company, and
Bertram R. Martin, James J. Mantras and Dale L.
Rasmussen, as Optionees - Exhibit 10.3
1989 Incentive Stock Option Plan and Amendment
to 1989 Incentive Stock Option Plan - Exhibits
10.2 and 10.6, respectively.
1996 Incentive Stock Option Plan - Exhibit 10.7.
<PAGE>
1997 Incentive Stock Option Plan - Exhibit 10.8.
(b) REPORTS ON FORM 8-K.
- ------------------------------------------------------------------------------
No reports were filed on Form 8-K during the last quarter
of the Company's fiscal year covered by this report.
(c) EXHIBITS
- ------------------------------------------------------------------------------
2.1 Deed of Sale of Business by and among IMPCO Technologies
Pty. Limited, as buyer, and Ateco Automotive Pty Limited,
as seller, dated as of July 1, 1996. (8)
2.2 Deed of Release by and among IMPCO Technologies, Inc. and
Ateco Automotive Pty Limited dated as of July 1, 1996. (8)
2.3 Shareholders Agreement for Gas Parts (NSW) Pty Limited by
and among IMPCO Technologies Pty. Limited, Gas Parts Pty
Limited and Gas Parts (NSW) Pty. Limited, dated as of July 4, 1996. (8)
3.1 Articles of Incorporation. (1)
3.2 Amended Certificate of Designation of AirSensors,
Inc. establishing 1993 Series 1 Preferred Stock. (5)
3.3 Certificate of Amendment of Certificate of Incorporation
providing for limitation of directors' liability. (3)
3.4 Certificate of Amendment of Certificate of Incorporation
providing for the decrease in authorized shares of common
stock from 50,000,000 to 25,000,000. (6)
3.5 Bylaws adopted July 22, 1998 (14)
4.1 Stockholders' Protection Rights Agreement dated as of June 30,
1999 between IMPCO Technologies, Inc. and ChaseMellon Stockholder
Services, L.L.C., as Rights Agreement. (13)
10.1 Lease between L-W Income Properties and IMPCO
Technologies, Inc. dated May 10, 1989. (2)
10.2 1989 Incentive Stock Option Plan. (3)
10.3 1991 Executive Stock Option Plan dated November 5, 1991,
among AirSensors, Inc., as the Company, and Bertram
R. Martin, James J. Mantras and Dale L. Rasmussen, as Optionees. (4)
10.4 First Amendment to Lease dated April 19, 1993, between
L-W Income Properties and IMPCO Technologies, Inc. (6)
10.5 1993 Stock Option Plan for Non-employee Directors (7)
10.6 Amendment to 1989 Incentive Stock Option Plan (7)
10.7 1996 Incentive Stock Option Plan (9)
10.8 1997 Incentive Stock Option Plan (10)
10.9 Lease between Klein Investments, Family Limited
Partnership, as lessor, and IMPCO Technologies, Inc.,
as lessee, dated August 18, 1997. (11)
10.10 Amendment dated March 18, 1998 to Loan agreement dated October 7,
1998 between Bank of America National Trust and Savings, as lender,
and IMPCO Technologies, Inc., as the borrower. (11)
10.11 Amendment dated April 29, 1998 to Loan agreement
<PAGE>
dated October 7, 1998 between Bank of America National Trust and
Savings, as lender, and IMPCO Technologies, Inc., as the borrower. (11)
10.12 Loan Agreement for IMPCO Technologies, B.V. as borrower, and Bank
of America National Trust and Savings Association, acting through
its Amsterdam branch, as lender, dated as of April 27, 1998. (11)
10.13 Loan Agreement dated September 11, 1998 between
Bank of America National Trust and Savings Association,
as lender, and IMPCO Technologies, Inc., as the borrower. (12)
10.14 Amendment to lease between Klein Investments, Family Limited
Partnership, as lessor, and IMPCO Technologies,
Inc., as lessee, dated march 9, 1999. (14)
10.15 Loan Agreement between IMPCO Tech Japan KK. as borrower,
and, Hongkong and Shanghai Banking Corporation Ltd., Osaka Branch.,
as lender, dated as of March 29, 1999. (14)
10.16 Employment Agreement dated April 1, 1999, between IMPCO Technologies,
Inc., as the Company, and Robert M.
Stemmler, as the Employee. (14)
22.1 Subsidiaries of the Company. (14)
23.1 Consent of Ernst & Young LLP. (14)
--------------------------------------
(1) Incorporated by reference from Form S-18 filed under
Registration No. 33-4013-S.
(2) Incorporated by reference from Form 10-K for fiscal year 1989.
(3) Incorporated by reference from Form 10-K for fiscal year 1990.
(4) Incorporated by reference from Form 10-K for fiscal year 1992.
(5) Incorporated by reference from Form S-2, File no. 33-56610 declared
effective March 9, 1993
(6) Incorporated by reference from Form 10-K for fiscal year 1993.
(7) Incorporated by reference from Form 10-K for fiscal year 1994.
(8) Incorporated by reference from 8-K/A dated July 1, 1996, and filed as
Exhibit Numbers (2.5) through (2.9) thereunder.
(9) Incorporated by reference from Form 10-K for fiscal year 1997.
(10) Incorporated by reference from Proxy Statement for fiscal year 1997.
(11) Incorporated by reference from Form 10-K for fiscal year 1998.
(12) Incorporated by reference from Form 10-Q for period ended October 31,
1998.
(13) Incorporated by reference from Form 8-K dated June 30, 1999 and filed
as Exhibit (4).
(14) Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
IMPCO Technologies, Inc.
By /s/ Robert M. Stemmler
-------------------------------------
Robert M. Stemmler,
President & Chief Executive Officer
Dated July 27, 1999
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Stemmler President, July 27, 1999
------------------------- Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
/s/ Brian Olson Chief Financial Officer July 27, 1999
------------------------- and Treasurer
(Principal Financial Officer)
/s/ Janet Harmier Corporate Controller July 27, 1999
-------------------------
/s/ Norman L. Bryan Director July 27, 1999
-------------------------
/s/ Paul Mlotok Director July 27, 1999
-------------------------
/s/ Christopher G. Mumford Director July 27, 1999
-------------------------
Director
-------------------------
Ulrich Ruetz
/s/ Edward L. Scarff Director July 27, 1999
-------------------------
Director
-------------------------
Don J. Simplot
/s/ Rawley F. Taplett Director July 27, 1999
-------------------------
/s/ Douglas W. Toms Director July 27, 1999
-------------------------
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
IMPCO Technologies, Inc.
We have audited the accompanying consolidated balance sheets of IMPCO
Technologies, Inc. as of April 30, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the three years in the period ended April 30, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of IMPCO Technologies, Inc. at April 30, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended April 30, 1999, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
/s/ Ernst & Young LLP
Long Beach, California
June 30, 1999
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
April 30, 1999 and 1998
-----------
ASSETS
------
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 2,009,208 $ 2,617,869
Accounts receivable 22,209,363 14,528,000
Less allowance for doubtful accounts 535,824 314,794
----------- -----------
Net accounts receivable 21,673,539 14,213,206
Inventories:
Raw materials and parts 10,694,453 9,565,310
Work-in-process 1,208,423 1,055,411
Finished goods 10,804,309 7,308,190
----------- -----------
Total inventories 22,707,185 17,928,911
Deferred tax assets 3,474,387 2,392,403
Other current assets 2,255,227 1,664,898
----------- -----------
Total current assets 52,119,546 38,817,287
Equipment and leasehold improvements:
Dies, molds and patterns 5,746,955 5,039,892
Machinery and equipment 7,793,650 7,074,004
Office furnishings and equipment 6,110,079 4,968,605
Leasehold improvements 2,965,366 2,288,022
Land and Buildings -- 267,000
----------- -----------
22,616,050 19,637,523
Less accumulated depreciation and amortization 12,730,976 10,613,052
----------- -----------
Net equipment and leasehold improvements 9,885,074 9,024,471
Intangibles arising from acquisitions 15,593,672 13,644,309
Less accumulated amortization 4,576,369 3,885,209
----------- -----------
Net intangibles arising from acquisitions 11,017,303 9,759,100
Other assets 540,239 576,953
----------- -----------
$73,562,162 $58,177,811
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
April 30, 1999 and 1998
(Continued)
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 8,294,977 $ 5,606,922
Accrued payroll obligations 2,493,402 1,848,425
Income taxes payable 1,261,009 746,587
Other accrued expenses 1,356,803 1,065,347
Current maturities of long-term debt 3,485,376 2,149,910
------------ ------------
Total current liabilities 16,891,567 11,417,191
Lines of credit 5,551,300 3,047,805
Term loans - Bank of America NT&SA 5,411,326 3,799,395
Term loan - DEPA Holding BV -- 1,820,000
Capital leases 2,102,173 1,927,166
Deferred tax liabilities 828,852 792,403
Minority interest 1,327,825 1,068,500
Commitments and contingencies -- --
Stockholders' equity:
1993 Series 1 Preferred Stock, $0.01 par value;
1999 - none authorized; 1998 - 5,950 shares
authorized, issued and outstanding $5,950,000
liquidation value -- 5,650,000
Common stock, $.001 par value, authorized
25,000,000 shares; 8,408,481 issued and
outstanding at April 30, 1999
(7,091,601 at April 30, 1998) 8,408 7,092
Additional paid-in capital relating to
common stock 45,375,995 38,386,357
Shares held in trust (68,946) (36,759)
Accumulated deficit (2,397,813) (8,197,885)
Foreign currency translation adjustment (1,468,525) (1,503,454)
------------ ------------
Total stockholders' equity 41,449,119 34,305,351
------------ ------------
$ 73,562,162 $ 58,177,811
============ ============
</TABLE>
See accompanying notes.
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended April 30, 1999, 1998 and 1997
---------
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Product sales $75,820,926 $62,209,310 $58,436,508
Contract revenue 11,005,528 8,873,554 3,391,528
----------- ----------- -----------
Net revenue 86,826,454 71,082,864 61,828,036
Costs and expenses:
Cost of sales 52,178,542 38,173,943 37,341,704
Research and development expense 11,611,758 12,061,609 7,724,894
Selling, general and administrative expense 16,133,080 13,729,352 11,911,572
----------- ----------- -----------
Total costs and expenses 79,923,380 63,964,904 56,978,170
Operating income 6,903,074 7,117,960 4,849,866
Interest expense 1,169,830 934,825 1,100,449
Gain on sale of 49% interest in subsidiary 2,169,405 -- --
----------- ----------- -----------
Income before income taxes, minority
interest in income of consolidated
subsidiaries and dividends 7,902,649 6,183,135 3,749,417
Provision for income taxes 1,501,503 907,516 262,459
Minority interest in income of
consolidated subsidiaries 70,532 410,554 261,667
----------- ----------- -----------
Net income before dividends 6,330,614 4,865,065 3,225,291
Dividends on preferred stock 530,542 594,997 581,365
----------- ----------- -----------
Net income applicable to common stock $ 5,800,072 $ 4,270,068 $ 2,643,926
=========== =========== ===========
Net income per share:
Basic $ .80 $ .67 $ .46
=========== =========== ===========
Diluted $ .71 $ .60 $ .43
=========== =========== ===========
Number of shares used in per share calculation:
Basic 7,293,160 6,333,769 5,722,382
=========== =========== ===========
Diluted 8,975,629 8,155,476 6,130,542
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended April 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
1993 Series 1 Preferred Stock:
Beginning balance $ 5,650,000 $ 5,650,000 $ 5,650,000
Preferred stock conversion (5,650,000) -- --
------------ ------------ ------------
Ending balance -- 5,650,000 5,650,000
Common Stock:
Beginning balance 7,092 5,815 5,655
Issuance of common stock (192,116, 57,796, and
139,244 shares, respectively) resulting from the
exercise of options pursuant to the stock option plans 192 58 139
Issuance of common stock (1,124,764 shares)
under Preferred stock conversion 1,124 -- --
Issuance of common stock (0, 1,219,218 and
20,775 shares, respectively) resulting from
the exercise of warrants -- 1,219 21
------------ ------------ ------------
Ending balance 8,408 7,092 5,815
Additional paid-in capital:
Beginning balance 38,386,357 29,342,121 28,746,994
Issuance of common stock resulting from
the exercise of options pursuant to the
stock option plans 1,433,763 194,271 439,335
Issuance of common stock under
Preferred stock conversion 5,648,875 -- --
Issuance of common stock resulting
from the exercise of warrants -- 8,453,063 155,792
Reduction in current tax liability
related to stock options -- 303,902 --
Other (93,000) 93,000 --
------------ ------------ ------------
Ending balance 45,375,995 38,386,357 29,342,121
Shares held in trust for deferred compensation plan,
at cost (2,395, 2,572 and 1,032 shares, respectively) (68,946) (36,759) (8,814)
Accumulated Deficit:
Beginning balance (8,197,885) (12,467,953) (15,111,879)
Net income applicable to common stock 5,800,072 4,270,068 2,643,926
------------ ------------ ------------
Ending balance (2,397,813) (8,197,885) (12,467,953)
Accumulated Other Comprehensive Income:
Beginning balance (1,503,454) (458,061) (34,748)
Foreign currency translation adjustment 34,929 (1,045,393) (423,313)
------------ ------------ ------------
Ending balance (1,468,525) (1,503,454) (458,061)
------------ ------------ ------------
Total stockholders' equity $ 41,449,119 $ 34,305,351 $ 22,063,108
============ ============ ============
Comprehensive Income:
Net income $ 5,800,072 $ 4,270,068 $ 2,643,926
Foreign currency translation adjustment 34,929 (1,045,393) (423,313)
------------ ------------ ------------
Comprehensive income $ 5,835,001 $ 3,224,675 $ 2,220,613
============ ============ ============
</TABLE>
See accompanying notes.
<PAGE>
IMPCO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,330,614 $ 4,865,065 $ 3,225,291
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of intangibles
arising from acquisition 691,419 455,645 263,998
Depreciation and other amortization 2,749,704 2,457,679 2,452,594
(Gain)/loss on disposal of asset (106,515) 30,926 --
Gain on sale of 49% interest in subsidiary (2,169,405) -- --
Increase in accounts receivable (7,636,517) (3,396,372) (2,750,026)
Increase in inventories (2,319,450) (3,665,033) (385,003)
Increase/(decrease) in deferred tax 1,045,535 372,856 (272,856)
Increase in accounts payable 2,941,749 1,178,829 58,508
Increase/(decrease) in accrued expenses (594,045) (806,387) 799,321
Minority interest in income of
consolidated subsidiaries 70,532 410,554 261,667
Other, net (563,867) (396,229) 54,381
----------- ----------- -----------
Net cash provided by operating activities 439,754 1,507,533 3,707,875
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (2,797,787) (3,219,766) (1,702,477)
Purchase of businesses (5,831,412) (2,813,197) (4,729,394)
Proceeds from sale of 49% interest in subsidiary 3,500,000 -- --
Proceeds from sale of equipment 587,456 270,001 74,319
Other, net -- -- (28,637)
----------- ----------- -----------
Net cash used in investing activities (4,541,743) (5,762,962) (6,386,189)
Cash flow from financing activities:
Increase (decrease) in borrowings under lines of credit 2,454,928 (2,407,382) 2,050,000
Payments on notes payable -- (328,839) (1,083,615)
Proceeds from issuance of notes payable -- -- 558,685
Proceeds from issuance of common stock 1,400,297 8,924,568 595,288
Payments on term loans (5,501,361) (4,074,197) (1,035,454)
Proceeds from issuance of bank term loans 6,631,560 3,992,521 3,968,750
Payments on capital lease obligations (934,182) (461,023) (297,961)
Dividends on preferred stock (530,542) (594,997) (581,365)
----------- ----------- -----------
Net cash provided by financing activities 3,520,700 5,050,651 4,174,328
Translation adjustment (27,372) (153,256) (331,259)
Net increase (decrease) in cash (608,661) 641,966 1,164,755
Cash at beginning of year 2,617,869 1,975,903 811,148
----------- ----------- -----------
Cash at end of year $ 2,009,208 $ 2,617,869 $ 1,975,903
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION AND DESCRIPTION OF THE BUSINESS - The
consolidated financial statements of IMPCO Technologies, Inc. (IMPCO or the
Company) [effective September 15, 1997, AirSensors, Inc. changed its name to
IMPCO Technologies, Inc.] include the accounts of the Company and it's majority
owned subsidiary IMPCO-BERU Technologies B.V. (IMPCO BV) [Effective January 29,
1999, IMPCO Technologies B.V. changed its name to IMPCO-BERU Technologies B.V.],
its majority owned subsidiary Grupo I.M.P.C.O. Mexicano, S. de R.L. de C.V.
