- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 JANUARY 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 Commission File Number 0-14812
EDISON CONTROL CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2716367
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 Maritime Drive 53074-0308
PO Box 308 (Zip Code)
Port Washington, Wisconsin
(Address of principal executive offices)
Registrant's telephone number, including area code:
414-268-6800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
Common stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of Edison Control Corporation common stock, held
by non-affiliates as of March 31, 1999 was $10,258,456.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 1999: 2,346,933 shares of common stock, par
value $.01 per share.
Documents Incorporated by Reference
1. Portions of Edison Control Corporation's 1998 Annual Report to
Shareholders are incorporated by reference into Parts I, II and IV of
this Form 10-K.
2. Portions of Edison Control Corporation's Notice of Annual Meeting and
Proxy Statement for the Registrant's 1999 Annual Meeting scheduled to be
held on June 8, 1999 are incorporated by reference into Part III of this
Form 10-K.
- --------------------------------------------------------------------------------
<PAGE>
PART I
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects", or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties, including, but not limited to, new product
advancements by competition, significant changes in industry technology,
economic or political conditions in the countries in which the Company does
business, the continued availability of sources of supply, the availability and
consummation of favorable acquisition opportunities, increasing competitive
pressures on pricing and other contract terms and economic factors affecting the
Company's security trading portfolio. These factors could cause actual results
to differ materially from those anticipated as of the date of this report.
Shareholders, potential investors and other readers are urged to consider these
factors in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The forward-looking
statements included herein are only made as of the date of this report and the
Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
Item 1. Business
Edison Control Corporation (the "Company") was incorporated under the laws of
the State of New Jersey on June 18, 1986 to succeed a limited partnership
organized on October 31, 1979. Until June 21, 1996, the principal operating
business was involved in the design, development, manufacture and sale of
electronic fault indicators. On June 21, 1996, the Company purchased, from
unaffiliated persons, all of the issued and outstanding stock of Construction
Forms, Inc. ("ConForms"), CF Ultra Tech, Inc. ("Ultra Tech") and CF Gilco, Inc.
("Gilco") and all of the issued and outstanding units of another affiliate,
JABCO, LLC. On October 31, 1996, the Company sold certain net assets of the
electronic fault indicators business to the manager of that operation. On
February 1, 1998, Ultra Tech and Gilco were merged into ConForms.
The Company conducts its business through its ConForms' divisions. ConForms, the
Company's principal operating unit, designs, manufactures and distributes
concrete pumping systems and accessories. Ultra Tech is engaged in the
manufacturing and marketing of abrasion resistant piping systems. Abrasion
resistant hardened pipe is used extensively in mining, pulp and paper mills,
wastewater treatment plants and coal-fired electric utility plants, as well as
in concrete pumping applications. Gilco is engaged in the manufacturing and
marketing of a broad line of concrete and mortar/plaster mixers for a broad
segment of industries.
ConForms
Most of ConForms' manufacturing operations and all of its administrative
functions are located at the Company's headquarters in Port Washington,
Wisconsin, which is approximately 25 miles north of Milwaukee. ConForms operates
three branch warehouses for light manufacturing and distribution of its
products. The warehouses are located in Gardena, California; Newport, Wales,
United Kingdom; and Johor Bahru, Malaysia. ConForms also owns a 50% interest in
South Houston Hose Company, a Houston, Texas based distributor of concrete
pumping accessories, industrial hoses and a variety of fittings for other
markets.
2
<PAGE>
ConForms produces a standardized line of concrete pumping components and
accessories compatible with many different types of concrete pumps in order to
be in a position to provide concrete pumpers and distributors with a complete,
high quality line of components and accessories priced lower than if each
component were purchased individually. ConForms believes that a pumping system
designed as a package helps improve the reliability and output of the pump.
In the 1970s, as concrete pumps became more reliable, available and acceptable
in the United States as the most efficient method of placing concrete, ConForms
worked closely with pump manufacturers and contractors to develop better
engineered products for the rapidly changing industry. The Company believes that
industry standards were largely established based on ConForms' designs.
ConForms' objective was, and continues to be, to provide high quality components
and a superior level of service to stay at the forefront of the concrete pumping
market. As ConForms continued to grow utilizing quality engineering, patent
protection, tooling and fixtures, manufacturing methods and distribution, it
became difficult for smaller manufacturers to match ConForms' total service
level. The Company believes this strategy has allowed ConForms to increase its
market share to over 50% of the North American market.
ConForms manufactures concrete pumping systems and accessories for many
applications, including use in high rise construction, airport and parking
structures, and bridge and tunnel construction. In addition, ConForms' products
are used extensively on mobile, truck-mounted concrete pumps equipped with
articulating booms. Because of the inherent abrasiveness of concrete being
conveyed under pressure, ConForms' products need to be replaced periodically and
the end-user usually contacts ConForms or a distributor for high-quality,
in-stock replacement components.
ConForms manufactures over 7,000 finished products, although approximately 500
products constitute approximately 80% of ConForms' sales. To its knowledge,
ConForms is the only complete source of system components and accessories needed
to pump and place concrete. ConForms' products include straight pipe sections in
a variety of lengths, diameters, wall thicknesses, degrees of hardness, and
fittings. In addition, ConForms' products include couplings, reducers, bends,
elbows and valves in various sizes and styles. Specially made rubber hose in a
variety of sizes and configurations is included in ConForms' product base. The
line also includes equipment, which is tailor-made for particular applications,
such as bridge-deck spreaders, krete-placers, hydraulic diversion discharge
valves, and customized equipment used in tunnel construction.
Marketing
ConForms' products, which account for approximately 77% of the Company's sales,
are marketed principally through its own sales personnel and distributors.
Besides contact from sales personnel, ConForms also attempts to maintain a
prominent level of market visibility through active membership in the American
Concrete Pumping Association, exhibits at industry trade shows, direct mail
publications to end users and conducting industry safety seminars. Approximately
95% of all orders are received over the telephone.
Export sales accounted for approximately 19.7% of ConForms' business for the
year ended January 31, 1999, compared to 21.3% in the prior year. International
markets are expected to be an increasing part of the business in future years.
Customers
ConForms' customer base consists of concrete pump manufacturers (19%),
pumper/dealers (organizations which run a concrete pumping operation but also
act as dealers of concrete pumps and systems) (33%), dealers (28%), pumping
contractors (14%) and various other businesses such as rental yards, general
contractors, pool contractors, ready mix operations, mines, fireproofers and
precast companies (6%).
No customer exceeded 10% of the Company's consolidated net sales for the year
ended January 31, 1999.
3
<PAGE>
Competition
ConForms competes with a number of manufacturers in the concrete pumping
components and accessories industry. However, the Company believes that this
competition is very fragmented, with most competitors offering a limited
selection of concrete pumping components and mainly selling against ConForms on
price. ConForms competes by providing a complete line of products, quality,
first class service and engineering assistance. Moreover, the Company believes
that ConForms' patents, manufacturing methods and inventory stocking strategy
provide it with a competitive advantage. Pump manufacturers also compete by
actively promoting their internal wear parts and piping systems. Also, some
customers develop their own in-house capability to produce some of the products.
Miscellaneous Data
Principal manufacturing operations include machining, welding, burning, bending,
heat-treating, painting, sawing, hose coupling, assembly and fixture and tool
making.
Raw materials principally include steel pipe and tubing, rubber hose and
castings. ConForms has long-term relationships with a select group of suppliers
to control costs and ensure material quality and availability. ConForms does not
have any written contractual agreements with any of its suppliers.
The business has marginally lower sales volume in the fourth quarter; however
working capital requirements are not significantly impacted. Terms of sale are
generally net 30 days.
ConForms has several patents and trademarks; only one, the method of
heat-treating pipe with a wall thickness of under .200 inches, is considered of
significant importance to the Company.
ConForms order backlog on March 31, 1999 and 1998 was approximately $965,000 and
$790,000, respectively; all of which should be completed prior to the end of the
current fiscal year.
Ultra Tech
Ultra Tech was formed in 1989 to help assure ConForms an in-house supply of the
highest quality, induction-hardened pipe for its concrete pumping systems. The
Company believes its induction-hardened pipe will typically last 3 to 8 or more
times longer than non-hardened pipe. Since its formation, Ultra Tech has
attempted to establish its own identity in many other markets, primarily
throughout the United States, including the mining industry to carry phosphate
and coal slurries, the pulp and paper industry for various slurry mixes, the
power industry to convey fly ash and coal and the waste treatment industry to
convey sludge.
Ultra Tech has developed a line of hardened and overlay pipe products available
in varying diameters, lengths and configurations which prolong the life of a
piping system, regardless of particular wear characteristics found in the
pumping system. The Company uses low alloy steel pipe, advanced heat-treating
technology and metallurgical principles to produce both UT600 and UT500
induction-hardened pipe. Both of these products have a hard, abrasion resistant
inner wall and a more ductile outer layer. For pure abrasion applications, UT600
provides outstanding wear resistance. UT600 induction-hardened pipe is made from
a raw steel pipe of a proprietary chemistry. The pipe is induction heated, then
water quenched on the inner wall. In applications involving impact or shock
loading, UT500 offers more ductility while maintaining a hard innerwear surface.
For applications where abrasion from shear and erosion are extreme, UltraWeld
Overlay is considered for superior wear resistance. The result is a surface
possessing an excellent combination of high resistance to erosion, severe
abrasion and moderate impact strength.
4
<PAGE>
In August 1995, Ultra Tech began production at a new induction-hardening plant
owned by its affiliate, JABCO, LLC in Port Washington, Wisconsin. Port
Washington is approximately 25 miles north of Milwaukee. Ultra Tech's new
equipment increased the size range of pipe it can process from 24 inches to 40
inches in diameter and reduced processing time by approximately 50%.
Marketing
Ultra Tech products, which account for approximately 14% of the Company's net
sales, are marketed through Company sales and marketing personnel and
distributors. Regular advertising is placed in various trade journals.
Ultra Tech's export sales for the year ended January 31, 1999 and 1998 accounted
for approximately 3.3% and 10.8% of Ultra Tech's net sales, respectively.
Customers
The market for Ultra Tech's products is primarily resource-based industries such
as mining, paper and energy. Secondary influence is felt in the processing
industries such as dredging, foundries, steel, cement, sludge and grain
handling. However, any pneumatic or hydraulic pipeline transporting solids is a
potential customer for Ultra Tech.
No customer exceeded 10% of the Company's consolidated net sales for the year
ended January 31, 1999.
Competition
There are a number of competitors in the piping industry, including mild steel,
duplex steel, plastic pipe, rubber lined pipe, basalt lined pipe, ceramic lined
pipe and cast alloy pipe. Ultra Tech is one of only three North American
competitors in the manufacturing of hardened pipe. Ultra Tech relies on its
efficient manufacturing processes, superior value, quality and engineering
assistance to compete.
Miscellaneous Data
Principal manufacturing operations include machining, welding, burning, bending,
heat-treating and sawing.
Raw materials principally include steel pipe in lengths up to 50 feet and
diameters from 2 1/2 to 40 inches. Ultra Tech does not have any written
contractual agreements with any of its suppliers. Raw materials are readily
available from various sources.
Ultra Tech's business is not seasonal. Working capital requirements may be
significant depending on the size of the order. Terms of sale are generally net
30 days.
Ultra Tech does not depend on patents and trademarks.
Ultra Tech's order backlog on March 31, 1999 and 1998 was approximately $705,000
and $1,025,000, respectively; all of which is to be completed prior to the end
of the current fiscal year.
Gilco
In 1989, ConForms acquired the assets of the mixer division of the Gilson
Brothers Company, a well-known manufacturer of construction and utility mixers.
This acquisition allowed ConForms to diversify and expand its product line and
market base in the concrete construction equipment industry. Gilco is engaged in
the design, manufacture and marketing of concrete and mortar/plaster mixers.
Gilco's product
5
<PAGE>
lines include mortar/plaster mixers with capacities of six to sixteen cubic
feet, concrete mixers with capacities of one and one-half to nine cubic feet and
non-tilt mixers with capacities of six to sixteen cubic feet.
Gilco's mixers are built to maintain high production with the densest mixes in
the toughest conditions. The mixers feature a square paddle shaft, steel
blades/adjustable wipers and a reinforced tubular steel frame. They also feature
a dual-belt drive and a completely enclosed extra heavy-duty gear drive with
automotive style clutch or a fully automatic hydraulic transmission. Gilco's new
polyurethane liners can be ordered across several mixer lines. Mixers are driven
by gas-powered engines or electric motors.
Gilco occupies a 50,000 square foot factory owned by the Company in Grafton,
Wisconsin. Grafton is approximately 20 miles north of Milwaukee.
Marketing
Gilco markets its products, which account for approximately 9% of the Company's
sales, through inside sales personnel, direct mail, trade magazine
advertisements and referrals. This is in addition to its existing distributor
and retail channels. Gilson mixers are positioned at the high quality, high
price end of the market.
Gilco's export sales accounted for approximately 1% and 2% of Gilco's net sales
volume during the years ended January 31, 1999 and 1998, respectively.
Customers
Approximately 48% of Gilco's sales are to construction equipment dealers.
Another 18% are sold direct to masons, plasterers, general contractors and other
end users. Retail outlets account for about 20% of Gilco's business. The
remaining 14% are sold to government agencies, rental yards, and other equipment
manufacturers.
No customer exceeded 10% of the Company's consolidated net sales for the year
ended January 31, 1999.
Competition
Gilco has a few large competitors along with several competitors of similar
size. While a few are only involved with mixers, most have a line of additional
and some-what related construction equipment products. Gilco competes on the
basis of its high quality.
Miscellaneous Data
Principal manufacturing operations include metal fabricating, welding, burning,
bending, assembly and painting.
Raw materials principally include sheet metal, steel, castings, tires and
engines. Gilco does not have any written contractual agreements with any of its
suppliers. All raw materials are readily available.
The business is seasonal with slightly lower sales volume in the fourth quarter;
however, working capital requirements are not significantly affected. Terms of
sale are generally net 30 days.
Gilco's patents and trademarks are not material to Gilco's business.
Gilco's order backlog on March 31, 1999 and 1998 was approximately $85,000 and
$80,000, respectively; all of which is to be shipped during the current fiscal
year.
