<PAGE> 1
Form 10-K for the period ended December 31, 1993
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________
Commission file number 1-6176
----------
AUGAT INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2022285
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
89 Forbes Boulevard, P.O. Box 448, Mansfield, Massachusetts 02048
- ----------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 508-543-4300
Securities registered pursuant to Section 12(b) of the Act: -------------
<TABLE>
<CAPTION>
Title of Each Class Name of Each Exchange
------------------- on Which Registered
---------------------
<S> <C>
Common Stock $.10 Par Value New York Stock Exchange
</TABLE>
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
-------- --------
The aggregate market value of the voting stock held by non-affiliates
of the Registrant at March 2, 1994 was $425,346,178.
The number of shares of the Registrant's common stock outstanding on
March 2, 1994 was 19,146,455.
Documents Incorporated by Reference:
Portions of the Proxy Statement for the Company's Annual Meeting of
Shareholders to be held April 26, 1994 are incorporated by reference into Part
III of this Form 10-K, to the extent described in such Part III.
<PAGE> 2
<TABLE>
FORM 10-K ANNUAL REPORT
TWELVE MONTHS ENDED DECEMBER 31, 1993
AUGAT INC.
<CAPTION>
PAGE
----
<S> <C>
PART I
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of
Security Holders 9
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Item 8. Financial Statements and
Supplementary Data 13
Item 9. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 34
PART III
Item 10. Directors and Executive
Officers of the Registrant 35
Item 11. Executive Compensation 39
Item 12. Security Ownership of
Certain Beneficial Owners
and Management 39
Item 13. Certain Relationships and
Related Transactions 39
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K 40
SIGNATURES 43
</TABLE>
<PAGE> 3
PART I
ITEM 1 - BUSINESS
- -----------------
General
- -------
Augat Inc. ("Augat") is a Massachusetts corporation organized in 1946. As used
herein the term the "Company" means Augat and, unless the context indicates
otherwise, its consolidated subsidiaries.
Augat designs and manufactures a broad range of electromechanical components
for the electronics industry. The Company's principal products are
interconnection components, including integrated circuit sockets and
accessories, coaxial cable network and fiber optic interconnection products,
packaging panels and interconnection test probes and systems. The Company also
makes terminals, custom connector assemblies, wiring harnesses and specialty
wiring systems for the automotive, communications, information processing and
business equipment markets.
Industry Segments
- -----------------
The Company operates within a single segment of the electronics industry
defined as the electromechanical component and subsystem sector. Although the
Company operates internally with several profit centers, the products of these
centers all have similar purposes or end uses, i.e., interconnecting or
controlling the flow of electricity among components or boards and other
assemblies within electronic equipment or systems. These products are used by
manufacturers of electronic equipment or systems. These products are used by
manufacturers of electronic equipment in their products to obtain specified
interconnections of components, subassemblies or subsystems.
Each profit center is responsible for the manufacture of its own products
within its own facilities. The manufacturing equipment and technology used by
each profit center, while similar, are not interchangeable because they are
customized for the particular product. However, Augat's manufacturing labor
force, for the most part, is similar and interchangeable, as are the basic
materials that make up the Company's products. Each profit center has
comparable capital-to-labor ratios, as well as labor costs as a percentage of
sales, with the exception of the Company's wire harness business, which
consumes twice as much labor cost as a percentage of sales as the other profit
centers.
Products of the various profit centers, while sold to different market
segments, principally the automotive, computer, dataprocessing,
telecommunications and CATV markets, are sold across the same geographic areas
and marketed via similar methods. Augat's customers are primarily companies
that manufacture or install electronic equipment.
1
<PAGE> 4
Narrative Description of the Business
- -------------------------------------
The Company designs, manufactures and markets electromechanical products used
for the interconnection of circuits in electronic applications. Passive
components used in electronic equipment, such as resistors and capacitors, and
more complex active components, such as transistors, integrated circuits,
hybrid circuits and microprocessors, must be attached and electrically
interconnected to perform their specified functions. The Company's products
principally relate to mounting and interconnecting components, testing or
controlling the flow of electricity among components, boards and/or other
assemblies within electronic equipment or systems.
In general terms, the Company's products can be applied wherever computer logic
is used, either in business or scientific systems or in the numerous products
which incorporate computer functions. More specifically, the Company's
products are used in computers, computer-aided engineering and manufacturing
systems, industrial electronics, test equipment, medical electronics, business
equipment, and additional applications in automotive, aerospace,
telecommunications and broadband communications - including CATV - markets.
Principal Products
- ------------------
The Company's products include a broad range of integrated circuit sockets,
miniature and subminiature switches, custom connector assemblies for the
automotive and telecommunications industries, packaging panels, coaxial cable
network and fiberoptic products and related hardware accessories and wire
harness assemblies for the automotive industry.
Integrated circuit sockets are mechanical devices into which integrated
circuits are plugged to provide easy component replacement. The sockets are
usually soldered to printed circuit boards by customers in order to connect
integrated circuits, including microprocessors, large and very large scale
integrated circuits and other dual-in-line packages, onto boards. Several
thousand varieties of miniature and subminiature control switches of the
toggle, slide, pushbutton and lighted types for use on printed circuit boards
or elsewhere in electronic equipment are sold by the Company.
Packaging panels are used to interconnect integrated circuits and other
components. Each panel consists of a board with one or more copper etched and
plated power and ground planes and incorporates sockets in particular patterns
for placement of integrated circuits or other components on one side and
wire-wrappable interconnections on the other. The Company also provides design
and wiring services for purchasers of packaging panels and for the wiring of
back planes and interconnection panels manufactured by others and provides
spring loaded test probes and test fixtures for use in conjunction with
functional board and device testers.
The Company is a manufacturer of high density discrete connectors for both
conventional board mounting and surface mounting.
2
<PAGE> 5
The Company also manufactures a wide range of interconnection hardware
accessories generally used on or in connection with printed circuit boards,
such as test jacks and jumpers, relay and crystal sockets, breadboards, racks
and enclosures, adaptor plugs and cable assemblies as well as marketing flat
cable and related components manufactured by others.
The Company is also a major supplier of connectors and electronic
packaging modules and wire harnesses to two major U.S. automotive manufacturers
and is actively participating in the development of interconnection components
for future automotive model years. Such automotive programs include a "mass
air flow module", an "actuating assembly" that triggers automatic seatbelts and
an "electronic search module" for a luxury car audio system.
Products manufactured for the telecommunication industry include central office
distribution, remote-switching and cross-connect applications. The Company
also is a leading supplier of coaxial connector, fiber optic and broadband
products for the cable television and local area network (LAN) markets.
Specifically in the CATV market, the Company provides single-part assemblies
and connectors as well as line amplifiers to cable system operators who, in
turn, construct cable television systems that distribute signals from the
head-end to a home. The Company is pursuing market opportunities for its
coaxial, broadband and fiber optic products in the rapidly evolving
communications technology marketplace.
Sources and Availability of Raw Materials
- -----------------------------------------
The Company's manufacturing operations utilize a wide variety of mechanical
components, raw materials and other supplies. It has multiple commercial
sources of supply for all materials which are important to its business.
Patents and Licenses
- --------------------
The Company owns a number of domestic and foreign patents and has filed a
number of additional patent applications. The Company's general policy has
been to seek patent protection for those inventions and improvements likely to
be incorporated in its products. While the Company believes that its patents
and patent applications have value, it considers that its competitive position
in the marketplace is not materially dependent upon patent protection and no
individual patent or patent application is considered material to future
operations.
Seasonality
- -----------
The only seasonal effect experienced by the Company is in the third quarter of
the calendar year and is principally due to vacation shutdowns at selected
Company locations and by many of its customers, particularly in Europe.
Working Capital
- ---------------
The Company manufactures and markets a full line of standard catalog items and
also an extensive line of special products to meet specific customer needs. In
order to maximize its market opportunities, the Company maintains a high level
of inventory of both raw materials and finished products. Sales by the Company
are generally made on credit and customers typically take 30 to 70 days to make
payment; thus, the Company also has significant amounts of money invested in
accounts receivable. Despite the high level of accounts receivable and
inventory required, the Company has generally been able to finance these assets
from current operations. When additional working capital in excess of that
generated by the business has been required, the use of short-term
3
<PAGE> 6
borrowings, long-term debt and equity financing have been utilized. The
Company's payment terms and the rights of return offered by it to customers and
to it by manufacturers vary among such customers and manufacturers, but
do not differ substantially from industry practice. The Company has generally
allowed credits for returns by customers under appropriate circumstances.
Marketing
- ---------
The Company sells to a broadly diversified group of customers located primarily
in the United States, Western Europe, Far East and Canada. Sales are made to
industrial and commercial customers within the computer, computer-aided
engineering and manufacturing, industrial electronics, test equipment,
telecommunications, aerospace, automotive and broadband communication markets.
The Company's products are also widely used in both industrial and
institutional research laboratories. During 1993 the Company's products and
services were sold directly to approximately 5,600 customers and a substantial
number of additional customers were served through a network of industrial
electronic component distributors. Of total sales 20% was derived from sales
through a number of distributors located throughout the world and no
distributor accounted for as much as 2% of the Company's sales. One customer,
Ford Motor Company, accounted for approximately 28% and another customer for 7%
of the Company's sales in 1993; no other customer accounted for more than 4% of
sales.
