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Previous: RALSTON PURINA CO, 10-Q/A, 1995-02-15 |
Next: ROLLINS TRUCK LEASING CORP, SC 13G/A, 1995-02-15 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
for the transition period from ___________ to __________
COMMISSION FILE NUMBER 1-7916
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
THE RECOGNITION FLEX/SAVE PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
RECOGNITION INTERNATIONAL INC.
2701 EAST GRAUWYLER ROAD
IRVING, TEXAS 75061
<PAGE> 2
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Administrator has duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE RECOGNITION FLEX/SAVE PLAN
(Name of Plan)
Date: January 27, 1995 By: /s/ Larry H. Lattig
---------------------------
Larry H. Lattig, Chairperson
Retirement Plan Committee
(Plan Administrator)
<PAGE> 3
THE RECOGNITION FLEX/SAVE PLAN
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants F-2
Statement of Financial Condition at
October 31, 1994 and 1993 F-3
Statement of Income and Changes in Plan Equity for
the years ended October 31, 1994, 1993 and 1992 F-4
Notes to Financial Statements F-5
</TABLE>
F-1
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Administrator and Participants
of The Recognition Flex/Save Plan
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial condition of The
Recognition Flex/Save Plan at October 31, 1994 and 1993, and the results of its
operations and the changes in its plan equity for each of the three years in
the period ended October 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Plan's Administrator; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, The Recognition Employee
Stock Ownership Plan was merged into the Plan effective October 18, 1992.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements
of financial condition and of income and changes in plan equity as of and for
the year ended October 31, 1994 is presented for purposes of additional
analysis rather than to present the financial condition and changes therein of
each fund. The fund information has been subjected to the auditing procedures
applied in the audits of the basic financial statements, and, in our opinion,
is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ PRICE WATERHOUSE LLP
Dallas, Texas
January 27, 1995
F-2
<PAGE> 5
THE RECOGNITION FLEX/SAVE PLAN
STATEMENT OF FINANCIAL CONDITION, WITH FUND INFORMATION
At October 31,
<TABLE>
<CAPTION>
1994
-------------------------------------------------------------------------------
RECOGNITION NEW AMERICA SCIENCE AND SPECTRUM EQUITY
STOCK GROWTH TECHNOLOGY GROWTH INCOME
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Assets
Cash $ 4,723 $ $ $ $
Investments in securities (Note 3):
Recognition International Inc.
common stock, at market
Participant account (cost of
$6,420,241 in 1994 and
$5,145,996 in 1993) 4,324,797
Suspense account (353,346 shares
in 1994 and 471,128 shares in
1993, cost of $3,932,741 in 1994
and $5,243,655 in 1993) 2,604,160
New America Growth Fund, at market
(cost of $4,355,328 in 1994 and
$3,531,194 in 1993) 4,969,025
Science and Technology Fund, at
market (cost of $3,133,068 in 1994
and $2,028,813 in 1993) 3,816,221
Spectrum Growth Fund, at market
(cost of $2,498,277 in 1994 and
$1,808,674 in 1993) 2,753,598
Equity Income Fund, at market
(cost of $7,076,204 in 1994 and
$6,220,956 in 1993) 7,519,084
Spectrum Income Fund, at market
(cost of $2,220,757 in 1994 and
$2,027,726 in 1993)
U.S. Treasury Money Fund
Stable Value Fund
Temporary investments 14,213
Participant loans (Note 1)
--------------- --------------- --------------- --------------- ---------------
Total assets 6,947,893 4,969,025 3,816,221 2,753,598 7,519,084
--------------- --------------- --------------- --------------- ---------------
Liabilities
Withdrawals and terminations
payable in cash 4,682 5,522 13,401 6,021 10,491
Long-term debt (Note 7) 3,540,452
--------------- --------------- --------------- --------------- ---------------
Total liabilities 3,545,134 5,522 13,401 6,021 10,491
--------------- --------------- --------------- --------------- ---------------
Plan equity $ 3,402,759 $ 4,963,503 $ 3,802,820 $ 2,747,577 $ 7,508,593
=============== =============== =============== =============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------------------
SPECTRUM U.S. TREASURY PARTICIPANT
INCOME MONEY STABLE LOAN
FUND FUND VALUE FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Assets
Cash $ $ $ $
Investments in securities (Note 3):
Recognition International Inc.