(IMPCO Mexicano) [Effective January 20, 1998 Industrias Mexicanas de Productos
de Combustibles, S. de R.L. de C.V. changed its name to Grupo I.M.P.C.O.
Mexicano, S. de R.L. de C.V.] and its wholly owned subsidiaries IMPCO
Technologies, Pty. Limited (IMPCO Pty) and IMPCO Tech Japan K.K. (IMPCO Japan).
All significant intercompany accounts and transactions have been eliminated in
consolidation.
The Company is engaged in the design, manufacturing and marketing of
gaseous fuel delivery systems and related devices that allow internal
combustion engines to operate on alternative fuels, primarily propane and
natural gas. Worldwide the Company's products are sold to distributors and
original equipment manufacturers.
(b) INVENTORIES - Inventories are valued at the lower of cost or
market. Cost is determined by the first-in, first-out (FIFO) method while
market is determined by replacement cost for raw materials and parts and net
realizable value for work-in-process and finished goods.
(c) PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment
are stated on the basis of historical cost. Depreciation of equipment is
provided using the straight-line method over the assets' estimated useful
lives, ranging from three to seven years. Amortization of leasehold
improvements, and equipment financed by the Company's capital lease facility,
is provided using the straight-line method over the shorter of the assets'
estimated useful lives or the lease terms.
(d) INTANGIBLES ARISING FROM ACQUISITION - Intangibles arising from
acquisition, primarily goodwill, are recorded based on the excess of the cost
of the acquisition over amounts assigned to tangible assets and liabilities.
Other intangible assets arising from acquisition include acquisition costs,
product rights and trademarks are being amortized using the straight-line
method over their estimated lives of twenty years.
(e) WARRANTY COSTS - Estimated future warranty obligations related
to certain products are provided by charges to operations in the period in
which the related revenue is recognized. Estimates are based, in part, on
historical experience.
(f) RESEARCH AND DEVELOPMENT COSTS - Research and development costs
are charged to expense as incurred. Equipment used in research and
development with alternative future uses is capitalized.
(g) CONTRACT REVENUE RECOGNITION - Contract revenue is principally
recognized by the percentage of completion method. Profits expected to be
realized on contracts are based on the Company's estimates of total contract
sales value and costs at completion. These estimates are reviewed and revised
periodically throughout the lives of the contracts.
(h) MINORITY INTEREST IN SUBSIDIARY - In October 1995, IMPCO
purchased 51 percent of IMPCO BV. In May 1998, IMPCO purchased the remaining
49 percent of IMPCO BV. Subsequently, in January 1999, IMPCO sold a 49
percent share of IMPCO BV. In July 1996, IMPCO acquired IMPCO Pty which
included a 50 percent share in a subsidiary (Gas Parts, NSW.) In January
1998, IMPCO Pty acquired the remaining 50 percent of Gas Parts, NSW. In
January 1999, IMPCO Pty acquired 51 percent of IMPCO SA. In December 1997,
IMPCO acquired a 90 percent interest in IMPCO Mexicano. Minority interest
represents the minority shareholder's proportionate share of equity in the
IMPCO BV, Gas Parts, NSW, SA and IMPCO Mexicano subsidiaries. The balance
sheet amounts in minority interest at April 30, 1999 represent 49 percent of
the equity held by the single minority shareholder in IMPCO BV, 10 percent of
the equity held by the single minority shareholder in IMPCO Mexicano and 49
percent of the equity held by the single minority shareholder in IMPCO SA.
(i) NET INCOME PER SHARE - Basic income per share is computed by
dividing net income applicable to common stock by the weighted average shares
outstanding during the period. Unlike primary earnings per share, common
stock equivalents, including outstanding stock options and warrants, are
excluded from the Basic calculation. Diluted earnings per share, similar to
the fully diluted computation, is computed based on the weighted average
number of common shares, all common stock equivalents, and if dilutive,
shares issued upon conversion of preferred stock.
(j) STOCK BASED COMPENSATION - In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123 "Accounting of Stock Based
Compensation", which established accounting and reporting standards for stock
based employee compensation plans effective after fiscal year 1996. SFAS 123
encourages entities to adopt the new method ("fair value based method") of
accounting; however it also allows an entity to continue to measure
compensation cost prescribed under existing rules ("intrinsic
<PAGE>
value based method") prescribed by Accounting Principle Board No. 25. Such
entities who elect to remain on the "intrinsic value based" method must make
certain pro forma disclosures as if the new fair value method had been
applied. At this time, the Company has not adopted the recognition provision
of SFAS 123, but has provided pro forma disclosures (see note 9).
(k) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF -Impairment losses are recorded on long-lived assets used in
operations when indicators of impairment (significant decrease in market
value of an asset, significant change in extent or manner in which the asset
is used or significant physical change to the asset) are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. The Company has not experienced any
significant changes in the business climate or in the use of assets that
would require the Company to write down the value of the assets recorded in
the balance sheet.
(l) USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
(m) RECLASSIFICATIONS - Certain reclassifications have been made to
the fiscal year 1997 and 1998 consolidated financial statements to conform to
the fiscal year 1999 presentation. Reportable segments for all periods have
been re-configured to include GFPD and AOD as separate business segments
(both formerly classified in the United States Operations), and to include
foreign based subsidiaries in the Non-U.S. Based Operations segment (formerly
foreign subsidiaries were stated separately).
(o) FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the
Company's foreign subsidiaries are generally translated at current exchange
rates, and related revenues and expenses are translated at average exchange
rates in effect during the period. Resulting translation adjustments are
recorded as a foreign currency component in shareholders' equity.
Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the
functional currency, except those transactions which operate as a hedge of an
identifiable foreign currency commitment, or as a hedge of a foreign currency
investment position, are included in the results of operations as incurred.
(p) FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial
instruments recorded on the balance sheet include cash, short-term bank debt,
and long-term bank debt. Because of the short maturity, the carrying amount
of cash and short-term bank debt approximates fair value. Since the interest
rates on the long-term debt are reset at intervals not to exceed twelve
months, the carrying value of the Company's long-term debt approximates fair
value.
At April 30, 1999, off balance sheet derivative financial
instruments include foreign currency forward contracts and interest rate swap
agreements (see note 4).
The Company enters into foreign currency forward contracts to hedge
the net receivable/payable position arising from intercompany transactions by
its foreign subsidiaries. Foreign currency contracts reduce the Company's
exposure to unfavorable fluctuations in foreign currencies versus the U.S.
dollar. Realized gains and losses on these contracts are recognized as part
of cost of sales in the same period as the hedged transaction.
Interest rate swap agreements are used by the Company to manage
interest rate risk on its floating rate debt portfolio. Each interest rate
swap is matched as a hedge against a specific debt instrument and has the
same notional amount and tenor as the related debt instrument principle. Fair
value of these instruments is based on estimated currency settlement cost.
ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued certain
Statements of Financial Accounting Standards (SFAS) which are applicable to
the Company. SFAS 130, "Reporting Comprehensive Income", which is effective
for fiscal years beginning after December 15, 1997; SFAS 131, 'Disclosures
About Segments of an Enterprise and Related Information", which is effective
for fiscal years beginning after December 15, 1997; and, SFAS 133,
"Accounting for Derivative Instruments and for Hedging Activities", which is
effective for fiscal years beginning after June 15, 1999.
SFAS 130 requires that all items required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The changes in cumulative translation adjustments,
reported through stockholders' equity, is currently the Company's only
component of comprehensive income. The Company adopted this standard in
fiscal 1999.
<PAGE>
SFAS 131 requires a public enterprise to report financial and
descriptive information about its reportable operating segments based upon
the way management organizes segments within the enterprise for making
operating decisions and assessing performances. The Company adopted this
standard in fiscal 1999 (see Note 11).
SFAS 133 requires all derivatives to be recorded on the balance
sheet at fair value and establishes special accounting for the following
three types of hedges: hedges of changes in the fair value of assets,
liabilities, or firm commitments (referred to as fair value hedges); hedges
of the variable cash flows of forecasted transactions (cash flow hedges); and
hedges of foreign currency exposures of net investments in foreign
operations. Though the accounting treatment and criteria for each of the
three types of hedges is unique, they all result in offsetting changes in
value or cash flows of both the hedge and the hedged item being recognized in
earnings in the same period. Changes in fair value of derivatives that do not
meet the criteria of one of these three categories of hedges would be
included in income. SFAS 133 was amended by SFAS 137 which delayed its
effective date. The Company will begin analyzing the various requirements in
order to determine what impact, if any, it will have on its disclosures,
financial position, results of operations, and cash flows. Currently, the
Company does not anticipate adopting this standard before fiscal 2002.
2. ACQUISITIONS
ATECO AUTOMOTIVE PTY. LTD. On July 1, 1996, the Company acquired
certain assets of Ateco Automotive Pty. Ltd. ("Ateco") for approximately
$6,500,000. Ateco, an Australian private company, has distributed IMPCO's
gaseous fuel carburetion systems and related devices for use with internal
combustion engines since 1969 through it Gas Division near Melbourne,
Australia.
In order to effectuate the transaction, IMPCO established a wholly
owned subsidiary in Australia, IMPCO Technologies Pty. Limited (IMPCO Pty).
The acquisition of Ateco has been accounted for under the purchase method of
accounting and the acquired operations have been included in the consolidated
financial statements since the date of acquisition. The assets acquired by
IMPCO Pty primarily consist of accounts receivable, inventories, equipment, a
note, business goodwill, distribution rights in Australia, and a 50 percent
interest in Ateco's sub-distributor. The amount of the consideration was
determined through negotiations between Ateco and IMPCO Pty.
The purchase price was financed through approximately $4,000,000 of
term loans provided by Bank of America NT&SA and its Sydney Australia Branch.
The term loans are both three-year loans with a five-year amortization
schedule and interest at market rates. In addition, accounts receivable due
to IMPCO by Ateco, totaling approximately $1,852,000, were offset against the
purchase price. The balance of the purchase price was paid with proceeds from
IMPCO's existing line of credit with Bank of America NT&SA. The Company
recognized approximately $3,601,000 of intangible assets arising from
acquisition which is being amortized over 20 years.
IMPCO TECHNOLOGIES B.V. On October 31, 1995, the Company, through
its wholly owned subsidiary IMPCO, acquired 51 percent of the outstanding
stock of Media, a private company in the Netherlands, from Centradas B.V., a
private company in the Netherlands, for cash in the amount of fl.3,187,500
(U.S.$2,023,000). Effective January 1, 1998, IMPCO Media Europe B.V. changed
its name to IMPCO Technologies B.V. (IMPCO BV). IMPCO BV has distributed
IMPCO's gaseous fuel carburetion systems and related devices for use in
internal combustion engines since 1972. IMPCO BV services the European
marketplace from its headquarters in the Netherlands and through its
subsidiaries in Germany, France and the United Kingdom.
The acquisition was financed through a term loan provided by Bank of
America which will be repaid over a five-year period with interest at market
rates [See Note 3]. The acquisition of IMPCO BV has been accounted for under
the purchase method of accounting and has been included in the consolidated
financial statements since the date of acquisition. The Company recognized
$2,100,000 of intangible assets arising from acquisition which is being
amortized on the straight-line method over 20 years.
On May 1, 1998 the Company purchased the remaining 49 percent of
IMPCO BV from Depa Holding B.V. for fl. 1,400,000 ($692,521). As a condition
precedent to purchase of the outstanding shares, IMPCO BV retired the debt
outstanding to Depa Holding B.V. with the proceeds from the term loan granted
by Bank of America NT&SA (See Note 3).
On January 28, 1999, the Company sold this 49 percent interest in
IMPCO BV to BERU Aktiengesellschaft, an international Original Equipment
Manufacturer (OEM) and aftermarket supplier of diesel and automotive engine
components and systems, for $3,500,000 in cash. The Company recorded a
pre-tax gain of $2,169,000 and an after-tax gain of $1,757,000, or $0.20 per
share on a diluted basis.
ALGAS CARBURETION. On December 5, 1997, the Company purchased
certain manufacturing equipment and inventory of the Algas Carburetion
Division of PGI International. The purchase price of US$2,400,000 was paid in
cash. On the same day, the Company acquired a 90 percent interest in
Industrias
<PAGE>
Mexicanas de Productos de Combustibles, S. de R.L. de C.V. Effective January
20, 1998 Industrias Mexicanas de Productos de Combustibles, S. de R.L. de
C.V. changed its name to Grupo I.M.P.C.O. Mexicano, S. de R.L. de C.V. (IMPCO
Mexicano). The purchase price of $961,000 was paid in cash. Immediately prior
to the Company's acquisition of a 90 percent ownership interest in Grupo
I.M.P.C.O. Mexicano, Grupo I.M.P.C.O. Mexicano acquired certain assets of the
carburetion division of Algas Mexicana, de R.L. de C.V. These acquisitions
were financed by term loans of approximately $3.3 million provided by Bank of
America NT&SA.
EDO CANADA, LTD. On December 12, 1997, the Company purchased from
the bankruptcy trustee of EDO Canada, Ltd. certain development, testing,
quality control and manufacturing equipment used for the manufacture of
storage tanks for compressed natural gas. The purchase price of $790,000 was
paid in cash and was primarily financed through Bank of America's BA Capital
Leasing.
GAS PARTS (NSW) PTY. LTD. On January 31, 1998, the Company's
wholly-owned subsidiary IMPCO Technologies Pty. Ltd. acquired the remaining
50 percent ownership interest in Gas Parts (NSW) Pty. Ltd. for A$225,000
(U.S.$148,500) in cash. The acquisition was accounted for using the purchase
method of accounting for step-acquisitions. Excess purchase price over fair
market value of the underlying assets was allocated to goodwill.
