SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended October 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from to
Commission file number 0-15046
WESTERBEKE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 041925880
(State or other jurisdiction of (I.R.S. Identification Employer No.)
incorporation or organization)
Avon Industrial Park
Avon, Massachusetts 02322 02322
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (508) 588-7700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock,
$.01 par value
(Title of class)
Indicate by a 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 as the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers, pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ].
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid
and asked prices of such stock, as of a specified date within 60 days prior
to the date of filing.
Aggregate market value as of January 22, 1996 ........ $2,404,350
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value, as of January 22, 1996 . 2,064,650
shares
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
ITEM 1. BUSINESS.
General
The Company is primarily engaged in the business of designing,
manufacturing and marketing marine engine and air-conditioning products. The
Company was organized in 1932 and was re-incorporated in Delaware in 1986.
The Company's marine products consist of diesel and gasoline engine-driven
electrical generator sets, inboard propulsion engines, self-contained,
reverse-cycle air-conditioners, and associated spare parts and accessories.
In addition, the Company manufactures and markets electrical generator sets
for use in non-marine applications. The Company markets its products
throughout the United States and internationally principally for
recreational marine applications. Accordingly, the market for the Company's
products is dependent on the market for recreational boats, including
auxiliary powered sailboats, powerboats, houseboats and other pleasure
boats. The market for recreational boats, and consequently the Company's
products, may be adversely affected by general economic conditions.
Products
The Company's marine engine product line consists of 17 models of
electrical generator sets, 20 models of inboard propulsion engines, and
associated spare parts and accessories. The Company also offers 11 models of
non-marine generator sets.
The Company's diesel and gasoline engine-driven marine generator sets
are installed in powerboats, houseboats, large sailboats and other pleasure
and commercial boats to provide electricity for communication and
navigational equipment, lighting, refrigeration and other galley services,
and other safety, operating and convenience needs. The Company's present
line of generator sets produce from 4.5 to 75 kilowatts of electricity. A
generator set consists of an electrical generator and an attached diesel or
gasoline engine used to drive the generator. These engines are fresh water
cooled and range from two to eight cylinders and from nine to 46 horsepower.
The Company's propulsion engines are inboard engines, generally
installed as auxiliary power systems for sailboats. The Company's propulsion
engines are fresh water cooled and range from two to six cylinders and from
12 to 108 horsepower. Management believes that more than 90% of the
propulsion engines produced by the Company are installed in sailboats of up
to 50 feet in length. The Company's higher horsepower propulsion engines are
also installed in powerboats of up to approximately 30 feet in length such
as fishing boats, cruisers and work boats.
The Company's product line includes marine diesel auxiliary engines
marketed under the Universal[register mark] name and associated spare and
replacement parts and marine air-conditioning products marketed under the
Rotary Aire[register mark] name. The Company manufactures and markets two
self-contained, reverse-cycle air-conditioning units and accessories under
the Rotary Aire[register mark] name. These units can be installed in
powerboats, houseboats, sailboats and other pleasure and commercial boats.
The Company's product line includes 11 models of electrical
generator sets which may be installed in bus-converted motor coaches,
specialty vehicles, such as refrigeration trucks, and ambulances and other
emergency vehicles to provide electricity for lighting, refrigeration and
other safety, operating and convenience needs. These generators may also be
used as stand-by or secondary power sources in the event of power outages or
in locations where primary power is not readily available, such as
construction sites, rural areas and less developed countries.
The Company offers a complete line of spare parts and accessories for
its current product lines and for most discontinued models. The Company's
line of spare parts includes oil and fuel filters, belts, thermostats,
distributor caps, fuses, spark plugs, wiring, alternators, heat exchangers,
circuit breakers, water and fuel pumps, starter motors and fuel solenoids.
Many basic parts are packaged and sold as spare part kits. Accessories
offered by the Company include various control and instrument panels,
exhaust silencers and generator sound enclosures.
The Company provides its distributors, dealers and final customers
with documentation covering operation, maintenance and repair procedures for
its products. Management believes that the provision of current and
comprehensive documentation enhances the Company's marketing and competitive
effectiveness. See "Marketing and Sales" and "Competition" below.
Each of the Company's products is covered by a one-year limited
warranty covering parts and authorized labor. In addition, the Company
offers a five-year limited warranty on certain marine generator sets. Many
of the Company's suppliers also warrant their products for parts and labor.
Some of the Company's major suppliers warrant their products for the
duration of the Company's warranties. The Company has not experienced any
unusual warranty claims during any of the last three fiscal years. The
Company's distributors are generally responsible for administering the
Company's warranties through the dealer network. See "Marketing and Sales"
below.
Governmental Regulation
In May and November 1994, the Environmental Protection Agency (the
"EPA") proposed emission standards for new gasoline and diesel powered
marine engines and marine and industrial generators of the types
manufactured by the Company. The emission standards are intended to reduce
the emissions of hydrocarbons, nitrogen oxides, carbon monoxide,
particulates and smoke. As proposed, the emission standards for gasoline and
diesel powered engines and generators of the types manufactured by the
Company would phase in over the period beginning August 1, 1996 and ending
January 1, 1999. The proposed regulations include manufacturer testing
requirements, selective enforcement auditing by the EPA, mandated warranty
periods of up to five years or 3,000 hours of operation for emission-related
parts and recall and repair authority for up to ten years or 6,000 hours of
operation. Over the past year, the Company has worked with the EPA in an
attempt to obtain relief from some of the proposed requirements, given what
the Company believes will be the disproportionate impact these requirements
would have on small businesses such as the Company. Final regulations have
not yet been issued covering all of the Company's products, and, accordingly,
the full impact of the final regulations on the Company cannot be assessed.
In addition, effective August 1, 1995, regulations went into effect in the
State of California establishing emissions standards covering most of the
Company's generators and mandating certain warranty conditions and
production testing requirements. In both the case of the proposed EPA
regulations and the State of California regulations, if the Company cannot
effect the required modifications of its products to meet the required
emissions levels within the time frames allowed, the Company could be
materially adversely affected. See "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations" below.
Design and Development
The Company has an ongoing product improvement and development program
intended to enhance the reliability, performance and longevity of existing
products, and to develop new applications for existing products. A
significant portion of the Company's senior management's time, as well as
the efforts of the Company's six person product engineering department, is
spent in this area. In prior years, the Company's product development
program resulted in the introduction of the Company's line of gasoline
engine-driven generator sets and propulsion engines. As part of the
Company's ongoing product development program, the Company upgrades its
engine products and periodically adds models to its product line. For
example, as and when improvements in component parts allow, the Company may
manufacture smaller or more light-weight versions of existing models. In
fiscal 1995, the product engineering department focused principally on the
modernization of the Company's existing product line and modifications which
the Company believes will be required as a result of the emissions standards
discussed above. In addition, in response to demand, the Company may expand
its engine product line by manufacturing generator sets or propulsion
engines with different kilowattage or horsepower than its existing models.
The Company intends to introduce upgraded and new models as and when
developed.
The Company's design and engineering focus is on reliability, ease of
maintenance, compactness, operating smoothness, safety and longevity, among
other technical and performance factors. The Company's technical and
performance specifications are utilized by the Company's suppliers in
producing certain component parts, metal and nonmetal fabrications and other
peripheral equipment that the Company manufactures and assembles into
finished products. Generally, the Company retains title to Company-developed
plans, patterns and specifications used by these suppliers.
For the three fiscal years ended October 1995, the Company incurred
expenses of approximately $1,549,600 for design and development activities
as follows: 1995 - $678,700, 1994 - $488,300 and 1993 - $382,600. All these
activities were conducted and sponsored by the Company and the major portion
of these expenses was applied toward salaries and other expenses of the
Company's product design and engineering personnel.
Manufacturing and Sources of Supply
The Company's manufacturing activities are conducted in an
approximately 37,500 square foot facility owned by the Company. See "Item 2
- - Properties" below. The Company has approximately 52 persons employed in
various manufacturing and assembly functions. See "Employees" below.
The Company's engine products generally contain from 250 to 500
component parts and assemblies purchased from domestic and foreign
manufacturers and suppliers. Some of these component parts are manufactured
to Company specifications, while others are further machined and assembled
by the Company. The basic component of the Company's engine products is a
"long block" engine, which is a complete engine block and head assembly
without peripheral equipment. Peripheral equipment added by the Company
includes subassemblies (generators, transmissions, alternators, carburetors,
motors and pumps), castings (flywheels, bellhousings, manifolds, mounts,
pulleys, brackets and couplings), sheet metal fabrications (control and
instrumentation panels), injection-molded plastic and other non-metallic
fabrications (belt guards, drip trays, belts, hoses and panels) and various
other component parts (mounts, switches and other electrical devices).
The Company purchases "long block" engines from five foreign
manufacturers. The Company currently purchases all of its requirements of
"long block" engines on a purchase order basis rather than pursuant to long-
term supply agreements. In certain cases, the Company has an agreement with
its "long block" engine manufacturers to supply these component parts
exclusively to the Company for marine products of the type produced by the
Company. Orders for "long block" engines are dollar-denominated and
therefore fluctuations in the dollar/yen exchange rate have had and will
continue to have an effect on the cost of the Company's raw materials. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company believes that the purchase of "long
block" engines on a purchase order basis has become the more common industry
practice. While the interruption of supply of "long block" engines from
existing suppliers would have a material adverse effect on the Company's
operations until alternative services are secured, management believes that
there are adequate alternative sources of supply of "long block" engines
available to it. In addition, the Company does not have long-term supply
agreements with other manufacturers of other component parts or peripheral
equipment. The Company believes that it can obtain these parts and equipment
from a variety of sources on commercially reasonable terms. However, the
disruption of its supply of these parts, equipment or "long block" engines
would have a material adverse effect on the Company's operations.
The lead time between ordering and receipt of component parts varies
with the part involved, but generally ranges from a few weeks in the case of
unfinished products to three to six months in the case of "long block"
engines, generators and transmissions. The Company has not experienced any
difficulties in obtaining finished or unfinished components or peripheral
equipment on commercially reasonable terms.
Most of the Company's purchases of component parts and peripheral
equipment from Japanese ("long block" engines), Italian (generators) and
other foreign manufacturers are dollar-denominated. Fluctuations in exchange
rates have resulted, and may in the future result, in price increases from
some of the Company's suppliers. Management believes that to varying degrees
the Company's competitors in the engine product markets have been and will
be similarly affected since many of its competitors also purchase component
parts and peripheral equipment abroad. However, some of the Company's
principal competitors are divisions of large and diversified multinational
companies with extensive production facilities and sales and marketing
staffs and substantially greater financial resources than the Company and
therefore may be better situated to accommodate price increases from
suppliers due to fluctuations in exchange rates. The engine product markets
are price sensitive, and there can be no assurance that the Company will be
able to pass on price increases from its suppliers to its customers.
The manufacturing of a particular engine product requires the
integration of a number of engineering, machining and assembly functions in
order to produce high quality components. Prior to final assembly, the
Company's manufacturing activities involve machining various metal and
nonmetal component parts on computer-controlled and conventional milling
machines, lathes, drill presses, welders and other machinery, modification
and assembly of electrical and mechanical subassemblies, calibration of
electrical devices and components, and testing for variances from
specifications and operating parameters. The Company has approximately nine
machine operators who satisfy approximately 95% of the Company's machining
needs. The remainder of the machining is performed by independent
contractors.
The Company has a final assembly line for its engine products where
component parts, subassemblies and peripheral equipment are assembled onto
"long-block" engines. Following final assembly, each generator set and
propulsion engine is tested at increasing loads up to full operating
capacity to verify performance and safety features. After product testing,
the product is pressure hot water washed, primed and painted, unpainted
components are attached, and the product is packed and shipped to the
customer, generally via common carrier freight collect.
The Company's air-conditioning products are produced on a separate
assembly line where component parts (compressors, evaporator and condensing
coils, fans, electrical components and plastic housings), purchased from
manufacturers and suppliers, are assembled into final units. The Company
does not have any long-term supply agreements with the manufacturers of
these component parts. However, the Company believes it can obtain most of
these parts from a variety of sources on commercially reasonable terms.
Following assembly, each air-conditioner is painted and tested for
performance, leakage and compliance with safety standards.
Management believes that the Company's present facilities are
sufficient for the production of its products in the foreseeable future. Any
future expansion will be dependent upon future growth in demand for the
Company's products. See "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Item 2 - Properties"
below.
Quality Control and Computerization
Management believes that maintaining high quality manufacturing
standards is important to its competitive position and also believes that
the Company has developed a reputation for high quality products. The
Company maintains quality control systems and procedures which it reviews
with its manufacturing personnel and which it modifies as appropriate.
The Company's quality control systems and procedures include the
testing of each fully assembled generator set and propulsion engine at
increasing loads up to full operating capacity to verify performance and
safety features. The checklist includes testing wiring and electrical
systems, all connections and fittings, fuel and oil systems, the fresh water
cooling system and safety shutdown features. In the case of the Company's
generator sets, output current, voltage and frequency are also tested. The
results of the tests are recorded and each product is approved by quality
assurance personnel before it leaves the testing area.
In line with its policy of updating and improving its manufacturing
operations, the Company utilizes a computerized manufacturing management
system which integrates the Company's inventory control, sales and financial
functions with its manufacturing operations.
Marketing and Sales
The Company's marine engine and air-conditioning products are marketed
through a nationwide and international network of distributors and dealers.
The Company markets its non-marine engine products through a sales
representative and to distributors. In addition, the Company's two sales
managers and senior management devote a substantial amount of time to the
overall coordination of the Company's sales to distributors, as well as to
the Company's direct sales to boat and other manufacturers (OEM's). Direct
sales by the Company to OEM's accounted for approximately 35%, 34% and 32%
of total sales for the fiscal years ended October 1995, 1994 and 1993,
respectively.
The Company's marine products are sold to distributors for resale to
manufacturers of powerboats, houseboats, sailboats and other pleasure and
commercial boats, and to boat dealers and marinas. Boat manufacturers
install the Company's products as original equipment. In addition, the
Company's distributors resell the Company's marine products to over 400
authorized dealers (including boatyards and marinas) located on or near
major navigable waterways throughout the United States and Canada. These
dealers install the Company's generator sets, propulsion engines and air-
conditioners as either new or replacement equipment. In addition, many of
these dealers maintain inventories of spare parts and accessories in order
to maintain and repair the Company's marine products.
The Company's distributor network consists of 11 domestic and 44
foreign distributors. The Company's domestic distributors are located along
the East, West and Gulf Coasts and in the Great Lakes Region. Two of the
Company's foreign distributors are located and operate in Canada, 16 are
located and operate in Europe, six are located and operate in Central and
South America, and nine are located and operate in the Far East. The Company
also has distributors in Australia, New Zealand, Pakistan, Turkey, Egypt,
Bahrain, Bermuda, Tahiti, the British West Indies, the U.S. Virgin Islands
and the Netherlands Antilles. Each distributor operates in a specified
region under a distribution agreement with the Company which assigns to the
distributor the nonexclusive responsibility for sales and service of the
Company's products in its territory, including warranty administration,
accounts receivable collection and other customer related functions. Each
distributor maintains inventories of the Company's marine products,
including spare parts and accessories, in order to provide boat
manufacturers and dealers with prompt delivery of products. Typically, the
Company's distributors and dealers also distribute and sell other marine
accessories and products. Generally, however, the Company's distributors do
not sell products which compete with the Company's products.
