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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-15299
NYCOR, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 22-2748564
(State of Incorporation) (I.R.S. Employer Identification No.)
287 CHILDS ROAD, BASKING RIDGE, NEW JERSEY 07920
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (908) 953-8200
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None
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Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
Common Stock, $1 par value
Class A Stock, $1 par value
Class B Stock, $1 par value
8 1/2% Convertible Subordinated Debentures due 2012
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
As of the close of business on March 19, 1996, there were outstanding
2,810,868 shares of registrant's Common Stock, 4,062,124 shares of its Class A
Stock and 713,575 shares of its Class B Stock. The approximate aggregate market
value (based upon the closing sale price of such stock) of these shares held by
non-affiliates of the registrant as of March 19, 1996 was $28,539,453. (The
value of a share of Common Stock is used as the value of a share of Class B
Stock as there is no established market for Class B Stock and it is convertible
into Common Stock on a share-for-share basis.)
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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NYCOR, INC.
FORM 10-K ANNUAL REPORT -- 1995
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business........................................................... 1
Item 2. Properties......................................................... 5
Item 3. Legal Proceedings.................................................. 6
Item 4. Submission of Matters to a Vote of Security Holders................ 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................ 7
Item 6. Selected Financial Data............................................ 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 7
Item 8. Financial Statements and Supplementary Data........................ 8
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 8
PART III
Item 10. Directors and Executive Officers of the Registrant................. 9
Item 11. Executive Compensation............................................. 10
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 12
Item 13. Certain Relationships and Related Transactions..................... 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 15
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ITEM 1. BUSINESS
(a) General Development of Business
NYCOR, Inc. (the "Company" or the "Registrant") is a holding company
currently comprising two operating companies, Rotorex Company, Inc. ("Rotorex")
and Melcor Corporation ("Melcor"). Rotorex manufactures rotary compressors
principally for use in room air conditioners. Melcor produces thermoelectric
heating and cooling modules used in a variety of applications in which space and
weight are considerations or precise temperature control is required. The
Company acquired both Rotorex and Melcor in September 1992. Unless otherwise
indicated, all references herein to the Company or the Registrant are to NYCOR,
Inc. and its subsidiaries.
The Company has announced that it has reached an agreement to merge with
Fedders Corporation ("Fedders"), subject to the approval of the stockholders of
both companies. The Company has agreed to merge with Fedders primarily because
it believes that, in order for Rotorex to take advantage of business
opportunities that may arise and respond rapidly to competitive requirements,
access to capital will be important. The concentration of Rotorex's sales to
Fedders (see below) may make access to capital more difficult as many lending
institutions have policies that make it difficult for borrowers that have a
significant concentration of business with one customer. The Company believes
that Rotorex will have a better ability to grow and achieve its full capability
as part of a larger, major participant in the world-wide air conditioner market
such as Fedders.
(c) Narrative Description Of Business
Rotorex and Melcor manufacture and sell components for use in cooling and
heating applications to original equipment manufacturers in the air conditioning
and refrigeration industries. Rotorex compressors use vapor compression to
create a cooling effect while Melcor's thermoelectric modules utilize
electricity, the Peltier effect, to perform cooling and heating functions.
ROTOREX
Products
Rotorex manufactures and sells a broad line of rotary compressors,
principally for the air conditioning and refrigeration markets.
Compressors are used as a principal component in a variety of cooling and
heating applications. Their function is to compress gas which is introduced into
the compressor, causing the temperature of the gas to rise. The change in
temperature of the gas permits a heat transfer to occur within the cooling and
heating system. Rotary compressors are characterized by a circular, or rotary,
motion and are generally smaller, quieter and more energy efficient than the
traditional reciprocating compressors.
Rotorex's product line consists of two basic series of compressors,
designated as the 39 Frame and 48 Frame, with capacities ranging from 5,100 to
18,500 BTUs. Models within each series, with specific cooling capacities within
the indicated range, are produced by varying the mechanical pump assembly and
motor. By varying the motors, Rotorex also creates compressors capable of
operating with different voltages for applications in various parts of the
world.
The air conditioners in which Rotorex's compressors are used are subject to
regulations providing for minimum energy efficiency rating ("EER") requirements.
Achieving required EERs results from a combination of an efficient compressor
and the design of the air conditioning system in which the compressor is
installed. Current proposed rulemaking by the Energy Department under the
National Appliance Energy Conservation Act would have the effect of increasing
minimum required EERs. Rotorex's compressors currently provide efficiencies
which enable its customers to meet EER requirements applicable to their air
conditioners. In the event that the new regulations are adopted, the efficiency
of certain models of Rotorex's compressors would have to be improved. It is not
certain at present if the proposed regulations will be adopted and, if they are,
when the requirements would become effective. Regardless of the adoption of
these proposed regulations, Rotorex is continually seeking to improve the
efficiency of its compressors in order to remain
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competitive in the markets it serves. Investments were made in 1995 to upgrade
Rotorex's laboratory facilities. These investments, which totaled approximately
$1.6 million, coupled with a strong design staff with many years of compressor
experience, give Rotorex the design capability necessary to make such
improvements. Investments in an automated assembly system are expected to help
improve mechanical efficiency and an ongoing motor design program further
enhances Rotorex's ability to improve the efficiency of its compressors.
Freon is used as a refrigerant in air conditioning systems. Freon is one of
the ozone-depleting chemicals that are currently being phased out of use. The
type of freon used in room air conditioners is an HCFC, which is currently an
acceptable substitute for the CFC refrigerants which have a much more harmful
effect on the environment. Rotorex does not expect that requirements to
ultimately phase out the use of HCFC refrigerants will have a material effect on
its operations or expenditures.
Marketing
Rotorex compressors are currently sold in the United States principally to
the residential room air conditioning market, with sales concentrated to
Fedders. Fedders has been the major customer for Rotorex compressors for more
than 20 years. Rotorex expects that, with the implementation of programs
designed to capitalize on the growing international market, international sales
may become a greater percentage of Rotorex's overall sales; however, there can
be no assurance as to the extent of such sales. Rotorex has entered into a
supply agreement (the "Supply Agreement") with Fedders, pursuant to which
Rotorex is required to sell to Fedders up to 800,000 rotary compressors annually
and Fedders is required to purchase 80% of its requirements for rotary
compressors from Rotorex up to 800,000 compressors, subject to certain
exceptions. The terms of sales to Fedders under the Supply Agreement are
negotiated annually and must be no less favorable than sales to other customers.
This requirement for sales to Fedders leaves Rotorex with substantial capacity
to expand its markets and customer base. Rotorex believes that its agreement
with Fedders provides it with a substantial base of sales from which to expand
its sales in the international markets for room air conditioners. Rotorex
participates in a substantial portion of the relatively mature United States
market for room air conditioners through the Supply Agreement and it intends to
capitalize on this base to increase its sales in the more rapidly growing
international markets. In 1995, Rotorex's sales were favorably impacted as a
result of the recent successful years enjoyed by the domestic air conditioning
industry. As previously indicated, as Rotorex's efforts in the international
markets continue, sales in these markets may represent a greater percentage of
Rotorex's overall sales.
Rotorex believes that significant growth opportunities exist in the
international market, particularly in Asia. Rotorex has been active in the
international market for a number of years through its technology licensing
program. Currently, Rotorex has three licensees in mainland China and one each
in Taiwan and South Korea. The license agreements require Rotorex to provide
technology to the licensees and the licensees to pay royalties to Rotorex based
upon sales of finished compressors. In early 1995, Rotorex established a
representative office in Beijing which is expected to enhance Rotorex's presence
in the important China market. Rotorex has also opened a branch office in
England to serve the European, Middle Eastern and North African markets and has
also established a sales office in Singapore. Late in 1995, Rotorex signed a
letter of intent to form a joint venture to manufacture rotary compressors in
Ningbo, China. Rotorex will continue to assess the international markets to
determine how best to participate in those markets.
A number of countries in which Rotorex is pursuing sales opportunities,
including China, impose tariffs on imported compressors. At present, Rotorex
believes that the demand for compressors in these markets will continue to
provide opportunities to increase sales in these markets. Rotorex will
continually assess the impact of tariffs on its markets to determine how best to
effectively serve such markets.
Rotorex promotes its products through the use of product literature,
catalogs and advertising in industry publications and exhibits its products at
industry and target market trade shows.
Production
Rotorex currently manufactures all of its compressors in a 200,000 square
foot facility owned by Rotorex in Frederick, Maryland. Efforts to improve
efficiency and productivity at this facility and the quality of the
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products manufactured are ongoing. In early 1995, Rotorex obtained the highest
level of certification, ISO 9001, for its quality management system under the
International Standards Organization. The ISO 9000 program is an internationally
recognized benchmark of quality management systems within a production facility.