common stock, at market
Participant account (cost of
$6,420,241 in 1994 and
$5,145,996 in 1993)
Suspense account (353,346 shares
in 1994 and 471,128 shares in
1993, cost of $3,932,741 in 1994
and $5,243,655 in 1993)
New America Growth Fund, at market
(cost of $4,355,328 in 1994 and
$3,531,194 in 1993)
Science and Technology Fund, at
market (cost of $3,133,068 in 1994
and $2,028,813 in 1993)
Spectrum Growth Fund, at market
(cost of $2,498,277 in 1994 and
$1,808,674 in 1993)
Equity Income Fund, at market
(cost of $7,076,204 in 1994 and
$6,220,956 in 1993)
Spectrum Income Fund, at market
(cost of $2,220,757 in 1994 and
$2,027,726 in 1993) 2,129,203
U.S. Treasury Money Fund 1,755,450
Stable Value Fund 15,320,399
Temporary investments
Participant loans (Note 1) 2,425,658
--------------- --------------- --------------- ---------------
Total assets 2,129,203 1,755,450 15,320,399 2,425,658
--------------- --------------- --------------- ---------------
Liabilities
Withdrawals and terminations
payable in cash 250 382 13,937
Long-term debt (Note 7)
--------------- --------------- --------------- ---------------
Total liabilities 250 382 13,937 0
--------------- --------------- --------------- ---------------
Plan equity $ 2,128,953 $ 1,755,068 $ 15,306,462 $ 2,425,658
=============== =============== =============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
1994 1993
--------------- ---------------
TOTAL (Note 9)
--------------- ---------------
<S> <C> <C>
Assets
Cash $ 4,723 $ 6,338
Investments in securities (Note 3):
Recognition International Inc.
common stock, at market
Participant account (cost of
$6,420,241 in 1994 and
$5,145,996 in 1993) 4,324,797 7,887,795
Suspense account (353,346 shares
in 1994 and 471,128 shares in
1993, cost of $3,932,741 in 1994
and $5,243,655 in 1993) 2,604,160 8,009,176
New America Growth Fund, at market
(cost of $4,355,328 in 1994 and
$3,531,194 in 1993) 4,969,025 4,506,263
Science and Technology Fund, at
market (cost of $3,133,068 in 1994
and $2,028,813 in 1993) 3,816,221 2,561,334
Spectrum Growth Fund, at market
(cost of $2,498,277 in 1994 and
$1,808,674 in 1993) 2,753,598 2,052,297
Equity Income Fund, at market
(cost of $7,076,204 in 1994 and
$6,220,956 in 1993) 7,519,084 6,729,490
Spectrum Income Fund, at market
(cost of $2,220,757 in 1994 and
$2,027,726 in 1993) 2,129,203 2,101,271
U.S. Treasury Money Fund 1,755,450 1,769,052
Stable Value Fund 15,320,399 16,056,746
Temporary investments 14,213 11,428
Participant loans (Note 1) 2,425,658 2,280,274
--------------- ---------------
Total assets 47,636,531 53,971,464
--------------- ---------------
Liabilities
Withdrawals and terminations
payable in cash 54,686 337,687
Long-term debt (Note 7) 3,540,452 4,535,997
--------------- ---------------
Total liabilities 3,595,138 4,873,684
--------------- ---------------
Plan equity $ 44,041,393 $ 49,097,780
=============== ===============
See notes to financial statements.
</TABLE>
F-3
<PAGE> 6
THE RECOGNITION FLEX/SAVE PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY, WITH FUND INFORMATION
Years Ended October 31,
<TABLE>
<CAPTION>
1994
-------------------------------------------------------------------------------
RECOGNITION NEW AMERICA SCIENCE AND SPECTRUM EQUITY
STOCK GROWTH TECHNOLOGY GROWTH INCOME
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income (Note 3) $ 2,785 $ 178,848 $ 320,095 $ 150,675 $ 508,236
Deposits and contributions
(Note 4) 1,627,244 664,222 616,844 500,872 710,422
Unrealized gains (losses)
on investments (Note 2) (8,931,345) (361,371) 150,631 11,698 (65,653)
Realized gains (losses) on
investments (Notes 2 and 6) (9,684) 55,426 26,142 27,482 36,789
Withdrawals and terminations
paid in:
Cash (247,650) (198,141) (116,898) (149,366) (501,877)
Recognition International Inc.
common stock, at market
1,451 shares, cost of $16,189
in 1994; 9,965 shares, cost of
$100,444 in 1993; 8,215 shares,
cost of $64,691 in 1992 (11,933)
Interfund transfers 3,569 150,260 245,806 186,691 139,802
Interest expense (396,900)
Administrative fees (Note 5)
Other income (expense)
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity (7,963,914) 489,244 1,242,620 728,052 827,719
Merger of ESOP (Note 8)
Equity, beginning of year 11,366,673 4,474,259 2,560,200 2,019,525 6,680,874
--------------- --------------- --------------- --------------- ---------------
Equity, end of year $ 3,402,759 $ 4,963,503 $ 3,802,820 $ 2,747,577 $ 7,508,593
=============== =============== =============== =============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------------------
SPECTRUM U.S. TREASURY PARTICIPANT
INCOME MONEY STABLE LOAN
FUND FUND VALUE FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment income (Note 3) $ 163,637 $ 53,067 $ 878,719 $ 157,919
Deposits and contributions
(Note 4) 367,020 312,059 737,250
Unrealized gains (losses)
on investments (Note 2) (165,099)
Realized gains (losses) on
investments (Notes 2 and 6) (4,723)
Withdrawals and terminations
paid in:
Cash (129,716) (279,546) (1,413,923) (233,506)
Recognition International Inc.