Sales to international customers totalled $2,279,300 (12.1% of net
sales), $1,708,000 (11.4% of net sales) and $1,950,100 (14.5% of net sales)
for the fiscal years ended October 1995, 1994 and 1993, respectively. See
Note 2 of Notes to Consolidated Financial Statements included in "Item 8 -
Financial Statements and Supplementary Data" for additional information
concerning sales to international customers for the Company's three most
recent fiscal years. Management is not aware of any special tariffs,
importation quotas or any other restrictions imposed by the foreign
countries in which the Company sells its products. All of the Company's
international sales are dollar-denominated which protects the Company to
some extent against foreign currency exchange rate fluctuations, although
significant increases in the value of the dollar in relation to foreign
currencies may adversely impact the Company's ability to market its products
abroad. Management believes that, to varying degrees, the Company's
competitors in the marine product market are similarly affected since many
of its competitors also sell products abroad. However, some of the Company's
principal competitors are divisions of large and diversified multinational
companies with extensive production facilities and sales and marketing
staffs and substantially greater financial resources than the Company and
therefore may be better situated to accommodate fluctuations in exchange
rates. Management is not aware of any other unusual or special risks
associated with this aspect of the Company's business. The Company considers
international customers to be an important market for its marine products.
An important aspect of the Company's marketing approach and
competitive position is the ability of its technical personnel and its
distributors to provide technical assistance to boat manufacturers and
dealers with a view to developing specifications and performance parameters
for unit or serial production of its marine products. To that end, the
Company selects its distributors with great care and continually monitors
their technical expertise. In addition, at times the Company conducts
seminars in each distribution region. These sessions are conducted by
personnel from the Company and from its distributors and are open to boat
manufacturers, dealers and individual boat owners. The Company occasionally
sponsors service schools at its manufacturing facility designed to upgrade a
distributor's technical expertise and to introduce product innovations and
new products. See "Competition" below.
The Company markets the Westerbeke[register mark], Universal[register
mark] and Rotary Aire[register mark] names and its marine products through
various methods of advertising. Certain advertising is accomplished under a
cooperative system with the Company's distributors. Under this system, the
Company pays a portion of the cost of and approves the advertising developed
by its distributors. Advertisements are placed in trade publications such as
Soundings, Motor Boating and Sailing, Sail, Power & Motor Yacht and Cruising
World. In addition, a substantial amount of the Company's advertising is
conducted through the distribution of technical and sales literature and
pamphlets, direct mailings, and sponsorship of exhibits at boat shows.
During the fiscal years ended October 1995, 1994 and 1993, the Company
incurred advertising and promotional expenses of $368,400, $283,000 and
$218,300, respectively.
For the fiscal year ended October 28, 1995, sales to Marysville Marine
Distributors, Inc., Hansen Marine Engineering, Inc., Sea Ray Boats, Inc. and
R.B. Grove, Inc., accounted for approximately 21.2%, 14.2%, 11.6% and 10.7%,
respectively, of the Company's total sales. See Note 2 of Notes to
Consolidated Financial Statements included in "Item 8 - Financial Statements
and Supplementary Data." The Company believes that, if necessary, it could
replace any of its distributors or sell the products presently distributed
by them directly to boat manufacturers and dealers. However, the loss of
these customers or the inability to replace these distributors could have a
material adverse effect on the Company.
The market for the Company's products is dependent on the market for
recreational boats, including auxiliary powered sailboats, powerboats,
houseboats and other pleasure boats. In addition, the recreational marine
boat business is seasonal in nature and accordingly, the Company's business
generally experiences some fluctuations in its business during the course of
the year. See Note 14 of Notes to Consolidated Financial Statements included
in "Item 8 - Financial Statements and Supplementary Data."
Proprietary Rights
Although the Company follows a policy of protecting its proprietary
rights to its marine engine products and designs, it does not believe that
its business, as a whole, is materially dependent upon such protection. The
Company has registered the names Westerbeke[register mark],
Universal[register mark], Rotary Aire[register mark] and Atomic
Four[register mark] under Federal trademark law.
Backlog and Credit Terms
The Company believes that because its production is based upon
cancelable purchase orders rather than long-term agreements, the amount of
its backlog is not an important indicator of future sales. The Company
extends credit to certain of its customers on terms which it believes are
normal and customary in the marine industry.
Competition
The business of manufacturing and supplying marine products is
extremely competitive. The Company faces competition from a number of
companies, including at least seven significant competitors, some of which
are divisions of large and diversified multinational companies with
extensive production facilities and sales and marketing staffs and
substantially greater financial resources than the Company. Such competitors
may be better situated to accommodate price increases from suppliers due to
fluctuations in exchange rates. In addition, the Company faces competition
from similar companies as it expands its product line or seeks other non-
marine applications for its product line. Price is an important competitive
factor, however, the Company believes that its pricing is competitive.
The market for the Company's marine products is dependent on the
market for recreational boats which may experience contracting sales as a
result of general economic conditions. A contracting market may result in
additional competition particularly for direct sales to large boat
manufacturers.
The Company believes that it can compete effectively with all of its
present competitors based upon the high quality, reliability, performance
and longevity of its products, the comprehensiveness of its line of
products, price, the effectiveness of its customer service and the technical
expertise of its personnel and that of its distributors.
Employees
At December 31, 1995, the Company had 78 full-time employees,
including officers and administrative personnel. None of the Company's
employees is covered by a collective bargaining agreement and the Company
considers its relationship with its employees to be excellent.
Directors and Executive Officers of the Company
The directors and executive officers of the Company are as follows:
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Name Position with the Company Age
- ---- ------------------------- ---
<S> <C> <C>
John H. Westerbeke, Jr....... Chairman, President and 55
Director (Class C)
John H. Westerbeke, Sr....... Director (Class C) 86
Carleton F. Bryant, III...... Executive Vice President, 50
Treasurer, Chief Operating
Officer and Secretary
Gerald Bench................. Director (Class A) 54
Thomas M. Haythe............. Director (Class B) 56
Nicholas H. Safford.......... Director (Class B) 63
James W. Storey.............. Director (Class B) 61
</TABLE>
John H. Westerbeke, Jr. has been President and a director of the
Company since 1976. In June 1986, Mr. Westerbeke, Jr. assumed the additional
position of Chairman of the Company. Mr. Westerbeke, Jr. has served in
various managerial capacities since joining the Company in 1966.
John H. Westerbeke, Sr. is the founder of the Company. Mr. Westerbeke,
Sr. has served as a director of the Company since 1946 and was Chairman of
the Board of Directors of the Company from 1976 until June 1986. Mr.
Westerbeke, Sr. is presently employed by the Company in various engineering
capacities.
Carleton F. Bryant, III has been Executive Vice President, Treasurer,
Chief Operating Officer, and Secretary of the Company since May 1993. From
October 1987 to May 1993, Mr. Bryant was Director of Business Development
for Analysis & Computer Systems, Inc., a developer of computer software and
systems. From June 1980 to October 1987, Mr. Bryant held various management
positions with Bird-Johnson Company, a manufacturer of ship propellers, bow
thrusters and hydraulic actuators. From 1969 to 1980, Mr. Bryant held a
variety of management positions with Bath Iron Works Corporation, a
shipbuilder.
Gerald Bench has been a director of the Company since June 1986. Mr.
Bench has been a partner in ICAP Marine Group (consulting firm) since April
1994. Mr. Bench has been the Chairman of TDG Aerospace, Inc. (manufacturer
of aircraft de-icing devices) since November 1993 and was the President from
October 1991 to November 1993. Mr. Bench was the President of Thermion, Inc.
(manufacturer of heaters for aircraft de-icing devices) from April 1990 to
September 1991. From July 1989 to March 1990, Mr. Bench was the general
manager of Lermer Corporation (manufacturer of airline galley equipment).
Mr. Bench is the former Chairman of the Board, President, Chief Executive
Officer and director of E&B Marine Inc. (marine supplies and accessories).
Mr. Bench had held various executive positions with E&B Marine Inc. for more
than 30 years.
Thomas M. Haythe has been a director of the Company since June 1986.
Mr. Haythe has been a partner of the law firm of Haythe & Curley since its
formation in February 1982. Mr. Haythe is also a director of Novametrix
Medical Systems Inc. (manufacturer of electronic medical instruments), Guest
Supply, Inc. (provider of hotel guest room amenities, accessories and
products), Isomedix Inc. (provider of sterilization services), Ramsay Health
Care, Inc. (provider of psychiatric health care services) and Ramsay Managed
Care, Inc. (provider of managed mental health care services).
Nicholas H. Safford has been a director of the Company since February
1991. Mr. Safford has been the President of Nicholas H. Safford & Co., Inc.
(investment counselor and private trustee) since 1983 and from 1979 to 1981.
From 1982 to 1983, Mr. Safford was the President and a director of Wendell,
Safford and Co., Inc. (investment counseling firm). Prior to 1978, Mr.
Safford was Vice President and a director of David L. Babson & Co., Inc.
(investment counseling firm).
James W. Storey has been a director of the Company since June 1986.
Mr. Storey was the President of Wellingsley Corporation (private investment
management company) from December 1986 through December 1992. Mr. Storey is
currently an independent consultant. From 1982 to 1986, Mr. Storey was the
President and Chief Executive Officer of Codex Corporation, a subsidiary of
Motorola, Inc., and was a Vice President of Motorola, Inc. Mr. Storey had
held various managerial positions with Codex Corporation since 1966. Mr.
Story is also a director of Progress Software Corporation (software) and
Kurzweil Applied Intelligence Inc. (software).
ITEM 2. PROPERTIES.
The Company's executive and administrative offices and manufacturing
operations are located in Avon, Massachusetts in an approximately 37,500
square foot facility owned by the Company. The Company also leases a
warehouse of approximately 16,000 square feet. Management believes that the
Company's present facilities are sufficient for the production of its
products in the foreseeable future. Any future expansion will be dependent
upon future growth in demand for the Company's products. Annual warehouse
rent was approximately $71,300 in fiscal 1995 and $76,200 in fiscal 1994.
See Notes 8 and 10 of Notes to Consolidated Financial Statements included in
"Item 8 - Financial Statements and Supplementary Data."
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is party to certain claims, suits and
complaints which arise in the ordinary course of business. Currently, there
are no such claims, suits or complaints which, in the opinion of management,
would have a material adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over- the-counter market
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ") under the symbol WTBK. On January 22, 1996, there were
approximately 190 shareholders of record. The following table sets forth the
range of high and low bid quotations per share of the Company's Common Stock
from October 31, 1993 through October 28, 1995, on the NASDAQ. High and low
bid quotations represent prices between dealers and do not reflect retail
mark-ups, mark-downs or commissions and may not represent actual
transactions.
<TABLE>
<CAPTION>
Common Stock Prices
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High Low
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<S> <C> <C>
FISCAL 1994
First Quarter (October 31, 1993
to January 29, 1994) $1.625 $1.50
Second Quarter (January 30, 1994
to April 30, 1994) 1.50 1.125
Third Quarter (May 1, 1994
to July 30, 1994) 3.625 1.375
Fourth Quarter (July 31, 1994
to October 29, 1994) 3.00 2.125
FISCAL 1995
First Quarter (October 30,
1994 to January 28, 1995) $2.313 $1.563
Second Quarter (January 29,
1995 to April 29, 1995) 2.625 1.688
Third Quarter (April 30, 1995
to July 29, 1995) 2.875 2.125
Fourth Quarter (July 30, 1995
to October 28, 1995) 2.375 2.125
</TABLE>
On January 22, 1996, the last bid and asked price quotations for the
Company's Common Stock were $2.25 and $2.625, respectively.
No dividends have been paid or declared on the Common Stock of the
Company and the Company does not expect to pay any dividends on its Common
Stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
Five Year Comparison of Selected Financial Data
<TABLE>
<CAPTION>
October 28, October 29, October 30, October 31, October 26,
For the Year: 1995 1994 1993 1992 1991
-------------------------------------------------------------------
(In thousands, except for per share amount)
<S> <C> <C> <C> <C> <C>
Net sales $18,794 $15,038 $13,411 $15,106 $13,031
Gross profit 4,292 3,399 3,104 3,293 2,582
Selling, general and administrative
expense 2,514 2,223 2,143 2,316 2,495
Research and development expense 679 488 383 387 442
Income (loss) from operations 1,099 688 579 591 (355)
Interest (income) expense (43) (19) (10) 14 144
Income before extraordinary item
and cumulative effect of change in
accounting principle 698 432 336 313 (371)
Net income (loss) 698 633 336 397 (371)
Income (loss) per share before
extraordinary item and cumulative
effect of change in accounting method 0.31 0.19 0.16 0.15 (0.18)
Net income (loss) per share* 0.31 0.28 0.16 0.19 (0.18)
At end of year:
Total assets $10,999 $10,264 $ 8,772 $ 9,281 $ 9,037
Working capital 5,908 5,733 5,520 5,547 4,986
Long-term liabilities 189 267 177 268 331
Stockholders' equity 9,091 8,319 7,658 7,322 6,925
<F*> See Note 1 of Notes to Consolidated Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
The following table sets forth, for the years indicated, the percentages which
the following items in the Consolidated Statements of Operations bear to Net
Sales.
<TABLE>
<CAPTION>
Years Ended
---------------------------------------
October 28, October 29, October 30,
1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 22.8 22.6 23.1
Selling, general and administrative expenses 13.4 14.8 16.0
Research and development expense 3.6 3.2 2.9
Income from operations 5.8 4.6 4.3
Interest income, net 0.2 0.1 0.1
Provision for income taxes 2.4 1.8 1.9
Net income 3.7 4.2 2.5
</TABLE>
Fiscal 1995 compared to Fiscal 1994
- -----------------------------------
Net sales increased $3,756,700 or 25.0% in fiscal 1995 as compared to fiscal
1994. The increase was attributable to higher unit sales of the Company's
marine generators, diesel propulsion engines, and after-market parts revenues.
The overall increase is primarily the result of more favorable economic
conditions benefiting the pleasure boat industry.
International sales were $2,279,300 in 1995, representing 12.1% of net sales,
as compared to $1,708,000 in 1994, or 11.4% of net sales. The increase in 1995
is the result of higher unit sales caused by improved economies in the
European countries.
Gross profit increased $893,000 or 26.3% in fiscal 1995 as compared to fiscal
1994. Gross profit as a percentage of sales increased to 22.8% in fiscal 1995
as compared to 22.6% in fiscal 1994. The increase in gross profit percentage
is primarily due to increased parts revenues and improved manufacturing
productivity during the year.
Selling, general and administrative expense increased $291,200 or 13.1% in
fiscal 1995 as compared to fiscal 1994. The Company incurred higher marketing
and promotional expenses due to increased boat show and travel activity.
Administration costs also increased primarily due to higher legal costs
associated with the negotiation of supplier contracts. Employee compensation
costs were also higher as a result of the Company's improved profitability.
Research and development expense increased $190,400 or 39.0% in fiscal 1995 as
compared to fiscal 1994. The increase is due to additional engineering
personnel and increased consulting costs associated with product enhancements.
The Company has also realized increased costs due to the compliance with
proposed federal and new state emission requirements.