During 1995, Rotorex completed several investments which are expected to
enhance manufacturing efficiencies. An automated compressor assembly system is
expected to increase capacity and improve quality and efficiency. As of March
26, 1996, the assembly system was not operating as specified. The manufacturer
of the system continues to work to bring the system to specified performance
levels. New gauging systems automate gauging of parts prior to their assembly in
the pump component of the compressor. Plant wide air conditioning provides
better temperature and humidity control which is beneficial in the manufacture
of high tolerance parts. These investments along with related site preparation,
cost approximately $10.3 million.
MELCOR
Products
Melcor manufactures solid state heat pump modules that utilize the Peltier
effect to perform the same cooling and heating functions as freon-based
compressors and absorption refrigerators.
Melcor's modules are typically used in spaces with special requirements,
such as limited space, lightweight cooling requirements or a space existing
under special environmental conditions. They are also used for precise
temperature control by reversing the electric current to cycle from cooling to
heating.
Melcor's customers are original equipment manufacturers that primarily use
the modules for cooling purposes in applications such as portable beverage
coolers and refrigerators, laboratory, scientific, medical and restaurant
equipment and telecommunications and computer equipment.
Melcor's products are sold under the trademark FRIGICHIP.
Marketing
Melcor's modules are currently sold by salaried salespeople and a network
of sales representative firms located throughout the world. The representative
firms purchase products from Melcor and resell them to their own customers. The
sales representatives provide all technical support and engineering design
required by their customers.
Over the past two years, softness in the Japanese and European economies
has impacted Melcor's sales in those markets. Additionally, Melcor has begun to
experience increased competition in certain product markets it serves, which has
primarily impacted sales of portable beverage coolers and refrigerators. This
increased competition is being addressed by an aggressive sales effort.
Melcor advertises its products in a variety of national and international
technical and trade publications, principally in the electronics and
electro-optical industries, and participates in international trade exhibitions.
Production
Melcor manufactures its modules in facilities near Lawrence Township, New
Jersey, comprising 53,000 square feet. The Company believes that the production
capacity available at Melcor's facilities is sufficient for its needs for the
foreseeable future.
Melcor designs and builds internally certain module producing equipment.
Melcor has a program in place to maintain, upgrade and replace equipment as
necessary and seeks to selectively automate its processes on an ongoing basis to
improve productivity.
SEASONALITY
Rotorex's results of operations and financial condition currently are
substantially dependent on its sales to the domestic room air conditioner
market, which is highly seasonal. In addition, Rotorex's working capital
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needs are seasonal, with its greatest utilization of lines of credit early in
the calendar year. Melcor's sales are moderately seasonal. Demand for its
products is lowest in the third calendar quarter.
RAW MATERIALS AND PURCHASED COMPONENTS
The most important material purchased by Rotorex is steel. However, steel
is a relatively small part of the overall cost of a compressor and increases in
its cost have not had a material impact on Rotorex's cost of production. Rotorex
also purchases from other domestic and foreign manufacturers certain components,
the most important of which is motors. Melcor's primary purchases of materials
are the elements that comprise the metal ingots, ceramic plates, stampings and
plating.
Neither Rotorex nor Melcor is dependent upon any one source for major
components of its manufactured products, except that General Electric Company,
Rotomatika (a Slovenian company), Daewoo and Goldstar, are major suppliers of
motors used by Rotorex in manufacturing compressors.
COMPETITION
Rotorex competes against approximately eight domestic and foreign
companies, many of which are substantially larger and have greater resources
than Rotorex. Competition in the market for Rotorex compressors is generally on
the basis of price and quality. The Company believes that its pricing and
warranty policies are competitive with those of similar manufacturers. In the
markets in which Rotorex competes, it faces competition from large manufacturers
from the United States, Japan and Korea. The Company believes that its pricing,
design and quality allow it to be competitive in these markets. In addition, the
investments previously described are expected to allow Rotorex to remain
competitive while improving operating margins. Purchasers of rotary compressors
generally require high efficiency, low noise and long-term reliability. The
Company believes that Rotorex is generally competitive based on these criteria.
A new design engineering laboratory and the other investments previously
described herein will allow Rotorex to continually improve its compressors to
remain competitive.
Melcor competes against several other manufacturers of thermoelectric
modules and believes it is one of the world's leading producers of
thermoelectric heat pump modules, in terms of unit sales and revenues, and
maintains this position on the basis of the price and quality of its products.
The quality of thermoelectric heat pump modules is measured by, among other
things, the change in temperature which can be produced by the modules and the
long-term reliability of the modules, which do not contain any moving parts.
BACKLOG
Orders for the Company's products are entered into the production sequence
as they are received. Generally, there is only a short production time necessary
to satisfy customer orders. Based on the foregoing, the Company does not believe
that recorded order backlog is a significant factor in understanding or
evaluating its business.
RESEARCH AND DEVELOPMENT
Information with respect to amounts spent on research and development by
the Company is included in Note 1 of the Notes to Consolidated Financial
Statements at page 22 herein. During 1993 and 1994, the expenses for research
and development increased significantly, primarily as a result of increased
expenditures at Rotorex necessary to staff and equip its design engineering
group in a manner appropriate to Rotorex's operations following the Company's
acquisition of Rotorex in September 1992. It is expected that these costs will
continue to increase but on a more moderate scale, consistent with the increase
in 1995. At Melcor, there is also a strong research and development effort and
certain costs previously otherwise classified were reclassified to research and
development in 1994.
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TRADEMARKS
Rotorex sells its compressors under the trademark ROTOREX. Melcor's modules
are sold under the trademark FRIGICHIPS. While the Company believes that these
trademarks are well known and enhance the marketing of Rotorex's and Melcor's
products, the Company does not consider that the successful conduct of either
operation is dependent upon such trademarks.
WORKING CAPITAL PRACTICES
The Company regularly reviews working capital components with a view to
maintaining the lowest level consistent with requirements of anticipated levels
of operations. Sales of both Rotorex compressors and Melcor modules are
currently weighted toward the first half of the calendar year, and the Company's
working capital requirements are greatest during this period. Information with
respect to the Company's warranty and return policies is included in Note 1 of
the Notes to Consolidated Financial Statements at page 21 herein.
ENVIRONMENTAL MATTERS
It is the Company's policy to take all practicable measures to minimize air
and water pollution resulting from its operations. Neither Rotorex nor Melcor
made capital expenditures on environmental protection related items during 1995
which were material to their total capital expenditures, earnings and
competitive position or anticipate making material capital expenditures on such
items in 1996.
EMPLOYEES
The Company has approximately 920 employees. The contract with the union
representing Rotorex employees expires in August 1997. The current agreement,
which was negotiated in 1994, created a new classification for employees who
work in operations in which high precision is a requirement and which are most
important from a quality standpoint. This and certain other work-rules changes
are expected to be a factor in improving efficiency at the Rotorex facility.
Melcor's employees are non-union. The Company considers its relations with its
employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's executive offices are located in facilities owned by the
Company in Basking Ridge, New Jersey. Rotorex and Melcor own or lease the
following facilities:
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APPROXIMATE
SQUARE FEET
LOCATION PRINCIPAL FUNCTION OF FLOOR AREA
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Frederick, Maryland manufacture of rotary 200,000
(owned by Rotorex) compressors
780 North Clinton Ave. manufacture of 15,000
Trenton, New Jersey components
(leased by Melcor)
990 Spruce Street manufacture of 15,000
Lawrence Twp, New Jersey components
(owned by Melcor)
1040 Spruce Street assembly of modules 22,400
Lawrence Twp, New Jersey and executive offices
(leased by Melcor)
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The Company believes that Rotorex's and Melcor's machinery, equipment and
facilities are in good operating condition. Certain of the investments at the
Rotorex facility described previously coupled with additional selected
investments and process changes are expected to increase Rotorex's capacity by
the fourth quarter of 1996, enabling Rotorex to support growing international
sales opportunities. Melcor has sufficient capacity to support sales growth for
the foreseeable future and continually seeks to selectively automate processes
at its facilities.
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ITEM 3. LEGAL PROCEEDINGS
On June 28, 1989, Rotorex received notice that it was named as a
potentially responsible party in a proceeding pending before the United States
Environmental Protection Agency captioned In the Matter of Spectron, Inc. Site.
This proceeding involves a superfund site in Elkton, Maryland which is currently
being remediated. Activities at the site are currently being undertaken by a
large (more than 850) group of companies under an Administrative Order by
Consent, Docket No. III-89-23-DC. In October 1995, Rotorex received a notice
describing a proposed settlement addressing all cleanup liabilities at the site.
Rotorex has indicated its interest in joining in the settlement as a de minimis
settlor. Assuming a settlement is reached on this basis, Rotorex's liability
would be approximately $140,000. The Company believes that the outcome of such
litigation will not have a materially adverse effect on the financial
statements.