6
<PAGE>
Year 2000 Matters
During fiscal 1998, the Company engaged in a comprehensive project to select and
implement a new enterprise resource planning ("ERP") system that will properly
recognize the Year 2000 problem. This project involved replacing certain
hardware and software maintained by the Company. The Company has received a
representation from the ERP software provider that its software is Year 2000
compliant. On February 1, 1999, the Company started operating with the new ERP
system. Contingency plans have been developed and will be implemented if Year
2000 problems are encountered with the new ERP system.
The total cumulative cost of the project was approximately $530,000. Purchased
ERP system hardware and software, approximately $385,000 of the total estimated
cost, was capitalized in accordance with normal policy. Personnel and all other
remaining costs related to the project were expensed as incurred.
The Company has not formally communicated with all its customers and suppliers
to determine the extent to which the Company is vulnerable to those third
parties' failure to address Year 2000 issues. The Company's business operations
could be affected by the year 2000 readiness of its customers and suppliers in
such areas as the delay in receipt of cash from customers, the interruption of
utilities and the inability of suppliers to deliver in a timely manner. The
Company does not anticipate any materially adverse affect on its business due to
Year 2000 problems encountered by its customers or suppliers; however, there can
be no assurance that its business will not be materially adversely affected by
such problems.
General Matters
Research and development expenditures are a part of the engineering department's
budget and are expensed as incurred. The estimated total amount spent on
research and development during the years ended January 31, 1999, 1998 and 1997
totaled approximately $212,000, $190,000 and $190,000, respectively.
The Company believes that compliance with Federal, state and local environmental
regulations will not require significant capital expenditures or materially
affect future earnings in fiscal 1999.
No portion of the business is subject to renegotiation of profits or termination
of contracts at the election of the United States government.
Industry Segments
Information on industry segments is incorporated by reference to footnote 15 of
the consolidated financial statements contained in the Company's 1998 Annual
Report to Shareholders.
Foreign Operations
Information on foreign operations is incorporated by reference to footnote 14 of
the consolidated financial statements contained in the Company's 1998 Annual
Report to Shareholders.
Employees
As of January 31, 1999, the Company had 111 active full-time employees.
7
<PAGE>
Item 2. Properties
The following table sets forth certain information with respect to the Company's
principal facilities as of January 31, 1999:
Square Feet of
Location Floor Space Description and Principal Use
- -------- ----------- -----------------------------
Port Washington, WI (1) 95,000 One-story and partial mezzanine,
masonry and metal clad, steel frame
office and manufacturing facility
on 15 acres used mainly for
manufacturing of ConForms and Ultra
Tech products and headquarters for
all office personnel.
Grafton, WI (1) 42,000 One and part two-story, masonry and
metal clad, steel and wood framed
office and manufacturing facility
on 2.2 acres used mainly for
manufacturing Gilco and Ultra Tech
products.
Cedarburg, WI (1) 53,000 One-story, masonry and metal-clad,
steel frame office and
manufacturing facility on 6.5
acres. Facility currently held for
sale.
Gardena, CA (2) 10,000 One-story office and manufacturing
facility used for the distribution
and light manufacturing of ConForms
products.
Newport, Wales, United 10,000 One-story office and manufacturing
Kingdom (3) facility used for the distribution
and light manufacturing of ConForms
products.
Johor Bahru, Malaysia(4) 10,000 One-story office and manufacturing
facility used for the distribution
and light manufacturing of ConForms
products.
- ---------
(1) The Company owns these facilities, all of which are mortgaged under debt
agreements.
(2) The Company leases this facility. The lease expires November 30, 2003.
(3) The Company leases this facility. The lease expires October 31, 2000.
(4) The Company leases this facility. The lease expires January 31, 2001.
The Company believes that all of its facilities are in good condition and are
adequate for their intended uses.
Item 3. Legal Proceedings
There are currently no material legal proceedings pending to which the Company
is a party nor were any material legal proceedings concluded during the fourth
quarter of fiscal 1998.
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 1998.
8
<PAGE>
Part II
Item 5. Market for the Company's Stock and Related Stockholder Matters
The Company's Common Stock trades on The Nasdaq Stock Market under the symbol
EDCO. The following table sets forth the high and low bid quotation for the
fiscal quarter shown. The prices quoted represent prices between dealers in
securities without adjustments for mark-ups, mark-downs or commissions and do
not necessarily reflect actual transactions.
Fiscal 1997
Quarter High Low
------- ---- ---
1st 5 1/4 4
2nd 5 3
3rd 5 1/2 4 1/8
4th 4 1/2 3 7/8
Fiscal 1998
Quarter High Low
------- ---- ---
1st 6 1/2 4
2nd 11 1/2 6 3/4
3rd 9 1/8 6 3/4
4th 7 1/2 6 1/8
The approximate number of shareholders of record and beneficial shareholders of
the Company's $.01 par value common stock as of January 31, 1999 was 33 and 600,
respectively.
The Company has not previously paid any dividends on its Common Stock. The
Company intends to follow a policy of retaining all of its earnings to finance
its business and any future acquisitions.
The following information for this Part II is incorporated by reference to the
Company's 1998 Annual Report to Shareholders, as follows:
Information Incorporated by
Item Caption Reference to:
- ---- ------- ---------------------------
6. Summary of Selected Financial Data Annual Report, page 9
7. Management's Discussion and Annual Report, pages 4 - 8
Analysis of Financial Condition
and Results of Operations
7A. Quantitative and Qualitative Annual Report, pages 6 - 7
Disclosures About Market Risk
8. Audited Financial Statements and Annual Report, pages 10 - 34
Supplemental Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
9
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
At March 31, 1999, the names and ages of all executive officers and directors of
the Company and all positions and offices held with the Company are listed
below. There are no family relationships between such persons. All officers are
elected annually by the Board of Directors at the first Board meeting following
each annual meeting of the shareholders. There are no agreements between any of
the officers and any other person pursuant to election as an officer.
First
Name Office Elected Age
---- ------ ------- ---
William B. Finneran Chairman of the Board and Director 1991 57
Jay J. Miller Director 1991 66
John J. Delucca Director 1991 55
Mary E. McCormack Director 1995 45
Alan J. Kastelic President and Chief Executive Officer of
Edison Control Corporation and Director 1996 55
Jay R. Hanamann Secretary, Treasurer and Chief 1996 39
Financial Officer
Robert L. Cooney Director 1997 65
William C. Scott Director 1997 64
William B. Finneran is a Managing Director of CIBC Oppenheimer Corp., an
investment-banking firm, and has been employed with them since 1972. Mr.
Finneran is a Director of National Planning Association, a non-profit advisory
board and Covenant House, a non-profit charitable institution. Mr. Finneran also
serves on the Board of Operation Smile and Villanova University.
Jay J. Miller has been a practicing attorney in the State of New York for more
than thirty years. Mr. Miller is a Director of Total-Tel USA Communication,
Inc., a provider of long distance telephone service. He is currently serving as
Chairman of the Board of AmTrust Pacific Ltd., a New Zealand property company.
John J. Delucca is Executive Vice President, Finance and Administration, and CFO
of Coty, Inc., a cosmetics and fragrance company. Previously, Mr. Delucca served
as Senior Vice President and Treasurer of RJR Nabisco from September 1993 to
December 1998, Chief Financial Officer of the Hascoe Association, a private
investment company from January 1991 to September 1993, President and Chief
Financial Officer for The Lexington Group from October 1990 to January 1991,
Senior Vice President of Finance and Managing Director of the Trump Group from
May 1988 to October 1990, and Senior Vice President of Finance for International
Controls Corporation from April 1986 to May 1988. In addition, Mr. Delucca is a
director of Enzo Biochem, Inc., a genetic research/testing company and Elliot
Company, a manufacturer of turbines and related equipment.
Mary E. McCormack is Director of Acquisitions of The Hertz Corporation. She was
President and Chief Executive Officer of the Edison Control Corporation from
February 1995 to February 1998. Prior to working with the Company, Ms. McCormack
was a Managing Director of Beechtree Capital Partners, Inc.,
10
<PAGE>
a boutique merchant banking firm which she co-founded in 1989. From 1983 to
1989, she served in a variety of capacities for the investment banking and
brokerage firm of Advest, Inc., most recently as Vice President-Corporate
Finance. Ms. McCormack is a Director of Star International Holdings, Inc., a
manufacturer of commercial cooking appliances.
Alan J. Kastelic was appointed President and Chief Executive Officer of Edison
Control Corporation in June 1998 and President and Chief Executive Officer of
Construction Forms, Inc. in June 1996 when Construction Forms, Inc. was acquired
by the Company. Mr. Kastelic had previously been Executive Vice President and
Chief Operating Officer of Construction Forms, Inc. which he joined in 1977.
Prior to joining Construction Forms, Mr. Kastelic was Manufacturing Manager at
Badger Dynamics and Chief Cost Accountant, Material Control Manager and Manager
of Manufacturing at the PCM division of Koehring Corporation.
Jay R. Hanamann was appointed Treasurer and Chief Financial Officer on July 1,
1996. Mr. Hanamann is the Chief Financial Officer of Construction Forms, Inc. He
has served in various financial and management functions with ConForms since
July 1990. From 1981 to 1990 he was employed by the international accounting
firm of Deloitte & Touche LLP.
Robert L. Cooney is a Partner of Cooney, Schroeder & Co., a consulting firm
which he co-founded in February 1997. Mr. Cooney was a Managing Director-Equity
Capital Markets at Credit Suisse First Boston from 1977 to January 1997. Mr.
Cooney also serves as a director of Hoenig Group Inc., a Nasdaq-listed global
securities brokerage firm located in Rye Brook, New York and Equity One, Inc., a
NYSE-listed real estate investment trust located in Miami, Florida.
William C. Scott was from 1988 to 1999 the Chairman and Chief Executive Officer
of Panavision Inc., the leading designer and manufacturer of high-precision film
camera systems for the motion picture and television industries. From 1972 until
1987, Mr. Scott was President and Chief Operating Officer of Western Pacific
Industries Inc., a manufacturer of industrial products. Prior to 1972 Mr. Scott
was a Group Vice President of Cordura Corporation (a business information
company) for three years and Vice President of Booz, Allen & Hamilton (a
management-consulting firm) for five years. He is currently Chairman of the
Board of TeleCast Communications Limited, London, England, a director of
Panavision Inc. and of Four Media Company.
Certain other information is incorporated by reference to "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement for its 1999 Annual Meeting of Shareholders.
Item 11. Executive Compensation
All information is incorporated by reference to "Executive Compensation" in the
Company's Proxy Statement for its 1999 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
All information is incorporated by reference to "Share Ownership of Directors,
Officers and Certain Beneficial Owners" in the Company's Proxy Statement for its
1999 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
There were no reportable transactions during the year.
11
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
The consolidated financial statements of the Company, together with the report
thereon of Deloitte & Touche, LLP appear on pages 10 through 34 of the Company's
1998 Annual Report to Shareholders, and are incorporated herein by reference.
(a)(2) Financial Statement Schedules:
Schedules not included have been omitted because they are either not applicable
or the information is presented in the consolidated financial statements or
notes thereto.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fourth quarter.
(c) Exhibits:
The Exhibits filed or incorporated by reference herein are as specified in the
Exhibit Index.
12
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
By: /s/ Alan J. Kastelic
Alan J. Kastelic
President and Chief Executive Officer (Principal Executive Officer)
April 21, 1999
By: /s/ Jay R. Hanamann
Jay R. Hanamann
Secretary, Treasurer and Chief Financial Officer (Principal Financial
and Accounting Officer)
April 21, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form
10-K has been signed below by the following persons on behalf of Edison Control
Corporation and in the capacities and on the dates indicated:
/s/ William B. Finneran
William B. Finneran
Chairman of the Board and Director
April 21, 1999
/s/ Mary E. McCormack
Mary E. McCormack
Director
April 21, 1999
/s/ Jay J. Miller
Jay J. Miller
Director
April 21, 1999
/s/ John J. Delucca
John J. Delucca
Director
April 21, 1999
/s/ Alan J. Kastelic
Alan J. Kastelic
Director and President and Chief Executive Officer of Construction Forms, Inc.
April 21, 1999
/s/ Robert L. Cooney
Robert L. Cooney
Director
April 21, 1999
/s/ William C. Scott
William C. Scott
Director
April 21, 1999
13
<PAGE>
EXHIBIT INDEX
- -------------
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation (incorporated by reference to the
Company's Form 10-Q for the quarter ended July 31, 1998).
3.2 By-laws of the Company (incorporated by reference to the
Company's Registration Statements on Form S-18 (File No.
33-6736-NY) filed on June 24, 1986).
4.1 Master Credit Agreement dated June 21, 1996 between Construction
Forms, Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and LaSalle
National Bank (incorporated by reference to the Company's Form
8-K dated July 8, 1996).
4.2 Loan Agreement dated June 21, 1996 between Construction Forms,
Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and Bank Audi USA
(incorporated by reference to the Company's Form 8-K dated July
8, 1996).
10.1 * 1986 Stock Option Plan of Company (incorporated by reference to
the Company's Registration Statement on Form S-18 (File No.
33-6736-NY) filed June 24, 1986).
10.2 * Stock Warrant issued to William Finneran (incorporated by
reference to the Company's 1997 Proxy Statement Exhibit 2).
10.3 * Edison Control Corporation 1999 Equity Incentive Plan, subject to
shareholder approval at the Company's 1999 Annual Meeting of
Shareholders.
10.4 Stock and Unit Purchase Agreement dated June 21, 1996 by and
among Registrant, Construction Forms Acquisition Inc. and the
Shareholders of Construction Forms, Inc., CF Gilco, Inc., and
JABCO, LLC (incorporated by reference to Form 8-K dated July 8,
1996).
10.5 * Employment Agreement dated June 21, 1996 between the Company and
Alan J. Kastelic (incorporated by reference to the Company's Form
10-K dated April 25, 1997).
10.6 * Employment Agreement dated June 21, 1996 between the Company and
Jay R. Hanamann (incorporated by reference to the Company's Form
10-K dated April 25, 1997).