CRUSADER ENGINE DIVISION. On December 4, 1998, the Company acquired
certain assets of the Crusader Engine division of Thermo Power Corporation, a
subsidiary of Thermo Power Electron Corporation, for approximately
$3,880,000. The Crusader Engine division provides engine dressing and related
devices for material handling engines. The Company funded $3,190,000 of the
purchase price using the Bank of America acquisition facility and $710,000
using the Bank of America capital lease facility. The acquisition was
accounted for under the purchase method of accounting and has been included
in the consolidated financial statements since the date of acquisition.
Goodwill of approximately $662,000 is being amortized on the straight-line
method over 20 years. Tangible net assets acquired consisted of $2,500,000 in
inventory and $718,000 in fixed assets.
MIKUNI CORPORATION. In March 1999, the Company purchased a dormant
company in Japan for $126,000 in order to establish IMPCO Tech Japan K.K.
(IMPCO Japan). On March 31, 1999, the Company's wholly-owned subsidiary IMPCO
Japan purchased certain manufacturing equipment and inventory of the Fukuoka
Division of Mikuni Corporation. The purchase price of $1,325,000 was paid in
cash. The acquisition was financed through a yen-denominated term loan
provided by the Hongkong and Shanghai Banking Corporation, Osaka Branch which
will be repaid over a five-year period with interest at market rates
[See Note 3]. The acquisition was accounted for under the purchase method of
accounting and has been included in the consolidated financial statements
since the date of acquisition. Goodwill of approximately $944,000 is being
amortized on the straight-line method over 20 years. Tangible net assets
acquired consisted of $362,000 in inventory and $19,000 in fixed and other
assets.
The unaudited pro forma financial information reflects the
consolidated results of operation of the Company as if the aforementioned
fiscal 1999 acquisitions had taken place at the beginning of the respective
periods. The pro forma information includes adjustments for the interest
expense that would have been incurred to finance the acquisitions, additional
depreciation based on the fair value of the property, plant and equipment
acquired and the amortization of intangibles arising from the transactions.
The pro forma information is not necessarily indicative of the results of
operations as they would have been had the transactions been effected on the
assumed dates.
<TABLE>
<CAPTION>
Fiscal Years Ending April 30,
-----------------------------
(Unaudited) 1999 1998
--------- ----------
<S> <C> <C>
Revenue $93,646 $84,742
Net earnings 5,865 4,178
Earnings per share - Basic .81 .66
Earnings per share - Diluted .72 .59
</TABLE>
3. DEBT PAYABLE
(a) BANK OF AMERICA NT&SA
On September 11, 1998 IMPCO amended its credit facility with Bank of
America NT&SA (Bank) by extending the term of the $12 million revolving line
of credit for a twelve month period ending August 31, 2000. The amended
credit facility lowers the interest rate on the revolving line of credit by
.25% to the bank's reference rate less .50%. The amended credit facility also
added a $6,000,000 term loan facility for possible future acquisitions. On
March 24, 1999, the Company amended its business loan agreement with Bank of
America to include a standby letter of credit in the amount of $1,833,000 to
guarantee the credit facilities granted by the Hongkong and Shanghai Banking
Corporation Ltd., Osaka Branch.
On September 9, 1998 the Company agreed to expand the capital lease
facility with BA Leasing Corporation from $5,525,000 to $6,525,000, reduce
the rate of interest on new borrowings by 15 basis points, and extend the
expiration date to September 1, 2004.
On May 1, 1998 IMPCO BV entered into a credit facility with Bank of
America NT&SA through its Amsterdam branch. The facility includes a term loan
for $2,100,000 or an equivalent amount in freely convertible foreign
currencies.
Including the revolving line of credit, the capital lease facility,
the standby letter of credit and the acquisition facilities, the total Bank
of America credit facility was $27,444,000 at April 30, 1999.
REVOLVING LINE OF CREDIT. The revolving line of credit bears
interest, payable monthly, at a fluctuating per annum rate equal to the
Bank's reference rate minus one-half of one percentage point (which was 7.25%
on April 30, 1999). The Company may elect to have all or portions of the line
bear interest at an alternative interest rate established by the Bank
(Offshore rate). The Offshore rate was 6.16% on April 30,
<PAGE>
1999. At April 30, 1999, the outstanding line of credit balance subject to
the reference rate was $860,000 and the amount subject to the offshore rate
was $4,500,000.
The credit facility provides a Mexican peso line of credit
equivalent to $1,000,000 for IMPCO Mexicano and is included as part of the
existing $12,000,000 revolving line of credit between the Company and the
Bank. For US borrowings, the revolving line of credit carries interest,
payable monthly, at a fluctuating per annum rate equal to the Bank's
reference rate or the London Interbank Offering Rate (LIBOR) plus 1.75%
(6.6525% at 4/30/99). For Mexican borrowings, the revolving line of credit
carries interest, payable monthly, at a fluctuating per annum rate equal to
the Bank of America Mexico (BAMSA) cost of funds plus 1.50% or the TIIE plus
1.50% (23.59% at 4/30/99). The TIIE is the Interbank Interest Equilibrium
Rate calculated by the Bank of Mexico for the most recent period of
twenty-eight (28) days prior to commencement of the interest period. The
Company may prepay the facility, in full or in part, upon two-business days
notice, subject to break funding costs, if any. The minimum prepayment is
US$250,000. At April 30, 1999, the total outstanding line of credit balance
of $107,000 was subject to the BAMSA cost of funds rate of 26.25%.
It is management's intent to renew the amount of its present
long-term obligation under the revolving line of credit for an uninterrupted
period extending beyond one year from the balance sheet date.
The line may be used for financing commercial letters of credit with
a maximum maturity of 180 days and standby letters of credit with a maximum
maturity of five years not to extend beyond April 30, 2002. The amount of
letters of credit outstanding at any one time may not exceed $2,000,000 for
commercial letters of credit and $750,000 for standby letters of credit. At
April 30, 1999, a standby letter of credit totaling $375,000 was outstanding.
The maximum amount available at any one time on the revolving line of credit
and the commercial letters of credit is $12,000,000.
TERM LOAN FOR ACQUISITION OF MEDIA. This term loan bears interest,
payable on a monthly basis, at the Bank's reference rate. The Company may
elect to have all or portions of the term loan bear interest at an
alternative interest rate agreed upon by the Bank and IMPCO for periods of
not less than 30 days nor more than one year. The alternative interest rate
is based on the Offshore rate plus 1.50%. Each alternative rate portion must
be for an amount not less than $500,000 and may not include any portion of
principal that is scheduled to be repaid before the last day of the
applicable interest period. On October 20, 1997, the Company entered into a
34 month interest rate swap agreement with Bank of America NT&SA ending
August 31, 2000, that fixes the interest rate on the facility at 7.90%. At
April 30, 1999, the total outstanding balance was $615,000.
TERM LOAN FOR THE ACQUISITION OF ALGAS. This term loan bears
interest, payable on a monthly basis, at the Bank's reference rate. The
Company may elect to have all or portions of the term loan bear interest at
an alternative interest rate agreed upon by the Bank and IMPCO for periods of
not less than 30 days nor more than one year. The alternative interest rate
is based on the Offshore rate plus 1.75%. Each alternative rate portion must
be for an amount not less than $500,000 and may not include any portion of
principal that is scheduled to be repaid before the last day of the
applicable interest period. On February 3, 1998, the Company entered into a
58-month interest rate swap agreement with the Bank ending December 5, 2002
that fixes the interest rate on the facility at 7.74%. At April 30, 1999, the
total outstanding balance was $2,475,000.
TERM LOAN FOR THE ACQUISITION OF IMPCO BV This term loan bears
interest, payable on a monthly basis, at the Bank's reference rate. The
Company may elect to have all or portions of the term loan bear interest at
an alternative interest rate agreed upon by the Bank and IMPCO for periods of
not less than 30 days nor more than one year. The alternative interest rate
is based on the Offshore rate plus 1.75%. Each alternative rate portion must
be for an amount not less than $500,000 and may not include any portion of
principal that is scheduled to be repaid before the last day of the
applicable interest period. On May 29, 1998, the Company entered into a
59-month interest rate swap agreement with the Bank ending April 15, 2003
that fixes the interest rate on the facility at 7.80%. At April 30, 1999, the
total outstanding balance was $554,000.
IMPCO BV TERM LOAN. On April 29, 1998 IMPCO BV entered into a credit
facility with Bank of America NT&SA through its Amsterdam branch. The
facility includes a term loan for $2,100,000 or an equivalent amount in
freely convertible foreign currencies. On May 1, 1998 IMPCO BV borrowed fl.
4,200,000 to refinance the existing term loan with Depa Holdings as a
condition precedent to the sale of the minority shares in IMPCO BV. This term
loan bears interest, payable on a monthly basis, at the Euro Interbank
Offered Rate for the corresponding period of the advance, plus 1.50%. The
company will repay principal in 20 successive quarterly installments. The
first 19 installments will be equal to fl. 210,000 with the last installment
equal to the remaining balance. The term loan may be prepaid, with payments
applied in inverse order of maturity, in whole or in part, at any time. At
April 30, 1999, the outstanding balance of fl. 3,570,000 (U.S. $1,713,957)
bore an interest rate of 4.27%.
<PAGE>
TERM LOAN FOR FUTURE ACQUISITION(S). This term loan bears interest,
payable on a monthly basis, at the Bank's reference rate. The Company may
elect to have all or portions of the term loan bear interest at an
alternative interest rate agreed upon by the Bank and IMPCO for periods of
not less than 30 days nor more than one year. The alternative interest rate
is based on the Offshore rate plus 1.50%. Each alternative rate portion must
be for an amount not less than $500,000 and may not include any portion of
principal that is scheduled to be repaid before the last day of the
applicable interest period. The Company will repay principal in 20 successive
quarterly installments, starting on the last day of the third month after
funding. The first 19 installments will be equal to 1/19 of the original
principal amount with the last installment equal to the remaining balance.
The term loan may be prepaid, with payments applied in inverse order of
maturity, in whole or in part, at any time.
On December 4, 1998 the Company utilized $3,190,000 of the
$6,000,000 term loan for the acquisition of Crusader Engines. On February 12,
1999 the Company made a partial prepayment on this loan in the amount of
$1,800,000. At April 30, 1999, the outstanding balance of $1,230,500 was
subject to the Offshore rate of 6.52%.
CAPITAL LEASE FACILITY. The capital lease facility is available in
incremental draws of $50,000 or more to finance acquisitions of equipment
such as machinery, dies, molds, office furniture, and motor vehicles. At
April 30, 1999, approximately $2,946,000 was outstanding and approximately
$1,274,000 was available under the capital lease facility. Each draw is to be
repaid in twenty consecutive quarterly installments. Each draw bears interest
at either a variable rate or fixed rate of interest. The fixed rate of
interest is the U.S. Treasury note bond-equivalent yield per annum
corresponding to the number of months remaining on the draw, plus 2.40
percentage points. The variable rate of interest is equal to Bank's London
Branch 3-month LIBOR rate plus 2.00 percentage points. At April 30, 1999, all
draws were subject to the variable rate of interest. The short-term portion
of the capital lease facility is included in current maturities of short-term
debt on the Company's balance sheet. On May 29, 1998, the Company entered
into a 59-month interest rate swap agreement with Bank of America ending
April 15, 2003 that fixes the interest rate on $2,578,000 of the facility at
8.50% for fundings 1 through 18, 8.20% for fundings 19 through 24 and 8.05%
for funding 25 through 29.
If the Company exercises an early termination option before the
scheduled expiration date of a capital lease, a termination charge will be
assessed. The termination charge is a sliding percentage (not to exceed 3%)
of the balance on the lease at time of termination.
STANDBY LETTER OF CREDIT. In order to secure yen denominated credit
facilities for IMPCO Japan, the Company was required to post a standby letter
of credit for the total available credit facility granted by the Hongkong and
Shanghai Banking Corporation Ltd., Osaka Branch. The original amount of the
facility is Y220,000,000 (U.S.$1,833,000) and will decrease quarterly as
payments are made on the underlying outstanding debt. The cost of the
facility is 1.00% per annum of the amount outstanding. On April 30, 1999, the
amount outstanding under the standby letter of credit was $1,844,000.
LOAN COVENANTS AND COLLATERAL. The Bank's credit facility contains
certain restrictions and financial covenants, including liquidity, tangible
net worth and cash flow coverage thresholds, as well as limitations on other
indebtedness, and is secured by substantially all of the Company's assets. At
April 30, 1999, the Company was in compliance with all covenants.
(b) TERM LOAN - DEPA HOLDING B.V.
On May 1, 1998, as a condition precedent to the sale of the minority
shares held by Depa Holding B.V., IMPCO BV retired this facility from the
proceeds of the term loan facility granted by Bank of America NT&SA.
(c) CREDIT FACILITY - MEES PIERSON
In February of 1996, IMPCO BV secured a fl. 3,000,000
(U.S.$1,440,300) revocable credit facility with Mees Pierson, a financial
institution in the Netherlands. The interest rate is determined weekly based
on a weighted average of several money market indices. IMPCO BV's borrowings
under this facility may not exceed the combined total of a specified amount
of its accounts receivable (70 percent of book value) and inventory (50
percent of book value). At April 30, 1999, the interest rate was 5.25% and
there was no outstanding balance on the credit facility.
(d) THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD.
TERM LOAN FOR THE ACQUISITION OF MIKUNI. On March 29, 1999, IMPCO
Japan secured a Y160,000,000 (U.S.$1,341,000) term loan facility with the
Hongkong and Shanghai Banking Corporation Ltd., Osaka Branch. This term loan
bears interest, payable on a quarterly basis, at the Euroyen London Interbank
Offer Rate plus 1.60%. The Company may elect to lock the interest rate on the
loan for periods of not less than 30 days nor more than 6 months. At April
30, 1999, the outstanding loan balance of Y160,000,000 (U.S.$1,341,000) bore
an interest rate of 1.794%.
<PAGE>
LINE OF CREDIT. On March 29, 1999, IMPCO Japan secured a Y60,000,000
(U.S.$503,000) revolving term loan facility with the Hongkong and Shanghai
Banking Corporation Ltd., Osaka Branch. This term loan bears interest,
payable on a quarterly basis, at the Euroyen London Interbank Offer Rate plus
1.60%. The Company may elect to lock the interest rate on the loan for
periods of not less than 30 days nor more than 6 months. At April 30, 1999,
the outstanding loan balance of Y10,000,000 (U.S.$84,000) bore an interest
rate of 1.794%.
Annual maturities of long-term debt for the five years subsequent to
May 1, 1999 (in millions) are as follows: 2000 - $2.1; 2001 - $1.9; 2002 -
$1.1; 2003 - $.9; and 2004 - $.3.
<PAGE>
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments for the purpose of reducing
its exposure to adverse fluctuations in interest and foreign exchange rates.
While these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged. The Company is not a party to leveraged derivatives and does not hold or
issue financial instruments for speculative purposes.
