<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------
FORM 10-K
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
Commission File No. 1-10011
ASTROTECH INTERNATIONAL CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1570579
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
960 Penn Avenue, Suite 800, Pittsburgh, PA 15222
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (412) 391-1896
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Class Which Registered
-------------- ----------------
Common Stock, par value $.01 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
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 the Form 10-K or any amendment to this
Form 10-K. [X]
As of December 1, 1996, there were 9,874,706 shares of Common Stock
outstanding, and the aggregate market value of the shares of Common Stock
(based upon the closing price of these shares on the American Stock Exchange)
held by non-affiliates was approximately $37,290,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III information will appear in the Registrant's Proxy Statement in
connection with its 1997 Annual Meeting of Stockholders. Such information will
be incorporated by reference as of the date of the filing of such Proxy
Statement.
<PAGE> 2
ASTROTECH INTERNATIONAL CORPORATION
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No.
Part I Page No.
- ------ --------
<S> <C>
1. Business 1
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
Part II
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5. Market for the Registrant's Common Stock, Preferred Stock
and Warrants, and Related Security Holder Matters 11
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
8. Financial Statements and Supplementary Data 19
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 19
Part III
- --------
Part III information will appear in the Registrant's Proxy
Statement in connection with its 1997 Annual Meeting of Stockholders.
Such Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A and such information will be
incorporated herein by reference as of the date of such filing. 20
Part IV
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14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 21
Signatures 45
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF THE BUSINESS
Astrotech International Corporation, a Delaware corporation, provides
engineering, design, fabrication, maintenance services and construction of
steel structures for a variety of industries, including refining,
petrochemical, water storage, pulp and paper, mining, alcohol, agriculture,
wastewater treatment, power generation and process systems. The Company's broad
range of products include large aboveground storage tanks (and related parts
and constituent products), pressure vessels, bins, silos, stacks and liners,
scrubbers and shop built tanks (both underground and aboveground). The Company
also provides non-destructive testing and inspection services for large above-
ground storage tanks, pressure vessels and piping and also offers mobile
storage tank leasing services.
The Company was originally incorporated in 1973 as a non-diversified,
closed-end investment company registered under the Investment Company Act of
1940, as amended. Beginning in late 1983, with the approval of its
stockholders, the Company began its conversion to an operating company. In
August of 1988, the Company underwent a Recapitalization, which was the
culmination of its efforts to completely restructure the Company and its
operations.
After the 1988 Recapitalization, the management of the Company searched for
potential acquisition candidates that would be compatible with the Company's
goals of growth and stability. In February 1989, the Company acquired HMT Inc.
("HMT"), a provider of proprietary products and maintenance and construction
services for large aboveground storage tanks ("ASTs"). In December 1989, the
Company acquired HMT Thermal Systems, Inc., a specialty manufacturer of
portable vapor thermal oxidation units and other products. In September 1991,
the Company acquired Tonkawa Tank Company, Inc. ("Tonkawa"), which provides
maintenance and construction services for ASTs. In January 1992, the Company
acquired Texoma Tank Company, Inc. ("Texoma"), a company which leases mobile
storage tanks. During fiscal 1994, the Company acquired HMT Rubbaglas Limited
("Rubbaglas") and Brown-Minneapolis Tank & Fabricating Company ("BMT"). BMT
fabricates and erects ASTs as well as other various steel structures, including
bins, stacks, vessels and shop-built tanks. Rubbaglas, designs, manufactures
and installs equipment for the AST industry in the European, African and Middle
East markets. On March 28, 1996, the Company acquired Graver Holding Company
and its wholly-owned subsidiary, Graver Tank & Mfg. Co., Inc. (collectively
"Graver"). Graver designs, manufactures and erects storage tanks and pressure
vessels for the petroleum and process industries. Graver also provides
nickel-clad installations for the air pollution and power generation
industries, providing fabrication and erection of scrubbers, chimneys, and
stack liners.
The Company's corporate headquarters and principal executive office is located
at 960 Penn Avenue, Suite 800, Pittsburgh, Pennsylvania 15222, where it employs
eight persons. Corporate strategy, policy, stockholder relations, legal
matters, taxation and finance are managed at the corporate headquarters.
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<PAGE> 4
When used herein, unless the context requires otherwise, the Company means
Astrotech International Corporation and its subsidiary companies.
(B) FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
The industrial storage industry is the only business segment in which the
Company operates.
(C) NARRATIVE DESCRIPTION OF BUSINESS
The Company provides engineering, design, fabrication, maintenance services and
construction of steel structures for a variety of industries, including
refining, petrochemical, water storage, pulp and paper, mining, alcohol,
agriculture, wastewater treatment, power generation and process systems. The
Company's broad range of products includes large aboveground storage tanks (and
related parts and constituent products), pressure vessels, bins, silos, stacks
and liners, scrubbers and shop built tanks (both underground and aboveground).
The Company also provides non-destructive testing and inspection services for
large aboveground storage tanks, pressure vessels and piping and also offers
mobile storage tank leasing services.
Approximately, 70% of the Company's revenues are derived from the petroleum and
petrochemical industries. The American Petroleum Institute (the "API")
estimates that there are approximately 100,000 large aboveground storage tanks
in the United States, i.e., those ASTs with a capacity in excess of 1,000
barrels used in the storage of petroleum and petrochemical liquids. These tanks
are owned primarily by large integrated oil companies and petrochemical
companies, and are typically located at petroleum and petrochemical terminals,
refineries, marketing outlets and pipeline facilities. The Company estimates
that there are at least 200,000 large ASTs located outside the United States,
although the Company believes that the average maintenance budget for these
tanks is substantially less than the average maintenance budget for similar
tanks in the United States.
According to the API, over 50% of such domestic ASTs were constructed more than
30 years ago, and over 90% are over 10 years old. However, as oil and gas
production and refining increase outside the United States, the Company
believes that such increased activity will require the construction of new ASTs
as part of the construction of new terminals, refineries and pipeline
facilities.
ASTs require periodic maintenance as a result of the corrosive effects of
weather and the storage of petroleum and volatile organic liquids. For most of
its history, much of the petroleum industry's maintenance of ASTs has been
non-systematic and conducted on an as-needed basis. In recent years, however,
heightened awareness and concern for the environment and the need to comply
with the increasingly stringent domestic safety and environmental laws,
together with tightening industry standards, have increased the demand for
storage tank repair and maintenance services. These factors have prompted the
need for new products and design methods which render product storage more
efficient and permit more precise and comprehensive leak detection. The
principal environmental laws and regulations that affect AST owners and
operators have been promulgated by federal, state and local authorities
generally in two areas: air pollution and soil and water contamination. These
laws and regulations encourage owners and operators of ASTs to maintain and
inspect their tanks on a regular basis and, in many cases, to install primary
and secondary seals, double tank bottoms and other secondary containment
systems to reduce the incidence of leakage and to allow for early detection of
leaks. In addition, such laws and regulations require that ASTs be equipped
with roof and seal assemblies that substantially decrease atmospheric emissions
from petroleum products, petrochemicals and other volatile organic liquids.
Increasing costs of compliance with these laws and regulations, however, may
lead to decreased utilization of ASTs if domestic refineries and other
petroleum storage facilities are partially or completely closed.
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<PAGE> 5
In January 1991, the API adopted API Standard 653 ("API 653"), which sets forth
industry standards for storage tank inspection, repair, alteration and
reconstruction. API 653 also provides standards for continued service
suitability of ASTs, materials, design considerations, tank dismantling and
reconstruction, welding, examination and testing, and recordkeeping. Under the
standards of API 653, any storage tank leaks are unacceptable, regardless of
size, and tank inspections are required at intervals not longer than five, ten
or 20 years, depending on the type of inspection. Many storage tank owners have
adopted the standards set forth in API 653, and the Company expects more
storage tank owners to adopt API 653 in the future, both in recognition of
changing industry standards and to decrease liability in the event of a storage
tank leak or rupture.
AST repair and maintenance have historically been provided primarily by
in-house maintenance crews and by small, regional service companies. As the
service and product requirements for ASTs have become more sophisticated,
however, creating greater numbers of more complicated engineering options,
owners of large ASTs have begun more frequently to engage outside contractors
and to upgrade the quality of their outside service providers and product
vendors. As a result, technical engineering and environmental expertise,
dependable quality products and service have become important factors in the
awarding of contracts for the repair and maintenance of ASTs.
The Company's operations also include service to other industries that require
controlled storage of a variety of solids, liquids and gasses. Other industries
serviced by the Company include water, wastewater treatment, pulp and paper,
electrical production, alcohol, agriculture, mining, power generation and
process industries.
OPERATIONS
Descriptions of some of the Company's products and services follow:
NEW TANK CONSTRUCTION. The Company designs, fabricates and erects
storage tanks, bins, silos, vessels and shop-built tanks. The Company has been
involved in state of the art wastewater treatment projects in the United
States. In addition, the Company is involved in the construction of proven
conservation and air pollution control structures suited for the storage of
methane, nitrogen and related gasses. Primary users of this product have been
the coal and steel industries.
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<PAGE> 6
TANK INSPECTION, ENGINEERING, RECONSTRUCTION AND REPAIR. The Company
provides "total solution" tank maintenance and repair. As a first step, the
Company's personnel offer sophisticated inspection and engineering services of
the type required to determine AST compliance with environmental regulations
and industry standards, including API 653. These services include ultrasonic
thickness testing and magnetic flux exclusion testing (both designed to test
AST structural integrity), primary and secondary seal inspection and gap
measurement, floating roof pontoon inspection and leak detection, weld seam
testing, and visual site inspection. In addition, the Company's personnel will
prepare condition reports and assist tank owners in the preparation of repair
option recommendations based on inspection results. Relying on the engineering
experience and technical abilities of its employees, the Company is able to
offer detailed recommendations for reconstruction and repair of ASTs, including
specifications and drawings, budgeting and pricing options and tank maintenance
programs.
The Company offers a broad range of repair and reconstruction services,
including emergency welding work, fire-fighting foam systems installations,
fixed cone roof construction, external and internal floating roof construction
and installation (often including the installation of the Company's own
floating roof seals and floating roof drain system products) and tank
foundation repair.
The Company also offers its customers a fully integrated tank maintenance
management program, including the development of a tank database for
maintenance and repair history, the scheduling of on-site in-service and
out-of-service inspections, the preparation of detailed tank inspection and
tank condition reports (including governmental reports), recommendations for
annual and emergency tank maintenance and repair budgets, development of
product specifications, and management of repair planning, scheduling and
subcontractor selection and supervision.
CHIMNEYS AND SCRUBBERS. The Company fabricates and erects a broad
range of scrubbers, chimneys and stack liners for the air pollution and power
generation industries.
PRESSURE VESSELS. The Company fabricates "in-shop" and field erected
vessels for the petroleum and process industries. Shop vessels range up to 22
feet in diameter, 300 feet in length and up to 600 tons in weight and field
erected vessels are limited in size only by on site conditions.
FLOATING ROOF SEALS. The Company designs, manufactures, markets and
installs primary and secondary tank seals for all types of floating roof ASTs.
A floating roof consists of a circular welded steel or aluminum roof that
floats on the surface of stored petroleum product. A floating roof minimizes
vapor emissions and minimizes losses of stored petroleum products. The tank
seal spans the gap between the rim of the roof and the tank wall, thereby
minimizing vapor emissions from the perimeter of the roof. Because the seal is
attached to the floating roof and not to the tank, the roof and seal together
are free to move up and down as the level of product in the tank changes. In
addition, the seal, together with a roof drainage system (another of the
Company's products, as described below), prevents substantially all of the rain
water captured on the floating roof from mixing with the product stored in the
tank. The most popular type of seal sold by the Company consists of both a
primary and a secondary seal. In addition to producing many proprietary primary
and secondary seal systems, the Company also produces several specialty seal
products which include the foam log primary seal, the double wiper seal and,
under license, the S.M.I. Mobil Seal for riveted shell tanks.
