SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1995 1-9298
RAYTECH CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-1182033
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Suite 512, One Corporate Drive
Shelton, Connecticut 06484
(Address of Principal Executive Office) (Zip Code)
(203) 925-8023
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock - $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. / /
Indicate by check mark whether the Registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has
been subject to such filed requirements for the past 90 days.
Yes X No
As of March 1, 1996, 3,230,080 shares of common stock were outstanding
and the aggregate market value of these shares (based upon the closing
price of these shares on the New York Stock Exchange) on such date
held by non-affiliates was approximately $12.1 million.
Documents Incorporated by Reference
Portions of Registrant's definitive proxy statement pursuant to
Regulation 14A for the 1995 Annual Meeting of Shareholders are
incorporated by reference in Part III.
<PAGE>
STATEMENT OF AMENDMENT
This Amendment No. 1 is being filed only to amend the Report of
Independent Accountants in Item 8 and the Consent of Independent
Accountants in Item 14, Exhibit 24. No other changes have occurred
as of this date.
<PAGE>
Item 8. FINANCIAL STATEMENTS
Financial Statements:
Consolidated Balance Sheets
December 31, 1995 and January 1, 1995
Consolidated Statements of Operations
for the 1995, 1994 and 1993 Fiscal Years
Consolidated Statements of Cash Flows
for the 1995, 1994 and 1993 Fiscal Years
Consolidated Statements of Shareholders'
Equity (Deficit) for the 1995, 1994, and
1993 Fiscal Years
Notes to Consolidated Financial Statements
Report of Independent Accountants
(Refer to Index to Consolidated Financial
Statements at Page 81.)<PAGE>
RAYTECH CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
<CAPTION>
Fiscal Year 1995 1994
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 19,597 $ 4,778
Trade accounts receivable, less allowance of $822
for 1995 and $519 for 1994 17,553 13,718
Inventories 23,573 22,859
Other current assets 5,390 5,019
Total current assets 66,113 46,374
Property, plant and equipment 114,437 111,147
Less accumulated depreciation 72,235 70,292
Net property, plant and equipment 42,202 40,855
Other assets 6,121 4,580
Total assets $114,436 $ 91,809
LIABILITIES
Current liabilities
Notes payable $ 8,187 $ 4,928
Current portion of long-term debt (including $22,696 and
$6,855 due to Raymark in 1995 and 1994, respectively) 22,839 8,001
Accounts payable 9,388 12,055
Accrued liabilities 20,376 21,150
Total current liabilities 60,790 46,134
Long-term debt due to Raymark 18,476 30,627
Long-term debt 242 245
Postretirement benefits other than pensions 8,253 7,436
Other long-term liabilities 7,995 3,651
Total liabilities 95,756 88,093
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Capital stock
Cumulative preferred stock, no par value
800,000 shares authorized, none issued - -
Common stock, par value $1.00
7,500,000 shares authorized; 5,362,139 and 5,351,024
issued in 1995 and 1994, respectively 5,362 5,351
Additional paid in capital 70,192 70,148
Accumulated deficit (54,913) (69,250)
Cumulative translation adjustment 2,600 2,028
23,241 8,277
Less treasury shares at cost (4,561) (4,561)
Total shareholders' equity 18,680 3,716
Total liabilities and shareholders' equity $114,436 $ 91,809
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
RAYTECH CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<CAPTION>
Fiscal year 1995 1994 1993
<S> <C> <C> <C>
Net sales $ 177,498 $ 167,615 $ 139,290
Cost of sales 128,799 123,067 101,827
Gross profit 48,699 44,548 37,463
Selling, general and administrative
expenses (25,994) (25,045) (20,440)
Other operating expense, net (1,746) (1,567) (2,600)
Operating profit 20,959 17,936 14,423
Currency transaction gains (losses) (43) (163) (11)
Interest expense - Raymark (2,006) (2,347) (2,827)
Interest expense (641) (254) (989)
Other income (expense), net 5,917 (714) 140
Income before provision for income
taxes and cumulative effect of
changes in accounting principles 24,186 14,458 10,736
Provision for income taxes (9,009) (5,815) (2,180)
Minority interest (840) - -
Income before cumulative effect of
changes in accounting principles 14,337 8,643 8,556
Cumulative effect of changes in
accounting principles - - (3,808)
Net income $ 14,337 $ 8,643 $ 4,748
Earnings per common share
before cumulative effect of
accounting changes $ 4.26 $ 2.52 $ 2.60
Cumulative effect of changes in
accounting principles - - (1.16)
Earnings per share $ 4.26 $ 2.52 $ 1.44
Weighted average shares outstanding 3,369,003 3,426,034 3,290,912
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
RAYTECH CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
<CAPTION>
Fiscal Year 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,337 $ 8,643 $ 4,748
Adjustments to reconcile net income
to net cash provided by operations:
Cumulative effect of changes in
accounting principles - - 3,808
Deferred income tax (853) (1,086) 77
Depreciation and amortization 7,654 7,007 6,803
Income applicable to minority interest 840 - -
Other items not providing or
requiring cash (Note C) 2,128 (271) 582
Changes in operating assets and liabilities:
Trade receivables (3,758) 52 (177)
Inventory (292) (2,504) (2,636)
Other current assets 42 (63) (366)
Other long-term assets (149) (252) (606)
Accounts payable (2,723) 1,938 2,731
Accrued liabilities (1,451) 3,159 4,543
Other long-term liabilities 1,194 (733) (1,168)
Net cash provided by operating activities 16,969 15,890 18,339
Cash flow from investing activities:
Capital expenditures (9,684) (10,668) (7,520)
Proceeds on sales of property, plant
and equipment 2,206 101 190
Purchase of subsidiary stock - - (44)
Net cash used in investing activities: (7,478) (10,567) (7,374)
Cash flow from financing activities:
Proceeds from short-term borrowings 3,775 4,719 -
Payment on short-term borrowings (905) - (1,441)
Principal payments on long-term debt (689) (2,876) (5,113)
Proceeds from borrowings from Raymark 6,258 500 2,500
Payments on borrowings from Raymark (3,085) (5,966) (5,016)
Other (73) (47) (94)
Net cash used in financing activities: 5,281 (3,670) (9,164)
Effect of exchange rate changes on cash 47 135 -
Net change in cash and cash equivalents 14,819 1,788 1,801
Cash and cash equivalents at beginning of year 4,778 2,990 1,189
Cash and cash equivalents at end of year $ 19,597 $ 4,778 $ 2.990
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (in thousands, except share data)
<CAPTION>
Number Paid Cumulative
of Shares Common in Accumulated Translation Treasury Stock
Issued Stock Warrants Capital Deficit Adjustment Cost Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 3, 1993 5,329,105 $ 5,329 $ 3,998 $66,160 $(82,379) $ 1,289 $(4,299) (2,052,022)
Stock options excercised 2,050 2 2
Treasury stock received
under Raymark
indemnification (262) (80,000)
Cumulative translation
adjustment (274)
Purchase of subsidiary
stock (44)
Other (130)
Net income for fiscal year
ended January 2, 1994 4,748
Balance,
January 2, 1994 5,331,155 $ 5,331 $ 3,998 $66,118 $(77,761) $ 1,015 $(4,561) (2,132,022)
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Continued, page 2
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (in thousands, except share data)
<CAPTION>
Number Paid Cumulative
of Shares Common in Accumulated Translation Treasury Stock
Issued Stock Warrants Capital Deficit Adjustment Cost Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 2, 1994 5,331,155 $ 5,331 $ 3,998 $66,118 $ (77,761) $ 1,015 $(4,561) (2,132,022)
Stock options exercised 19,869 20 32
Warrants expired (3,998) 3,998
Cumulative translation
adjustment 1,013
Purchase of treasury
stock - (34)
Other (132)
Net income for fiscal year
ended January 1, 1995 8,643
Balance,
January 1, 1995 5,351,024 $ 5,351 $ - $70,148 $(69,250) $ 2,028 $(4,561) (2,132,056)
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Continued, page 3
<TABLE>
RAYTECH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (in thousands, except share data)
<CAPTION>
Number Paid Cumulative
of Shares Common in Accumulated Translation Treasury Stock
Issued Stock Warrants Capital Deficit Adjustment Cost Shares
<S> <C> <C> <C> <S> <C> <C> <C> <C> <C>
Balance,
January 1, 1995 5,351,024 $ 5,351 $ - $70,148 $(69,250) $ 2,028 $(4,561) (2,132,056)
Stock options exercised 11,115 11 44
Cumulative translation
adjustment 572
Purchase of treasury
stock - (3)
Net income for the fiscal
year ended December 31,
1995 14,337
Balance,
December 31, 1995 5,362,139 $ 5,362 $ - $70,192 $(54,913) $ 2,600 $(4,561) (2,132,059)
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
RAYTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except share data)
Note A - Formation of Raytech Corporation, Sale of Raymark,
Chapter 11 Proceeding and Other Litigation
Raytech Corporation ("Raytech" or the "Company") was
incorporated on June 13, 1986 in Delaware and held as a
subsidiary of Raymark Corporation ("Raymark"). In October 1986,
Raytech became the publicly traded (NYSE) holding company of
Raymark stock through a triangular merger restructuring plan
approved by Raymark's shareholders at its October 1986 Annual
Meeting whereby each share of common stock of Raymark was
automatically converted into both a share of Raytech common stock
and a right to purchase a warrant for Raytech common stock. Each
warrant entitled the holder to purchase one share of Raytech
common stock at a price of $9.00 at any time, subject to certain
limitations, prior to October 1, 1991, extended to 1994. The
warrants expired on October 1, 1994. Raymark, thereby, became a
wholly-owned subsidiary of Raytech. The purpose of the formation
of Raytech and the restructuring plan was to provide a means to
gain access to new sources of capital and borrowed funds to be
used to finance the acquisition and operation of new businesses
in a corporate structure that should not subject it or such
acquired businesses to any asbestos-related or other liabilities
of Raymark.
Prior to the formation of Raytech, Raymark was first sued in
an asbestos-related claim in 1971 and has since been named as a
defendant in more than 88,000 lawsuits in which substantial
damages have been sought for injury or death from exposure to
airborne asbestos fibers. More than 35,000 of such lawsuits have
been disposed of by settlements, dismissals, summary judgments
and trial verdicts at a cost in excess of $333,000 principally
covered by Raymark's insurance. Subsequent to the sale of
Raymark as described below lawsuits continued to be filed against
Raymark at the rate of approximately 1,000 per month until an
involuntary petition in bankruptcy was filed against Raymark in
February 1989, which stayed all its litigation and remains
pending.