In May and November 1994, the Environmental Protection Agency (the "EPA")
proposed emission standards for new gasoline and diesel powered marine
engines and marine and industrial generators of the types manufactured by
the Company. As proposed, the emission standards would phase in over the
period beginning August 1, 1996 and ending January 1, 1999. The proposed
regulations include manufacturer testing requirements, selective enforcement
auditing by the EPA, mandated warranty periods of up to five years or 3,000
hours of operation for emission-related parts and recall and repair authority
for up to ten years or 6,000 hours of opeation. Final regulations have not
yet been issued covering all of the Company's products and, accordingly, the
full impact of the final regulations on the Company cannot be assessed. In
addition, effective August 1, 1995, regulations went into effect in the State
of California establishing emissions standards covering most of the Company's
generators and mandating certain warranty conditions and production testing
requirements. In both the case of the proposed EPA regulations and the State
of California regulations, if the Company cannot effect the required
modifications of its products to meet the required emissions levels within
the time frames allowed, the Company could be materially adversely affected.
Net interest income was $42,900 in fiscal 1995 compared to $19,000 in fiscal
1994. The increase is primarily due to increased interest income earned on
higher invested cash balances during the year.
The Company's income tax expense in fiscal 1995 was $444,400 as compared to
$275,000 in fiscal 1994.
The Company's net income was $697,600 as compared to $633,000 in fiscal 1994.
The increase is mainly attributable to higher unit sales throughout fiscal
1995. Net income for 1994 includes $201,300 resulting from the cumulative
effect of adopting Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("Statement 109"). Statement 109 required a change
from the deferred method under APB Opinion 11 to the asset and liability
method of accounting for income taxes.
Effective October 30, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Under this statement, the Company's marketable securities
are classified as "available for sale" and are recorded at current market
value with a offsetting adjustment to stockholders' equity.
Fiscal 1994 compared to Fiscal 1993
- -----------------------------------
Net sales increased $1,626,700 or 12.1% in fiscal 1994 as compared to fiscal
1993. The increase was attributable to higher unit sales primarily to OEM
customers.
International sales were $1,708,000 in 1994, representing 11.4% of net sales,
as compared to $1,950,100 in 1993, or 14.5% of net sales. The decrease in 1994
is the result of lower unit sales caused by a general economic slowdown in the
European countries.
Gross profit increased 9.5% in fiscal 1994 as compared to fiscal 1993. Gross
profit as a percentage of sales decreased to 22.6% in fiscal 1994 as compared
to 23.1% in fiscal 1993. The decrease in gross profit percentage is primarily
due to increased product costs as a result of price increases from key
suppliers.
Selling, general and administrative expense increased $80,300 or 3.7% in
fiscal 1994 as compared to fiscal 1993. The increase is mainly due to
increases in product warranty costs and customer bad debt expenses.
Research and development expense increased $105,700 or 27.6% in fiscal 1994 as
compared to fiscal 1993. The increase is due to additional engineering
personnel and increased consulting costs associated with product enhancements.
Net interest income was $19,000 in fiscal 1994 compared to $9,600 in fiscal
1993. The increase is primarily due to lower interest expense costs associated
with the Company's capital leases during the year.
The Company's income tax expense in fiscal 1994 was $275,000 as compared to
$252,500 in fiscal 1993.
The Company's net income was $633,000 in fiscal 1994 as compared to $335,700
in fiscal 1993. Net income for 1994 includes $201,300 resulting from the
cumulative effect of adopting Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("Statement 109"). Statement 109 required a
change from the deferred method under APB Opinion 11 to the asset and
liability method of accounting for income taxes.
Liquidity and Capital Resources
During fiscal 1995, net cash provided by operations was $336,700 as compared
to net cash provided by operations of $877,800 in fiscal 1994. Cash flow
provided by operations in fiscal 1995 was principally the result of net income
of $697,600 and non-cash charges for depreciation and amortization of
$402,500. Major uses of cash during fiscal 1995 include increases in
inventories of $634,800, purchases of property, plant and equipment of
$349,400, and investments in mutual funds of $313,000. The rise in inventories
is primarily the result of increased demand and the timing of sales order
shipments.
During fiscal 1995 and 1994, the Company purchased property, plant and
equipment of $349,400 and $463,600, respectively. The Company plans capital
spending of approximately $250,000 for emission testing and other related
emission equipment during fiscal 1996.
On June 4, 1992, the Company entered into a $3,000,000 line of credit
agreement (the "Credit Agreement") with State Street Bank and Trust Company,
collateralized by inventory, accounts receivable and general intangibles of
the Company. The Credit Agreement was renewed on March 31, 1995, and will
expire on March 31, 1996. The Company believes that it will be able to
continue to extend the term of the Credit Agreement on commercially reasonable
terms. As of October 28, 1995, the Company had approximately $2,902,500 in
unused borrowing capacity under the Credit Agreement and approximately $97,500
committed to cover the Company's reimbursement obligations under certain
letters of credit.
Management believes cash flow from operations and borrowings available under
the Credit Agreement will provide for working capital needs, principal
payments on long-term debt, and capital and operating leases through fiscal
1996.
Domestic inflation is not expected to have a major impact on the Company's
operations.
The costs of engine blocks and other components are subject to foreign
currency fluctuations (primarily the Japanese yen). The weakening U.S. dollar
relative to the yen in 1995 did result in cost increases to the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
WESTERBEKE CORPORATION AND SUBSIDIARY
-------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended October 28, 1995,
October 29, 1994 and October 30, 1993
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Westerbeke Corporation:
We have audited the accompanying consolidated balance sheets of Westerbeke
Corporation and subsidiary as of October 28, 1995 and October 29, 1994, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
October 28, 1995. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule as listed
in Item 14(a)2. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Westerbeke Corporation and subsidiary as of October 28, 1995 and October 29,
1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended October 28, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in note 1 to the consolidated financial statements, effective
October 31, 1993, the Company changed its method of accounting for income
taxes by adopting the provisions of Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.
/s/ KPMG PEAT MARWICK LLP
Boston, Massachusetts
December 21, 1995
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 28, October 29,
ASSETS 1995 1994
--------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,322,200 $ 1,727,600
Accounts receivable, net of allowance for doubtful
accounts of $60,500 and $60,800, respectively (Note 2) 1,541,400 1,568,200
Inventories (Note 3) 4,313,500 3,678,700
Prepaid expenses and other assets 134,100 158,400
Deferred income taxes (Note 9) 316,200 278,600
----------- -----------
Total current assets 7,627,400 7,411,500
Property, plant and equipment, net (Notes 4, 8 and 10) 1,594,900 1,622,600
Other assets, net (Note 5) 1,140,800 966,200
Investments in marketable securities (Note 1) 486,100 101,900
Note receivable--related party (Note 6) 149,400 162,000
----------- -----------
$10,998,600 $10,264,200
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 8) $ 22,100 $ 43,900
Current portion of obligation under capital
leases (Note 10) 12,700 51,500
Accounts payable 1,077,600 1,256,900
Accrued expenses and other liabilities 380,400 311,200
Accrued income taxes (Note 9) 226,300 15,400
----------- -----------
Total current liabilities 1,719,100 1,678,900
----------- -----------
Deferred income taxes (Note 9) 144,200 187,100
Long-term debt, net of current portion (Note 8) 44,700 66,800
Obligations under capital leases (Note 10) -- 12,700
----------- -----------
188,900 266,600
----------- -----------
Commitments and contingencies (Notes 7 and 10)
Stockholders' equity (Notes 11 and 12):
Common stock, $.01 par value; authorized 5,000,000
shares; issued and outstanding 2,064,650 shares
in 1995 and 2,061,550 shares in 1994 20,600 20,600
Additional paid-in capital 5,902,100 5,899,000
Unrealized gain on marketable securities (Note 1) 71,200 --
Retained earnings 3,096,700 2,399,100
----------- -----------
Total stockholders' equity 9,090,600 8,318,700
----------- -----------
$10,998,600 $10,264,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended
-----------------------------------------
October 28, October 29, October 30,
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Net sales (Note 2) $18,794,200 $15,037,500 $13,410,800
Cost of sales 14,502,100 11,638,400 10,306,800
-----------------------------------------
Gross profit 4,292,100 3,399,100 3,104,000
Selling, general and administrative expense 2,514,300 2,223,100 2,142,800
Research and development expense 678,700 488,300 382,600
-----------------------------------------
Income from operations 1,099,100 687,700 578,600
Interest income, net 42,900 19,000 9,600
-----------------------------------------
Income before income taxes and cumulative effect
of change in accounting principle 1,142,000 706,700 588,200
Provision for income taxes (Note 9) 444,400 275,000 252,500
-----------------------------------------
Income before cumulative effect of change in
accounting principle 697,600 431,700 335,700
Cumulative effect of change in method of
accounting for income taxes (Note 9) -- 201,300 --
-----------------------------------------
Net income $ 697,600 $ 633,000 $ 335,700
=========================================
Income per share:
Income before cumulative effect of change in
accounting principle $ 0.31 $ 0.19 $ 0.16
Cumulative effect of change in method of
accounting for income taxes -- $ 0.09 --
-----------------------------------------
Net income per share $ 0.31 $ 0.28 $ 0.16
=========================================
Weighted average shares 2,248,564 2,220,667 2,120,223
=========================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three years ended October 28, 1995
<TABLE>
<CAPTION>
Common Stock Additional Unrealized Gains Total
------------------- Paid-In on Marketable Retained Stockholders'
Shares Amount Capital Securities Earnings Equity
--------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
October 31, 1992 2,033,750 $20,300 $5,871,500 $ -- $1,430,400 $7,322,200
Net income -- -- -- -- 335,700 335,700
------------------------------------------------------------------------------
October 30, 1993 2,033,750 20,300 5,871,500 -- 1,766,100 7,657,900
Exercise of stock options 27,800 300 27,500 -- -- 27,800
Net income -- -- -- -- 633,000 633,000
------------------------------------------------------------------------------
October 29, 1994 2,061,550 20,600 5,899,000 -- 2,399,100 8,318,700
Exercise of stock options 3,100 -- 3,100 -- -- 3,100
Unrealized gains on marketable securities -- -- -- 71,200 -- 71,200
Net income -- -- -- -- 697,600 697,600
------------------------------------------------------------------------------
October 28, 1995 2,064,650 $20,600 $5,902,100 $71,200 $3,096,700 $9,090,600
==============================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
-----------------------------------------
October 28, October 29, October 30,
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 697,600 $ 633,000 $ 335,700
Reconciliation of net income to net cash provided
(used) by operating activities:
Cumulative effect of accounting change -- (201,300) --
Depreciation and amortization 402,500 398,400 445,500
Deferred income taxes (80,500) -- 33,400
Changes in operating assets and liabilities:
Accounts receivable 26,800 (291,500) (143,200)
Inventories (634,800) (393,200) 616,800
Prepaid expenses and other assets 24,300 29,900 4,500
Recoverable income taxes -- 64,600 (22,600)
Other assets (200,000) (208,300) (558,300)
Accounts payable (179,300) 841,700 (570,200)
Accrued expenses and other liabilities 69,200 (1,900) (196,400)
Income tax payable 210,900 6,400 8,700
----------------------------------------
Net cash provided (used) by operating activities 336,700 877,800 (46,100)
----------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (349,400) (463,600) (159,600)
Note receivable-related party -- (165,000) --
Proceeds from payment of note receivable-related party 12,600 3,000 --
Investment in marketable securities (313,000) (101,900) --
----------------------------------------
Net cash used in investing activities (649,800) (727,500) (159,600)
----------------------------------------
Cash flows from financing activities:
Exercise of stock options 3,100 27,800 --
Principal payments on long-term debt and capital
lease obligations (95,400) (92,000) (120,100)
----------------------------------------
Net cash used in financing activities (92,300) (64,200) (120,100)
----------------------------------------
Increase (decrease) in cash and cash equivalents (405,400) 86,100 (325,800)
Cash and cash equivalents, beginning of period 1,727,600 1,641,500 1,967,300
----------------------------------------
Cash and cash equivalents, end of period $1,322,200 $1,727,600 $1,641,500
========================================
Supplemental cash flow disclosures:
Interest paid $ 8,700 $ 17,000 $ 26,300
Income taxes paid $ 313,700 $ 204,000 $ 223,600
Supplemental disclosures of non cash flow item:
Increase in unrealized gains on marketable securities 71,200 -- --
========================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 28, 1995, October 29, 1994 and October 30, 1993
1. Summary of Significant Accounting Policies:
Basis of Presentation
The consolidated financial statements include the accounts of Westerbeke
Corporation (the "Company"), and its wholly owned subsidiary, Westerbeke
International, Inc. (a foreign sales corporation). Westerbeke International,
Inc. was inactive during fiscal years 1995, 1994, and 1993.
The presentation 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 these estimates.
Cash Equivalents
All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents.
Investments in Marketable Securities
Marketable investment securities at October 28, 1995 and October 29, 1994
consist of equity securities in various mutual funds. The Company adopted the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities (Statement 115) at
October 30, 1994. Under Statement 115, the Company classifies its marketable
securities in one of two categories: trading or available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses on trading securities are included in
earnings. Unrealized holding gains and losses, net of related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Transfers of
securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains and losses are recognized in earnings for
transfers into trading securities.
A decline in the market value of any available-for-sale security below cost
that is deemed other than temporary is charged to earnings resulting in the
establishment of a new cost basis for the security.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available-for-sale are included in
earnings with cost determined using the specific identification method.
Marketable investment securities at October 28, 1995 include equity
securities, principally mutual funds for which the Company has both intent and
ability to hold. Equity securities are stated at the fair market value at
October 28, 1995 and are stated at the lower of aggregate cost or market at
October 29, 1994. The total cost of the marketable securities at October 28,
1995 was $414,900. The total cost of marketable securities at October 29, 1994
was $101,900. Gross unrealized holding gains in investment securities at
October 28, 1995 and October 29, 1994 were $71,200 and $0, respectively.
Inventories
Inventories are valued at the lower of cost (determined on the last-in, first-
out method) or market.
Depreciation and Amortization
The Company computes depreciation and amortization expense on a straight-line
basis over the following estimated useful lives:
<TABLE>
<CAPTION>
Asset Classification Estimated Useful Lives
- -------------------- ----------------------
<S> <C>
Building and building improvements 15 - 40 years
Machinery and equipment 10 years
Patterns 5 years
Furniture and fixtures 5 - 10 years
Transportation equipment 3 - 5 years
Equipment under capital lease 5 - 10 years
Intangibles 3 - 17 years
</TABLE>
Intangible assets are classified in other assets. Maintenance and repairs are
charged to expense in the period incurred. The cost and accumulated
depreciation of assets retired or sold are removed from the accounts and any
gain or loss is credited or charged to income.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the life of the lease or their estimated useful lives.
Revenue Recognition
The Company recognizes revenue upon shipment of product.
Product Warranty Cost
The anticipated costs related to product warranty are expensed at the time of
sale of the product. Accrued warranty expense of $196,100 is included in
accrued expenses and other liabilities at October 28, 1995 and October 29,
1994.
Income Taxes
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, was issued by the Financial Accounting Standards Board in February
1992. Statement 109 requires a change from the deferred method under APB
Opinion 11 to the asset and liability method of accounting for income taxes.
Under the asset and liability method of Statement 109, deferred income taxes
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred taxes of a
change in tax rate is recognized in income in the period that includes the
enactment date.
Effective October 31, 1993, the Company adopted Statement 109 and has reported
the cumulative effect of that change in the method of accounting for income
taxes in the fiscal 1994 consolidated statement of operations.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1993 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year of
the calculation. Under the deferred method, deferred taxes are not adjusted
for subsequent changes in tax rates.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and common stock equivalents
outstanding during each fiscal year. Common stock equivalents are not included
in loss years because they are antidilutive.