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<PAGE> 7
FLOATING ROOF DRAIN SYSTEMS. The Company designs, manufactures and
installs floating roof drain systems, which are needed to drain rainwater out
of floating roof ASTs. Traditionally, roof drain systems have consisted either
of flexible hoses or of fixed pipes connected by rigid swivel joints. The
Company's patented HMT Pivot Master is a combination of both as steel pipes are
connected by flexible composite hose joints. Unlike traditional fixed pipe
systems, the Pivot Master is designed for submerged use, requires no
maintenance or lubrication, and contains no O-rings, bearings or seals, the
deterioration of which causes leaks and requires repair. The Pivot Master can
also be designed for dual-use as part of a fire-fighting foam delivery system.
The Pivot Master roof drain system is complemented by the Company's patented
Check Mate(R) Hydrocarbon Sensing Valve, which is designed to detect the
presence of hydrocarbons in the water passing through the valve. Connected to
the drain gate valve at the end of the Pivot Master (or any other roof drain
system), the Check Mate(R) permits rainwater to drain freely. Should
hydrocarbons leak into the drain system, however, an internal sensing device in
the Check Mate(R) will cause the valve to automatically shut and will trigger
both visual and remote indicators of the shutdown. The Check Mate(R) requires
no external power source and permits year-round unrestricted draining, thereby
reducing wintertime drain system freeze-ups and floating roof collapse caused
by severe rainstorms.
INTERNAL FLOATING ROOF. The Company fabricates an aluminum internal
floating roof marketed worldwide under the Aluminator(R) trademark. The Company
introduced this product to the petroleum industry in 1993 after several years
of development and testing. The Aluminator(R) floating roof is installed inside
covered roof tanks and floats on the stored product. This roof, together with
the Company's patented seal system, greatly reduces evaporation losses on tanks
containing volatile organic compounds. The Company believes that its roof
design contains several unique features that eliminate problems encountered
with this type of roof in the past, improves vapor containment and provides
longer service life in severe operating conditions.
SECONDARY CONTAINMENT AND LEAK DETECTION. The Company constructs and
installs secondary containment systems that help control AST leaks and permit
tank owners to detect those before soil or groundwater contamination has
occurred. While the Company constructs a variety of secondary containment
systems, including those designed by its customers, the system most commonly
installed by the Company is a "double-bottom" system, consisting of the
installation of a new tank bottom approximately four inches above the existing
tank bottom. The space between the two tank bottoms is filled with a liner
membrane composed of either high density polyethylene or polyurethane installed
over the tank bottom and a layer of concrete or sand containing zinc or
magnesium anodes to prevent corrosion of the new tank bottom. Leak detection
channels and openings between the two tank bottoms are constructed to permit
visual or electronic detection of leaks, permitting the containment of those
leaks when they do occur, and when they do not, providing assurance that the
tank is not the source of contamination which may be present in the area.
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<PAGE> 8
The Company also markets a fiber optic fluid detection and control system for
various applications including use in virtually any secondary containment
system to provide continuous leak monitoring. This system employs
non-electrical, safe fiber optic sensors that discriminate between various
fluids, based upon their particular refractive index. These sensors are highly
resistant to corrosion and do not require replacement, resetting or
re-calibration after exposure.
TANK LEASING SERVICES. The Company leases mobile tanks for the storage
of fluids. Such tanks may be transported to and from refineries and petroleum
facilities to handle the temporary storage needs of such facilities.
CUSTOMERS AND MARKETING
The majority of the Company's customers are major integrated oil companies. The
Company also services power generation facilities, independent petroleum
refining and marketing companies, major petrochemical companies, independent
terminal operating companies, sugar processing, pulp and paper, agricultural
and specialty construction industries. Most of the Company's major customers
operate at multiple locations and through various divisions and subsidiaries.
No customer accounted for more than 10% of revenues during the last three
fiscal years.
The Company's marketing efforts are primarily through the efforts of regional
and area offices and in-house salespeople. The Company maintains offices and/or
manufacturing facilities throughout the United States in close proximity to the
operating facilities of existing and potential customers so that the Company's
regional and area personnel can maintain frequent personal contact with the
individuals who make purchasing decisions. The Company also maintains operations
in Australia and Singapore, which service the Pacific Rim, while the Company's
United Kingdom subsidiary, headquartered in London, sells products in Europe,
Africa and the Middle East. HMT Canada Ltd. services the Canadian market.
Decisions to utilize the Company's products or services are generally made on a
project-by-project basis as construction specific upgrade, maintenance or
repair projects are identified. In most cases, potential customers request bids
for a specific project from the Company and one or more of its competitors.
Although most of the Company's work is obtained through a competitive bid
process, many contracts are obtained without bids through direct negotiation or
through various alliance agreements with customers.
COMPETITION
The Company's competitors include a number of nationally recognized, large
firms as well as operators that service a limited geographic area and that are
generally smaller than the Company in terms of scope of operations. Such
smaller operators compete primarily on the basis of price, and generally do not
offer the proprietary product features, technical expertise, quality and safety
programs offered by the Company. The Company believes it obtains business
primarily because of its reputation for high quality products and services, the
technical expertise of its regional and area personnel, its relationships with
existing customers, and its ability to respond quickly and effectively to
customer needs in various locations. The Company believes it can continue to
compete effectively with its larger competitors by emphasizing its leadership
in construction services and products.
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<PAGE> 9
FOREIGN OPERATIONS
The Company maintains offices in Australia, Canada, Singapore and England, and
has sales representatives in other countries. Internationally, the Company's
revenues are derived primarily from product sales without installation. The
Company's current international sales strategy is to emphasize product sales
rather than maintenance and construction services due to the higher margins
provided by product sales and the limited availability and transportation costs
associated with providing qualified service personnel in foreign countries.
RAW MATERIALS
The principal raw materials used in the manufacture of the Company's products
are steel, aluminum and various elastomeric materials. Raw materials are
obtained from a number of commercial sources at prevailing prices and the
Company does not depend on any single supplier for any substantial portion of
raw materials. The Company does not anticipate any problems in obtaining its
raw materials.
PATENTS
The Company utilizes certain patents including (i) a secondary seal for the
floating roof of welded tanks, (ii) a maintenance-free roof drain system
marketed under the name "Pivot Master" and (iii) a primary shoe seal for
floating roof tanks which expire in 1999, 2005 and 2009, respectively. The
Company also holds a U.S. patent on its Check Mate(R) Hydrocarbon Sensing
Valve, which expires in 2008. In addition to its patents, the Company holds
distribution rights for a patented secondary seal for riveted shell tanks, an
exclusive license for its Tank Sentry fiber optic detection and control system
and has patent applications pending for an aluminum internal floating roof
marketed under the name Aluminator(R). The Company believes that while these
patents and distribution rights are advantageous to its marketing efforts, they
are not critical to the operation of its business. Accordingly, the Company
believes the expiration of such patents and/or distribution rights will not
materially affect its business.
BACKLOG
The amounts of backlog of orders, as of September 30, 1996, and September 30,
1995 were $43,492,000 and $36,723,000, respectively, including both the
uncompleted portion of contracts in progress and contracts awarded and not then
started. Substantially all of these contracts are expected to be completed
during the next fiscal year.
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<PAGE> 10
EMPLOYMENT
At September 30, 1996, the Company employed 1,051 persons. The number of
employees tends to fluctuate as additional employees are employed on a
project-by-project basis, as needed. Employees who meet certain requirements,
including age and length of service, are entitled to participate in a number of
employee benefit programs, including hospitalization, insurance and certain
retirement plans. Approximately, 153 of the Company's employees are covered by
collective bargaining agreements. The Company considers its relations with its
employees to be good.
ENVIRONMENTAL
The Company's policy is to comply with federal, state and local provisions
enacted to regulate the discharge of materials into the environment. The
Company has made no material expenditures during fiscal 1996 to comply with
environmental regulations and no material expenditures are anticipated to be
made for fiscal 1997.
The operations of the Company are subject to the requirements of the
Occupational Safety and Health Act ("OSHA") and comparable state laws.
Regulations promulgated under OSHA by the U.S. Department of Labor require
employers of persons in the refining and petrochemical industries, including
independent contractors, to implement work practices, medical surveillance
systems and personnel protection programs in order to protect employees from
equipment safety hazards and exposure to hazardous chemicals.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
The Company has operations in Australia, Singapore, England and Canada which
generated aggregate revenues of $8,173,000, $6,024,000 and $7,384,000 and
aggregate net income of $305,000, $3,000 and $259,000 during the years ended
September 30, 1996, 1995 and 1994, respectively. Aggregate identifiable assets
of these foreign operations at September 30, 1996 and 1995 were $6,104,000 and
$5,142,000, respectively.
The Company also has export sales to various countries which amounted to
$4,765,000, $1,089,000 and $1,210,000 for the years ended September 30, 1996,
1995 and 1994, respectively.
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<PAGE> 11
ITEM 2. PROPERTIES
The Company believes that its properties are adequate and suitable to meet its
current requirements, and some are capable of being utilized further to
accommodate growth. While the HMT Thermal Systems and the HMT Tonkawa
facilities are not significantly under-utilized, storage space and land are
capable of being utilized further to accommodate growth. The following table
sets forth the Company's principal properties:
<TABLE>
<CAPTION>
Description and Monthly
Location Productive Capacity Status Rent
- -------- ------------------- ------ ----
<S> <C> <C> <C>
Pittsburgh, Executive Office- Leased through $5,153
Pennsylvania 5,000 sq. ft. July 31, 1997
Houston, Texas HMT offices Leased through $7,707
9,400 sq. ft. April 30, 2001
HMT Thermal Systems office Owned N/A
and equipment manufacturing
facility 28,000 sq. ft. on 13 acres
Beaumont, Texas HMT Tank Service operation Owned N/A
center - 6,950 sq. ft. on 4.6 acres
Kelton, Pennsylvania HMT Construction Services - Owned N/A
22,000 sq. ft. on 4 acres
Tonkawa, HMT Tonkawa Tank Division Owned N/A
Oklahoma offices and fabrication facility -
10,000 sq. ft. on 9 acres
St. Paul, BMT headquarters offices and Owned(1) N/A
Minnesota tank fabrication facility -
88,628 sq. ft. on 17.9 acres
Birmingham, BMT tank fabrication facility - Owned(1) N/A
Alabama 76,558 sq. ft. on 20 acres
Orem, BMT tank fabrication facility - Owned(1) N/A
Utah 36,720 sq. ft. on 16.8 acres
Houston, BMT Offices - Leased through $2,100
Texas 2,627 sq. ft. September 30, 1998
Pasadena, Graver offices and fabrication facility - Owned(1) N/A
Texas 154,000 sq. ft. on 18.7 acres
</TABLE>
Other leased office and storage spaces are located in: Anaheim, California;
Bixby, Oklahoma; Baton Rouge, Port Allen and Westlake, Louisiana; Evans,
Georgia; Edgecliff, N. S. Wales, Australia; and Calgary, Alberta, Canada.
The Company also owns and leases facilities in London, England.
(1) Facilities are mortgaged.
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<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
On March 19, 1996, the Company's HMT Inc. subsidiary was served with a
Complaint filed in Superior Court of California, County of Contra Costa. This
matter arises out of a tank fire which occurred in June of 1995, at a refinery
in northern California, where Company employees were replacing seals on an
aboveground storage tank. This Complaint, filed by Valerie Vega-Wright, seeks
to certify a class of persons affected by the fire under theories of
negligence, nuisance, battery, trespass and strict liability. The Complaint
seeks damages for, among other things, personal injuries and loss of property
value, and is requesting unspecified compensatory and punitive damages. The
Company has removed this litigation to the U.S. District Court for the Northern
District of California. On October 22, 1996, HMT was served with a Complaint in
Allison v. Unocal et al, which was simultaneously filed in the Contra Costa
Superior Court. The Complaint seeks damages for alleged personal injuries,
property damage and punitive damages. Two hundred sixteen plaintiffs contend
that they were injured as a result of the tank fire and seek damages against
HMT as well as the owner of the refinery. The Company is currently attempting
to request the federal court that all actions be remanded back to the state
court based on this second Complaint. The Company's insurance carriers (both
primary and excess) have been notified and both the Company and its insurance
carriers are assessing the claims and related policy coverages. This matter is
in its initial stages and investigative activities are continuing. While the
ultimate outcome cannot now be determined because of the uncertainties which
exist, the Company believes that its insurance coverages are adequate to
address its potential liability, if any; and any unfavorable result not covered
by insurance could result in a material charge which has not been reflected in
the accompanying financial statements. The Company intends to vigorously defend
this action.