common stock, at market
1,451 shares, cost of $16,189
in 1994; 9,965 shares, cost of
$100,444 in 1993; 8,215 shares,
cost of $64,691 in 1992
Interfund transfers (154,297) 11,241 (804,043) 220,971
Interest expense
Administrative fees (Note 5) (97,138)
Other income (expense)
--------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity 76,822 (317) (601,997) 145,384
Merger of ESOP (Note 8)
Equity, beginning of year 2,052,131 1,755,385 15,908,459 2,280,274
--------------- --------------- --------------- ---------------
Equity, end of year $ 2,128,953 $ 1,755,068 $ 15,306,462 $ 2,425,658
=============== =============== =============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
--------------- --------------- --------------
TOTAL (Note 10) (Note 11)
--------------- -------------------------------
<S> <C> <C> <C>
Investment income (Note 3) $ 2,413,981 $ 1,791,652 $ 1,690,192
Deposits and contributions
(Note 4) 5,535,933 6,026,784 4,943,398
Unrealized gains (losses)
on investments (Note 2) (9,361,139) 5,612,777 2,638,774
Realized gains (losses) on
investments (Notes 2 and 6) 131,432 1,110,101 892,000
Withdrawals and terminations
paid in:
Cash (3,270,623) (2,574,897) (3,218,204)
Recognition International Inc.
common stock, at market
1,451 shares, cost of $16,189
in 1994; 9,965 shares, cost of
$100,444 in 1993; 8,215 shares,
cost of $64,691 in 1992 (11,933) (132,317) (82,108)
Interfund transfers
Interest expense (396,900) (477,001)
Administrative fees (Note 5) (97,138) (51,124) (30,417)
Other income (expense) 26,336 (369)
--------------- --------------- ---------------
Net increase (decrease) in plan
equity (5,056,387) 11,332,311 6,833,266
Merger of ESOP (Note 8) 2,893,907
Equity, beginning of year 49,097,780 37,765,469 28,038,296
--------------- --------------- ---------------
Equity, end of year $ 44,041,393 $ 49,097,780 $ 37,765,469
=============== =============== ===============
See notes to financial statements.
</TABLE>
F-4
<PAGE> 7
THE RECOGNITION FLEX/SAVE PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization of the Plan
The Plan is a defined contribution plan for employees of Recognition
International Inc. ("Recognition"). Generally, any employee who has completed
90 days of continuous service is eligible to participate. Participants may
elect to defer a percentage of their eligible compensation, as defined by the
Plan, which is withheld from their paychecks and contributed to the Plan.
The Plan Administrator is the Retirement Plan Committee comprised of
employees of Recognition appointed by Recognition's Board of Directors.
The Trustee for the Plan was Texas Commerce Bank-Dallas, N.A. until
April 30, 1992. Effective May 1, 1992, the Plan was amended in a number of
respects and an amended and restated Trust Agreement was entered into with the
new Plan Trustee, T. Rowe Price Trust Company. The amendments included the
following:
(1) The Plan Administrator was given the power and responsibility to
select all investment funds to be offered under the Plan, other than
the Recognition Stock Fund.
(2) Participants were given the ability to change investment fund
selections daily, via telephone request.
(3) Plan provisions regarding loans and hardship withdrawals were changed
to be consistent with new Internal Revenue Service ("IRS")
regulations.
(4) The Plan Administrator was allowed to charge fees to participants for
loans, withdrawals and certain other transactions to cover Trustee
fees and other costs.
Effective October 18, 1992 (the "Merger Date"), Recognition's Employee
Stock Ownership Plan ("ESOP") was merged into the Plan and the Plan was amended
and restated (see Note 8 - Merger of ESOP). The amendments included the
following:
(1) Each participant's account in the former ESOP was transferred to the
Plan and ESOP account balances of participants who were employees on
the Merger Date became fully vested.
(2) The assets of the ESOP, including the unallocated shares of
Recognition common stock in the suspense account, continued to be held
in a separate trust (the "ESOP Trust") with Bankers Trust Company of
New York as the ESOP Trustee. The other assets of the Plan, including
the pre-merger assets of the
F-5
<PAGE> 8
Plan and ongoing participant deferrals, continued to be held in a
separate trust (the "401(k) Trust") with T. Rowe Price Trust Company
as the 401(k) Trustee.
(3) Recognition's contribution formerly allocated in cash was replaced
with an allocation of shares of Recognition common stock from the
ESOP.
(4) Participants were allowed to transfer fully vested account balances
from the ESOP Trust to the 401(k) Trust.
The ESOP has a loan which was used to purchase shares of Recognition
common stock ("ESOP Stock"). The loan is payable to Recognition. Each year,
Recogition is required to make cash contributions to the Plan sufficient to
make payments due on the loan. The ESOP Stock purchased with the loan is held
in a suspense account and allocated to Plan participants over a period of years
as the loan is repaid.
The Plan was amended September 30, 1993 as follows:
(1) Plan provisions regarding allocation of ESOP Stock and
additional employer contributions were changed to allow former
participants whose employment was terminated during the fourth
quarter of the fiscal year because of a reduction in force to
share in the allocation.