2. Business Segment
The Company has one business segment; the designing, manufacturing and
marketing of marine engines and related products. The profitability of the
Company is directly tied to the marine industry. The industry is subject to
fluctuations in economic conditions that may adversely affect the Company.
Four customers accounted for approximately 58% and 52% of Company revenues for
the fiscal years ended 1995 and 1994, respectively. Three customers totaled
41% of Company revenues for the fiscal year ended 1993. The loss of one of
these customers could adversely affect the Company's profitability.
Net sales include export sales, primarily to customers in the Far East, Canada
and Europe of approximately $2,279,300, $1,708,000 and $1,950,100 for fiscal
years ended October 28, 1995, October 29, 1994, and October 30, 1993,
respectively. In fiscal 1995, four customers accounted for sales in excess of
10% of net sales as follows: $3,993,600, $2,664,600, $2,171,900 and
$2,011,700. In fiscal 1994, four customers accounted for sales in excess of
10% of net sales as follows: $2,667,900, $2,006,600, $1,572,000 and
$1,525,300. In fiscal 1993, three customers accounted for sales in excess of
10% of net sales as follows: $2,308,100, $1,625,100 and $1,510,000.
At October 28, 1995, three customers accounted for trade accounts receivable
in excess of 10% of net accounts receivable as follows: $267,400, $223,000,
and $217,400. At October 29, 1994, three customers accounted for trade
accounts receivable in excess of 10% of net accounts receivable as follows:
$293,500, $288,600, and $188,200. The Company performs ongoing credit
evaluations of its customers and therefore does not require collateralization
of trade receivables.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
October 28, 1995 October 29, 1994
---------------- ----------------
<S> <C> <C>
Raw materials $3,319,000 $3,010,500
Work-in-process 322,700 271,600
Finished goods 671,800 396,600
---------- ----------
$4,313,500 $3,678,700
========== ==========
</TABLE>
The Company uses the last-in, first-out (LIFO) method to value inventory. The
Company believes the LIFO inventory method results in a better matching of
costs and revenues during periods of changing prices. Inventories would have
been $1,204,000 and $1,113,000 higher at October 28, 1995 and October 29,
1994, respectively, if the first-in, first-out (FIFO) method had been used. In
1993, inventory was reduced resulting in liquidation of LIFO inventory layers
carried at lower costs prevailing in prior years as compared with the current
cost of inventory. The effect of the inventory reductions was to reduce cost
of sales by approximately $156,000 in fiscal 1993. Inventory cost determined
on the FIFO method approximates replacement or current cost.
The basic component of the Company's engine products is a "long block" engine,
which is a complete engine block and head assembly without peripheral
equipment. The Company purchases "long block" engines from five foreign
manufacturers. While the interruption of supply of "long block" engines from
existing suppliers would have a material adverse effect on the Company's
operations until alternative services are secured, management believes that
there are adequate alternative sources of supply of "long block" engines
available to it.
4. Property, Plant and Equipment
Property, plant and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
October 28, 1995 October 29, 1994
---------------- ----------------
<S> <C> <C>
Land $ 48,000 $ 48,000
Building and building improvements 1,280,100 1,112,100
Furniture and fixtures 423,700 421,700
Machinery patterns and equipment 1,756,100 1,576,500
Transportation equipment 11,100 11,100
Leasehold improvements 20,400 20,400
Equipment under capital lease 845,400 845,400
---------- ----------
4,384,800 4,035,200
Less accumulated depreciation 2,789,900 2,412,600
---------- ----------
$1,594,900 $1,622,600
========== ==========
</TABLE>
The Company incurred depreciation expense of approximately $377,300, $353,000,
and $336,000 for fiscal years 1995, 1994, and 1993, respectively.
5. Other Assets
The Company has entered into a split-dollar insurance arrangement with John H.
Westerbeke, Jr. as part of his employment agreement (see note 10), pursuant to
which the Company will pay the premium costs of certain life insurance
policies. Upon surrender of the policies or payment of the death benefit, the
Company is entitled to repayment of an amount equal to the cumulative premiums
previously paid by the Company, with all remaining payments to be made to Mr.
Westerbeke Jr. or his beneficiaries. Included in other assets at October 28,
1995 and October 29, 1994 is $801,300 and $601,300, respectively, which
represents the cumulative value of insurance premiums paid to date.
6. Note Receivable-Related Party
The Company holds a note receivable from John H. Westerbeke, Jr. the chairman,
president and chief executive officer of the Company. The principal amount of
the secured loan at October 28, 1995 and October 29, 1994 was $149,400 and
$162,000, respectively. The loan was used by Mr. Westerbeke Jr. to purchase a
40 foot sailboat. The loan bears interest at 7-3/4% per annum, is secured by a
security interest in the sailboat and is payable in monthly installments over
a ten year period. The Company has leased the sailboat from Mr. Westerbeke,
Jr. pursuant to a lease expiring in July 1999 at a rental of $2,660 per month
(see Note 10). The Company makes use of the boat to evaluate the performance
of its marine engines and products and for other corporate matters.
7. Revolving Demand Note Payable
On June 4, 1992, the Company entered into a $3,000,000 line of credit
agreement (the "Credit Agreement") with State Street Bank and Trust Company,
collateralized by inventory, accounts receivable and general intangibles of
the Company. The Credit Agreement was renewed on March 31, 1995, and will
expire on March 31, 1996. Borrowings outstanding under the agreement are
limited to 80% of eligible accounts receivable and 40% of eligible inventories
valued on a first-in, first-out basis with interest payable at the prime rate.
At October 28, 1995, the Company had approximately $2,902,500 in unused
borrowings under the Credit Agreement and approximately $97,500 committed to
cover the Company's reimbursement obligations under certain open letters of
credit and bankers' acceptances.
8. Long-Term Debt
Long-term debt consists of:
<TABLE>
<CAPTION>
October 28, 1995 October 29, 1994
---------------- ----------------
<S> <C> <C>
Mortgage note with an interest rate of 5 1/2%
with repayment terms through August 1998. $66,800 $ 87,700
Convertible subordinated note issued in Rotary
Marine, Inc. asset acquisition with interest
at 7% annually; principal payments in annual
installments through January 1995. - 23,000
------- --------
66,800 110,700
Less current portion 22,100 43,900
------- --------
$44,700 $ 66,800
======= ========
</TABLE>
At October 28, 1995, the real estate mortgage note is collateralized by
certain land and buildings with a net book value of approximately $711,000.
Aggregate maturities of long-term debt for each of the ensuing three years are
as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<C> <C>
1996 $22,100
1997 23,400
1998 21,300
-------
$66,800
=======
</TABLE>
9. Income Taxes
As discussed in Note 1, the Company adopted Statement 109 as of October 31,
1993. The cumulative effect of this change in accounting for income taxes of
$201,300 is determined as of October 31, 1993 and is reported separately in
the consolidated statement of operations for the year ended October 29, 1994.
Income tax expense attributable to income from continuing operations consists
of:
<TABLE>
<CAPTION>
Years Ended
------------------------------------------------------
October 28, 1995 October 29, 1994 October 30, 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
Federal:
Current $396,000 $210,000 $157,300
Deferred (63,400) - 26,400
-------- -------- --------
332,600 210,000 183,700
-------- -------- --------
State:
Current 128,900 65,000 61,800
Deferred (17,100) - 7,000
-------- -------- --------
111,800 65,000 68,800
-------- -------- --------
Total $444,400 $275,000 $252,500
======== ======== ========
</TABLE>
The Company has no available book or tax net operating loss carryforwards.
Federal income tax returns covering all taxable periods through October 31,
1984 have been examined by the Internal Revenue Service. The Internal Revenue
Service has finalized a review of the Company's fiscal 1992 and 1993 tax
returns. The results did not have a material effect on the financial condition
of the Company.
Income tax expense was $444,400, $275,000, and $252,500 for the years ended
October 28, 1995, October 29, 1994, and October 30, 1993, respectively, and
differed from the amounts computed by applying the U.S. federal income tax
rate of 34 percent to pretax income as a result of the following:
<TABLE>
<CAPTION>
Years Ended
------------------------------------------------------
October 28, 1995 October 29, 1994 October 30, 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
Provision at statutory rate $388,300 $240,300 $200,000
State tax provision,
net of federal tax benefit 73,800 42,900 36,900
Officers' life insurance 2,000 - 12,500
Other, net (19,700) (8,200) 3,100
-------- -------- --------
Total $444,400 $275,000 $252,500
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at October
28, 1995, and October 29, 1994 are presented below.
<TABLE>
<CAPTION>
October 28, 1995 October 29, 1994
---------------- ----------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable reserve $ 41,100 $ 39,800
Inventory reserves and capitalization 196,100 159,800
Warranty reserve 79,000 79,000
--------- ---------
Total gross deferred tax assets 316,200 278,600
Less valuation allowance - -
--------- ---------
Net deferred tax assets 316,200 278,600
--------- ---------
Deferred tax liabilities:
Fixed assets, principally due to
accelerated depreciation methods (144,200) (187,100)
--------- ---------
Net deferred tax assets $ 172,000 $ 91,500
========= =========
</TABLE>
The valuation allowance for deferred tax assets as of October 29, 1994 was $0.
There was no net change in the total valuation allowance for the year ended
October 28, 1995. Management believes that the realization of net deferred tax
assets is more likely than not because future operations of the Company are
expected to generate sufficient taxable income.
10. Commitments and Contingencies
Lease Obligations
The Company has lease agreements for a warehouse and certain equipment (see
note 6) expiring at various dates through 1999. Rental expense under operating
leases was $91,500, $76,200, and $83,100 for the years ended October 28, 1995,
October 29, 1994 and October 30, 1993, respectively.
Property, plant and equipment includes $116,600 of equipment under capital
lease, net of accumulated amortization of $728,800 at October 28, 1995.
The future minimum lease payments required under capital and operating leases
that have initial or remaining noncancelable lease terms in excess of one year
are as follows:
<TABLE>
<CAPTION>
Year Capital Operating
- ---- ------- ---------
<C> <C> <C>
1996 $13,000 $ 71,600
1997 - 31,900
1998 - 31,900
1999 - 21,300
------- --------
Total future minimum lease payments 13,000 156,700
========
Less: amount representing interest 300
-------
Present value of minimum lease payments 12,700
Less: current portion 12,700
-------
Long-term obligations under capital leases $ 0
=======
</TABLE>
Letters of Credit and Bankers' Acceptances
Certain foreign vendors require the Company to provide letters of credit at
the time purchase orders are placed. As of October 28, 1995, the Company was
contingently liable for open letters of credit and bankers' acceptances of
approximately $97,500 (see note 7).
Royalty Arrangements
As a result of the acquisition of Rotary Marine, Inc. of Sarasota, Florida, on
January 5, 1990, the Company is required to make contingent cash payments to
the sellers based upon a percentage of sales of marine air conditioning
products and accessories by the Company during the fiscal years ending 1992
through 1996. No payment was made in fiscal 1995, 1994 or 1993 as the sales
criteria were not met.
Employment Agreements
In March of 1993, the Company entered into an Employment Agreement (the
"Agreement") with John H. Westerbeke, Jr., the chairman of the board,
president, and chief executive officer of the Company. The Agreement calls for
Mr. Westerbeke, Jr. to be paid an annual salary of $141,750, subject to
increases based upon the Consumer Price Index and at the discretion of the
Company. The Agreement also provides for payment of a bonus at the discretion
of the board of directors of the Company. Under the Agreement, Mr. Westerbeke,
Jr. may elect to have all or any part of his base salary or bonus paid as
deferred compensation. Payments of deferred compensation are to be made in
cash and no special fund has been established to ensure the payment of
deferred compensation. The Agreement also requires the Company to pay premiums
for certain life insurance policies on the life of Mr. Westerbeke, Jr. In
addition, in the event of a change in control of the Company, Mr. Westerbeke,
Jr. may terminate his employment during the one year period following such
change in control, and in such event, the Company is required to pay him a
lump sum cash payment in an amount equal to three times his average annual
cash compensation during the most recent five taxable years of the Company. In
addition, in such circumstances, the Company is required to continue to carry
group life and health insurance for Mr. Westerbeke, Jr. for a three year
period and is required to pay any premiums payable on the life insurance
policies on his life for a three year period.
Under an employment agreement between the Company and John H. Westerbeke, Sr.,
a director of the Company, Mr. Westerbeke, Sr. will be paid $35,000 per year.
This agreement provides that following his retirement, Mr. Westerbeke, Sr.
will act as consultant to the Company at an annual consulting fee of $30,000.
11. Stockholders' Equity
In June 1986, the board of directors and the stockholders of the Company
adopted the Company's 1986 Stock Option Plan (the "Option Plan"), under which
300,000 shares of common stock have been made available. The Company has also
reserved 250,000 shares of common stock for issuance in connection with a
Supplemental Stock Option Plan (the "Supplemental Plan"). The Supplemental
Plan permits acceleration of the exercisability of options in the event of a
change in control of the Company with the Company retaining the right of first
refusal with respect to shares issued under this plan.
Options under the plans may be either nonqualified stock options or incentive
stock options. Options may be granted to eligible employees of the Company and
members of the board of directors.
The price at which the shares may be granted may not be less than the lower of
fair market value or tangible book value in the case of nonqualified options,
or 100% of the fair market value in the case of incentive stock options. The
options generally become excercisable in 20% annual increments beginning on
the date of the grant and expire at the end of ten years.
Information for fiscal years 1993, 1994 and 1995, with respect to the Option
Plan, is as follows:
<TABLE>
<CAPTION>
Shares Option Price
------ ------------
<S> <C> <C>
Outstanding at October 31, 1992 49,500 $1.00 - $1.875
Granted 175,000 $1.125
------- --------------
Outstanding at October 30, 1993 224,500 $1.00 - $1.875
Exercised (7,700) $1.00
Canceled (6,200) $1.875
------- --------------
Outstanding at October 29, 1994 210,600 $1.00 - $1.125
Exercised (3,100) $1.00
------- --------------
Outstanding at October 28, 1995 207,500 $1.00 - $1.125
======= ==============
</TABLE>
The outstanding options expire on various dates through May 2003. Options for
122,500 shares of common stock were exercisable at October 28, 1995. Options
for 92,500 shares are available for future grant under the Option Plan.
Information for fiscal years 1993, 1994, and 1995, with respect to the
Supplemental Plan, is as follows:
<TABLE>
<CAPTION>
Shares Option Price
------ ------------
<S> <C> <C>
Outstanding at October 31, 1992 200,400 $0.875 - $1.00
Granted 75,000 $1.125
Canceled (100,000) $1.00
-------- ---------------
Outstanding at October 30, 1993 175,400 $0.875 - $1.125
Granted - -
Exercised (20,100) $1.00
Canceled - -
-------- ---------------
Outstanding at October 29, 1994 and October 28, 1995 155,300 $0.875 - $1.125
======== ===============
</TABLE>
The outstanding options expire on various dates through March 2003. Options
for 120,300 shares of common stock were exercisable at October 28, 1995.
Options for 94,700 shares are available for future grant under the
Supplemental Plan.
Additionally, the Company has granted nonqualified options to a consultant to
purchase 6,200 shares of common stock, all of which are exercisable at October
28, 1995.
Preferred Stock
As of October 28, 1995, October 29, 1994 and October 30, 1993, 1,000,000
shares of $1.00 par value Serial Preferred Stock were authorized; none were
issued or outstanding.