FOREIGN CURRENCY MANAGEMENT. The results and financial condition of the
Company's international operations are affected by changes in exchange rates
between certain foreign currencies and the U.S. Dollar. The Company's exposure
to fluctuations in currency exchange rates has increased as a result of the
growth of its international subsidiaries. The functional currency for all of the
Company's international subsidiaries is the local currency of the subsidiary. An
increase in the value of the U.S. Dollar increases costs incurred by the
subsidiaries because most of its international subsidiaries' inventory purchases
are U.S. Dollar denominated. The Company monitors this risk and attempts to
minimize the exposure through forward currency contracts and the management of
cash disbursements in local currencies. The Company uses forward currency
contracts, which typically expire within one year, to hedge payments related to
the purchase of goods by its international subsidiaries. Realized gains and
losses on these contracts are recognized as part of cost of sales in the same
period as the hedged transactions. At April 30, 1999, the Company had forward
currency contracts protecting U.S.$2,400,000 in inventory purchases. At April
30, 1999 the fair value of forward currency contracts was ($99,000).
The Company seeks to hedge its foreign currency economic risk by
minimizing its U.S. Dollar investment in foreign operations using foreign
currency term loans and lines of credit to finance the operations of its foreign
subsidiaries. The term loans and lines of credit are denominated in local
currencies and translated to U.S. Dollars at period end exchange rates.
INTEREST RATE MANAGEMENT. The Company uses interest rate swap
agreements with Bank of America NT&SA to manage its exposure to interest rate
changes and stabilize the cost of borrowed funds. When an agreement is executed,
the interest rate swap is matched as a hedge to a specific debt instrument and
has the same notional amount and tenor as the related debt instrument principal.
Since the interest rate instruments effectively hedge the underlying interest
rate exposure, the net cash amounts paid or received on the agreements are
accrued and recognized as an adjustment to interest expense. At April 30, 1999,
the Company had $5,555,000 secured under fixed interest rate agreements at a
weighted-average fixed interest rate of 7.97 percent. Absent these fixed rate
agreements, the weighted-average variable rate for this debt at April 30, 1999
would have been 6.84 percent. Fair value of these instruments is based on
estimated current settlement cost. At April 30, 1999 the fair value of interest
rate swap agreements was approximately ($59,000).
FAIR VALUE OF LONG-TERM DEBT. The fair value of the Company's long-term
debt is estimated using discounted cash flows based on the Company's incremental
borrowing rates for similar types of borrowings. At April 30, 1999 the fair
value of the Company's long-term debt approximated carrying value.
<PAGE>
5. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED APRIL 30,
----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 1,949,698 $ 90,759 $ 79,065
State 106,665 36,314 23,828
Foreign 412,399 208,556 432,422
----------- --------- ---------
2,468,762 335,629 535,315
Deferred:
Federal (967,259) 571,887 (272,856)
----------- --------- ---------
Total provision (benefit) for income taxes: $1,501,503 $ 907,516 $ 262,459
----------- --------- ---------
----------- --------- ---------
</TABLE>
Income before income taxes and minority interest in income of
consolidated subsidiaries and dividends for U.S. and foreign based operations is
shown below:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED APRIL 30,
----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. $ 6,724,365 $ 4,574,310 $ 2,737,074
Foreign 1,178,284 1,608,825 1,012,343
----------- --------- ---------
$ 7,902,649 $ 6,183,135 $ 3,749,417
----------- --------- ---------
----------- --------- ---------
</TABLE>
The current provision (benefit) for income taxes for fiscal years
1999, 1998 and 1997 has been reduced by the utilization of approximately
$164,500, $5,045,500 and $3,953,000 of federal net operating loss
carryforwards, respectively, and by approximately $502,000 of research
credits for fiscal year 1999. During fiscal years 1999, 1998 and 1997, the
current provision for state taxes was reduced by the utilization of
approximately $516,000, $375,000 and 246,000, respectively, of investment
and/or research tax credits.
During the fourth quarter of fiscal year 1997, the Company reevaluated
the valuation allowance for its deferred tax assets. Based on this reevaluation,
which considered among other items, projections as to future taxable income, the
Company determined that the valuation allowance should be reduced by $1,559,000
principally due to the presumed future use of federal net operating loss
carryforwards. This reduction in the valuation allowance is reflected in the
deferred tax benefit for fiscal year 1997. During fiscal year 1998, the Company
determined that there is no need to carry a valuation allowance and therefore
reduced the valuation allowance by $510,000. Management has determined, based on
the Company's history of prior operating earnings and its expectations for the
future, that operating income of the Company will more likely than not be
sufficient to recognize fully these net deferred tax assets and that the
estimated effective annual rate in the future years will approximate the
statutory rate.
During the third quarter of fiscal year 1999, the Company realized a
foreign tax credit of $595,208 from the 49 percent sale of its IMPCO BV
subsidiary.
A reconciliation of income taxes computed at the federal statutory
income tax rate to income taxes reported in the consolidated statements of
income is as follows:
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED APRIL 30,
---------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
Permanent differences 2.0% 3.0 4.0
Benefit of net operating loss
carryforward (.7) (13.8) (38.0)
Foreign tax credit from
sale of Media (7.6) - -
Federal alternative minimum tax - - 2.1
State tax, net 3.5 .4 .6
Foreign tax, net .2 .1 4.3
R & D Credit (12.4) (9.0) -
----- ----- -----
Effective tax rate 19.0% 14.7% 7.0%
----- ----- -----
----- ----- -----
</TABLE>
The components of the Company's deferred tax liabilities and assets is
as follows:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
------------------------
1999 1998
----------- ----------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation ($1,076,502) ($955,000)
Other (107,079) (81,000)
----------- -----------
(1,183,581) (1,036,000)
----------- -----------
----------- -----------
Deferred tax assets:
Tax credit carryforwards 2,602,593 2,024,000
Inventory reserves 452,780 173,000
Other provisions for estimated expenses 773,743 439,000
----------- -----------
$3,829,116 $2,636,000
----------- -----------
----------- -----------
</TABLE>
At April 30, 1999, the Company had a general business tax credit
carryforward available for federal income tax purposes of approximately
$2,248,000 which, if not utilized, will expire by fiscal year 2013.
Additionally, the Company had an alternative minimum tax credit carryforward
available for federal income tax purposes of approximately $355,000 which does
not expire for tax reporting purposes.
6. COMMITMENTS AND CONTINGENCIES
(a) LEASES
The Company has certain non-cancelable operating leases for facilities
and equipment, and non-cancelable capital leases for machinery, equipment and
motor vehicles. Future minimum lease commitments under non-cancelable leases are
as follows:
<TABLE>
<CAPTION>
Lease Obligations
----------------------------------
Fiscal years ending April 30, Capital Operating
---------------------------------- ------------- --------------
<S> <C> <C>
2000 $ 1,220,160 $ 1,563,910
2001 908,185 1,220,538
2002 745,399 1,100,557
2003 613,819 1,028,241
2004 225,377 1,004,587
Later years - 184,956
------------ ------------
Total minimum lease payments 3,712,940 $ 6,102,789
------------ ------------
Less imputed interest 643,339
------------
Present value of future minimum
lease payments 3,069,601
Less current portion 967,428
------------
Long-term capital lease obligation $ 2,102,173
------------
------------
</TABLE>
Total rental expense under the operating leases for the fiscal years
ended April 30, 1999, 1998 and 1997 was approximately $1,281,000, $1,126,700,
and $903,000, respectively. The Company currently
<PAGE>
leases facilities in Cerritos, California; Irvine, California; Seattle,
Washington; Sterling Height, Michigan; Rijswijk, Holland; Langgons, Germany;
Genas Cedex, France; Cheltenham, Australia; De Mexico, Mexico; and Fukuoka,
Japan. These leases are non-cancelable and certain leases have renewal
options.
During fiscal year 1999, the Company increased its $5,525,000 capital
lease facility to $6,525,000 to finance acquisitions of equipment such as
machinery, dies, molds and patterns, office furniture and fixtures and motor
vehicles. At April 30, 1999 and 1998 respectively, approximately $2,946,000 and
$2,625,000 was outstanding under the capital lease facility. At April 30, 1999
the gross and net assets acquired under the capital lease facility was
approximately $5,224,000 and $2,565,000, respectively. At April 30, 1998 the
gross and net assets acquired under the capital lease facility was approximately
$3,854,000 and $2,131,000, respectively.
(b) CONTINGENCIES
The Company is currently subject to certain legal proceedings and
claims arising in the ordinary course of business. Based on discussions with
legal counsel, management does not believe that the outcome of any of these
matters will have a materially adverse effect on the Company's consolidated
financial statements.
(c) INVESTMENT AND TAX SAVINGS PLAN
The Company's Investment and Tax Savings Plan (the Plan) is a defined
contribution plan which is qualified under Internal Revenue Service Code Section
401(k). The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). All employees who are at least age twenty-one or
older are eligible to participate in the Plan on the first day of any calendar
month following one year of service with the Company. Employees of the Company
who elect to participate in the Plan may contribute into the Plan not less than
1% nor more than 15% of compensation. The Company's matching contributions are
discretionary and match elective salary deferrals up to 1.8% of compensation.
Approximately 46% of eligible employees were enrolled in the 401(k) plan at
April 30, 1999. Employer contributions totaled approximately $122,000, $98,000,
and $95,000 for fiscal years ended 1999, 1998 and 1997.
<PAGE>
7. STOCKHOLDERS' EQUITY
(a) 1993 SERIES 1 PREFERRED STOCK
The holders of the Company's' 1993 Series 1 Preferred Stock
(Preferred Stock) were entitled to receive annual cumulative dividends of up
to $105 per share and not less than $80 per share ($100 per share at April
30, 1999). The dividend rate, which was adjusted on the first day of each
calendar quarter, was based on the Seafirst Bank prime rate of interest plus
1.5 percent (assuming a deemed principal value of $1,000 per share).
Commencing March 31, 1999, the Company had the right to convert the
Preferred Stock to common stock if the average market price for the common stock
for the immediately preceding 30 trading days equals or exceeds the conversion
price then in effect and the Company pays all accrued dividends. On March 31,
1999, in accordance with its conversion right, the Company converted 1,124,764
shares of Preferred Stock into common stock and paid all accrued dividends. The
Preferred Stock was convertible into common stock by dividing the conversion
price at March 31, 1999 into its liquidation value of $1,000 for each share
being converted, which resulted in a conversion price of $5.29 per share.
(b) STOCK OPTIONS
The Company has five stock option plans that provide for the issuance
of options to key employees and directors of the Company. As of April 30, 1999,
1998 and 1997, the Company had outstanding stock options of 1,502,658,
1,308,086, and 922,810, respectively, to purchase shares of common stock. The
following table summarizes the transactions of the Company's stock option plans
for the three-year period ended April 30, 1999:
<TABLE>
<CAPTION>
Weighted
Number Average
Of Exercise
Shares Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unexercised options outstanding -
April 30, 1996 841,303 $7.59
Options granted 238,118 $6.84
Options exercised (139,244) $3.16
Options forfeited (17,367) $8.60
- --------------------------------------------------------------------------------------------------------
Unexercised options outstanding -
April 30, 1997 922,810 $7.82
Options granted 475,556 $7.86
Options exercised (57,795) $3.36
Options forfeited (32,485) $6.80
Unexercised options outstanding -
April 30, 1998 1,308,086 $8.06
Options granted 406,688 $9.25
Options exercised (192,116) $7.46
Options forfeited (20,000) $12.27
- --------------------------------------------------------------------------------------------------------
Unexercised options outstanding -
April 30, 1999 1,502,658 $8.40
Price range $0.00 to $1.625 20,606 $0.06
(weighted-average contractual life
of 2.5 years)
Price range $3.25 to $4.875 10,000 $3.89
(weighted-average contractual life
of 2.5 years)
Price range $4.875 to $6.50 192,948 $6.03
(weighted-average contractual life
of 6.4 years)
Price range $6.50 to $8.125 814,126 $7.63
(weighted-average contractual life
of 7.0 years)
Price range $8.125 to $9.75 154,234 $8.63
(weighted-average contractual life
of 6.9 years)
Price range $9.75 to $11.375 81,556 $11.11
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(weighted-average contractual life
of 4.9 years)
Price range $11.375 to $13.00 167,000 $11.77
(weighted-average contractual life
of 5.3 years)
Price range $13.00 to $14.625 2,188 $13.13
(weighted-average contractual life
of 8.5 years)
Price range $14.625 to $16.25 60,000 $16.25
(weighted-average contractual life
of 9.5 years)
- --------------------------------------------------------------------------------------------------------
Exercisable options -
April 30, 1997 501,727 $8.00
April 30, 1998 544,232 $8.63
April 30, 1999 489,517 $8.85
Price range $0.00 to $1.625 20,606 $0.06
Price range $3.25 to $4.875 10,000 $3.89
Price range $4.875 to $6.50 99,081 $5.83
Price range $6.50 to $8.125 26,626 $7.57
Price range $8.125 to $9.75 113,204 $8.65
Price range $9.75 to $11.375 80,000 $11.11
Price range $11.375 to $13.00 140,000 $11.73
- --------------------------------------------------------------------------------------------------------
</TABLE>
1997 INCENTIVE STOCK OPTION PLAN. During fiscal year 1998, the Company
adopted the 1997 Incentive Stock Option Plan. Options for up to 750,000 shares
of common stock may be issued to eligible employees. Options vest at a rate of
40 percent after the first two years following the date of grant and 20 percent
each year thereafter so that the employee is 100 percent vested in the option
after 5 years. The Board of Directors may grant options which have different
vesting and exercise provisions. Further information relating to this plan is as
follows:
OPTION PRICE PER SHARE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
---------------------------
1999 1998
---- ----
<S> <C> <C> <C>
Beginning balance $7.63 to $11.63 427,000 -
Granted $7.63 to $13.00 327,000 427,000
Relinquished $10.75 to $13.00 (12,000) -
Ending balance $7.63 to $11.63 742,000 427,000
Shares available for future grant 8,000 3,000
</TABLE>
The 327,000 options granted in fiscal year 1999 include 320,000
shares that were issued with contingent vesting schedules. These 320,000
shares shall vest pursuant to the plan's normal vesting schedule and be
exercisable if the closing price of the Company's common stock equals or
exceeds (i) $17.00 per share on or prior to April 30, 1999 or (ii) $15.30 per
share on at least 20 of 30 consecutive trading days occurring on or before
April 30, 1999. The contingency provision was satisfied on June 26, 1998. On
this date, 320,000 shares were granted with an effective grant date of May
22, 1997.
1996 INCENTIVE STOCK OPTION PLAN. During fiscal year 1997, the
Company adopted the 1996 Incentive Stock Option Plan. Options for up to
250,000 shares of common stock may be issued to eligible employees. Options
vest at a rate of 40 percent after the first two years following the date of
grant and 20 percent each year thereafter so that the employee is 100 percent
vested in the option after 5 years. Further information relating to this plan
is as follows:
OPTION PRICE PER SHARE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $6.25 to $11.00 237,404 212,583 -
Granted $12.25 5,000 38,556 218,118
Exercised $6.25 to $8.75 (15,914) (2,000) -
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Relinquished $6.25 (500) (11,735) (5,535)
Ending balance $6.25 to $12.25 225,990 237,404 212,583
Exercisable at April 30 $6.25 to $8.75 64,704 2,800 -
Shares available for future grant 6,096 10,596 37,417
</TABLE>
1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS. During fiscal year
1994, the Company adopted the 1993 Stock Option Plan for Non-employee Directors.