The Company is a party to certain other legal proceedings occurring in the
ordinary course of business. Based upon information presently available to it,
the Company does not believe that the final outcome of any of these other
matters will have a materially adverse effect on the consolidated financial
position, results of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended September 30, 1996.
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<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND WARRANTS AND RELATED
SECURITY HOLDER MATTERS
The Company's Common Stock is traded on the American Stock Exchange. On March
31, 1995, the Company's warrants, which were also traded on the American Stock
Exchange, expired. The high and low sales prices for each quarter as reported
in the consolidated transaction reporting system are shown below for the
periods indicated.
<TABLE>
<CAPTION>
Fiscal
Year Common Stock Warrants
High Low High Low
================================================================================================
<S> <C> <C> <C> <C> <C>
1996
First Quarter 4-3/8 3-1/16 * *
Second Quarter 4-13/16 3-5/8 * *
Third Quarter 9 4-1/8 * *
Fourth Quarter 6-1/8 4-3/8 * *
1995
First Quarter 2-7/8 2-9/16 1/4 1/16
Second Quarter 3-1/2 2-11/16 1/8 1/256
Third Quarter 3-7/16 2-11/16 * *
Fourth Quarter 3-15/16 3-1/8 * *
</TABLE>
* Warrants expired in March 1995.
No dividends have been paid on the Common Stock. The Company currently intends
to retain earnings to finance the growth and development of its business and
does not anticipate paying cash dividends on its Common Stock in the
foreseeable future.
The last reported sales prices as of December 1, 1996 of the Company's Common
Stock was $5.125 per share.
As of December 1, 1996, there were approximately 9,000 holders of record of
Common Stock.
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<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended September 30,
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1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $122,190 $100,203 $ 68,726 $ 39,549 $ 50,954
Income from continuing
operations 4,010 2,731 796 587 3,191
Income from discontinued
operations - - 154 564 379
Cumulative effect of change
in accounting principle
for income taxes - - 2,931 - -
Net income 4,010 2,731 3,881 1,151 3,570
Net income applicable
to common shares 4,010 2,731 3,881 1,151 3,326
Total assets 88,364 66,551 64,906 34,012 32,506
Working capital 12,722 10,283 8,928 7,161 5,381
Long-term obligations 21,035 12,092 12,334 5,731 4,760
Earnings per common and dilutive common equivalent share:
- ---------------------------------------------------------
Income from continuing
operations $ .40 $ .28 $ .09 $ .07 $ .40
Cumulative effect of change
in accounting principle - - .32 - -
Net income .40 .28 . 42 .14 .46
Earnings per common share-assuming full dilution:
- -------------------------------------------------
Income from continuing
operations $ .40 $ .28 $ .09 $ .07 $ .38
Cumulative effect of change
in accounting principle - - .32 - -
Net income .40 .28 .42 .14 .43
</TABLE>
See Notes 1, 2 and 9 of Notes to Consolidated Financial Statements included
herein for a discussion of change in accounting for income taxes, acquisitions
and discontinued operations, respectively, which affected comparability among
years.
- 12 -
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
consolidated financial statements and accompanying notes.
Management believes the Company's growth opportunities will be enhanced by
increased expenditures by refineries, storage terminals and pipeline facilities
as high capacity utilization may generate more capital and maintenance
spending, as well as to engage in more preventative maintenance and to comply
with current and proposed environmental regulations and industry standards.
Management also expects increased activity in the international markets.
Historically, the Company's second fiscal quarter results have tended to
fluctuate, principally due to climatic conditions affecting some of the
Company's operations and the timing of maintenance budgets at some of the
Company's customers. Consequently, the Company's second quarter ending March 31
typically includes lower revenues than the other three quarters.
1. Liquidity and Sources of Capital
During the two years following its recapitalization in August 1988, the Company
financed its acquisitions and activities principally with cash on hand and cash
generated from the operations of its acquired businesses. Since that time, the
Company has entered into bank credit facilities to supplement its necessary
cash resources and finance its acquisitions.
On February 28, 1995, the Company executed a Revolving Credit and Term Loan
Agreement (the "Credit Facility") with Bank One, which consolidated then
existing term indebtedness previously incurred at the subsidiary levels and
provided financing to be used for working capital support, capital expenditures,
possible acquisitions and other general corporate purposes. During fiscal 1996,
the Company executed two amendments to the Credit Facility providing for, among
other things, financing for the acquisition of Graver Holding Company and its
wholly owned subsidiary, Graver Tank & Mfg. Co., Inc. ("Graver") and an increase
in permitted capital expenditures in fiscal year 1996.
The Credit Facility, as amended, consists of the following:
(i) A term loan in the original amount of $12,000,000, payable in
equal quarterly installments of $550,000 until February 28,
2000, when the remaining outstanding balance will be due. At
September 30, 1996, the outstanding balance on this loan was
$8,700,000.
(ii) A revolving line of credit of up to $14,000,000. The borrowing
amount is based on the Company's eligible accounts receivable
and inventory, as defined. The principal amount outstanding plus
all accrued and unpaid interest is due on February 28, 1998.
Outstanding letters of credit, which totaled $2,854,000 at
September 30, 1996, reduce the amount available for borrowing.
On September 30, 1996, the outstanding balance on this loan was
$7,452,000 and $3,694,000 was available for borrowing.
- 13 -
<PAGE> 16
(iii) An advancing term loan which was available until February 28,
1996 for capital expenditures. During fiscal 1996, the Company
borrowed $2,000,000 under this loan which is payable in equal
quarterly installments of $125,000 until February 28, 2000. At
September 30, 1996, the outstanding balance on this loan was
$1,750,000.
(iv) A $3,000,000 acquisition loan used to purchase Graver. This
loan is payable in equal quarterly installments of $125,000
until February 28, 2000 when the remaining outstanding balance
will be due. At September 30, 1996, the outstanding balance on
this loan was $2,750,000.
(v) A $2,000,000 advancing term loan available until February 28,
1997 for capital expenditures. Beginning on May 28, 1997, any
principal amount then outstanding will be payable in equal
quarterly installments until February 28, 2001. At September 30,
1996, no amounts were outstanding under this loan.
All obligations of the Company under the Credit Facility are collateralized by
substantially all of the assets of the Company and the pledge by the Company of
the Common Stock of each of its direct subsidiaries. The obligations of the
Company are guaranteed by each direct and indirect subsidiary. The Credit
Facility contains certain covenants which provide for, among other things,
maintenance of various financial ratios. At September 30, 1996, the Company was
in compliance with all such covenants.
Required principal payments to be made by the Company in fiscal years 1997,
1998, 1999, 2000 and 2001 on long-term debt outstanding at September 30, 1996,
are $3,373,000, $10,744,000, $3,200,000, $2,850,000 and $750,000, respectively.
The Company expects that cash generated from operations will be sufficient to
repay these principal payments and related interest in fiscal 1997 and each of
the following four fiscal years.
Cash provided by operating activities was $5,029,000 for fiscal 1996, as
compared to $6,663,000 for fiscal 1995. The net cash provided operating
activities in the current year resulted from net cash inflows from net income
plus non-cash items aggregating $9,604,000 offset by net cash outflows due to
changes in working capital items.
- 14 -
<PAGE> 17
Cash used in investing activities of $9,852,000 for fiscal 1996 was primarily
used for capital expenditures and the acquisition of Graver. The base purchase
price recorded by the Company was $2,900,000. The seller is entitled to receive
additional cash proceeds of up to $1,250,000 pursuant to the terms of an
earn-out arrangement based on future profits (as defined) of Graver during each
of the three fiscal years ending September 30, 1998. In fiscal year 1996, this
contingent purchase consideration amounted to $236,000 and will be paid in
fiscal 1997. These payments could affect liquidity in future years. In
addition, the Company repaid Graver's existing bank obligations totaling
$2,420,000. Net cash used in investing activities of $3,964,000 for fiscal 1995
was primarily used for capital expenditures and the acquisition of an exclusive
worldwide license to use and market certain technology. Capital expenditures
during fiscal year 1996 totaled $7,300,000 compared to last year's expenditures
of $3,993,000. The 1996 amount includes $3 million principally for machinery
and equipment, $2.4 million for tanks held for lease, $1.3 million for a new
computer system, including hardware and software and $600,000 for facility
improvements. During fiscal 1996, the Company completed the installation of a
new corporate-wide management information system, and in July the Company
acquired substantially all of the fixed assets of CTI Inspection Services, Inc.
which is engaged in the business of providing non-destructive testing and
inspection services for aboveground storage tanks and automated ultrasonic
inspection of pressure vessels and piping. The acquisition of these assets were
not included in the Company's original 1996 capital expenditure budget. The
Company has currently budgeted $5 million for capital expenditures during
fiscal 1997 including $2.9 million principally for machinery and equipment,
$700,000 for tanks held for lease, $900,000 for computer hardware and software
and $500,000 for facility improvements. The Company expects to be able to
finance these expenditures with available working capital and credit
facilities.
Net cash provided by financing activities of $5,338,000 in fiscal 1996 was
primarily a result of borrowing for the acquisition of Graver and net
borrowings under the Company's revolving line of credit and the Company's 1995
capital expenditure advancing term loan offset by the payment of Graver's
existing bank obligations totaling $2,420,000 and regularly scheduled payments
on long-term debt. During November 1995, the Company completed a program to
repurchase small shareholders' common stock at no cost to the shareholder.
Through this program the Company repurchased and retired 90,109 shares of stock
at an aggregate purchase price of $293,000. Net cash used in financing
activities of $4,023,000 in fiscal 1995 was primarily a result of net repayment
of the Company's revolving lines of credit and regularly scheduled payments on
long-term debt. In February, 1989, the Company acquired all the capital stock
of HMT Inc. As partial consideration for the acquisition, the Company issued a
promissory note in the principal amount of $1,500,000 to each of the two
sellers. During fiscal 1995, the Company prepaid, in cash, the note payable to
one of the sellers, who is now a director of the Company and converted the note
payable to the other seller, who is a director and executive officer of the
Company, into 183,006 shares of common stock. At the date of this transaction,
each note had an outstanding principal balance of $583,333 and bore interest at
the rate of 12% per annum.
On March 1, 1994 the Company acquired Brown-Minneapolis Tank & Fabricating Co.
("BMT") for a total base purchase price of $17,040,000 which was comprised of
the following: (i) $11,540,000 in cash; (ii) a $500,000 promissory note; and
(iii) 1,600,000 shares of the Company's Common Stock with a value of $5,000,000.
In addition, the Company may be required to pay up to $9,000,000 to the seller
based upon future gross profits of BMT, as defined, during the five year period
ending September 30, 1998. For fiscal years 1996 and 1995, such consideration
amounted to $1,355,000 and $424,000, respectively and no such consideration was
earned for fiscal year 1994. The amount earned for 1996 will be paid in fiscal
1997. These payments could affect liquidity in future periods.
- 15 -
<PAGE> 18
The Company believes that its existing funds, amounts generated by operations,
and amounts available for borrowing under its credit facility with Bank One
will be sufficient to meet its working capital needs through fiscal 1997.
Management continues to review acquisition opportunities. It is anticipated
that any significant acquisition will require acquisition financing and will
require the consent of Bank One. No assurances can be made that any such
acquisition will be made, or that any such financing will be obtained on terms
and conditions satisfactory to the Company.
2. Results of Operations
The Company's revenues are recognized on the percentage-of-completion method.