As of December 31, 1995, the Company was on appeal in the United States
Court of Appeals for the Second Circuit from a judgment, in the amount of $1.2
million, exclusive of interests and costs, rendered against Rotorex in the
United States District Court for the Northern District of New York in a case
captioned Delchi Carrier SpA v Rotorex Corporation. The appeal was filed in
October 1994 and seeks to overturn a judgment for lost profits and certain costs
arising out of a contract to supply compressors in 1988. The Company satisfied
the judgment in the first quarter of 1996. For additional information on legal
proceedings, see Note 9 of the Notes to Consolidated Financial Statements at
page 27 herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as of March 26, 1996
with respect to each person who is an executive officer of the Company. Officers
are elected annually for a term of one year and until their successors have been
elected and qualified.
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NAME AGE POSITION HELD
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Salvatore Giordano......................... 85 Chairman of the Board
Sal Giordano, Jr........................... 57 Vice Chairman and Chief Executive
Officer
Joseph Giordano............................ 63 President
Kent E. Hansen............................. 48 Vice President-Finance and General
Counsel, Chief Financial Officer;
Secretary
Edwin Diaz................................. 33 Controller
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Messrs. Salvatore Giordano and Sal Giordano, Jr. have held their present
positions since November 1986. Mr. Joseph Giordano has been President of the
Company since May 1990 and, prior thereto, Senior Vice President of the Company
from November 1986. Messrs. Salvatore Giordano and Sal Giordano, Jr. are
executive officers of Fedders and they and Mr. Joseph Giordano are directors and
stockholders of Fedders. Messrs. Sal Giordano, Jr. and Joseph Giordano are sons
of Mr. Salvatore Giordano.
Mr. Hansen has held his present position since August 1992. Previously, he
was Vice President and General Counsel of Fedders from October 1989 and, prior
thereto, Associate General Counsel of Fedders from September 1985.
Mr. Diaz was elected Controller of the Company in October 1994. Prior to
joining the Company, Mr. Diaz was Controller of Lancer Industries, Inc. from
October 1990 and Assistant Controller of The Alfieri Organization from May 1988.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock and Class A Stock trade on the Nasdaq Stock
Market. There is no established public trading market for the Company's Class B
Stock, as there are restrictions on its transfer. As of March 19, 1996, there
were 2,536 record holders of Common Stock, 2,542 record holders of Class A Stock
and 41 record holders of Class B Stock. For information with respect to the
Company's Common Stock, Class A Stock and Class B Stock, see Notes 4, 5 and 11
of the Notes to Consolidated Financial Statements at pages 24, 25 and 27 herein.
ITEM 6. SELECTED FINANCIAL DATA
See the table entitled "Selected Financial Data" at page 16 herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses factors which influenced the financial
position and operating results of the Company during the periods included in the
accompanying consolidated financial statements. The Company acquired Rotorex and
Melcor in September 1992.
Results of Operations. The Company's revenues increased in 1995 by
$3,630,000 over 1994. The net growth in revenues in 1995 reflects higher sales
of rotary compressors under the Supply Agreement (see Note 2 of the Notes to
Consolidated Financial Statements) and an increase in international sales.
Melcor's revenues in 1995 remained unchanged versus 1994. The Company's revenue
growth in 1994 over 1993 of $16,011,000 was due to increased compressor sales to
Fedders, offset by lower sales of thermoelectric heating and cooling modules
caused by increased competition in certain of Melcor's markets. The Company had
revenues of $59,226,000 in 1993, its first full year of operations with Rotorex
and Melcor.
The gross profit margin decreased in 1995 as a result of continued
manufacturing inefficiencies at the Company's rotary compressor operations.
During 1995, manufacturing inefficiencies from sustaining high production
volumes and efforts to operate the newly purchased automated compressor assembly
system at specified levels have negatively impacted results. As of December 31,
1995, the assembly system was not operating as specified. The manufacturing
inefficiencies at Rotorex are not expected to show significant improvement until
the assembly system is fully operational at specified levels. The 1994 gross
profit margin was lower than 1993 due to manufacturing inefficiencies in the
production of rotary compressors as a result of ramping up to and sustaining a
higher level of production than had been required at Rotorex in more than 5
years.
Selling, general and administrative expense of $9,171,000 in 1995
represents a decrease over 1994, which included a one-time charge of $1,200,000
for certain litigation. Excluding the 1994 litigation charge, 1995 selling,
general and administrative expense increased over 1994 by $818,000, primarily
due to increased sales and marketing efforts at Rotorex and Melcor. Selling,
general and administrative expense of $9,553,000 in 1994 increased over 1993 due
to the provision for certain litigation and an increase in research and
development costs primarily attributable to staffing and equipping Rotorex's
design engineering group.
Interest expense in 1995 is related to capital lease obligations of Rotorex
incurred in 1995 (see Note 7 of the Notes to Consolidated Financial Statements).
The 1995 net loss of $4,061,000 reflects less favorable results than the
1994 earnings of $635,000 as a result of the factors described above. In 1993,
the Company produced earnings of $4,244,000 in the first full year of operations
with Rotorex and Melcor. During 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 "Accounting for Income Taxes" as of January 1, 1993.
The cumulative effect of accounting change reflects the utilization of tax loss
carryforwards in the first quarter of 1993.
Liquidity and Capital Resources. The Company's working capital
requirements are currently heaviest in the first three months of the year as
operations reflect the seasonal demands of the air conditioner market. The
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Company's cash provided from operations in 1995, 1994, and 1993 was $5,104,000,
$5,380,000 and $1,410,000 respectively.
Accounts receivable of $4,075,000 at December 31, 1995 decreased from
$7,323,000 due to Fedders' taking advantage of Rotorex's cash discount terms.
Inventories at December 31, 1995 increased to $11,783,000 from $10,745,000 at
December 31, 1994 primarily from increased production requirements at the rotary
compressor operation. Other current assets increased $806,000 over 1994
primarily due to prepaid lease obligations and other miscellaneous manufacturing
supplies. The increase of $3,345,000 in accounts payable is due to the increased
production requirements at Rotorex.
Capital expenditures for the years ended December 31, 1995 and 1994 were
$2,977,000 and $1,707,000, respectively. During 1995, the Company entered into
$7,463,000 of new capital leases primarily for an automated compressor assembly
system and a plant wide air conditioning system (see Note 7 of the Notes to
Consolidated Financial Statements). These investments are primarily for projects
expected to enhance manufacturing efficiencies and capacity at Rotorex.
The Company has a $3,000,000 working capital facility with a commercial
bank, which bears interest at the prime rate plus one percent. The facility
expires April 30, 1996. Management believes that the facility will be extended
and the Company's cash flow from operations and financing arrangements are
adequate to meet the needs of its operations and its future requirements.
Management continues to assess the Company's ability to secure additional
financing to achieve the Company's growth objectives. The concentration of
Rotorex's sales to Fedders may make access to capital more difficult as many
lending institutions have policies that make it difficult for borrowers that
have a significant concentration of business with one customer. Management
believes the merger with Fedders, if completed, would improve the Company's
access to additional financing and its ability to grow and achieve its full
capacity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company at December 31, 1995
and 1994 and for each of the three years in the period ended December 31, 1995,
the notes thereto and the report of the Company's independent auditors thereon
are included at pages 17 through 29 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In August 1995, the Company dismissed Ernst & Young LLP ("E & Y") as its
independent accountants. The Company has engaged BDO Seidman, LLP as its new
independent accountants.
The reports of E & Y on the Company's financial statements for the years
ended December 31, 1994 and 1993 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. During the last two fiscal years, the
Company has not had any disagreements with E & Y on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Following is information with respect to the Company's directors. With the
exception of Mr. Keen, each of the individuals listed below has been a director
since October 1986. Mr. Keen was first elected a director of the Company in
1990. Set forth opposite the name of each nominee and each director is his age,
principal occupation for the past five years, the name and principal business of
any corporation or other organization in which such employment is carried on and
other business directorships held by the nominee or director. Two Directors are
elected annually for terms of three years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST
NAME FIVE YEARS AND AGE
-------------------------------------- ---------------------------------------------------
<S> <C>
Sal Giordano, Jr.*.................... Vice Chairman of the Company (1)(2); 57
William J. Brennan.................... Retired(2); Director of Fedders Corporation and
CSM Environmental Systems, Inc.; 68
Joseph Giordano*...................... President of the Company(1)(2); 63
S. A. Muscarnera**.................... Director of Fedders Corporation(2); 56
Salvatore Giordano.................... Chairman of the Board of the Company(1)(2); 85
C. A. Keen............................ Retired(3); 71
</TABLE>
- ---------------
* Son of Salvatore Giordano.
** Nephew of Salvatore Giordano.
(1) Messrs. Salvatore Giordano and Sal Giordano, Jr. are also executive officers
of, and they and Mr. Joseph Giordano are directors and stockholders of,
Fedders, a manufacturer of room air conditioners. Fedders purchases
compressors from Rotorex, in the ordinary course of its business. In 1995,
such purchases totaled $62 million.