(2) Provisions were added to comply with the Internal Revenue Code
(the "Code") provisions which impose a 20% mandatory
withholding tax on a distribution from the Plan unless the
distribution is transferred directly to another qualified plan
or IRA.
The Code limits contributions to the Plan in several respects. The
total amount deferred by each participant cannot exceed a specified dollar
limit which, for calendar year 1994, was $9,240. Participant compensation in
excess of $235,840 for the Plan year 1994 was excluded in calculating
participant deferrals and allocation of employer contributions. Total
contributions during any Plan year, including both participants' deferrals and
allocation of employer contributions (whether in cash or stock), may not exceed
the maximum amount Recognition may deduct for federal income tax purposes for
the year. Additional rules apply to prevent discrimination in favor of highly
compensated employees.
Subsequent to the Merger Date, the Plan provided for the allocation of
ESOP Stock from the suspense account based on participants' proportionate
contributions for the year, with certain adjustments. For the years ended
October 31, 1994 and 1993, the maximum contribution considered in the
allocation was a contribution of three percent of each participant's
compensation. For the year ended October 31, 1992, the maximum contribution
F-6
<PAGE> 9
considered was six percent of each participant's compensation. Recognition's
Board of Directors may also authorize additional discretionary contributions.
Contributions to the Plan are held in trust and invested in the
investment funds described in "Note 3 - Investment programs" at the election of
the participant.
The Plan allows a participant to borrow up to 50 percent of his vested
interest in the Plan (other than amounts held in the ESOP Trust). Beginning May
1, 1993, interest rates on loans are based on the applicable Federal Rate (as
calculated by the IRS) as of the beginning of the fiscal quarter, plus one
percent. Prior to May 1, 1993, rates were based on the prime rate at the
beginning of the fiscal quarter, plus one percent. Repayment is made through
payroll deductions. The interest rates in effect and the number of
participants with loans at October 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Interest rate:
Term equal to
or less than 36 months 6.80% 4.85%
Term greater than 36 months 8.05% 6.32%
Number of participants 333 346
</TABLE>
The total amount credited to a participant's accounts is eligible for
distribution upon retirement, disability or death, regardless of the number of
years of service. If employment terminates for any other reason, the total
amount credited to the participant's contribution account and the vested
portion (which ranges from 25 percent with two years of service to 100 percent
with five years of service) of the participant's employer contribution account
is eligible for distribution. The distribution is automatic if the
participant's account balance is $3,500 or less. If the amount is more than
$3,500, the participant must consent to distribution in writing. The
distribution is made by delivery of cash equal to the value of the
participant's vested account balance, other than the Recognition Stock Fund
which may be distributed in either cash or whole shares of Recognition common
stock. Prior to termination, a participant may withdraw the vested portion of
Recognition's contributions to the Plan, except those held in the ESOP Trust,
which have been in the Plan at least two years. A participant's own
contributions may only be withdrawn after reaching age 59 1/2 or in the case of
"hardship" (as defined in regulations under the Code). For six months after
any withdrawal, the participant is suspended from making contributions.
The Board of Directors of Recognition may terminate the Plan at any
time by appropriate resolution. The Board also has the power to suspend or
discontinue Recognition's contributions to the Plan. Upon termination of the
Plan or permanent discontinuance of
F-7
<PAGE> 10
Recognition's contributions, the proportionate interest of each participant
becomes fully vested and is to be distributed after provision is made for the
expenses of administration, termination and liquidation.
In accordance with the provisions of the Plan and the Trust
Agreements, all normal expenses of administering the Plan are paid by the
Trustees out of forfeitures of Recognition's contributions with any deficiency
being paid by Recognition or by the Trustees from the Trust assets, at
Recognition's option. Administrative expenses paid by the Plan during 1994,
1993 and the first six months of 1992, were funded from forfeitures.
Administrative expenses for the last six months of 1992 were paid directly by
Recognition.
Note 2 - Accounting policies
The Plan maintains its accounts on the accrual basis of accounting.
Investments- Investments in marketable securities and long-term
investments are recorded in the Plan at market value. The appreciation or
depreciation of those investments, based upon the quoted market value at
October 31, is recorded as an unrealized increase or decrease in Plan equity
for the fiscal year. At the date securities are distributed or sold, including
transfers to other funds, the difference between the average cost of the
investments in the fund and the market value is recorded as a realized gain or
loss. Temporary investments are recorded at cost which approximates market.
Federal income taxes - The IRS issued a favorable determination letter
dated January 28, 1994 on the qualification of the Plan under the applicable
Sections of the Code and the tax-exempt status of the related Trusts under
Section 501(a) of the Code. The determination letter covers the plan as in
effect at October 31, 1994. The letter also covers The Recognition Employee
Stock Ownership Plan, which was merged with the Plan effective October 18,
1992, and amendments thereto. The Plan Administrator believes that the plan
continues to fulfill the requirements of a qualified plan and is not subject to
tax.
Under present federal income tax laws and regulations, a participant
will not be subject to federal income taxes on the contributions made by
Recognition or withheld from the participant's compensation under the Plan, or
on the interest, dividends or profits on the sale of securities received by the
Plan Trustee(s), until the participant's account is distributed or
unqualifiedly made available to the participant.