The following table presents, as a percentage of revenues, certain selected
financial data for the Company for the periods indicated.
<TABLE>
<CAPTION>
For the Year Ended
September 30,
--------------------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.%
Cost of revenues 74.5 73.5 71.6
----- ----- ----
Gross profit 25.5 26.5 28.4
Depreciation and amortization expense 3.2 3.2 4.0
Selling, general and administrative expenses 16.1 18.0 20.3
----- ----- ----
Operating profit 6.2 5.3 4.1
Interest and other income .3 .5 .1
Interest expense 1.1 1.3 1.8
Income tax expense 2.1 1.8 1.2
----- ----- ----
Income from continuing operations 3.3% 2.7% 1.2%
===== ===== ====
</TABLE>
HMT Rubbaglas Limited was acquired on November 19, 1993, BMT was acquired on
March 1, 1994, and Graver was acquired on March 28, 1996. The results of
operations of these acquisitions are included in the consolidated financial
statements since the respective dates of acquisition.
Fiscal 1996 Compared to Fiscal 1995
The Company's revenues increased by $21,987,000 or 22% in fiscal 1996 as
compared to fiscal 1995. Approximately 57% of the increase was a result of the
inclusion of Graver from the period March 29, 1996 to September 30, 1996. The
remainder of the increase was primarily a result of an increase in demand for
the Company's tank construction services and increased revenues from
international operations.
The total amounts of contracts in backlog, as of September 30, 1996 and 1995,
were approximately $43,492,000 and $36,723,000, respectively, including both
the uncompleted portion of contracts in progress and contracts awarded but not
yet started. The increase was principally attributable to the addition of
Graver's backlog offset by a decrease in construction backlog. The majority of
the backlog at September 30, 1996 is expected to be completed within a year.
- 16 -
<PAGE> 19
Gross profit margin on revenues decreased from 26.5% in fiscal 1995 to 25.5% in
fiscal 1996. This was primarily a net result of a change in the revenue mix of
the business.
Selling, general and administrative expenses increased $1,709,000 or 10% from
fiscal 1995 to 1996. Approximately 54% of the increase was a result of the
acquisition of Graver. The remainder of the increase was primarily a result of
increased costs associated with the Company's investment in a corporate wide
management information system and the addition of new offices to serve expanded
geographic markets. However, due to the increase in revenues, selling, general
and administrative expenses, as a percentage of revenues, decreased from 18.0%
in fiscal 1995 to 16.1% in fiscal 1996.
The Company had operating profit of $7,532,000 for fiscal 1996 compared to
$5,353,000 for fiscal 1995 as a result of the items discussed above.
Approximately 36% of the increase resulted from the acquisition of Graver.
Interest expense remained relatively constant from 1995 to 1996 despite
increased debt levels due to decreased interest rates negotiated pursuant to
the first amendment to the Credit Facility.
Current income tax expense consists of federal, state and foreign income taxes.
Deferred income taxes consist principally of federal income taxes. The
Company's effective income tax rate was 38.6% and 39.3% of income from
continuing operations before income taxes in fiscal years 1996 and 1995,
respectively. The rate varied from the statutory rate primarily due to goodwill
amortization, which is not deductible for tax purposes, state taxes, and that,
based on the Company's utilization of federal tax net operating loss
carryforwards, the Company reversed $270,000 in 1996 and $240,000 in 1995 of
its valuation allowance representing investment and research and development
tax credits expiring principally in 2000 which are now expected to be utilized
for tax purposes. The benefit for existing federal net operating loss
carryforwards was recorded at the beginning of fiscal 1995 when the Company
changed its method of accounting for income taxes. Therefore, although
utilization of these carryforwards reduces the Company's liability for payment
of federal income taxes, it does not benefit net income in current periods. At
September 30, 1996, the Company had investment and research and development tax
credit carryforwards of approximately $375,000 which expire principally in 2000
and alternative minimum tax credit carryforwards of approximately $670,000
which have no expiration date.
The Company had net income of $4,010,000 for fiscal 1996 compared to $2,731,000
for fiscal 1995. The majority of the increase resulted from higher volumes of
revenues and the inclusion of Graver for the second half of the year in 1996.
Effective October 1996, the Company will adopt Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long Lived Assets to be Disposed Of". The adoption of SFAS No. 121 will
not have a material effect on the Company's financial position or results of
operations.
- 17 -
<PAGE> 20
Effective October 1996, the Company will adopt SFAS No. 123, "Accounting for
Stock-Based Compensation." This new standard defines a fair value based method
of accounting for an employee stock option or similar equity instrument. This
statement gives entities a choice of recognizing related compensation expense by
adopting the new fair value method or to continue to measure compensation using
the intrinsic value approach under Accounting Principles Board (APB) Opinion No.
25, the former standard. If the former standard for measurement is elected, SFAS
No. 123 requires supplemental disclosure to show the effects of using the new
measurement criteria. The Company intends to continue using the measurement
prescribed by APB Opinion No. 25, and accordingly, this pronouncement will not
affect the Company's financial position or results of operations.
Fiscal 1995 Compared to Fiscal 1994
The Company's revenues increased by $31,477,000 or 46% in fiscal 1995 as
compared to fiscal 1994. Approximately $19.3 million or 61% of this increase
was attributable to revenues of BMT during the first five months of fiscal
1995. The remainder of the increase is primarily a result of an increase in
demand for the Company's tank construction services and installation of its
proprietary products.
Gross profit margin on revenues decreased from 28.4% in fiscal 1994 to 26.5% in
fiscal 1995. The overall decrease in gross profit margins for the period was
primarily caused by the impact of BMT, whose tank construction projects had
lower gross profit margins than the margins associated with the Company's other
operations. The decrease was somewhat offset, however, by an increase in gross
margin in the Company's tank service business due to the emphasis management
has placed on product sales and related installation contracts which have
higher margins than the Company's repair and maintenance services. In addition
the Company has combined the insurance requirements of all of its operations
and restructured the overall insurance programs which, coupled with the
Company's loss control measures and ongoing safety programs, resulted in a
reduction of the insurance cost component of costs of revenues in fiscal 1995.
Selling, general and administrative expenses increased $4,031,000 or 29% from
fiscal 1994 to fiscal 1995. The increase is primarily a result of the inclusion
of BMT since its date of acquisition. However, due to the increase in revenues,
selling, general and administrative expenses decreased as a percentage of
revenues from 20.3% to 18.0%.
The Company had operating profit of $5,353,000 for fiscal 1995 compared to
$2,798,000 for fiscal 1994. Approximately 17% of the increase was due to the
inclusion of the operating profit of BMT for the full period in fiscal 1995 and
the remainder was due to increased operating profit in all of the Company's
operations resulting from increased volume discussed above.
- 18 -
<PAGE> 21
Other income in fiscal 1995 includes a gain on the sale of land and buildings
of $312,000. Interest expense increased from $1,233,000 during fiscal 1994 to
$1,333,000 in fiscal 1995 principally due to increased term borrowing during
fiscal 1994 to fund capital expenditures and to fund the acquisitions of
Rubbaglas and BMT. Such increase was offset somewhat due to the Company's
increased operating cash flow, decreased interest rates and the flexibility in
cash management allowed by the consolidation of the Company's debt as discussed
above.
Current income tax expense consists of state and foreign income taxes. Deferred
income taxes consist principally of federal income taxes. The Company's
effective income tax rate decreased from 52% of income from continuing
operations before income taxes in fiscal 1994 to 39% in fiscal 1995. This
decrease was due to higher earnings in fiscal 1995 and relatively constant
goodwill amortization, which is not deductible for tax purposes and the
reversal of the valuation allowance in fiscal 1995 discussed above.
The Company had income from continuing operations of $2,731,000 for fiscal 1995
compared to $796,000 during fiscal 1994. The majority of the increase resulted
from higher volumes of revenues and higher gross margins in the Company's tank
service business due to the emphasis management has placed on increased product
sales and related installation contracts.
During fiscal 1994 the Company recorded a gain from discontinued operations of
$154,000, net of federal income tax of $80,000 representing a gain on the sale
of assets of Astrotech Space Operations, Inc. In addition, in fiscal 1994, the
Company recorded a gain of $2,931,000 as a result of the cumulative effect of a
change in accounting for income taxes.
Impact of Inflation
Operating results for the three-year period ended September 30, 1996 were not
significantly affected by inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in this report on pages 21
through 44.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There have been no changes in accountants nor disagreements with accountants on
accounting or financial disclosures.
- 19 -
<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the Directors and Executive Officers of the Company
will appear beneath the caption "Information Concerning Directors and Officers
of the Company" in the Company's definitive Proxy Statement which will be
distributed in connection with its 1997 Annual Meeting of Stockholders. Such
Proxy Statement will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A and such information will be incorporated herein by
reference as of the date of such filing.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to management remuneration and transactions will appear
beneath the caption "Executive Compensation" in the Company's definitive Proxy
Statement which will be distributed in connection with its 1997 Annual Meeting
of Stockholders. Such Proxy Statement will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A and such information will be
incorporated herein by reference as of the date of such filing.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to the ownership of equity securities by management and by
beneficial owners of 5% or more of the Common Stock of the Company will be set
forth under the captions "Principal Holders of Securities" and "Information
Concerning Directors and Officers of the Company" in the Company's definitive
Proxy Statement which will be distributed in connection with its 1997 Annual
Meeting of Stockholders. Such Proxy Statement will be filed with the Securities
and Exchange Commission pursuant to Regulation 14A and such information will be
incorporated herein by reference as of the date of such filing.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and transactions between the
Company and its Officers and Directors will appear beneath the caption
"Information Concerning Directors and Officers of the Company" in the Company's
definitive Proxy Statement which will be distributed in connection with its
1997 Annual Meeting of Stockholders. Such Proxy Statement will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A and such
information will be incorporated herein by reference as of the date of such
filing.
In the event that the Company's definitive Proxy Statement to be distributed in
connection with its 1997 Annual Meeting of Stockholders is not filed, or mailed
for filing, with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days of the end of the Company's last fiscal year, the Company
will amend this Report within such time period to provide the information
required by Part III hereof.
- 20 -
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) & (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Astrotech International
Corporation and subsidiaries are required by Item 8:
Consolidated Balance Sheet at September 30, 1996 and 1995.
Consolidated Statement of Income for the Years Ended September 30, 1996,
1995 and 1994.
Consolidated Statement of Cash Flows for the Years Ended September 30,
1996, 1995 and 1994.
Consolidated Statement of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994.
The following schedule of Astrotech International Corporation and subsidiaries
are required by Item 14(d):
Schedule II - Valuation and qualifying accounts
All other financial statements and schedules not listed have been omitted
because they are not applicable, or not required, or because the required
information is included in the Consolidated Financial Statements or notes
thereto.
(a)(3) EXHIBITS
Exhibits are listed in the Exhibit Index which is on pages 46 and 47 of this
Form 10-K.
(b) REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the quarter ended September 30, 1996.
- 21 -
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders
Astrotech International Corporation:
We have audited the consolidated financial statements and financial statement
schedule of Astrotech International Corporation and subsidiaries as listed in
Item 14(a) (1) and (2) of this Form 10-K. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Astrotech International Corporation and subsidiaries as of September 30, 1996
and 1995 and the consolidated results of their operations and cash flows for
each of the three years in the period ended September 30, 1996, in conformity
with generally accepted accounting principles. In addition, the financial
statement schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly the
information required to be included therein.
As discussed in Note 1, the Company changed its method of accounting for income
taxes in fiscal 1994.