<TABLE>
The acquisition of National Industries, Inc. in August 1991, has changed the
sales mix of the Registrants' major products as follows (see also Footnote
Number 2 to the accompanying financial statements of the Registrant which are
included under Item 8 hereof):
<CAPTION>
Percent of sales
----------------
1993 1992 1991
---- ---- ----
As As As Pro-
Reported Reported Reported forma
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Interconnection Products Business 30% 35% 46% 37%
Wiring Systems and Components Business 52% 50% 37% 49%
Communication Products Business 18% 15% 17% 14%
---- ---- ---- ----
Total 100% 100% 100% 100%
==== ==== ==== ====
</TABLE>
The Company markets its products and services through independent sales
representatives and direct Company sales personnel working throughout the
United States and abroad, including wholly owned marketing subsidiaries in the
United Kingdom, France, Germany, Switzerland, Sweden, Italy, Japan, Canada and
Australia and sales offices in other areas.
In 1993 the Company's international sales amounted to approximately 21% of
total sales. Approximately 51% of these sales were derived from Western
Europe. The overall net margins on international sales are somewhat less than
those obtained on sales made in the United States. The Company's international
business is subject to risks customarily encountered in foreign operations,
including fluctuations in monetary exchange rates.
4
<PAGE> 7
Backlog
- -------
The Company estimates that its backlog of unfilled orders at December 31, 1993
was $104 million compared with $90 million at December 31, 1992. Orders tend
to fluctuate during the year according to customer requirements and business
conditions, and the backlog level from quarter to quarter does not follow a
consistent pattern. Although unfilled orders can be cancelled, the Company's
experience has been that the dollar amount of cancelled orders is not material.
Substantially all of the backlog is reasonably expected to be shipped within
twelve months.
Government Contracts
- --------------------
The amount of the Company's business that may be subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
government is insignificant.
Competition
- -----------
The Company encounters competition in all areas of its business activity from a
number of competitors but does not compete with any one company in all areas.
Competitors range from some of the country's largest diversified companies to
small and highly specialized firms. The Company competes primarily on the
basis of technology, innovation, performance and reliability. Price and
company reputation are also important competitive factors. Although there are
no precise statistics available, the Company believes it is a principal factor
in the markets in which it competes.
Research, Development and Engineering
- -------------------------------------
The Company maintains a continuous program of design, development and
engineering of new products and improvement of existing products to meet the
changing needs of its customers. The Company provides engineering assistance
to its customers, designing products to fill their individual requirements.
The majority of new product development, manufacturing research, quality
control development, new equipment development and related research and
development expenditures take place in product management groups involving
engineering, marketing, manufacturing, quality control and general management
personnel. These expenses are included in the categories of marketing,
manufacturing and general administrative expenses. In calendar year 1993, 1992
and 1991 expenditures for such research, development and engineering were
approximately $19 million, $19 million, and $16 million, respectively.
Environmental Affairs
- ---------------------
The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment. The Company has spent
substantial amounts to purchase, install, and operate pollution control
equipment and conduct appropriate environmental audits. The Company believes
that its efforts in this regard places it in substantial compliance with
existing environmental laws and regulations.
5
<PAGE> 8
In connection with the acquisition of National Industries, Inc. in 1991, the
Company determined that possible contamination at certain National facilities in
Alabama warranted additional study. The Company informed the State of Alabama
about the possible contamination and its desire to voluntarily proceed with
further study and, if necessary, remediation of the possible contamination.
The Company has completed its investigation and provided this information to the
State. The State has informed the Company that it believes further
investigation is necessary. The Company, however, has considered and disagreed
with the State's comments and is voluntarily proceeding to design and implement
an appropriate remedy. The Company has included in its financial statements an
allowance of $4.7 million for estimated environmental cleanup costs as of
December 31, 1993.
Employees
- ---------
The Company had approximately 4,300 employees as of December 31, 1993. None of
the employees are covered by collective bargaining agreements and operations
have never been interrupted by a work stoppage. The Company believes that
relations with its employees are good. The Company also contracts for
manufacturing labor and as of December 31, 1993 had approximately 2,000
contract laborers.
Financial Information about Foreign and Domestic Operations and Export Sales
- ----------------------------------------------------------------------------
Certain financial information concerning domestic and international operations
and export sales can be found in Footnote number 10 to the accompanying
financial statements of the Registrant which are included under Item 8 hereof.
Balance of this page intentionally left blank.
6
<PAGE> 9
<TABLE>
ITEM 2 - PROPERTIES
- -------------------
Information regarding the Company's active properties appears below:
<CAPTION>
Approximate facility
size December 31, 1993
(Square Feet)
-----------------------
<S> <C>
Montgomery, Alabama 192,000 (1)
Sanford, Maine 92,000 (1)
Canton, Massachusetts 30,000 (1)
Mansfield, Massachusetts 38,000 (1)
Mashpee, Massachusetts 83,000 (1)
North Attleboro, Massachusetts 52,000 (1)
Boyne, Michigan 68,000 (1)
Chesterfield, Michigan 66,000 (1)
Chesterfield, Michigan 26,000 (2)
Clinton, Michigan 96,000 (1)
Livonia, Michigan 6,000 (2)
Horseheads, New York 75,000 (1)
Horseheads, New York 11,000 (2)
Kent, Washington 58,000 (2)
Sydney, Australia 4,000 (2)
Mississauga, Canada 5,000 (2)
Telford, England 41,000 (1)
LaSeine, France 6,000 (2)
Troisdorf, Germany 22,000 (2)
Tsuen Wan, N.T., Hong Kong 1,000 (2)
Milan, Italy 4,000 (2)
Kawasaki, Japan 13,000 (2)
Mishima, Japan 1,000 (2)
Empalme, Sonora, Mexico 170,000 (2)
Singapore 24,000 (2)
Stockholm, Sweden 2,000 (2)
Bioggio, Switzerland 188,000 (1)
Zug, Switzerland 2,000 (2)
---------
1,376,000
=========
Total facilities up for sale or
inactive as accounted for by
restructuring reserves 352,000
=========
<FN>
(1) Company - owned facility
(2) Company - leased facility
</TABLE>
7
<PAGE> 10
The Company believes that its existing facilities are adequate and suitable for
the manufacture and sale of its products and have sufficient capacity to meet
its current requirements. Machine capacity is adequate although additional
machine capacity is currently being added in the business to meet increasing
demands for the Company's new products and for ongoing cost reduction programs.
The Company anticipates no difficulty in retaining occupancy of any of its
manufacturing, office or sales facilities through lease renewals prior to
expiration or through month-to-month occupancy, or in replacing them with
equivalent facilities.
In addition to the above listed properties, the Company leases a small amount
of other office/warehouse space in the United States and foreign countries.
The amount of such space is not significant.
See Note 7 - "Commitments and Contingencies" to the accompanying financial
statements of the Registrant which are included under Item 8 hereof for
information concerning the Company's obligations under all leases.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
On April 26, 1985, the Company and its subsidiary, Isotronics, Inc.
("Isotronics"), commenced an action in the Bristol County Superior Court of
Massachusetts against Aegis, Inc. ("Aegis"), and a former employee of
Isotronics (the "Employee"), seeking damages to be trebled under the
Massachusetts statute relating to unfair trade practices (M.G.L. c. 93A) and
injunctive relief. The complaint alleged wrongdoing by the defendants in
connection with the organization and operation of Aegis, which competed with
Isotronics in the manufacture and sale of microcircuit packages.
On May 21, 1985, the defendants filed a counterclaim, and added the Chairman of
the Board of the Company as an additional defendant. The counterclaim alleged
improper interference with a contract of Aegis; the making of disparaging
remarks about the Employee and another officer of Aegis; that the action is
groundless; and that it was commenced because of personal animosity toward the
Employee. The counterclaim seeks damages of $7,500,000 for abuse of process,
damages of $50,000 for interference with the contract, and damages of
$7,500,000, to be trebled, for violation of the Massachusetts statute relating
to unfair trade practices (M.G.L. c 93A). A reply was filed which denied the
material allegations of the counterclaim.
On May 13, 1985, Aegis commenced an action in the U.S. District Court for the
District of Massachusetts. The allegations of the amended complaint in the
federal case generally are similar to those of the counterclaim in the Superior
Court case, but include an additional claim that the Company and Isotronics had
attempted to monopolize interstate commerce in violation of the Sherman Act.
The allegations with respect to damages are similar to those of the Superior
Court counterclaim.
Assets of Isotronics were sold by the Company in May 1989, but all claims
relating to the litigation were retained by the Company.
On August 31, 1989 the Bristol County Superior Court ruled that Aegis and the
Employee violated the Massachusetts statute relating to unfair trade practices.
The court ruled further that Aegis and the Employee had failed to prove the
counterclaims they had asserted against the Company, Isotronics and an officer
of the Company.
Aegis and the Employee appealed the decision and on October 1, 1990, the case
was argued to the Massachusetts Supreme Judicial Court. The court rendered a
decision on January 16, 1991, affirming the trial court's finding of a knowing
and willful violation of the Massachusetts Unfair Trade Practices statute. A
further trial to determine the amount of damages to be awarded against Aegis
and the Employee took place in the Bristol County Superior Court from January
6, 1992 until February 20, 1992.
8
<PAGE> 11
On November 2, 1992, the Court issued a 173 page Memorandum of Decision and
Order ("Order"). The Order concluded that the illegal conduct of defendants
Aegis and Employee proximately caused the Company to suffer $14,140,000 in lost
profits during the period January 1, 1985 until March 31, 1987.