12. 1986 Employee Stock Purchase Plan
In June 1986, the board of directors and the stockholders of the Company
adopted the Company's 1986 Employee Stock Option Plan (the "Purchase Plan").
Under the Purchase Plan, an aggregate of 100,000 shares of common stock are
available for purchase by eligible employees of the Company, including
directors and officers, through payroll deductions over successive six-month
offering periods. The Purchase Plan will become effective when so declared by
the board of directors.
The Purchase Plan is intended to qualify as an "Employee Stock Purchase Plan"
within the meaning of Section 423 of the Internal Revenue Code. The purchase
price of the common stock under the Purchase Plan will be 85% of the average
of the closing high bid and last asked prices per share in the over-the-
counter market on either the first or last day of each six-month offering
period, whichever is less. As of October 28, 1995, there has been no activity
under the Purchase Plan.
13. Employee Benefit Plan
In 1994, the Company began an Employee Deferred Compensation Plan that covers
all employees over 18 years of age who have completed at least 3 months of
service with the Company. Contributions by the Company are discretionary and
are determined by the Company's board of directors. The Company has made no
contributions to the plan.
14. Quarterly Financial Data and Restatement of Fiscal 1994 First Quarter
Information (Unaudited)
(In thousands, except per share amounts)
Selected quarterly financial data for the years ended October 28, 1995 and
October 29, 1994 is as follows:
<TABLE>
<CAPTION>
Fiscal
First Second Third Fourth Year
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal 1995:
Net sales $4,305 $5,245 $4,879 $4,365 $18,794
Gross profit 956 1,215 1,087 1,034 4,292
Income from operations 177 347 323 252 1,099
Net income 114 213 200 171 698
Net income per share 0.05 0.09 0.09 0.08 0.31
Fiscal 1994:
Net sales $2,856 $3,871 $4,372 $3,939 $15,038
Gross profit 625 915 1,082 777 3,399
Income from operations 28 213 314 133 688
Income before cumulative
effect of accounting change 20 131 190 91 432
Net income 221 131 190 91 633
Income per share before
cumulative effect of
accounting change 0.01 0.06 0.08 0.04 0.19
Net income per share 0.10 0.06 0.08 0.04 0.28
</TABLE>
SCHEDULE II
WESTERBEKE CORPORATION AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNT
For the years ended October 28, 1995, October 29, 1994
and October 30, 1993
<TABLE>
<CAPTION>
Balance at Charged to Charged Balance
Beginning of Costs and to Other at End
Period Expenses Accounts Deductions of Year
------------ ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
1993
Allowance for
doubtful accounts $68,900 - - $9,400 $59,500
1994
Allowance for
doubtful accounts $59,500 $1,300 - - $60,800
1995
Allowance for
doubtful accounts $60,800 - - 300 $60,500
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain biographical information concerning the directors of the
Company as of January 1, 1996 is set forth below. Such information was
furnished by them to the Company.
<TABLE>
<CAPTION>
Certain
Name of Director Age Biographical Information
- ------------------------------------------------------------------------
<S> <C> <S>
GERALD BENCH 54 Partner, ICAP Marine Group (consulting
firm) since April 1994; Chairman, TDG
Aerospace, Inc. (manufacturer of
aircraft de-icing devices) since
November 1993; President of TDG
Aerospace, Inc. from October 1991 to
November 1993; President, Thermion, Inc.
(manufacturer of heaters for aircraft
de-icing devices) from April 1990 to
September 1991; General Manager, Lermer
Corporation (manufacturer of airline
galley equipment) from June 1989 through
March 1990; former Chairman of the
Board, President, Chief Executive
Officer and Director of E&B Marine Inc.
(marine supplies and accessories) from
prior to 1988; Director of the Company
since June 1986.
THOMAS M. HAYTHE 56 Partner, Haythe & Curley (attorneys)
since February 1982; Director:
Novametrix Medical Systems Inc.
(manufacturer of electronic medical
instruments), Guest Supply, Inc.
(provider of hotel guest room amenities,
accessories and products), Isomedix Inc.
(provider of sterilization services),
Ramsay Health Care, Inc. (provider of
psychiatric health care services) and
Ramsay Managed Care, Inc. (provider of
managed mental health care services);
Director of the Company since June 1986.
NICHOLAS H. SAFFORD 63 President, Nicholas H. Safford & Co.,
Inc. (investment counselor and private
trustee) since 1983 and from 1979 to
1981; former president and director of
Wendell, Safford & Co., Inc. (investment
counseling firm) from 1982 to 1983;
former vice president and director of
David L. Babson & Co., Inc. (investment
counseling firm) prior to 1978; Director
of the Company since February 1991.
JAMES W. STOREY 61 Consultant since January 1993;
President, Wellingsley Corporation
(private investment management company)
from December 1986 through December
1992; President and Chief Executive
Officer of Codex Corporation, a
subsidiary of Motorola, Inc. from 1982
to 1986; Vice President of Motorola,
Inc. from 1982 to 1986; Director:
Progress Software Corporation (software)
and Kurzweil Applied Intelligence Inc.
(software); Director of the Company
since June 1986.
JOHN H. WESTERBEKE, JR. 55 President of the Company since 1976;
Director of the Company since 1976;
Chairman of the Board of Directors of
the Company since June 1986.
JOHN H. WESTERBEKE, SR. 86 Founder of the Company; Presently
serving in various engineering
capacities with the Company; Chairman of
the Board of Directors of the Company
from 1946 to June 1986.
</TABLE>
For additional information concerning the management of the
Company, see "Item 1 - Business - Executive Officers" contained in
Part I hereof.
The Board of Directors of the Company consists of three classes
of directors, Class A, Class B and Class C. Directors in each class
are elected for a term of three years. The term of office of the Class
A directors will expire at the Annual Meeting of Stockholders to be
held in 1996. Class B and Class C directors will be elected at the
Annual Meetings to be held in 1997 and 1998, respectively. Mr. Bench
is a Class A director, Messrs. Haythe, Safford and Storey are Class B
directors and Messrs. Westerbeke, Jr. and Westerbeke, Sr. are Class C
directors.
The directors and officers of the Company other than Messrs.
Bench, Haythe, Safford and Storey are active in the business on a day-
to-day basis. Messrs. Westerbeke, Sr. and Westerbeke, Jr. are father
and son. No other family relationships exist between any of the
directors and officers of the Company.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more
than ten percent of the Company's Common Stock, to file with the SEC
initial reports of ownership and reports of changes in ownership of
Common Stock. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and representations
that no other reports were required, during the fiscal year ended
October 28, 1995 all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten percent beneficial owners
were complied with.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information for the fiscal years
ended October 28, 1995, October 29, 1994 and October 30, 1993
concerning the compensation paid or awarded to the Chief Executive
Officer and the other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Fiscal
Name and Year
Principal Ended All Other
Position October Salary Bonus Options(#) Compensation
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <S> <C>
John H. Westerbeke, Jr. 1995 $148,998 $ 5,730 -- $51,920(1)
President, Chairman of 1994 145,186 3,212 -- 62,143(1)
the Board of Directors 1993 142,663 3,444 150,000 94,399(1)
and Class C Director
Carleton F. Bryant, III (2) 1995 $ 94,500 $16,667 -- --
Executive Vice President, 1994 94,500 2,173 -- --
Treasurer, Chief Operating 1993 45,433 1,110 100,000 --
Officer and Secretary
<FN>
<F1> Includes amounts ($31,980, $45,842 and $88,055 in fiscal 1995, 1994 and
1993, respectively) reflecting the current dollar value of the benefit
to Mr. Westerbeke of premiums paid by the Company with respect to
a split-dollar insurance arrangement (see "Employment Agreements"
below for a description of such arrangement). Such benefit was
determined by calculating the time value of money (using the
applicable federal rates) of the premiums paid by the Company in
the fiscal years ended October 28, 1995, October 29, 1994 and
October 30, 1993 for the period from the date on which each premium
was paid until March 31, 1998 (which is the earliest date on which
the Company could terminate the agreement and request a refund of
premiums paid). The amount for fiscal 1993 is the aggregate of the
benefit to Mr. Westerbeke of payment of the first and second year
premiums, both of which were paid in fiscal 1993.
<F2> Effective May 3, 1993, Carleton F. Bryant, III became Executive
Vice President, Treasurer, Chief Operating Officer and Secretary
of the Company. See "Employment Agreements" below.
</TABLE>
The Company did not grant any stock options to the executive
officers named in the Summary Compensation Table during the fiscal year
ended October 28, 1995.
The following table sets forth the number and value of options
held by the executive officers named in the Summary Compensation Table
at October 28, 1995. During the fiscal year ended October 28, 1995,
none of the executive officers named in the Summary Compensation Table
exercised any options or warrants to purchase Common Stock.
OPTION VALUES AT OCTOBER 29, 1994
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money (1)
Options at Options at
October 28, 1995 October 28, 1995
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John H. Westerbeke, Jr. 100,000 70,000 $102,500 $78,750
Carleton F. Bryant, III 40,000 60,000 $ 40,000 $60,000
<FN>
<F1> In-the-money options are those where the fair market value of the
underlying Common Stock exceeds the exercise price of the option.
The value of in-the-money options is determined in accordance
with regulations of the Securities and Exchange Commission by
subtracting the aggregate exercise price of the option from the
aggregate year-end value of the underlying Common Stock.
</TABLE>
Employment Agreements
- ---------------------
The Company has an Employment Agreement (the "Agreement") with
John H. Westerbeke, Jr., the Chairman of the Board, President and Chief
Executive Officer of the Company, which provides for his employment by
the Company at an annual salary of $141,750, subject to increases based
upon the Consumer Price Index and at the discretion of the Company.
The Agreement also provides for payment of a bonus at the discretion of
the Board of Directors of the Company. Under the Agreement, Mr.
Westerbeke may elect to have all or any part of his base salary or
bonus paid as deferred compensation in five annual installments
commencing in March following the year in which he retires or ceases to
be actively employed by the Company. Payments of deferred compensation
are to be made in cash and no special fund has been established to
ensure the payment of deferred compensation. The Agreement also
requires the Company to pay premiums for certain life insurance
policies on the life of Mr. Westerbeke as described below. The
Agreement may be terminated by the Company upon the disability of Mr.
Westerbeke, by the Company with or without cause, and by Mr. Westerbeke
in the event there has occurred a constructive termination of
employment by the Company. In addition, in the event of a change in
control of the Company, as defined in the Agreement, Mr. Westerbeke may
terminate his employment during the one year period following such
change in control, and in such event, the Company will be required to
pay him a lump sum cash payment in an amount equal to three times his
annual cash compensation during the most recent five taxable years of
the Company, less $1,000. In addition, in such circumstances, the
Company is required to continue to carry group life and health
insurance for Mr. Westerbeke for a three year period and is required to
pay any premiums payable on the split-dollar life insurance policies on
his life for a three year period. Under the Agreement, Mr. Westerbeke
has agreed not to compete with the Company for a period of one year
following termination of his employment.
The Company has entered into a split-dollar insurance arrangement
with Mr. Westerbeke, Jr., pursuant to which the Company will pay the
premium costs of certain life insurance policies that pay a death
benefit of not less than $2,419,153 in the aggregate upon the death of
Mr. Westerbeke. Upon surrender of the policies or payment of the death
benefit thereunder, the Company is entitled to repayment of an amount
equal to the cumulative premiums previously paid by the Company, with
all remaining payments to be made to Mr. Westerbeke or his
beneficiaries. See footnote (1) to the "Summary Compensation Table"
above for further information on premium payments made by the Company.
The Company has an agreement with Carleton F. Bryant, III, the
Executive Vice President, Treasurer and Chief Operating Officer of the
Company, which provides for his employment by the Company at an annual
salary of $94,500. Under a related agreement Mr. Bryant agrees not to
compete with the Company for a period of three years following the
termination of his employment.
The Company has an agreement with John H. Westerbeke, Sr., a
director of the Company, which provides for his employment by the
Company at an annual salary of $35,000 until Mr. Westerbeke, Sr.
retires. This agreement also provides that following his retirement,
Mr. Westerbeke, Sr. will act as a consultant to the Company at an
annual consulting fee of $30,000. The Company paid Mr. Westerbeke, Sr.
$35,000 during fiscal 1995.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Thomas M. Haythe, a director of the Company and a member of the
Compensation Committee, is a partner of the New York City law firm of
Haythe & Curley, which firm acted as legal counsel to the Company
during the past fiscal year. It is expected that Haythe & Curley will
continue to render legal services to the Company in the future.
Compensation of Directors
- -------------------------
The Company pays its directors a fee of $1,000 for attending each
meeting of the Board of Directors of the Company.
Termination of Employment and Change of Control Arrangements
- ------------------------------------------------------------
See "Employment Agreements" above for information concerning
certain change of control arrangements with respect to John H.
Westerbeke, Jr., the Chairman of the Board, President and Chief
Executive Officer of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The shareholders (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who, to the
knowledge of the Board of Directors of the Company, owned beneficially
more than five percent of any class of the outstanding voting
securities of the Company as of January 1, 1996, each director and each
executive officer named in the Summary Compensation Table of the
Company who owned beneficially shares of Common Stock and all directors
and executive officers of the Company as a group, and their respective
shareholdings as of such date (according to information furnished by
them to the Company), are set forth in the following table. Except as
indicated in the footnotes to the table, all of such shares are owned
with sole voting and investment power.
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Name and Address Owned Beneficially of Class
- -----------------------------------------------------------------------------
<S> <C> <C>
FMR Corp............................ 213,738(1) 10.4%
82 Devonshire Street
Boston, Massachusetts 02109
Dimensional Fund Advisors Inc....... 103,200(2) 5.0%
1299 Ocean Avenue
Santa Monica, California 90401
Gerald Bench........................ 0 --
38 McKinley Drive
Ocean, New Jersey 07712
Thomas M. Haythe.................... 20,100(3) *
237 Park Avenue
New York, New York 10017
Nicholas H. Safford................. 20,100(4) *
9 Cleaves Street
Rockport, Massachusetts 01966
James W. Storey..................... 20,100(5) *
3 Saddle Ridge Road
Dover, Massachusetts 02030
John H. Westerbeke, Jr.............. 1,178,250(6) 54.4%
Avon Industrial Park
Avon, Massachusetts 02322
John H. Westerbeke, Sr.............. 0 --
Avon Industrial Park
Avon, Massachusetts 02322
Carleton F. Bryant, III............. 40,000(7) 1.9%
Avon Industrial Park
Avon, Massachusetts 02322
All Directors and Officers as a
Group (seven persons)............. 1,278,550(3)(4)(5)(6)(7) 56.4%
<FN>
<F*> Less than one percent.
<F1> Information as to the holdings of FMR Corp. ("FMR") is based
upon a report on Schedule 13D filed with the Securities and
Exchange Commission. Such report indicates that 231,738 shares
were beneficially owned by FMR with sole voting power and sole
dispositive power.
<F2> Information as to the holdings of Dimensional Fund Advisors Inc.
("Dimensional") is based upon a report on Schedule 13G filed
with the Securities and Exchange Commission. Such report
indicates that 103,200 shares were owned with sole dispositive
power and 83,200 shares were owned with sole voting power. Such
report indicates that persons who are officers of Dimensional
also serve as officers of DFA Investment Dimensions Group Inc.,
an open-ended investment company (the "Fund") registered under
the Investment Company Act of 1940 and in their capacity as
officers of the Fund, such persons vote 20,000 shares owned by
the Fund.