(2) Messrs. Salvatore Giordano, Joseph Giordano, Sal Giordano, Jr. and S. A.
Muscarnera have been associated in executive capacities with the Company and
Fedders for more than five years. Mr. Brennan was President and Treasurer of
the Company until his retirement on December 31, 1987.
(3) Mr. Keen was Vice President of Fedders for more than 20 years until his
retirement in August 1992, with responsibilities in a number of areas during
that time, including marketing, treasury and international sales and
sourcing.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 1995, the Board of Directors of the Company held eight meetings. All
of the present directors attended 75% or more of such meetings and of meetings
of committees of which they were members. Directors who are not employees
receive an annual fee of $16,000.
The Audit Committee of the Board of Directors, consisting of Messrs.
William J. Brennan and S.A. Muscarnera, held two meetings during 1995. The Audit
Committee reviews the audit function with the Company's independent auditors.
The chairman of the Audit Committee, Mr. Brennan, receives a fee of $1,000 for
each meeting he attends. Other members of the Audit Committee who are not
employees receive a fee of $500 for each meeting they attend.
The Company does not have a nominating or compensation committee.
9
<PAGE> 12
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following information is furnished as to all cash compensation paid by
the Company and its subsidiaries during the past three years to each of the
highest paid executive officers of the Company whose aggregate direct
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------ (I)
---------------------------
(C) (D) (G) ALL OTHER
(A) (B) SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
- -------------------------------------- ---- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Salvatore Giordano.................... 1993 245,000 29,738 60,000 --
Chairman of the Board of Directors 1994 265,506 29,738 -- --
1995 265,506 29,738 -- --
Sal Giordano, Jr. .................... 1993 220,883 29,738 60,000 --
Vice Chairman 1994 237,660 -- -- 14,444
1995 237,660 -- -- 13,724
Joseph Giordano....................... 1993 170,833 29,738 60,000 5,125
President 1994 181,866 29,738 -- 13,826
1995 185,503 -- -- 16,952
Kent E. Hansen........................ 1993 170,910 29,738 60,000 5,125
Vice President-Finance 1994 181,866 29,738 -- 7,849
and General Counsel 1995 185,503 -- -- 10,750
</TABLE>
- ---------------
(1) Includes the Company contribution to savings and investment retirement plans
up to the 3% level permitted by the plans and, in 1994 and 1995, the dollar
value of the benefit of premiums paid for split-dollar life insurance
policies projected on an actuarial basis, which cost is recovered by the
Company from the proceeds of such policies (Mr. Sal Giordano, Jr., $6,485
and $6,595, Mr. Joseph Giordano, $7,478 and $7,372 and Mr. Hansen, $1,501
and $3,686 in 1994 and 1995, respectively).
AGGREGATE OPTION/SAR EXERCISES AND YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth the number of shares exercised during 1995,
the value realized upon exercise, the number of unexercised options at the end
of 1995, and the value of unexercised in-the-money options at the end of 1995.
10
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT OPTIONS
SHARES YEAR-END(#) YEAR-END($)
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Salvatore Giordano........................ -- -- -- E -- E
-- -- 90,000U 178,125U
Sal Giordano, Jr.......................... -- -- -- E -- E
-- -- 90,000U 178,125U
Joseph Giordano........................... -- -- -- E -- E
-- -- 75,000U 139,688U
Kent E. Hansen............................ -- -- 15,000E 38,438E
-- -- 60,000U 101,250U
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no separate Compensation Committee, and matters concerning
executive compensation are considered by the entire Board of Directors, with
directors who are also officers of the Company abstaining from any vote
concerning their own proposed compensation. During 1995, Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano, were both directors and
executive officers of the Company.
EMPLOYMENT CONTRACT
Mr. Salvatore Giordano has an Employment Agreement with the Company, which
became effective on October 26, 1993. The material provisions of the Agreement
include; (1) an annual base salary of at least $250,000, payable in equal
semi-monthly installments; (2) annual participation in all compensatory plans
and arrangements of the Company no less favorable than the fiscal year 1993
plans including, but not limited to, a bonus not less than the amount of the
fiscal year 1993 bonus, and continuing eligibility to be awarded stock options;
(3) reimbursement for all expenses incurred while on Company related business;
and (4) annual consideration for base salary and plan participation increases,
if deemed justified by the Company. The Agreement has a stated expiration date
of October 26, 2003, but the term of the Agreement automatically extends and has
a remaining term of ten years from any point in time, until the term is finally
fixed at a period of ten years from an intervening event, as provided for in the
Agreement, such as permanent disability or death. During 1995, the Company
amortized the estimated present value of future non-salary benefits payable
under the Agreement based upon certain assumptions, in the amount of $306,000
11
<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NYCOR
As of March 19, 1996 each director of NYCOR and all directors and executive
officers of NYCOR owned beneficially the number of shares of NYCOR's equity
securities set forth in the following table. As of such date, no director or
executive officer of NYCOR owns beneficially any shares of NYCOR Preferred
Stock. Shares subject to acquisition within 60 days pursuant to stock options
are shown separately. Unless otherwise indicated, the owners listed have sole
voting and investment power. NYCOR Class A Stock has no voting rights except as
provided under the Delaware law.
<TABLE>
<CAPTION>
SHARES
AMOUNT AND SUBJECT TO
NATURE OF ACQUISITION PERCENT
TITLE OF NAME OF INDIVIDUAL BENEFICIAL WITHIN 60 OF CLASS
CLASS OR PERSONS IN GROUP OWNERSHIP DAYS(8) OWNED(9)
- ------------- -------------------------------------- ---------- ----------- ------------
<C> <S> <C> <C> <C>
Common Stock Salvatore Giordano.................... 12,816 (1) 0 Less than 1%
Sal Giordano, Jr...................... 83,917 (1)(2) 0 3.0%
Joseph Giordano....................... 47,528 (1) 0 1.7%
William J. Brennan.................... 58,529 (3) 0 2.1%
S. A. Muscarnera...................... 16,250 0 Less than 1%
All directors and executive officers
as a
group................................. 213,102 0 7.6%
Class A Stock Salvatore Giordano.................... 587,850 (4)(5) 90,000 16.4%
Sal Giordano, Jr...................... 368,988 (4)(6) 90,000 11.1%
Joseph Giordano....................... 141,942 (4) 75,000 5.3%
William J. Brennan.................... 63,373 (3) 22,500 2.1%
S. A. Muscarnera...................... 35,903 22,500 1.4%
C. A. Keen............................ 14,250 22,500 Less than 1%
Kent E. Hansen........................ 25,000 75,000 2.4%
All directors and executive officers
as a
group................................. 1,016,944 397,500 31.8%
Class B Stock Salvatore Giordano.................... 640,352 (7) 0 89.7%
Sal Giordano, Jr...................... 640,352 (7) 0 89.7%
Joseph Giordano....................... 640,352 (7) 0 89.7%
All directors and executive officers
as a
group................................. 640,352 (7) 0 89.7%
Ownership of Common Stock, Class A
Stock and Class B Stock combined,
by all directors and executive
officers
as a group............................ 1,870,248 397,500 28.5%
</TABLE>
- ---------------
(1) The amount shown includes 2,969 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power.
(2) The amount shown includes 2,500 shares held of record by Mr. Giordano's wife
and 20,201 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(3) The amount shown includes 250 shares as to which Mr. Brennan shares voting
and investment power.
(4) The amount shown includes 110,256 shares as to which Messrs. Salvatore
Giordano, Joseph Giordano and Sal Giordano, Jr. share voting and investment
power.
(5) The amount shown includes 80,201 shares held of record by Mr. Giordano's
wife in trust for their grandchildren, as to which Mr. Giordano disclaims
beneficial ownership.
12
<PAGE> 15
(6) The amount shown includes 4,991 shares held of record by Mr. Giordano's wife
and 8,610 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) The amount shown is held by Giordano Holding Corp. Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano are officers and directors
of such corporation and share voting and investment power over these shares.
(8) The amounts shown are the number of shares held under options exercisable
within 60 days.
(9) The NYCOR Class B Stock is convertible into NYCOR Common Stock at any time
on a share-for-share basis. In the event that the individuals named as
owning NYCOR Class B Stock converted their shares into NYCOR Common Stock
less than 5% of the class would remain outstanding, and pursuant to the
terms of the Certificate of Incorporation of NYCOR, all remaining NYCOR
Class B Stock and all outstanding NYCOR Class A Stock would automatically be
converted into NYCOR Common Stock. In such event, and assuming exercise of
all options, such individuals and the group would beneficially own the
following number of shares constituting the indicated percentage of NYCOR
Common Stock which would then be outstanding: Mr. Salvatore Giordano,
1,241,018 shares (of which 753,577 are shares as to which Mr. Giordano
shares voting and investment power with Messrs. Joseph Giordano and Sal
Giordano, Jr.) constituting 17.4%; Mr. Sal Giordano, Jr., 1,093,257 shares
(of which 753,577 are shares as to which Mr. Giordano shares voting and
investment power with Messrs. Salvatore Giordano and Joseph Giordano)
constituting 15.5%; Mr. Joseph Giordano, 829,822 shares (of which 753,577
are shares as to which Mr. Giordano shares voting and investment power with
Messrs. Salvatore Giordano and Sal Giordano, Jr.) constituting 11.9%; and
all directors and executive officers as a group 1,649,886 shares
constituting 25.7%.