In 1987, a joint venture owned by Olin Corporation ("Olin") and Asahi Glass Co,
Ltd. purchased the stock of Aegis. Because of alleged indemnity obligations
which may run from Olin to the defendant Employee, the Company moved to amend
its Complaint and add Olin as a defendant. On November 25, 1992 the court
allowed the Company's motion. Olin moved to dismiss that complaint. The Court
denied Olin's motion on December 14, 1992. At the same time the Court granted
the Company a preliminary injunction restraining Olin from modifying any
obligation it may have to defendant Employee. Olin has renewed its objections
to the Company's complaint.
On December 14, 1992, final judgment was entered entitling the Company to
recover from the defendants jointly and severally, the sum of $14,140,000 in
compensatory damages, plus costs of $376,632.98, interest of $10,744,460.47,
and attorneys' fees of $1,216,188.06, for a total of $26,477,281.51. The
judgment also awarded the Company noncompensatory damages of $14,140,000. The
judgment also found in favor of the former Chairman of the Board on all counts
of the defendants' counterclaims against him.
The defendants have appealed the judgment, generally challenging the entire
damages decision. The Company has filed a cross appeal limited to the question
of whether a portion of the damages award should be assessed against each of
the defendants jointly instead of jointly and severally. The appeal of the
damages decision was argued before the Supreme Judicial Court in early October
1993, and the Court has not issued its decision.
On September 4, 1992, the Company filed suit in the United States District
Court for the District of Massachusetts against June M. Collier ("Collier").
This suit arises out of an Agreement of Merger which the Company entered into
in August 1991, and through which an Alabama manufacturing company, National
Industries, Inc. was merged into Augat National Inc., a wholly owned subsidiary
of the Company. The Company alleges that the defendant, who was the sole
stockholder of National Industries, breached certain warranties she made in
connection with the merger and misrepresented the financial and operating
conditions of National Industries. The suit also alleges a violation of Mass.
Gen. Laws c. 93A. Collier has answered the company's complaint and asserted
counterclaims for breach of contract, breach of the implied covenant of good
faith and fair dealing, violation of section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5, duress, misrepresentation and violations of Mass.
Gen. Laws c. 93A. The Company has responded to Collier's counterclaims and has
denied all of the substantive allegations. Management believes that Collier's
counterclaims are without merit and will defend them vigorously. Discovery is
scheduled to end on June 15, 1994. Trial has been set for August 1, 1994.
There are no other material legal proceedings to which the Registrant is a
party. Routine litigation incidental to its business is immaterial.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not Applicable.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- --------------------------------------------------------------------------
The Company's Common Stock is currently traded on the New York Stock Exchange
under the symbol "AUG".
<TABLE>
The following table sets forth the range of high and low closing prices for its
Common Stock on a quarterly basis for each of the Company's last three fiscal
years.
<CAPTION>
Closing Price Range
Common Stock Dividends
1993 High Low Paid
- ----- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter $13.25 $11.25 -
2nd Quarter 16.88 12.63 -
3rd Quarter 21.75 16.50 -
4th Quarter 21.25 15.50 -
------- ------- ---------
$21.75 $11.25 -
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
1992
- -----
1st Quarter $11.00 $ 8.63 -
2nd Quarter 12.00 10.25 -
3rd Quarter 13.25 9.88 -
4th Quarter 12.25 10.38 -
------- ------- -------
$13.25 $ 8.63 -
1991
- -----
1st Quarter $13.00 $ 9.13 $.10
2nd Quarter 14.00 11.25 .10
3rd Quarter 13.00 11.13 .10
4th Quarter 12.25 7.88 .10
------- ------- ------
$14.00 $ 7.88 $.40
</TABLE>
The Company, in December 1991, suspended its quarterly common stock dividend in
order to maintain a strong balance sheet and to ensure Augat's financial
long-term objectives. As discussed in Note 3 of the Notes to Consolidated
Financial Statements which are included under Item 8 hereof, the Company's
senior secured notes impose certain restrictions on the payment of dividends.
Management intends to reinstate a dividend when it is feasible and prudent.
The approximate number of holders of record of the company's Common Stock at
December 31, 1993 was 1,648.
<TABLE>
ITEM 6 - SELECTED FINANCIAL DATA
<CAPTION>
(In thousands except per share data)
1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales, Income and Dividends
Net sales $420,263 $361,718 $281,602 $299,193 $306,647
Cost of products
sold 328,964 287,524 219,358 212,437 221,016
Selling, general and
administrative
expenses 63,492 60,920 62,301 63,940 62,566
Restructuring costs 22,000 2,500
Other income (expense)
- net (4,207) (3,519) 463 1,133 1,221
Income (loss) before
taxes and minority
interests 23,600 9,755 (21,594) 23,949 21,786
Provision for taxes 8,000 3,169 468 6,816 6,886
Net income (loss) 15,600 6,586 (22,062) 17,133 14,900
Earnings (loss) per
share .83 .36 (1.21) .95 .83
Cash dividends per
share .40 .40 .40
Net income (loss) as
percent of net sales 3.7% 1.8% (7.8%) 5.7% 4.9%
Net income (loss) as
percent of share-
holders' average
equity 8.1% 3.7% (11.4%) 8.7% 8.1%
Working Capital
Current assets 176,508 157,641 154,941 153,582 140,549
Current liabilities 57,580 50,767 60,930 37,292 40,603
Working capital 118,928 106,874 94,011 116,290 99,946
Current ratio 3.1 to 1 3.1 to 1 2.5 to 1 4.1 to 1 3.5 to 1
Other Data
Property, plant, and
equipment - net 99,999 98,262 101,795 105,468 99,406
Total assets 317,860 295,448 293,229 272,541 252,032
Long-term debt 45,797 56,939 50,236 12,864 16,098
Debt/Equity ratio 22.7% 31.4% 28.4% 6.1% 8.7%
Shareholders' equity 201,611 181,481 176,633 209,389 185,519
Average common shares
outstanding 18,789 18,370 18,182 18,050 17,962
</TABLE>
10
<PAGE> 13
<TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
As an aid to understanding the Company's operating results, the following table
indicates the percentage of sales that each income statement item represents,
and the percentage increase or decrease in such items for the years indicated.
<CAPTION>
Percentage
Increase
(Decrease)
---------------
Years ended December 31, 1993 1992
------------------------- vs. vs.
1993 1992 1991 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 16.2% 28.4%
Cost of goods sold 78.3 79.5 77.9 14.4 31.1
Gross Margin 21.7 20.5 22.1 23.0 19.1
Selling, general, etc. 15.1 16.8 22.1 4.2 (2.2)
Restructuring costs - - 7.8 * *
Other (income) expense 1.0 1.0 (.2) 19.6 *
Provision for taxes 1.9 .9 .2 152.4 *
------ ------ ------ ------ ------
Net income (loss) 3.7% 1.8% (7.8%) 136.9% *
====== ====== ====== ====== ======
<FN>
* Not meaningful
</TABLE>
<TABLE>
Sales by Major Product Area
A breakdown of sales for calendar years 1993, 1992 and 1991 by
major product is as follows:
<CAPTION>
Net Sales (In thousands) 1993 % 1992 % 1991 %
------ ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interconnection Products
Business $129,000 30% $127,000 35% $130,000 46%
Wiring Systems and
Components Business 217,000 52% 180,000 50% 105,000 37%
Communications Products
Business 74,000 18% 55,000 15% 47,000 17%
-------- ---- -------- ---- -------- ----
Total $420,000 100% $362,000 100% $282,000 100%
-------- ---- -------- ---- -------- ----
</TABLE>
Results of Operations
The Company continued to grow sales in 1993 over 1992 due to the significant
improvement in the domestic automotive markets and increased market penetration
in the cable television and telecommunications segments of the communications
industry. The sales improvement in 1992 over 1991 was attributable to the
Company's expanded role in the worldwide automotive markets as well as
substantial sales growth in the Communications Products Business. Sales in
1991 were affected in all major business units by the worldwide recession.
International sales were $89 million, $92 million and $79 million for the years
1993, 1992 and 1991, respectively. Sales in 1991 included $28 million from
National Industries, Inc. acquired in August 1991. See Note 2 of the
Notes to Consolidated Financial Statements which are included under Item 8
hereof.
The Interconnection Products Business sales remained flat for the three years
ended 1993 as the computer industry continued its lackluster performance.
Increases in new product sales have been offset by reduction in sales of mature
product lines and price reductions during this three year period.
Sales in the Wiring Systems and Components Business increased worldwide 21% in
1993 with domestic sales increasing 27% and international sales decreasing 22%
compared with 1992. For 1992, domestic sales increased 88% and international
sales increased 14% when compared to 1991.
Worldwide sales in the Communication's Business increased 35% in 1993 over 1992
after increasing 17% in 1992 over 1991. The division serves two primary
markets: cable television and telecommunications. Both markets continued their
growth improvement in 1993 that started in 1992.
11
<PAGE> 14
Sales in 1993 continued its growth due to increased domestic volume in the
automotive business, improvement in worldwide communications sales offset
in part by a decline in international automotive sales.
Cost of products sold decreased by 1.2% of sales in 1993 as the Company
benefitted from its on-going cost control and productivity programs, increase
in new products offerings which were offset by selective selling price
decreases. These costs increased by 1.6% of sales in 1992 compared to 1991 due
to the inclusion for a full year of National Industries which has higher labor
and material costs compared to the other business units.