In accordance with the restructuring plan, Raytech purchased
the Wet Clutch and Brake Division and German subsidiary in 1987
from its then wholly-owned subsidiary, Raymark. Each such
acquisition was financed through borrowed funds from new lenders
and Raytech stock and notes. Pursuant to these acquisitions,
Raymark agreed to indemnify Raytech for any future legal
liabilities and costs that may result from asbestos litigation.
Management believes that each purchase by Raytech from Raymark
complies with Raytech's restructuring plan principles of (i)
paying fair market value, (ii) acquiring businesses that did not
give rise to any asbestos-related or other claims against<PAGE>
Note A, continued
Raymark, (iii) permitting Raymark to retain the proceeds for its
ongoing business and creditors, (iv) entering the transactions in
good faith and not to hinder, delay or defraud creditors, and (v)
conducting its affairs independent of Raymark.
In May 1988, following shareholder approval, Raytech sold
all of the Raymark stock to Asbestos Litigation Management, Inc.,
thereby divesting itself of Raymark. Consideration received for
the Raymark stock consisted of $50 cash paid at the closing and a
7-l/2% $950 promissory note to be paid in six equal annual
installments beginning one year after the closing with interest
payable annually. This transaction resulted in a pretax loss of
approximately $59,000 which was reflected in the 1988
consolidated financial statements.
Despite the restructuring plan implementation and subsequent
divestiture of Raymark, Raytech was named a co-defendant with
Raymark and other named defendants in approximately 3,300
asbestos-related lawsuits as a successor in liability to Raymark.
The dollar value of these lawsuits cannot be estimated. Until
February 1989, the defense of all such lawsuits was provided to
Raytech by Raymark in accordance with the indemnification
agreement included as a condition of the purchase of the Wet
Clutch and Brake Division and German subsidiary from Raymark in
1987. In February 1989, an involuntary petition in bankruptcy
was filed against Raymark and remains pending. Subsequent to the
bankruptcy proceedings against Raymark, a restrictive funding
order was issued by an Illinois Circuit Court, which required one
of Raymark's insurance carriers to pay claims but not defense
costs, and another insurance carrier had been declared insolvent.
These circumstances caused Raymark to be unable to fund the
costs of defense to Raytech in the asbestos-related lawsuits
referenced above, as provided in the indemnity section of the
acquisition agreement. Raymark's cost of defense and disposition
of cases up to the automatic stay of litigation under the
involuntary bankruptcy proceedings has been approximately $333
million of Raymark's total insurance coverage of approximately
$395 million. Of the $62 million remaining, $32 million is
covered by the insolvent carrier, and the remaining is either
blocked due to lower levels not being exhausted or does not
provide for defense of the claims.
In an asbestos-related personal injury case decided in
October 1988 in a U.S. District Court in Oregon, Raytech was
ruled under Oregon equity law to be a successor to Raymark's
asbestos-related liability. The successor ruling was appealed by
Raytech and in October 1992 the Ninth Circuit Court of Appeals
affirmed the District Court's judgment on the grounds stated in
the District Court's opinion. The effect of this decision <PAGE>
Note A, continued
extends beyond the Oregon District due to a Third Circuit Court
of Appeals decision in a related case cited below wherein Raytech
was collaterally estopped (precluded) from relitigating the issue
of its successor liability for Raymark's asbestos-related
liabilities.
As the result of the inability of Raymark to fund Raytech's
costs of defense recited above, and in order to obtain a ruling
binding across all jurisdictions as to whether Raytech is liable
as a successor for asbestos-related and other claims, including
claims yet to be filed relating to the operations of Raymark or
its predecessors, on March 10, 1989, Raytech filed a petition
seeking relief under Chapter 11 of Title 11, United States Code
in the United States Bankruptcy Court, District of Connecticut.
Under Chapter 11, substantially all litigation against Raytech
has been stayed while the debtor corporation and its non-filed
operating subsidiaries continue to operate their businesses in
the ordinary course under the same management and without
disruption to employees, customers or suppliers. In the
Bankruptcy Court a creditors' committee was appointed, comprised
primarily of asbestos claimants' attorneys. In August 1995,
pursuant to an order of the Bankruptcy Court, an official
committee of equity security holders was appointed for a limited
time relating to a determination of equity security holders'
interest in the estate.
Since the bankruptcy filing several entities have asserted
claims in Bankruptcy Court alleging environmental liabilities of
Raymark based upon similar theories of successor liability
against Raytech as alleged by asbestos claimants. These claims
are not covered by the class action referenced below and will be
resolved in the bankruptcy case. The environmental claims
include a claim of the Pennsylvania Department of Environmental
Resources ("DER") to perform certain activities in connection
with Raymark's Pennsylvania manufacturing facility, which
includes submission of an acceptable closure plan for a landfill
containing hazardous waste products located at the facility and
removal of accumulated baghouse dust from its operations. In
March 1991, the Company entered a Consent Order which required
Raymark to submit a revised closure plan which provides for the
management and removal of hazardous waste, for investigating
treatment and monitoring of any contaminated groundwater and for
the protection of human health and environment at the site, all
relating to the closure of the Pennsylvania landfill and to pay a
nominal civil penalty. The estimated cost for Raymark to comply
with the order is $1.2 million. The DER has reserved its right
to reinstitute an action against the Company and the other
parties to the DER order in the event Raymark fails to comply
with its obligations under the Consent Order. Another
environmental claim was filed against the Company by the U.S.
Environmental Protection Agency for civil penalties charged<PAGE>
Note A, continued
Raymark in the amount of $12 million arising out of alleged
Resource Conservation and Recovery Act violations at
Raymark's Stratford, Connecticut, manufacturing facility.
It is possible that additional claims for reimbursement of
environmental cleanup costs related to Raymark facilities may be
asserted against Raytech, as successor in liability to Raymark.
Determination of Raytech's liability for such future possible
claims, if any, would be subject to Bankruptcy Court
deliberations and proceedings.
Under bankruptcy rules, the debtor-in-possession has an
exclusive period in which to file a reorganization plan. Such
exclusive period had been extended by the Bankruptcy Court
pending the conclusion of the successor liability litigation.
However, in December 1992, the creditors' committee filed a
motion to terminate the exclusive period to file a plan of
reorganization. At a hearing in May 1993, the motion was denied
by the Bankruptcy Court but was appealed by the creditors'
committee. In November 1993, the U.S. District Court reversed
the Bankruptcy Court and terminated the exclusive period to file
a plan of reorganization effective in January 1994. Accordingly,
any party in interest, including the debtor, the creditors'
committee, or a creditor could thereafter file a plan of
reorganization.
In May 1994, Raytech filed a Plan of Reorganization
("Debtor's Plan") in the U.S. Bankruptcy Court for the purpose of
seeking confirmation allowing Raytech to emerge from the
bankruptcy filed March 10, 1989. Important conditions precedent
to confirmation of the Debtor's Plan include a final judgment in
the litigation to determine whether Raytech is a successor to the
liabilities of Raymark and a resolution of the environmental
claims or other claims filed or to be filed by governmental
agencies. The Debtor's Plan provides that in the event Raytech
is found to be a successor, it is to establish a successor trust
funded by an amount determined to be the difference between what
Raytech should have paid for the businesses purchased from
Raymark less the amount actually paid and less amounts to be paid
for environmental and other claims. This remedy would satisfy
its obligations as a successor in full and render all claimants
unimpaired, thereby eliminating the need for balloting and all
equity shareholders would retain their interests in full.
Raytech's management believes the Debtor's Plan to be
confirmable. In September 1994, the Creditors' Committee filed
its own Plan of Reorganization in competition to the Debtor's
Plan ("Creditors' Plan"). The Creditors' Plan calls for the
elimination of Raytech Corporation and its stockholders to be
replaced with a new Raytech. All of the stock of new Raytech
would then be distributed to unsecured claimants, environmental
claimants and both past and future asbestos disease claimants on<PAGE>
Note A, continued
a formulated basis set forth in the Plan. Current stockholders
of Raytech would receive nothing under the Plan. Raytech
believes the Creditors' Plan is unconfirmable and will vigorously
contest attempts to have it confirmed while it continues to try
to get the Debtor's Plan confirmed. Upon motion of the parties
and support of the Bankruptcy Court, the major interested parties
agreed in August 1995 to participate in non-binding mediation to
attempt to effectuate a consensual plan of reorganization. The
mediation process commenced in October 1995 and was concluded in
March 1996 without agreement for a consensual plan of
reorganization. The competing plans of Raytech and its creditors
will now return to Bankruptcy Court procedures. The outcome of
these matters is expected to take considerable time and is
uncertain. If an adverse plan is confirmed, it would have a
material adverse impact on Raytech and its stockholders.
In June 1989 Raytech filed a class action in the Bankruptcy
Court against all present and future asbestos claimants seeking a
declaratory judgment that it not be held liable for the asbestos-
related liabilities of Raymark. It was the desire of Raytech to
have this case heard in the U.S. District Court, and since the
authority of the Bankruptcy Court is referred from the U.S.
District Court, upon its motion and argument the U.S. District
Court withdrew its reference of the case to the Bankruptcy Court
and thereby agreed to hear and decide the case. In September
1991, the U.S. District Court issued a ruling dismissing one
count of the class action citing as a reason the preclusive
effect of the 1988 Oregon case, previously discussed, under the
doctrine of collateral estoppel (conclusiveness of judgment in a
prior action), in which Raytech was ruled to be a successor to
Raymark's asbestos liability under Oregon law. The remaining
counts before the U.S. District Court involve the transfer of
Raymark's asbestos-related liabilities to Raytech on the legal
theories of alter-ego and fraudulent conveyance. Upon a motion
for reconsideration, the U.S. District Court affirmed its prior
ruling in February 1992. Also, in February 1992, the U.S.
District Court transferred the case in its entirety to the U.S.
District Court for the Eastern District of Pennsylvania. Such
transfer was made by the U.S. District Court without motion from
any party in the interest of the administration of justice as
stated by the U.S. District Court. In December 1992, Raytech
filed a motion to activate the case and to obtain rulings on the
remaining counts which was denied by the U.S. District Court. In
October 1993, the creditors' committee asked the Court to certify
the previous dismissal of the successor liability count. In
February 1994, the U.S. District Court granted the motion to
certify and the successor liability dismissal was accordingly
appealed. In May 1995, the Third Circuit Court of Appeals ruled
that Raytech is collaterally estopped (precluded) from
relitigating the issue of its successor liability as ruled in the
1988 Oregon case recited above, affirming the U.S. District<PAGE>
Note A, continued
Court's ruling of dismissal. A petition for a writ of certiorari
was denied by the U.S. Supreme Court in October 1995. The ruling
leaves the Oregon case, as affirmed by the Ninth Circuit Court of
Appeals, as the prevailing decision holding Raytech to be a
successor to Raymark's asbestos-related liabilities.