COOPERS & LYBRAND L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
December 6, 1996
- 22 -
<PAGE> 25
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1996 and 1995
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 515 $ --
Trade accounts receivable, net of allowance of
$176 in 1996 and $170 in 1995 (Note 3) 28,490 19,821
Inventories (Note 4) 4,622 4,225
Costs and estimated earnings in excess
of billings on uncompleted contracts (Note 5) 6,046 4,348
Deferred income taxes (Notes 1 and 10) 2,042 2,143
Prepaid expenses and other current assets 1,283 887
--------------- --------------
TOTAL CURRENT ASSETS 42,998 31,424
PROPERTY, PLANT AND EQUIPMENT
Land 2,404 2,134
Buildings 6,751 4,066
Furniture and office equipment 2,801 1,546
Machinery and equipment 16,895 13,034
Tanks and trucks held for lease 7,336 4,980
--------------- --------------
36,187 25,760
Less accumulated depreciation and amortization 10,082 7,658
--------------- --------------
26,105 18,102
OTHER ASSETS
Costs in excess of net assets acquired, net
of accumulated amortization of $4,327 in
1996 and $3,740 in 1995 (Note 2) 17,690 15,689
Other assets 1,571 1,336
--------------- --------------
TOTAL ASSETS $88,364 $66,551
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
- 23 -
<PAGE> 26
CONSOLIDATED BALANCE SHEET, CONTINUED
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks not yet presented for payment, net $ -- $443
Accounts payable 7,621 6,630
Notes payable 70 19
Accrued compensation and benefits 3,996 2,811
Accrued expenses and other current liabilities 7,959 5,555
Earn-Outs payable 1,670 544
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 5) 5,587 2,743
Current portion of long-term debt (Note 6) 3,373 2,396
------------------- -------------------
TOTAL CURRENT LIABILITIES 30,276 21,141
LONG-TERM DEBT (Note 6) 17,544 10,086
DEFERRED INCOME TAXES (Notes 1 and 10) 3,491 2,006
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, authorized
20,000,000 shares; issued and outstanding
9,868,706 shares in 1996 and 9,929,315
shares in 1995 (Notes 7 and 8) 99 99
Additional capital 59,734 60,009
Retained earnings (deficit) (22,780) (26,790)
------------------- -------------------
37,053 33,318
------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $88,364 $66,551
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements.
- 24 -
<PAGE> 27
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
For the years ended September 30, 1996, 1995 and 1994
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ----------------
<S> <C> <C> <C>
Continuing operations:
Revenues $122,190 100,203 $68,726
Cost of revenues 91,102 73,651 49,195
Depreciation and amortization expense 3,852 3,204 2,769
Selling, general and administrative expenses 19,704 17,995 13,964
----------------- --------------- ----------------
OPERATING PROFIT $7,532 $5,353 $2,798
Interest and other income 329 481 94
Interest expense (1,331) (1,333) (1,233)
----------------- --------------- ----------------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 6,530 4,501 1,659
Income tax expense (2,520) (1,770) (863)
----------------- --------------- ----------------
INCOME FROM CONTINUING OPERATIONS 4,010 2,731 796
Discontinued operations (Note 9):
Gain on sale of assets of ASO, net of income tax
expense of $80 -- -- 154
----------------- --------------- ----------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 4,010 2,731 950
Cumulative effect of change in accounting
principle for income taxes (Note 1) -- -- 2,931
----------------- --------------- ----------------
NET INCOME $4,010 $2,731 $3,881
================= =============== ================
Earnings per common and dilutive common
equivalent share (Note 1):
Income from continuing operations $0.40 $0.28 $0.09
Income before cumulative effect of change
in accounting principle $0.40 $0.28 $0.10
Cumulative effect of change in accounting principle -- -- $0.32
Net income $0.40 $0.28 $0.42
Weighted average shares outstanding 10,108,397 9,886,296 9,157,393
</TABLE>
See Notes to Consolidated Financial Statements.
- 25 -
<PAGE> 28
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended September 30, 1996, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $4,010 $2,731 $3,881
Adjustments to reconcile net income to net cash provided
by operating activities of continuing operations:
Depreciation 3,227 2,629 2,258
Amortization 625 575 511
Deferred income taxes 1,790 1,280 595
Net gain on sale of land, buildings, and equipment (48) (347) (9)
Income from discontinued operations -- -- (234)
Cumulative effect of change in accounting principle -- -- (2,931)
Cash provided (used) by assets and liabilities:
Trade accounts receivable (3,246) (936) (3,283)
Inventories (250) (743) (717)
Costs and estimated earnings in excess of
billings on uncompleted contracts (730) 268 (7)
Prepaid expenses and other assets (128) (536) 163
Accounts payable 232 (590) 2,311
Accrued compensation and benefits 576 992 184
Accrued expenses 352 804 (743)
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,381) 536 (28)
Other liabilities -- -- 186
-------------- -------------- --------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,029 6,663 2,137
-------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures (7,300) (3,993) (2,083)
Contingent purchase consideration paid (544) -- --
Cash paid for license agreement -- (265) --
Net cash paid for acquisition of subsidiaries and
related expenses, net of cash acquired (2,836) -- (11,104)
Proceeds from notes receivable from employee 613 -- --
Cash received from sale of subsidiary -- -- 234
Cash received from sale of land, buildings and equipment 215 294 175
-------------- -------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (9,852) (3,964) (12,778)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds under revolving lines of credit and notes payable 47,081 22,080 28,515
Proceeds from long-term debt 5,000 400 10,061
Repayments under revolving lines of credit and notes payable (41,626) (23,780) (26,309)
Repayments of long-term debt to related parties (160) (968) (417)
Repayments of other long-term debt (4,239) (2,193) (1,862)
Checks not yet presented for payment, net (443) 443 --
Cash paid for stock repurchase (293) -- --
Other 18 (5) (9)
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 5,338 (4,023) 9,979
-------------- -------------- --------------
Increase (decrease) in cash $515 ($1,324) ($662)
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
- 26 -
<PAGE> 29
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended September 30, 1996, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Retained
Common Additional Earnings
Stock Capital (Deficit)
---------------- ---------------- ----------------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993 81 54,454 (33,402)
Net income 3,881
Issuance of Common Stock issued in con-
nection with the acquisition of BMT (Note 2) 16 4,984
Costs of extending the Warrants,
net of Warrants exercised (9)
---------------- ---------------- ----------------
BALANCE AT SEPTEMBER 30, 1994 97 59,429 (29,521)
Net income 2,731
Issuance of 183,006 shares of Common
Stock, net of costs of issuance (Note 6) 2 575
Stock options and Warrants exercised 5
---------------- ---------------- ----------------
BALANCE AT SEPTEMBER 30, 1995 99 60,009 (26,790)
Net income 4,010
Repurchase of 90,109 shares (Note 7) (1) (292)
Exercise of stock options, net of costs of issuance 1 17
---------------- ---------------- ----------------
BALANCE AT SEPTEMBER 30, 1996 99 59,734 (22,780)
================ ================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
- 27 -
<PAGE> 30
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company provides engineering, design, fabrication, maintenance services and
construction of steel structures for a variety of industries, including
refining, petrochemical, water storage, pulp and paper, mining, alcohol,
agriculture, wastewater treatment, power generation and process systems. The
Company's broad range of products include large aboveground storage tanks (and
related parts and constituent products), pressure vessels, bins, silos, stacks
and liners, scrubbers and shop built tanks (both underground and aboveground).
The Company also provides non-destructive testing and inspection services for
large aboveground storage tanks, pressure vessels and piping and also offers
mobile storage tank leasing services.
Basis of Presentation
The consolidated financial statements include the accounts of Astrotech
International Corporation and its subsidiaries (the "Company"). Intercompany
accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect 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.
Acquisitions
Acquisitions have been accounted for using the purchase method of accounting.
The results of operations for the periods since the respective dates of
acquisition are included in the consolidated financial statements. Costs in
excess of net assets acquired are amortized on the straight-line method
principally over forty years. Any contingent purchase consideration accrued or
paid increases costs in excess of net assets acquired and is amortized over the
remaining amortization period of such intangible asset. The Company regularly
reviews the individual components of the balances of all of its long term
assets by analyzing the future recoverability of the assets and recognizes, on
a current basis, any diminution in value.
- 28 -
<PAGE> 31
New Accounting Pronouncements
Effective October 1996, the Company will adopt Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long Lived Assets to be Disposed Of." The adoption of SFAS No. 121 will
not have a material effect on the Company's financial position or results of
operations.
Effective October 1996, the Company will adopt SFAS No. 123, "Accounting for
Stock-Based Compensation." This new standard defines a fair value based method
of accounting for an employee stock option or similar equity instrument. This
statement gives entities a choice of recognizing related compensation expense by
adopting the new fair value method or to continue to measure compensation using
the intrinsic value approach under Accounting Principles Board (APB) Opinion No.
25, the former standard. If the former standard for measurement is elected, SFAS
No. 123 requires supplemental disclosure to show the effects of using the new
measurement criteria. The Company intends to continue using the measurement
prescribed by APB Opinion No. 25, and accordingly, this pronouncement will not
affect the Company's financial position or results of operations.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Expenditures for additions
and improvements are capitalized, while those for maintenance and repairs are
expensed as incurred. The cost and accumulated depreciation or amortization of
assets sold or retired are removed from the respective accounts and any gain or
loss is reflected in results of operations. Provisions for depreciation are
computed for financial reporting purposes using the straight-line method based
on estimated useful lives. Depreciation for tax reporting purposes is computed
principally on accelerated methods. Total accumulated depreciation on tanks and
trucks held for lease at September 30, 1996 and 1995 was $1,374,000 and
$904,000, respectively.
Other Assets
Included in other assets are patents and license agreements which are recorded
at cost and are being amortized on the straight-line method based on their
respective estimated useful lives ranging up to 17 years.
Revenue Recognition
Revenues primarily arise from contracts and are recognized on the
percentage-of-completion method. Revenues are measured by the percentage of
costs incurred to date to total costs estimated for some contracts and the
percentage of direct labor dollars earned for other contracts. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. It is reasonably possible that future operating results
may be affected if actual contract costs incurred differ from total contract
costs currently estimated by management.
- 29 -
<PAGE> 32
The asset, "Costs and estimated earnings in excess of billings on uncompleted
contracts," represents revenues recognized in excess of amounts billed and
costs incurred. The liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized. Generally, contracts are progress billed as work progresses.
Operating Cycle
In accordance with industry practice, the Company classifies as current assets
amounts relating to long-term construction contracts which may have terms
extending beyond one year but are expected to be realized during the normal
operating cycle of the Company. The liabilities in the accompanying balance
sheets which have been classified as current liabilities are those expected to
be satisfied by the use of assets classified as current assets.
Research and Development
Expenditures for research and development activities are expensed as incurred.
For the years ended September 30, 1996, 1995 and 1994, research and development
expenses were $381,000, $439,000 and $334,000, respectively.
Income Taxes
The Company computes income taxes under the liability method. Under this
method, deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities, as measured by the
enacted tax rates which will be in effect when these differences reverse, and
based on the expected utilization of net operating loss and tax credit
carryforwards. Deferred tax expense or benefit is the result of changes in
such basis differences, enacted rates and expected utilization of
carryforwards.
As a result of the adoption of SFAS No. 109 in fiscal 1994, the Company recorded
a gain from cumulative effect of change in accounting principle of $2,931,000.
The gain arose principally from the tax effect of anticipated use of net
operating loss carryforwards existing at October 1, 1993. As of September 30,
1996, the Company has used all of its previously available net operating loss
carryforwards.
Earnings Per Common Share
Earnings per common and dilutive common equivalent share are computed by
dividing income from continuing operations, income before cumulative effect of
change in accounting principle and net income, respectively, by the weighted
average number of shares and dilutive common equivalent shares of common stock
outstanding during the year. Outstanding Warrants were anti-dilutive and
certain outstanding stock options have a dilutive effect in the three years
presented.
- 30 -
<PAGE> 33
Foreign Currency Translation
The functional currencies for the Company's foreign operations are the
applicable local currencies. The translation of the applicable foreign
currencies into U.S. dollars for balance sheet accounts is performed using
rates of exchange in effect at the balance sheet date. Income statements are
translated at average exchange rates during the period. For the years ended
September 30, 1996, 1995 and 1994, such translation adjustments were not
significant.