Selling, general and administrative expenses (SG&A) continued to decrease as a
percentage of sales in 1993. This resulted from the leveraging of such
expenses due to increased volume, along with the Company's ongoing concerted
effort to maintain strong cost control in this area. Management intends to
maintain SG&A expenses in the 16% to 18% range of sales.
In 1991, the Company reviewed the operations and asset base of the
Interconnection Products Business and it was determined that the recession has
shortened the life-cycle of some of the division's mature products resulting in
substantial excess manufacturing capacity. Accordingly, this resulted in a $22
million restructuring charge against 1991 operating results. The major
components of the charge include $18 million to close two manufacturing
facilities, discontinue selected mature product lines, consolidate two
administrative offices into one, and reduce administrative and management
personnel. The 1991 restructuring program has been substantially completed in
1993. Additionally, a $4 million reserve was provided for the write-down of
two unsold facilities.
Interest income decreased in 1993 and 1992 due to excess cash being reinvested
in the business units and lower investment rates compared to the prior year.
Interest expense decreased in 1993 due to reduction in long-term debt. For
1992, interest expense increased substantially from 1991 due to the full year
impact of the $45 million debt incurred in September 1991 for the acquisition
of National Industries, Inc.
Effective January 1, 1993, the Company adopted Financial Accounting Standard
No. 109, "Accounting for Income Taxes" (SFAS 109). This change, as of that
date, did not have a significant impact on the financial statements. Taxes in
1993 and 1992 were 33.9% and 32.5% of income, respectively, compared to the
statutory rate in 1993 and 1992 of 35% and 34%, respectively. The loss
incurred in 1991 as a result of the restructuring was not tax benefitted due to
the lack of income earned in the jurisdictions where the charge was incurred.
The effective statutory rate for 1993 and 1992 was negatively impacted by taxes
imposed by various domestic operations and by higher taxes on international
earnings where the Company operates. These higher taxes were offset by the tax
benefit associated with the 1991 restructuring charge. An income tax provision
of $.5 million was reported in 1991 due to income earned in various tax
jurisdictions. See Note 5 of the Notes to Consolidated Financial Statements
which are included under Item 8 hereof for the reconciliation of the provision
for income taxes.
Liquidity and Capital Resources
The Company maintains sufficient liquidity and has the resources to fund its
operations under current business conditions. The Company in 1993 amended its
revolving credit agreement with three banks by increasing its maximum borrowing
to $40 million. As of December 31, 1993, the Company had outstanding
borrowings of $1 million under this credit facility. During 1993, the Company
reduced its total debt by $14.2 million. The Company's financial condition
improved in 1993 as working capital increased to $119 million compared to $107
million in 1992. At year end 1993, long-term debt represented 22.7% of equity
compared with 31.4% for 1992. Income generated from operations along with
established credit facilities is sufficient to cover expected growth in the
next few years. Capital expenditures in 1994 are projected to be in the $20 to
22 million range.
The Company, in December 1991, suspended its quarterly common stock dividend in
order to maintain a strong balance sheet and to ensure Augat's financial
long-term objectives. Management intends to reinstate a dividend when it is
feasible and prudent.
12
<PAGE> 15
In December 1992, the Company was awarded a $40 million judgment as a result of
a lawsuit involving unfair trade practices. The lawsuit is under appeal
and the eventual amount to be received is not determinable at this time.
The book value of the Company's common stock at December 31, 1993, was $10.60.
<TABLE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The following financial statements and financial statement schedules are
submitted herewith:
<CAPTION>
Financial Statements: Pages
------
<S> <C>
Independent Auditors' Report 14
Consolidated Balance Sheets at December 31,
1993 and 1992 15
Consolidated Statements of Income for the years
ended December 31, 1993, 1992 and 1991 17
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1993, 1992
and 1991 18
Consolidated Statements of Cash Flows for the
years ended December 31, 1993, 1992 and 1991 19
Notes to Consolidated Financial Statements 20
Financial Statement Schedules:
Schedule V - Property, Plant and Equipment 29
Schedule VI - Accumulated Depreciation, and
Amortization of Property, Plant and Equipment 30
Schedule VIII - Valuation and Qualifying Accounts 31
Schedule IX - Short-Term Borrowings 32
Schedule X - Supplementary Income Statement Information 33
</TABLE>
13
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Augat Inc.
Mansfield, Massachusetts
We have audited the accompanying consolidated balance sheets of Augat
Inc. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1993. Our audits also
included the consolidated financial statement schedules listed at Item 8.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedules 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, such consolidated financial statements present fairly,
in all material respects, the financial position of Augat Inc. and subsidiaries
as of December 31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE
Boston, Massachusetts
January 27, 1994
14
<PAGE> 17
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
(In thousands) 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,540 $ 28,323
Accounts receivable - less allowance for doubtful accounts,
$1,129 in 1993 and $1,451 in 1992 73,633 53,084
Refundable income taxes 138 113
Inventories:
Finished goods 33,493 31,447
Work in process 26,415 17,491
Raw materials 26,654 24,428
-------- ---------
Total inventories 86,562 73,366
Deferred income taxes 4,556
Prepaid expenses 3,079 2,755
-------- ---------
Total current assets 176,508 157,641
-------- ---------
Property, Plant, and Equipment:
Land 3,528 4,204
Building and building improvements 54,674 56,830
Machinery and equipment 115,155 105,931
Furniture and fixtures 20,603 19,781
Construction in progress - buildings and machinery 10,010 6,942
-------- ---------
Total 203,970 193,688
Less accumulated depreciation 103,971 95,426
-------- ---------
Property, plant, and equipment - net 99,999 98,262
-------- ---------
Other Assets:
Goodwill - net 26,759 28,037
Property held for sale 9,179 6,801
Other 5,415 4,707
-------- ---------
Total other assets 41,353 39,545
-------- ---------
Total $317,860 $295,448
======== =========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 18
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
(In thousands) 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 1,000 $ 3,900
Current maturities of long-term debt 2,130 2,290
Accounts payable 28,353 21,016
Federal, state and foreign taxes payable 3,352 1,361
Accrued restructuring costs 1,751 2,952
Accrued compensation and benefits 10,193 8,653
Other accrued expenses 10,801 10,595
-------- ---------
Total current liabilities 57,580 50,767
-------- ---------
Long-Term Debt 45,797 56,939
Deferred Income Taxes 12,872 6,261
Commitments and Contingencies
Shareholders' Equity:
Common stock - par value $.10 per share:
Authorized 60,000,000 shares:
Issued and outstanding, 19,032,767 in 1993 and 18,421,624 in 1992 1,903 1,842
Paid-in capital 69,262 62,442
Retained earnings 118,878 103,278
Cumulative translation adjustment 11,923 14,121
Treasury stock, at cost:
16,700 shares at 1993 and 1992 (110) (110)
Unearned compensation - restricted stock awards (245) (92)
-------- ---------
Shareholders' equity 201,611 181,481
-------- ---------
Total $317,860 $295,448
======== =========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 19
<TABLE>
STATEMENTS OF CONSOLIDATED INCOME
<CAPTION>
For the Years Ended December 31,
(In thousands except per share data) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $420,263 $361,718 $281,602
Cost of products sold 328,964 287,524 219,358
-------- -------- --------
Gross margin 91,299 74,194 62,244
Selling, general and administrative expenses 63,492 60,920 62,301
Restructuring costs 22,000
-------- -------- --------
Income (loss) from operations 27,807 13,274 (22,057)
Other income (expense):
Interest income, etc. 386 1,486 2,905
Interest expense (4,593) (5,005) (2,442)
-------- -------- --------
Net (4,207) (3,519) 463
-------- -------- --------
Income (loss) before taxes on income 23,600 9,755 (21,594)
Provision for taxes on income 8,000 3,169 468
-------- -------- --------
Net income (loss) $ 15,600 $ 6,586 $(22,062)
-------- -------- --------
Earnings (loss) per share $ .83 $ .36 $ (1.21)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 20
<TABLE>
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
<CAPTION>
(In thousands) For the Years Ended December 31, 1993, 1992 and 1991
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock
---------------------
Number of Cumulative
Shares Paid-in Retained Translation
Outstanding Amount Capital Earnings Adjustment
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990 18,086 $1,809 $58,746 $126,019 $23,172
Common stock issued under
employee benefit plans 81 8 821
Stock issued in connection with an acquisition 189 19 2,181
Net loss (22,062)
Dividends paid (7,265)
Foreign currency translation adjustment (6,590)
------ ----- ------ -------- -------
Balance, December 31, 1991 18,356 1,836 61,748 96,692 16,582
Common stock issued under
employee benefit plans 66 6 694
Net income 6,586
Foreign currency translation adjustment (2,461)
------ ----- ------ -------- -------
Balance, December 31, 1992 18,422 1,842 62,442 103,278 14,121
Common stock issued under
employee benefit plans 611 61 6,820
Net income 15,600
Foreign currency translation adjustment (2,198)
------ ----- ------ -------- -------
Balance, December 31, 1993 19,033 $1,903 $69,262 $118,878 $11,923
====== ===== ====== ======= =======
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 21
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
For the Years Ended December 31,
(In thousands) 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $15,600 $ 6,586 $(22,062)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 15,758 16,040 16,041
Amortization of restricted stock awards 169 131 105
Provision for non-current asset write-down 600 13,844
Gain on the sale of property, plant, and equipment (97) (213) (420)
Deferred income taxes - net 2,055 831 (7,484)
Loss applicable to minority interests (82)
Increase (decrease) in cash from changes in assets and liabilities,
net of effects from business acquired:
Accounts receivable (20,549) (2,496) 13,721
Refundable income taxes (25) 962 300
Inventories (13,196) 117 (436)
Prepaid expenses (324) (486) 1,613
Other assets (703) (3,003) (838)
Accounts payable 7,337 4,051 (9,814)
Income taxes payable 1,991 598 (857)
Accrued restructuring, compensation and other expenses 545 (9,266) (1,644)
Effect of exchange rate changes on
current assets and liabilities (other than cash) (693) (701) (488)
------- ------- -------
Net cash provided by operating activities 8,468 13,151 1,499
------- ------- -------
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment (20,377) (14,495) (14,240)
Proceeds from the sale of property, plant, and equipment 407 2,924 2,446
Payment for business acquired (38,201)
------- ------- -------
Net cash used for investing activities (19,970) (11,571) (49,995)
------- ------- -------
Cash Flows From Financing Activities:
Cash dividends paid (7,265)
Proceeds from short-term borrowings 29,700 12,900 45,000
Payments for short-term borrowings (32,600) (58,000)
Proceeds from long-term debt 49,000
Payments for long-term debt (11,302) (4,269) (2,483)
Common stock issued under employee benefit plans 6,560 592 857
------- ------- -------
Net cash provided (used) by financing activities (7,642) 223 36,109
------- ------- -------
Effect of exchange rate changes on cash (639) (1,006) (2,705)
Net changes in cash and cash equivalents (19,783) 797 (15,092)
Cash and cash equivalents beginning of year 28,323 27,526 42,618
------- ------- -------
Cash and cash equivalents end of year $ 8,540 $28,323 $ 27,526
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned domestic and foreign subsidiaries. Long-term
investments in affiliated companies representing ownership interests of 20% to
50% are accounted for on the equity method. Foreign subsidiaries are included
on the basis of fiscal years ended November 30. Material intercompany
transactions and balances have been eliminated.