Costs incurred by the Company for asbestos-related
liabilities are indemnified by Raymark under the 1987 acquisition
agreements. By agreement, Raymark has reimbursed the Company in
part for such indemnified costs by payment of the amounts due in
Raytech common stock of equivalent value. Under such agreement,
Raytech received 177,570 shares in 1990, 163,303 shares in 1991
and 80,000 shares in 1993. The Company's acceptance of its own
stock was based upon an intent to control dilution of its
outstanding stock. In 1992, the indemnified costs were
reimbursed by offsetting certain payments due Raymark from the
Company under the 1987 acquisition agreements. Costs incurred in
1994 and 1995 were applied as a reduction of the note obligations
pursuant to the agreements.
In October 1992, the Secretary of the Department of Labor
filed suit against Raymark and certain named fiduciaries in the
U.S. District Court for Connecticut naming the Company as a
successor to Raymark, alleging the breach of fiduciary duties
required under ERISA in connection with the purchase of a group
annuity contract from Executive Life Insurance Company to fund
the benefits of participants and beneficiaries of three pension
plans. Executive Life was placed in conservatorship by the
California Insurance Commission in April 1991. The Department of
Labor filed a claim in the Bankruptcy Court in the amount of
$22.8 million covering its theory of damages alleged in the suit.
This litigation was settled by the parties as approved by the
Court in October 1995, wherein Raytech was dismissed without
liability.
In February 1994, a jury in the U.S. District Court for the
Southern District of Indiana returned a verdict in favor of
Raybestos Products Company ("RPC"), a wholly-owned subsidiary of
the Company, for $2.9 million plus costs and against Gilbert W.
Younger and Transgo, a corporation. RPC had sued the defendants
in 1990 for defamation of products and injurious falsehoods
concerning RPC's manufactured products. In April 1994, the Court
granted RPC its costs, attorneys' fees and interest in addition
to the damages awarded by the jury. The defendants filed for
bankruptcy under Chapter 11 in 1992 and the defendant's plan of
reorganization was confirmed in September 1994 by a California
Bankruptcy Court. Under the plan of reorganization and ordered
by the Court, the total amount of the awarded damages had been
placed in a secured escrow account pending appeals. In April
1995, the Seventh Circuit Court of Appeals affirmed the verdict
except for the award of prejudgment interest. In June 1995, RPC
<PAGE>
Note A, continued
received the awarded damages, including post-judgment interest,
in the amount of $4.6 million, bringing the case to a final
conclusion.
The adverse ruling in the Third Circuit Court of Appeals, of
which a petition for writ of certiorari was denied by the U.S.
Supreme Court, precluding Raytech from relitigating the issue of
its successor liability leaves the U.S. District Court's (Oregon)
1988 ruling as the prevailing decision holding Raytech to be a
successor to Raymark's asbestos-related liabilities. This ruling
could have a material adverse impact on Raytech as it does not
have the resources needed to fund Raymark's substantial uninsured
asbestos-related liabilities. Determination of Raytech's actual
liabilities are subject to the Bankruptcy Court's deliberations
and rulings and the competing plans of reorganization filed in
the Bankruptcy Court referenced above.
The ultimate liability of the Company with respect to
asbestos-related, environmental, or other claims cannot presently
be determined. Accordingly, no provision for such liability has
been recorded in the financial statements. The accompanying
financial statements have been prepared assuming that the Company
will continue as a going concern. An unfavorable result on the
matters described above would have a material adverse effect on
the Company's results of operations and financial position.
These uncertainties raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or adjustments relating
to establishment, settlement and classification of liabilities
that may be required in connection with reorganizing under the
Bankruptcy Code.<PAGE>
Note B - Summary of Significant Accounting Policies
1. Background and Basis of Presentation
Raytech, through its principal subsidiaries, is a
multinational manufacturer and marketer of specialty
engineered products for heat resistant, inertia control,
energy absorption and transmission applications. Its
products are used in the vehicular, aerospace, nucleonics,
petrochemical, energy, metal working, construction,
agriculture, utility and electronic industries, among
others.
Raytech operates through six business units: Raybestos
Products Company ("RPC"), located in Crawfordsville, Indiana;
Raybestos Industrie-Produkte GmbH, located in Morbach,
Germany; Raybestos U.K. Ltd., located in Liverpool, England;
Allomatic Products Company, located in Sullivan, Indiana;
and Raybestos Aftermarket Products Company located in
Crawfordsville, Indiana.
Demand for the Company's product is derived primarily from
the automotive original equipment, agriculture, construction
and aftermarket segments which are highly competitive.
These markets can be highly influenced by prevailing
economic conditions such as interest rates and employment
issues.
The consolidated financial statements include the accounts
of Raytech Corporation and its majority-owned subsidiaries.
Intercompany balances and transactions have been eliminated
in consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
Certain 1994 amounts have been reclassified to conform to
the current year's presentation.
2. Fiscal Year
The Company reports on a 52-53 week fiscal year; the last
three fiscal years ended December 31, 1995, January 1,
1995, and January 2, 1994.
3. Cash and Cash Equivalents
Cash equivalents are recorded at cost, which approximates
market, and consist primarily of U.S. Treasury notes and tax
exempt mutual funds with maturities of three months or less.<PAGE>
Note B, continued
4. Inventories
Inventories are stated at the lower of cost or market with
cost determined primarily by using the FIFO (first in, first
out) method.
5. Property, Plant and Equipment
Property, plant and equipment is stated at cost less
accumulated depreciation and amortization. Depreciation and
amortization is based on the estimated service life of the
related asset and is provided using the straight line method
for assets acquired after 1980 and accelerated methods for
previously acquired assets. Maintenance and repairs that do
not increase the useful life of an asset are expensed as
incurred. Interest is capitalized on major capital
expenditures during the period of construction and to the
date such asset is placed in service. Upon disposal of
property, plant and equipment, the appropriate accounts are
reduced by the related costs and accumulated depreciation.
The resulting gains and losses are reflected in the
Consolidated Statements of Operations.
6. Employee Benefits
Raytech has several pension plans covering substantially all
employees. Pension expense for the defined benefit plan
includes current service costs and the amortization of prior
service costs over 15 years.
The Company also provides self-insured health care and life
insurance benefits for its active and retired employees. The
Company adopted the provisions of Statement of Financial
Accounting Standards No. 106, Accounting for Postretirement
Benefits Other Than Pensions, in the first quarter of fiscal
1993 (refer to Note J).
The Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers Accounting
for Postemployment Benefits," in the first quarter of fiscal
1994 (refer to Note J).
7. Income Taxes
The Company provides for income taxes based on pretax
financial accounting income or loss, including deferred
taxes for the effect of temporary differences between
financial accounting and taxable earnings. The Company
adopted the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, in the first
quarter of fiscal 1993 (refer to Note I).<PAGE>
Note B, continued
8. Net Income Per Share
Primary net income per common share is computed based on the
weighted average number of common and common equivalent
shares outstanding during the year. Fully diluted net
income per common share is not presented since it does not
differ materially from primary net income per common share
or is anti-dilutive.
9. Translation of Foreign Currencies
The local currencies of the Company's subsidiaries in
Germany and the United Kingdom have been designated as the
functional currencies. Accordingly, financial statements of
foreign operations are translated using the exchange rate at
the balance sheet date for assets and liabilities, and an
average exchange rate in effect during the year for revenue
and expense items. The effects of translating the Company's
foreign subsidiaries' financial statements are recorded as a
separate component of shareholders' equity (deficit).
10. Revenue Recognition
Sales are recorded by the Company when products are shipped
to customers.
11. Recently Issued Accounting Pronouncements
The Company accounts for stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and has not yet
determined whether it will choose to recognize compensation
expense or opt to comply with the disclosure requirements
when Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," is adopted in
1996.
In March 1995, Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," ("SFAS No.
121") was issued, effective January 1, 1996. SFAS No. 121
requires that in the event certain facts and circumstances
indicate an asset may be impaired, an evaluation of
recoverability must be performed to determine whether or not
the carrying amount of the asset is required to be written
down. The Company does not expect the adoption of this
statement to have a material effect on its financial
condition or results of operations.<PAGE>
Note C - Statements of Cash Flows
Other items not providing or requiring cash consist of:
1995 1994 1993
Net loss (gain) on sale/writedown
of fixed assets $1,994 $(1,960) $ 53
Nonmonetary yarn purchases
(Note H) - 1,570 -
Interest expensed but not paid 204 196 434
Other non-cash items (70) (77) 95
$2,128 $ (271) $ 582
Income taxes paid were $10,202, $7,719, and $2,633 during
1995, 1994 and 1993, respectively.
Interest paid was $2,449, $2,607, and $3,382 during 1995,
1994 and 1993, respectively.
The Company has classified temporary investments as cash
equivalents if the original maturity of such investments is three
months or less.
Excluded from the 1995, 1994 and 1993 Consolidated
Statements of Cash Flows is $791, $686, and $298, respectively,
of plant and equipment acquisitions in accounts payable or under
capital leases. The 1994 Consolidated Statement of Cash Flows
excludes the sale of the Radevormwald, Germany, facility for a
$1,530 receivable from the buyer, which was paid in January 1995.<PAGE>
Note D - Inventories
Inventories consist of the following:
Fiscal Year 1995 1994
Raw materials $ 6,901 $ 6,367
Work-in-process 6,143 6,524
Finished goods 10,529 9,968
$23,573 $ 22,859
Inventory Reserves
Fiscal Year 1995 1994 1993
Beginning balance $ 2,601 $ 1,423 $ 1,903
Provisions (113) 2,435 30
Charge-offs (231) (1,257) (510)
Ending balance $ 2,257 $ 2,601 $ 1,423<PAGE>
Note E - Property, Plant and Equipment
Property, plant and equipment, at cost, is summarized as
follows:
Estimated
Useful
Lives
Fiscal Year 1995 1994 (Years)
Land $ 546 $ 533 -
Buildings and improvements 17,553 15,890 5-40
Machinery and equipment 91,638 89,981 3-20
Capitalized leases 1,283 772 See Below
Construction in progress 3,417 3,971 -
114,437 111,147
Less accumulated depreciation
and amortization 72,235 70,292
Net property, plant and
equipment $ 42,202 $ 40,855
Capitalized leases consist primarily of automobiles and
telephone and computer equipment and are amortized over the
economic life of the assets or the term of the leases, whichever
is shorter.