10.7 * Stock Option Plan dated June 21, 1996 between the Company and
Alan J. Kastelic (incorporated by reference to the Company's Form
10-K dated April 25, 1997).
10.8 * Stock Option Plan dated June 21, 1996 between the Company and Jay
R. Hanamann. (incorporated by reference to the Company's Form
10-K dated April 25, 1997).
10.9 * Nonqualified Stock Option Agreement dated May 29, 1997, between
the Company and Robert Cooney (incorporated by reference to the
Company's Registration Statement on Form S-8 (File No. 333-41483)
filed December 4, 1997).
10.10 * Nonqualified Stock Option Agreement dated October 15, 1997,
between the Company and William Scott (incorporated by reference
to the Company's Registration Statement on Form S-8 (File No.
333-41483) filed December 4, 1997).
14
<PAGE>
13. Pages from 1998 Annual Report to shareholders which are
incorporated by reference to Form 10-K. 21. Subsidiaries of
Edison Control Corporation.
23. Consent and Report of Independent Auditors.
27. Financial Data Schedule for the twelve-month period ended January
31, 1999.
99. Definitive Proxy Statement for 1999 Annual Meeting of
Shareholders (to be filed within 120 days of January 31, 1999).
* Represents a management compensation plan.
EXHIBIT 10.3
EDISON CONTROL CORPORATION
1999 EQUITY INCENTIVE PLAN
Section 1. Purpose
The purpose of the Edison Control Corporation 1999 Equity Incentive Plan
(the "Plan") is to promote the best interests of Edison Control Corporation
(together with any successor thereto, the "Company") and its shareholders by
providing key employees and consultants of the Company and its Affiliates (as
defined below), and members of the Company's Board of Directors who are not
employees of the Company, with an opportunity to acquire a, or increase their,
proprietary interest in the Company. It is intended that the Plan will promote
continuity of management and increased incentive and personal interest in the
welfare of the Company by those key employees and consultants who are primarily
responsible for shaping and carrying out the long-range plans of the Company and
securing the Company's continued growth and financial success. Also, by
encouraging stock ownership by directors, the Company seeks to attract and
retain on its Board of Directors persons of exceptional competence and to
furnish an added incentive for them to continue their association with the
Company.
Section 2. Definitions
As used in the Plan, the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by, controls, or is under common control
with, the Company.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock or Performance Share or other award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Change in Control" will be deemed to have occurred if: (i) any
entity not affiliated with the Company or any Affiliate is or becomes the
beneficial owner of securities of the Company representing at least 25% of the
combined voting power of the Company's then outstanding voting securities; (ii)
there is consummated any business combination of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's capital stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company's capital stock immediately prior to the merger have the same
proportionate ownership of capital stock of the surviving corporation
immediately after the merger, or any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the consolidated assets of the Company; or (iii) the shareholders of the
Company approve any plan for the liquidation or dissolution of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
<PAGE>
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company (or any other committee thereof designated by such
Board to administer the Plan) consisting of not less than two Independent
Directors, each of whom shall qualify as a "non-employee director" within the
meaning of Rule 16b-3 and as an "outside director" under Section 162(m)(4)(C) of
the Code or any successor provisions thereto.
(h) "Consultant" shall mean any consultant or advisor to the Company, any
Subsidiary or any Affiliate who is not otherwise an employee of the Company or
any Affiliate who is responsible for or contributes to the management, growth or
profitability of the business of the Company or any Affiliate, as determined by
the Committee in its discretion.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(k) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code (or any successor provision thereto).
(l) "Independent Directors" shall mean any member of the Company's Board
of Directors who is not an employee of the Company or of any Affiliate.
(m) "Key Employee" shall mean any officer or other key employee of the
Company or of any Affiliate who is responsible for or contributes to the
management, growth or profitability of the business of the Company or any
Affiliate, as determined by the Committee in its discretion.
(n) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(o) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(p) "Participant" shall mean a Key Employee, Consultant or Independent
Director designated to be granted an Award under the Plan.
(q) "Performance Period" shall mean, in relation to Performance Shares,
any period for which a performance goal or goals have been established.
(r) "Performance Share" shall mean any right granted under Section 6(d)
of the Plan that will be paid out as a Share (which, in specified circumstances,
may be a Share of Restricted Stock).
-2-
<PAGE>
(s) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or political subdivision thereof.
(t) "Released Securities" shall mean Shares of Restricted Stock with
respect to which all applicable restrictions have expired, lapsed or been
waived.
(u) "Restricted Securities" shall mean Awards of Restricted Stock or
other Awards under which issued and outstanding Shares are held subject to
certain restrictions pursuant to the Plan or an Award Agreement.
(v) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan or, in specified circumstances, a Share paid in connection with a
Performance Share under Section 6(d) of the Plan.
(w) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
under the Exchange Act, or any successor rule or regulation thereto.
(x) "Shares" shall mean shares of Common Stock of the Company, $.01 par
value, and such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(b) of the Plan.
(y) "Stock Appreciation Right" shall mean any right granted under Section
5(c) of the Plan.
Section 3. Administration
The Plan shall be administered by the Committee; provided, however, that
if at any time the Committee shall not be in existence, the functions of the
Committee as specified in the Plan shall be exercised by the Board of Directors
of the Company (the "Board") and all references to the Committee herein shall
include the Board. To the extent permitted by applicable law, the Board may
delegate to another committee of the Board or to one or more senior officers of
the Company any or all of the authority and responsibility of the Committee with
respect to the Plan, other than with respect to Participants who are subject to
Section 16 of the Exchange Act. To the extent that the Board has delegated to
such other committee or one or more officers the authority and responsibility of
the Committee, all references to the Committee herein shall include such other
committee or one or more officers.
Subject to the terms of the Plan and applicable laws and without
limitation by reason of enumeration, the Committee shall have full discretionary
power and authority to: (i) designate Participants; (ii) determine the type or
types of Awards to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards granted to Participants; (iv) determine the terms and conditions of any
Award granted to a Participant; (v) determine whether, to what extent and under
what circumstances Awards granted to Participants may be settled or exercised in
cash, Shares, other securities, other Awards or other property, and the method
or methods by which Awards may be settled, exercised, canceled, forfeited or
suspended; (vi) determine whether, to what extent and under what circumstances
cash, Shares, other Awards and
-3-
<PAGE>
other amounts payable with respect to an Award granted to Participants under the
Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan (including,
without limitation, any Award Agreement); (viii) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time or from time to
time, and shall be final, conclusive and binding upon all Persons, including the
Company, any Affiliate, any Participant, any holder or beneficiary of any Award,
any shareholder and any employee of the Company or of any Affiliate.
Section 4. Shares Available for Award
(a) Shares Available. Subject to adjustment as provided in Section 4(b):
(i) Number of Shares Available. The number of Shares with respect
to which Awards may be granted under the Plan shall be 200,000, subject
to the limitations set forth in Section 6(c)(i) and subject to the other
provisions of this Section 4. If, after the effective date of the Plan,
any Shares covered by an Award granted under the Plan, or to which any
Award relates, are forfeited or if an otherwise terminates, expires or is
cancelled prior to the delivery of all of the Shares or of other
consideration issuable or payable pursuant to such Award, then the number
of Shares counted against the number of Shares available under the Plan
in connection with the grant of such Award, to the extent of any such
forfeiture, termination, expiration or cancellation, shall again be
available for granting of additional Awards under the Plan.
(ii) Accounting for Awards. The number of Shares covered by an
Award under the Plan, or to which such Award relates, shall be counted on
the date of grant of such Award against the number of Shares available
for granting Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares and/or of treasury Shares.
(b) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company,
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee may, in such manner as it may
deem equitable, adjust any or all of (i) the number and type of Shares subject
to the Plan and which thereafter may be made the subject of Awards under the
Plan;
-4-
<PAGE>
(ii) the number and type of Shares subject to outstanding Awards; and (iii) the
grant, purchase or exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, in each case, that with respect to Awards of Incentive
Stock Options no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b) of the Code (or any
successor provision thereto); and provided further that the number of Shares
subject to any Award payable or denominated in Shares shall always be a whole
number.
Section 5. Eligibility
Any Key Employee, including any executive officer or employee-director of
the Company or of any Affiliate, and any Consultant or Independent Director,
shall be eligible to be designated a Participant.
Section 6. Awards
(a) Option Awards. The Committee is hereby authorized to grant Options to
Key Employees, Consultants and Independent Directors with the terms and
conditions as set forth below and with such additional terms and conditions, in
either case not inconsistent with the provisions of the Plan, as the Committee
shall determine in its discretion; provided, however, that Consultants and
Independent Directors may not be granted Incentive Stock Options.
(i) Exercise Price. The exercise price per Share of an Option
granted pursuant to this Section 6(a) shall be determined by the
Committee; provided, however, that such exercise price shall not be less
than 100% of the Fair Market Value of a Share on the date of grant of
such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee; provided, however, that in no event shall the term of any
Option exceed a period of ten years from the date of its grant.
(iii) Exercisability and Method of Exercise. An Option shall
become exercisable in such manner and within such period or periods and
in such installments or otherwise as shall be determined by the
Committee; provided, however, that regardless of any other exercise or
vesting period specified in any Award Agreement with respect to any
Option, each Option granted under the Plan shall become immediately
exercisable in full for the remainder of the Option term automatically
upon the occurrence of a Change in Control. The Committee also shall
determine the method or methods by which, and the form or forms,
including, without limitation, cash, Shares, other securities, other
Awards, other property or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant exercise price, in which
payment of the exercise price with respect to any Option may be made or
deemed to have been made.
(iv) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code (or any successor provision
thereto) and any regulations promulgated thereunder. Notwithstanding any
provision in the Plan to the contrary, no Incentive Stock Option may be
granted hereunder after the tenth anniversary of the adoption of the Plan
by the Board.
-5-
<PAGE>
(b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Key Employees and Consultants. Independent
Directors are not eligible to be granted Stock Appreciation Rights under the
Plan. Subject to the terms of the Plan and any applicable Award Agreement, a
Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the Fair
Market Value of one Share on the date of exercise over (ii) the grant price of
the Stock Appreciation Right as specified by the Committee, which shall not be
less than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan, the grant price,
term, methods of exercise, methods of settlement (including whether the
Participant will be paid in cash, Shares, other securities, other Awards, or
other property or any combination thereof), and any other terms and conditions
of any Stock Appreciation Right shall be as determined by the Committee in its
discretion; provided, however, that regardless of any other exercise or vesting
period specified in any Award Agreement with respect to any Stock Appreciation
Right, each Stock Appreciation Right granted under the Plan shall become
immediately exercisable in full for the remainder of the Stock Appreciation
Right term automatically upon the occurrence of a Change in Control. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock Awards.
(i) Issuance. The Committee is hereby authorized to grant Awards
of Restricted Stock to Key Employees and Consultants; provided, however,
that the aggregate number of Shares of Restricted Stock granted under the
Plan to all Participants as a group shall not exceed 20,000 Shares of the
total number of Shares available for Awards under Section 4(a)(i),
subject to Section 4(a)(ii) and the other provisions of Section 4.
Independent Directors are not eligible to be granted Restricted Stock
under the Plan.
(ii) Restrictions. Shares of Restricted Stock granted to
Participants shall be subject to such restrictions as the Committee may
impose in its discretion (including, without limitation, any limitation
on the right to vote a Share of Restricted Stock or the right to receive
any dividend or other right or property), which restrictions may lapse
separately or in combination at such time or times, in such installments
or otherwise, as the Committee may deem appropriate in its discretion;
provided, however, that regardless of any other vesting or restriction
period specified in any Award Agreement with respect to any Restricted
Stock, each Share of Restricted Stock granted under the Plan shall become
a Released Security automatically upon the occurrence of a Change in
Control.
(iii) Registration. Any Restricted Stock granted under the Plan to
a Participant may be evidenced in such manner as the Committee may deem
appropriate in its discretion, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates. In the
event any stock certificate is issued in respect of Shares of Restricted
Stock granted under the Plan to a Participant, such certificate shall be
registered in the name of the Participant and shall bear an appropriate
legend (as determined by the Committee) referring to the terms,
conditions and restrictions applicable to such Restricted Stock.
-6-
<PAGE>
(iv) Payment of Restricted Stock. At the end of the applicable
restriction period relating to Restricted Stock granted to a Participant,
one or more stock certificates for the appropriate number of Shares of
Released Securities, free of restrictions imposed under the Plan and the
Award Agreement, shall be delivered to the Participant or, if the
Participant received stock certificates representing the Restricted Stock
at the time of grant, the legends placed on such certificates shall be
removed.
(v) Forfeiture. Except as otherwise determined by the Committee in
its discretion, upon termination of employment or consultancy of a
Participant (as determined under criteria established by the Committee in
its discretion) for any reason during the applicable restriction period,
all Shares of Restricted Stock still subject to restriction under the
Plan or an Award Agreement shall be forfeited by the Participant;
provided, however, that the Committee may, when it finds that a waiver
would be in the best interests of the Company, waive in whole or in part
any or all remaining restrictions with respect to Shares of Restricted
Stock held by a Participant.
(d) Performance Share Awards.
(i) Issuance. The Committee is hereby authorized to grant Awards
of Performance Shares to Key Employees and Consultants. Independent
Directors are not eligible to be granted Performance Shares under the
Plan.
(ii) Performance Goals and Other Terms. The Committee shall
determine in its discretion the Performance Period, the performance goal
or goals to be achieved during any Performance Period, the proportion of
payments, if any, to be made for performance between the minimum and full
performance levels, the restrictions applicable to Shares of Restricted
Stock received upon payment of Performance Shares (if Performance Shares
are paid in such manner), and any other terms, conditions and rights
relating to a grant of Performance Shares; provided, however, that
regardless of any other requirements or restrictions specified in any
Award Agreement with respect to any Performance Share, each Performance
Share granted under the Plan shall become immediately payable in full
(assuming the maximum performance goal and any other requirements have
been fully satisfied) automatically upon the occurrence of a Change in
Control. Performance goals established by the Committee may be based on
one or more measures such as return on shareholders' equity, earnings or
any other standard or standards deemed relevant by the Committee,
measured internally or relative to other organizations and before or
after extraordinary items.