Inventories
Inventories are stated at the lower of cost (principally, first-in, first-out
method) or market.
Property, Plant, and Equipment
Property, plant, and equipment is recorded at cost. For financial reporting
purposes, depreciation is provided using the straight-line method based on the
estimated useful lives of the various classes of assets. The estimated useful
lives for buildings and improvements are 5 to 40 years; for machinery and
equipment 3 to 10 years; and for furniture and fixtures 3 to 10 years.
Maintenance, repairs and minor improvements are charged to expense as incurred,
while additions, major improvements and renewals of fixed assets are
capitalized. The cost of property retired or sold together with the accumulated
depreciation is removed from the respective accounts and any difference, less
proceeds from sale, is charged or credited to income.
Revenue Recognition
Sales are recognized at the time of shipment.
Income Taxes
The Company, effective January 1, 1993, adopted the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
cumulative effect on prior years at the date of adoption was not material to
the results of operations or the financial position of the Company.
SFAS 109 uses an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, SFAS 109
generally considers all expected future events other than enactments of
changes in the tax law or rates. Previously, the Company used the Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes" (SFAS 96),
which employed an asset and liability approach that gave no recognition to
future events other than the recovery of assets and settlement of liabilities at
their carrying amounts.
Research and Development
Research and development costs are expensed as incurred. Such costs amounted to
approximately $19,000, $19,000 and $16,000, in 1993, 1992 and 1991,
respectively.
Translation of Foreign Currencies
Assets and liabilities of foreign operations are translated at year-end
exchange rates. Revenues and expenses are translated using average exchange
rates. The resulting translation adjustment is reported as a separate component
of shareholders' equity. Gains and losses from foreign currency transactions
are reflected in net income.
Other Assets
The excess of the purchase price of acquired companies over the fair value of
net identifiable assets at dates of acquisition has been recorded as goodwill
and is being amortized on a straight-line basis over various periods not
exceeding twenty-five years. Accumulated amortization at December 31, 1993 and
1992, was $3,498 and $2,206 respectively. Amortization of goodwill was $1,292,
$1,262 and $533, in 1993, 1992 and 1991, respectively.
Earnings Per Share
Earnings per share is based on the weighted average number of shares
outstanding during each year. The exercise of all presently outstanding stock
options and the issuance of shares under the "Employee Stock Purchase Plan"
would have no dilutive effect on earnings per share.
20
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
Statements of Cash Flows
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Supplemental Cash Flow Information
Cash payments during the years ended 1993, 1992 and 1991 included interest of
$4,510, $3,450 and $2,497, and income taxes of $4,112, $2,362 and $7,428,
respectively.
In 1991, the Company paid cash of $38,201, issued common stock of $2,200
and assumed liabilities of $30,808 to acquire assets with a fair value of
$71,209.
Financial Instruments and Concentrations of Credit Risk
Off-Balance-Sheet Risk - The Company enters into forward foreign exchange and
commodity contracts to hedge foreign currency and inventory purchases,
respectively, when deemed appropriate for periods consistent with its committed
exposures. The Company's foreign exchange and commodity contracts do not
subject the Company to risk because gains and losses on contracts are offset by
losses and gains on the assets, liabilities, and transactions being hedged. The
foreign exchange contracts generally have maturities which do not exceed six
months. Gains and losses on contracts which hedge specific foreign currency
denominated commitments are deferred and recognized in the period in which the
transaction is completed. As of December 31, 1993, the Company had $3.5 million
of foreign exchange contracts outstanding. The Company had no outstanding
foreign exchange contracts at December 31, 1992.
Concentrations of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
temporary cash investments and trade receivables.
The Company places its temporary cash investments with high credit
qualified financial institutions. The investment policy limits the Company's
exposure to concentrations of credit risk. Except for major domestic automotive
manufacturers, credit risk with respect to trade receivables is limited due to
the large number of customers comprising the Company's customer base, and its
dispersion across many different industries and geographies. Sales to major
domestic automotive manufacturers represent approximately 35% and 31% of total
sales in 1993 and 1992, respectively.
The Company's financial instruments include cash, accounts receivable
and payable, notes payable and long-term debt at December 31, 1993. Cash,
accounts receivable and payable are recorded at their net realizable value,
which approximates market. Based on the borrowing rates currently available to
the Company, Management believes the recorded value of notes payable and
long-term debt approximates market.
In the normal course of its business activities, the company is required
under certain contracts to provide letters of credit which may be drawn down in
the event the Company fails to perform under the contracts. At December 31,
1993, letters of credit outstanding amounted to $1,700.
2. ACQUISITIONS
In August 1991, the Company acquired National Industries, Inc., a manufacturer
of wire harnesses for the automotive industry, for $9,600 in cash, $28,601
repayment of debt and the issuance of 188,840 shares of the Company's common
stock with a fair market value of $2,200.
The acquisition has been accounted for by the purchase method of
accounting, and accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on the estimated fair value at the
date of acquisition. The excess of the purchase price over the fair value of the
net assets acquired, as adjusted in 1992, of $27,937, has been recorded as
goodwill, and is being amortized over twenty-five years.
The operating results of this acquisition are included in the Company's
consolidated results of operations from the date of acquisition. Unaudited pro
forma summary results of operations of the acquisition as if the acquisition had
occurred at the beginning of 1991, after giving effect to certain adjustments,
including amortization of goodwill, interest expense on the acquisition debt and
related income tax effects, would have resulted in net sales of $345,522, a net
loss of $27,405 and loss per share of $1.50. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made as of those dates or of
results which may occur in the future.
21
<PAGE> 24
<TABLE>
3. DEBT AND AVAILABLE CREDIT FACILITIES
Long-term debt at December 31, 1993 and 1992, exclusive of current maturities,
consisted of the following:
<CAPTION>
1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Senior secured notes due 1995 - 1999 at interest rates
ranging from 8.71% to 8.61% $40,000 $40,000
Revolving credit facility at interest rates ranging from 4.7% to 6.0% 9,000
Industrial development and pollution control revenue
bonds at interest rates ranging from 5.7% to 7.5%, due 1995-2009 5,376 7,110
Capitalized lease obligations:
Industrial development bonds due 1995-1996 at interest rates ranging
from 70% to 75% of prime 421 829
------- -------
Total $45,797 $56,939
======= =======
</TABLE>
Long-term borrowing maturities in each of the five years subsequent to
December 31, 1994, are as follows: 1995, $10,866; 1996, $10,331; 1997, $8,900;
1998, $8,900 and 1999 and thereafter, $6,800. The industrial development and
pollution control revenue bonds are collateralized by buildings and equipment
with a net book value of approximately $10,850, of which $6,026 is guaranteed by
a letter of credit at December 31, 1993.
The capitalized lease obligations, which are financed by proceeds from
bonds, are secured by the leased facilities which had a net book value of $1,413
at December 31, 1993.
In 1992, the Company completed a private placement of $40,000 of senior
secured notes. Interest is paid semiannually commencing August 1, 1992. The
private placement senior secured note agreement includes certain financial
covenants and restrictions upon dividends, investments, indebtedness, and the
sale of certain assets. Dividends cannot exceed $9,800 plus 50% of net income
annually.