Concentration of Credit Risk
The Company grants credit to customers involved primarily in the petroleum and
petrochemical industries. The Company performs ongoing credit evaluations of
its customers to minimize its credit risk.
Reclassifications
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the current year presentation.
2. ACQUISITIONS
A. Graver Tank & Mfg. Co., Inc.
On March 28, 1996, the Company acquired Graver Holding Company and its
wholly-owned subsidiary, Graver Tank & Mfg. Co., Inc. (collectively "Graver").
Graver designs, manufactures and erects storage tanks and pressure vessels for
the petroleum and process industries. Graver also provides nickel-clad
installations for the power generation and air pollution industries, providing
fabrication and erection of scrubbers, chimneys, and stack liners.
The base purchase price recorded by the Company of $2,900,000 consisted of
$2,750,000 in cash and $150,000 of acquisition-related expenses. The seller is
entitled to receive additional cash proceeds of up to $1,250,000 pursuant to
the terms of an earn-out arrangement based on future profits (as defined) of
Graver during each of the three fiscal years ending September 30, 1998. For
fiscal year 1996, this contingent purchase consideration amounted to $236,000.
In addition, the Company repaid Graver's existing bank obligations totaling
$2,420,000. A portion of the cash consideration paid for Graver was provided
through a credit facility with Bank One, Texas, N.A. See Note 6.
The acquisition has been accounted for using the purchase method of accounting.
The results of operations of Graver commencing March 29, 1996 are included in
the consolidated financial statements. Costs of the acquisition in excess of
net assets of the business acquired were approximately $1,154,000.
- 31 -
<PAGE> 34
The following unaudited pro forma information shows the results of operations
of the Company and Graver for the fiscal years ended September 30, 1996 and
1995, assuming the companies had combined as of October 1, 1994:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues $132,579,000 $130,329,000
Net income $ 3,344,000 $ 959,000
Net income per common share $ .33 $ .10
</TABLE>
This pro forma information does not purport to be indicative of the results
that actually would have been obtained if the companies had been combined
during the periods presented and is not intended to be a projection of future
results.
B. Brown-Minneapolis Tank & Fabricating Co. ("BMT")
On March 1, 1994, the Company acquired BMT, a designer, fabricator and field
erector of steel structures including storage tanks, bins, stacks, vessels and
shop-built tanks (both underground and aboveground). The base purchase price
recorded by the Company of $17,040,000 consisted of $11,540,000 in cash, a
$500,000 subordinated promissory note, and 1,600,000 shares of Astrotech common
stock with an aggregate assigned value of $5,000,000 based on the market price
of the stock on March 1, 1994. The remaining balance of $425,000 on the
subordinated promissory note is included in long-term debt. The seller of BMT
is also entitled to contingent purchase consideration of up to $9,000,000 in
cash based upon future gross profits (as defined) of BMT during the five-year
period ending September 30, 1998. For fiscal years 1996 and 1995, this
contingent purchase consideration amounted to $1,355,000 and $424,000,
respectively and no such consideration was earned for fiscal year 1994.
The results of operations of BMT commencing March 1, 1994 are included in the
consolidated financial statements. Costs of the acquisition in excess of net
assets of the business acquired were approximately $5,425,000.
C. HMT Rubbaglas Limited
On November 19, 1993, the Company acquired all the capital stock of HMT
Rubbaglas Limited, a privately-held British company headquartered in London,
England. HMT Rubbaglas designs, manufactures and installs equipment for the
aboveground storage tank industry. HMT Rubbaglas has a manufacturing facility in
London, England and a sales network and distribution system throughout the
United Kingdom, Continental Europe, Africa and the Middle East. The purchase
price paid by the Company for all of the outstanding stock of HMT Rubbaglas was
$2,250,000. In addition, the Company will be obligated to pay a contingent
purchase consideration in the form of an Earn-Out of up to 850,000 pounds
sterling based upon future operating profits of Rubbaglas during each of the
five years ending September 30, 1998. No such consideration was earned for
fiscal years 1996, 1995 or 1994. Costs of the acquisition in excess of the net
assets acquired were approximately $1,500,000.
- 32 -
<PAGE> 35
The following unaudited pro forma information shows the results of operations
of the Company, BMT, and HMT Rubbaglas for the fiscal year ended September 30,
1994, assuming the companies had combined as of October 1, 1993:
<TABLE>
<CAPTION>
1994
------
<S> <C>
Revenues $83,663,000
Income from continuing operations 321,000
Income from continuing operations
per common share .03
Net income 3,406,000
Net income per common share $ .35
</TABLE>
This pro forma information does not purport to be indicative of the results
that actually would have been obtained if the companies had been combined
during the periods presented and is not intended to be a projection of future
results.
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable at September 30, 1996 and 1995 arose from the
following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Completed contracts and product sales $10,626,000 $ 7,282,000
Uncompleted contracts 14,779,000 9,868,000
Retainage 3,085,000 2,671,000
----------- -----------
$28,490,000 $19,821,000
=========== ===========
</TABLE>
4. INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method. At September 30, 1996 and 1995, inventories consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Raw materials and component parts $ 3,589,000 $ 3,283,000
Work in process 596,000 306,000
Finished goods 437,000 636,000
----------- -----------
$ 4,622,000 $ 4,225,000
=========== ===========
</TABLE>
- 33 -
<PAGE> 36
5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts at September 30, 1996 and
1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Costs incurred on uncompleted contracts $95,609,000 $51,364,000
Estimated earnings 15,150,000 10,026,000
----------- -----------
110,759,000 61,390,000
Less billings to date 110,300,000 59,785,000
----------- -----------
$ 459,000 $ 1,605,000
=========== ===========
</TABLE>
Included in the accompanying consolidated balance sheet under the following
captions:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 6,046,000 $ 4,348,000
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,587,000 2,743,000
----------- -----------
$ 459,000 $ 1,605,000
=========== ===========
</TABLE>
6. LONG-TERM DEBT
On February 28, 1995, the Company executed a Revolving Credit and Term Loan
Agreement (the "Credit Facility") with Bank One, which consolidated then
existing term indebtedness previously incurred at the subsidiary levels and
provided financing to be used for working capital support, capital
expenditures, possible acquisitions and other general corporate purposes.
During fiscal 1996, the Company executed two amendments to the Credit Facility
providing for, among other things, financing for the acquisition of Graver and
an increase in permitted capital expenditures in fiscal year 1996.
The Credit Facility, as amended, consists of the following:
(i) A term loan in the original amount of $12,000,000, which
consolidated all of the term bank borrowings previously existing
at the Company's subsidiary level, bearing interest at the
Company's option at either the bank's base rate plus a spread
ranging from 1/4 percent to 1/2 percent or at various LIBOR rates
plus spreads ranging from 1 3/4 percent to 2 3/4 percent. The
applicable spread is based upon the ratio of the Company's total
liabilities to tangible net worth, as defined. Interest is
payable either quarterly or at certain LIBOR contract
termination dates. At September 30, 1996, the interest rate was
7.2%. The term loan is payable in equal quarterly installments
of $550,000 until February 28, 2000, when the remaining
outstanding balance will be due.
- 34 -
<PAGE> 37
(ii) A revolving line of credit of up to $14,000,000, bearing
interest at options 1/4 percent below the same options available
under the term loan. In addition, the Company pays a quarterly
commitment fee of 1/4 percent per annum on the average daily
unused amount. The borrowing amount is based on the Company's
eligible accounts receivable and inventory, as defined. At
September 30, 1996, the weighted average interest rate was 7.1%.
The principal amount outstanding plus all accrued and unpaid
interest is due on February 28, 1998. Outstanding letters of
credit, which totaled $2,854,000 at September 30, 1996, reduce
the amount available for borrowing. On September 30, 1996,
$3,694,000 was available for borrowing.
(iii) An advancing term loan which was available until February 28,
1996 for capital expenditures bearing interest at the same
options as the term loan. During fiscal 1996, the Company
borrowed $2,000,000 under this loan which is payable in equal
quarterly installments of $125,000 until February 28, 2000. At
September 30, 1996, the interest rate was 7.2%.
(iv) A $3,000,000 acquisition loan used to purchase Graver. This
loan bears interest at the same options as the term loan and is
payable in equal quarterly installments of $125,000 until
February 28, 2000 when the remaining outstanding balance will
be due. At September 30, 1996, the interest rate was 7.2%.
(v) A $2,000,000 advancing term loan available until February 28,
1997 for capital expenditures bearing interest at the same
options as the term loan. Beginning on May 28, 1997, any
principal amount then outstanding will be payable in equal
quarterly installments until February 28, 2001. At September 30,
1996, no amounts were outstanding under this loan.
All obligations of the Company under the Credit Facility are collateralized by
substantially all of the assets of the Company and the pledge by the Company of
the Common Stock of each of its direct subsidiaries. The obligations of the
Company are guaranteed by each direct and indirect subsidiary. The Credit
Facility contains certain covenants which provide for, among other things,
maintenance of various financial ratios. At September 30, 1996, the Company was
in compliance with all such covenants.
As partial consideration for the acquisition of HMT Inc. in 1989, the Company
issued a promissory note in the principal amount of $1,500,000 to each of the
two sellers. During the third quarter of fiscal 1995, the Company prepaid, in
cash, the note payable to one of the sellers, who is now a director of the
Company and converted the note payable to the other seller, who is a director
and executive officer of the Company, into 183,006 shares of common stock. The
conversion rate was based on the market price of the Common Stock at the time
of the exchange. Each note had an outstanding principal balance of $583,333 and
bore interest at the rate of 12% per annum.
- 35 -
<PAGE> 38
Long-term debt at September 30, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Term loan $ 8,700,000 $10,900,000
Revolving line of credit 7,452,000 1,050,000
1995 Advancing term loan 1,750,000 -
Acquisition loan 2,750,000 -
Other 265,000 532,000
----------- -----------
20,917,000 12,482,000
Less current portion 3,373,000 2,396,000
----------- -----------
$17,544,000 $10,086,000
=========== ===========
</TABLE>
Required principal payments on long-term debt outstanding at September 30, 1996
for the next five fiscal years are as follows:
1997 $ 3,373,000
1998 $10,744,000
1999 $ 3,200,000
2000 $ 2,850,000
2001 $ 750,000
Effective October 1, 1995, the Company adopted SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments," which requires disclosure about fair value
of all financial instruments. At September 30, 1996, the only financial
instruments held by the Company are its long-term debt obligation. Based on
interest rates currently available, management believes that the carrying amount
of long-term debt is a reasonable estimation of fair value.
7. COMMON STOCK AND WARRANTS TO PURCHASE COMMON STOCK
Each share of Common Stock is entitled to one vote on all matters considered at
a meeting of stockholders unless otherwise provided in fixing the relative
rights and preferences on one or more classes of preferred stock which may be
established.
On March 31, 1995, all of the Company's outstanding Warrants (858,346) expired
in accordance with their terms. Each Warrant had entitled the holder thereof to
purchase one share of Common Stock at a price of $6.00 per share.
During November 1995, the Company completed a program to repurchase small
shareholders' common stock at no cost to the shareholder. Through this program
the Company repurchased 90,109 shares of stock at an aggregate purchase price
of $293,000.
- 36 -
<PAGE> 39
8. STOCK OPTIONS
A. 1984 Stock Option Plan
In 1984, the Company adopted a Stock Option Plan (the "1984 Plan") for eligible
employees, including officers and directors. At September 30, 1996 and 1995,
options to purchase 18,832 shares of Common Stock were outstanding and
exercisable at a price of $1.94 per share. No additional options may be granted
under the 1984 Plan.
B. 1989 Stock Incentive Plan
In 1989, the Company's Board of Directors adopted the 1989 Stock Incentive Plan
(the "Stock Incentive Plan") which was approved by the stockholders at the
annual meeting held on May 18, 1989. Options may be granted to key employees of
the Company and to directors who are employees or consultants of the Company.