(iii) Rights and Benefits During the Performance Period. The
Committee may provide that, during a Performance Period, a Participant
shall be paid cash amounts, with respect to each Performance Share held
by such Participant, in the same manner, at the same time, and in the
same amount paid, as a cash dividend on a Share. Participants shall have
no voting rights with respect to Performance Shares held by them.
(iv) Adjustments with Respect to Performance Shares. Any other
provision of the Plan to the contrary notwithstanding, the Committee may
in its discretion at any time or from time to time adjust performance
goals (up or down) and minimum or full
-7-
<PAGE>
performance levels (and any intermediate levels and proportion of
payments related thereto), adjust the manner in which performance goals
are measured, or shorten any Performance Period or waive in whole or in
part any or all remaining restrictions with respect to Shares of
Restricted Stock issued in payment of Performance Shares, if the
Committee determines that conditions, including but not limited to,
changes in the economy, changes in competitive conditions, changes in
laws or governmental regulations, changes in generally accepted
accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions by the Company or its Affiliates, or the
occurrence of other unusual, unforeseen or extraordinary events, so
warrant.
(v) Payment of Performance Shares. As soon as is reasonably
practicable following the end of the applicable Performance Period, one
or more certificates representing the number of Shares equal to the
number of Performance Shares payable shall be registered in the name of
and delivered to the Participant; provided, however, that any Shares of
Restricted Stock payable in connection with Performance Shares shall,
pending the expiration, lapse, or waiver of the applicable restrictions,
be evidenced in the manner as set forth in Section 6(c)(iii) hereof.
(e) Other Awards.
(i) Other Stock-Based Awards. Other awards, valued in whole or in
part by reference to, or otherwise based on, Shares may be granted either
alone or in addition to or in conjunction with other Awards for such
consideration, if any, and in such amounts and having such terms and
conditions as the Committee may determine.
(ii) Other Benefits. The Committee shall have the right to provide
types of benefits under the Plan in addition to those specifically listed
if the committee believes that such benefits would further the purposes
for which the Plan was established.
(f) General.
(i) No Consideration for Awards. Awards shall be granted to
Participants for no cash consideration unless otherwise determined by the
Committee.
(ii) Award Agreements. Each Award granted under the Plan shall be
evidenced by an Award Agreement in such form or forms (consistent with
the terms of the Plan) as shall have been approved by the Committee.
(iii) Awards May Be Granted Separately or Together. Awards to
Participants under the Plan may be granted either alone or in addition
to, in tandem with, or in substitution for, any other Award or any award
granted under any other plan of the Company or any Affiliate. Awards
granted in addition to, or in tandem with, other Awards, or in addition
to, or in tandem with, awards granted under any other plan of the Company
or any Affiliate, may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.
(iv) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be
made by the
-8-
<PAGE>
Company or an Affiliate upon the grant, exercise or payment of an Award
to a Participant may be made in such form or forms as the Committee shall
determine, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee in its discretion. Such
rules and procedures may include, without limitation, provisions for the
payment or crediting of interest on installment or deferred payments.
(v) Limits on Transfer of Awards. No Award (other than Released
Securities), and no right under any such Award, shall be assignable,
alienable, saleable or transferable by a Participant otherwise than by
will or by the laws of descent and distribution (or, in the case of an
Award of Restricted Securities, to the Company); provided, however, that
a Participant at the discretion of the Committee may be entitled, in the
manner established by the Committee, (A) to designate a beneficiary or
beneficiaries to exercise his or her rights, and to receive any property
distributable, with respect to any Award upon the death of the
Participant or (B) to transfer any Award. No Award (other than Released
Securities), and no right under any such Award, may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(vi) Term of Awards. Except as otherwise provided in the Plan, the
term of each Award shall be for such period as may be determined by the
Committee.
(vii) Share Certificates; Representation. In addition to the
restrictions imposed pursuant to Section 6(c) and Section 6(d) hereof,
all certificates for Shares delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations and other requirements of the
Commission, the Nasdaq National Market or any other stock exchange or
other market upon which such Shares are then listed or traded, and any
applicable federal or state securities laws, and the Committee may cause
a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions. The Committee may require
each Participant or other Person who acquires Shares under the Plan by
means of an Award originally made to a Participant to represent to the
Company in writing that such Participant or other Person is acquiring the
Shares without a view to the distribution thereof.
(viii) Waiver of Conditions. The Committee may, in whole or in
part, waive any conditions or other restrictions with respect to any
award.
Section 7. Amendment and Termination of the Plan; Correction of Defects and
Omissions
(a) Amendments to and Termination of the Plan. The Board may at any time
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that shareholder approval of any amendment of the Plan shall also be obtained if
otherwise required by: (i) the Code or any rules promulgated thereunder (in
order to allow for Incentive Stock Options to be granted under the Plan) or (ii)
the quotation or listing requirements of the Nasdaq National Market or any other
principal securities exchange or market on which the Shares are then traded (in
order to maintain the quotation or the listing of the Shares thereon). To the
extent permitted by applicable
-9-
<PAGE>
law and subject to such shareholder approval as may be required above, the
Committee may also amend the Plan, provided that any such amendments shall be
reported to the Board. Termination of the Plan shall not affect the rights of
Participants with respect to Awards previously granted to them, and all
unexpired Awards shall continue in force and effect after termination of the
Plan except as they may lapse or be terminated by their own terms and
conditions.
(b) Correction of Defects, Omissions and Inconsistencies. The Committee
may in its discretion correct any defect, supply any omission or reconcile any
inconsistency in any Award or Award Agreement in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
Section 8. General Provisions
(a) No Rights to Awards. No Key Employee, Consultant, Independent
Director, Participant or other Person shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of treatment of
Key Employees, Consultants, Independent Directors, Participants or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards need
not be the same with respect to each Participant.
(b) Withholding. No later than the date as of which an amount first
becomes includable in the gross income of a Participant for federal income tax
purposes with respect to any Award under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations arising with respect to Awards to
Participants under the Plan may be settled with Shares previously owned by the
Participant; provided, however, that the Participant may not settle such
obligations with Shares that are part of, or are received upon exercise of, the
Award that gives rise to the withholding requirement. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the
Participant. The Committee may establish such procedures as it deems appropriate
for the settling of withholding obligations with Shares.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(d) Rights and Status of Recipients of Awards. The grant of an Award
shall not be construed as giving a Participant the right to be retained in the
employ or consultancy of the Company or any Affiliate. Further, the Company or
any Affiliate may at any time dismiss a Participant from employment or
consultancy, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement. Except for
rights accorded under the Plan and under any applicable Award Agreement,
Participants shall have no rights as holders of Shares as a result of the
granting of Awards hereunder.
-10-
<PAGE>
(e) Unfunded Status of the Plan. Unless otherwise determined by the
Committee, the Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company or the Committee and any Participant
or other Person. To the extent Person holds any right by virtue of a grant under
the Plan, such right (unless otherwise determined by the Committee) shall be no
greater than the right of an unsecured general creditor of the Company.
(f) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the internal laws of the State of Wisconsin and applicable federal law.
(g) Severability. If any provision of the Plan or any Award Agreement or
any Award is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction, or as to any Person or Award, or would disqualify the Plan,
any Award Agreement or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan,
any Award Agreement or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award, and the remainder of the Plan, any such Award
Agreement and any such Award shall remain in full force and effect.
(h) No Fractional Shares. No fractional Shares or other securities shall
be issued or delivered pursuant to the Plan, any Award Agreement or any Award,
and the Committee shall determine (except as otherwise provided in the Plan)
whether cash, other securities or other property shall be paid or transferred in
lieu of any fractional Shares or other securities, or whether such fractional
Shares or other securities or any rights thereto shall be canceled, terminated
or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
Section 9. Effective Date of the Plan
The Plan shall be effective on the date the Plan is adopted by the Board,
subject, however, to the approval of the Plan by the Company's shareholders
within 12 months following the date of adoption of the Plan by the Board.
Section 10. Term of the Plan
No Award shall be granted under the Plan following the tenth anniversary
of its effective date. However, unless otherwise expressly provided in the Plan
or in an applicable Award Agreement, any Award theretofore granted may extend
beyond such date and, to the extent set forth in the Plan, the authority of the
Committee to amend, alter, adjust, suspend, discontinue or terminate any such
Award, or to waive any conditions or restrictions with respect to any such
Award, and the authority of the Board to amend the Plan, shall extend beyond
such date.
-11-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed in this Annual Report to Shareholders are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects", or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties, including, but not limited to, new product
advancements by competition, significant changes in industry technology,
economic or political conditions in the countries in which the Company does
business, the continued availability of sources of supply, the availability and
consummation of favorable acquisition opportunities, increasing competitve
pressures on pricing and other contract terms, economic factors affecting the
Company's customer base and stock price variations affecting the Company's
securities trading portfolio. These factors could cause actual results to differ
materially from those anticipated as of the date of this report. Shareholders,
potential investors and other readers are urged to consider these factors in
evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements
included herein are only made as of the date of this report and the Company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
The year ended January 31, 1999 ("fiscal 1998") was the year for preparing for
the future. Edison Control Corporation (the "Company") completed its move into
its 95,000 square foot manufacturing faciltiy in Port Washington, Wisconsin,
increased sales and marketing efforts in foreign countires, and implemented a
new enterprise resource planning system ("ERP") that the Company believes is
year 2000 compliant. Notwithstanding these expenditures, the Company was able to
increase net sales by 4.9% and net income by 8.8%. Capital expenditures for the
year were $3,082,725; however, debt only increased by $718,259.
RESULTS OF OPERATIONS
Fiscal 1998 versus Fiscal 1997
Net sales for fiscal 1998 increased 4.9% to $25,050,116 compared with
$23,875,214 in the prior year. Strong domestic sales at Construction Forms
("ConForms"), the inclusion of sales from the Company's Malaysian operation and
increased mortar-plaster mixer sales into the Florida market accounted for the
increase. The lower percentage increase this year compared to last year was due
to decreases in sales volume at the Company's Ultra Tech and ConForms Europe
divisions. Fewer sales to mining industry customers and the slowing of the
construction economies in Europe accounted for the decrease at Ultra Tech and
ConForms Europe, respectively.
As a percentage of net sales, gross profit margin decreased to 35.6% for fiscal
1998 as compared to 38.4% in the prior year. The decrease was due mainly to
product mix variations, the increase of lower margin foreign sales and costs
associated with the move from Cedarburg to Port Washington. Selling, engineering
and administrative expenses represented 18.2% of net sales for fiscal 1998 and
fiscal 1997, respectively. Selling, engineering and administrative expenses
increased $209,984 in fiscal 1998 to $4,560,257 due to increased personnel in
engineering, increased sales costs related to foreign sales, moving costs and
training and other costs incurred in relation to the implementation of the new
ERP system.
Interest expense was $955,818 and $1,133,382 for fiscal 1998 and 1997,
respectively. The decrease resulted from a reduction of the average outstanding
debt from the previous year. Assuming rates remain stable, interest expense is
expected to decrease in fiscal 1999 as further debt reduction is anticipated.
4
<PAGE>
Net investment loss, which includes interest, dividends and realized and
unrealized gains or losses on trading securities, was $152,947 for fiscal 1998
compared to last year's net loss of $173,366. A major reason for the net loss
was the decrease in the market value of the Company's holdings in Glenayre
Technologies, Inc. and VIVUS Inc. Although the Company has no established formal
investment policies or practices for its trading securities portfolio, the
Company generally pursues an aggressive trading strategy, focusing primarily on
generating near-term capital appreciation from its investments in common equity
securities. Securities held in the Company's portfolio at the end of each period
are reported at fair value, with unrealized gains and losses included in
earnings for that period. These factors, combined with the relative size of the
Company's trading portfolio, has led, and will likely continue to lead, to
significant period-to-period earnings volatility depending upon the capital
appreciation or depreciation of the Company's trading securities portfolio as of
the end of each reporting period. The Company does not use or buy derivative
securities. See "Quantitative and Qualitative Disclosures about Market Risk".
The amortization of goodwill, financing costs, stock options and stock warrants
created a total non-cash charge of $1,301,863 for fiscal 1998 compared to
$1,600,421 for the prior year. Goodwill from the June 1996 acquisition of
ConForms is being amortized over a 40-year period. The stock option amortization
was fully amortized as of June 21, 1997. The amortization of financing costs and
stock warrants will continue principally until June 21, 1999. Excluding these
items, the Company would have reported net income of approximately $1,983,000,
or $.69 per diluted share. The total amortization of all these non-cash charges
for the year ended January 31, 2000 is expected to approximate $660,000.
The Company recorded tax expense of $850,000 for fiscal 1998, which represented
the estimated annual effective rate of 41.4% applied to pre-tax book income.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial statement
reporting purposes and the amounts used for income tax purposes.
Net income of $1,202,330, or $.52 and $.42 per share, basic and diluted,
respectively, for fiscal 1998 represented an increase of $97,168 from net income
of $1,105,162, or $.49 and $.41 per share, basic and diluted, respectively, for
the prior fiscal year.
Fiscal 1997 versus Fiscal 1996
Net sales for fiscal 1997 increased 75.5% to $23,875,214 compared with
$13,604,340 in the prior year. The increase was mainly attributable to the
inclusion of the results of operations of ConForms and subsidiaries for the full
year in fiscal 1997. On a pro-forma basis, ConForms and subsidiaries' net sales
for fiscal 1997 increased $2,653,879 (12.5%) compared to fiscal 1996. Strong
domestic sales at ConForms and large project sales to power and phosphate
industry customers at Ultra Tech accounted for the increase.
Gross profit margin increased to 38.4% for fiscal 1997 as compared to 32.4% in
the prior year. The increase was due to better pricing on Ultra Tech sales,
better fixed cost coverage from the increased volume at ConForms and Ultra Tech,
the inclusion of the acquired companies for the full period, and the sale of the
Company's electronic fault indicator business in late 1996.