Maintenance and repairs charged to expense amounted to
approximately $11.1 million, $9.3 million, and $5.9 million for
1995, 1994 and 1993, respectively.
Depreciation and amortization expenses relating to property,
plant and equipment were $7,566, $6,892, and $6,680 for 1995,
1994 and 1993, respectively.<PAGE>
Note F - Debt
Debt consists of the following:
Fiscal Year 1995 1994
Notes due to Raymark (a) $ 41,172 $37,482
Notes payable to banks (c) 8,187 4,928
Attorney notes (including accrued
interest of $398 in 1994) (b) - 1,016
Capitalized leases and other
obligations 385 375
Total borrowings 49,744 43,801
Less current portion 31,026 12,929
Long-term debt $ 18,718 $ 30,872
The aggregate maturities of debt are as follows:
1996 31,026
1997 7,006
1998 7,400
1999 4,312
Total Debt $ 49,744
(a) The notes due to Raymark amounting to $41,172 and
$37,482 at December 31, 1995 and January 1, 1995, respectively,
are the result of the purchase of the Wet Clutch and Brake
Division and the German subsidiary from Raymark in 1987.
In December 1992, the Company and Raymark amended the
Asset Purchase Agreement of the Wet Clutch and Brake Division.
Under the terms of the amendment, the original note in the
principal amount of $23,074 plus accrued interest of $17,543 was
canceled and replaced by an uncollateralized promissory note in
the amount of $40,617, bearing interest at the rate of 6% per
annum and payable in equal monthly installments of $650
commencing April 1993. The principal portion of the monthly
installments was to be paid into an escrow account pending
clearance of all Raymark encumbrances and liabilities as provided
by the agreement (refer to Note A). In May 1995, the escrow
agreement was amended, and the Company reclaimed the balance in
the escrow and suspended payment of the monthly installments as a
result of the Third Circuit Court of Appeals decision that
jeopardizes the assets purchased from Raymark in 1987 being free
of all Raymark related encumbrances and liabilities.
As agreed by the Company and Raymark, remaining
obligations under the German subsidiary note, payable in German
deutsche marks (DM) are suspended pending the assets purchased
being free of all Raymark related encumbrances and liabilities.
At December 31, 1995, the balance due on the German note amounted
to DM4,440 ($3,091), including interest.<PAGE>
Note F, continued
The Company has classified its acquisition-related debt
to Raymark consistent with the repayment terms in effect prior to
the May 1995 elimination of the escrow account and the suspension
of the German note payments. Accordingly, $22,696 of the Raymark
debt is classified as current portion of long-term debt on the
consolidated balance sheets, which includes $1,746 reclaimed from
the escrow account. Costs incurred by the Company subject to the
indemnification clause of the 1987 agreements will be applied as
a reduction of the note obligations (refer to Note H). The
repayment terms of this debt could be further affected by the
Bankruptcy Court proceedings referred to in Note A.
In September 1993 and January 1994, Raytech Composites,
Inc., a wholly-owned subsidiary of the Company, entered loan
agreements with Raymark for $2.5 million and $3 million,
respectively, and as of December 31, 1995 has borrowed $2.5
million and $.5 million under the loan agreements, respectively.
The loans bear interest at 6% per annum with principal and
accrued interest due in April 1996.
(b) In February 1995, a lawsuit brought by a certain law
firm holding uncollateralized 10.48% notes originally due in
October 1994 was settled for $542.
(c) The Company's wholly-owned German subsidiary (Raybestos
Industrie-Produkte GmbH) has available lines of credit with
several German banks amounting to DM7,910 ($5,506). Interest is
charged at rates approximating 3-5% above the German Federal Bank
rate. At December 31, 1995, the weighted average rate on the
outstanding borrowings was 7.9%. The expiration of the lines
varies through January 30, 1996. At December 31, 1995, the
remaining available lines of credit amounted to DM1,572 ($1,094).
In March 1995, RPC, a wholly-owned subsidiary of the
Company, entered into a five-year loan agreement with The CIT
Group/Credit Finance, Inc., which provides for RPC to borrow up
to $15 million, consisting of a revolving line of credit of $10
million and a term loan of $5 million at an interest rate of
1.75% above the prime rate. The amount of borrowing is
predicated on satisfying an asset based formula related to levels
of certain accounts receivable, inventories and machinery and
equipment. The loans are collateralized by all assets, excluding
land and buildings, at RPC. The purpose of the loan is for
working capital, capital expenditures, acquisitions and possible
settlement of successor liability issues. Under the terms of the
loan agreement, RPC is required to maintain certain cash flow
levels and is prohibited from declaring or paying dividends,
except under certain conditions. The amount outstanding under
this loan agreement at December 31, 1995 was $3,775. The
additional borrowing availability at December 31, 1995 is $11
million based upon the asset borrowing formula.<PAGE>
Note G - Research and Development
Cost of research and new product development amounted to
$5,864 in 1995, $5,298 in 1994, and $4,320 in 1993 and is
included in selling, general and administrative expenses in the
Consolidated Statements of Operations.<PAGE>
Note H - Related Parties
During 1995 and other relevant periods of time, Raymark was
owned by a corporation owned by Bradley C. Smith, son of Craig R.
Smith, Director and Chief Executive Officer of the Company.
As discussed in Note A, in 1987, Raytech acquired certain
assets and assumed certain liabilities of the Wet Clutch and
Brake Division and acquired the stock of a German subsidiary from
its then wholly-owned subsidiary, Raymark. The purchases from
Raymark and subsequent transactions with Raymark took place as
follows:
Wet Clutch and Brake Acquisition
The purchase price of $76,900 for the Wet Clutch and Brake
Division was initially comprised of $14,900 cash, $16,000 of
Raytech stock issuable in installments and $46,000 of notes
(refer to Note F). The Raytech stock issuable to Raymark was due
in six annual installments beginning October 30, 1987. The first
installment was $10,000 and the remaining installments were
$1,200 each. The number of shares to be issued was determined by
taking the average closing price of Raytech stock for the five
days prior to the payment date. Accordingly, Raytech issued
1,365,188 and 311,688 shares of stock to Raymark as of November
1987 and 1988, respectively. Pursuant to the 1987 Asset Purchase
Agreement of the Wet Clutch and Brake Division, Raymark could
require Raytech to repurchase or redeem any of the shares of its
stock held by Raymark at the then current market price. In June
1988, the Company reached an agreement with Raymark for cash
prepayments on a portion of promissory notes due Raymark for the
purchase of the Wet Clutch and Brake Division in return for the
elimination of the redemption rights on 1,365,188 shares of
Raytech stock then held by Raymark. This cash prepayment of
$4,500 was paid to Raymark over an eighteen-month period, $2,100
during 1988, and the remaining $2,400 in 1989. In November 1988,
pursuant to the said Asset Purchase Agreement, Raytech issued
311,688 shares of Raytech stock to Raymark. Raymark exercised
its option to require the Company to repurchase these shares.
Accordingly, Raytech paid $1,200 to Raymark in return for 311,688
shares of Company stock. The 1989 and 1990 installments of
$1,200 were paid in cash in lieu of stock at the request of
Raymark. In August 1991, the Company and Raymark amended the
Asset Purchase Agreement to require all future annual stock
payments in cash in lieu of the issuance of shares of Common
Stock in annual installments through November 1992. In December
1992, the Asset Purchase Agreement was again amended providing
for payment of the 1991 and 1992 payments to be completed in
March 1993. Such amendment also provided for a restructure of
the remaining note defined below (see Note F).<PAGE>
Note H, continued
The German Acquisition
The purchase price of approximately $8,200 of the German
subsidiary (Raybestos Industrie-Produkte GmbH) was initially
comprised of a DM7.0 million note (approximately $4,300 at the
acquisition date) and of DM6.5 million (approximately $3,900 at
the acquisition date) of Raytech stock issuable in installments.
The Raytech stock issuable to Raymark was due in eight
installments commencing March 1987. The first installment was
DM1.25 million ($694 at the issuance date) and the remaining
installments were DM750 which are translated into dollars using
the exchange rate in effect when each payment becomes due. The
number of shares issuable was determined by the weighted average
closing price of Raytech stock for the five days prior to the
payment date. Accordingly, Raytech issued 72,038 and 63,565
shares of stock to Raymark as of March 1987 and 1988,
respectively. The 1989 installment of DM750 was paid in April
1989 in cash in lieu of stock at Raymark's request in the amount
of $396. Raytech issued 163,303 shares of stock to Raymark in
March 1990 in payment of the 1990 installment. In August 1991,
the Company and Raymark amended the Stock Purchase Agreement to
require the three remaining annual stock payments in cash in lieu
of the issuance of shares of Common Stock in annual installments
through April 1994. In December 1992, the Stock Purchase
Agreement was again amended providing for payment of the 1992
payments to be completed in March 1993. Payments due in 1993 and
1994 are suspended pending the purchased assets being free of all
Raymark-related liabilities as required (see Note F).
The Raymark Divestiture
In May 1988, the common stock of Raymark Corporation was
divested and sold to Asbestos Litigation Management, Inc.
("ALM"), a wholly-owned subsidiary of Litigation Control
Corporation ("LCC"). At the time of the said sale, LCC was 60%
beneficially owned by Craig R. Smith, President and CEO of
Raytech (15% through his son, Bradley C. Smith).
In September 1988, LCC entered a tripartite agreement with
Celotex Corporation and Raymark for the purpose of sharing
asbestos litigation costs. Consideration paid by Raymark to LCC
was to assign $1,000 of its $33,530 note receivable due in 1994
from Raytech pursuant to the aforementioned Wet Clutch and Brake
Division acquisition.
In October 1988, LCC repurchased 75% of its outstanding
stock consisting of all of the shares beneficially owned by Craig
R. Smith and Bradley C. Smith and another unrelated shareholder
for $750. Consideration paid to Craig R. Smith and Bradley C.<PAGE>
Note H, continued
Smith was $450 and $150, respectively. Messrs. Smith and Smith
were thereby completely divested of any stock ownership in LCC.
In January 1989, LCC sold all of the outstanding stock of
its subsidiary, ALM, to Bradley C. Smith, the son of Craig R.
Smith, and another unrelated party for $17. Subsequently,
Bradley C. Smith purchased the balance of the stock of ALM and is
now the sole owner. ALM owns all of the common stock of Raymark.