<F3> Consists of 20,100 shares issuable upon the exercise of
presently exercisable stock options held by Mr. Haythe.
<F4> Consists of 20,100 shares issuable upon the exercise of
presently exercisable stock options held by Mr. Safford.
<F5> Consists of 20,100 shares issuable upon the exercise of
presently exercisable stock options held by Mr. Storey.
<F6> Includes 100,000 shares issuable upon the exercise of presently
exercisable stock options held by Mr. Westerbeke, Jr.
<F7> Consists of 40,000 shares issuable upon the exercise of
presently exercisable stock options held by Mr. Bryant.
</TABLE>
To the Company's knowledge, there have been no significant
changes in stock ownership or control of the Company as set forth above
since January 1, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company leases a 40-foot sailboat from Mr. Westerbeke, Jr.,
the Chairman of the Board, President and Chief Executive Officer of the
Company, pursuant to a lease expiring in July 1999. The Company pays
an annual rental to him of $31,920 and also pays approximately $10,000
to $15,000 of annual expenses in connection with the operation and
maintenance of the sailboat. The Company makes use of the sailboat to
evaluate the performance of its marine engine products and for other
corporate purposes. In July 1994, Mr. Westerbeke, Jr. executed a
promissory note payable to the Company in the principal amount of
$165,000. The proceeds of the loan were used by Mr. Westerbeke, Jr. to
purchase the sailboat which is leased to the Company as described
above. The loan, which is due June 1, 2004, is payable in equal
monthly installments which commenced on July 1, 1994, together with
interest at 7.75% per annum and is secured by the sailboat. Management
of the Company believes that the terms of the lease and of the secured
loan are no less favorable to the Company than it could obtain from an
unrelated party.
Thomas M. Haythe, a Class B director of the Company, is a partner
of the New York City law firm of Haythe & Curley, which firm has acted
as legal counsel to the Company (and its predecessor) for several
years. It is expected that Haythe & Curley will continue to render
legal services to the Company in the future.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
<TABLE>
<CAPTION>
Included in PART II of this report: Page
<S> <C>
Report of KPMG Peat Marwick LLP............................. 25
Consolidated Balance Sheets at October 28, 1995 and
October 29, 1994........................................... 26
Consolidated Statements of Operations for the three years
in the period ended October 28, 1995....................... 27
Consolidated Statements of Changes in Stockholders' Equity
for the three years in the period ended October 28, 1995... 28
Consolidated Statements of Cash Flow for the three years
in the period ended October 28, 1995....................... 29
Notes to Consolidated Financial Statements.................. 30
2. Financial Statement Schedule:
Included in PART II of this report:
Schedule II - Valuation and Qualifying Account for the
three years in the period ended October 28, 1995........... 40
</TABLE>
Schedules other than those listed above are omitted because
they are not required or are not applicable, or the required
information is shown in the Consolidated Financial Statements
or Notes thereto. Columns omitted from schedules filed have
been omitted because the information is not applicable.
3. Exhibits:
The exhibits required to be filed as part of this Annual
Report on Form 10-K are listed in the attached Index to
Exhibits.
(b) Current Reports on Form 8-K:
During the fiscal quarter ended October 28, 1995, the
Company did not file any Current Reports on Form 8-K.
* * *
Copies of the exhibits filed with this Annual Report on Form 10-K or
incorporated by reference herein do not accompany copies hereof for
distribution to stockholders of the Company. The Company will furnish a
copy of any of such exhibits to any stockholder requesting the same for a
nominal charge to cover duplicating costs.
POWER OF ATTORNEY
The registrant and each person whose signature appears below
hereby appoint John H. Westerbeke, Jr. and Thomas M. Haythe as
attorneys-in-fact with full power of substitution, severally, to
execute in the name and on behalf of the registrant and each such
person, individually and in each capacity stated below, one or more
amendments to this Annual Report on Form 10-K, which amendments may
make such changes in this Annual Report as the attorney-in-fact acting
in the premises deems appropriate and to file any such amendment(s) to
this Annual Report with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: January 25, 1996
WESTERBEKE CORPORATION
By /s/ John H. Westerbeke, Jr.
John H. Westerbeke, Jr.
Chairman and President
Pursuant to the requirements of the Securities and Exchange
Act of 1934, this Annual Report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the
dates indicated.
Dated: January 25, 1996
By /s/ John H. Westerbeke, Jr.
John H. Westerbeke, Jr.
Chairman and President and
Principal Executive Officer
Dated: January 25, 1996 By /s/ Carleton F. Bryant III
Carleton F. Bryant III
Executive Vice President,
Chief Operating Officer and
Principal Financial
and Accounting Officer
Dated: January 25, 1996 By /s/ Gerald Bench
Gerald Bench
Director
Dated: January 25, 1996 By /s/ Thomas M. Haythe
Thomas M. Haythe
Director
Dated: January 25, 1996 By /s/ Nicholas H. Safford
Nicholas H. Safford
Director
Dated: January 25, 1996 By /s/ James W. Storey
James W. Storey
Director
Dated: January 25, 1996 By /s/ John H. Westerbeke, Sr.
John H. Westerbeke, Sr.
Director
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Name of Exhibit Page
- ---------------------------------------------------------------------------------
<C> <S> <C>
2 Agreement and Plan of Merger between the Company and
J.H. Westerbeke Corporation, a Massachusetts corporation........ (1)
3(a) Certificate of Incorporation of the Company (as amended)........ (1)
3(b) By-Laws of the Company.......................................... (5)
10(a) Agreement dated as of June 30, 1986 by and between the Company
and John H. Westerbeke, Sr...................................... (1)
10(b) 1986 Stock Option Plan of the Company as amended on
January 6, 1987 and on May 26, 1988............................. (5)
10(c) 1986 Employee Stock Purchase Plan of the Company................ (1)
10(d) Supplemental Stock Option Plan of the Company................... (5)
10(e) Agreement dated as of June 1, 1986 by and among the Company,
Ruth A. Westerbeke, John H. Westerbeke, Jr., and John H.
Westerbeke, Jr., John H. Westerbeke, Sr. and Ruth A. Westerbeke,
as trustees..................................................... (1)
10(f) Form of Agreement with Distributors - Domestic..................
10(g) Form of Agreement with Distributors - International............ (1)
10(h) Supplemental Medical Insurance Policy........................... (1)
10(i) Letter Agreement dated May 22, 1992 between the Company and
State Street Bank and Trust Company............................. (3)
10(j) Letter Agreement dated March 17, 1995 between the Company and
State Street Bank and Trust Company.............................
10(k) Security Agreement dated June 4, 1992 by the Company in favor of
State Street Bank and Trust Company............................. (3)
10(l) Note of the Company dated March 22, 1995, due March 31, 1996 in
the principal amount of $3,000,000 payable to the order of
State Street Bank and Trust Company.............................
10(m) Asset Purchase Agreement dated as of January 5, 1990 by and
among the Company, Westerbeke Rotary Aire, Inc., Rotary Marine,
Inc., Eugene Whipp and Arville J. Collins....................... (5)
10(n) Convertible Subordinated Note of the Company and Westerbeke
Rotary Aire, Inc. dated January 5, 1990 in the principal amount
of $115,000 payable to Rotary Marine, Inc....................... (5)
10(o) Lease dated November 4, 1987 by and between GBD/Odyssey
Associates Limited Partnership and the Company.................. (5)
10(p) Lease Amendment Agreement dated April 29, 1991 by and between
GBD/Odyssey Associates Limited Partnership and the Company...... (2)
10(q) Second Lease Amendment Agreement dated April 7, 1993 by and
between GBD/Odyssey Associates Limited Partnership and the
Company......................................................... (4)
10(r) Subordination, Nondisturbance and Attornment Agreement dated
November 8, 1994 by and among the Company, New Avon Limited
Partnership and UNUM Life Insurance Company of America.......... (5)
10(s) Employment Agreement dated March 24, 1993 between the Company
and John H. Westerbeke, Jr., Chairman, President and Chief
Executive Officer of the Company................................ (4)
10(t) Employment Agreement dated May 14, 1993 and Confidentiality
Agreement dated May 14, 1993 between the Company and Carleton F.
Bryant III, Chief Operating Officer of the Company.............. (4)
21 Subsidiary of the Company.......................................
23 Consent of KPMG Peat Marwick LLP................................
24 Power of Attorney................................................. (See Page 54
of Annual
Report on
Form 10-K)
27 Financial Data Schedule...........................................
<FN>
<F1> Incorporated by reference to Exhibits to Registration Statement
No. 33-6972 filed with the Securities and Exchange Commission.
<F2> Incorporated by reference to Exhibits to Annual Report on Form 10-K
for fiscal year ended October 26, 1991.
<F3> Incorporated by reference to Exhibits to Annual Report on Form 10-K
for fiscal year ended October 31, 1992.
<F4> Incorporated by reference to Exhibits to Annual Report on Form 10-K
for fiscal year ended October 30, 1993.
<F5> Incorporated by reference to Exhibits to Annual Report on Form 10-K
for fiscal year ended October 29, 1994.
</TABLE>
Exhibit 10(f)
WESTERBEKE CORPORATION
DOMESTIC
MASTER DISTRIBUTOR AGREEMENT
This Agreement ("Agreement") is made by and between Westerbeke
Corporation, a Delaware corporation (hereinafter referred to as "Westerbeke"),
and __________ ______________________ (name of distributor), a(n) ____________
(individual, partnership or corporation), with its principal office at
_____________________ (street address), _________________ (city),
_____________ (county), ________________ (state) ________ (zip code)
(hereinafter referred to as "Distributor"), and will govern the relationship
between Westerbeke and the Distributor with respect to the promotion, sale,
repair and service of Westerbeke Products (as defined herein).
1. APPOINTMENT. Subject to the terms of this Agreement, Westerbeke
hereby appoints Distributor a non-exclusive distributor of the products and
the replacement parts and accessories related thereto listed on Schedule A to
this Agreement (said products, replacement parts and accessories are
hereinafter referred to as the "Westerbeke Products") within the geographic
areas of responsibility set forth on Schedule B to this Agreement (hereinafter
referred to as the "Area").
2. OBLIGATIONS OF DISTRIBUTOR. Distributor hereby accepts the
appointment described in Section 1 subject to the terms of this Agreement and
agrees that its obligations under this Agreement shall, without limitation,
include the following:
(a) Best Efforts. Distributor shall use its best efforts to
promote, sell, repair and service Westerbeke Products in the Area, which best
efforts shall include, but shall not be limited to, each of the obligations
specified in this Section 2.
(b) Retail Dealers. Distributor shall appoint a sufficient number
of retail dealers ("Dealers") within the Area for the sale, service, and
repair of Westerbeke Products; provided, however, that (i) all such Dealers
shall meet minimum reasonable requirements established by Westerbeke, (ii)
Distributor shall utilize in appointing such Dealers the Dealer Agreement form
provided by Westerbeke or a retail dealer agreement form acceptable to
Westerbeke, (iii) Distributor shall not, without Westerbeke's consent, solicit
orders for or sell Westerbeke Products to any Dealer or other person, unless
such Dealer or other person's selling area or place of business or residence,
in the case of a person not engaged in the business of resale, is completely
contained within the Distributor's Area, (iv) in no case shall Distributor
appoint any Dealer or sub-distributor in violation of, or contrary to, the
terms and conditions of this Agreement and (v) Distributor shall furnish to
Westerbeke, from time to time upon Westerbeke's request therefor, a list of
all such Dealers and such other information as Westerbeke shall reasonably
request that shall relate to the Distributor's network of Dealers and
Distributor's sales of Westerbeke Products to such Dealers. In the event that
Distributor shall violate the provisions of this paragraph, Westerbeke shall
have the right to elect, in addition to any other remedy contained in this
Agreement (including without limitation, Westerbeke's termination of such
Distributor), that Distributor pay Westerbeke, as liquidated damages, a sum
equal to the applicable Discount (as defined in Section 3 hereof) on any
Westerbeke Products the sale of which shall have been in violation of this
paragraph.
(c) Inventory; Facilities.
(i) Distributor shall maintain an inventory of Westerbeke Products
which is adequate for the Area (as determined in accordance with Section
2(c)(ii) hereof) and sales, parts, repair and service facilities, including
any special tools or equipment required to service and repair Westerbeke
Products, at a place or places of business of a size and character
satisfactory to Westerbeke and such place or places of business shall not be
moved or materially changed without the prior written consent of Westerbeke.
(ii) Distributor shall purchase (subject to the provisions of
Section 2(d) hereof) a sufficient quantity of Westerbeke Products such that
Westerbeke Products shall have a fair share of the total market for such types
of products in the Area, as determined by relevant marketing factors existing
in the Area. Distributor shall, if requested by Westerbeke, negotiate in good
faith with Westerbeke the quantity of Westerbeke Products necessary to satisfy
the provisions of the preceding sentence; provided, however, that if the
parties cannot agree in writing on such quantity, Westerbeke shall have the
right to establish such quantity by reference to such marketing factors.
(iii) Distributor shall furnish to Westerbeke on or prior to the
fifteenth day of each October, January, April and July, a list of
Distributor's current inventory of Westerbeke Products and an estimate of
Distributor's anticipated requirements for Westerbeke Products for the
succeeding six month period.
(d) Source of Requirements. In the event that Distributor shall
have made an election for Discount A pursuant to the terms of Section 3(a) of
this Agreement (and only in such event), Distributor shall purchase only from
Westerbeke and from no other source whatsoever all of Distributor's
requirements of such of the Westerbeke Products as constitute accessory or
replacement parts, except for those such accessory or replacement parts as are
set forth on Schedule C attached hereto. In the event that Distributor shall
violate the terms of the foregoing sentence, Distributor shall be deemed to
have elected, effective immediately upon the occurrence of any such violation,
for Discount B pursuant to the terms of Section 3(a) of this Agreement.
(e) Staff. Distributor shall, at all times, employ such numbers of
adequately trained and competent personnel as are necessary to fulfill all of
Distributor's obligations under this Agreement.
(f) Service. Distributor shall provide, at reasonable rates,
prompt and workmanlike repair and service, including repairs and service under
warranty in accordance with the provisions of this Agreement, for all
Westerbeke Products, whether or not such Westerbeke Products have been sold by
Distributor.
(g) Use of Westerbeke Name. Distributor shall identify itself as a
"Westerbeke Authorized Distributor" in telephone directories, on its
stationery, and in any advertising media such as newspapers, magazines, and
direct mailings that Distributor customarily uses, and Westerbeke hereby
grants Distributor a non-exclusive license for the duration of this Agreement
to use Westerbeke's trademarks or trade names or product designations
(including part numbers) (collectively, the "Trademarks") for such purposes;
provided, however, that Distributor shall not use Westerbeke's Trademarks in
its corporate name or as a style of doing business, and shall not place any of
Westerbeke's Trademarks on any product or item whatsoever, without the express
written consent of Westerbeke. Distributor hereby acknowledges that
Westerbeke owns exclusive rights to all Trademarks and any other trademarks
and trade names adopted or used by Westerbeke.
(h) End Use Purchasers. Distributor and its dealers shall develop
and maintain records sufficient for purposes of compliance with the Federal
Boat Safety Act to permit the identification of the end use purchaser of all
Westerbeke Products sold by Distributor or its Dealers, when provided by
Westerbeke with the Distributor's purchase order number, the model and the
serial numbers of the Westerbeke Product and its date of shipment by
Westerbeke, and Distributor shall assist Westerbeke in ascertaining the
identity of the end use purchaser, should Westerbeke, for any purpose, deem
that necessary.