F-8
<PAGE> 11
Note 3 - Investment programs
Each participant has the option to specify that contributions made for
his account be invested in any one of, or divided among, the Recognition Stock
Fund, and seven funds sponsored by T. Rowe Price Associates, Inc. or its
affiliates: the New America Growth Fund, the Science & Technology Fund, the
Spectrum Growth Fund, the Equity Income Fund, the Spectrum Income Fund, the
U.S. Treasury Money Fund and the Stable Value Fund.
Contributions designated to the Recognition Stock Fund are invested in
Recognition common stock by purchases generally made in the open market at no
more than the prevailing market price. Participants' investments in the
Recognition Stock Fund at October 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Market value per share $7.37 $ 17.00
Number of shares held 586,604 463,988
Number of participants 1,361 1,023
</TABLE>
Contributions designated to the New America Growth Fund are invested
in a mutual fund which seeks long-term growth of capital through investments
primarily in the common stocks of U.S. companies which operate in the service
sector of the economy. Current income is a secondary objective of this fund.
Total return from an investment in this fund consists primarily of capital
appreciation (or depreciation), and secondarily of dividend income.
Participants' investments in the New American Growth Fund at October 31, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Market value per share $27.02 $ 28.95
Number of shares held 183,902 155,657
Number of participants 671 669
</TABLE>
Contributions designated to the Science & Technology Fund are invested
in a mutual fund which seeks long-term growth of capital through investments
primarily in the common stocks of companies which are expected to benefit from
the development, advancement and use of science and technology. Current income
is incidental to this fund's investment objective. Total return consists
primarily of capital appreciation (or depreciation). Participants' investments
in the Science & Technology Fund at October 31, 1994 and 1993 were as follows:
F-9
<PAGE> 12
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Market value per share $21.79 $ 21.58
Number of shares held 175,136 118,690
Number of participants 562 486
</TABLE>
Contributions designated to the Spectrum Growth Fund are invested in a
mutual fund which seeks long-term growth of capital and growth of income by
investing primarily in a diversified group of mutual funds which in turn invest
principally in equity securities. Current income is a secondary objective of
this fund. This fund's investment return is diversified by its investments in
the underlying mutual funds which invest in traditional growth companies, small
aggressive growth stocks, growth and income stocks and international
securities. Participants' investments in the Spectrum Growth Fund at October
31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Market value per share $12.43 $ 12.33
Number of shares held 221,528 166,447
Number of participants 498 437
</TABLE>
Contributions designated to the Equity Income Fund are invested in a
mutual fund which seeks to provide high current income by investing primarily
in dividend-paying stocks of established companies. In selecting such stocks,
this fund emphasizes companies with favorable prospects for increasing dividend
income, and secondarily, capital appreciation. Total return consists primarily
of dividend income and secondarily of capital appreciation (or depreciation).
Participants' investments in the Equity Income Fund at October 31, 1994 and
1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Market value per share $17.08 $ 17.20
Number of shares held 440,227 391,249
Number of participants 752 773
</TABLE>
Contributions designated to the Spectrum Income Fund are invested in a
mutual fund which seeks a high level of current income and preservation of
capital by investing primarily in a diversified group of mutual funds which in
turn invest principally in fixed income securities. This fund's net asset
value per share fluctuates principally in response to changes in interest rate
levels. Total return consists primarily of dividend income and
F-10
<PAGE> 13
secondarily of capital appreciation (or depreciation). Participants'
investments in the Spectrum Income Fund at October 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Market value per share $10.43 $ 11.34
Number of shares held 204,142 185,297
Number of participants 439 436
</TABLE>
Contributions designated to the U.S. Treasury Money Fund are primarily
invested in a money market fund which seeks to maximize safety of capital,
liquidity and the highest available current income. This fund invests in
securities backed by the full faith and credit of the U.S. Government,
primarily U.S. Treasury securities. The average portfolio maturity will not be
greater than 90 days. This fund had an effective interest rate of 3.53 and
2.51 percent for the years ended December 31, 1994 and 1993, respectively. At
October 31, 1994 and 1993, the number of participants in this fund totaled 323
and 355, respectively.
Contributions designated to the Stable Value Fund are primarily
invested in a bank collective investment fund which seeks to provide a
competitive rate of return while maintaining principal stability. To achieve
its objective, this fund invests primarily in a portfolio of guaranteed
investment contracts issued by U.S. and Canadian insurance companies,
structured investment contracts and bank investment contracts. This fund had
an effective interest rate of 5.93 and 6.08 percent for the years ended
December 31, 1994 and 1993, respectively. At October 31, 1994 and 1993, the
number of participants in this fund totaled 739 and 808, respectively.