Aggregate short-term notes payable averaged $3,094, $15,917 and $19,000
during 1993, 1992 and 1991, respectively, and the weighted average interest
rates on such borrowings were 6%, 6% and 8%. The maximum outstanding balances
were $10,000, $49,000 and $49,000 in 1993, 1992 and 1991. Short-term debt was
used principally for working capital needs, and in 1991 for an acquisition.
In 1993, the Company increased its borrowing limit from $20 million up
to $40 million under its secured revolving credit agreement with several banks.
The agreement which expires no sooner than December 31, 1994 requires a
commitment fee of one-half percent per annum, payable on any available and
unused portion. At December 31, 1993 and 1992, the Company's borrowings under
the revolving credit facility totaled $1.0 million and $12.9 million,
respectively, which was borrowed for working capital purposes. Interest on the
working capital borrowings are at prime rate (6% at December 31, 1993).
4. RESTRUCTURING COSTS
Restructuring costs totaling $22,000 in 1991 include provisions for estimated
costs from restructuring and cost-reduction programs. This provision includes
costs associated with plant closings, discontinuance of selected older
products, the write-off of related equipment and the write-down of facilities
to net realizable value. The 1991 restructuring program has been substantially
completed in 1993.
The Company in connection with the acquisition of National Industries,
Inc. in 1991 established a restructuring liability for estimated costs to
reorganize National Industries' operations. This program has been substantially
completed as of December 31, 1993.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
<TABLE>
5. INCOME TAXES
The geographic components of income (loss) before taxes on income were as
follows:
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $21,364 $6,456 $(23,978)
Foreign 2,236 3,299 2,384
------- ------ --------
Income (loss) before taxes on income $23,600 $9,755 $(21,594)
======= ====== ========
</TABLE>
<TABLE>
The components of the provision (credit) for taxes on income were as follows:
<CAPTION>
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $1,607 $ 189 $(1,858)
Foreign 1,452 1,141 347
State 838 871 1,154
------- ------ --------
Total current 3,897 2,201 (357)
------- ------ --------
Deferred:
United States 3,611 (825)
Foreign 492 968 1,650
------- ------ --------
Total deferred 4,103 968 825
------- ------ --------
Provision for taxes on income $8,000 $3,169 $ 468
======= ====== ========
</TABLE>
Deferred income taxes result from timing differences in the recognition of
revenues and expenses for financial statement and income tax purposes. Included
in the deferred amounts for 1993 are the benefits of operating losses and
credits of $3,035 and a decrease in the valuation reserve of $513.
<TABLE>
A reconciliation of the Company's provision for taxes on income and the amount
computed by applying the statutory federal income tax rate to income (loss)
before taxes is as follows:
<CAPTION>
% Of Pretax Income (Loss)
-----------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate 35.0 34.0 (34.0)
State income taxes - net 2.3 5.9 3.5
Foreign income taxed at different rates, losses not tax benefitted,
or earnings of foreign subsidiaries expected to be remitted 9.0 18.5 5.6
Net domestic losses (with) without tax benefit and tax credit carryovers (12.8) (33.0) 29.6
Effect of adoption of SFAS 96 (3.8)
Non-deductible expenses .6 5.1 1.3
Other items - net (.2) 2.0
------- ------ ------
Effective tax rate 33.9 32.5 2.2
======= ====== ======
</TABLE>
23
<PAGE> 26
<TABLE>
The components of the net deferred tax asset and liability as of December 31,
1993, were as follows:
<CAPTION>
Deferred Tax
-----------------------------------------------
Current: Assets Liabilities Total
-----------------------------------------------
<S> <C> <C> <C>
Accrued liabilities $(3,883) $(3,883)
Alternative minimum tax credit carryforwards (2,616) (2,616)
Other liabilities $ 1,943 1,943
------- ------- --------
Current deferred tax asset (6,499) 1,943 (4,556)
------- ------- --------
Non-current:
Pension costs (2,293) (2,293)
Operating loss carryfowards (6,665) (6,665)
Foreign tax credit carryfowards (2,442) (2,442)
Property, plant, and equipment 15,165 15,165
------- ------- --------
Non-current deferred tax liability (11,400) 15,165 3,765
Valuation allowance 9,107 9,107
------- ------- --------
Net non-current deferred tax liability $(2,293) $15,165 $12,872
------- ------- --------
</TABLE>
The accumulated earnings of foreign subsidiaries on which federal income
taxes have not been provided amounted to $48,948 through December 31, 1993. The
Company's intention is to permanently reinvest these earnings at least until
such time as they can be repatriated without a material incremental tax cost.
At December 31, 1993 the Company had foreign net operating losses
amounting to approximately $20,792, of which $16,952 can be carried foward
indefinitely and the balance expires at various dates through 1998.
Additionally, there were available foreign tax credits of $2,442 that will
expire at various dates through 1998 and alternative minimum tax credits of
$2,616 which have indefinite carryover periods.
6. EMPLOYEE BENEFIT PLANS
Pension Plans
The Company sponsors noncontributory defined benefit pension plans that cover
substantially all eligible U.S. employees. Benefits are based on employees'
years of service and compensation during employment. The principal plan is
funded on a current basis, in compliance with the requirements of the Employee
Retirement Income Security Act.
The Supplementary Employee Retirement Plan (SERP) is a non-qualified
plan providing certain elected officers with additional defined pension
benefits.
Pension expense was $1,155, $875 and $964 in 1993, 1992 and 1991,
respectively.
<TABLE>
The following table sets forth the plans' funded status and amounts recognized
in the consolidated financial statements:
<CAPTION>
December 31,
Defined Benefit Plan SERP
----------------------- ----------------------
1993 1992 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plans' funded status:
Plan assets at fair value $13,954 $12,531 $ 6,152 $5,278
Projected benefit obligation:
Vested 13,206 10,347 3,767 2,023
Nonvested 469 429
Effect of future compensation increases 5,075 3,360 448 468
------ ------- ------ -----
Plan assets in excess of (less than)
projected benefit obligation (4,796) (1,605) 1,937 2,787
Unrecognized net (gain) or loss 2,730 (1,055) 1,246 (408)
Unrecognized net transition obligation (asset)
being recognized over 15 years (1,834) (2,202) 1,371 1,501
------ ------- ------ -----
Prepaid (accrued) pension liability $(3,900) $ (4,862) $4,554 $3,880
------ ------- ------ -----
Pension cost - net:
Service cost-benefits earned during year $ 1,349 $ 1,198 $ 261 $ 221
Interest cost on projected benefit obligation 1,195 1,067 261 218
Actual return on plan assets (932) (945) (108) (45)
Net amortization and deferral (694) (659) (177) (180)
------ ------- ------ -----
Pension cost - net $ 918 $ 661 $ 237 $ 214
------ ------- ------ -----
</TABLE>
24
<PAGE> 27
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
<CAPTION>
1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial assumptions:
Discount rate 7.5% 8.5%
Long-term rate of compensation increases 5.0% 5.0%
Long-term rate of return on plan assets 8.5% 9.0%
</TABLE>
The Company's foreign defined contribution pension plans are consistent with
local practice and are principally funded through insurance programs. Pension
expense in 1993, 1992 and 1991, for the foreign plans was $800, $857 and $914,
respectively.
Savings and Retirement Plan
The Company, in 1988, adopted the Augat Inc. Savings and Retirement Plan and
established a related trust. The Plan covers substantially all eligible U.S.
employees and allows employees to contribute from one to ten percent of salary
through salary reduction, up to the Internal Revenue Service limit on salary
reduction contributions. The Company will make matching contributions of 25% of
the employees' contributions of up to 6% of salary in the form of Company
common stock. Company contributions will vest 20% after two years of service
(with prior service vesting allowed for active employees at the inception of
the Plan), increasing by 20% per year up to 100% after six years of service.
The Plan will permit participants to elect to invest their contributions in one
or more of three savings and investment funds. For the years 1993, 1992 and
1991, the Company contributed 17,390, 19,820 and 17,984 shares, respectively,
of Company common stock to the Plan at a cost of $245, $215 and $224,
respectively.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company and its subsidiaries are obligated under facility and equipment
leases which expire at various dates through 2002. These leases generally
provide extension privileges and are exclusive of real estate taxes, insurance
and other expenses. Rent expense in 1993, 1992 and 1991 was $6,765, $5,720
and $3,613, respectively. Annual minimum future rentals are $5,686, $3,971,
$2,451, $1,554 and $1,075 for the years 1994 through 1998, and aggregate to
$2,115 for all the years subsequent to 1998.
Contingencies
The acquisition of National Industries, Inc. included a liability of
approximately $5,400 to cover the estimated costs of site remediation for
certain National facilities. Management estimated the liability using
third-party consultants. Costs incurred as of December 31, 1993 (approximately
$700) represent amounts expended for preliminary site evaluation and design and
testing. The Company is in the process of discussing with governmental agencies
the procedures necessary to complete additional studies and remediation. The
Company believes the recorded liability of approximately $4,700 at December 31,
1993 to be adequate.
8. COMMON STOCK
In 1988, the Company's Board of Directors adopted a Shareholder Rights Plan and
declared a dividend distribution of one Right for each outstanding share of
common stock. Pursuant to the Plan, the Rights become exercisable when certain
triggering events occur that involve an entity's attempt to acquire, or the
acquisition of, at least 20 percent of the Company's Common Stock or announces
a tender or exchange offer that would result in such entity owning 30 percent
or more of the Company's Common Stock. Such percentages may, at the Board's
discretion, be lowered.