The Stock Incentive Plan is intended to attract and retain key employees and
consultants of outstanding competence and to provide such employees and
consultants with an incentive to achieve long-term corporate objectives by
giving them an opportunity to acquire an equity interest in the Company. No
Stock Appreciation Rights and Restricted Stock Options, allowed by the plan,
have been granted.
During 1996, options to purchase 15,000 shares of Common Stock expired, options
to purchase 29,500 shares of Common Stock at an average price of $1.78 per
share were exercised and options to purchase 35,000 shares of Common Stock were
issued. At September 30, 1996, options to purchase 414,500 shares of Common
Stock were outstanding and exercisable at an average price of $3.40 per share.
Pursuant to the Stock Incentive Plan, 516,180 shares of Common Stock, including
101,680 shares reserved for options which are available for grant, were
reserved at September 30, 1996 for issuance by the Company.
During 1995, options to purchase 22,000 shares of Common Stock expired, options
to purchase 4,000 shares of Common Stock at an average price of $1.13 per share
were exercised and options to purchase 59,500 shares of Common Stock were
issued. At September 30, 1995, options to purchase 424,000 shares of Common
Stock were outstanding and exercisable at an average price of $3.33 per share.
Pursuant to the Stock Incentive Plan, 545,680 shares of Common Stock, including
121,680 shares reserved for options which are available for grant, were
reserved at September 30, 1995 for issuance by the Company.
C. 1994 Stock Option Plan for Employees of Brown-Minneapolis Tank & Fabricating
Co.
In connection with the Company's acquisition of BMT, the Company's Board of
Directors adopted the 1994 Stock Option Plan for Employees of BMT ("1994 BMT
Plan") which was approved by the Company's stockholders at the annual meeting
held on May 17, 1994. Pursuant to the 1994 BMT Plan (which became effective on
March 1, 1994, the day the Company completed the acquisition of BMT), 400,000
shares of Common Stock were reserved for issuance by the Company in connection
with awards of stock options under the 1994 BMT Plan. These shares are
available for issuance to key employees of BMT or any BMT subsidiary. Effective
March 1, 1994, stock options to purchase 400,000 shares of Common Stock were
awarded to 19 key employees of BMT (none of whom are executive officers or
directors of the Company). The exercise price of each stock option was $3.125
(equal to the fair market value, as defined in the 1994 BMT plan, on the date
of grant). Such options are not exercisable during the first year after grant
and are exercisable, cumulatively, at the rate of 20% for each year thereafter
until the fifth anniversary of the date of grant when such options become
vested and fully exercisable.
- 37 -
<PAGE> 40
The 1994 BMT Plan is intended to promote the future growth and financial
success of the Company and its BMT subsidiary by attracting and retaining key
employees of outstanding competence for BMT and providing such employees an
incentive to achieve long term corporate objectives by giving them an
opportunity to acquire an equity interest in the Company.
At September 30, 1996 and 1995, options to purchase 400,000 shares of Common
Stock were outstanding, 194,500 and 80,000, respectively, of which were
exercisable on that date and 400,000 shares of Common Stock were reserved for
issuance by the Company.
D. 1995 Nonemployee Directors Stock Option Plan
In February 1995, the Company's Board of Directors adopted the 1995 Nonemployee
Directors Stock Option Plan ("Directors Plan") which was approved by the
Company's stockholders on May 9, 1995. All directors of the Company who are not
employees are eligible to receive options to purchase Common Stock under the
Directors Plan. Each of the four eligible directors received an option to
purchase 10,000 shares at an exercise price of $3.1875 (equal to the fair
market value of the Common Stock on the date of grant). Such options were not
exercisable during the first year after grant and are fully exercisable
thereafter until the tenth anniversary of the grant date. In addition, current
directors are ineligible to receive additional options under the Directors
Plan, although any new eligible director will be granted, at election or
appointment, an option to purchase 10,000 shares at an exercise price equal to
the fair market value on the date of grant. The maximum number of shares which
may be issued pursuant to the Directors Plan is 100,000. At September 30, 1996,
options to purchase 40,000 shares of Common Stock were outstanding, all of
which were exercisable on that date and 40,000 shares of Common Stock were
reserved for issuance by the Company.
9. DISCONTINUED OPERATIONS
On October 29, 1987, substantially all of the assets of Astrotech Space
Operations, Inc. ("ASO") were sold. During fiscal year 1994, the Company
recorded an additional gain on the sale of the assets of ASO of $234,000
representing additional purchase consideration earned for the preceding
calendar year. No further amounts can be earned under the terms of the purchase
agreement.
- 38 -
<PAGE> 41
10. INCOME TAXES
The income tax provisions for the years ended September 30, 1996, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $ 150,000 $ - $ -
State 420,000 450,000 204,000
Foreign 160,000 40,000 144,000
Deferred:
Federal 1,730,000 1,370,000 539,000
State 60,000 (90,000) (24,000)
---------- ---------- ----------
$2,520,000 $1,770,000 $ 863,000
========== ========== ==========
</TABLE>
Foreign income taxes arise from income before taxes aggregating $467,000,
$43,000 and $403,000 in fiscal 1996, 1995 and 1994, respectively, from the
combined operations of the Company's Australian, British and Canadian
subsidiaries and all other income taxes arise principally from the domestic
operations of the Company.
Deferred tax assets (liabilities) at September 30, 1996 and 1995 are comprised
of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net operating loss carryforwards $ 159,000 $ 459,000
Tax credit carryforwards 1,045,000 780,000
Accrued expenses, deductible when paid 1,138,000 1,685,000
----------- -----------
Gross deferred tax assets 2,342,000 2,924,000
Gross deferred tax liability - fixed
asset basis differences (3,791,000) (2,517,000)
Valuation allowance - (270,000)
----------- -----------
$(1,449,000) $ 137,000
=========== ===========
</TABLE>
The valuation allowance in 1995 represented tax credit carryforwards which were
not expected to be utilized prior to expiration. During fiscal 1996 and 1995,
based on the Company's utilization of federal tax net operating loss
carryforwards resulting from higher than expected earnings, the Company
reversed $270,000 and $240,000, respectively of its valuation allowance
representing investment and research and development tax credits expiring
principally in 2000 which are now expected to be utilized.
- 39 -
<PAGE> 42
The provision for income taxes from income from continuing operations in 1996,
1995 and 1994 varied from the U.S. statutory rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
Amortization of goodwill 3.3 4.3 10.3
Foreign income (2.4) (.3) (8.3)
Foreign income taxes 2.5 .9 8.7
State income taxes, net of federal benefit 4.8 5.3 8.1
Other, net .5 .4 (.8)
Reversal of valuation allowance (4.1) (5.3) -
---- ---- ----
38.6% 39.3% 52.0%
==== ==== ====
</TABLE>
At September 30, 1996, the Company had investment and research and development
tax credit carryforwards of approximately $375,000 which expire principally in
2000 and alternative minimum tax credit carryforwards of approximately $670,000
which have no expiration date.
11. CONSOLIDATED STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURES
The following noncash investing and financing transactions have been excluded
from the Consolidated Statement of Cash Flows:
During the year ended September 30, 1996, the Company acquired Graver
Tank & Mfg. Co., Inc. Fair value of net assets acquired was $2,900,000
consisting of assets acquired of $12,964,000 and liabilities assumed of
$10,064,000.
During the year ended September 30, 1995, the Company received a
mortgage note in the amount of $497,000 for the sale of land and
buildings and issued shares of Common Stock to a related party in
exchange for a promissory note payable of $583,000. The Company also
refinanced long-term debt and notes payable of $13,111,000.
During the year ended September 30, 1994, the Company issued shares of
Common Stock with an assigned value of $5,000,000 and a promissory note
of $500,000 in connection with the acquisition of BMT. The Company also
refinanced long-term debt of $3,043,000.
For the years ended September 30, 1996 and 1995, the Company has
recorded contingent purchase consideration related to prior
acquisitions totaling $1,591,000 and $544,000, respectively. These
amounts are accrued in the year earned and paid in the following year.
For the years ended September 30, 1996, 1995 and 1994, the Company made cash
payments for income taxes of $718,000, $647,000 and $214,000, respectively.
Cash paid for interest was $1,305,000, $1,334,000, and $1,261,000 for the years
ended September 30, 1996, 1995 and 1994, respectively.
- 40 -
<PAGE> 43
12. COMMITMENTS AND CONTINGENCIES
A. Leases
The Company leases certain facilities and equipment under operating leases
which contain renewal options and escalation clauses in some cases. Rent
expense for these operating leases for the years ended September 30, 1996, 1995
and 1994 amounted to $699,000, $553,000 and $496,000, respectively.
The Company leases office space from two entities in which a director and a
director-officer of the Company have ownership interests. During 1996, 1995 and
1994, total lease payments to related parties were $154,000, $223,000 and
$230,000, respectively.
Future annual minimum payments under noncancellable operating leases at
September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Year ending
September 30,
-------------
<S> <C>
1997 $287,000
1998 216,000
1999 146,000
2000 96,000
2001 46,000
--------
$791,000
========
</TABLE>
B. Litigation
On March 19, 1996, the Company's HMT Inc. subsidiary was served with a
Complaint filed in Superior Court of California, County of Contra Costa. This
matter arises out of a tank fire which occurred in June of 1995, at a refinery
in northern California, where Company employees were replacing seals on an
aboveground storage tank. This Complaint, filed by Valerie Vega-Wright, seeks
to certify a class of persons affected by the fire under theories of
negligence, nuisance, battery, trespass and strict liability. The Complaint
seeks damages for, among other things, personal injuries and loss of property
value, and is requesting unspecified compensatory and punitive damages. The
Company has removed this litigation to the U.S. District Court for the Northern
District of California. On October 22, 1996, HMT was served with a Complaint in
Allison v. Unocal et al, which was simultaneously filed in the Contra Costa
Superior Court. The Complaint seeks damages for alleged personal injuries,
property damage and punitive damages. Two hundred sixteen plaintiffs contend
that they were injured as a result of the tank fire and seek damages against
HMT as well as the owner of the refinery. The Company is currently attempting
to request the federal court that all actions be remanded back to the state
court based on this second Complaint. The Company's insurance carriers (both
primary and excess) have been notified and both the Company and its insurance
carriers are assessing the claims and related policy coverages. This matter is
in its initial stages and investigative activities are continuing. While the
ultimate outcome cannot now be determined because of the uncertainties which
exist, the Company believes that its insurance coverages are adequate to
address its potential liability, if any; and any unfavorable result not covered
by insurance could result in a material charge which has not been reflected in
the accompanying financial statements. The Company intends to vigorously defend
this action.
- 41 -
<PAGE> 44
The Company is a party to certain other legal proceedings occurring in the
ordinary course of business. Based upon information presently available to it,
the Company does not believe that the final outcome of any of these other
matters will have a materially adverse effect on the consolidated financial
position, results of operations or liquidity of the Company.
C. Insurance
The Company's insurance program for workers' compensation, general liability
and group medical is partially self-insured. Estimated costs of claims
outstanding of $4,667,000 at September 30, 1996 under these self-insurance
agreements are included in accrued liabilities in the accompanying consolidated
balance sheet. It is reasonably possible that the ultimate cost of claims
outstanding could differ from management's current estimates. In connection
with the Company's insurance programs, a standby letter of credit has been
issued by the Company in the amount of $2,764,000 to cover reimbursement
obligations for self-insurance claims to be paid by the Company's insurer.
13. RETIREMENT PLANS
The Company maintains three separate 401(k) retirement savings plans. Eligible
employees, as defined, can contribute varying amounts, up to 18% of eligible
salary. The Company (i) may make discretionary contributions based upon profits
as determined by the Board of Directors and (ii) matches employee participant
contributions in an amount equal to (a) 25% of each participant's contribution
up to a maximum of 4% of a participant's salary, (b) 75% of each participating
employee's contribution of up to a maximum of 6% of the participating
employee's compensation for each year or (c) 50% of each participating
employee's contribution of up to a maximum of 4% of the participating
employee's compensation for each year. The plans are funded currently and the
Company has recorded expense, pursuant to the Company match, of $404,000,
$344,000 and $266,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
The Company also contributes to union-sponsored retirement plans for its
employees covered under collective bargaining agreements. Amounts contributed
are determined based upon a percentage of wages paid or amounts per hour worked
by such employees or a match of the employees' contributions.