Selling, engineering and administrative expenses represented 18.2% and 23.8% of
net sales for fiscal 1997 and 1996, respectively. The percentage decrease for
fiscal 1997 was primarily attributable to the inclusion of the results of
operations of the acquired companies and decreases in general insurance and
ConForms' sales and marketing expenses. Selling, engineering and administrative
expenses of the acquired companies on a pro-forma basis decreased to $3,815,658
in fiscal 1997 from $4,462,498 in fiscal 1996. This was mainly due to decreased
personnel wages and benefits, general insurance and ConForms' sales and
marketing expense.
5
<PAGE>
Interest expense was $1,133,382 and $775,762 for fiscal 1997 and 1996,
respectively. Debt was incurred to finance the acquisition on June 21, 1996. The
increase in interest expense was due to a full year of outstanding debt.
Net investment loss, which includes interest, dividends and realized and
unrealized gains or losses on trading securities, was $173,366 for fiscal 1997
compared to last year's net gain of $33,279. A major reason for the decrease was
related to the decrease in the market value of the Company's holdings in
Glenayre Technologies, Inc. and VIVUS Inc.
The amortization of goodwill, financing costs, stock options and stock warrants
created a total non-cash charge of $1,600,421 for fiscal 1997 compared to
$1,235,253 for the prior year. Excluding these items, the Company would have
reported net income of approximately $2,065,000 or $.77 per diluted share.
The Company recorded tax expense of $850,000 for fiscal 1997, which represented
the estimated annual effective rate of 43.5% applied to pre-tax book income.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial statement
reporting purposes and the amounts used for income tax purposes.
Net income of $1,105,162, or $.49 and $.41 per share, basic and diluted,
respectively, for fiscal 1997 represented an increase of $1,836,190 from a net
loss of $731,028, or $.33 per share, basic and diluted, for the prior year. This
change was principally due to the operating results of ConForms and
subsidiaries.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk, foreign currency risk and equity
price risk. These risks include changes in U.S interest rates, changes in
foreign currency exchange rates as measured against the U.S. dollar and changes
in the prices of stocks traded on the U.S. markets.
Interest Rate Risk
The Company's revolving credit borrowings and variable rate term loans, which
total $14,741,601 as of January 31, 1999, are subject to interest rate risk.
Most of the borrowings float at either the prime rate or LIBOR plus a certain
amount of basis points. Based on the fiscal 1998 year end balance, an increase
of one percent in the interest rate on the Company's loans would cause an
increase in interest expense of approximately $147,000, or $.03 per diluted
share, on an annual basis. The Company currently does not use derivatives to fix
variable rate interst obligations.
Foreign Currency Risk
The Company has foreign operations in the United Kingdom and Malaysia. Sales and
purchases are typically denominated in the British pound, Malaysian ringgit,
German mark, Singapore dollar or U.S. dollar, thereby creating exposures to
changes in exchange rates. The changes in exchange rates may positively or
negatively affect the Company's sales, gross margins and retained earnings. The
Company does not enter into foreign exchange contracts but attempts to minimize
currency exposure risk through working capital management. There can be no
assurance that such an approach will be successful, especially in the event of a
significant and sudden decline in the value of a currency.
Equity Price Risk
Approximately 11% of the Company's total assets as of January 31, 1999 are
invested in trading securities of various domestic companies. The market value
of these investments is subject to fluctuation. This factor, combined with the
relative size of the Company's trading portfolio ($3,616,314 at January 31,
1999), has led and will likely continue to lead, to significant period-to-period
earnings volatility depending upon the capital
6
<PAGE>
appreciation or depreciation of the Company's trading securities portfolio. A
10% decrease in the quoted market price of these trading securities would
decrease the fair market value of these securities by approximately $360,000, or
$0.07 per diluted share. Although the Company has no established formal
investment policies or practices for its trading securities portfolio, the
Company generally pursues an aggressive trading strategy, focusing primarily on
generating near-term capital appreciation from its investments in common equity
securities. Securities held in the Company's portfolio at the end of each period
are reported at fair value, with unrealized gains and losses included in
earnings for that period. These factors, combined with the relative size of the
Company's trading portfolio, has led, and will likely continue to lead, to
significant period-to-period earnings volatility depending upon the capital
appreciation or depreciation of the Company's trading securities portfolio as of
the end of each reporting period. The Company does not use or buy derivative
securities.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $1,480,894 for fiscal 1998, compared to
$3,671,674 for fiscal 1997. In fiscal 1997, the net sale of trading securities
accounted for approximately $837,000 of the operating cash flow. Excluding the
net trading securities activity from operating cash flow, the significant
decrease in operating cash flow was due to the increase in purchases of raw
materials in the last few months of fiscal 1998 compared to the same period last
year.
Net working capital of $12,730,093 at January 31, 1999 increased $1,856,761, or
17.1%, from the fiscal 1997 year-end level of $10,873,332. The current ratio at
January 31, 1999 was 3.8:1 compared to 3.5:1 at prior year-end. The change was
mainly due to the increase in inventories and in assets held for sale.
Cash used in investing activities for fiscal 1998 was $2,962,272 compared to
$470,364 in fiscal 1997. This increase was principally due to the $2,527,802
increase in capital expenditures for the year. During fiscal 1998, the Company
constructed an addition to its Port Washington facility and implemented a new
enterprise resource planning system.
Due to the capital expenditures, the Company increased its debt by $718,259 in
fiscal 1998, which accounted for most of the cash provided from financing
activities. Cash used in financing activities in fiscal 1997 of $2,884,082 was
due to repayment of debt. The Company has reduced its debt by $4,852,759 since
the June 21, 1996 acquisition date. The Company's debt to capitalization ratio
at January 31, 1999 and 1998 was 47.7% and 49.0%, respectively. The Company
maintains various debt agreements, which are described in more detail in the
footnotes to the consolidated financial statements. Required principal payments
in fiscal 1999 are expected to be approximately $530,000.
The Company believes that it can fund proposed capital expenditures and
operational requirements from operations and currently available cash and cash
equivalents, investments, trading securities and existing bank credit lines.
Proposed capital expenditures for the fiscal year ending January 31, 2000 are
expected to total approximately $900,000, compared to $3,082,725 for fiscal
1998. The significant decrease is due principally to the construction of an
addition at the Company's Port Washington facility and the implementation of a
new ERP system in fiscal 1998. The Company also intends to sell its Cedarburg
facility which is classified as an asset held for sale in the consolidated
balance sheet. The Company's asking price for the facility is $1,295,000,
although there can be no assurance as to when or if this facility may be resold.
The Company intends to continue to expand its businesses, both internally and
through potential acquisitions. The Company currently anticipates that any
potential acquisitions would be financed primarily by internally generated
funds, additional borrowings or the issuance of the Company's stock.
7
<PAGE>
Year 2000
During fiscal 1998, the Company engaged in a comprehensive project to select and
implement a new enterprise resource planning ("ERP") system that will properly
recognize the Year 2000 problem. This project involved replacing certain
hardware and software maintained by the Company. The Company has received a
representation from the ERP software provider that its software is Year 2000
compliant. On February 1, 1999, the Company started operating with the new ERP
system. Contingency plans have been developed and will be implemented if Year
2000 problems are encountered with the new ERP system.
The total cumulative cost of the project was approximately $530,000. Purchased
ERP system hardware and software, approximately $385,000 of the total estimated
cost, was capitalized in accordance with normal policy. Personnel and all other
remaining costs related to the project were expensed as incurred.
The Company has not formally communicated with all its customers and suppliers
to determine the extent to which the Company is vulnerable to those third
parties' failure to address Year 2000 issues. The Company's business operations
could be affected by the Year 2000 readiness of its customers and suppliers in
such areas as the delay in receipt of cash from customers, the interruption of
utilities and the inability of suppliers to deliver in a timely manner. The
Company does not anticipate any materially adverse affect on its business due to
Year 2000 problems encountered by its customers or suppliers; however, there can
be no assurance that its business will not be materially adversely affected by
such problems.
8
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
EDISON CONTROL CORPORATION
Year Ended January 31, Year Ended December 31
---------------------------------------------- -----------------------------
1999 1998 1997 1995 1994
---- ---- ---- ---- ----
Statements of Operations
<S> <C> <C> <C> <C> <C>
Net sales $ 25,050,116 $ 23,875,214 $13,604,340 $ 791,502 $ 1,444,004
Cost of sales $ 16,125,601 $ 14,717,711 $ 9,191,243 $ 660,857 $ 1,005,326
Gross profit $ 8,924,515 $ 9,157,503 $ 4,413,097 $ 130,645 $ 438,678
Selling, engineering & administrative $ 4,560,257 $ 4,350,273 $ 3,238,168 $ 729,267 $ 676,857
Operating income (loss) $ 4,045,728 $ 4,190,142 $ 531,702 $ (598,622) $ (238,179)
Realized gains (losses) on trading securities $ 161,598 $ (54,837) $ 2,802,490 $ 2,214,145 $ 712,530
Unrealized (losses) gains on trading securities $ (375,863) $ (205,618) $(2,854,059) $ 1,842,902 $ (193,830)
Interest, dividends and other income $ 75,574 $ 63,276 $ 84,848 $ 39,598 $ 187,818
Income (loss) before cumulative effect $ 1,202,330 $ 1,105,162 $ (731,028) $ 2,082,582 $ 382,780
Cumulative effect of change in accounting
principle, net of income taxes $ - $ - $ - $ - $ 1,447,567
Net income (loss) $ 1,202,330 $ 1,105,162 $ (731,028) $ 2,082,582 $ 1,830,347
Per Share Information
Net income (loss) per share - basic $ 0.52 $ 0.49 $ (0.33) $ 0.98 $ 0.87
Net income (loss) per share - diluted $ 0.42 $ 0.41 $ (0.33) $ 0.94 $ 0.84
Book value at year end $ 6.90 $ 6.41 $ 5.98 $ 4.86 $ 3.89
At Year End
Working capital $ 12,730,093 $ 10,873,332 $11,554,170 $ 10,299,875 $ 8,101,993
Property, plant and equipment-net $ 8,187,899 $ 6,945,103 $ 7,077,228 $ 65,687 $ 65,618
Total assets $ 34,902,997 $ 32,355,957 $34,060,105 $ 12,553,486 $ 9,332,572
Long-term debt $ 14,741,601 $ 14,023,342 $16,907,424 $ - $ -
Shareholders' equity $ 16,183,272 $ 14,590,525 $13,601,241 $ 10,375,912 $ 8,176,330
Weighted average shares outstanding
-assuming dilution 2,883,133 2,686,951 2,558,232 2,209,117 2,174,918
Common stock outstanding 2,346,933 2,275,933 2,275,933 2,136,000 2,100,000
Note: As discussed in the Management's Discussion and Analysis of Financial
Condition and Results of Operations, significant changes were made to
the Company's core business in fiscal 1996.
Note: The Company adopted the provisions of FASB 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company adopted the
provisions of the new standard for securities held as of or acquired
after January 1, 1994. The cumulative effect as of January 1, 1994 of
adopting Statement No. 115 increased net income by $1,447,567 (net of
$962,635 in deferred income taxes), or $.69 per share-basic and $.67 per
share-diluted.
</TABLE>
9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Of Edison Control Corporation:
We have audited the accompanying consolidated balance sheets of Edison Control
Corporation and subsidiaries (the "Corporation") as of January 31, 1999 and
1998, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended January
31, 1999. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Edison Control Corporation and
subsidiaries as of January 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1999, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Milwaukee, Wisconsin
March 26, 1999
10
<PAGE>
EDISON CONTROL CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1999 AND 1998
- --------------------------------------------------------------------------------------------------------------
ASSETS (Note 8) 1999 1998
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 468,072 $ 1,037,288
Investments (Note 1) 190,000 190,000
Trading securities (Notes 1 and 3) 3,616,314 3,653,763
Accounts receivable, less allowance of
$268,000 and $320,000, respectively (Note 1) 3,513,342 2,995,637
Receivable from affiliate (Note 5) 93,575 103,482
Inventories (Notes 1 and 4) 7,619,746 5,974,302
Prepaid expenses and other current assets 193,650 193,099
Deferred income taxes (Note 7) 2,000
Refundable income taxes (Note 7) 120,505 81,182
Assets held for sale (Note 1) 1,032,200
Deferred financing costs (Note 10) 389,236 983,333
------------ ------------
Total current assets 17,238,640 15,212,086
INVESTMENT IN AND ADVANCES TO AFFILIATE (Note 5) 421,263 433,150
OTHER ASSETS:
Prepaid pension (Note 9) 151,477 283,134
Deferred income taxes (Note 7) 129,000
Deferred financing costs (Note 10) 389,236
------------ ------------
Total other assets 280,477 672,370
PROPERTY, PLANT AND EQUIPMENT (Note 1):
Cost:
Land 302,902 343,059
Buildings and improvements 3,603,659 2,788,014
Machinery and equipment 5,869,300 4,729,916
Construction in progress 10,908 47,014
------------ ------------
9,786,769 7,908,003
Less - accumulated depreciation (1,598,870) (962,900)
------------ ------------
8,187,899 6,945,103
GOODWILL (net of amortization of $600,000 and 8,690,318 8,922,576
$367,741, respectively) (Note 1)
ORGANIZATIONAL/FINANCE COSTS (net of
amortization of $226,670 and $140,398, respectively)(Note 1) 84,400 170,672
------------ ------------
TOTAL $ 34,902,997 $ 32,355,957
============ ============
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
CURRENT LIABILITIES:
<S> <C> <C>
Trade accounts payable $ 1,939,917 $ 1,261,244
Accrued compensation 739,938 781,566
Taxes other than income taxes 21,325 29,985
Other accrued expenses (Note 6) 522,694 555,045
Deferred income taxes (Note 7) 115,000
Deferred compensation (Notes 1 and 10) 754,250 754,250
Current maturities on long-term debt (Note 8) 530,423 841,664
------------ ------------
Total current liabilities 4,508,547 4,338,754
LONG-TERM DEBT, LESS CURRENT MATURITIES (Note 8) 14,211,178 13,181,678
DEFERRED INCOME TAXES (Note 7) 245,000
------------ ------------
Total liabilities 18,719,725 17,765,432
SHAREHOLDERS' EQUITY (Note 10):
Preferred Stock, $.01 par value; 1,000,000 shares authorized,
none issued
Common Stock, $.01 par value; 20,000,000 shares authorized,
2,346,933 and 2,275,933 shares issued and outstanding, respectively 23,469 22,759
Additional paid-in capital 10,323,225 10,016,435
Retained earnings 5,760,823 4,558,493
Accumulated other comprehensive income 75,755 (7,162)
------------ ------------
Total shareholders' equity 16,183,272 14,590,525
------------ ------------
TOTAL $ 34,902,997 $ 32,355,957
============ ============
See notes to consolidated financial statements.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 1999, 1998 and 1997
- ---------------------------------------------------------------------------------------------------------------
Year Ended January 31
--------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
NET SALES $ 25,050,116 $ 23,875,214 $ 13,604,340
COST OF GOODS SOLD 16,125,601 14,717,711 9,191,243
------------ ------------ ------------
GROSS PROFIT 8,924,515 9,157,503 4,413,097
OTHER OPERATING EXPENSES:
Selling, engineering and administrative expenses 4,560,257 4,350,273 3,238,168
Stock option amortization (Note 10) 298,558 455,691
Goodwill and organizational/finance cost
amortization (Note 1) 318,530 318,530 187,536
------------ ------------ ------------
Total other operating expenses 4,878,787 4,967,361 3,881,395
------------ ------------ ------------
OPERATING INCOME 4,045,728 4,190,142 531,702
OTHER EXPENSE (INCOME):
Interest expense 955,818 1,133,382 775,762
Realized (gains) losses on trading securities (161,598) 54,837 (2,802,490)
Unrealized losses on trading securities 375,863 205,618 2,854,059
Interest and miscellaneous income (75,574) (63,276) (84,848)
Loss on sale of assets, net (Note 2) 434,166
Stock warrant amortization (Note 10) 983,333 983,333 594,097
Equity in earnings of affiliate (Note 5) (84,444) (78,914) (18,016)
------------ ------------ ------------
Total other expense (income) 1,993,398 2,234,980 1,752,730
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 2,052,330 1,955,162 (1,221,028)
INCOME TAXES (CREDIT) (Note 7) 850,000 850,000 (490,000)
------------ ------------ ------------
NET INCOME (LOSS) 1,202,330 1,105,162 (731,028)
OTHER COMPREHENSIVE INCOME (LOSS)-
Foreign currency translation adjustments (Note 1) 82,917 (115,878) 108,716
------------ ------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 1,285,247 $ 989,284 $ (622,312)
============ ============ ============
NET INCOME (LOSS) PER SHARE (Note 1):
Net Income (Loss) Per Share - Basic $ 0.52 $ 0.49 $ (0.33)
============ ============ ============
Net Income (Loss) Per Share - Diluted $ 0.42 $ 0.41 $ (0.33)
============ ============ ============
See notes to consolidated financial statements.