(i) Sales to Boatbuilders. Distributor shall actively pursue sales
of Westerbeke Products to boatbuilders located within the Area and shall
develop and maintain (A) records of its efforts to sell to such boat builders
and (B) estimates of potential sales to boatbuilders within the Area, which
records and estimates it shall furnish Westerbeke upon Westerbeke's reasonable
request therefor. Notwithstanding anything contained in Section 1 of this
Agreement to the contrary, Westerbeke may elect to sell directly to any such
boatbuilder if Westerbeke, in its sole discretion, determines that such
boatbuilder's volume or potential volume of purchases is sufficiently large or
that the nature of such boatbuilder's business requires that it purchase
directly from Westerbeke. Provided that Distributor shall have complied with
the requirements of this Section 2(i), as determined by Westerbeke in its sole
discretion, Distributor will receive a commission of _____________________ of
the net sales price on any sales by Westerbeke to any such boatbuilder in
consideration of Distributor's efforts in establishing the boatbuilder's
account and for continued maintenance and service of the account. This
commission will not apply to sales by Westerbeke to the established national
accounts listed on Schedule D hereto.
(j) Promotion. Distributor shall diligently promote the sale of,
solicit orders for and stimulate interest in Westerbeke Products in the Area.
Distributor shall cooperate with Westerbeke in preparing reports, order
forecasts and other information concerning market coverage, and shall follow
all reasonable recommendations of Westerbeke as to marketing policy and market
coverage.
(k) Goodwill. Distributor shall take such necessary or desirable
steps to preserve and enhance Westerbeke's goodwill and reputation in the Area
as Westerbeke may reasonably request.
(l) Insurance. Distributor shall maintain during the term of this
Agreement: (i) Worker's Compensation Insurance as prescribed by law in the
state or states in which Distributor's business is maintained, (ii)
comprehensive general liability insurance (including product liability
insurance), and (iii) casualty insurance on the properties where Distributor
conducts any business related to the promotion, sale, repair or service of
Westerbeke Products.
(m) Financial Information. Distributor shall provide to Westerbeke
(i) an annual balance sheet and income statement for Distributor within 90
days after Distributor's fiscal year end, and (ii) such other financial
statements for Distributor as Westerbeke may reasonably request. In the event
that Distributor shall fail to do so, Westerbeke shall have the right to amend
the terms of credit, if any, applicable to such Distributor to such terms as
Westerbeke, in its sole discretion, shall deem desirable.
(n) Compliance with Law. Distributor shall (i) comply with all
statutes, laws and regulations of federal, state and local authorities which
are applicable to the Distributor's business and to the performance by it of
its obligations pursuant to this Agreement; (ii) promptly notify Westerbeke of
any such statute, law or regulation relating to the performance by the parties
of the terms of this Agreement, including without limitation any requirements
as to the form or specifications of any Westerbeke Product or any packing,
invoicing or shipping documents required to be provided with respect to any
shipment of Westerbeke Products, and of any change to any such statute, law or
regulation; provided, however, that Westerbeke shall not be responsible or
liable for any penalty that may result from its failure to comply with any
such statute, law or regulation if it has used reasonable efforts so to
comply; and (iii) not take any action the effect of which might be to cause
Westerbeke to be in violation of any such statute, law or regulation.
(o) Inspection. Westerbeke shall have the right to inspect
Distributor's places of business during regular business hours without notice
in order to monitor Distributor's compliance with its obligations under this
Agreement.
3. PRICES AND TERMS OF SALE.
(a) Price and Election of Discount. The prices of Westerbeke
Products sold to Distributor by Westerbeke shall be Westerbeke's list prices
(the "List Prices") in effect at the time of shipment less the applicable
discount (the "Discount") set forth in Schedule A hereto. The Discount shall
be either Discount A or Discount B (each as set forth on Schedule A), and
Distributor shall have made an election to that effect on the signature page to
this Agreement. In the event that Distributor shall elect Discount A (and only
in such event), the terms and provisions of Section 2(d) of this Agreement
shall apply. Westerbeke shall from time to time notify Distributor of its List
Prices, which it may amend from time to time without notice.
(b) Terms and Conditions of Sale. Unless Westerbeke agrees otherwise
in writing, the terms and conditions of such sale to Distributor of Westerbeke
Products shall be governed by Westerbeke's standard terms and conditions of
sale, which it shall from time to time announce and which it shall have the
right to amend without notice. Any additional terms and conditions of sale
shall be as set forth in Westerbeke's acknowledgment of Distributor's order.
Unless Westerbeke agrees otherwise in writing, payment for Westerbeke Products
shall be made in cash upon making any order or by irrevocable letter of credit
confirmed by a bank acceptable to Westerbeke.
(c) Exclusion of Taxes. Unless Westerbeke otherwise expressly agrees
in writing, prices for Westerbeke Products shall not include any sales, use,
excise, ad valorem, receipt or other such taxes, which may at any time be
imposed by federal, state or local authorities by reason of the sale by
Westerbeke of Westerbeke Products to Distributor and Distributor shall pay all
of such taxes other than income taxes imposed on Westerbeke by any
governmental authority.
4. ORDERS. Westerbeke shall not ship any Westerbeke Products
except upon receipt of firm orders. Each order of Distributor is subject to
acceptance by Westerbeke, and Westerbeke may, for any reason, reject an order
or any portion thereof. Westerbeke shall use its best efforts to ship accepted
orders, but shall not be liable for delays in shipping or delivery, or for
failure to ship such orders, for any reasonable cause.
5. CHANGE OF PRODUCTS. Unless otherwise specified, all orders for
Westerbeke Products shall refer to the type, model, line and style of
Westerbeke Products in production at the time Westerbeke receives such orders.
Westerbeke may, at any time and without prior notice, declare obsolete or
discontinue the manufacture or sale of any Westerbeke Products or any type,
model, line or style of Westerbeke Products, and may modify the construction
or classification of any Westerbeke Products. Westerbeke shall not be
obligated to manufacture or sell replacement parts or accessories for any such
Westerbeke Products that are declared obsolete or discontinued by Westerbeke
or modified by Distributor or any other person. Westerbeke may take any such
action without incurring any obligations to Distributor arising directly or
indirectly by reason of Distributor's previous purchases of Westerbeke
Products.
6. SHIPMENT. Westerbeke's responsibility for risk of loss of or
damage to Westerbeke Products ceases and title to Westerbeke Products passes
to Distributor upon the delivery of shipments to the carrier thereof.
Distributor shall accept all upon arrival at their destination and shall file
claims with or against any such carrier thereof for any losses, shortages or
damages of any kind.
The cost of any insurance arranged by Westerbeke shall be for
Distributor's account.
7. WARRANTY. Each of the Westerbeke Products sold by Westerbeke to
Distributor under this Agreement is subject to Westerbeke's express warranty
applicable to the particular Westerbeke Product in effect at the time
Westerbeke sells such Westerbeke Product to Distributor. Other than such
express warranty, Westerbeke makes no representation, express or implied
(including implied warranties of merchantability and fitness for a particular
purpose) concerning any Westerbeke Products or otherwise concerning the
matters contemplated by this Agreement. Westerbeke makes no warranty at all
with respect to any product or item which is not a Westerbeke Product.
Distributor shall make no representations or warranties with respect to any
Westerbeke Products without the prior consent of Westerbeke and Distributor
hereby agrees to indemnify and save Westerbeke harmless from any and all
liabilities, claims or damages that Westerbeke may suffer by reason of any
unauthorized representations or warranties made by Distributor.
Distributor acknowledges that the marine engine products business is a
high risk business and that Westerbeke shall not be responsible for damages
which Distributor may incur from delayed shipments or from any other cause,
whether liability is asserted in contract or tort (including negligence and
strict product liability). Distributor acknowledges and agrees that
Westerbeke's sole responsibility in the case of breach of the foregoing
warranty shall be for Westerbeke to comply with Westerbeke's policy for return
of defective products in effect at the time of such breach. In no event shall
Westerbeke be liable for loss of profits, loss of use, or incidental,
consequential or special damages of any kind.
8. WARRANTY WORK. Distributor must obtain authorization from
Westerbeke in advance of any major warranty work to be performed by
Distributor or one of its Dealers, including, but not limited to, any work
involving removal or reinstallation of an engine or generator. Westerbeke
may, in its sole discretion and with respect to any warranty work, determine
that such work shall be performed by Westerbeke or by any other party of its
own choice. If warranty work is performed by Distributor or one of its
Dealers, Distributor shall furnish to Westerbeke upon Westerbeke's request
reasonable evidence that such work was necessary within the applicable
provisions of the applicable warranty, and Distributor shall return to
Westerbeke, upon Westerbeke's request, within thirty (30) days, freight
collect, any part claimed to be defective under such warranty. Distributor
shall inform Westerbeke of any such part, the intended return thereof, and any
relevant information with respect thereto, sufficiently in advance of the
intended shipment date to allow Westerbeke to arrange for shipment, should
Westerbeke so desire. If Westerbeke, in its sole discretion, determines that
such part is defective and that the work performed was necessary, Westerbeke
shall pay Distributor for such parts at list price less the standard discount
established by Westerbeke for Dealers. Westerbeke shall pay Distributor for
any labor performed at the applicable warranty labor rate established by
Westerbeke, which rate shall be evaluated periodically by Westerbeke and may
be amended from time to time by Westerbeke without notice. If the warranty
work is performed by one of Distributor's Dealers, Distributor shall supply
any parts and pay to such retail dealer for labor the amount paid by
Westerbeke to Distributor for such labor.
9. SETOFF. Distributor agrees that Westerbeke shall have the right
to setoff against any amounts which may become payable by Westerbeke to
Distributor under this Agreement or otherwise, any amounts due from
Distributor to Westerbeke, including without limitation any amounts
anticipated to be owed to Westerbeke in the event that Westerbeke shall have
reason to believe such an amount may become due by virtue of the arising of
any claim by Westerbeke, whether arising under this Agreement or otherwise,
including without limitation any claims arising under Sections 1 and 2(g) of
this Agreement.
10. PERFORMANCE EXCUSED. Whenever either party shall be prevented
from or delayed in carrying out any obligation of such party hereunder (other
than for the payment of money) by reason of any act of God, war, riot,
accident, strike, lockout, injunction, boycott, inability to obtain power, raw
materials, or transportation facilities, breakage of machinery, national
defense requirements, or any other similar or dissimilar cause beyond the
control of such party, the performance of such obligation by such party shall
be excused to the extent of such prevention or delay. If, because of any such
cause, Westerbeke is unable to supply the total demand for Westerbeke
Products, Westerbeke may, in its sole discretion, allocate its available
supply among itself and all of its distributors and customers, including those
not under contract, in an equitable manner. Any deliveries suspended because
of any such circumstance shall be cancelled without liability, but this
Agreement shall otherwise remain unaffected.
11. ASSIGNMENT. Distributor may not assign its rights or delegate
its performance under this Agreement without the prior written consent of
Westerbeke, and any attempted assignment or delegation without such consent
shall be void. The sale or other transfer of control of Distributor shall be
deemed to be an assignment for purposes of this Section 11.
12. DISTRIBUTOR IS NOT AN AGENT. This Agreement does not create the
relation of principal and agent between Westerbeke and Distributor and under
no circumstances is either party to be considered an agent of the other.
Distributor buys and sells Westerbeke Products as an independent business
enterprise for its own account. Distributor has no authority either to bind
Westerbeke to any obligation or to represent Westerbeke in any circumstances,
and Distributor shall not so bind or represent Westerbeke.
13. TERMINATION OF AGREEMENT.
(a) Either party may terminate this Agreement without cause on not
less than ninety (90) days prior written notice.
(b) Either party may terminate this Agreement with immediate effect
upon written notice for cause. For purposes of this Section 13(b), "cause"
shall be deemed to include any of (i) the failure of Distributor to pay any
amount, or any portion thereof, outstanding to Westerbeke within ninety (90)
days following any shipment to Distributor or such other time as the same
shall have become due; (ii) the breach of any term of this Agreement on the
part of Distributor; (iii) an attempt by Distributor to assign this Agreement
or any right or obligation hereunder without Westerbeke's written consent;
(iv) an assignment by Distributor of all or a substantial part of
Distributor's assets for the benefit of creditors; (v) the insolvency of
Distributor or of any member of Distributor if it is a partnership; (vi) the
institution of voluntary or involuntary proceedings by or against Distributor
in bankruptcy or under insolvency laws or for a receivership or for the
dissolution of Distributor (if it is a corporation or a partnership); (vii)
the death, incapacity, resignation, or other elimination of Distributor (if it
is an individual), or of any partner in Distributor (if it is a partnership);
(viii) any change in the ownership, control or operating management of
Distributor, whether voluntary or involuntary; or (ix) the substantial
discontinuance of Distributor's distribution and resale activities in the
Area. Distributor agrees to advise Westerbeke immediately in writing of the
occurrence of any event specified in this paragraph.
(c) Notwithstanding any provisions of Sections 13(a) or (b) above
to the contrary, Westerbeke reserves the right to terminate this Agreement
with respect to any of the Westerbeke Products set forth on Schedule A at its
sole election upon not less than 90 days prior written notice or with
immediate effect upon written notice for cause (as such term is defined in
Section 13(b) above). In such event, Sections 14(a) and (b) below shall be
deemed to apply only with respect to the termination of this Agreement with
respect to such Westerbeke Products and Section 14(c) shall not apply.
14. EFFECTS OF TERMINATION.
(a) Westerbeke shall have the right to cancel wholly or partially
any or all unshipped orders and requisitions accepted from Distributor prior
to the date when notice of termination was given, and Westerbeke is not
obliged to accept any orders or requisitions after such notice has been given.
(b) If, after the date notice of termination was given, Westerbeke
accepts orders from Distributor or otherwise transacts business with
Distributor related to the sale of Westerbeke Products, all such transactions
will be governed by the same terms that this Agreement provides so far as
those terms are applicable, but no such acceptance of orders or transaction of
business shall be construed as a renewal of this Agreement or as a waiver of
termination.
(c) Upon termination Distributor shall cease to use stationery or
other printed matter identifying it as a Westerbeke Authorized Distributor,
shall remove signs from the exterior and interior of any of its properties so
identifying it, and shall take all necessary steps to change its listing in
telephone directories and to do all other acts necessary to remove any
identification as a Westerbeke Authorized Distributor.
(d) Distributor shall not be entitled to any payments in the nature
of termination indemnities or damages upon termination of this Agreement for
any reason whatsoever.
15. NON-COMPETITION; CONFIDENTIALITY.
(a) Distributor shall not, during the term of this Agreement,
without the express written consent of Westerbeke, directly or indirectly
engage, participate or invest in or assist, as owner, part-owner, shareholders
or partner, or in any other capacity, (i) in any business organization within
the Area whose activities or products are competitive with Westerbeke's
activities or Westerbeke Products, or whose products are like or similar to
the Westerbeke Products or perform or are designed to perform the same or a
similar function to or which otherwise compete with any of the Westerbeke
Products, or whose activities include, directly or indirectly, the design,
manufacture, production, importation, sale or promotion of any products which
are like or similar to the Westerbeke Products or which perform or are
designed to perform the same or a similar function to or which otherwise
compete with any of the Products, or (ii) in any such business organization
whose activities engaged in or products distributed, marketed or sold within
the Area are competitive with, are similar to or perform the same or similar
function as any of the Westerbeke Products. Distributor shall, further, not
distribute, sell or promote on a wholesale or retail basis, any such
competitive or similar products.