Except for the ownership of ALM by his son, Bradley C. Smith,
Craig R. Smith has no relationship to, or control of Raymark.
Other Matters
During 1989, Raytech incurred costs, including bankruptcy
related attorneys' fees and lender refinance charges, in the
amount of $1,558 subject to the indemnification clause of the
1987 agreement covering the purchase of assets of the Wet Clutch
and Brake Division. Pursuant to Raymark's request, Raytech
accepted 926,821 shares of Raytech stock in payment therefor.
During 1990, Raytech incurred similar costs in the amount of
$1,033 and was indemnified by a return of $364 or 177,570 shares
of Raytech stock held by Raymark, an offset against the April
1990 note payment due under the German acquisition of $521, and
then a subsequent return in February 1991 of an additional $148
or 74,826 shares of Raytech stock. Additionally, in January
1991, the Company incurred $750 of additional refinance charges,
which were also subject to the indemnification clause. Raytech
accepted Raymark's request to a reimbursement in the form of all
remaining shares of Raytech stock held by Raymark, which amounted
to $175 or 88,477 shares and then a reduction of $575 of future
stock obligations pursuant to the Wet Clutch and Brake and German
subsidiary acquisitions. Accordingly, in April 1991, $446 of
such credit was used to defray the April 1991 stock obligation
pursuant to the German subsidiary acquisition leaving a balance
of $132 to be applied toward the stock obligation due in November
1991 pursuant to the Wet Clutch and Brake acquisition. In July
1991, the Company and Raymark agreed that any future
reimbursement of indemnified costs by Raymark will be taken in
the form of a reduction of future stock obligations under the
Stock Purchase Agreement for the German subsidiary and any excess
to be taken as a reduction of the note due Raymark. In December
1992, the Company and Raymark amended the Asset Purchase
Agreement of the Wet Clutch and Brake Division. Under the terms
of the amendment, the note in the principal amount of $23,074
plus accrued interest in the amount of $17,543 was canceled and
replaced by an uncollateralized promissory note in the amount of
$40,617, bearing interest at the rate of 6% per annum and payable
in equal monthly installments of $650 commencing April 1993. The
principal portion of the monthly installments was to be paid into
an escrow pending, clearance of all Raymark encumbrances and<PAGE>
Note H, continued
liabilities as provided by the Agreements. Payments due in 1991
and 1992 under the acquisition agreements as amended and deferred
by agreement, amounting to $1,875, including accrued interest,
were paid in monthly installments of $650 until paid in full in
March 1993 bearing interest at 6%. As agreed by the Company and
Raymark, 1993 and 1994 obligations under the German subsidiary
note were suspended pending the assets purchased from Raymark in
1987 being free of all Raymark related encumbrances and
liabilities. Also, costs incurred by the Company subject to the
indemnification clause of the 1987 agreements were to be applied
as a reduction of the note obligations. As agreed in April 1993,
the Company received 80,000 shares of its stock from Raymark
valued at $262 as a credit for reimbursement of costs incurred by
the Company under the indemnification clause. As of December
1994, the Company had incurred $253 of additional costs subject
to the indemnification clause which were applied as a reduction
of the note obligations pursuant to the agreement. As of May
1995, the Company had incurred $460 of additional costs subject
to the indemnification clause which was applied as a reduction of
the note obligations pursuant to the agreement. Also, in May
1995, the Company reclaimed the balance in the escrow and
suspended payment of the monthly installments as a result of the
Third Circuit Court of Appeals decision that jeopardizes the
assets purchased from Raymark in 1987 being free of all Raymark
related encumbrances and liabilities. As of December 1995, the
Company had incurred $305 of additional costs subject to the
indemnification clause.
In 1990 and 1991, Raytech Powertrain, Inc., a subsidiary of
the Company, and owner of all of the capital stock of Allomatic
Products Company ("APC"), sold approximately 45% of the capital
stock of APC to a group of investors, including Craig Smith, for
the purpose of partially financing APC's move from New York to
Indiana and for the further growth of its business.
Subsequently, all APC stock held by Craig Smith was transferred
to relatives and related companies, including Universal Friction
Composites, Inc., and accordingly, in the opinion of General
Counsel of the Company, remains beneficially owned by him. The
total current beneficial ownership of Craig Smith in APC stock is
40%. In March 1995, APC declared a cash dividend of $2.81 per
share payable in equal quarterly installments to shareholders of
record in March 1995. At the record date, Craig Smith
beneficially owned 41,658 shares of the outstanding shares of APC
stock. The first, second and third quarter installments of the
declared dividend were paid in 1995. The Company's Board of
Directors reviewed Craig Smith's beneficial ownership of the APC
stock and resulting payment of dividends at length and has
recommended continued disclosure of the related party
transactions and appointed the General Counsel of the Company to
monitor and report all such related party transactions in the
future.<PAGE>
Note H, continued
In September 1993 and January 1994, Raytech Composites,
Inc., a wholly-owned subsidiary of the Company, borrowed $2,500
and $500 under the loan agreements with Raymark. The loans bear
interest at 6% per annum with principal and accrued interest due
in April 1996.
During 1995, the Company purchased yarn from Raymark
amounting to $2,993, which included freight of $99, and at
December 31, 1995, the related payable amounted to $239.
During 1988, the Company repurchased 200,000 shares of its
common stock from Echlin Inc. in exchange for $1.2 million of
credit on future product sales from the Company to Echlin, which
is pre-petition debt under the Company's bankruptcy filing. As
of December 31, 1995, Echlin's voting interest in the Company is
16.9%.
On March 20, 1996, 49% of the common stock of Raymark
Corporation was purchased by Craig R. Smith from his son
Bradley C. Smith for $7 in an agreement containing an option to
purchase the balance of the common stock at a later date. This
event occurred subsequent to the date of the audited report and
is unaudited.<PAGE>
Note I - Income Taxes
Effective January 4, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109
(SFAS 109, "Accounting For Income Taxes"). The adoption of SFAS
109 changed the Company's method of accounting for income taxes
from the deferred method to the liability approach. Previously
the Company deferred the past effects of timing differences
between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences
of temporary differences between the carrying amounts and tax
bases of assets and liabilities. The Company elected to account
for the change prospectively and has included a net amount of
$2.2 million of income, primarily the result of the recognition
of deferred tax assets, in the 1993 Consolidated Statements of
Operations as the cumulative effect of the change.
Income before provision for income taxes, minority interest
and cumulative effect of accounting changes consists of both
domestic and foreign as follows:
1995 1994 1993
Domestic $23,811 $18,875 $14,394
Foreign 375 (4,417) (3,658)
$24,186 $14,458 $10,736
The Company's provision for taxes, excluding the cumulative
effects of accounting changes, consists of the following:
1995 1994 1993
Current:
Federal $ 7,876 $ 5,277 $1,017
State 1,852 1,590 1,062
Foreign 133 34 23
Deferred:
Federal (853) (1,086) 57
State - - 20
Foreign 1 - -
Total income taxes $ 9,009 $ 5,815 $2,180<PAGE>
Note I, continued
The analysis of the variance from the U.S. statutory income
tax rate for consolidated operations is as follows:
1995 1994 1993
U.S. statutory rate 35.0% 34.7% 34.1%
Increases (decreases)
resulting from:
Foreign losses not deductible - 10.6 12.2
Utilization of tax credits (.1) (5.0) (13.6)
Net increase in benefit from
carryback of future
deductible amounts (3.6) (2.4) (7.5)
State income taxes, net of
federal benefit 5.0 7.2 6.6
Adjustment of prior years'
accruals (.1) (4.8) (11.7)
Other 1.0 (.1) .2
Effective income tax rate 37.2% 40.2% 20.3%
Deferred tax assets (liabilities) are comprised of the
following:
1995 1994 1993
Excess of book provisions
over tax deductions $ 5,247 $ 4,108 $ 2,905
Postretirement benefit 3,238 2,892 2,493
AMT credit carryforward - - 361
Excess of tax basis over
book basis of assets due
to restructuring 2,277 2,580 2,854
Foreign loss carryforwards 3,865 3,710 2,015
Other 798 982 1,034
Gross deferred tax assets 15,425 14,272 11,662
Deferred tax asset
valuation allowance (8,547) (8,465) (6,035)
Deferred tax assets 6,878 5,807 5,627
Gross deferred tax
liabilities (excess of
tax over book depreciation) (3,352) (3,134) (4,040)
Net deferred tax asset $ 3,526 $ 2,673 $ 1,587<PAGE>
Note I, continued
The net deferred tax asset represents future tax deductions
that can be realized upon carryback to prior years.
The deferred tax asset valuation allowance increased by $82
during 1995. The deferred tax asset valuation allowance
increased by $2,430 during 1994. The deferred tax asset
valuation allowance decreased by $1,296 during 1993.
During 1995, the Company utilized foreign loss
carryforwards, which reduced income tax expense by $177. At
December 31, 1995, the Company had foreign loss carryforwards of
$7,994, which do not expire.<PAGE>
Note J - Employee Benefits
In January 1988, the Company formed Raytech Corporation's
Retirement Plan for Hourly Employees (the "Raytech Plan"). The
Raytech Plan covers substantially all hourly employees of RPC
retroactive to November 1, 1987 and calls for benefits to be paid to
eligible employees at retirement based upon an annual normal
retirement allowance of $192.00 multiplied by the number of years of
credited service. Effective in January 1994, the retirement
allowance was raised to $198.00. Prior to November 1, 1987 all
obligations due to Raybestos Products Company employees and the
related assets were covered under Raymark Industries, Inc. Retirement
Plan for Hourly Employees (the "Predecessor Plan"). In May of 1988,
pursuant to the divestiture of Raymark, all assets and obligations of
the Predecessor Plan transferred to Asbestos Litigation Management.
Employees covered under the Raytech Plan are eligible to
participate upon the attainment of age 21 and the completion of one
year of service. The benefits are based on negotiated benefits and
years of credited service. Employees who were eligible under the
Predecessor Plan became immediately eligible at November 1, 1987 for
the Raytech Plan. Upon retirement, these employees will receive
benefits from both plans.
The Company's funding policy is to contribute annually the
minimum amount required by the Employee Retirement Income Security
Act. The plan invests primarily in short-term investment contracts.
The Company uses the "projected unit credit method" for determining
the amounts and incidence of employer contributions to provide for
pension benefits.