See notes to consolidated financial statements.
</TABLE>
13
<PAGE>
EDISON CONTROL CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1999, 1998 and 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Additional Other
------------------------- Paid-in Retained Comprehensive
Shares Amount Capital Earnings Income Total
<S> <C> <C> <C> <C> <C>
BALANCES, JANUARY 31, 1996 2,136,000 $ 21,360 $ 6,143,334 $ 4,184,359 $ 10,349,053
Stock issued at acquisition (Note 10) 114,933 1,149 860,851 862,000
Stock warrants issued (Note 10) 2,950,000 2,950,000
Stock options exercised (Note 10) 25,000 250 62,250 62,500
Foreign currency translation adjustment $ 108,716 108,716
Net (loss) (731,028) (731,028)
--------- -------- ----------- ----------- --------- ------------
BALANCES, JANUARY 31, 1997 2,275,933 22,759 10,016,435 3,453,331 108,716 13,601,241
Foreign currency translation adjustment (115,878) (115,878)
Net income 1,105,162 1,105,162
--------- -------- ----------- ----------- --------- ------------
BALANCES, JANUARY 31, 1998 2,275,933 22,759 10,016,435 4,558,493 (7,162) 14,590,525
Stock options exercised (Note 10) 71,000 710 306,790 307,500
Foreign currency translation adjustment 82,917 82,917
Net income 1,202,330 1,202,330
--------- -------- ----------- ----------- --------- ------------
BALANCES, JANUARY 31, 1999 2,346,933 $ 23,469 $10,323,225 $ 5,760,823 $ 75,755 $ 16,183,272
========= ======== =========== =========== ========= ============
See notes to consolidated financial statements.
</TABLE>
14
<PAGE>
EDISON CONTROL CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1999, 1998 and 1997
- ---------------------------------------------------------------------------------------------------------------
Year Ended January 31
--------------------------------------------
1999 1998 1997
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 1,202,330 $ 1,105,162 $ (731,028)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation of plant and equipment 766,497 653,089 328,421
Amortization 1,301,863 1,600,421 1,235,253
Provision for doubtful accounts (39,931) 76,780 10,127
Realized (gain) loss on trading securities sales (161,598) 54,837 (2,802,490)
Unrealized loss on trading securities 375,863 205,618 2,854,059
Purchases of trading securities (2,530,113) (3,768,475) (9,003,912)
Proceeds from the sales of trading securities 2,353,297 4,605,945 15,409,029
Loss on sale of assets 26,202 19,973 396,318
Equity in earnings of affiliate (84,444) (78,914) (18,016)
Changes in assets and liabilities, net of acquired companies:
Accounts receivable (456,077) (377,314) (140,961)
Receivable from affiliate 9,907 52,553 44,973
Inventories (1,611,616) (679,253) 1,417,211
Prepaid expenses and other assets 1,356 1,395 23,928
Prepaid pension 131,657 101,887 57,577
Trade accounts payable 676,489 388,713 (71,315)
Accrued compensation (41,965) 175,254 78,084
Taxes other than income taxes 724 (2,223) (44,774)
Other accrued expenses (43,183) 19,550 101,490
Income taxes 94,636 (97,324) (538,285)
Deferred income taxes (491,000) (386,000) (1,370,871)
----------- ----------- -----------
Net cash provided by operating activities 1,480,894 3,671,674 7,234,818
----------- ----------- -----------
INVESTING ACTIVITIES:
Additions to plant and equipment (3,082,725) (554,923) (416,340)
Maturity of certificate of deposit 94,000
Payments received from (advances to) affiliate 96,331 (14,182) 45,823
Proceeds from sale of assets 24,122 4,741 9,819
Payment for the purchase of acquired companies, net of
cash acquired (18,914,093)
----------- ----------- -----------
Net cash used in investing activities (2,962,272) (470,364) (19,274,791)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 2,175,000 600,000 16,540,000
Payments on long-term debt (1,456,741) (3,484,082) (4,531,936)
Proceeds from issuance of common stock 95,724
Stock options exercised 177,500 62,500
----------- ----------- -----------
Net cash provided by (used in) financing activities 895,759 (2,884,082) 12,166,288
----------- ----------- -----------
(Continued)
</TABLE>
15
<PAGE>
EDISON CONTROL CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1999, 1998 and 1997
- -----------------------------------------------------------------------------------------------------------
Year Ended January 31
-----------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 16,403 $ (51,948) $ 46,762
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (569,216) 265,280 173,077
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,037,288 772,008 598,931
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 468,072 $ 1,037,288 $ 772,008
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 946,210 $ 1,111,901 $ 773,954
Income taxes, net of refunds $ 1,246,200 $ 1,336,130 $ 1,419,070
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Stock issued as part of purchase price of
acquired companies $ 766,274
Notes receivable canceled as part of purchase
price of acquired companies $ 332,400
Fair value of warrant issued in connection with
financing of acquisition $ 2,950,000
See notes to consolidated financial statements.
</TABLE>
16
<PAGE>
EDISON CONTROL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of Edison Control Corporation ("Edison") and
subsidiaries, all of which are wholly owned (collectively, the
"Company"). All material intercompany accounts and transactions have been
eliminated in consolidation.
Nature of Operations - The Company is currently comprised of the
following operations. Construction Forms ("ConForms") is a leading
manufacturer and distributor of systems of pipes, couplings and hoses and
other equipment used for the pumping of concrete. ConForms manufactures a
wide variety of finished products which are used to create appropriate
configurations of systems for various concrete pumps. Ultra Tech
manufactures abrasion resistant piping systems for use in industries such
as mining, pulp and paper, power and waste treatment. Gilco produces a
line of concrete and plaster/mortar mixers. JABCO primarily leases
property and equipment to the Company.
The Company's principal market is in North America with limited sales
activity in Europe, South America and Asia.
Cash Equivalents - The Company considers all temporary investments with
maturities of three months or less when acquired to be cash equivalents.
Investments - Investments consist of certificates of deposit with
maturities in excess of three months and are recorded at cost which
approximates market. The Company intends to hold the certificates until
maturity.
Trading Securities - Debt and equity securities purchased and held
principally for the purpose of selling them in the near term are
classified as "trading securities" and reported at fair value with
unrealized gains and losses included in earnings. The cost of securities
sold is based on the first-in, first-out method.
Accounts Receivable - Accounts receivable are stated net of an allowance
for doubtful accounts and finance charges.
Inventories - Inventories are stated at the lower of cost (principally
last-in, first-out method) or market.
Assets held for sale - Assets held for sale consist of land and building,
which are no longer in use as of January 31, 1999. These assets were
reclassified from property, plant and equipment and are recorded at their
net book value. No depreciation has been taken on these assets since they
were taken out of service. The Company classifies these assets as current
assets since it believes that these assets will be sold within the next
twelve months.
Property, Plant and Equipment - Property, plant and equipment is stated
at cost. Expenditures for major renewals and improvements are
capitalized, while maintenance and repairs, which do not significantly
improve the related asset or extend its useful life, are charged to
expense as incurred.
17
<PAGE>
For financial reporting purposes, plant and equipment is depreciated
primarily by the straight-line method over the estimated useful lives of
the assets. Estimated useful lives of buildings and improvements range
from 7 to 40 years and of machinery and equipment from 2 to 12 years.
Depreciation claimed for income tax purposes is computed by accelerated
methods.
Goodwill and Intangible Assets - Goodwill represents the excess of the
purchase price over the fair value of identifiable net assets of acquired
companies and is amortized on a straight-line basis over 40 years. The
Company assesses the carrying value of goodwill at each balance sheet
date. Consistent with Statement of Financial Accounting Standard ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", such assessments include, as
appropriate, a comparison of the estimated future nondiscounted cash
flows anticipated to be generated during the remaining amortization
period of the goodwill to the net carrying value of goodwill. The Company
recognizes diminution in value of goodwill, if any, on a current basis.
Organizational/finance costs are amortized over their economic useful
lives ranging from three to twenty years.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Fair Value of Financial Instruments - Management believes the carrying
amount of financial instruments is a reasonable estimate of the fair
value of these instruments.
Translation of Foreign Currencies - Assets and liabilities of foreign
operations are translated into United States dollars at current exchange
rates. Income and expense accounts are translated into United States
dollars at average exchange rates for the periods and capital accounts
have been translated using historical rates. The resulting translation
adjustments are recorded as other comprehensive income.
Revenue Recognition - The Company recognizes revenue upon shipment of
products.
Research and Development - Amounts expended for research and development
for the years ended January 31, 1999, 1998 and 1997 totaled approximately
$212,000, $190,000 and $190,000, respectively, and are expensed as
incurred.
18
<PAGE>
Net income (loss) per share - Effective for 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
Per Share," which established new standards for the calculation of net
income per share effective for interim and annual periods ending after
December 1997. Income per share for the year ended January 31, 1997 has
been restated to comply with SFAS No. 128. Reconciliation of the
numerator and denominator of the basic and diluted per share computations
are summarized as follows:
<TABLE>
<CAPTION>
Year Ended January 31
-----------------------------------------------
1999 1998 1997
---- ---- ----
Net Income (Loss) Per Share - Basic:
<S> <C> <C> <C>
Net income (loss) (numerator) $ 1,202,330 $ 1,105,162 $ (731,028)
Weighted average shares outstanding (denominator) 2,315,503 2,275,933 2,210,848
Net income (loss) per share - basic $ 0.52 $ 0.49 $ (0.33)
Net Income (Loss) Per Share - Diluted:
Net income (loss) (numerator) $ 1,202,330 $ 1,105,162 $ (731,028)
Weighted average shares outstanding 2,315,503 2,275,933 2,210,848
Effect of dilutive securities:
Stock options 178,257 99,224 -
Stock warrants 389,373 311,794 -
----------- ----------- ----------
Weighted average shares outstanding (denominator) 2,883,133 2,686,951 2,210,848
Net income (loss) per share - diluted $ 0.42 $ 0.41 $ (0.33)
</TABLE>
Stock options and warrants were antidilutive for the year ended January
31, 1997 under the treasury stock method.
Accounting Pronouncements - In 1998, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." The Company is in the process of evaluating the
accounting and reporting requirements and does not believe the adoption
of SFAS No. 133 will have a material impact on the Company's consolidated
financial statements.
Reclassifications - Certain reclassifications have been made to the prior
years' financial statements to conform with the current year
presentation.
19
<PAGE>
2. ACQUISITIONS AND DISPOSITIONS
On June 21, 1996, the Company purchased all of the issued and outstanding
stock of Construction Forms, Inc. and subsidiaries and JABCO, LLC for an
aggregate cash consideration of approximately $20,550,000. The
acquisition was accounted for as a purchase transaction with the purchase
price allocated to the fair value of specific assets acquired and
liabilities assumed. Accordingly, the results of operations have been
included since the date of the acquisition. Resultant goodwill is being
amortized over 40 years. The purchase price was allocated as follows:
Receivables $ 2,810,237
Inventory 6,699,256
Property, plant and equipment 6,990,408
Goodwill 9,290,317
Prepaid pension 442,598
Cash and other assets 1,714,648
Liabilities assumed (7,397,464)
------------
$ 20,550,000
============
On October 31, 1996, the Company sold certain net assets of its
electronic fault indicator operation. In return, the Company received
cash of $10,000, a $275,000 promissory note bearing interest at an annual
rate of 8.25%, and a five year warrant to purchase 20% of the capital
stock of the new company. It is management's opinion that the possibility
of collection of any future principal or interest on the note receivable
is remote and, accordingly, has reserved the total balance of the note
and will not record any interest income until received. The total loss on
the sale of these net assets was $434,166, including the note receivable
reserve.