13
<PAGE> 16
PRINCIPAL STOCKHOLDERS OF NYCOR
The following table sets forth information at December 31, 1995 with
respect to the beneficial ownership of NYCOR's voting securities by all persons
known by NYCOR to own more than 5% of NYCOR's outstanding voting securities.
Unless otherwise indicated, the owners listed have sole voting and investment
power.
<TABLE>
<CAPTION>
AMOUNT
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER(1) OWNED OF CLASS
- ------------- ------------------------------------------------ ------------ ---------
<S> <C> <C> <C>
Common Stock Heartland Advisors, Inc......................... 524,146 18.9%
790 North Milwaukee Street
Milwaukee, WI 53202
Lindner Investment Series Trust................. 380,432(1) 12.1%
Ryback Management Corporation
7711 Carondelet Ave., Box 16900
St. Louis, MO 63105
Class B Stock Salvatore Giordano.............................. 640,352 89.7%
Joseph Giordano and
Sal Giordano, Jr.
c/o NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dimensional Fund Advisors, Inc.................. 67,515(2) 9.5%
1299 Ocean Avenue 11th Floor
Santa Monica, CA 90901
</TABLE>
- ---------------
(1) Includes 345,432 shares which would be held upon conversion of $1.70
Convertible Exchangeable Preferred Stock.
(2) The following statement has been provided by Dimensional Fund Advisors,
Inc.: "Dimensional Fund Advisors, Inc. ("Dimensional") a registered
investment advisor, is deemed to have beneficial ownership of 67,515 shares
of NYCOR, Inc., all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund
Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 10 herein.
14
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Index to Financial Statements and Financial Statement Schedules
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company are
included at pages 17 through 29 therein:
Consolidated Balance Sheets at December 31, 1995 and 1994.
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Certified Public Accountants.
Report of Independent Auditors.
15
<PAGE> 18
(a) 2. Financial Statement Schedules
Consolidated Schedules as of and for each of the years ended December
31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
FORM 10-K
PAGE
---------
<S> <C>
II. Valuation and Qualifying Accounts............................. S-1
Report of Independent Certified Public Accountants................ S-2
</TABLE>
All other schedules have been omitted because of the absence of the
conditions under which they are required or because the required information is
included in the Consolidated Financial Statements or the notes thereto.
SELECTED FINANCIAL DATA(A)
YEARS ENDED DECEMBER 31
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales................................ $78,867 $75,237 $59,226 $ 4,624 --
Interest and other income................ -- -- -- $ 9,586 $ 6,380
Net income (loss)........................ $(4,061) $ 635 $ 4,244(b) $ 5,240 $ 4,065
Net income (loss) per share.............. $ (0.79) $ (0.17) $ 0.30 $ 0.48 $ 0.30
Cash dividends per share declared:
Preferred Stock........................ $ 1.70 $ 2.98 $ 0.850 $ 1.275 $ 1.700
Common Stock........................... -- -- -- $ 0.120 $ 0.160
Class A Stock.......................... -- -- -- $ 0.120 $ 0.160
Class B Stock.......................... -- -- -- $ 0.108 $ 0.144
AT DECEMBER 31
Cash and cash equivalents................ $ 1,533 $ 1,981 $ 1,336 $ 1,495 $12,214
Total assets............................. $93,502 $88,994 $90,956 $89,073 $75,642
Long-term debt (including current
portion)............................... $ 6,877 $ 33 $ 26 $ 546 --
Stockholders equity...................... $72,730 $78,746 $81,565 $76,524 $74,056
</TABLE>
- ---------------
(a) The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes
thereto.
(b) In 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes,
which resulted in income of $627,000 or $0.09 per share from the cumulative
effect of an accounting change.
16
<PAGE> 19
NYCOR, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
------- -------
(AMOUNTS IN
THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,533 $ 1,981
Accounts receivable, net of allowance for doubtful accounts of $607 and
$409 in 1995 and 1994, respectively................................. 2,215 1,353
Accounts receivable from Fedders Corporation........................... 1,860 5,970
Inventories............................................................ 11,783 10,745
Other current assets................................................... 1,417 611
------- -------
Total current assets........................................... 18,808 20,660
Property, plant and equipment, net....................................... 31,179 23,854
Goodwill................................................................. 41,124 42,240
Other assets............................................................. 2,391 2,240
------- -------
Total assets................................................... $93,502 $88,994
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 7,709 $ 4,364
Accrued expenses....................................................... 4,724 4,798
Current portion of long-term debt...................................... 1,176 10
Other current liabilities.............................................. 81 71
------- -------
Total current liabilities...................................... 13,690 9,243
Long-term debt........................................................... 5,701 23
Other long-term liabilities:
Warranty expense....................................................... 577 616
Other.................................................................. 804 366
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1 par value, 5,000,000 shares authorized, 1,150,000
issued and outstanding at December 31, 1995 and 1994 with a
liquidation preference of $23,000,000............................... 1,150 1,150
Common Stock, $1 par value, 115,000,000 shares authorized, 2,882,580
and 2,882,155 issued at December 31, 1995 and 1994, respectively.... 2,882 2,882
Class A Stock, $1 par value, 100,000,000 shares authorized, 4,229,971
issued at December 31, 1995 and 1994................................ 4,230 4,230
Class B Stock, $1 par value, 7,500,000 shares authorized, 713,675 and
714,100 issued and outstanding at December 31, 1995 and 1994,
respectively........................................................ 714 714
Additional paid-in capital............................................. 37,779 37,779
Retained earnings from January 1, 1988................................. 27,128 33,144
Less-treasury stock, at cost:
82,561 shares of Common Stock and 178,596 shares of Class A Stock at
December 31, 1995 and 1994.......................................... (1,153) (1,153)
------- -------
Total stockholders' equity..................................... 72,730 78,746
------- -------
Total liabilities and stockholders' equity..................... $93,502 $88,994
======= =======
</TABLE>
See accompanying notes
17
<PAGE> 20
NYCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales..................................................... $78,867 $75,237 $59,226
Cost of goods sold............................................ 73,210 64,921 46,554
Selling, general and administrative expense................... 9,171 9,553 8,366
------- ------- -------
Operating income (loss)....................................... (3,514) 763 4,306
Interest expense (income) (net of interest income of $115 in
1995)....................................................... 189 (93) (73)
------- ------- -------
Income (loss) before income taxes and cumulative effect of an
accounting change........................................... (3,703) 856 4,379
Federal, foreign and state income taxes....................... 358 221 762
------- ------- -------
Income (loss) before cumulative effect of an accounting
change...................................................... (4,061) 635 3,617
Cumulative effect of an accounting change..................... -- -- 627
------- ------- -------
Net income (loss)............................................. (4,061) 635 4,244
Preferred Stock dividend requirement.......................... (1,955) (1,955) (1,955)
------- ------- -------
Net income (loss) attributable to common stockholders......... $(6,016) $(1,320) $ 2,289
======= ======= =======
Primary earnings (loss) per share:
Income (loss) before cumulative effect of an accounting
change................................................... $ (0.79) $ (0.17) $ 0.21
Cumulative effect of an accounting change................... -- -- 0.09
------- ------- -------
Net income (loss) per share................................... $ (0.79) $ (0.17) $ 0.30
======= ======= =======
</TABLE>
See accompanying notes
18
<PAGE> 21
NYCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)........................................... $(4,061) $ 635 $ 4,244
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation........................................... 3,100 2,966 2,877
Amortization........................................... 1,548 1,557 1,365
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable............. 3,248 (2,377) (2,074)
Decrease (increase) in inventories..................... (1,038) 2,234 (2,963)
Increase in other current assets....................... (806) (203) (243)
Increase in other assets............................... (583) (282) (47)
Increase (decrease) in accounts payable................ 3,345 509 (780)
Increase (decrease) in accrued expenses and other
current liabilities................................. 351 341 (969)
------- ------- --------
Net cash provided by operations..................... 5,104 5,380 1,410
------- ------- --------
Cash flows from investing activities:
Proceeds from sale of equipment............................. -- 439 --
Additions to property, plant and equipment.................. (2,977) (1,707) (957)
------- ------- --------
Net cash used in investing activities............... (2,977) (1,268) (957)
------- ------- --------
Cash flows from financing activities:
Dividends paid.............................................. (1,955) (3,421) (978)
Payments on capital lease................................... (620) (13) (67)
Proceeds from stock options exercised....................... -- 228 120
Proceeds from sale of stock................................. -- -- 1,166
Acquisition of treasury stock............................... -- (261) --
Increase (decrease) in short-term borrowing................. -- -- (400)