(b) Distributor shall, during the term of this Agreement and
forever after any termination or expiration hereof, keep confidential and
never disclose, divulge, use or distribute any proprietary or confidential
information or rights or any trade secrets or technical information, regarding
the Westerbeke Products or otherwise, divulged or made known to the
Distributor by Westerbeke, except where, pursuant to the prior written consent
of Westerbeke, such disclosure is necessary in order for Distributor to
perform its duties hereunder. The provisions of this Section 15(b) shall
survive the expiration or termination of this Agreement.
16. LIMITED PURCHASE OF WESTERBEKE STOCK. Distributor represents
that it does not, as of the date hereof, directly or indirectly, own, hold or
otherwise have a beneficial interest in more than 5% of the outstanding shares
of common stock of Westerbeke, and agrees that it will not, at any time,
directly or indirectly, purchase or otherwise acquire such shares if, after
such purchase or acquisition, Distributor would, directly or indirectly, own,
hold or otherwise have a beneficial interest in more than 5% of such shares,
without the prior written consent of Westerbeke.
17. NOTICES. All notices provided for in this Agreement shall be in
writing and sent by registered or certified mail, return receipt requested,
addressed, if to Distributor, to it at the address of Distributor stated in
the opening paragraph of this Agreement and, if to Westerbeke, to it at Avon
Industrial Park, Avon, Massachusetts 02322; provided, however, that by notice
as specified in this paragraph either party may specify a different address
for receiving notices under this Agreement.
18. WAIVER. No act, delay, or omission by either party shall be
deemed a waiver of any right, power, or remedy of such party unless such
waiver is in writing, and then only to the extent set forth therein. All
remedies either under this Agreement or by law or otherwise afforded to any
party shall be cumulative and not alternative. No waiver of any provision,
right, or remedy under this Agreement on any other occasion shall constitute a
waiver of any other provision, right or remedy on any other occasion.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement of and between the parties with respect to the
subject matter hereof and supersedes all prior representations and agreements.
It shall not be varied, amended, or modified by any oral agreement or
representation or otherwise than by an instrument in writing on a subsequent
date hereto duly executed by the parties.
20. TITLES. The titles used in this Agreement are intended for
convenience of reference only. They are not intended and shall not be
construed to be a substantive part of this Agreement or in any other way to
affect the validity, construction, or effect of any of the provisions of this
Agreement.
21. GOVERNING LAW; ARBITRATION. This Agreement is made in and will
be governed by and construed in all respects according to the laws of the
Commonwealth of Massachusetts. The parties agree that any legal action to
resolve any dispute regarding the provisions of or otherwise arising out of
this Agreement shall be referred to the American Arbitration Association to be
settled by arbitration in the City of Boston, Massachusetts in accordance with
the commercial arbitration rules of said Association. The fees and expenses
of the arbitrator shall be borne by that person or entity among the parties
whose last offer of settlement of the claim differed by a greater amount from
the arbitrator's award than did the last offer of settlement of the other
party. The determination of the arbitrator as to the amount, if any, of the
claim which is properly allowable shall be conclusive and binding upon the
parties hereto and judgment may be entered thereon in any court having
jurisdiction thereof. The provisions of this paragraph shall survive
indefinitely the termination of this Agreement.
22. SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement shall be held to be in violation of or
not enforceable because of any law, it is understood that such provision shall
be deemed modified to the extent necessary to comply with such law or, if such
modification would be impracticable, shall be deemed deleted and none of the
other rights or obligations herein shall be prejudiced or rendered
unenforceable by reason thereof.
23. SIGNATURE. This Agreement becomes valid on being signed by
Westerbeke and on being signed for Distributor by a duly authorized officer or
executive of Distributor if a corporation, or by one of the general partners
of Distributor if a partnership, or by Distributor if an individual.
Exhibit 10(j)
State Street
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
March 17, 1995
Mr. Carleton F. Bryant III
Chief Operating Officer
Westerbeke Corporation
Avon Industrial Park
Avon, MA 02322
Dear Carl:
I am pleased to inform you that in accordance with our discussion and based on
the financial and other information you have furnished, State Street Bank and
Trust Company (the "Bank") has completed the necessary credit approval process
to renew a $3,000,000 secured line of credit (the "Line of Credit") for
Westerbeke Corporation (the "Company"). The Line of Credit will be available
for working capital purposes and will continue to be made available pursuant
to the terms and conditions of the letter agreement (the "Agreement") dated
May 22, 1992. Such terms and conditions are summarized below.
The terms and conditions of the Bank's facility to the Company are as follows:
Line of Credit - $3,000,000
- --------------
The Bank will make available a Line of Credit, secured by a first lien on the
Company's accounts receivable and inventory, to be used for working capital
purposes. Advances under the Line of Credit will be limited to the lesser of
(i) $3,000,000 or (ii) a formula including up to 80% of the unpaid face amount
of all eligible accounts receivable which are no more than ninety ("90") days
from invoice date, plus 40% of inventory. Advances against inventory will be
capped at $2,000,000.
The Line of Credit may be used for direct borrowings, letters of credit up to
270 days, and bankers' acceptances.
A one quarter of one percent (1/4%) per annum fee will be charged on the
unused Line of Credit amount, charged quarterly in arrears.
Borrowings will bear interest at the State Street Bank and Trust Company Prime
Rate, as announced from time to time.
General Terms and Conditions
- ----------------------------
Until the termination of the facility, the Company will maintain its primary
deposit and disbursement accounts at State Street Bank and Trust Company.
The Company will furnish quarterly financial statements including a
consolidated balance sheet, statement of income, statement of retained
earnings, statement of changes in working capital, and statement of cash
flows, compiled by the Company and certified by the Company's Chief Operating
Officer or Controller to the effect that the statements are prepared in
accordance with generally accepted accounting principles consistently applied
and are accurate and complete, to be delivered to the Bank within 60 days
after the end of each of the Company's first, second, and third fiscal
quarters. Such statements to set forth a comparison to the results of
operations from the previous fiscal year.
The Company will furnish annual financial statements including a consolidated
balance sheet, statement of income, statement of retained earnings, statement
of changes in working capital, and statement of cash flows, audited by
independent public accountants acceptable to the Bank and certified by such
accountants to the effect that the statements are prepared in accordance with
generally accepted accounting principles consistently applied and are accurate
and complete, to be delivered to the Bank within 90 days after the end of the
Company's fiscal year. Such statements to set forth a comparison to the
results of operations from the previous fiscal year.
The Company will furnish monthly accounts receivable agings along with monthly
borrowing base certificates, signed by an authorized officer of the Company,
for the purposes of determining availability under the Line of Credit. Such
borrowing base certificates are to be delivered to the Bank within 20 days
after the end of each of the Company's fiscal months.
Periodic field examinations will be performed by the Bank, similar to those
conducted in the past.
The Company will furnish operating projections, including income statement and
balance sheet, broken down by each fiscal quarter, to the Bank within 60 days
after the end of the Company's fiscal year.
The Company will also be required to furnish such other information about the
Company's financial condition and operations as the Bank may request from time
to time.
The availability of advances, letters of credit, and banker's acceptances
under the Line of Credit will be subject to the condition that the Bank
continue to be satisfied with the business and financial condition of the
Company and to adverse changes in government regulations or monetary policy.
The availability of the Line of Credit will be reviewed by the Bank from time
to time and in any event prior to March 31, 1996 to determine whether the Line
of Credit should be continued or renewed.
All advances, direct or contingent, will be payable on March 31, 1996 and will
be evidenced by the fully-executed promissory note which is enclosed.
The Bank specifically reserves the right to propose additional terms which are
not inconsistent with the terms set forth in this letter.
The Bank's willingness to provide the financing contained in this letter is
also subject to the following conditions: (i) there are no material
misstatements or omissions in the financial statements or other information
provided, and (ii) that, in the Bank's judgement, there has been no material
adverse change in the business, assets, financial condition, or prospects of
the Company since the financial statements dated as of January 28, 1995.
As an inducement to the Bank to extend the Line of Credit, you represent and
warrant to the Bank that (i) the execution, delivery and performance of all
the agreements and instruments in connection with the Line of Credit are
within the Company's power and authority and have been authorized by all
necessary corporate proceedings and will not contravene any provision of the
Company's charter or bylaws or any agreement or undertaking binding upon the
Company; (ii) the Line of Credit is a legal, valid and binding obligation of
the Company which does not require the consent or approval of any governmental
agency or authority; and (iii) there is no litigation, proceeding or
investigation pending, or to the knowledge of the officers of the Company,
threatened against the Company other than previously disclosed to the Bank.
Carl, I hope the terms and conditions outlined above meet with your approval.
I look forward to reviewing this letter with you in detail at your convenience.
Please indicate your acceptance of the terms and conditions contained herein
by signing on the line provided below on or before March 31, 1995.
Sincerely,
/s/ R. Thomas Coffey
- ---------------------
R. Thomas Coffey
Assistant Vice President
Accepted:
WESTERBEKE CORPORATION
/s/ Carleton F. Bryant III
- ---------------------------
By: Carleton F. Bryant III
Title: Chief Operating Officer
Date: March 22, 1995
Exhibit 10(l)
TIME NOTE - GRID - FLUCTUATING INTEREST
$ 3,000,000.00 March 22, 1995
- -------------- ---------------------
Boston, Massachusetts
On March 31, 1996, for value received, Westerbeke Corporation (the
"Borrower") promises to pay to the order of STATE STREET BANK AND TRUST
COMPANY ("Bank") at the office of Bank located at 225 Franklin Street, Boston,
Massachusetts 02110, or such other place as the holder hereof shall designate,
- -------------Three Million------------------------------- DOLLARS or, if less,
the aggregate unpaid principal amount of all loans made by the Bank to the
Borrower, together with interest on unpaid balances payable monthly in arrears
on the first day of each calendar month and on the due date hereof, at a
fluctuating interest rate per annum equal to Zero (0)% above Bank's Prime Rate
in effect from time to time. Each change in such interest rate shall take
effect simultaneously with the corresponding change in such Prime Rate.
"Prime Rate" shall mean the rate of interest announced by Bank in Boston from
time to time as its "Prime Rate." Interest shall be calculated on the basis of
actual days elapsed and a 360-day year. If this note is not paid in full on
the due date, whether as stated or by acceleration, interest on unpaid balances
shall thereafter be payable on demand at a fluctuating interest rate per annum
equal to 4% above the Prime Rate in effect from time to time.
All loans hereunder and all payments on account of principal and
interest hereof shall be recorded by the Bank and prior to any transfer
hereof, endorsed on the gird on the reverse hereof which is part of this note.
The entries on the records of the Bank (including any appearing on this note)
shall be prima facie evidence of amounts outstanding hereunder.
This note shall, at the option of the holder, become immediately due
and payable without notice or demand upon the occurrence of any of the
following events:
(a) Failure to make any payment of interest when due;
(b) Failure for 90 days to discharge any attachment or levy on any
property of the Borrower;
(c) Default in the payment or performance of any liability,
obligation or agreement of any maker hereof to or with the holder hereof;
(d) Occurrence of any of the following with respect to the Borrower
or any endorser or guarantor hereof: admission in writing of his or its
inability, or be generally unable, to pay his or its debts as they become due,
death, dissolution, termination of existence, cessation of normal business
operations, insolvency, appointment of a receiver of any part of the property
of, legal or equitable assignment, conveyance or transfer of property for the
benefit of creditors by, or the commencement of any proceedings under any
bankruptcy or insolvency laws by or against, such person.
Any deposits or other sums at any time credited by or due from the
holder to the Borrower, or to any endorser or guarantor hereof, and any
securities or other property of the Borrower or any such endorser or guarantor
at any time in the possession of the holder may at all times be held and
treated as collateral for the payment of this note and any and all other
liabilities (direct or indirect, absolute or contingent, sole, joint or
several, secured or unsecured, due or to become due, now existing or hereafter
arising) of the Borrower to the holder. Regardless of the adequacy of
collateral, the holder may apply or set off such deposits or other sums
against such liabilities at any time in the case of the Borrower, but only
with respect to matured liabilities in the case of endorsers and guarantors.
The Borrower and every endorser and guarantor of this note hereby
waive presentment, demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or
enforcement hereof and consent that this note may be extended from time to
time and that no extension or other indulgence, and no substitution, release
or surrender of collateral and no discharge or release of any other party
primarily or secondarily liable hereon, shall discharge or otherwise affect
the liability of the Borrower or any such endorser or guarantor. No delay or
omission on the part of the holder in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder, and a
waiver of any such right on any one occasion shall not be construed as a bar
to or waiver of any such right on any future occasion.
This note is secured by any and all collateral at any time granted to
Bank to secure any obligations of any maker hereof.
The Borrower and every endorser and guarantor of this note agree to
pay on demand all costs and expenses (including legal costs and attorneys'
fees) incurred or paid by the holder in enforcing this note on default.
This note shall take effect as a sealed instrument and shall be
governed by the laws of the Commonwealth of Massachusetts.
Address Westerbeke Corporation
- ------- ----------------------
Borrower's Name (print or type)
Avon Industrial Park By /s/ John H. Westerbeke, Jr.
- -------------------- -----------------------------
Signature John H. Westerbeke, Jr.
Avon, MA 02322
- ---------------
By _____________________________
Signature
EXHIBIT 21
Subsidiary of Westerbeke Corporation
------------------------------------
Westerbeke International, Inc., a U.S. Virgin Islands corporation, which
qualifies as a foreign sales corporation.
Exhibit 23
Consent of Independent Auditors
-------------------------------
The Board of Directors and Stockholders
of Westerbeke Corporation:
We consent to incorporation by reference in the Registration Statement (File
No. 33-24435) on Form S-8 of Westerbeke Corporation of our report dated
December 21, 1995 relating to the consolidated balance sheets of Westerbeke
Corporation and subsidiary as of October 28, 1995 and October 29, 1994 and the
related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
October 28, 1995, and related schedule, which report appears in the
October 28, 1995 annual report on Form 10-K of Westerbeke Corporation.
Our report refers to a change in the method of accounting for income taxes.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 26, 1996
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<ARTICLE> 5
<CIK> 0000796502
<NAME> WESTERBEKE CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-END> OCT-28-1995
<CASH> 1,322,200
<SECURITIES> 0
<RECEIVABLES> 1,541,400
<ALLOWANCES> 60,500
<INVENTORY> 4,313,500
<CURRENT-ASSETS> 7,627,400
<PP&E> 4,384,800
<DEPRECIATION> 2,789,900
<TOTAL-ASSETS> 10,998,600
<CURRENT-LIABILITIES> 1,719,100
<BONDS> 0
0
0
<COMMON> 20,600
<OTHER-SE> 9,090,600
<TOTAL-LIABILITY-AND-EQUITY> 10,998,600
<SALES> 18,794,200
<TOTAL-REVENUES> 18,794,200
<CGS> 14,502,100
<TOTAL-COSTS> 14,502,100
<OTHER-EXPENSES> 3,193,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,700
<INCOME-PRETAX> 1,142,000
<INCOME-TAX> 444,400
<INCOME-CONTINUING> 697,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 697,600
<EPS-PRIMARY> .31
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</TABLE>