Options for up to 350,000 shares of the Company's common stock may be issued to
members of the Company's Board of Directors who are not and have not been
employees of the Company within three years prior to the date of the grant of an
option. Options are not assignable and generally vest cumulatively at the rate
of 25 percent per year, commencing twelve months following the date of grant.
The option exercise price per share is the higher of (i) the average of the fair
market values for the fifteen trading days immediately following the date of
grant or (ii) the market value on the fifteenth trading day immediately
following the date of grant. Further information relating to this plan is as
follows:
OPTION PRICE PER SHARE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $8.25 to $11.78 290,000 290,000 270,000
Granted $16.25 60,000 - 20,000
Exercised $8.64 to $11.78 (80,000) - -
Ending balance $8.25 to $16.25 270,000 290,000 290,000
Exercisable at April 30 $8.25 to $11.78 197,500 255,000 222,500
Shares available for future - 60,000 60,000
grant
</TABLE>
1991 EXECUTIVE STOCK OPTION PLAN. During fiscal year 1992, the Company
adopted the 1991 Executive Stock Option Plan, under which three executive
officers were granted Series A and Series B options. These options may be
exercised at any time through November 6, 2001, are not assignable, and may be
exercised whether or not the optionee is an employee at the time of exercise.
The Series B options were granted in exchange for the termination of certain
executive officers rights in the 1989 phantom stock pool. Further information
relating to this Plan is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
----------------------------------
SERIES A OPTIONS Option price
per share 1999 1998 1997
--------------- -------- -------- --------
<S> <C> <C> <C> <C>
Beginning balance $3.89 51,668 51,668 126,668
Exercised $3.89 (41,668) - (75,000)
-------- -------- --------
Ending balance $3.89 10,000 51,668 51,668
-------- -------- --------
-------- -------- --------
Exercisable at April 30 10,000 51,668 51,668
-------- -------- --------
-------- -------- --------
SERIES B OPTIONS
Beginning balance $0.06 21,806 53,520 96,900
Exercised $0.06 (1,200) (31,714) ( 43,380)
-------- -------- --------
Ending balance $0.06 20,606 21,806 53,520
-------- -------- --------
-------- -------- --------
Exercisable at April 30 20,606 21,806 53,520
-------- -------- --------
-------- -------- --------
</TABLE>
1989 INCENTIVE STOCK OPTION PLAN. Under the Company's 1989 Incentive
Stock Option Plan, up to 500,000 options may be issued. Options generally vest
at the rate of 25 percent per year, cumulatively, beginning on the first
anniversary of the date of grant. Further information relating to the 1989
Incentive Stock Option Plan is as follows:
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
--------------------------------------
Option price
per share 1999 1998 1997
------------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Beginning balance $5.25 to $11.25 280,208 315,039 347,735
Granted $13.00 to $13.13 14,688 10,000 -
Exercised $6.00 to $ 7.31 (53,334) (24,081) (20,864)
Relinquished $13.00 (7,500) (20,750) (11,832)
------------- ------------- ------------
Ending balance $5.25 to $13.13 234,062 280,208 315,039
----------- ----------- -----------
Exercisable at April 30 $5.25 to $11.25 196,707 212,958 174,039
------------- ------------- ------------
------------- ------------- ------------
Shares available for future grant 16,398 23,586 12,836
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Net income $ 6,401,146 $ 5,275,619 $ 3,486,958
Preferred stock dividends (530,542) (594,997) (581,365)
Minority interest (70,532) (410,554) (261,667)
----------- ----------- -----------
Numerator for basic earnings per
share - income available to
common stockholders 5,800,072 4,270,068 2,643,926
Effect of dilutive securities:
Preferred stock dividends 530,542 594,997 -
----------- ----------- -----------
Numerator for diluted earnings per
share - income available to
common stockholders after
assumed conversions $ 6,330,614 $ 4,865,065 $ 2,643,926
Denominator:
Denominator for basic earnings per
Share -- weighted-average shares 7,293,160 6,333,769 5,722,382
Effect of dilutive securities:
Employee stock options 650,151 450,315 117,738
Warrants - 246,628 290,422
Convertible preferred stock1 1,032,318 1,124,764 -
----------- ----------- -----------
Dilutive potential common shares 1,682,469 1,821,707 408,160
Denominator for diluted earnings per
share -- adjusted weighted-average
shares and assumed conversions 8,975,629 8,155,476 6,130,542
----------- ----------- -----------
Basic earnings per share $ 0.80 $ 0.67 $ 0.46
----------- ----------- -----------
Diluted earnings per share $ 0.71 $ 0.60 $ 0.43
----------- ----------- -----------
</TABLE>
1On March 31, 1999 preferred stock was converted to common stock and
the diluted Earnings Per Share is calculated as though the conversion occurred
at the beginning of the fiscal year. The basic earnings per share is calculated
with weighted average shares based on the conversion at March 31, 1999. The
convertible preferred shares is equal to the full conversion (1,124,764 shares)
less the weighted average shares for the month of April 1999 (92,446 shares).
For additional disclosures regarding the employee stock options, see
Note 7. Options to purchase 60,000 shares of common stock at $16.25 were
outstanding during fiscal year 1999 and options to purchase 260,000 shares of
common stock at prices ranging from $10.88 to $11.78 were outstanding during
fiscal year 1998 but were not included in the computation of diluted earnings
per share because the options' exercise price was greater than the average
market price of the common shares and, therefore, the effect would be
anti-dilutive.
9. COMPENSATORY STOCK OPTION PLAN
The Company has elected to account for its employee stock options under
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" (APB 25) and related Interpretations in accounting for employee stock
options. No compensation expense is recorded under APB 25 because the
<PAGE>
exercise price of the Company's employee common stock options equals the
market price of the underlying common stock on the grant date.
SFAS 123 requires "as adjusted" information regarding net income and
net income per share to be disclosed for new options granted after fiscal
year 1996. The fair value of these options was determined at the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
YEAR ENDED APRIL 30,
1999 1998 1997
----- ----- -----
Expected dividend yield 0% 0% 0%
Calculated volatility .584 .534 .486
Risk-free interest rate 3% 3% 3%
Expected life of the option in years 8.82 9.09 8.70
The estimated fair value of the options is amortized to expense over
the options' vesting period for "as adjusted" disclosures. The net income per
share "as adjusted" for the effects of SFAS 123 is not indicative of the
effects on reported net income/loss for future years. The Company's reported
"as adjusted" information at April 30 is as follows: (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net Income $ 5,800 $ 4,270 $ 2,644
As Adjusted $ 5,645 $ 3,628 $ 2,467
Net Income Per Share As Reported - Basic $ .80 $ .67 $ .46
Net Income Per Share "As Adjusted" - Basic $ .77 $ .57 $ .43
Net Income Per Share As Reported - Dilutive $ .71 $ .60 $ .43
Net Income Per Share "As Adjusted" - Dilutive $ .69 $ .52 $ .40
</TABLE>
In management's opinion existing stock option valuation models do
not provide a reliable single measure of the fair value of employee stock
options that have vesting provisions and are not transferable. In addition,
option pricing models require the input of highly subjective assumptions,
including expected stock price volatility.
10. REVENUES
During fiscal year 1999, the IMPCO BV, IMPCO Pty, Grupo IMPCO
Mexicano and IMPCO Japan subsidiaries accounted for approximately 15 percent,
6 percent, 3 percent and less than 1 percent of total consolidated revenues,
respectively, and contract revenue accounted for approximately 13 percent of
consolidated revenues. During fiscal year 1998, the IMPCO BV, IMPCO Pty,
IMPCO Mexicano subsidiaries accounted for approximately 16 percent, 10
percent and 1 percent of total consolidated revenues, respectively, and
contract revenue accounted for approximately 12 percent of consolidated
revenues. During fiscal year 1999 and 1998, General Motors Corporation, and
customers associated with the GM program, accounted for approximately 28
percent and 15 percent, respectively, of consolidated revenues. During fiscal
year 1997, no single unaffiliated customer exceeded ten percent of
consolidated revenues.
The Company routinely sells products to a broad base of customers,
which includes distributors and original equipment manufacturers. Based on
the nature of these customers, credit is generally granted without collateral
being required. Management does not anticipate that a significant credit risk
exists as a result of these customer relationships.
11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
BUSINESS SEGMENTS. The Company currently operates in three business
segments: Gaseous Fuel Products Division (GFPD), Automotive OEM Division
(AOD) and Non-U.S. Based Subsidiary Operations. The Company evaluates
performance based on profit or loss from operations before interest and
income taxes. The accounting policies of the reportable segments are the same
as those described in the Summary of Significant Accounting Policies.
GFPD is a leading supplier of engine components and systems that
allow internal combustion engines to operate on gaseous fuels, primarily
propane and natural gas. GFPD designs, develops, manufacturers and markets
components and systems for engines ranging from 1 to 4,000 horsepower. The
division sells its products to the motor vehicle, material handling, small
utility engine and large industrial
<PAGE>
engine aftermarket through a world wide distributor network encompassing over
400 distributors, sub-distributors and dealers in over 30 countries.
AOD was organized in mid-1996 to develop and manufacture fuel
systems for Automotive OEM applications. The division carries out a complete
range of operations aimed at developing cost-effective and efficient gaseous
fuel systems and components for urban fleet vehicles such as trucks and taxis
and passenger vehicles. AOD capabilities include: full vehicle engineering
and validation; powertrain controls and validation; advanced manufacturing
for engine controls; natural gas fuel storage; and testing procedures to meet
different global emission control standards and fuel control devices and
technology for gaseous fuels and other gases for subsequent use in internal
combustion engines, fuels cells and other applications requiring metering of
gases.
The Non-U.S. based subsidiary operations segment consists of
subsidiary operations located in Europe, Australia, Mexico, and Japan. The
subsidiaries develop and manage distributor networks for the Company's engine
components, kits and systems. The world wide distributor network encompasses
over 400 distributors, sub-distributors and dealers that focus on the
material handling, motor vehicle, heavy duty engine, and small industrial
engine markets. The subsidiaries also provide sales support, application
development, and technical support to aftermarket and OEM customers.
FINANCIAL INFORMATION BY BUSINESS SEGMENT. Financial information by
business segment for continuing operations follows:
<TABLE>
<CAPTION>
- ------------------------------------------------ ---------------- ----------------- ---------------
Revenues (IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ ---------------- ----------------- ---------------
<S> <C> <C> <C>
Gaseous Fuels Products Division $52,632 $48,277 $43,010
Automotive OEM Division 24,469 12,328 6,154
Non-U.S. Based Subsidiaries 21,188 19,304 17,018
Intersegment Elimination (11,463) (8,826) (4,354)
- ------------------------------------------------ ---------------- ----------------- ---------------
Total $86,826 $71,083 $61,828
- ------------------------------------------------ ---------------- ----------------- ---------------
- ------------------------------------------------ ---------------- ----------------- ---------------
Operating Income (IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ ---------------- ----------------- ---------------
Gaseous Fuels Products Division $14,284 $14,749 $11,093
Automotive OEM Division (27) (1,451) (1,801)
Non-U.S. Based Subsidiaries 1,504 1,772 1,266
Corporate Expenses (5,516) (4,996) (4,315)
Advanced Research & Product Develop. (3,053) (2,523) (1,314)
Intersegment Elimination (289) (433) (79)
- ------------------------------------------------ --------------- ------------------ ---------------
Total $6,903 $7,118 $4,850
- ------------------------------------------------ --------------- ------------------ ---------------
- ------------------------------------------------ ---------------- ----------------- ---------------
Identifiable Assets (IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ ---------------- ----------------- ---------------
Gaseous Fuels Products Division $27,663 $18,681 $13,641
Automotive OEM Division 18,024 9,679 5,150
Non-U.S.Based Subsidiaries 9,579 16,214 13,637
Corporate 18,296 13,604 14,685
- ------------------------------------------------ ---------------- ----------------- ---------------
Total $73,562 $58,178 $47,113
- ------------------------------------------------ ---------------- ----------------- ---------------
- ------------------------------------------------ ---------------- ----------------- ---------------
Capital Expenditures (IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ ---------------- ----------------- ---------------
Gaseous Fuels Products Division $1,067 $528 $521
Automotive OEM Division 1,163 2,304 504
Non-U.S. Based Subsidiaries 228 134 520
Corporate 340 254 157
- ------------------------------------------------ ---------------- ----------------- ---------------
Total $2,798 $3,220 $1,702
- ------------------------------------------------ ---------------- ----------------- ---------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------ ---------------- ----------------- ---------------
Depreciation and Amortization
(IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ ---------------- ----------------- ---------------
<S> <C> <C> <C>
Gaseous Fuels Products Division $1,261 $1,155 $1,053
Automotive OEM Division 890 816 743
Non-U.S. Based Subsidiaries 659 395 394
Corporate 631 547 527
- ------------------------------------------------ ---------------- ----------------- ---------------
Total $3,441 $2,913 $2,717
- ------------------------------------------------ ---------------- ----------------- ---------------
</TABLE>
PRODUCT REVENUES BY APPLICATION. The Company's product revenues by
application across all business segments follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------- ---------------- ----------------
(IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ----------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Motor vehicle products $32,748 $21,870 $23,784
Forklifts and other material handling equipment 31,822 29,493 23,291
Small portable to large stationary engines 11,251 10,846 11,362
- ----------------------------------------------------- ---------------- ---------------- ----------------
Total product sales $75,821 $62,209 $58,437
- ----------------------------------------------------- ---------------- ---------------- ----------------
</TABLE>
GEOGRAPHIC INFORMATION. The Company's geographic information for
revenues to unaffiliated customers and long-lived assets is shown below. The
basis for determining revenues is the geographic point of shipment, not the
location of the customer. Long-lived assets represent long-term tangible
assets and are physically located in the region as indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------ --------------- ------------------ ---------------
Revenues to Unaffiliated Customers
(IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ --------------- ------------------ ---------------
<S> <C> <C> <C>
United States $65,638 $51,779 $44,809
Europe 12,941 11,588 9,203
Australia 5,398 6,893 7,816
Mexico 2,671 823 -
Japan 178 - -
- ------------------------------------------------ --------------- ------------------ ---------------
Total $86,826 $71,083 $61,828
- ------------------------------------------------ --------------- ------------------ ---------------
- ------------------------------------------------ --------------- ------------------ ---------------
Long-Lived Assets (IN THOUSANDS) FY 1999 FY 1998 FY 1997
- ------------------------------------------------ --------------- ------------------ ---------------
United States $9,230 $8,355 $6,363
Europe 309 394 493
Australia 282 248 364
Mexico 47 27 -
Japan 17 - -
- ------------------------------------------------ --------------- ------------------ ---------------
Total $9,885 $9,024 $7,220
- ------------------------------------------------ --------------- ------------------ ---------------
</TABLE>
12. CONTRACT REVENUE
In August 1995, the Company extended its original 1993 two year
fixed-price contract with General Motors Corporation (GM) to develop,
manufacture and install compressed natural gas engine management systems (CNG
systems). Under the terms of the contract, the Company is engineering,
testing and validating CNG systems for certain 1998, 1999, 2000 and 2001
model year car and truck platforms in compliance with GM's specifications.
Revenues for development efforts are principally recognized by the
percentage of completion method and principally related to contracts with GM.
During fiscal year 1999, 1998, and 1997 GM and other contract revenues
comprised 13 percent, 12 percent, and 5 percent of the Company's total
revenues, respectively.