Repayment of long-term debt................................. -- -- (453)
------- ------- --------
Net cash used in financing activities............... (2,575) (3,467) (612)
------- ------- --------
Net increase (decrease) in cash and cash equivalents.......... (448) 645 (159)
Cash and cash equivalents, beginning of year.................. 1,981 1,336 1,495
------- ------- --------
Cash and cash equivalents, end of year........................ $ 1,533 $ 1,981 $ 1,336
======= ======= ========
Supplemental disclosure:
Interest paid............................................... $ 301 $ 20 $ 30
Income taxes paid........................................... $ 354 $ 226 $ 300
Non-cash investing and financing activities:
Leased asset additions and related obligations.............. $ 7,463 -- --
</TABLE>
See accompanying notes
19
<PAGE> 22
NYCOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON CLASS A CLASS B PAID-IN TREASURY RETAINED
STOCK STOCK STOCK STOCK CAPITAL STOCK EARNINGS
--------- ------ ------- ------- ---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...... $ 1,150 $2,809 $ 3,524 $ 715 $ 34,798 $ (792) $ 34,320
Net income........................ -- -- -- -- -- -- 4,244
Preferred Stock dividend.......... -- -- -- -- -- -- (489)
Reclassification of additional
paid-in capital................. -- -- -- -- 1,663 -- (1,663)
Limited stock offering............ -- -- 606 -- 560 -- --
Stock options exercised........... -- 25 25 -- 70 -- --
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1993...... 1,150 2,834 4,155 715 37,091 (792) 36,412
Net income........................ -- -- -- -- -- -- 635
Preferred Stock dividend.......... -- -- -- -- -- -- (3,421)
Conversion of stock............... -- 1 -- (1) -- -- --
Purchase of treasury stock........ -- -- -- -- -- (361) --
Stock issuance.................... -- -- 28 -- 72 -- --
Stock options exercised........... -- 47 47 -- 134 -- --
Reclassification of additional
paid-in capital................. -- -- -- -- 482 -- (482)
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1994...... 1,150 2,882 4,230 714 37,779 (1,153) 33,144
Net loss.......................... -- -- -- -- -- -- (4,061)
Preferred Stock dividend.......... -- -- -- -- -- -- (1,955)
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1995...... $ 1,150 $2,882 $ 4,230 $ 714 $ 37,779 $ (1,153) $ 27,128
====== ====== ====== ==== ======= ======= =======
</TABLE>
See accompanying notes
20
<PAGE> 23
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include
the accounts of NYCOR, Inc. (the "Company") and its two operating subsidiaries,
Melcor Corporation ("Melcor") and Rotorex Company, Inc. ("Rotorex"). All
significant intercompany accounts and transactions are eliminated in
consolidation. Melcor is a manufacturer of solid state thermoelectric heat pump
modules, which are used for special cooling and heating applications. Rotorex
manufactures compressors for room air conditioners.
NET SALES: Sales are recorded at the time of shipment net of provisions
for sales allowances, warranty and similar items.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are stated at cost,
which is equal to market, and include highly liquid debt instruments with
initial maturities of less than 90 days.
WARRANTY AND RETURN POLICY: Rotorex's warranty policy provides two-year
coverage for compressors. The Company's products may only be returned with the
consent of the Company. The Company's policy is to accrue the estimated cost of
warranty coverage and returns at the time the sale is recorded.
INVENTORIES: Inventories are stated at the lower of the first-in,
first-out (FIFO) cost or market. The Company periodically reviews inventory for
slow moving and obsolete items. Write downs, which have historically been
insignificant, are recorded in the period in which they are identified.
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Finished goods................................................... $ 1,021 $ 897
Work in process.................................................. 5,689 4,660
Raw materials and supplies....................................... 5,073 5,188
------- -------
$11,783 $10,745
======= =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT: Replacements, betterments and additions to
property, plant and equipment are capitalized at cost. Expenditures for
maintenance and repairs are charged to expense as incurred. Upon sale or
retirement of property, plant and equipment, the cost and related accumulated
depreciation are removed from the respective accounts and any gain or loss is
reflected in income. Property, plant and equipment consist of the following at
December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements............................................ $ 2,666 $ 2,664
Buildings and improvements....................................... 10,414 7,951
Machinery and equipment.......................................... 27,534 19,622
------- -------
Property, plant and equipment at cost............................ 40,614 30,237
Accumulated depreciation......................................... (9,435) (6,383)
------- -------
$31,179 $23,854
======= =======
</TABLE>
Depreciation is calculated using the straight-line method over the
estimated useful life of each asset which is 7 to 30 years for building and
improvements, and 3 to 12 years for machinery and equipment.
GOODWILL AND OTHER ASSETS: Other assets consist primarily of intangible
assets which, other than goodwill, are amortized over periods from 5 to 37 years
using the straight-line method. Goodwill is amortized over 40 years using the
straight-line method and is net of accumulated amortization of $3,652,000 and
21
<PAGE> 24
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
$2,536,000 at December 31, 1995 and 1994, respectively. Other assets are net of
accumulated amortization of $1,146,000 and $714,000 at December 31, 1995 and
1994, respectively, and consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
License agreements................................................. $ 412 $ 522
Customer relationships............................................. 1,003 1,033
Other intangibles.................................................. 180 383
Other.............................................................. 796 302
------ ------
Total other assets............................................ $2,391 $2,240
====== ======
</TABLE>
The recoverability of goodwill and other intangibles are evaluated
periodically based upon the expected, undiscounted net cash flows from the
related businesses.
ACCRUED EXPENSES: Accrued expenses consist of the following at December
31:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Employee compensation and benefits................................. $1,074 $1,406
Professional and consulting fees................................... 773 484
Income taxes payable............................................... 6 17
Current portion of warranty expense................................ 385 361
Litigation and contingencies....................................... 1,852 1,942
Other.............................................................. 634 588
------ ------
$4,724 $4,798
====== ======
</TABLE>
RESEARCH AND DEVELOPMENT COSTS: All research and development costs are
charged to expense as incurred and amount to $1,592,000 in 1995, $1,444,000 in
1994 and $745,000 in 1993.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RISK AND UNCERTANTIES: Approximately 68% of the Company's employees are
covered by a three year collective bargaining agreement, which expires in August
1997.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS: In March 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards "FAS" No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." The Company believes that this
pronouncement will not have a material impact on the Company's results of
operations and financial condition. In October, 1995 the FASB issued FAS No. 123
"Accounting for Stock-Based Compensation." Management is evaluating the
implementation of FAS 123, but does not expect it to have a material impact on
the Company's results of operations or financial condition.
AMOUNTS PER SHARE: Primary earnings per share are computed by dividing net
income, less Preferred Stock dividends, by the weighted average number of shares
of Common Stock, Class A Stock, Class B Stock and other common stock equivalents
outstanding during the year: 7,580,000, 7,583,000 and 7,544,000 in 1995, 1994
and 1993, respectively (notes 4 and 5).
22
<PAGE> 25
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Fully diluted earnings per share are computed by dividing net income by the
weighted average number of shares of Common Stock, Class A Stock, Class B Stock
and other common stock equivalents (assuming conversion of Preferred Stock)
outstanding during the year: 10,133,000, 10,136,000 and 10,097,000 in 1995, 1994
and 1993, respectively. In 1995, 1994 and 1993, fully diluted earnings per share
were anti-dilutive.
RECLASSIFICATIONS: Certain items in the 1994 financial statements have
been reclassified to conform to the 1995 presentation.
2 -- TRANSACTIONS WITH FEDDERS
Certain officers and directors of the Company are also officers and
directors of Fedders Corporation ("Fedders") and have stockholdings in both
companies. Since being acquired from Fedders in 1992, Rotorex has supplied
Fedders with rotary compressors under a ten year supply agreement which requires
Fedders to purchase certain minimum quantities, up to 800,000 units, on an
annual basis. Sales to Fedders are at negotiated market prices and amount to
$61,951,000, $60,381,000, and $36,697,000 during 1995, 1994 and 1993,
respectively.
In November 1995, the Company announced that a definitive agreement was
reached to merge with Fedders. Under the terms of the agreement, NYCOR
stockholders will receive Fedders Stock with a market value, as described in the
agreement, of $6.25 on the effective date of the merger, for each share of NYCOR
Common, Class A and Class B stock outstanding prior to the merger. Such
consideration will be Fedders Class A stock, if the market value of such stock,
as determined in accordance with the agreement, prior to the merger is $6.25 or
higher per share. If the market value of Fedders Class A stock, as determined in
accordance with the agreement, is less than $6.25 per share, NYCOR stockholders
will receive shares of a new Fedders Convertible Preferred Stock with terms
expected to support an initial market value of $6.25 per share.