20
<PAGE>
3. TRADING SECURITIES
Trading securities at January 31, 1999 consisted of the following:
Number of
Name of Issuer/ Shares or
Title of Issue Units Cost Market Value
Common Stocks:
Cendant Corp. 20,000 $ 435,438 $ 435,000
Equity One, Inc. 9,500 104,500 85,500
Glenayre Technologies, Inc. 40,000 1,029,352 200,000
Microsoft 2,000 250,050 350,000
Panavision Inc. 304 8,150 3,420
Philip Morris 5,000 266,875 234,375
Sun International Hotels 10,100 448,250 431,144
US Trust Corporation 25,000 411,953 1,825,000
VIVUS, Inc. 20,000 621,350 51,875
----------- -----------
Total $ 3,575,918 $ 3,616,314
=========== ===========
Trading securities at January 31, 1998 consisted of the following:
Number of
Name of Issuer/ Shares or
Title of Issue Units Cost Market Value
Common Stocks:
General Motors Corp. 5,000 $ 147,325 $ 173,125
Glenayre Technologies, Inc. 40,000 1,029,352 527,500
NCR Corp. 10,000 278,750 300,625
Oxford Health Plans, Inc. 10,000 160,000 175,000
Panavision Inc. 6,400 139,750 166,800
Raytheon 2,812 118,925 143,763
Sun International Hotels 10,100 330,100 386,325
US Trust Corporation 25,000 411,953 1,484,375
VIVUS, Inc. 20,000 621,350 296,250
----------- -----------
Total $ 3,237,505 $ 3,653,763
=========== ===========
21
<PAGE>
4. INVENTORIES
Inventories consisted of the following:
January 31, January 31,
1999 1998
Raw materials $ 4,158,860 $ 2,945,598
Work-in-process 992,073 818,003
Finished goods 2,631,813 2,325,701
----------- ----------
7,782,746 6,089,302
Less - reserve to reduce carrying value
to LIFO cost (163,000) (115,000)
----------- -----------
Net inventories $ 7,619,746 $ 5,974,302
=========== ===========
5. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company owns 50% of the outstanding common stock of South Houston
Hose Company and accounts for the investment by the equity method. The
Company had sales of approximately $900,000, $798,000 and $685,000 to the
affiliate during 1998, 1997 and 1996, respectively. Summary unaudited
financial information as of January 31, 1999, 1998 and 1997, and for the
years then ended is as follows:
1999 1998 1997
Current assets $ 1,208,819 $ 1,130,349 $ 934,399
Noncurrent assets 60,439 45,878 49,930
Current liabilities 311,764 388,727 306,198
Noncurrent liabilities - - 41,555
Shareholders' equity 957,494 787,500 633,364
Net sales 3,278,014 2,749,253 2,239,949
Net income 169,994 154,136 90,858
22
<PAGE>
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
Year Ended January 31,
------------------------------------
1999 1998
Group benefits $ 130,000 $ 130,000
Warranty 207,500 240,000
Legal and professional 56,758 47,468
Interest 54,577 58,510
Selling commissions 25,188 28,519
Other 48,671 50,548
---------- ---------
Total $ 522,694 $ 555,045
========== =========
7. INCOME TAXES
Deferred income taxes are provided on temporary differences relating to
reporting expenses in different periods for financial statement and
income tax purposes and differences in bases of assets and liabilities.
Such differences relate primarily to unrealized gain (losses) on
investments, depreciation expense, inventory costs, bad debt expense,
warranty costs, insurance, compensation and pension expense.
The provision for income taxes (credit) is as follows:
Year Ended January 31
---------------------------------------------
1999 1998 1997
Currently payable:
Federal $ 1,144,000 $ 1,066,000 $ 718,871
State 197,000 170,000 162,000
----------- ----------- ----------
1,341,000 1,236,000 880,871
Deferred:
Federal (416,000) (332,000) (1,120,871)
State (75,000) (54,000) (250,000)
----------- ----------- ----------
(491,000) (386,000) (1,370,871)
----------- ----------- ----------
Total $ 850,000 $ 850,000 $ (490,000)
=========== =========== ==========
23
<PAGE>
Temporary differences which gave rise to the deferred tax assets
(liabilities) included the following items at January 31, 1999 and 1998:
1999 1998
Deferred tax assets:
Compensation and other employee benefits $ 313,000 $ 312,000
Book reserves and other items 18,000 97,000
Net operating loss carryforwards 3,000
Deferred financing 999,000 615,000
Vacation pay 73,000 67,000
--------- ---------
1,403,000 1,094,000
--------- ---------
Deferred tax liabilities:
Inventory items (642,000) (638,000)
Unrealized gains (16,000) (162,000)
Fixed assets (555,000) (544,000)
Pension benefit (59,000) (110,000)
--------- ---------
(1,272,000) (1,454,000)
--------- ---------
Net deferred tax asset (liability) $ 131,000 ($360,000)
========== ==========
The reconciliation of income tax computed at the U.S. federal statutory
rates to income tax expense is:
Year Ended January 31
---------------------------------
1999 1998 1997
Statutory tax rate 34.0% 34.0% 34.0%
State taxes, net of federal tax benefit 6.0 6.0 4.8
Goodwill 3.8 4.0 (3.8)
Dividends received deduction (0.3) (0.3) 1.3
Reversal of provision for taxes not
necessary in the future 0.0 0.0 4.5
Other, net (2.1) (0.2) (0.7)
----- ----- -----
Effective tax rate 41.4% 43.5% 40.1%
===== ===== =====
24
<PAGE>
8. LONG-TERM DEBT
Long-term debt, less current maturities, consisted of the following at
January 31, 1999 and 1998:
1999 1998
Industrial revenue bonds $ 2,750,000 $ 2,875,000
RLF term loan 96,582
Bank revolving credit loan 4,700,000 3,225,000
Bank overadvance term loan 396,984 1,125,278
Subordinated bank loan 6,798,035 6,798,064
------------ ------------
Total debt 14,741,601 14,023,342
Less current portion (530,423) (841,664)
------------ ------------
Total long-term debt $ 14,211,178 $ 13,181,678
============ ============
The Industrial Revenue Bonds ("IRB") were issued to finance construction
of a new production facility in Port Washington, Wisconsin. A total of
$3,000,000 was issued for the facility and is due in annual installments
of $125,000 from February 1997 through February 2000, $150,000 from
February 2001 through February 2005, and $175,000 from February 2006
through February 2015. The interest rate at January 31, 1999 was 3.75%.
The Revolving Loan Fund (RLF) term loan was a loan issued by the City of
Port Washington to finance the purchase of real estate for the
construction of an addition at the Company's Port Washington facility. A
total of $100,000 was issued for the facility and is due in monthly
installments through September 4, 2008. The interest rate at January 31,
1999 was 4.0%.
The master credit agreement, which expires June 21, 2000, allows for
revolving credit borrowings not to exceed $6,000,000. Borrowings which
are based on qualified assets bear interest at either the prime rate plus
.50% or the LIBOR rate plus 1.25% on the first $1,800,000 of debt (6.33%
at January 31, 1999) and the LIBOR rate plus 2.00% on amounts in excess
of $1,800,000 (7.08% at January 31, 1999).
Also under the master credit agreement, the Company maintains an
overadvance term loan. Monthly principal payments of $59,722 are required
by the agreement. Borrowings bear interest at either the prime rate plus
.375% or the LIBOR rate plus 3.1%. The interest rate at January 31, 1999
was 8.125%. The agreement calls for additional principal payments based
on excess cash flow as defined in the agreement.
The terms under the master credit agreement, among other provisions,
require the Company to maintain a minimum current ratio, tangible net
worth, and fixed charge ratio, and restricts the Company to a maximum
debt to worth ratio. Substantially all of the Company's assets are
collateralized under the above debt agreements.
25
<PAGE>
The Company has a loan agreement with a bank which provides for
subordinated borrowings up to $6,800,000 through June 21, 2002.
Borrowings bear interest at the bank's LIBOR rate plus 1.25%. On January
31, 1999, the interest rate was 6.31%. The loan is secured by
substantially all of the assets of the Company and is guaranteed by the
principal stockholder of Edison.
Annual principal payments for the next five years on long-term debt are
as follows:
<TABLE>
<CAPTION>
Year Ending RLF Revolving Overadvance Subordinated
January 31, IRB Term Loan Credit Loan Term Loan Bank Loan Total
<S> <C> <C> <C> <C> <C> <C>
2000 $ 125,000 $ 8,439 $ $ 396,984 $ $ 530,423
2001 125,000 8,784 4,700,000 4,833,784
2002 150,000 9,141 159,141
2003 150,000 9,514 6,798,035 6,957,549
2004 150,000 9,902 159,902
Thereafter 2,050,000 50,802 2,100,802
------------ -------- ----------- --------- ------------ ------------
$ 2,750,000 $ 96,582 $ 4,700,000 $ 396,984 $ 6,798,035 $ 14,741,601
============ ======== =========== ========= ============ ============
</TABLE>
9. EMPLOYEE RETIREMENT PLANS
The Company adopted SFAS No. 132, "Employer's Disclosures about Pensions
and Other Postretirement Benefits," in fiscal 1998. SFAS No. 132 revises
disclosure requirements for such pension and postretirement benefit plans
to, among other things, standardize certain disclosures and eliminate
certain other disclosures no longer deemed useful. SFAS No. 132 does not
change the measurement or recognition criteria for such plans.
The Company has a noncontributory defined benefit pension plan, which
relates to the acquired companies, covering substantially all full-time
employees. The plan provides for benefits based on years of service and
compensation.
The following tables set forth the plan's change in benefit obligation,
change in plan assets and funded status at January 31, 1999 and 1998:
26
<PAGE>
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 2,884,024 $ 2,843,888
Service cost 150,302 135,824
Interest cost 223,198 186,853
Acturial loss (gain) 335,398 (152,363)
Benefits paid (187,124) (130,178)
Assumption change 374,215
---------- -----------
Benefit obligation at end of year 3,780,013 2,884,024
Change in plan assets:
Fair value of plan assets at beginning of year 3,998,045 3,521,285
Actual return on plan assets 690,910 606,938
Benefits paid (187,124) (130,178)
----------- -----------
4,501,831 3,998,045
Funded Status 721,818 1,114,021
Unrecognized net acturial gain (570,341) (830,887)
----------- -----------
Prepaid pension expense $ 151,477 $ 283,134
=========== ===========
</TABLE>
Assumptions for the years ended January 31 were:
1999 1998 1997
Discount rate 6.75% 7.50% 7.50%
Expected return on plan assets 8.00 8.00 8.00
Rate of compensation increase 6.00 6.00 6.00
The Company's funding policy is to contribute annually amounts within the
limits which can be deducted for Federal income tax purposes. No
contributions were made to the Plan during the years ended January 31,
1999, 1998 and 1997.
Pension expense consisted of the following components for the years ended
January 31:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 150,302 $ 135,824 $ 65,707
Interest cost on projected benefit obligation 223,198 186,853 119,475
Actual return on plan assets (gain) loss (690,910) (606,938) (369,579)
Net amortization and deferral 449,067 386,148 241,974
---------- ---------- --------
Net periodic pension expense $ 131,657 $ 101,887 $ 57,577
========== ========== ========
</TABLE>
The Company also has a retirement savings and thrift plan (401(k) plan),
which relates to the acquired companies, covering substantially all of
its employees. Under the 401(k) plan, the Company contributes amounts
based on employee contributions. Amounts charged to earnings for the plan
for the years ended January 31, 1999, 1998 and 1997 were $91,059, $80,943
and $42,831, respectively.
27
<PAGE>
10. EMPLOYEE STOCK OPTION PLANS
The Company adopted a 1986 Stock Option Plan (the "Plan") for the benefit
of directors, officers and key employees of the Company. Pursuant to the
Plan, as amended, these persons may be granted options to purchase up to
an aggregate of 150,000 shares of Common Stock. The Board of Directors
may authorize the granting of options under the Plan, and may determine
to whom the options may be granted, the number thereof, the option price
and the exercise period. The price for incentive stock options, which may
be granted under the Plan and which meet the requirements of Section 422A
of the Internal Revenue Code, as amended, will not be less than the fair
market value of the Common Stock on the date the option is granted (100%
of such fair market value for an optionee who holds more than 10% of the
outstanding shares of the capital stock of the Company). The price for
non-statutory options shall be fixed at the discretion of the Board of
Directors and in no event will the option price for any non-statutory
option granted be less than 85% of the fair market value of the Common
Stock on the date of grant. The maximum exercise period for any option
under the Plan is ten years from the date the option is granted (five
years for an optionee who holds more than 10% of the outstanding shares
of the capital stock of the Company). In November 1987, the Board of
Directors issued non-statutory options to purchase an aggregate of 90,000
shares at an exercise price of $2.50 per share ("2.50 options"). In 1989,
the Company issued non-statutory options to purchase an additional 60,000
shares at an exercise price of $1.22 per share. In November 1996, William
Finneran purchased 25,000 shares of his options.
In June 1993, the Board of Directors granted five-year non-statutory
options to purchase 18,000 shares each to Clark H. Bailey, Gerald B.
Cramer, John J. Delucca and Jay J. Miller, and 35,000 shares to William
B. Finneran, Directors of the Company, at an exercise price of $2.50 per
share, vesting 50% at June 5, 1994 and 50% at June 4, 1995 ("vesting
$2.50 options"). In June 1995, Clarke H. Bailey exercised his option and
purchased 18,000 shares. In September 1997, the options for Gerald B.
Cramer expired. In May, 1998, John J. Delucca and Jay J. Miller exercised
their options and purchased 18,000 shares each. Also, in May 1998,
William B. Finneran exercised his options and purchased 35,000 shares.
In July 1993, the Board of Directors granted non-statutory options to
purchase 18,000 shares to John M. Sanzo, a Director of the Company, at an
exercise price of $4.00 per share, vesting 50% at July 15, 1994 and 50%
at July 15, 1995 ("vesting $4.00 options"). In October 1994, the Board of
Directors resolved that the stock option, heretofore, granted to Mr. John
M. Sanzo to be fully vested notwithstanding any term of said option to
the contrary and that said option would expire 120 days following the
effectiveness of a Registration Statement on Form S-8 under the
Securities Act of 1993, as amended. In June 1995, John M. Sanzo exercised
his option and purchased 18,000 shares.