13. PURCHASES
During fiscal years 1999, 1998 and 1997, purchases from one vendor
constituted approximately 7 percent, 18 percent and 17 percent of
consolidated net inventory purchases, respectively. In fiscal year 1999, 10
suppliers accounted for approximately 32% of consolidated net inventory
purchases.
14. SUPPLEMENTARY CASH FLOW INFORMATION
<PAGE>
During fiscal years 1999, 1998 and 1997 the Company incurred capital
lease obligations of approximately $1,264,000, $1,296,000 and $835,000,
respectively.
Interest and taxes paid during fiscal year 1999, 1998, and 1997 are
as follows:
FISCAL YEAR ENDED APRIL 30,
---------------------------------------------
1999 1998 1997
---------- ---------- ----------
Interest paid $1,221,000 $ 940,000 $1,062,000
Taxes paid 3,042,000 191,000 755,000
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR 1999
JULY 31 OCT. 31 JAN. 31 APR. 30
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Product sales $ 17,187 $ 16,902 $ 16,044 $ 25,688
Contract revenue 2,686 3,420 3,824 1,075
Total revenue 19,873 20,322 19,868 26,763
Cost of sales 10,915 11,927 10,933 18,403
Gross Profit 8,958 8,394 8,935 8,361
Research and development expense 2,700 3,082 2,777 3,052
Net income 1,484 893 3,075 348
Net income per share:
Basic .21 .12 .43 .05
Diluted .18 .11 .36 .05
FISCAL YEAR 1998
JULY 31 OCT. 31 JAN. 31 APR. 30
----------- ------------- ------------- -------------
Product sales $ 14,151 $ 15,730 $ 14,835 $ 17,493
Contract revenue 2,138 2,432 2,158 2,146
Total revenue 16,289 18,162 16,993 19,639
Cost of sales 8,819 9,756 8,657 10,942
Gross Profit 7,470 8,406 8,336 8,697
Research and development expense 2,743 2,947 3,359 3,013
Net income 692 991 1,197 1,391
Net income per share:
Basic .12 .17 .18 .20
Diluted .11 .15 .16 .18
</TABLE>
16. OTHER MATTERS
<PAGE>
In April 1997, the Company sold air pollution control devices to its
subsidiary, IMPCO BV, a Netherlands corporation. This subsidiary then sold
the goods to Sagace Holland B.V., another Netherlands corporation, which
reexported the goods to Iran contrary to U.S. licenses authorizing the
initial export of the goods from the United States. The sales involved
approximately 150 units of emission control equipment used on forklifts or
similar vehicles that operate on compressed natural gas with a value of
approximately $350,000. These events were voluntarily reported by the Company
to the Office of Export Enforcement, U.S. Department of Commerce, and the
Office of Foreign Assets Control, U.S. Department of the Treasury, in August
1997.
Subsequent to reporting the foregoing events, the Company learned
that in April 1997, the Company sold similar air pollution control devices
with a value of approximately $100,000 to a distributor. The distributor then
reexported these goods to Iran, again contrary to U.S. export licenses. These
events were also voluntarily disclosed by the Company to the same Federal
agencies in 1998.
17. SUBSEQUENT EVENT (UNAUDITED)
On June 30, 1999, the Company's Board of Director's adopted a
Stockholder Protection Rights Agreement and declared a dividend of one Right
on each outstanding share of IMPCO common stock. The dividend was paid on
July 26, 1999 to stockholders of record on July 12, 1999.
<PAGE>
IMPCO TECHNOLOGIES, INC.
SCHEDULE II - VALUATION ACCOUNTS
<TABLE>
<CAPTION>
Additions
charged
Balance at (credited) Write-offs Balance
beginning to costs and and other at end
of period expenses adjustments of period
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
for the years ended:
April 30, 1999 $314,794 $305,958 ($84,928) $535,824
April 30, 1998 288,111 119,390 (92,707) 314,794
April 30, 1997 165,322 157,288 (34,499) 288,111
Inventory valuation reserve
for the years ended:
April 30, 1999 774,732 938,906 (170,164) 1,543,474
April 30, 1998 837,718 235,865 (298,851) 774,732
April 30, 1997 610,515 384,829 (157,626) 837,718
Warranty reserve
for the years ended:
April 30, 1999 301,190 224,968 ( 37,347) 488,811
April 30, 1998 275,760 219,813 (194,383) 301,190
April 30, 1997 469,639 222,121 (416,000) 275,760
Product liability reserve
for the years ended:
April 30, 1999 48,991 - (47,991) 1,000
April 30, 1998 91,935 - (42,944) 48,991
April 30, 1997 156,848 10,793 (75,705) 91,935
</TABLE>
<PAGE>
EXHIBIT 3.5
BY-LAWS
OF
IMPCO TECHNOLOGIES, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the stockholders of
the corporation for the purpose of electing directors and for the transaction of
such other business as may properly be brought before the meeting shall be held
on such date, and at such time and place within or without the State of Delaware
as may be designated from time to time by the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders shall
be called at any time by the Secretary or any other officer, whenever directed
by the Board of Directors or by the Chief Executive Officer. The purpose or
purposes of the proposed meeting shall be included in the notice setting forth
such call.
SECTION 3. NOTICES. Except as otherwise provided by law, notice of the
time, place and, in the case of a special meeting, the purpose or purposes of
the meeting of stockholders shall be delivered personally or mailed not earlier
than sixty, nor less than ten days previous thereto, to each stockholder of
record entitled to vote at the meeting at such address as appears on the records
of the corporation.
SECTION 4. QUORUM. The holders of one-third of the voting power of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute; but if at any regularly called meeting of stockholders there be less
than a quorum present, the stockholders present may adjourn the meeting from
time to time without further notice other than announcement at the meeting until
a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if, after the adjournment, a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 5. PRESIDING OFFICER. The Chairman of the Board, or in the
Chairman's absence or at the Chairman's direction, the President, or in the
President's absence or at the President's direction, any officer of the
corporation shall call all meetings of the stockholders to order and shall act
as Chairman of such meeting. The Secretary of the corporation or, in such
officer's absence, an Assistant Secretary shall act as Secretary of the meeting.
If neither the Secretary nor an Assistant Secretary is present, the Chairman of
the meeting shall appoint a Secretary of the
<PAGE>
meeting. Unless otherwise determined by the Board of Directors prior to the
meeting, the Chairman of the meeting shall determine the order of business
and shall have the authority in his or her discretion to regulate the conduct
of any such meeting, including, without limitation, by imposing restrictions
on the persons (other than stockholders of the corporation or their duly
appointed proxies) who may attend any such meeting, whether any stockholder
or stockholders' proxy may be excluded from any meeting of stockholders based
upon any determination by the Chairman, in his or her sole discretion, that
any such person has unduly disrupted or is likely to disrupt the proceedings
thereat, and the circumstances in which any person may make a statement or
ask questions at any meeting of stockholders. The Chairman of the meeting
shall have authority to adjourn any meeting of stockholders.
SECTION 6. PROXIES. At all meetings of stockholders, any stockholder
entitled to vote thereat shall be entitled to vote in person or by proxy, but no
proxy shall be voted after three years from its date, unless such proxy provides
for a longer period. Without limiting the manner in which a stockholder may
authorize another person or persons to act for the stockholder as proxy pursuant
to the General Corporation Law of the State of Delaware, the following shall
constitute a valid means by which a stockholder may grant such authority: (1) a
stockholder may execute a writing authorizing another person or persons to act
for the stockholder as proxy, and execution of the writing may be accomplished
by the stockholder or the stockholder's authorized officer, director, employee
or agent signing such writing or causing his or her signature to be affixed to
such writing by any reasonable means including, but not limited to, by facsimile
signature; or (2) a stockholder may authorize another person or persons to act
for the stockholder as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission to the person
who will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person who
will be holder of the proxy to receive such transmission, provided that any such
telegram, cablegram or other means of electronic transmission must either set
forth or be submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder. It if is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the judge or judges of stockholder votes or,
if there are no such judges, such other persons making that determination shall
specify the information upon which they relied.
Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to the preceding paragraph of this
Section 6 may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
Proxies shall be filed with the Secretary of the meeting prior to or at
the commencement of the meeting to which they relate.
SECTION 7. VOTE REQUIRED. When a quorum is present at any meeting, the
vote of the holders of a majority in voting power of the stock present or
represented by proxy and entitled to vote on the matters shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute, the Certificate of Incorporation or these By-
2
<PAGE>
Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
SECTION 8. RECORD DATE. In order that the corporation may determine the
stockholders (a) entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or (b) entitled to consent to corporate action in
writing without a meeting, or (c) entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date (i) in the case of
clause (a) above, shall not be more than sixty nor less than ten days before the
date of such meeting, (ii) in the case of clause (b) above, shall not be more
than ten days after the date upon which the resolution fixing the record date is
adopted by the board of directors, and (iii) in the case of clause (c) above,
shall not be more than sixty days prior to such action. If for any reason the
Board of Directors shall not have fixed a record date for any such purpose, the
record date for such purpose shall be determined as provided by law. Only those
stockholders of record on the date so fixed or determined shall be entitled to
any of the foregoing rights, notwithstanding the transfer of any such stock on
the books of the corporation after any such record date so fixed or determined.
SECTION 9. STOCKHOLDERS LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not so specified, at the place where the meeting is to be held. The list
shall also be produced at the time and kept at the place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 10. JUDGES OF STOCKHOLDER VOTES. The Board of Directors, in
advance of all meetings of the stockholders, shall appoint one or more judges of
stockholder votes, who may be stockholders or their proxies, but not directors
of the corporation or candidates for office. In the event that the Board of
Directors fails to so appoint judges of stockholder votes or, in the event that
one or more judges of stockholder votes previously designated by the Board of
Directors fails to appear or act at the meeting of stockholders, the Chairman of
the meeting may appoint one or more judges of stockholder votes to fill such
vacancy or vacancies. Judges of stockholder votes appointed to act at any
meeting of the stockholders, before entering upon the discharge of their duties,
shall be sworn faithfully to execute the duties of judge of stockholder votes
with strict impartiality and according to the best of their ability and the oath
so taken shall be subscribed by them. Judges of stockholder votes shall, subject
to the power of the Chairman of the meeting to open and close the polls, take
charge of the polls, and, after the voting, shall make a certificate of the
result of the vote taken.
3
<PAGE>
SECTION 11. (A) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of
persons for election to the Board of Directors of the corporation and the
proposal of business to be considered by the stockholders may be at an annual
meeting of stockholders (a) pursuant to the corporation's notice of meeting
delivered pursuant to Article 1, Section 3 of these By-Laws, (b) by or at the
direction of the Chairman of the Board or (c) by any stockholder or the
corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in subparagraphs (2) and (3) of this paragraph (A) of this
By-Law and who was a stockholder of record at the time such notice is delivered
to the Secretary of the corporation.
(2) For nomination or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this By-Law, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation, and, in the case of business other
than nominations, such other business must be a proper matter for stockholder
action. To be timely, a stockholder's notice shall be delivered to the Secretary
at the principal executive offices of the corporation not less than seventy days
nor more than ninety days prior to the first anniversary of the preceding year's
annual meeting; PROVIDED, HOWEVER, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (b) as to
any other business that the stockholder proposed to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposed is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-Law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
corporation at least eighty days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this By-Law shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive officers of the corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the corporation.
4
<PAGE>
(B) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting pursuant to Article
I, Section 2 of these By-Laws. Nominations of persons for election to the Board
of Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this By-Law and who is a stockholder of record at the
time such notice is delivered to the Secretary of the corporation. Nominations
by stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice as required
by paragraph (A)(2) of this By-Law shall be delivered to the Secretary at the
principal executive offices of the corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) GENERAL. (1) Only persons who are nominated in accordance with the
procedures set forth in this By-Law shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this By-Law. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this By-Law and, if any proposed nomination or business is not in compliance
with this By-Law, to declare that such defective nomination shall be disregarded
or that such proposed business shall not be transacted.
(2) For purposed of this By-Law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) For purposes of this By-Law, no adjournment nor notice of
adjournment of any meeting shall be deemed to constitute a new notice of such
meeting for purposes of this Section 11, and in order for any notification
required to be delivered by a stockholder pursuant to this Section 11 to be
timely, such notification must be delivered within the periods set forth above
with respect to the originally scheduled meeting.
(4) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
5
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER AND CLASSES. The Board of Directors of the
corporation shall consist of nine directors or such other number of directors,
but not less than three, as shall from time to time be fixed exclusively by
resolution of the Board of Directors. The directors shall be divided into three
classes, each class to be elected for a three-year term. Directors shall (except
as hereinafter provided for the filing of vacancies and newly created
directorships) be elected by the holders of a plurality of the voting power
present in person or represented by proxy and entitled to vote. One-third of the
total number of directors shall constitute a quorum for the transaction of
business and, except as otherwise provided by law or by the corporation's
Certificate of Incorporation, the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. Directors need not be stockholders.
SECTION 2. VACANCIES. Newly created directorships in the Board of
Directors that result from an increase in the number of directors and any
vacancy occurring in the Board of Directors shall be filled only by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office for a term as
set forth in these By-Laws. If any applicable provision of the General
Corporation Law of the State of Delaware expressly confers power on stockholders
to fill such a directorship at a special meeting of stockholders, such a
directorship may be filled at such meeting only by the affirmative vote of at
least 80 percent in voting power of all shares of the corporation entitled to
vote generally in the election of directors, voting as a single class.
SECTION 3. MEETINGS AND NOTICES. Meetings of the Board of Directors
shall be held at such place within or without the State of Delaware as may from
time to time be fixed by resolution of the Board or as may be specified in the
notice of any meeting. Regular meetings of the Board of Directors shall be held
at such times as may from time to time be fixed by resolution of the Board and
special meetings may be held at any time upon the call of the Chairman of the
Board or the President, by oral, or written notice including, telegraph, telex
or transmission of a telecopy, e-mail or other means of transmission, duly
served on or sent or mailed to each director to such director's address or
telecopy number as shown on the books of the corporation not less than one day
before the meeting. The notice of any meeting need not specify the purposes
thereof. A meeting of the Board may be held without notice immediately after the
annual meeting of stockholders at the same place at which such meeting is held.
Notice need not be given of regular meetings of the Board held at time by
resolution of the Board. Notice of any meeting need not be given to any director
who shall attend such meeting in person (except when the director attends a
meeting for the express purpose of objecting at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened), or who shall waive notice thereof, before or after such meeting, in
writing.
SECTION 4. SEPARATE SERIES OF STOCK. Notwithstanding the foregoing,
whenever the holders of any one or more series of Preferred Stock or Series
Common Stock issued by the corporation shall have the right, voting separately
by series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, removal, filling of vacancies and
6
<PAGE>
other features of such directorships shall be governed by the terms of the
Certificate of Incorporation applicable thereto. The number of directors that
may be elected by the holders of any such series of Preferred Stock or Series
Common Stock shall be in addition to the number fixed by or pursuant to the
By-Laws. Except as otherwise expressly provided in the terms of such series,
the number of directors that may be so elected by the holders of any such
series of stock shall be elected for terms expiring at the next annual
meeting of stockholders and without regard to the classification of the
members of the Board of Directors as set forth in Section 1 hereof, and
vacancies among directors so elected by the separate vote of the holders of
any such series of Preferred Stock or Series Common Stock shall be filled by
the affirmative vote of a majority of the remaining directors elected by such
series, or, if there are no such remaining directors, by the holders of such
series in the same manner in which such series initially elected a director.