Note 4 - Deposits and contributions
Deposits and contributions for the years ended October 31, 1994, 1993
and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Employee savings
contributions $3,914,567 $3,889,668 $3,075,807
Rollover contri-
butions from
unaffiliated
plans 228,921 744,671 717,591
ESOP loan principal
and interest
payment 1,392,445 1,392,445 1,150,000
---------- ---------- -----------
$5,535,933 $6,026,784 $4,943,398
========== ========== ==========
</TABLE>
F-11
<PAGE> 14
The ESOP loan payment in 1994, 1993 and 1992 resulted in 117,782,
117,782 and 130,690 shares, respectively, being allocated from the suspense
account to participants, including, in 1992, 567 shares allocated to former
ESOP participants who died, retired or were disabled. The allocation of ESOP
Stock from the suspense account for the years ended October 31, 1994 and 1993
were based on participants' proportionate contributions for the year, with
certain adjustments, up to a contribution of three percent of each
participant's compensation. The allocation of ESOP stock for the year ended
October 31, 1992 was based on participants' proportionate contributions for the
year, with certain adjustments, up to a contribution of six percent of each
participant's compensation.
Note 5 - Forfeitures
Employer matching contributions forfeited by participants upon
withdrawing from the Plan may be recredited to their accounts upon returning to
the Plan if certain requirements are met. In accordance with provisions of the
Plan, forfeitures of participants' equity in employer contributions of $97,138,
$51,124 and $30,417 in 1994, 1993 and 1992, respectively, which were not
required to be recredited, were used to pay administrative fees of the Plan.
F-12
<PAGE> 15
Note 6 - Realized gains (losses) from sales of investments
Realized gains (losses) for the years ended October 31, 1994, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ----------- ---------
<S> <C> <C> <C>
Recognition Stock
Fund
Market price $1,305,629 $ 4,785,325 $ 637,225
Aggregate cost 1,315,313 3,830,004 675,983
---------- ----------- ---------
Realized gains
(losses) $ (9,684) $ 955,321 $ (38,758)
========== =========== =========
New America Growth
Fund
Market price $ 649,885 $ 608,154 $ 125,187
Aggregate cost 594,459 537,639 124,092
---------- ----------- ---------
Realized $ 55,426 $ 70,515 $ 1,095
gains ========== =========== =========
Science & Technology
Fund
Market price $ 635,692 $ 285,571 $ 40,575
Aggregate cost 609,550 245,303 38,826
---------- ----------- ---------
Realized gains $ 26,142 $ 40,268 $ 1,749
========== =========== =========
Spectrum Growth
Fund
Market price $ 511,450 $ 297,134 $ 37,751
Aggregate cost 483,968 286,526 37,583
---------- ----------- ---------
Realized gains $ 27,482 $ 10,608 $ 168
========== =========== =========
Equity Income Fund
Market price $1,224,811 $ 1,041,710 $ 227,668
Aggregate cost 1,188,022 1,012,235 229,482
---------- ----------- ---------
Realized gains
(losses) $ 36,789 $ 29,475 $ (1,814)
========== =========== =========
Spectrum Income
Fund
Market price $ 517,223 $ 329,692 $ 76,392
Aggregate cost 521,946 325,778 76,246
---------- ----------- ---------
Realized gains
(losses) $ (4,723) $ 3,914 $ 146
========== =========== =========
</TABLE>
F-13
<PAGE> 16
Realized gains for the former investment funds for the year ended
October 31, 1992 were as follows:
<TABLE>
<CAPTION>
1992
----------
<S> <C>
Aggressive Equity Fund
Market price $2,118,683
Aggregate cost 1,963,220
----------
Realized gains $ 155,463
==========
Conservative Equity Fund
Market price $3,558,489
Aggregate cost 3,416,342
----------
Realized gains $ 142,147
==========
</TABLE>
The Interest Fund, a former investment fund, recorded a gain of
$631,804 due to a market value adjustment in April 1992 resulting from the
difference between book and market value at the time of liquidation.
Included in the Recognition Stock Fund's realized gains (losses) for
the years ended October 31, 1994, 1993 and 1992 were realized gains (losses)
from stock distributions in the amounts of $(4,256), $31,873 and $17,418,
respectively.
Note 7 - Long-term debt
In October 1992, in connection with the merger of the ESOP into the
Plan, the Plan assumed a loan which is payable to Recognition (the "ESOP Loan")
in six annual installments which began October 31, 1992. The ESOP Loan accrues
interest at a rate of 8.75 percent. Annual principal payments on the ESOP Loan
are due October 31 each year as follows:
<TABLE>
<S> <C>
1995 $1,082,656
1996 1,177,388
1997 1,280,408
</TABLE>
Note 8 - Merger of ESOP
As discussed in Note 1, the ESOP was merged into the Plan and the Plan
was amended and restated on October 18, 1992, the Merger Date.
On the Merger Date, the ESOP's assets consisted of 911,743 shares of
Recognition common stock with a market value of $10,147,700, and temporary
investments of $10,102. Of the 911,743 shares of Recognition common stock held
by the ESOP, 192,143 were
F-14
<PAGE> 17
allocated to participants in the ESOP as of the Merger Date and 719,600 were
held in a suspense account for future allocation to participants.
Of the shares held by the ESOP, 910,223 were acquired with the proceeds
of the ESOP Loan described in Note 7. The outstanding balance of the ESOP Loan
on the Merger Date was $6,601,441.