If any entity becomes the beneficial owner of 25 percent or more of the
Common Stock (except pursuant to a tender or exchange offer for all shares at a
fair price as determined by the independent members of the Board), if a 20
percent or more shareholder consolidates or merges into or engages in certain
self-dealing transactions with the Company, or if there occurs any
reclassification, merger, or other transaction or transactions which increases
by more than one percent of the proportionate share of the Company's outstanding
Common Stock held by a 20 percent or more shareholder, then each holder of a
Right will be entitled to purchase that number of shares of the Company's Common
Stock which equals the exercise price of the Right divided by one-half of
the current market price of such Common Stock at the date of the occurrence of
the event. In addition, if the Company is involved in a merger or other business
combination transaction with another entity in which it is not the surviving
corporation or in connection with which its Common Stock is changed or
converted, or it sells or transfers 50 percent or more of its assets or earning
power to another entity, each Right that has not previously been exercised will
entitle its holder to purchase the number of shares of common stock of such
other person which equals the exercise price of the Right divided by one-half of
the current market price of such Common Stock at the date of the occurrence of
the event. The Company will generally be entitled to redeem the Rights at $.02
per Right
25
<PAGE> 28
at any time until the tenth day following a public announcement that a 20
percent stock position has been acquired and in certain other circumstances.
The Rights will expire on August 23, 1998, unless earlier redeemed or exchanged.
9. STOCK OPTION AND STOCK PURCHASE PLANS
Stock Options, Appreciation Rights and Restricted Stock
The Company has three Stock Option and Appreciation Rights Plans, the 1984, the
1987 and the 1989 Plans, pursuant to which stock options and appreciation
rights have been granted and will be granted in the future. In addition,
restricted stock awards may be granted under the 1989 Plan.
All Plans provide for the issuance of stock options and tandem
appreciation rights to key employees of the Company and, in the case of the 1987
and 1989 Plans only, also to directors of the Company. The options may be either
incentive stock options or non-qualified options. No more than a total of
2,100,000 shares of common stock may be issued under all of the Plans. The
period over which options must be exercised is determined on the date of grant
and may not be later than 10 years or 10 years and 30 days in the case of
incentive and non-qualified options, respectively.
Under the Plans, incentive stock options will be granted at fair market
value as of the date of grant and may not be exercised until 12 months after
the date of grant. Non-qualified options must equal at least 90% of the fair
market value on the date of grant.
Stock appreciation rights may also be granted to holders of options.
Under exercise of such rights, the holder will receive shares of common stock or
a combination of cash and common stock at the election of the Board of Directors
equal to the increase in the fair market value of the number of shares of common
stock subject to such rights. Under the Plan, when both an option and an
appreciation right are granted, the exercise of one cancels the other.
Restricted stock awards may be issued under the 1989 Plan and entitle
the participant to purchase common stock from the Company under terms which
provide for vesting over a specified number of years and a right of repurchase
by the Company of non-vested stock when the recipient's relationship with the
Company terminates. The price of the awards may be less than fair market value
but not less than par value ($.10 per share). Compensation expense resulting
from the grant of awards is recognized over the period from the award date to
the date the forfeiture provisions lapse. Stock awards amounting to 26,500
shares were issued in 1993 and 10,500 shares were issued in 1992. Shares
repurchased totaled 4,500 and 5,000 in 1992 and 1991, respectively, and none in
1993. The net cost of shares outstanding in 1993 was $169.
The Compensation Committee of the Board of Directors administers all of
the Plans.
<TABLE>
A summary of options under the Plans is as follows:
<CAPTION>
Number of Shares Option Price Per Share
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1990 1,564,164
Granted 419,000 $ .10-12.75
Exercised (40,290) .10-12.63
Cancelled or expired (424,688) 9.38-24.50
--------- -----------
Outstanding, December 31, 1991 1,518,186
Granted 481,000 .10-11.75
Exercised (40,317) .10-10.88
Cancelled or expired (227,078) 9.38-23.25
--------- -----------
Outstanding, December 31, 1992 1,731,791
Granted 328,525 .10-16.88
Exercised (567,935) .10-14.50
Cancelled or expired (254,293) 9.38-15.00
--------- -----------
Outstanding, December 31, 1993 1,238,088
---------
Options exercisable at December 31, 1993 372,163 $9.38-12.63
--------- -----------
Options available for future grant at December 31, 1993 182,008
---------
</TABLE>
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan which allows employees to
purchase shares of common stock of the Company at a 15% discount from market
value (subject to a minimum price and a maximum contribution per employee)
pursuant to annual offerings. The maximum number of shares available for
issuance under the current plan is 600,000 shares over a five-year period
ending in 1997. Employees purchased 25,818, 5,380 and 22,810 shares in 1993,
1992 and 1991, respectively.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
10. BUSINESS SEGMENT AND FOREIGN OPERATIONS
The Company operates within a single segment of the electronics industry
defined as the electromechanical component and subsystem sector. The Company
designs, manufactures and markets a broad range of electromechanical components
and subsystems.
The sales and marketing operations outside the United States are
conducted through marketing/warehousing subsidiaries in Australia, Canada,
France, Germany, Italy, Japan, Singapore, Sweden, Switzerland, the United
Kingdom and sales offices in other areas. The foreign manufacturing operations
are in Mexico, Singapore, Switzerland and the United Kingdom. The products
manufactured in Switzerland are sold to the parent company for further
processing or to the foreign marketing/warehousing subsidiaries for further
finishing or resale in local markets.
<TABLE>
Financial information concerning the Company's operations by major
geographical area is as follows:
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
United States
Sales excluding export sales $331,200 $269,603 $202,518
Export sales 9,181 9,304 4,684
Intersegment sales 18,464 18,914 15,265
-------- -------- --------
Total 358,845 297,821 222,467
======== ======== ========
Western Europe:
Sales excluding export sales 44,979 55,914 51,541
Export sales 1,282 1,079 161
Intersegment sales 5,301 5,853 5,435
-------- -------- --------
Total 51,562 62,846 57,137
======== ======== ========
Other Areas:
Sales excluding export sales 33,621 25,818 22,698
Export sales
Intersegment sales 3,942 984 1,737
-------- -------- --------
Total 37,563 26,802 24,435
======== ======== ========
Total 447,970 387,469 304,039
Less eliminations 27,707 25,751 22,437
-------- -------- --------
Total $420,263 $361,718 $281,602
======== ======== ========
Operating Income:
United States $ 37,740 $ 17,036 $ 2,320
Western Europe (135) 4,309 7,265
Other Areas 771 (1,596) (1,773)
-------- -------- --------
Total $ 38,376 $ 19,749 $ 7,812
======== ======== ========
Identifiable Assets:
United States $230,322 $211,087 $208,683
Western Europe 58,027 62,757 64,831
Other Areas 29,511 21,604 19,715
-------- -------- --------
Total $317,860 $295,448 $293,229
======== ======== ========
</TABLE>
Operating income by geographical area does not include corporate
expenses, restructuring costs, other income or expenses, or income taxes.
Intersegment sales between areas are made at negotiated selling prices. One
customer accounted for approximately 28% and 24% of sales for 1993 and 1992,
respectively.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
11. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<CAPTION>
(In thousands)
---------------------------------------------------
Net Earnings
Net Gross Income (Loss)
1993 Sales Margin (Loss) Per Share
<S> <C> <C> <C> <C>
1st Quarter $101,155 $21,545 $ 2,900 $ .16
2nd Quarter 106,295 23,313 3,600 .19
3rd Quarter 100,014 22,421 4,100 .22
4th Quarter 112,799 24,020 5,000 .26
-------- ------- --------- -------
$420,263 $91,299 $ 15,600 $ .83
1992
1st Quarter $ 84,587 $16,916 $ 1,400 $ .08
2nd Quarter 90,234 18,609 2,193 .12
3rd Quarter 91,422 18,879 1,703 .09
4th Quarter 95,475 19,790 1,290 .07
-------- ------- --------- -------
$361,718 $74,194 $ 6,586 $ .36
1991
1st Quarter $ 63,121 $15,280 $ 1,183 $ .07
2nd Quarter 64,846 15,875 758 .04
3rd Quarter* 70,015 15,812 (20,531) (1.13)
4th Quarter 83,620 15,277 (3,472) (.19)
-------- ------- --------- -------
$281,602 $62,244 $(22,062) $(1.21)
<FN>
* Includes before tax restructuring costs of $22,000 in 1991.