SECTION 5. QUORUM BY CLASS OF STOCK. If at any meeting for the election
of directors, the corporation has outstanding more than one class of stock, and
one or more such classes or series thereof are entitled to vote separately as a
class, and there shall be a quorum of only one such class or series of stock,
that class or series of stock shall be entitled to elect its quota of directors
notwithstanding absence of a quorum of the other class or series of stock.
SECTION 6. EXECUTIVE COMMITTEE. The Board of Directors may designate
three or more directors to constitute an executive committee, one of whom shall
be designated Chairman of such committee. The members of such committee shall
hold such office until their successors are elected and qualified. Any vacancy
occurring in the committee shall be filled by the Board of Directors. Regular
meetings of the committee shall be held at such times and on such notice and at
such places as it may from time to time determine. The committee shall act,
advise with and aid the officers of the corporation in all matters concerning
its interest and the management of its business, and shall generally perform
such duties and exercise such powers as may from time to time be delegated to it
by the Board of Directors, and shall have authority to exercise all the powers
of the Board of Directors, so far as may be permitted by law, in the management
of the business and the affairs of the corporation whenever the Board of
Directors is not in session or whenever a quorum of the Board of Directors fails
to attend any regular or special meeting of such Board. The committee shall have
power to authorize the seal of the corporation to be affixed to all papers which
are required by the Delaware General Corporation Law to have the seal affixed
thereto. The fact that the executive committee has acted shall be conclusive
evidence that the Board of Directors was not in session at such time or that a
quorum of the Board had failed to attend the regular or special meeting thereof.
The executive committee shall keep regular minutes of its transactions
and shall cause them to be recorded in a book kept in the office of the
corporation designated for that purpose, and shall report the same to the Board
of Directors at their regular meeting. The committee shall make and adopt its
own rules for the government thereof and shall elect its own officers.
SECTION 7. OTHER COMMITTEES. The Board of Directors may from time to
time establish such other committees to serve at the pleasure of the Board which
shall be comprised of such members of the Board and have such duties as the
Board shall from time to time establish. Any director may belong to any number
of committees of the Board. The Board may also establish
7
<PAGE>
such other committees with such members (whether or not directors) and such
duties as the Board may from time to time determine.
SECTION 8. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
SECTION 9. TELEPHONIC, ETC. PARTICIPATION IN MEETINGS. The members of
the Board of Directors or any committee thereof may participate in a meeting of
such Board or committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 9 shall constitute presence in person at such a meeting.
SECTION 10. COMPENSATION OF DIRECTORS. The Board of Directors may
establish policies for the compensation of directors and for the reimbursement
of the expenses of directors, in each case, in connection with services provided
by directors to the corporation.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The Board of Directors, as soon as may be after
each annual meeting of the stockholders, shall elect officers of the
corporation, including a Chairman of the Board or President and a Secretary. The
Board of Directors may also from time to time elect such other officers
(including one or more Vice Presidents, a Treasurer, one or more Assistant Vice
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers) as it may deem proper or may delegate to any elected officer of the
corporation the power to appoint and remove any such other officers and to
prescribe their respective terms of office, authorities and duties. Any Vice
President may be designated Executive, Senior or Corporate, or may be given such
other designation or combination of designations as the Board of Directors may
determine. Any two or more offices may be held by the same person.
SECTION 2. TERM. All officers of the corporation elected by the Board
of Directors shall hold office for such term as may be determined by the Board
of Directors or until their respective successors are chosen and qualified. Any
officer may be removed from office at any time either with or without cause by
the affirmative vote of a majority of the members of the Board then in office,
or, in the case of appointed officers, by any elected officer upon whom such
power of removal shall have been conferred by the Board of Directors.
SECTION 3. POWERS AND DUTIES. Each of the officers of the
corporation elected by the Board of Directors or appointed by an officer in
accordance with these By-Laws shall have the powers and duties prescribed by
law, by the By-Laws or by the Board of Directors and, in the case of
appointed officers, the powers and duties prescribed by the appointing
officer, and, unless otherwise prescribed by the By-Laws or by the Board of
Directors or such appointing officer, shall have such further powers and
duties as ordinarily pertain to that office. The
8
<PAGE>
Chairman of the Board or the President, as determined by the Board of
Directors, shall be the Chief Executive Officer and shall have the general
direction of the affairs of the corporation.
SECTION 4. DELEGATION OF OFFICER'S POWERS AND DUTIES. Unless otherwise
provided in these By-Laws, in the absence or disability of any officer of the
corporation, the Board of Directors may, during such period, delegate such
officer's powers and duties to any other officer or to any director and the
person to whom such powers and duties are delegated shall, for the time being,
hold such office.
ARTICLE IV
CERTIFICATES OF STOCK
SECTION 1. CERTIFICATED AND UNCERTIFICATED STOCK. The shares of stock
of the corporation shall be represented by certificates, provided that the Board
of Directors may provide by resolution or resolutions that some or all of any or
all classes or series of the corporation's stock shall be uncertificated shares.
Any such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the corporation. Notwithstanding the adoption
of such a resolution by the Board of Directors, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by the Chairman of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the corporation, or as otherwise permitted by law,
representing the number of shares registered in certificate form. Any or all the
signatures on the certificate may be a facsimile.
SECTION 2. TRANSFERS. Transfers of stock shall be made on the books of
the corporation by the holder of the shares in person or by such holder's
attorney upon surrender and cancellation of certificates for a like number of
shares, or as otherwise provided by law with respect to uncertificated shares.
SECTION 3. LOST CERTIFICATES. No certificate for shares of stock in the
corporation shall be issued in place of any certificate alleged to have been
lost, stolen or destroyed, except upon production of such evidence of such loss,
theft or destruction and upon delivery to the corporation of a bond of indemnity
in such amount, upon such terms and secured by such surety, as the Board of
Directors in its discretion may require.
ARTICLE V
CORPORATE BOOKS
The books of the corporation may be kept outside of the State of
Delaware at such place or places as the Board of Directors may from time to time
determine.
9
<PAGE>
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person (an "Indemnitee") who
was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
corporation or, while a director or officer of the corporation, is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the
preceding sentence, except as otherwise provided in Section 3, the corporation
shall be required to indemnify an Indemnitee in connection with a proceeding (or
part thereof) commenced by such Indemnitee only if the commencement of such
proceeding (or part thereof) by the Indemnitee was authorized by the Board of
Directors of the corporation.
SECTION 2. PREPAYMENT OF EXPENSES. The corporation shall pay the
expenses (including attorneys' fees) incurred by an Indemnitee in defending any
proceeding in advance of its final disposition, PROVIDED, HOWEVER, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article VI or otherwise.
SECTION 3. CLAIMS. If a claim for indemnification or advancement of
expenses under this Article VI is not paid in full within sixty (60) days after
a written claim therefor by the Indemnitee has been received by the corporation,
the Indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the corporation shall have the burden
of proving that the Indemnitee is not entitled to the requested indemnification
or advancement of expenses under applicable law.
SECTION 4. NONEXCLUSIVITY OF RIGHTS. The rights conferred on any
Indemnitee by this Article VI shall not be exclusive of any other rights which
such Indemnitee may have or hereafter acquire under any statute, provision of
the certificate of incorporation, these by-laws, agreement, vote of stockholders
or disinterested directors or otherwise.
SECTION 5. OTHER SOURCES. The corporation's obligation, if any, to
indemnify or to advance expenses to any Indemnitee who was or is serving at its
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Indemnitee may collect as indemnification or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or non-profit enterprise.
10
<PAGE>
SECTION 6. AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any Indemnitee in respect of any act or omission
occurring prior to the time of such repeal or modification..
SECTION 7. OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES. This
Article VI shall not limit the right of the corporation, to the extent and in
the manner permitted by law, to indemnify and to advance expenses to persons
other than Indemnitees when and as authorized by appropriate corporate action.
ARTICLE VII
CHECKS, NOTES, PROXIES, ETC.
All checks and drafts on the corporation's bank accounts and all bills
of exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be hereunto authorized from time to time by
the Board of Directors. Proxies to vote and consents with respect to securities
of other corporations owned by or standing in the name of the corporation may be
executed and delivered from time to time on behalf of the corporation by the
Chairman of the Board, the President, or by such officers as the Board of
Directors may from time to time determine.
ARTICLE VIII
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation. In lieu of the corporate seal, when so authorized by the Board of
Directors or a duly empowered committee thereof, a facsimile thereof may be
impressed or affixed or reproduced.
ARTICLE IX
AMENDMENTS
These By-Laws may be amended, added to, rescinded or repealed at any
meeting of the Board of Directors or of the stockholders, provided notice of the
proposed change was given in the notice of the meeting of the shareholders or,
in the case of a meeting of the Board of Directors, in a notice given not less
than two days prior to the meeting; provided, however, that, notwithstanding any
other provisions of these By-Laws or any provision of law which might otherwise
permit a lesser vote of the stockholders, the affirmative vote of the holders of
at least 80 percent in voting power of all shares of the corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required in order for the stockholders to alter, amend or repeal
Section 2 and Section 11 of Article I, Sections 1 and 2 of Article II or this
proviso to this Article IX of these By-Laws or to adopt any provision
inconsistent with any of such Sections or with this proviso.
Adopted by the Board of Directors on July 22, 1998.
11
<PAGE>
Exhibit 10.14
SECOND AMENDMENT TO LEASE
L-W Income Properties, a California Limited Partnership (Lessor), IMPCO
Technologies, Inc., a Delaware corporation (Lessee) and AirSensors, Inc., a
Delaware corporation (Guarantor) agree as follows:
1. RECITALS
1.1 LEASE
Lessor and Lessee executed a Lease dated May 10, 1989, for
premises commonly known as 16804 Gridley Place, Cerritos, California. That
Lease was amended by a First Amendment to Lease dated April 19, 1993. The
original Lease dated May 10, 1989, and its First Amendment dated April 19,
1993 are collectively referred to as the "the Lease". Guarantor has
guaranteed Lessee's performance of its obligations under the Lease pursuant
to a Guaranty dated October 15, 1993 (the Guaranty).
<PAGE>
1.2 PRESENT TRANSACTION
The term of the Lease runs to May 31, 1999. The Lease gives
the Lessee options to extend the Lease for two additional 5-year periods.
Lessee has exercised its first option to extend the Lease for five years
commencing June 1, 1999. The parties wish by this agreement to agree upon the
fair market rent which will prevail during the extended term.
2. RENT
Commencing June 1, 1999, the base rent shall be $41,100 per month,
payable on the first day of each month. The rent shall be adjusted on the
first day of the thirty-first month of the option term (December 1, 2001) in
accordance with the provisions of Exhibit "B" of the May 10, 1989 lease.
3. GUARANTY
Guarantor agrees that its Guaranty shall continue in effect during
the extended term of the
2
<PAGE>
Lease.
4. NO OTHER CHANGES
No other changes or amendments are made to the Lease except as set
forth herein, and the Lease as herein amended shall continue in effect for
the extended term.
5. ENTIRE AGREEMENT
This Amendment constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and all prior and
contemporaneous agreements, representations, negotiations and understanding
of the parties hereto, oral or written, are hereby superseded and merged
herein. Each party to this Amendment expressly warrants and represents to the
other that it has not relied upon any representation, inducement, promise or
agreement, oral or otherwise, by any party, or anyone acting on behalf of any
party, which is not embodied herein. No modification or
3
<PAGE>
amendment of this Amendment shall be binding unless fully executed in
writing. This agreement may be executed in counterparts.
IMPCO TECHNOLOGIES, INC., L-W INCOME PROPERTIES,
A Delaware Corporation A California Limited
Partnership
By: /s/ Don L.Dominic By: /s/ Steven Laskey
Its: General Council Its: Partner
Date: Date: March 9, 1999
4
<PAGE>
Exhibit 10.15
LOAN AGREEMENT
29 March 1999
The Hongkong and Shanghai Banking Corporation Limited (hereinafter referred to
as the "Bank") hereby agrees to grant a loan of JPY 160,000,000 (Japanese Yen
one hundred and sixty million only) to Impco Technologies Japan Corp
(hereinafter referred to as the "Borrower") on the following terms and
conditions:
Amount : JPY 160,000,000 (Japanese Yen one hundred and sixty
million only)
Purpose : Acquisition funds
Period : From 31 March 1999 to 31 March 2004
Maturity : 31 March 2004
Drawdown Date : on 31 March 1999 in one single amount
Repayment : Quarterly installment of JPYS,000,000.
Each installment will be debited to your
current account.
Repayment : Repayment Date Repayment Amount
Schedule 1st 30JUN1999 JPY8,000,000 plus interest
2nd 30SEP1999 JPY8,000,000 plus interest
3rd 30DEC1999 JPY8,000,000 plus interest
4th 31MAR2000 JPY8,000,000 plus interest
5th 30JUN2000 JPY8,000,000 plus interest
6th 29SEP2000 JPY8,000,000 plus interest
7th 29DEC2000 JPY8,000,000 plus interest
8th 30MAR2001 JPY8,000,000 plus interest
9th 29JUN2001 JPY8,000,000 plus interest
10th 28SEP2001 JPY8,000,000 plus interest
llth 28DEC2001 JPY8,000,000 plus interest
12th 29MAR2002 JPY8,000,000 plus interest
13th 28JUN2002 JPY8,000,000 plus interest
14th 30SEP2002 JPY8,000,000 plus interest
15th 30DEC2002 JPY8,000,000 plus interest
16th 31MAR2003 JPY8,000,000 plus interest
17th 30JUN2003 JPY8,000,000 plus interest
18th 30SEP2003 JPY8,000,000 plus interest
19th 30DEC2003 JPY8,000,000 plus interest
20th 31MAR2004 JPY8,000,000 plus interest
Interest : Interest rate will be charged at 1.6% per annum over our cost. The
cost will be quoted two business days prior to the date of each installment.
Interest on the loan will be debited to your current account quarterly in
arrears on each loan repayment date.
Interest shall be computed on the basis of a year of three hundred sixty five
(365) days for the actual number of days elapsed, being understood that the
first day of the interest payment period shall be included in the relevant
number of days but that the last day of the interest payment period shall not
be included therein.
<PAGE>
If the Borrower fails to perform any obligations which are owed to the Bank,
the Borrower shall pay the Bank damages at the rate of 15% per annum for the
amount payable from the due date of the obligation to the date of payment.
When any payment under this Agreement would otherwise be due on a day which
is not a business day, the due date for payment shall be the previous
business day.
Prepayment : With the Bank's prior approval, (which will not be withheld,
provided we are satisfied that the funds utilized are generated from your
internal resources, out of cash flow rather than from external re-financing)
during an interest period the loan may, with two business days advance notice
to us, be repaid subject to the usual charges (i.e. the differential between
the return the Bank would have received had the loan run to maturity and the
return the Bank is able to obtain by the placing of the funds repaid for the
remainder of the period in the market). If repayment is made without the
Bank's prior approval, a fee of 2% on the amount repaid will be payable in
addition to that mentioned above.