On the Merger Date, the ESOP had a $662,454 liability for the
distribution of cash and shares of Recognition common stock to former ESOP
participants.
The assets and liabilities of the ESOP were transferred to the Plan at
their fair market value on the Merger Date.
F-15
<PAGE> 18
Note 9 - Statement of Financial Condition - 1993
The statement of financial condition at October 31, 1993 was as follows:
<TABLE>
<CAPTION>
RECOGNITION NEW AMERICA SCIENCE AND SPECTRUM EQUITY
STOCK GROWTH TECHNOLOGY GROWTH INCOME
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Assets
Cash $ 6,338 $ $ $ $
Investment income receivable
Investments:
Recognition International Inc.
common stock, at market
Participant account 7,887,795
Suspense account 8,009,176
New America Growth Fund, at market 4,506,263
Science and Technology Fund, at
market 2,561,334
Spectrum Growth Fund, at market 2,052,297
Equity Income Fund, at market 6,729,490
Spectrum Income Fund, at market
U.S. Treasury Money Fund
Stable Value Fund
Temporary investments 11,428
Participant loans
--------------- --------------- --------------- --------------- ---------------
Total assets 15,914,737 4,506,263 2,561,334 2,052,297 6,729,490
--------------- --------------- --------------- --------------- ---------------
Liabilities
Withdrawals and terminations
payable in cash 12,067 32,004 1,134 32,772 48,616
Long-term debt 4,535,997
--------------- --------------- --------------- --------------- ---------------
Total liabilities 4,548,064 32,004 1,134 32,772 48,616
--------------- --------------- --------------- --------------- ---------------
Plan equity $ 11,366,673 $ 4,474,259 $ 2,560,200 $ 2,019,525 $ 6,680,874
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM U.S. TREASURY PARTICIPANT
INCOME MONEY STABLE LOAN
FUND FUND VALUE FUND FUND TOTAL
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Assets
Cash $ $ $ $ $ 6,338
Investment income receivable
Investments:
Recognition International Inc.
common stock, at market
Participant account 7,887,795
Suspense account 8,009,176
New America Growth Fund, at market 4,506,263
Science and Technology Fund, at
market 2,561,334
Spectrum Growth Fund, at market 2,052,297
Equity Income Fund, at market 6,729,490
Spectrum Income Fund, at market 2,101,271 2,101,271
U.S. Treasury Money Fund 1,769,052 1,769,052
Stable Value Fund 16,056,746 16,056,746
Temporary investments 11,428
Participant loans 2,280,274 2,280,274
--------------- --------------- --------------- --------------- ---------------
Total assets 2,101,271 1,769,052 16,056,746 2,280,274 53,971,464
--------------- --------------- --------------- --------------- ---------------
Liabilities
Withdrawals and terminations
payable in cash 49,140 13,667 148,287 337,687
Long-term debt 4,535,997
--------------- --------------- --------------- --------------- ---------------
Total liabilities 49,140 13,667 148,287 0 4,873,684
--------------- --------------- --------------- --------------- ---------------
Plan equity $ 2,052,131 $ 1,755,385 $ 15,908,459 $ 2,280,274 $ 49,097,780
=============== =============== =============== =============== ===============
</TABLE>
<PAGE> 19
Note 10 - Statement of Income and Changes in Plan Equity - 1993
The statement of income and changes in plan equity for the year ended October
31, 1993 was as follows:
<TABLE>
<CAPTION>
RECOGNITION NEW AMERICA SCIENCE AND SPECTRUM EQUITY
STOCK GROWTH TECHNOLOGY GROWTH INCOME
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income $ 1,403 $ 22,963 $ 62,986 $ 75,518 $ 361,222
Deposits and contributions 1,609,632 667,380 483,348 525,307 883,812
Unrealized gains
on investments 3,427,024 821,441 465,413 237,062 570,939
Realized gains on investments 955,321 70,515 40,268 10,608 29,475
Withdrawals and terminations
paid in:
Cash (195,311) (170,312) (60,262) (75,966) (403,167)
Recognition International Inc.
common stock, at market (132,317)
Interfund transfers (1,779,227) 212,341 789,235 256,566 557,846
Interest expense (477,001)
Administrative fees
Other income
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity 3,409,524 1,624,328 1,780,988 1,029,095 2,000,127
Equity, beginning of year 7,957,149 2,849,931 779,212 990,430 4,680,747
--------------- --------------- --------------- --------------- ---------------
Equity, end of year $ 11,366,673 $ 4,474,259 $ 2,560,200 $ 2,019,525 $ 6,680,874
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM U.S. TREASURY
INCOME MONEY STABLE INTEREST EQUITY
FUND FUND VALUE FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income $ 117,019 $ 34,388 $ 968,349 $ $ 745
Deposits and contributions 502,456 350,122 1,004,727
Unrealized gains
on investments 90,898
Realized gains on investments 3,914
Withdrawals and terminations
paid in:
Cash (115,516) (88,885) (1,363,025)
Recognition International Inc.