- 42 -
<PAGE> 45
14. MAJOR CUSTOMERS, FOREIGN OPERATIONS AND EXPORT SALES INFORMATION
The industrial storage industry is the only business segment in which the
Company operates. No customer accounted for more than 10% of revenues in fiscal
years 1996, 1995 and 1994.
The Company has operations in Australia, Singapore, England and Canada which
generated aggregate revenues of $8,173,000, $6,024,000 and $7,384,000 and
aggregate net income of $305,000, $3,000 and $259,000 during the years ended
September 30, 1996, 1995 and 1994, respectively. Aggregate identifiable assets
of these foreign operations at September 30, 1996 and 1995 were $6,104,000 and
$5,142,000, respectively.
The Company also has export sales to various countries which amounted to
$4,765,000, $1,089,000 and $1,210,000 for the years ended September 30, 1996,
1995 and 1994, respectively.
15. QUARTERLY FINANCIAL INFORMATION (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1996 Fiscal Quarters First Second Third Fourth 1996
- -------------------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 25,910 $ 24,019 $ 33,008 $ 39,253 $122,190
Gross profit before depreciation
and amortization expense 6,815 6,667 8,361 9,245 31,088
Net income 866 696 1,082 1,366 4,010
Net income per common share* .09 .07 .11 .14 .40
</TABLE>
<TABLE>
<CAPTION>
1995 Fiscal Quarters First Second Third Fourth 1995
- -------------------- --------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 24,871 $ 22,832 $ 23,551 $ 28,949 $100,203
Gross profit before depreciation
and amortization expense 6,589 6,454 6,167 7,342 26,552
Net income 659 475 591 1,006 2,731
Net income per common share* .07 .05 .06 .10 .28
</TABLE>
* Quarterly figures may not total to year-end numbers due to rounding.
- 43 -
<PAGE> 46
ASTROTECH INTERNATIONAL CORPORATION
VALUATION & QUALIFYING ACCOUNTS (SEC Schedule II)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance at Charged Balance at
Beginning to End of
Classification of Period Expense Deductions Other Period
-------------- --------- ------- ---------- ----- ------
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1996:
- ------------------------------
Allowance for
Doubtful Accounts $170 $ - $ (35) $ 41(1) $176
Deferred income tax
valuation allowance $270 $ - $(270)(2) $ - $ -
Year Ended September 30, 1995:
- ------------------------------
Allowance for
Doubtful Accounts $ 30 $140 $ - $ - $170
Deferred income tax
valuation allowance $510 $ - $(240)(2) $ - $270
Year Ended September 30, 1994:
- ------------------------------
Allowance for
Doubtful Accounts $ - $ - $ (8)(3) $ 38(4) $ 30
Deferred income tax
valuation allowance $ - $510(5) $ - $ - $510
</TABLE>
(1) Acquired through acquisition of Graver.
(2) Reversal of allowance due to expected utilization of investment and
research and development tax credits expiring principally in 2000.
(3) Accounts written off, less recoveries.
(4) Acquired through acquisition of BMT.
(5) Included in cumulative effect of change in accounting principle for
income taxes.
- 44 -
<PAGE> 47
Signatures
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
ASTROTECH INTERNATIONAL CORPORATION
By: /s/ S. Kent Rockwell
------------------------------
S. Kent Rockwell
Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
Date: December 23, 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
--------- -----
<S> <C>
/s/ S. Kent Rockwell Chairman of the Board,
- --------------------------- Chief Executive Officer and
S. Kent Rockwell Chief Financial Officer; and Director
Date: December 23, 1996
/s/ T. Richard Mathews President and Director
- ---------------------------
T. Richard Mathews
Date: December 23, 1996
/s/ Raymond T. Royko Vice President, Secretary and
- --------------------------- General Counsel
Raymond T. Royko
Date: December 23, 1996
/s/ Helen Vardy Gricks Treasurer and Chief
- --------------------------- Accounting Officer
Helen Vardy Gricks
Date: December 23, 1996
/s/ Fred E. Baxter, Jr. Director
- ---------------------------
Fred E. Baxter, Jr.
Date: December 23, 1996
/s/ John Henry Director
- ---------------------------
John Henry
Date: December 23, 1996
/s/ Robert F. Kastelic Director
- ---------------------------
Robert F. Kastelic
Date: December 23, 1996
/s/ Roger W. Thiltgen Director
- ---------------------------
Roger W. Thiltgen
Date: December 23, 1996
</TABLE>
- 45 -
<PAGE> 48
INDEX TO EXHIBITS
Exhibit No. 3 Articles of Incorporation and By-laws.
- -------------
(i) Certificate of Incorporation of Astrotech International
Corporation ("Astrotech") (Incorporated by reference to
Astrotech's Registration Statement on Form S-4 No.
33-22919).
(ii) By laws of Astrotech, as amended on October 3, 1995
(Incorporated by reference to the Company's Annual Report
on Form 10-K filed on December 18, 1995.)
Exhibit No. 4 Instruments defining the rights of security holders,
- ------------- including indentures.
(a) Certificate of Designations/$1.20 Cumulative Convertible
Preferred Stock (Incorporated by reference to Astrotech's
Registration Statement on Form S-4 No. 33-22919).
(b) Plan of Recapitalization and Agreement of Merger, dated as
of March 25, 1988, between Astrotech International
Corporation, a Delaware corporation ("Old Astrotech"), and
New AIX Corporation, a Delaware Corporation and
wholly-owned subsidiary of Old Astrotech (Incorporated by
reference to Astrotech's Registration Statement on Form S-4
No. 33-22919).
Exhibit No. 10 Material Contracts.
- --------------
(a) Astrotech International Corporation 1984 Stock Option Plan.
(Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 No. 33-3360).*
(b) Astrotech International Corporation 1989 Stock Incentive
Plan. (Incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-8 No.
33-29745).*
(c) The 1994 Stock Option Plan for Employees of
Brown-Minneapolis Tank & Fabrication Co. (Incorporated by
reference to the Company's Registration Statement on Form
S-8 No. 33-85106).*
(d) Stock Purchase Agreement dated as of February 7, 1994, by
and among Irwin Jacobs, the Company and Brown-Minneapolis
Tank & Fabricating Co. (Incorporated by reference to
Exhibit 10(i) to the Company's Current Report on Form 8-K
filed on March 14, 1994).
(e) Revolving Credit and Term Loan Agreement entered into the
28th day of February 1995, by and between the Company and
Bank One, Texas, N.A.--a national banking association and
First Amendment (incorporated by reference to the Company's
Current Reports on Form 8-K filed on March 9, 1995 and
April 10, 1996, respectively).
- 46 -
<PAGE> 49
(f) The Company's 1995 NonEmployee Directors' Stock Option Plan
(incorporated by reference to Exhibit A to the Company's
Proxy Statement for the Annual Meeting of Shareholders
filed on or about April 10, 1995).*
(g) Stock Purchase Agreement dated as of March 7, 1996, by and
among Timothy J. McDavid, Astrotech International
Corporation, Graver Holding Company and Graver Tank & Mfg.
Co. (incorporated by reference to the Company's current
report on Form 8-K filed on April 10, 1996).
- -------------------
* Denotes management contract or compensatory plan.
Exhibit No. 11 Statement re computation of per share earnings
- --------------
Exhibit No. 21 Subsidiaries of the Registrant.
- --------------
Exhibit No. 23 Consent of Independent Certified Public Accountants.
- --------------
Exhibit No. 27 Financial Data Schedule
- --------------
- 47 -
<PAGE> 1
Astrotech International Corporation and Subsidiaries Exhibit 11
Computation of Earnings per Common Share
For the Years Ended September 30, 1996, 1995 and 1994
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -------
<S> <C> <C> <C>
EARNINGS PER COMMON AND DILUTIVE COMMON EQUIVALENT SHARE
1. Income from continuing operations $4,010 $2,731 $ 796
2. Weighted average shares outstanding 10,108,397 9,886,296 9,157,393
3. Income from continuing operations per
common share (1 divided by 2) $ .40 $ .28 $ .09
4. Income before cumulative effect of change in
accounting principle 4,010 2,731 950
5. Income before cumulative effect of change in
accounting principle per common share
(4 divided by 2) .40 .28 .10
6. Cumulative effect of change in accounting principle - - 2,931
7. Cumulative effect of change in accounting principle
per common share (6 divided by 2) - - .32
8. Net income 4,010 2,731 3,881
9. Net income per common share (8 divided by 2) $ .40 $ .28 $ .42
</TABLE>
<PAGE> 1
Exhibit No. 21
SUBSIDIARIES OF ASTROTECH INTERNATIONAL CORPORATION
Domestic Subsidiaries
- ---------------------
<TABLE>
<CAPTION>
State of Percent
Name Incorporation Owned
---- ------------- -----
<S> <C> <C>
HMT Inc. Texas 100%
HMT Construction
Services, Inc. Delaware 100% by HMT Inc.
HMT Tank Service, Inc. Texas 100% by HMT Inc.
AIX Intellectual Properties, Inc. Delaware 100% by HMT Inc.
HMT Sentry Systems, Inc. Delaware 100% by HMT Inc.
Astrotech Investments, Inc. Delaware 100%
Texoma Tank Company, Inc. Texas 100%
Brown-Minneapolis Tank &
Fabricating Co. Minnesota 100%
Graver Holding Company Delaware 100%
Graver Tank & Mfg. Co., Inc. Delaware 100% by Graver Holding Co.
Graver Tank International Corp. Delaware 100% by Graver Tank & Mfg. Co. Inc.
Graver Power, Inc. Delaware 100% by Graver Tank & Mfg. Co. Inc.
Graver Tank & Vessel, Inc. Delaware 100% by Graver Tank & Mfg. Co. Inc.
</TABLE>
Foreign Subsidiaries
- --------------------
<TABLE>
<CAPTION>
Jurisdiction Percent
Name Incorporation Owned
---- ------------- -----
<S> <C> <C>
Australasian HMT Pty. Ltd. Australia 100% by HMT Inc.
HMT Canada, Ltd. Canada 100% by HMT Inc.
HMT Rubbaglas, Ltd. England 100% by HMT Inc.
HMT Singapore Pte. Ltd. Republic of
Singapore 100% by HMT Inc.
</TABLE>
<PAGE> 1
EXHIBIT No. 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Astrotech International Corporation on Form S-8 (Nos. 33-3360; 33-29754;
33-41687; 33-68010; 33-85106; 33-92314; 33-92406 and 33-99290), and in each
related prospectus, and the Post-Effective Amendment to Form S-4 on Form S-3
(Registration Statement No. 33-22719), of our report dated December 6, 1996, on
our audits of the consolidated financial statements and financial statement
schedule of Astrotech International Corporation and subsidiaries as of September
30, 1996 and 1995 and for each of the three years in the period ended September
30, 1996, which report is included in this Annual Report on Form 10-K.
600 Grant Street
Pittsburgh, Pennsylvania
December 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835759
<NAME> ASTROTECH INTER. CORP.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 515
<SECURITIES> 0
<RECEIVABLES> 28,666
<ALLOWANCES> 176
<INVENTORY> 4,622
<CURRENT-ASSETS> 42,998
<PP&E> 36,187
<DEPRECIATION> 10,082
<TOTAL-ASSETS> 88,364
<CURRENT-LIABILITIES> 30,276
<BONDS> 17,544
0
0
<COMMON> 99
<OTHER-SE> 36,954
<TOTAL-LIABILITY-AND-EQUITY> 88,364
<SALES> 0
<TOTAL-REVENUES> 122,190
<CGS> 0
<TOTAL-COSTS> 91,102
<OTHER-EXPENSES> 27,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,331
<INCOME-PRETAX> 6,530
<INCOME-TAX> 2,520
<INCOME-CONTINUING> 4,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,010
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