The net periodic pension cost for defined benefit plans was
comprised of:
1995 1994 1993
Service cost $ 174 $ 214 $ 193
Interest cost on projected benefit
obligations 124 107 82
Actual return on plan assets (79) (59) (26)
Net amortization and deferral 11 8 (17)
Net periodic pension cost $ 230 $ 270 $ 232<PAGE>
Note J, continued
The unfunded status of the Raytech Plan is as follows:
December 31, January 1,
1995 1995
Actuarial present value of
benefit obligations:
Vested $(2,052) $(1,351)
Non-vested (148) (83)
Total accumulated benefit obligations $(2,200) $(1,434)
Projected benefit obligations $(2,200) $(1,434)
Plan net assets at fair value 1,460 1,125
Excess of projected benefit
obligation over plan assets (740) (309)
Unrecognized past service cost 79 87
Unrecognized actuarial loss 502 8
Adjustment required to recognize
minimum liability (581) (95)
Net accrued pension liability $ (740) $ (309)
The assumptions used for the fiscal years ending 1995, 1994 and
1993 were:
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
Discount rate 7.0% 8.5% 7.0%
Expected long-term rate of
return on assets 6.0% 8.0% 8.0%
The Company's German subsidiaries have defined benefit plans
covering certain employees.
The net periodic pension cost for these defined benefit plans is
comprised of:
1995 1994 1993
Service cost $ 105 $ 91 $ 77
Interest cost on projected
benefit obligation 190 161 154
Amortization of transition amount 62 55 54
Amortization of actuarial gain (182) (157) (307)
Net periodic pension cost $ 175 $ 150 $ (22)
Discount rate 7.0% 7.0% 7.0%<PAGE>
Note J, continued
The unfunded status of the German plans is as follows:
Dec. 31, Jan. 1,
1995 1995
Actuarial present value
benefit obligations:
Vested $(2,387) $(1,891)
Non-vested (164) (370)
Total accumulated benefit obligations $(2,551) $(2,261)
Projected benefit obligations $(2,722) $(2,409)
Unrecognized past service cost 495 516
Unrecognized actuarial gain (159) (282)
Current maturities 132 117
Net accrued pension liability $(2,254) $(2,058)
In June 1986, Raymark terminated its defined benefit plan for
salaried employees and replaced it by modifying the defined
contribution plan. Subsequent to the sale of Raymark, this defined
contribution plan was replaced by a similar plan which covers
essentially all salaried employees of Raytech. Contributions
generally aggregate up to 6% of each salaried employee's base salary
in stock or cash. The total expense in 1995, 1994 and 1993 under
these defined contribution plans was $598, $603 and $540,
respectively.
The Company also provides certain postretirement life insurance
and medical benefits covering substantially all hourly and salaried
domestic employees. These benefits and similar benefits for active
employees are provided through an insurance company and a third-party
administrator whose premiums are based on benefits paid during the
years.
Under the Company's non-contributory postretirement life
insurance plan, at retirement, participants meeting eligibility
requirements, which are based on age and years of service, are
entitled to receive a death benefit of $3 for hourly employees; or
for salaried employees an amount equal to 50% of final annual base
salary for pre-October 1, 1988 hires or an amount equal to the
greater of $5 or 10% of final annual base salary for post-October 1,
1988 hires. These benefits are provided by the purchase of
individual life insurance policies upon the participants' retirement.
The Company also has a contributory, self-insured post-
retirement health plan. The plan provides certain medical coverage
to retirees and their dependents during the retirees' lifetime, and
benefits are subject to deductibles, an 80% coinsurance provision and
a $10 lifetime maximum for hourly employees and a $50 lifetime<PAGE>
Note J, continued
maximum for salaried employees. Eligibility is based on age and
years of service. Hourly participant contributions are governed by
the Company's collective bargaining agreement for pre-age 65 coverage
and are based on scheduled amounts for post age-65 coverage.
Contributions for pre-age 65 salaried participants are based on 15%
of pooled cost for retirees and 25% of pooled cost for spouses with
no contribution required for post-age 65 participants.
The Company funds the costs associated with providing the post-
retirement life insurance and health benefits on a "pay-as-you-go"
basis.
Effective the beginning of fiscal 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No.
106, "Employers Accounting for Postretirement Benefits Other than
Pensions," which requires companies to recognize the cost of
providing postretirement benefits over the employees' service period.
Prior to the requirements of SFAS 106, the Company recognized the
cost of providing these benefits on an "as incurred" basis.
The components of the accumulated postretirement benefit
obligation are as follows:
1995 1994
Retirees and dependents $ 979 $ 737
Actives fully eligible 3,076 2,254
Actives not fully eligible 5,950 4,222
Unfunded accumulated postretirement
benefit obligation 10,005 7,213
Unrecognized net gain(loss) (1,566) 380
Accrued postretirement benefit cost 8,439 7,593
Less current portion 186 157
$ 8,253 $ 7,436
The Company elected to recognize the accumulated postretirement
benefit obligation at the beginning of fiscal 1993 as a cumulative
charge to earnings. This charge, which amounted to $5,972, is in the
Company's Consolidated Statement of Operations as the cumulative
effect of an accounting change.
The components of net periodic postretirement benefit expense
for fiscal 1995, 1994 and 1993 are as follows:
1995 1994 1993
Service cost $ 383 $ 431 $ 313
Interest cost on accumulated
post-retirement benefit obligation 623 548 459
Unrecognized net gain(loss) (11) 73 0
Net periodic expense $ 995 $1,052 $ 772<PAGE>
Note J, continued
The assumed discount rates used to measure the accumulated
postretirement benefit obligation at December 31, 1995 and January 1,
1995 are 7.0% and 8.5%, respectively. The assumed health care cost
trend rate used to measure the expected cost of benefits is 10% for
both fiscal 1996 and 1995, gradually declining to attain an ultimate
rate of 6% in the year 2016. The health care cost trend rate has a
significant effect on the amounts reported. For example, a one
percentage point increase in the health care cost trend rate would
increase the accumulated postretirement benefit obligation by $900
and increase net periodic expense by $108.
The following table summarizes the number of active and retired
employees at the end of the last three fiscal years who are covered
under these plans:
Year Active Retirees
1995 1,244 41
1994 1,310 36
1993 1,187 37
Effective the beginning of fiscal 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No.
112, "Employers' Accounting for Postemployment Benefits," which
requires companies to recognize the cost of providing postemployment
benefits over the employees' service period. The effect of
implementing the provisions of SFAS 112 was immaterial.
During 1988, certain assets of the employee savings plans were
invested in a long-term investment contract with Executive Life
Insurance Company. In April 1991, Executive Life Insurance Company
was placed in conservation by the California Insurance Commission and
pursuant to the terms of a Rehabilitation Plan approved by a
California Superior Court effective September 1993, all contracts
were restructured adjusting the values downward. In 1994, the
Company committed to make additional contributions to the employee
savings plans to reinstate certain designated employee investment
values lost as a result of the Executive Life Insurance Company
failure and subsequent conservation and rehabilitation plan.
Following receipt of governmental approvals, the Company made the
contributions to the employee savings plans in April 1995 in the
amount of $1,068 covering full reinstatement of investment losses in
Executive Life contracts. In October 1995, the Company was
reimbursed $224 from Executive Life holdbacks.<PAGE>
Note K - Geographic Information
<TABLE>
Raytech, through its principal subsidiaries, is a multinational manufacturer and
marketer of specialty engineered products for heat resistant, inertia control, energy
absorption and transmission applications. Its products are used in the vehicular,
aerospace, nucleonics, petrochemical, energy, metal working, construction, agriculture,
utility and electronic industries, among others.
A summary of information about Raytech's operations by geographic segments at year-
end 1995, 1994 and 1993 and for the fiscal years then ended follows:
<CAPTION>
Operating
Net Profit Identifiable Depreciation Capital
Sales (Loss) Assets & Amortization Expenditures
<S> <C> <C> <C> <C> <C>
1995
Domestic $126,061 $ 19,835 $ 90,258 $ 5,263 $ 7,130
Germany 48,257 1,062 21,596 2,142 2,929
United Kingdom 3,180 62 2,582 161 216
Consolidated $177,498 $ 20,959 $114,436 $ 7,566 $ 10,275
1994
Domestic $124,116 $ 21,011 $ 70,550 $ 5,131 $ 6,797
Germany 43,499 (2,606) 19,928 1,740 3,866
Other - - 1,331 21 691
Consolidated $167,615 $ 18,405 $ 91,809 $ 6,892 $ 11,354
1993
Domestic $ 98,828 $ 18,132 $ 62,223 $ 5,072 $ 5,296
Germany 40,462 (3,709) 17,265 1,731 2,522
Consolidated $139,290 $ 14,423 $ 79,488 $ 6,803 $ 7,818
<FN>
Domestic sales to a single customer, Caterpillar, Inc., were 14%, 16% and 15% of
consolidated sales for 1995, 1994 and 1993, respectively. The Company's German
subsidiaries had sales to two customers, Fichtel & Sachs and LUK, of 9%, and 8% each of
consolidated sales for 1995, 9% each of consolidated sales for 1994 and 10% each of
consolidated sales for 1993.
</FN>
</TABLE>
<PAGE>
NOTE L - Summarized Quarterly Financial Data (Unaudited)
(in thousands except share and market data)
Fiscal Quarters Ended 1995
April 2 July 2 October 1 December 31
Net sales $ 49,913 $ 45,705 $ 41,685 $ 40,195
Gross profit 14,389 11,176 10,508 11,704
Income before provision
for taxes and minority
interest 7,117 9,751 3,184 4,134
Net income $ 4,577 $ 5,645(a) $ 1,586 $ 2,529
Net income per share $ 1.33 $ 1.67 $ .47 $ .75
Market range:
-high 4-5/8 4-3/8 4-1/4 3-3/4
-low 4 2-1/4 2-3/4 2-3/4
Dividends - - - -
Fiscal Quarters Ended 1994-1995
April 3 July 3 October 2 January 1
Net sales $ 43,555 $ 43,849 $ 42,062 $ 38,149
Gross profit 11,781 11,439 9,511 11,817
Income before provision
for taxes 4,757 4,340 2,996 2,365
Net income $ 2,990(b) $ 2,589 $ 1,906 $ 1,158
Net income per share $ .89 $ .75 $ .56 $ .33
Market range:
-high 5-l/4 5 4-3/4 5-7/8
-low 2-7/8 3-7/8 4 4-l/4
Dividends - - - -
(a) Includes a one-time aftertax gain of $2.7 million, which resulted
from a favorable judgment in regard to a product defamation
lawsuit.