In October 1995, the 1986 Stock Option Plan was amended to increase by
200,000 the number of shares of common stock authorized for issuance,
thereunder to a total of 350,000 shares.
In February 1995, the Board of Directors authorized and on October 17,
1995, the stockholders approved a grant to the Company's President and
Chief Executive Officer of a ten-year option to purchase up to 200,000
shares of common stock pursuant to the 1986 Option Plan at an exercise
price of $4.00 per share, vesting 33% each at date of grant, on February
1, 1996, and on February 1, 1997, respectively.
In February 1996, non-qualified options for 17,500 shares were granted to
three individuals for services rendered at an exercise price of $4.50 per
share. The options are exercisable up to the close of business on
December 31, 1999.
28
<PAGE>
In May 1997, five-year non-qualified options for 25,000 shares were
granted to Robert Cooney, a member of the Board of Directors, at an
exercise price of $3.50 per share, vesting 50% at November 29, 1997 and
50% on May 29, 1998.
In October 1997, five-year non-qualified options for 25,000 shares were
granted to William Scott, a member of the Board of Directors, at an
exercise price of $3.50 per share, vesting 50% at April 15, 1998 and 50%
on October 15, 1998.
In connection with the issuance of the subordinated debt, the principal
shareholder of the Company provided collateral to a bank to support a
guaranty of repayment by the Company of the principal and interest on the
loan. The arrangement was made to reduce the cost of borrowed funds from
that which would have been otherwise obtainable by the Company from
unaffiliated "mezzanine" lenders. In consideration of his providing such
collateral, the Company issued a ten-year Warrant to purchase 500,000
shares of Common Stock exercisable at a price of $1.60 per share. At the
time the transaction was negotiated, Common Stock was quoted at
approximately $4.00 per share. On the date the ConForms acquisition was
consummated, which was the grant date, the closing sale price for the
Common Stock in the over-the-counter market was $7.50 per share. The
difference between the Warrant price and the fair market value at the
grant date is being amortized over the three-year term of the
subordinated debt.
In connection with the ConForms acquisition, the Company entered into
agreements for the sale for investment of an aggregate of 114,933 shares
of Common Stock for a total purchase price of $862,000 to key management
personnel of ConForms and its affiliates. In addition, the Company
granted ten-year nonqualified options to purchase an aggregate of 167,611
shares of Common Stock exercisable at $3.00 per share to key personnel.
Such options vest fully on the first anniversary of the closing of the
acquisition. On the date of the grant of the options, the closing sale
price for the Common Stock was $7.50 per share. The difference between
the option price and the fair market value at the time of grant was
amortized over the one-year vesting period.
In January 1999, the Board of Directors approved, subject to shareholder
approval, the Edison Control Corporation 1999 Equity Incentive Plan. The
Plan provides that up to a total of 200,000 shares of Common Stock will
be available for the granting of stock options, stock appreciation
rights, restricted stock or performance shares. No awards were granted
under this Plan as of January 31, 1999.
The Company has adopted the disclosure-only provisions of SFAS No.123,
"Accounting for Stock-Based Compensation," but continues to apply
Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for all of its plans. Compensation expense was $983,333,
$1,281,891, and $1,049,788 for the years ended January 31, 1999, 1998 and
1997, respectively. If the Company had elected to recognize compensation
costs for the options/warrants issued after December 15, 1994 in
accordance with SFAS No. 123, net income (loss) and net income (loss) per
share would have changed to the pro-forma amounts as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) As reported: $ 1,202,330 $ 1,105,162 $ (731,028)
Pro-forma: 1,754,989 1,240,831 (2,128,210)
Net income (loss) per share -basic As reported: 0.52 0.49 (0.33)
Pro-forma: 0.76 0.55 (0.96)
Net income (loss) per share -diluted As reported: 0.42 0.41 (0.33)
Pro-forma: 0.61 0.46 (0.96)
</TABLE>
29
<PAGE>
The fair value of stock options/warrants used to compute and disclose
pro-forma net income (loss) and pro-forma net income (loss) per share is
the estimated present value at grant date using the Black Scholes option
pricing model with the following weighted average assumptions:
Year Ended January 31,
---------------------------------------------
1999 1998 1997
Dividend yield 0% 0% 0%
Expected volatility 51% 55% 53%
Risk-free interest rate:
5 year - - 6.65%
4 year - 5.41% -
3 year 4.69% - -
2 year - - 6.29%
1 year - 5.35% -
Stock option/warrant activity is summarized as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Year Ended Average Year Ended Average
January 31, Exercise January 31, Exercise
1999 Price 1998 Price
---- ----- ---- -----
<S> <C> <C> <C> <C>
Options/warrant outstanding,
beginning of year 1,006,111 $ 2.52 974,111 $ 2.47
Options/warrant granted - - 50,000 3.50
Options/warrant exercised (71,000) 2.50 - -
Options/warrant expired - - (18,000) 2.50
------------- ------- ------------- --------
Options/warrant outstanding,
end of year 935,111 $ 2.52 1,006,111 $ 2.52
============= ======= ============= ========
Options/warrant exercisable,
end of year 935,111 $ 2.52 968,611 $ 2.48
============= ======= ============= ========
Price range per share $1.60 - $4.50 $1.60 - $4.50
============= =============
</TABLE>
30
<PAGE>
Weighted
Year Ended Average
January 31, Exercise
1997 Price
---- -----
Options/warrant outstanding,
beginning of year 314,000 $ 3.46
Options/warrant granted 685,111 2.02
Options/warrant exercised (25,000) 2.50
- -
------------- ------
Options/warrant outstanding,
end of year 974,111 $ 2.47
============= ======
Options/warrant exercisable,
end of year 739,833 $ 2.21
============= ======
Price range per share $1.60 - $4.50
=============
The weighted average remaining contractual life of stock options and
warrants outstanding at January 31, 1999 is 6.8 years.
The weighted average fair value of options granted and warrants issued
during the years ended January 31, 1998 and 1997 was $1.98 and $6.11,
respectively. No options or warrants were issued during the year ended
January 31, 1999.
11. VALUATION ACCOUNTS
Activity related to valuation accounts for the years ended January 31,
1999, 1998 and 1997 is as follows:
31
<PAGE>
<TABLE>
<CAPTION>
Additions Deductions for
charged to bad debts written
Balance, (deductions off, inventory Balance,
Beginning Acquired from) costs disposed of or End of
Valuation Accounts of Year Companies and expenses warranty claims Year
Allowance for doubtful accounts
<S> <C> <C> <C> <C> <C> <C>
and finance charges: 1/31/99 $ 320,000 $ (39,931) $ (12,069) $ 268,000
1/31/98 292,000 - 76,780 (48,780) 320,000
1/31/97 - 304,026 10,127 (22,153) 292,000
Excess and obsolete inventory reserve: 1/31/99 557,000 - (41,000) - 516,000
1/31/98 772,500 - (215,500) - 557,000
1/31/97 - 770,000 2,500 - 772,500
Notes receivable reserve: 1/31/99 275,000 - - - 275,000
1/31/98 275,000 - - - 275,000
1/31/97 - - 275,000 - 275,000
Warranty reserve: 1/31/99 240,000 - 188,895 (221,395) 207,500
1/31/98 151,000 - 164,000 (75,000) 240,000
1/31/97 - 174,466 42,360 (65,826) 151,000
</TABLE>
12. COMMITMENTS
The Company has employment agreements with two of its executives. Minimum
salaries to be paid to these individuals for the year ended January 31,
2000 are $270,000.
The Company has various warehouse and auto leases expiring at various
dates through January 2004. Future minimum lease payments required under
these noncancelable operating lease agreements are approximately as
follows:
Year Ending
January 31,
2000 $ 158,000
2001 140,000
2002 62,000
2003 58,000
2004 49,000
---------
Total $ 467,000
=========
Total rent expense for the years ended January 31, 1999, 1998 and 1997
was approximately $181,000, $145,000 and $137,000, respectively.
13. RELATED PARTY TRANSACTIONS
At January 31, 1999, Edison held in its investment portfolio 304 shares
of Panavision Inc., which were purchased in 1998 at a cost of $8,150 and
have a market value at January 31, 1999 of $3,420. A member of the Board
of Directors of Panavision Inc. is a member of the Board of Directors of
the Company. At January 31, 1999, Edison also held in its investment
portfolio 9,500 shares of Equity One, Inc., which were purchased in 1998
at a cost of $104,500 and have a market value at January 31, 1999 of
$85,500. A member of the Board of Directors of Equity One, Inc. is a
member of the Board of Directors of the Company.
32
<PAGE>
14. FOREIGN OPERATIONS
Foreign operations information for the year ended January 31, 1999
follows:
<TABLE>
<CAPTION>
United United
States Kingdom Malaysia Total
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers $22,942,593 $ 1,652,010 $ 455,513 $25,050,116
Operating income (loss) 4,131,668 280 (86,220) 4,045,728
Identifiable assets 32,373,533 1,682,731 846,733 34,902,997
Depreciation and amortization 2,005,444 49,677 13,239 2,068,360
Capital expenditures 3,054,929 20,090 7,706 3,082,725
</TABLE>
Foreign operations information for the year ended January 31, 1998
follows:
<TABLE>
<CAPTION>
United United
States Kingdom Malaysia Total
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers $21,852,948 $ 1,827,477 $ 194,789 $23,875,214
Operating income (loss) 4,328,227 (51,859) (86,226) 4,190,142
Identifiable assets 30,050,025 1,852,144 453,788 32,355,957
Depreciation and amortization 2,196,795 49,737 6,978 2,253,510
Capital expenditures 412,097 54,919 87,907 554,923
</TABLE>
Foreign operations information for the year ended January 31, 1997
follows:
<TABLE>
<CAPTION>
United United
States Kingdom Malaysia Total
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers $21,852,948 $ 1,827,477 $ 194,789 $23,875,214
Operating income (loss) 4,328,227 (51,859) (86,226) 4,190,142
Identifiable assets 30,050,025 1,852,144 453,788 32,355,957
Depreciation and amortization 2,196,795 49,737 6,978 2,253,510
Capital expenditures 412,097 54,919 87,907 554,923
</TABLE>
33
<PAGE>
15. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in 1998. The Company's operating segments are
organized based on the nature of products and services provided. A description
of the nature of the segment's operations and their accounting policies are
contained in Note 1. Segment information follows:
<TABLE>
<CAPTION>
Edison
Ultra Holding
ConForms Tech Gilco Company Total
<S> <C> <C> <C> <C> <C>
Year ended January 31, 1999
Net sales to unaffiliated customers $ 19,424,098 $ 3,484,277 $ 2,141,741 $ - $ 25,050,116
Operating income (loss) 3,469,171 1,059,404 (139,172) (343,675) 4,045,728
Identifiable assets 23,518,902 5,302,383 1,593,897 4,487,815 34,902,997
Depreciation and amortization 722,534 317,691 44,240 983,895 2,068,360
Capital expenditures 2,996,112 72,143 14,470 - 3,082,725
Year ended January 31, 1998
Net sales to unaffiliated customers $ 18,050,120 $ 3,989,750 $ 1,835,344 $ - $ 23,875,214
Operating income (loss) 3,768,062 1,157,834 97,419 (833,173) 4,190,142
Identifiable assets 19,648,193 5,742,341 1,077,870 5,887,553 32,355,957
Depreciation and amortization 653,779 273,123 43,029 1,283,579 2,253,510
Capital expenditures 342,263 209,039 3,621 - 554,923
Year ended January 31, 1997
Net sales to unaffiliated customers $ 9,285,487 $ 1,882,030 $ 1,549,711 $ 887,112 $ 13,604,340
Operating income (loss) 691,941 733,550 170,871 (1,064,660) 531,702
Identifiable assets 19,758,720 5,541,593 1,223,550 7,536,242 34,060,105
Depreciation and amortization 356,165 134,398 21,468 1,051,643 1,563,674
Capital expenditures 341,009 70,004 2,936 2,391 416,340
</TABLE>
16. CONTINGENCIES AND LITIGATION
The Company is involved in various legal proceedings which have arisen in
the normal course of business. Reserves are recorded when the occurrence
of loss is probable and can be reasonably estimated. In the opinion of
management, the resolution of these contingencies will not have a
materially adverse effect on the Company's financial condition or results
of operations.
34
EXHIBIT 21
SUBSIDIARIES OF EDISON CONTROL CORPORATION
STATE OF TRADE
NAME INCORPORATION NAMES
Construction Forms, Inc. Wisconsin CF, ConForms, Construction
Forms, CF Pipejoint, ConForms
Europe, UTI, UT, Ultra Tech,
GC, Gilco, Gilson
JABCO, LLC Wisconsin JABCO
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference on Form S-8 of Edison Control
Corporation 1986 Stock Option Plan of our report dated March 26, 1999,
incorporated by reference in the Annual Report on Form 10-K of Edison Control
Corporation for the year ended January 31, 1999.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR
THE YEAR ENDED JANUARY 31, 1999 AND IS QUAILIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 468072
<SECURITIES> 3806314
<RECEIVABLES> 3874917
<ALLOWANCES> 268000
<INVENTORY> 7619746
<CURRENT-ASSETS> 17238640
<PP&E> 9786769
<DEPRECIATION> 1598870
<TOTAL-ASSETS> 34902997
<CURRENT-LIABILITIES> 450547
<BONDS> 14211178
0
0
<COMMON> 23469
<OTHER-SE> 16159803
<TOTAL-LIABILITY-AND-EQUITY> 34902997
<SALES> 25050116
<TOTAL-REVENUES> 25050116
<CGS> 16125601
<TOTAL-COSTS> 4878787
<OTHER-EXPENSES> 1993398
<LOSS-PROVISION> (39931)
<INTEREST-EXPENSE> 955818
<INCOME-PRETAX> 2052330
<INCOME-TAX> 850000
<INCOME-CONTINUING> 1202330
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1202330
<EPS-PRIMARY> .52
<EPS-DILUTED> .42
</TABLE>