Security : Stand-by Documentary Credit (No. 3015192) for JPY160,000,000
issued by Bank of America NT & SA Los Angeles Branch valid until 30 April
2000, which will be automatically extended without amendment for a one year
period upon such date and upon each anniversary of such date, but in no event
later than 30 April 2004.
Other conditions:
1) If at any time the Borrower fails to repay the principal amount or
pay the interest due thereon, the total loan amount together with interest
accrued thereon up to the date of actual payment become immediately due and
payable without further notice.
2) Payments by the Borrower shall be made to the Bank without any
set-off, counter-claim, withholding or condition of any kind except that if the
Borrower is compelled by law to make such withholding, the sum payable by the
Borrower shall be increased so that the amount actually received by the Bank is
the amount it would have received if there had been no withholding.
3) The agreement refers to and incorporates the Agreement on Bank
Transactions dated 26MAR1999 submitted by the Borrower to the Bank, provided,
however, that in the event of any inconsistency between the terms and
conditions of this Agreement and the Agreement on Bank Transactions, the
terms and conditions of this Agreement shall prevail.
4) This loan agreement will be governed by and construed in accordance
with the laws of Japan.
IN WITNESS HEREOF, this Agreement has been made as on 29 March 1999.
THE BANK: THE BORROWER:
THE HONGKONG AND SHANGHAI IMPCO TECHNOLOGIES JAPAN CORP
BANKING CORPORATION LIMITED,
OSAKA
/s/ N D Coates /s/ Mutsuo Taguchi
- -------------- -------------------
Manager Osaka President
Revenue stamp JPY100,000.-
<PAGE>
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made on April 1, 1999 by and among IMPCO
Technologies, Inc., a Delaware corporation ("IMPCO") and Robert Stemmler
("Employee"). Capitalized terms not otherwise defined in this Agreement shall
have the meanings specified in Section 5 unless the context otherwise requires.
Section 1. EMPLOYMENT.
The Company hereby employs Employee to render services to the Company
in an executive capacity as the President and Chief Executive Officer of IMPCO.
Employees shall be a Director and member of the Executive Committee of IMPCO
during the Term.
Employee hereby accepts employment under this Agreement and agrees to
devote his best effort and substantially full tine, attention and energy to the
Company's business. Employee's duties shall include all of the duties normally
associated with the position of chief executive officer and shall include such
other activities, responsibilities and duties as may be reasonably assigned from
time to time by the Board of Directors. The Company, through the Board of
Directors, shall retain full direction and control of the manner, means and
methods by which Employee performs the services for which he is employed
hereunder, provided that Employee's duties and responsibilities shall be of
substantially the same character as, or equivalent to, those performed by a
executive officer.
Section 2. COMPETITION.
2.1 BASE SALARY. During the Term, IMPCO will pay Employee a base
salary of $300,000 per year during the first twelve months of the effective
date this agreement, $330,000 per year for second twelve months period and
base salary of $360,000 per year for the third twelve months period prorated
on a daily basis for any period of the Term which is less than a full year .
The annual base salary will be paid to Employee every two weeks for a total
of twenty-six payments annually pursuant to IMPCO's normal payroll policy, as
modified from time to time. Remaining contract of this fiscal year,
2.2 INCENTIVE COMPENSATION. During the Term, Employee shall be
eligible for an annual cash bonus under a plan approved by Executive
Committee of the Board of Directors on August 16, 1994 (Attachment A), which
shall be payable each year within 100 days following the end of the Fiscal
Year
1
<PAGE>
and shall be protected on a daily basis for any period of the Term which does
not include all of a Fiscal Year.
2.3 BENEFITS. During the Term, Employee shall be entitled to the
following fringe benefits:
(a) Except as otherwise specified in this Agreement, the fringe
benefits that the Company makes generally available to its executive officers,
which currently include medical insurance and a Section 401(k) defined
contribution employee savings plan and a deferred compensation plan
(unqualified);
(b) Term life Insurance in the face amount of $750,000;
(c) Long-term disability insurance providing for monthly disability
payments of $10,000 to the expiration of this contract after a waiting period
not in excess of ninety (90) days;
(d) A car allowance of $12000 per year, plus reimbursement of fuel,
maintenance, registration and other expenses, pro rated on a daily basis for any
period of the Term which is less than a full year;
(e) Four (4) weeks of paid vacation each calendar year, pro rated
on a daily basis for any period of the Term which is less than a full year;
(f) Ten (10) days of sick leave each calendar year, pro rated on a
daily basis for any period of the Term which is less than a full year. Unused
sick leave will not be accumulated or carried over nor paid for upon
termination of this Agreement.
(g) A paid up annuity to provide lifetime medial insurance for
Employee and his spouse.
(h) Availability of a Company leased vehicle for business purposes.
(I) Annual Estate Planning Cost
2.4 BUSINESS EXPENSE REIMBURSEMENT. During the Term, the Company
will reimburse Employee for reasonable out-of-pocket expenses incurred by
Employee in performance of service for the Company under this Agreement (e.g.
transportation. Lodging and food expenses incurred while traveling on Company
business), all subject to such policies and other requirements as the Company
may from time to time establish for its employee generally. Employee shall
maintain such records as will enable the Company to deduct such items as
business expenses when computing its taxes.
2
<PAGE>
2.5 WITHHOLDING. Payment of compensation to Employee will be
subject to withholding of such amounts on account of payroll taxes, income
taxes and other withholding as may be required by applicable law, rule or
regulation of any governmental authority or as consented to by Employee.
Section 3. TERM AND TERMINATION PAYMENTS.
3.1 TERM. Subject to approval of this Agreement by the Board of
Directors, the Term will commence on April 1, 1999, for three (3) consecutive
twelve (12) month periods unless earlier terminated as a result of: (a)
Company's termination of Employee's employment pursuant to Section 3.2; (b)
Employee's resignation of employment pursuant to Section 3.3: (c) death of
employee; or (d) the disability of Employee resulting from injury, illness or
disease, whether of a mental or physical nature, which substantially impairs
or prevents the Employee from performing his duties and obligations under
this Agreement for a period of three (3) consecutive months as determined in
good faith by the Board of Directors.
3.2 TERMINATION BY COMPANY. Company may terminate Employee's
employment with or without cause at any time by giving Employee written
notice at least thirty (30) days prior to the effective date of termination;
PROVIDED, that if such termination of employment is effective:
(a) Prior to the expiration of the three year Term, then the
Employee shall be paid for the remaining balance of the contract a lump sum
payment equal to the annual base salary under Section 2.1 plus the additional
cash compensation under Section 2.2 that Employee would have earned for the
remaining months following the effective date of termination of employment,
and the benefits provided pursuant to Section 2.4 shall continue for the
remaining months of the fiscal year following the effective date of
termination of employment; and
3.3. TERMINATION BY EMPLOYEE. Employee may resign at any time by
giving the Company written notice at least thirty (30) days prior to the
effective date of such termination. In the event of termination by Employee,
Employee shall not be entitled to any compensation or benefits following the
effective date of termination of employment.
3.4 DEATH OR DISABILITY. If Employee's employment is terminated by
death or disability as provided in Section 3.1 (d), Employee shall not be
entitled to any compensation or benefits from the Company except as provided
in Section 2.4 (b), (c) and (g)
3
<PAGE>
Section 4. CONFIDENTIALITY.
4.1 CONFIDENTIALITY INFORMATION. Employee shall not at any time
during the period of his employment or thereafter, except as required in the
course of his employment with the Company or as authorized in writing by the
Board of Directors, directly or indirectly use, disclose, disseminate or
reproduce any Confidential Information or use any Confidential Information to
complete, directly or indirectly, with the Company. All notes, notebooks,
memoranda, computer program and similar repositories of information
containing or relating in any way to Confidential Information shall be the
property of the Company. All such items made or complied by Employee or made
available to Employee during the Term, including all copies thereof, shall be
delivered to the Company by Employee upon termination of the Term or at any
other time upon request of the Company.
4.2 PROPRIETARY INFORMATION OF OTHERS. Employee will not use in
the course of Employee's employment with the Company, or disclose or
otherwise make available to the Company, any information, documents or other
items which Employee may have received from any prior employer or other
person and which Employee is prohibited from so using, disclosing or making
available by reason of any contract, court order, law or other obligation by
which Employee is bound.
4.3 EQUITABLE RELIEF. Employee acknowledges that: the provisions
of this Section 4 are essential to the Company; the Company would not enter
into this Agreement if it did not include such provisions; the damages
sustained by the Company as a result of any breach of such provisions cannot
be adequately remedied by damages; and, in addition to any other right or
remedy that the Company may have under this Agreement by law or otherwise,
the Company will be entitled to injunctive and other equitable relief to
prevent or curtail any breach of any such provisions.
Section 5. DEFINITIONS.
Whenever used in this Agreement with initial letters, capitalized,
the following terms will have the following meanings:
"BOARD OF DIRECTORS" means, unless otherwise specified, IMPCO
Technologies, Inc.'s Board of Directors.
"CONFIDENTIAL INFORMATION" means information not generally known
relating to the business of the Company or any third party that is contributed
to, developed by, disclosed to, or known to Employee in his course of employment
by the Company, including but not limited to customer lists, specifications,
data,
4
<PAGE>
research, test procedures and results, know-how, services used, computer
programs, information regarding past, present and prospective plans and
methods of purchasing, accounting, engineering, business, marketing,
merchandising, selling and servicing used by the Company.
"FISCAL YEAR" means the Company's fiscal year for financial
accounting purposes, which is currently a fiscal year ending on April 30.
"TERM" means the period during which Agreement is in effect as
provided in Section 3.1.
Section 6. MISCELLANEOUS.
6.1 COMPLIANCE WITH LAWS. In the performance of this Agreement,
each party will comply with all applicable laws, regulations, rules, orders
and other requirements of governmental authorities having jurisdiction.
6.2 NONWAIVER. The failure of any party to insist upon or enforce
strict performance by any other of any provision of this Agreement or to
exercise any right, remedy or provision of this Agreement will not be
interpreted or construed as a waiver or relinquishment to any extent of such
party's right to consent or rely upon the same in that or any other instance;
rather the same will be and remain in full force and effect.
6.3 ENTIRE AGREEMENT.This Agreement constitutes the entire
Agreement, and supersedes any and all prior Agreements, between the Company
and Employee. No amendment, modification or waiver of any of the provisions
of this Agreement will be valid unless set forth in a written instrument
signed by the party to be bound thereby.
6.4 APPLICABLE LAW AND VENUE. This Agreement will be interpreted,
construed and enforced in all respects in accordance with the local laws of
the State of California and venue for any action out of this Agreement shall
be in Los Angeles County, California.
6.5 SURVIVAL. Section 4. Together with all other provisions of
this Agreement that may reasonably be interpreted or construed to survive any
termination of the Term, shall survive termination of the Term.
6.6 ATTORNEYS' FEES. In the event any suit or proceeding is
instituted by any party against another arising out of this Agreement, the
prevailing party shall be entitled to recover its attorneys' fees and
expenses of litigation or arbitration.
6.7 SEVERABILITY. If any term, provision, covenant, or condition
of this Agreement shall be held by a court of competent jurisdiction to be
invalid,
5
<PAGE>
unenforceable, or void, the remainder of this Agreement shall remain in full
force and effect.
6.8 HEADINGS. The headings and captions of this Agreement are
provided for convenience only and are not intended to have any effect upon
the interpretation or construction or construction of the Agreement.
6.9 NOTICES. Any notice, request, consent, or approval required or
permitted to be given under this Agreement or pursuant to law shall be
sufficient if in writing, and personally delivered to Employee or by
registered or certified mail to Employee's residence ( as noted in the
Company's records), or if personally delivered to the Company's Corporate
Secretary at the Company's principal office.
IMPCO TECHNOLOGIES, INC.
By: /s/ DON SIMPLOT
---------------
Director By: /s/ DON J. SIMPLOT
-----------------------
Compensation Committee.
By: /s/ ULRICH RUETZ
----------------
Director
By: /s/ RAWLAND F. TAPLETT
----------------------
Director By: /s/ DON J. SIMPLOT
------------------------
Its Chairman Don Simplot
By: /s/ PAUL MLOTOK
---------------
Director /s/ ULRICH RUETZ
-------------------
Member Ulrich Reutz
By: /s/ DOUGLAS W. TOMS
-------------------
Director /s/ RAWLAND F. TAPLETT
----------------------
Member Rawley Taplett
By: /s/ NORM L. BRYAN
-----------------
Director
Employee:
/s/ ROBERT M. STEMMLER
----------------------
Robert M. Stemmler
6
<PAGE>
EXHIBIT 22.1
IMPCO TECHNOLOGIES, INC.
SUBSIDIARIES OF THE COMPANY
Name Jurisdiction of Incorporation
- ------- ------------------------------
Fuel Injection Centers
of America, Inc. Washington
Canadian AirSensors, Inc. British Columbia, Canada
IMPCO Technologies, B.V. Holland
IMPCO Europe, B.V. Holland
IMPCO Technologies, Pty. Australia
Grupo I.M.P.C.O. Mexicano,
S. de R.L. de C.V. Mexico
IMPCO de Venezuela S. de R.L. Venezuela
IMPCO Tech Japan K.K. Japan
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in (a) Amendment No. 3 to the
Registration Statement (Form S-3, No. 33-56610) pertaining to shares of common
stock IMPCO Technologies, Inc. and in the related Prospectus, (b) Amendment No.
1 to the Registration Statement (Form S-8, No. 33-38649) pertaining to the 1989
Incentive Stock Option Plan of IMPCO Technologies, Inc. and in the related
Prospectus, (c) the Registration Statement (Form S-8, No. 33-72008) pertaining
to the 1991 Executive Stock Option Plan of IMPCO Technologies, Inc. and in the
related Prospectus, (d) the Registration Statement (Form S-8, No. 33-37035)
pertaining to the 1996 Incentive Stock Option Plan of IMPCO Technologies, Inc.
and (e) the Registration Statement (Form S-8, No. 33-62889) pertaining to the
IMPCO Investment and Tax Savings Plan, of our report dated June 30, 1999 with
respect to the consolidated financial statements and financial statement
schedule of IMPCO Technologies, Inc. included in this Annual Report (Form 10-K)
for the year ended April 30, 1999.
/s/ Ernst & Young LLP
Long Beach, California
July 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> APR-30-1999
<CASH> 2,009,208
<SECURITIES> 0
<RECEIVABLES> 22,209,363
<ALLOWANCES> 535,824
<INVENTORY> 22,707,185
<CURRENT-ASSETS> 52,119,546
<PP&E> 22,616,050
<DEPRECIATION> 12,730,976
<TOTAL-ASSETS> 73,562,162
<CURRENT-LIABILITIES> 16,891,567
<BONDS> 0
0
0
<COMMON> 8,409
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 73,562,162
<SALES> 75,820,926
<TOTAL-REVENUES> 86,826,454
<CGS> 52,178,542
<TOTAL-COSTS> 79,923,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,169,830
<INCOME-PRETAX> 7,902,649
<INCOME-TAX> 1,501,503
<INCOME-CONTINUING> 6,330,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,800,072
<EPS-BASIC> 0.80
<EPS-DILUTED> 0.71
</TABLE>