(b) Includes an additional charge of $400 associated with a commitment
by the Company to reinstate certain designated investment values
lost in certain employee savings plans investment contracts.<PAGE>
Note M - Supplementary Financial Statement Detail
Fiscal Year l995 l994
ACCRUED LIABILITIES
Property taxes $ 2,023 $ 1,826
Legal 324 476
Plant consolidation 448 630
Taxes 2,050 2,820
Wages and related taxes 4,239 5,327
Pensions and employee benefits 5,991 5,745
Product due Echlin (see Note H) 1,183 1,183
Other 4,118 3,143
$ 20,376 $ 21,150
OTHER LONG-TERM LIABILITIES
Long-term pensions $ 2,253 $ 2,057
Deferred taxes 2,856 380
Other 2,886 1,214
$ 7,995 $ 3,651
Fiscal Year 1995 1994 1993
OTHER OPERATING EXPENSE, NET
Production equipment write-down $(1,746) - -
German plant consolidation - $(1,167) $(3,300)
Insurance recovery - - 1,400
Reinstatement of designated
employee savings plans values - (400) (700)
$(1,746) $(1,567) $(2,600)
OTHER INCOME (EXPENSE), NET
Interest income $ 227 $ 82 $ 48
Lawsuit judgment 4,597 - -
Note settlement 489 - -
Other 604 (796) 92
$ 5,917 $ (714) $ 140
ALLOWANCE FOR BAD DEBTS
Beginning balance $ 519 $ 402 $ 533
Provisions 303 312 219
Charge-offs - (195) (350)
Ending balance $ 822 $ 519 $ 402<PAGE>
Note N - Commitments and Contingencies
Rental expense amounted to $894, $741, and $941 in 1995,
1994 and 1993, respectively. The approximate minimum rental
commitments under non-cancelable leases at December 31, 1995 were
as follows: 1996, $542; 1997, $465; 1998, $219; 1999, $138,
2000, $92 and 2001 and thereafter, $504.<PAGE>
Note O - Stock Option Plans
The Company's 1980 Non-Qualified Stock Option Plan (the
"Plan"), as amended, provides for the grant of options for up to
600,000 shares of common stock and any accompanying stock appreciation
rights. The Company granted both non-qualified and incentive stock
options. In general, options granted under the Plan are at 100% of
the fair market value on grant date or par value, whichever is higher.
Once granted, options become exercisable in whole or in part after one
year and expire on the tenth anniversary of the grant. Prior to the
merger (refer to Note A), options were generally exercisable at the
cumulative rate of 20% per year beginning one year from the date of
grant. At the 1986 Annual Meeting, par value was reduced to $1.00 per
share, and options granted below par value in 1985 were approved. On
the effective date of the merger, all outstanding options under the
Plan were canceled and new non-qualified options were issued by the
Company at an option price of $6.81 which was equal to the fair market
value at the date of grant. The term during which any future options
may be granted under the Plan expired on December 31, 1989.
In 1991, the shareholders approved the adoption of a new non-
qualified stock option plan ("1990 Plan") to replace the expired Plan.
The terms and provisions of the 1990 Plan are similar to the expired
Plan, providing for the grant of options for up to 500,000 shares of
common stock authorized for such purpose by the shareholders.
Effective November 1, 1992, the Company granted 479,071 non-qualified
options at an option price of $2.75. At the date of grant the market
price per share was $2.375.
The following summarizes activity in fiscal 1993, 1994 and 1995 under
the Plan:
Option Price Options
Period Per Share ($) Outstanding
January 3, 1993 1.75 to 7.875 872,042
Canceled 1.75 (650)
Exercised 1.75 (2,050)
January 2, 1994 1.75 to 7.875 869,342
Canceled 1.75 to 6.81 (36,418)
Exercised 1.75 to 2.75 (19,869)
January 1, 1995 1.75 to 7.875 813,055
Canceled 1.75 to 6.81 (104,706)
Exercised 1.75 to 2.75 (11,115)
December 31, 1995 1.75 to 7.875 697,234<PAGE>
Note P - Concentration of Trade Receivables and
Financial Instruments
Financial instruments, which potentially subject the Company
to concentration of credit risk, consist principally of cash and
cash equivalents and trade receivables. The Company places its
cash with high credit quality institutions. At times such amounts
may be in excess of the FDIC insurance limits. The primary
businesses of the Company's U.S. subsidiaries are the automotive
and heavy duty equipment markets and the related aftermarkets
within the United States. As of December 31, 1995, the Company had
uncollateralized receivables with two customers approximating
$3,721, which represents 21% of the Company's trade accounts
balance. During fiscal 1995, sales to these customers amounted to
approximately $37,609, which represents 21% of the Company's
revenues. The Company performs ongoing credit evaluations of its
customers' financial condition but does not require collateral to
support customer receivables. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit
risk of specific customers, historical trends and other
information.<PAGE>
Note Q - Subsequent Event
On January 31, 1996, Raytech Composites, Inc., a subsidiary
of the Company, acquired a minority share of 47% of the stock of
Advanced Friction Materials Company ("AFM") located in Sterling
Heights, Michigan, from Oscar E. Stefanutti and related family
trusts for $9,400. Raybestos Products Company, the operating
subsidiary of Raytech Composites, Inc., simultaneously entered
into a technology exchange agreement with AFM and agreed to
purchase certain operating assets and real property both on the
closing and on the first anniversary date at a combined purchase
price of $10,600 to be adjusted in part by an evaluation of
certain current assets.
AFM, the majority ownership of which remains in Oscar E.
Stefanutti and related family trusts, is engaged and will
continue in the development, engineering and sales of automobile
transmission component parts, including friction plates, bands
and friction materials for torque converters, to original
equipment manufacturers.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Raytech Corporation:
We have audited the consolidated financial statements of Raytech
Corporation (the "Company," a holding company) and subsidiaries
listed in Item 14(a) of this Form 10-K. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Raytech Corporation and subsidiaries as of
December 31, 1995 and January 1, 1995 and the consolidated
results of their operations and their cash flows for each of the
three fiscal years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements,
Raymark Corporation ("Raymark") is a defendant in numerous
lawsuits seeking substantial damages relating to airborne
asbestos fibers. The Company has been named a co-defendant in
approximately 3,300 of these asbestos-related lawsuits as a
successor in liability to Raymark. In addition, the Company is
co-defendant with Raymark in lawsuits involving environmental
matters as a successor in liability to Raymark. On March 10,
1989, Raytech filed a petition seeking relief under Chapter 11 of<PAGE>
the United States Bankruptcy Code (the "Bankruptcy Code"). Under
the provisions of the Bankruptcy Code, the Company is operating
as a debtor-in-possession. The Company's operating subsidiaries,
none of which have filed for protection under Chapter 11,
continue to operate their businesses in the ordinary course of
business. Raytech filed to protect itself from the lawsuits
mentioned above and to obtain a binding ruling for all
jurisdictions on whether Raytech is liable as a successor for
asbestos-related claims, including any claims yet to be filed,
relating to the operations of Raymark or its predecessors.
During 1995, Raytech received adverse rulings precluding it from
relitigating the 1988 ruling holding Raytech to be a successor to
Raymark's asbestos-related claims. Determination of Raytech's
actual liabilities as successor to Raymark's asbestos-related and
environmental claims is subject to the uncertainties inherent in
the process of reorganizing under the Bankruptcy Code. Such
liabilities could have a material adverse effect on the Company.
These uncertainties raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or adjustments relating
to establishment, settlement and classification of liabilities
that may be required in connection with reorganizing under the
Bankruptcy Code.
As discussed in Notes I and J to the consolidated financial
statements, effective January 4, 1993, the Company changed its
method of accounting for income taxes and postretirement benefits
other than pensions.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 15, 1996
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(a) The following financial statements are included in Part II,
Item 8:
(1) Financial Statements
Consolidated Balance Sheets - December 31, 1995 and
January 1, 1995.
Consolidated Statements of Operations for the 1995,
1994 and 1993 fiscal years
Consolidated Statements of Cash Flows for the 1995,
1994 and 1993 fiscal years
Consolidated Statements of Shareholders' Equity
(Deficit) for the 1995, 1994 and 1993 fiscal years
Notes to Consolidated Financial Statements
Report of Independent Accountants<PAGE>
(2) Financial Statement Schedules
The following additional financial information is filed as
part of this Form 10-K and should be read in conjunction
with the consolidated financial statements. Schedules not
included with this additional financial information have
been omitted either because they are not applicable or
because the required information is shown in the
consolidated financial statements.
- Schedule I - Condensed Financial Statements
of the Registrant (Parent)(Unaudited)
(3) The Exhibits are listed in the index of Exhibits at Item
(c) hereafter.
(b) Reports on Form 8-K
On May 15, 1995, the Registrant filed a Form 8-K with the
Commission with respect to a Ruling of the United States Court
of Appeals for the Third Circuit in the case entitled Raytech
Corporation v. Earl White, et al. (No. 94-1347) which affirmed a
lower court ruling that had dismissed part of an action brought
by the Registrant seeking a declaratory judgment that it not be
held liable for the asbestos-related liabilities of Raymark
Industries, Inc. from which the Registrant had purchased some of
its operating assets. The lower court, the U.S. District Court
of the District of Connecticut, had issued a ruling in 1991
dismissing the successor liability count of the class action
citing as a reason the preclusive effect of a 1988 judgment of
the U.S. District Court of the District of Oregon (Schmoll v.
ACands, Inc., et al.) under the doctrine of collateral estoppel
in which case the Registrant was ruled to be a successor to
Raymark Industries, Inc. asbestos-related liabilities.
(c) Index of Exhibits Page
2(a) Plan or Reorganization dated May 31, 1994
filed by the Registrant (k)
2(b) Plan of Reorganization dated September 12,
1994 filed by the unsecured creditors'
committee (l)
3(a) Certificate of Incorporation of Raytech (d)
3(b) By-laws of Raytech (d)
4(a) Amendment No. 1 to Form S-4 Registration
Statement, Registration No. 33-7491 (b)
10(a) Raytech Corporation's 1980 Non-Qualified Stock
Option Plan, as amended (c)
<PAGE>
Page
10(b) Raytech Corporation's Variable Compensation
Program as amended and restated December 14, 1990
(g)
10(c) Amended and Restated Agreement and Plan of
Merger dated as of September 4, 1986 (a)
10(d) Stock Purchase Agreement dated March 30, 1987
between Raymark Industries, Inc. and Raytech
Composites (e), Amendment dated July 18, 1991
(h) and Amendment dated December 21, 1992 (i)
10(e) Asset Purchase Agreement dated October 29, 1987
between Raymark Industries, Inc. and Raytech
Composites, Inc. (e), Amendment dated July 18,
1991 (h) and Amendment dated December 21, 1992 (i)
10(f) Stock Purchase Agreement dated May 18, 1988
between Raytech Corporation and Asbestos
Litigation Management, Inc. (f)
10(g) Asset Purchase Agreement (Notarial Deed) dated
June 19, 1992 between Ferodo Beral GmbH and
Raytech Composites, Inc. and Raybestos
Reibbelag GmbH (i)
10(h) Loan Agreement dated September 16, 1993 between
Raytech Composites, Inc. and Raymark Industries,
Inc. (j)
10(i) Loan Agreement dated January 10, 1994 between
Raytech Composites, Inc. and Raymark Industries,
Inc. (j)
10(j) Loan and Security Agreement dated March 29, 1995
between Raybestos Products Company and The CIT
Group/Credit Finance, Inc. (m)
11 Statement re. Computation of Per Share Earnings 88
22 Subsidiaries of Raytech 89
24 Consent of Independent Accountants 90
Footnotes to Exhibits
(a) Filed as an Exhibit to Registrant's Amendment No. 1 to
Form S-4, Registration Statement, Registration No. 33-7491,
filed with the Securities and Exchange Commission on
September 5, 1986.