3 -- INCOME TAXES
At December 31, 1995, the Company had tax operating loss carryforwards of
approximately $15,355,000, of which $10,912,000 expires in 1996 and the
remainder of which expires between 1997 and 2010. The Company also had
investment tax credit carryforwards of approximately $201,000 which expire in
the period from 1996 through 2000 and alternative minimum tax ("AMT") credit
carryforwards of approximately $1,373,000.
23
<PAGE> 26
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Deferred tax liabilities and assets, which reflect the net tax effects of
temporary differences between assets and liabilities for financial reporting and
income tax purposes, consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities -- tax over book amortization........... $ 1,752 $ 1,082
------- -------
Total deferred tax liabilities................................. $ 1,752 $ 1,082
------- -------
Deferred tax assets:
Net operating loss carryforwards............................... 5,221 4,131
AMT carryforwards.............................................. 1,373 1,373
Book over tax depreciation..................................... 1,088 709
Warranty....................................................... 327 332
Other.......................................................... 836 816
Valuation allowance for deferred tax assets...................... (7,093) (6,279)
------- -------
Total deferred tax assets...................................... 1,752 1,082
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
The reconciliation of the provision for income taxes, at the U.S. federal
statutory tax rates, to income tax expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax at statutory rate..................... $(1,259) $ 291 $1,531
Goodwill amortization.................................... 87 87 87
Utilization of tax loss carryforwards.................... -- (362) (946)
Operating losses with no current tax benefit............. 1,195 -- --
Alternative minimum tax.................................. -- 20 95
Refund of federal tax.................................... -- -- (91)
Foreign tax.............................................. 292 155
State taxes, net of federal benefit...................... 43 30 86
----- ------ -------
$ 358 $ 221 $ 762
===== ====== =======
</TABLE>
The provision for income taxes for 1995 consists of current state and
foreign taxes of $66,000 and $292,000, respectively. The provision for income
taxes for 1994 consists of current federal, state and foreign taxes of $20,000,
$46,000 and $155,000, respectively. The provision for income taxes for 1993
consists of deferred federal taxes of $627,000 and current state taxes of
$135,000.
The Company adopted Statement of Financial Accounting Standard No. 109
("FAS 109") "Accounting for Income Taxes" as of January 1, 1993. The adoption of
FAS 109 did not have a material effect on pretax income. However, the cumulative
effect of adopting FAS 109 was to increase net income by $627,000.
At December 31, 1987, the Company adopted Statement of Financial Accounting
Standard No. 96, ("FAS 96") "Accounting for Income Taxes," which allows the
recognition of the tax benefits of net operating loss carryforwards in the
statement of operations as a reduction of income tax expense. In September 1989,
the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 86. In the SEC staff's view, tax benefits of net operating loss
carryforwards must be reported as an addition to additional paid-in capital
rather than being recorded in the statement of operations.
24
<PAGE> 27
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Based on the circumstances that existed when the Company reclassified its
accumulated deficit to additional paid-in capital in 1988 and adopted FAS 96,
the SEC staff has indicated that they would not object to the Company's
continued reporting of the tax benefit of its net operating loss carryforwards
in the statement of operations. If SAB No. 86 had been applied, net income for
1994, and 1993 would have been reduced by $362,000, and $946,000, respectively.
There would have been no effect on the balance sheet.
4 -- STOCK OPTION PLANS
All stock option plans, as approved by the stockholders, provide for the
granting to employees and officers of incentive stock options (as defined under
current tax laws) and non-qualified stock options to directors who are not
employees. Stock options are exercisable at a price no less than the market
value on the date of grant. Existing stock option plans permit the granting of
options to purchase up to 571,890 shares of Common Stock and up to 721,890
shares of Class A Stock. Stock options are exercisable one year after the date
of grant and, if not exercised, will expire five years from the original date of
grant.
<TABLE>
<CAPTION>
EXERCISE
(IN THOUSANDS OF SHARES) # OPTIONS PRICE
--------- --------------
<S> <C> <C>
Options outstanding at December 31, 1992........................... 373 $2.31 to $2.50
Granted............................................................ 368
Cancelled.......................................................... 1
Exercised.......................................................... 50
---
Options outstanding at December 31, 1993........................... 690 $2.31 to $3.88
Exercised.......................................................... 95
---
Options outstanding at December 31, 1994........................... 595 $2.31 to $3.88
---
Cancelled.......................................................... (106)
---
Options outstanding at December 31, 1995........................... 489 $2.31 to $3.88
===
Options exercisable at December 31, 1995........................... 15
</TABLE>
5 -- CAPITAL STOCK
PREFERRED STOCK: The Preferred Stock is convertible into Common Stock and
Class A Stock at a rate of 1.11 shares of Common Stock and 1.11 shares of Class
A Stock for each share of Preferred Stock. Accordingly, at December 31, 1995,
1,276,500 shares of Common Stock and 1,276,500 shares of Class A Stock are
reserved for issuance upon conversion. The Preferred Stock is also exchangeable
in whole, but not in part, at the option of the Company for the Company's
unissued 8 1/2% Convertible Subordinated Debentures due 2012 at the rate of $20
principal amount of Debentures for each share of Preferred Stock. The
Debentures, if issued, will be convertible into Common Stock and Class A Stock
at the conversion rate applicable to the Preferred Stock. The holders of
Preferred Stock are entitled to receive upon liquidation $20 per share, plus
accumulated and unpaid dividends to the date of distribution, before any
distribution is made on the Common Stock, Class A Stock or Class B Stock. The
Preferred Stock has an annual, cumulative dividend rate of $1.70 per share and
has no voting rights. Subsequent to December 31, 1995 the Preferred Stock was
exchanged for 8 1/2% Convertible Subordinated Debentures (note 10).
COMMON STOCK: Shares of Common Stock are reserved for the conversion of
Preferred Stock, Class A Stock and Class B Stock. At December 31, 1995, 571,890
shares are also reserved for issuance in connection with options not yet granted
or exercised under the Company's stock option plans (note 4).
25
<PAGE> 28
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
CLASS A STOCK: Class A Stock has rights, including dividend rights,
substantially identical to Common Stock, except that the Class A Stock is not
entitled to vote except to the extent provided under Delaware law. Class A Stock
will automatically be converted into Common Stock on a share-for-share basis
whenever all of the Class B Stock converts into Common Stock and, accordingly,
at December 31, 1995, 4,229,971 shares are reserved for such conversion.
Additionally, 721,890 shares are reserved for issuance in connection with
options not yet granted or exercised under the Company's stock option plans
(note 4).
CLASS B STOCK: Class B Stock is immediately convertible into Common Stock
on a share-for-share basis and accordingly, at December 31, 1995, 714,100 shares
of Common Stock are reserved for such conversion. Class B Stock has, in certain
circumstances, greater voting power in the election of directors (10 votes per
share) but receives a lower dividend (90%), if declared, than Common Stock and
Class A Stock, and has limited transferability.
6 -- SHORT-TERM BORROWING
The Company has a $3,000,000 revolving credit facility with a commercial
bank collateralized by all tangible and intangible assets, except for the
machinery and equipment of Rotorex, which expires April 30, 1996. The interest
rate on the credit facility is one percentage point above the bank's prime rate
(8 1/2% at December 31, 1995).
7 -- LONG TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ----
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligation........................................... $6,877 $33
Capital lease obligation, current portion.......................... 1,176 10
--- ---
Long-term debt..................................................... $5,701 $23
=== ===
</TABLE>
The Company has equipment which are under capital leases. The aggregate
future minimum lease payments for the years ending December 31, 1995 are as
follows: $1,176,000 in 1996, $1,308,000 in 1997, $1,449,000 in 1998, $1,405,000
in 1999, and $1,539,000 in 2000. The present value of minimum lease payments is
$6,877,000, excluding $2,011,000 of interest.
8 -- COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment under operating leases
which expire over the next five years. Most of these operating leases contain
one of the following options: (a) the Company may, at the end of the initial
lease term, purchase the property at the then fair market value or (b) the
Company may renew its lease at the then fair market value for a period of one
month to seven years. The Company has granted the lessor under the lease at
Rotorex a security interest in machinery and equipment owned by Rotorex. Minimum
payments for operating leases having initial or remaining non-cancelable terms
in excess of one year are as follows: $2,042,000 in 1996, $1,876,000 in 1997,
$1,807,000 in 1998, $1,704,000 in 1999 and $735,000 in 2000, and $958,000
thereafter. Minimum lease payments total $9,122,000. Total rent expense for all
operating leases amounted to $1,408,000 in 1995, $1,208,000 in 1994, and
$819,000 in 1993.