common stock, at market
Interfund transfers 172,320 388,354 (974,443) (20,342) (54,152)
Interest expense
Administrative fees (51,124)
Other income 26,336
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity 771,091 632,855 (364,392) (20,342) (27,071)
Equity, beginning of year 1,281,040 1,122,530 16,272,851 20,342 27,071
--------------- --------------- --------------- --------------- ---------------
Equity, end of year $ 2,052,131 $ 1,755,385 $ 15,908,459 $ 0 $ 0
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
PARTICIPANT
LOAN
FUND TOTAL
-------------- ---------------
<S> <C> <C>
Investment income $ 147,059 $ 1,791,652
Deposits and contributions 6,026,784
Unrealized gains
on investments 5,612,777
Realized gains on investments 1,110,101
Withdrawals and terminations
paid in:
Cash (102,453) (2,574,897)
Recognition International Inc.
common stock, at market (132,317)
Interfund transfers 451,502
Interest expense (477,001)
Administrative fees (51,124)
Other income 26,336
--------------- ---------------
Net increase (decrease) in plan
equity 496,108 11,332,311
Equity, beginning of year 1,784,166 37,765,469
--------------- ---------------
Equity, end of year $ 2,280,274 $ 49,097,780
=============== ===============
</TABLE>
<PAGE> 20
Note 11 - Statement of Income and Changes in Plan Equity - 1992
The statement of income and changes in plan equity for the year ended October
31, 1992 was as follows:
<TABLE>
<CAPTION>
RECOGNITION NEW AMERICA SCIENCE AND SPECTRUM EQUITY
STOCK GROWTH TECHNOLOGY GROWTH INCOME
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income $ 5,144 $ $ $ $ 44,259
Deposits and contributions 1,299,969 412,939 235,404 261,996 440,355
Unrealized gains (losses)
on investments 2,555,794 153,627 67,108 6,562 (62,406)
Realized gains (losses) on
investments (38,758) 1,095 1,749 168 (1,814)
Withdrawals and terminations
paid in:
Cash (165,085) (28,684) (5,870) (12,973) (142,389)
Recognition International Inc.
common stock, at market (82,108)
Interfund transfers (227,430) 2,310,954 480,821 734,677 4,402,742
Administrative fees
Other income (expense) (17,771)
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity 3,329,755 2,849,931 779,212 990,430 4,680,747
Merger of ESOP 2,893,907
Equity, beginning of year 1,733,487
--------------- --------------- --------------- --------------- ---------------
Equity, end of year $ 7,957,149 $ 2,849,931 $ 779,212 $ 990,430 $ 4,680,747
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM U.S. TREASURY AGGRESSIVE CONSERVATIVE
INCOME MONEY STABLE EQUITY EQUITY
FUND FUND VALUE FUND FUND FUND
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income $ 21,264 $ 9,302 $ 211,290 $ 111,640 $ 102,109
Deposits and contributions 249,478 317,677 612,155 115,366 151,560
Unrealized gains (losses)
on investments (17,352) (146,998) 82,439
Realized gains (losses) on
investments 146 155,463 142,147
Withdrawals and terminations
paid in:
Cash (28,888) (36,310) (555,276) (109,961) (182,436)
Recognition International Inc.
common stock, at market
Interfund transfers 1,056,392 805,431 16,004,682 (2,027,009) (3,302,113)
Administrative fees (30,417)
Other income (expense) 56,847 (4,562) (6,802)
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity 1,281,040 1,122,530 16,272,851 (1,906,061) (3,013,096)
Merger of ESOP
Equity, beginning of year 1,906,061 3,013,096
--------------- --------------- --------------- --------------- ---------------
Equity, end of year $ 1,281,040 $ 1,122,530 $ 16,272,851 $ 0 $ 0
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
PARTICIPANT
INTEREST EQUITY LOAN
FUND FUND FUND TOTAL
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment income $ 1,102,076 $ 1,099 $ 82,009 $ 1,690,192
Deposits and contributions 846,499 4,943,398
Unrealized gains (losses)
on investments 2,638,774
Realized gains (losses) on
investments 631,804 892,000
Withdrawals and terminations
paid in:
Cash (1,883,244) (67,088) (3,218,204)
Recognition International Inc.
common stock, at market (82,108)
Interfund transfers (22,013,408) 5,016 1,769,245
Administrative fees (30,417)
Other income (expense) (28,202) 121 (369)
--------------- --------------- --------------- ---------------
Net increase (decrease) in plan
equity (21,344,475) 6,236 1,784,166 6,833,266
Merger of ESOP 2,893,907
Equity, beginning of year 21,364,817 20,835 28,038,296
--------------- --------------- --------------- ---------------
Equity, end of year $ 20,342 $ 27,071 $ 1,784,166 $ 37,765,469
=============== =============== =============== ===============
</TABLE>
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
<S> <C>
23. Consent of Independent Accountants
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-38896) of Recognition International Inc. of our
report dated January 27, 1995, appearing on Page F-2 of this Annual Report on
Form 11-K.
/s/ PRICE WATERHOUSE LLP
Dallas, Texas
February 13, 1995
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