<PAGE>
(b) Filed with the Securities and Exchange Commission on
September 5, 1986.
(c) Included in Registrant's Registration Statement on Form
S-8 (Registration No. 2-95251) filed with the Securities
and Exchange Commission on January 11, 1985.
(d) Included as an Exhibit to Registrant's Report on Form
10-K filed with the Securities and Exchange Commission
on March 23, 1987.
(e) Included as an Exhibit to Registrant's Report on Form
10-K filed with the Securities and Exchange Commission on
March 28, 1988, as amended by Form 8 filed on April 11,
1988 and Form 8 filed on April 19, 1988.
(f) Included as an Exhibit to Registrant's Report on Form
10-K filed with the Securities and Exchange Commission on
March 29, 1989.
(g) Included as an Exhibit to Registrant's Report on Form
10-K filed with the Securities and Exchange Commission on
March 20, 1991.
(h) Included as an Exhibit to Registrant's Report on Form
10-Q filed with the Securities and Exchange Commission on
September 29, 1991, as amended by Form 8 filed on
February 27, 1992.
(i) Included as an Exhibit to Registrant's Report on Form
10-K filed with the Securities and Exchange Commission on
March 22, 1993.
(j) Included as an Exhibit to Registrant's Report on Form 10-K
filed with the Securities and Exchange Commission on
March 14, 1994.
(k) Included as an Exhibit to Registrant's Report on Form 10-Q
filed with the Securities and Exchange Commission on
August 9, 1994.
(l) Included as an Exhibit to Registrant's Report on Form
10-Q filed with the Securities and Exchange Commission
on November 7, 1994.
(m) Included as an Exhibit to Registrant's Report on Form
10-Q filed with the Securities and Exchange Commission
on April 2, 1995.
Copies of exhibits which are not included herewith and which
have not previously been filed with the Securities and Exchange
Commission may be obtained by submitting a written request,
specifying the name of the exhibit and including payment of
$2.00 for each exhibit to cover handling and postage, to:<PAGE>
LeGrande L. Young, Secretary, Raytech Corporation, Suite 512,
One Corporate Drive, Shelton, Connecticut 06484.
(d) The Index to Consolidated Financial Statements and Financial
Statement Schedules is included beginning on page 81
hereafter.
<PAGE>
<TABLE>
FORM 10-K
RAYTECH CORPORATION AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share data)
<CAPTION>
For the Fiscal Year Ended
December 31, January 1, January 2,
Primary 1995 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Income before cumulative effect
of accounting changes $ 14,337 $ 8,643 $ 8,556
Cumulative effect of changes in
accounting principles - - (3,808)
Net income as reported $ 14,337 $ 8,643 $ 4,748
Common shares outstanding
at beginning of year 3,218,968 3,199,133 3,277,083
Weighted average of treasury
stock acquired (2) (20) (60,679)
Weighted average of stock
issued to employee savings plan - - -
Weighted average of stock
issued to vendor - - -
Common equivalent shares for
assumed exercise of employee
stock options 143,041 220,601 73,445
Weighted average of options
exercised 6,996 6,320 1,263
Common shares held in escrow
released and transferred
to treasury stock - - -
Weighted average shares
outstanding 3,369,003 3,426,034 3,290,912
Income per share before cumulative
effect of changes in accounting
principles $4.26 $2.52 $2.60
Cumulative effect of changes in
in accounting principles - - (1.16)
Primary income per
common share $4.26 $2.52 $1.44
</TABLE>
Exhibit 22
Subsidiaries of Raytech Corporation Incorporated
Raytech Composites, Inc. Delaware
Suite 512, One Corporate Drive
Shelton, CT 06484
Raytech Powertrain, Inc. Delaware
Suite 512, One Corporate Drive
Shelton, CT 06484
Raytech Fasteners, Inc. Delaware
Suite 512, One Corporate Drive
Shelton, CT 06484
Raybestos Products Company Delaware
1204 Darlington Avenue
Crawfordsville, IN 47933
Raybestos U.K. Ltd. England
16, Spindus Road
Speke
Liverpool L24 1YA, England
Raytech Composites Europe GmbH Germany
Bahnstrasse 48-50
5608 Radevormwald, Germany
Raybestos Industrie-Produkte GmbH Germany
Industriestrasse, 7
D-54497 Morbach, Germany
Raybestos Reibtechnik GmbH Germany
Quettingerstrasse, 220
D-51381 Leverkusen 3, Germany
Allomatic Products Company Delaware
609 E. Chaney
Sullivan, IN 47882
Raybestos Aftermarket Products Company Delaware
964 East Market Street
Crawfordsville, IN 47933
Miami Rivet Company Delaware
Suite 512, One Corporate Drive
Shelton, CT 06484
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
registration statement of Raytech Corporation and subsidiaries
on Form S-8 (File No. 33-42420) of our report, which includes
explanatory paragraphs related to the Company's ability to
continue as a going concern and adoption of new accounting
standards, dated March 15, 1996, on our audits of the consolidated
financial statements of Raytech Corporation and subsidiaries as of
December 31, 1995 and January 1, 1995 and for each of the three fiscal
years in the period ended December 31, 1995, which report is included
in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 15, 1996
[TYPE] EX-27
[ARTICLE] 5
[LEGEND]
[CIK] 0000797917
[NAME] RAYTECH CORP
[MULTIPLIER] 1,000
[CURRENCY] U.S. DOLLARS
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-02-1995
[PERIOD-END] DEC-31-1995
[EXCHANGE-RATE] 1
[CASH] 19,597
[SECURITIES] 0
[RECEIVABLES] 18,375
[ALLOWANCES] 822
[INVENTORY] 23,573
[CURRENT-ASSETS] 66,113
[PP&E] 114,437
[DEPRECIATION] 72,235
[TOTAL-ASSETS] 114,436
[CURRENT-LIABILITIES] 60,790
[BONDS] 0
[COMMON] 5,362
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 13,318
[TOTAL-LIABILITY-AND-EQUITY] 114,436
[SALES] 177,498
[TOTAL-REVENUES] 177,498
[CGS] 128,799
[TOTAL-COSTS] 128,799
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 2,647
[INCOME-PRETAX] 24,186
[INCOME-TAX] 9,009
[INCOME-CONTINUING] 14,337
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 14,337
[EPS-PRIMARY] 4.26
[EPS-DILUTED] 4.26
[TYPE] EX-27
[ARTICLE] 5
[RESTATED]
[CIK] 0000797917
[NAME] RAYTECH CORP
[MULTIPLIER] 1,000
[CURRENCY] U.S. DOLLARS
<TABLE>
<S> <C> <C> <C>
[PERIOD-TYPE] 3-MOS 6-MOS 9-MOS
[FISCAL-YEAR-END] JAN-01-1995 JAN-01-1995 JAN-01-1995
[PERIOD-START] JAN-02-1995 JAN-02-1995 JAN-02-1995
[PERIOD-END] APR-02-1995 JUL-02-1995 OCT-01-1995
[EXCHANGE-RATE] 1 1 1
[CASH] 2,949 10,705 18,001
[SECURITIES] 0 0 0
[RECEIVABLES] 19,905 20,177 19,408
[ALLOWANCES] 598 612 677
[INVENTORY] 22,648 22,539 22,713
[CURRENT-ASSETS] 48,351 56,416 63,054
[PP&E] 113,960 115,164 116,126
[DEPRECIATION] 71,016 71,980 72,813
[TOTAL-ASSETS] 95,904 104,217 110,986
[CURRENT-LIABILITIES] 45,145 43,363 47,321
[BONDS] 0 0 0
[PREFERRED-MANDATORY] 0 0 0
[PREFERRED] 0 0 0
[COMMON] 5,351 5,362 5,362
[OTHER-SE] 3,876 9,247 10,870
[TOTAL-LIABILITY-AND-EQUITY] 95,904 104,217 110,986
[SALES] 49,913 95,618 137,303
[TOTAL-REVENUES] 49,913 95,618 137,303
[CGS] 35,524 70,053 101,230
[TOTAL-COSTS] 35,524 70,053 101,230
[OTHER-EXPENSES] 0 0 0
[LOSS-PROVISION] 0 0 0
[INTEREST-EXPENSE] 607 1,349 1,976
[INCOME-PRETAX] 7,117 16,868 20,052
[INCOME-TAX] 2,540 6,084 7,598
[INCOME-CONTINUING] 4,577 10,222 11,808
[DISCONTINUED] 0 0 0
[EXTRAORDINARY] 0 0 0
[CHANGES] 0 0 0
[NET-INCOME] 4,577 10,222 11,808
[EPS-PRIMARY] 1.33 3.00 3.46
[EPS-DILUTED] 1.33 3.00 3.46
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RAYTECH CORPORATION
By: /s/CRAIG R. SMITH
Craig R. Smith
President and
Chief Executive Officer
Date: April 18, 1996<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities shown on
April 18, 1996.
Signature and Title Signature and Title
/s/ CRAIG R. SMITH /s/DENNIS G. HEINER
Craig R. Smith Dennis G. Heiner
President, Chief Executive Director
Officer and Director
/s/ALBERT A. CANOSA /s/DONALD P. MILLER
Albert A. Canosa Donald P. Miller
Vice President of Administration, Director
Treasurer and Chief
Financial Officer
/s/ROBERT L. BENNETT /s/ROBERT B. SIMS
Robert L. Bennett Robert B. Sims
Director Director
/s/ROBERT M. GORDON
Robert M. Gordon
Director