The Company has an employment agreement with an officer. The agreement has
a term of ten years from any point in time and provides for salary during the
employment period, a disability program, postretirement benefits and a death
benefit in an amount equal to ten times the prior year's compensation, payable
by the Company over ten years. The estimated present value of future non-salary
benefits payable under the
26
<PAGE> 29
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
agreement has been determined based upon certain assumptions and is being
amortized over the expected remaining years of service to the Company.
9 -- LITIGATION
The Company is involved in litigation incidental to the conduct of its
business. It is the opinion of management, after consultation with counsel, that
the outcome of such litigation will not have a materially adverse effect on the
financial statements. In 1994, a judgment for approximately $1,200,000,
exclusive of interest and costs, was rendered against the Company in a lawsuit
dating from 1987. Subsequent to December 31, 1995 the Company paid $1,200,000
plus accrued interest in final settlement of this judgment. The amount of the
total settlement payment was fully accrued as of December 31, 1995.
10 -- SUBSEQUENT EXCHANGE OF PREFERRED STOCK
On March 15, 1996, the Company exchanged the Preferred Stock for 8 1/2%
Convertible Subordinated Debentures due 2012 at the rate of $20 principle amount
of Debenture for each share of Preferred Stock. As a result of this exchange
long-term debt increased by $23,000,000, and total stockholders equity was
reduced by a corresponding amount. Had this exchange occurred at the beginning
of 1995, interest expense and net loss would have increased by $1,955,000, no
Preferred Stock dividend would of been declared and net loss per share would not
have changed from the reported amount.
11 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 QUARTERS 1994 QUARTERS
------------------------------------------- -------------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND MARKET PRICE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $21,036 $19,707 $15,844 $22,280 $21,457 $23,083 $11,575 $19,122
======= ======= ======= ======= ======= ======= ====== =======
Net income (loss).............. $ (899) $ (328) $(1,887) $ (947) $ 1,227 $ 660 $(1,312) $ 60
======= ======= ======= ======= ======= ======= ====== =======
Primary net income (loss) per
share........................ $(0.18) $(0.11) $(0.31) $(0.19) $ 0.10 $ 0.02 $(0.24) $ (0.05)
======= ======= ======= ======= ======= ======= ====== =======
Market price per share:
Common: High............... 31/4 215/16 215/16 57/8 51/2 43/4 51/8 3
Low................ 25/8 23/8 23/8 21/8 37/8 31/2 23/4 21/8
Class A: High.............. 27/8 23/4 31/8 51/2 43/4 41/2 5 27/8
Low................. 23/8 23/8 23/8 21/8 31/4 31/8 21/2 2
Preferred: High............ 143/4 15 151/2 17 193/4 183/4 181/2 16
Low................ 13 12 121/4 131/2 171/4 17 151/4 131/4
Cash dividends declared:
Preferred Stock.............. $ 0.425 $ 0.425 $ 0.425 $ 0.425 $ 0.850 $ 0.850 $ 0.850 $ 0.425
Common Stock................. -- -- -- -- -- -- -- --
Class A Stock................ -- -- -- -- -- -- -- --
Class B Stock................ -- -- -- -- -- -- -- --
</TABLE>
27
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of NYCOR, Inc.
We have audited the accompanying balance sheet of NYCOR, Inc., as of
December 31, 1995 and the related statements of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NYCOR, Inc., as of December
31, 1995, and the results of its operations and cash flows for the year then
ended, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
January 23, 1996, except for note 10,
which is as of March 16, 1996
28
<PAGE> 31
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
NYCOR, Inc.
We have audited the accompanying balance sheets of NYCOR, Inc., as of
December 31, 1994 and 1993 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. Our audits also included the financial
statement schedule listed in Index at item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
NYCOR, Inc., at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in note 3 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes to conform with
Statement of Accounting Standard No. 109.
ERNST & YOUNG
Princeton, New Jersey
January 20, 1995
29
<PAGE> 32
(A) 3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
(3)(i) Certificate of Incorporation of NYCOR, Inc., included as Annex A to the
Information Statement forming a part of the Company's Registration Statement on
Form 10 and incorporated herein by reference.
(ii) Certificate of the Powers, Designation, Preference, Rights and Limitations of
$1.70 Convertible Exchangeable Preferred Stock of NYCOR, Inc., filed as Exhibit
(4) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1987 and incorporated herein by reference.
(iii) Certificate of Amendment of Certificate of Incorporation of NYCOR, Inc., filed as
Exhibit (3)(iii) to the Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.
(iv) By-Laws of NYCOR, Inc., included as Annex B to the Information Statement forming a
part of the Company's Registration Statement on Form 10 and incorporated herein by
reference.
(10)(i) NYCOR, Inc. Stock Option Plan, included as Annex C to the Information Statement
forming a part of the Company's Registration Statement on Form 10 and incorporated
herein by reference.
(ii) NYCOR, Inc. Stock Option Plan I, filed as Exhibit (10)(ii) to the Company's Annual
Report on Form 10-K for 1987 and incorporated herein by reference.
(iii) NYCOR, Inc. Stock Option Plan II, filed as Exhibit (10)(iii) to the Company's
Annual Report on Form 10-K for 1988 and incorporated herein by reference.
(iv) NYCOR, Inc. Stock Option Plan III, filed as Exhibit (10)(iv) to the Company's
Annual Report on Form 10-K for 1989 and incorporated herein by reference.
(v) NYCOR, Inc. Stock Option Plan IV, filed as Exhibit (10)(v) to the Company's Annual
Report on Form 10-K for 1990 and incorporated herein by reference
(vi) Supply Agreement between Rotorex Company, Inc. and Fedders Nyorth America, Inc.
dated September 28, 1992, filed as Exhibit (10)(vi) to the Company's Annual Report
on Form 10-K for 1992 and incorporated herein by reference.
(vii) Agreement and Plan of Merger dated November 30, 1995 between Fedders Corporation
and NYCOR, Inc., filed as Annex A to Registration Statement on Form S-4 of Fedders
Corporation (Registration No. 333-00483) and incorporated herein by reference.
</TABLE>
30
<PAGE> 33
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.
NYCOR, Inc.
By: /s/ KENT E. HANSEN
------------------------------------
Kent E. Hansen
Vice President-Finance
and General Counsel
Date: March 29, 1996
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 and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ SALVATORE GIORDANO Chairman of the Board March 29, 1996
- ---------------------------------------------
Salvatore Giordano
/s/ SALVATORE GIORDANO JR. Vice Chairman and a Director March 29, 1996
- --------------------------------------------- (Principal Executive Officer)
Salvatore Giordano Jr.
/s/ JOSEPH GIORDANO Director March 29, 1996
- ---------------------------------------------
Joseph Giordano
/s/ WILLIAM J. BRENNAN Director March 29, 1996
- ---------------------------------------------
William J. Brennan
/s/ S.A. MUSCARNERA Director March 29, 1996
- ---------------------------------------------
S.A. Muscarnera
/s/ C.A. KEEN Director March 29, 1996
- ---------------------------------------------
C.A. Keen
/s/ KENT E. HANSEN Vice President-Finance and March 29, 1996
- --------------------------------------------- General Counsel (Principal
Kent E. Hansen Financial Officer)
/s/ EDWIN DIAZ Controller (Principal March 29, 1996
- --------------------------------------------- Accounting Officer)
Edwin Diaz
</TABLE>
31
<PAGE> 34
SCHEDULE II
NYCOR, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
------------ ----------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995...................... $409 $ 493 $295 $ 607
========= ========= ======== =========
Year ended December 31, 1994...................... $336 $ 336 $263 $ 409
========= ========= ======== =========
Year ended December 31, 1993...................... $313 $ 54 $ 31 $ 336
========= ========= ======== =========
</TABLE>
S-1
<PAGE> 35
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Nycor, Inc.
The audit referred to in our report dated January 23, 1996 relating to the
consolidated financial statements of Nycor, Inc. which is contained in Item 8 of
this Form 10-K, included the audit of the December 31, 1995 financial statement
schedule listed in the accompanying index. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
Woodbridge, New Jersey
January 23, 1996
S-2
<PAGE> 36
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,533
<SECURITIES> 0
<RECEIVABLES> 4,682
<ALLOWANCES> 607
<INVENTORY> 11,783
<CURRENT-ASSETS> 18,808
<PP&E> 40,614
<DEPRECIATION> 9,435
<TOTAL-ASSETS> 93,502
<CURRENT-LIABILITIES> 13,690
<BONDS> 5,701
0
1,150
<COMMON> 7,826
<OTHER-SE> 63,754
<TOTAL-LIABILITY-AND-EQUITY> 72,730
<SALES> 78,867
<TOTAL-REVENUES> 78,867
<CGS> 73,210
<TOTAL-COSTS> 82,381
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189
<INCOME-PRETAX> (3,703)
<INCOME-TAX> 358
<INCOME-CONTINUING> (4,061)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,061)
<EPS-PRIMARY> (0.79)
<EPS-DILUTED> (0.79)
</TABLE>