</TABLE>
28
<PAGE> 31
<TABLE>
SCHEDULE V
AUGAT INC. AND SUBSIDIARIES
---------------------------
PROPERTY, PLANT, AND EQUIPMENT
<CAPTION>
For the Years Ended December 31, 1993, 1992 and 1991
(In thousands)
- -------------------------------------------------------------------------------------------------------------------
Balance At Retire- Balance
Beginning Additions ments Other Translation At End
Description of Year At Cost Or Sales Changes Adjustments Of Year
(1) (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Land $ 4,204 $ $ $( 616) $( 60) $ 3,528
Buildings and building
improvements 56,830 35 27 ( 1,353) ( 811) 54,674
Machinery and equipment 105,931 947 3,240 12,083 ( 566) 115,155
Furniture and fixtures 19,781 340 978 1,643 ( 183) 20,603
Construction in progress 6,942 19,055 (15,938) ( 49) 10,010
-------- ------- ------ --------- -------- --------
TOTAL $193,688 $20,377 $4,245 $( 4,181) $(1,669) $203,970
-------- ------- ------ --------- -------- --------
Year Ended December 31, 1992:
Land $ 4,410 $ $ $( 113) $( 93) $ 4,204
Buildings and building
improvements 58,745 1,309 302 ( 2,365) ( 557) 56,830
Machinery and equipment 102,970 1,264 2,484 4,361 ( 180) 105,931
Furniture and fixtures 17,772 1,801 580 943 ( 155) 19,781
Construction in progress 6,365 10,121 796 ( 8,706) ( 42) 6,942
-------- ------- ------- --------- -------- --------
TOTAL $190,262 $14,495 $4,162 $( 5,880) $(1,027) $193,688
-------- ------- ------- --------- -------- --------
Year Ended December 31, 1991:
Land $ 3,925 $ 305 $ 191 $ 569 $( 198) $ 4,410
Buildings and building
improvements 54,500 642 687 6,912 (2,622) 58,745
Machinery and equipment 109,274 1,552 2,224 ( 3,604) (2,028) 102,970
Furniture and fixtures 14,626 1,589 114 2,006 ( 335) 17,772
Construction in progress 10,374 10,152 827 (13,000) ( 334) 6,365
-------- ------- ------ --------- -------- --------
TOTAL $192,699 $14,240 $4,043 $( 7,117) $(5,517) $190,262
-------- ------- ------ --------- -------- --------
- ------------------------------------------------------------------------------------------------------------------
<FN>
NOTES: 1993 1992 1991
---- ---- ----
1.a. Includes assets written off as part of restructuring. $(3,914) $(20,266)
b. Includes assets acquired in purchase transactions.
See note 2 to the consolidated financial statements. 13,943
c. Includes assets which have been reclassified to or
from Property held for sale. $(4,181) (1,966) (794)
See note 4 to the consolidated financial statements. ------- ------- --------
TOTAL $(4,181) $(5,880) $( 7,117)
d. Includes reclassifications made between categories. ======= ======= ========
2. Amounts represent the effect of Financial Accounting
Standards Board Statement No. 52, "Foreign Currency
Translation".
</TABLE>
29
<PAGE> 32
<TABLE>
SCHEDULE VI
AUGAT INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991
(In thousands)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO TRANSLATION BALANCE
BEGINNING COSTS AND OTHER ADJUSTMENTS AT END
DESCRIPTION OF YEAR EXPENSES RETIREMENTS CHANGES (1) (2) OF YEAR
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December
31, 1993:
Buildings and
building
improvements $15,231 $ 1,908 $ 22 $(1,147) $( 197) $ 15,773
Machinery and
equipment 68,334 9,856 2,995 ( 3) ( 452) 74,740
Furniture and
fixtures 11,861 2,702 919 ( 34) ( 152) 13,458
-----------------------------------------------------------------------
TOTAL $95,426 $14,466 $3,936 $(1,184) $( 801) $103,971
-----------------------------------------------------------------------
Year Ended December
31, 1992:
Buildings and
building
improvements $14,191 $ 2,205 $ 279 $( 861) $( 25) $ 15,231
Machinery and
equipment 64,350 9,865 1,939 (3,805) ( 137) 68,334
Furniture and
fixtures 9,926 2,622 325 ( 251) ( 111) 11,861
-----------------------------------------------------------------------
TOTAL $88,467 $14,692 $2,543 $(4,917) $( 273) $ 95,426
-----------------------------------------------------------------------
Year Ended December
31, 1991:
Buildings and
building
improvements $13,796 $ 2,134 $ 223 $(1,002) $( 514) $ 14,191
Machinery and
equipment 65,430 10,920 1,719 (8,872) (1,409) 64,350
Furniture and
fixtures 8,005 2,244 75 ( 50) ( 198) 9,926
-----------------------------------------------------------------------
TOTAL $87,231 $15,298 $2,017 $(9,924) $(2,121) $ 88,467
-----------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<FN>
NOTES: 1993 1992 1991
-------- -------- --------
1a. Includes amounts written off as part of restructuring. $(3,914) $(8,922)
b. Includes amounts acquired in purchase transactions.
See note 2 to the consolidated financial statements.
c. Includes amounts which have been reclassified to
Property held for sale. $(1,184) (1,003) (1,002)
See note 4 to the consolidated financial -------- -------- --------
statements. Total $(1,184) $(4,917) $(9,924)
d. Includes reclassification made between ======= ======= =======
categories
2. Amounts represent the effect of Financial Accounting
Standards Board Statement No. 52 "Foreign
Currency Translation".
</TABLE>
30
<PAGE> 33
<TABLE>
SCHEDULE VIII
AUGAT INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1993, 1992 and 1991
(In thousands)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------
CHARGED CHARGED
BALANCE AT TO COSTS TO OTHER BALANCE
BEGINNING AND ACCOUNTS DEDUCTIONS - AT END
DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR
- ---------------------------------------------------------------------------------------------------------------------
1993
- ----
<S> <C> <C> <C> <C> <C>
VALUATION ACCOUNTS DEDUCTED FROM
ASSETS TO WHICH THEY APPLY -
- - Allowance for doubtful accounts $1,451 $272 Bad Debts $594 (1) $1,129
- - Reserve for assets held for
resale $600 $ 600
------------------------ ----------------------------
1992
- ----
VALUATION ACCOUNTS DEDUCTED FROM
ASSETS TO WHICH THEY APPLY -
- - Allowance for doubtful accounts $1,479 $514 Bad Debts $542 (1) $1,451
------------------------ ------------------------------
1991
- ----
VALUATION ACCOUNTS DEDUCTED FROM
ASSETS TO WHICH THEY APPLY -
- - Allowance for doubtful accounts $1,832 $302 $236 (2) Bad Debts $891 (1) $1,479
------------------------ -----------------------------
- ---------------------------------------------------------------------------------------------------------------------
<FN>
Note 1. Amount is net of recoveries.
Note 2. Amount acquired in purchase transaction. See note 2 to the
consolidated financial statements.
</TABLE>
31
<PAGE> 34
<TABLE>
AUGAT INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands, except interest rates)
<CAPTION>
(3)
(3) Weighted
Weighted Average average
interest Maximum amount interest
(2) rate at amount outstanding rate
(1) Balance at end of outstanding during during
Classification end of year year during year year year
- -------------- ----------- ------- ------------ ---------- --------
1993
- ----
<S> <C> <C> <C> <C> <C>
Lines of credit $ 1,000 6.0% $10,000 $ 3,094 6.0%
1992
- ----
Lines of credit $12,900 6.0% $49,000 $15,917 6.0%
1991
- ----
Lines of credit $49,000 6.6% $49,000 $19,000 8.0%
<FN>
(1) U.S. dollar bank borrowings represent variable rate borrowings
under the Company's $40,000 credit agreement in 1993 and the
Company's former $20,000 and $10,000 credit agreements in 1992
and 1991, respectively. In 1992 and 1991, borrowings also include
bridge loan financing totaling $45,000 obtained in connection
with the acquisition of National Industries Inc.
(2) Reflects balance of borrowings under the credit agreement, short-
term, fixed rate loan prior to reclassification of such borrowings
(or a portion of such borrowings) to long-term debt based on the
Company's intention to refinance these notes on a long-term basis
and the ability, if necessary, to refinance these notes under the
credit agreement. At the end of 1992 and 1991, $9,000 and $40,000 of
such borrowings were reclassified to long-term
debt.
(3) The computation of average amounts outstanding and weighted average
interest rates during the year are based on daily balances and
interest rates for U.S dollar borrowings.
</TABLE>
32
<PAGE> 35
<TABLE>
SCHEDULE X
AUGAT INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
CHARGED TO COSTS AND EXPENSES
-----------------------------------
ITEM 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and Repairs $4,137 $4,335 $3,724
------ ------ ------
Advertising Costs $1,413 $2,090 $2,355
------ ------ ------
<FN>
Information not listed herein is omitted because of the absence of the
conditions under which it is required.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 36
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------
Not Applicable.
The balance of this page intentionally left blank.
34
<PAGE> 37
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning directors is incorporated
herein by reference pursuant to Rule 12b-23 to the Company's Proxy Statement
dated March 24, 1994 with respect to the Annual Meeting of Shareholders to be
held April 26, 1994.
<TABLE>
The following table sets forth the names of all executive officers of the
Company and certain other information relating to the positions held by them
with the Company and other business experience.
<CAPTION>
Business Experience
Executive Officer Age Position For the Past Five Years
- ----------------- --- -------- -----------------------
<S> <C> <C> <C>
Marcel P. Joseph 58 Chief Executive Chairman of the Board
Officer, President of Directors since
and Chairman of February, 1989.
the Board President and Chief
Executive Officer
since February, 1988.
Served as Executive
Vice President and
President and Chief
Operating Officer
with Communications
Satellite Corporation,
from April, 1985 to
February, 1988. For
twenty-four of the
previous twenty-six
years he was with
General Electric
Company serving in
various management
positions, the last
being as Vice Presi-
dent and General
Manager of the Trans-
portation Products
Division.
Anthony F. Lefkowicz 56 Vice President Vice President, Auto-
and General motive Business since
Manager, Augat September 1991. From
Automotive February 1991 to
Business September 1991 he was
Vice President of
Manufacturing Opera-
tions. Previously he
was Vice President and
General Manager, Auto-
motive Division from
May 1988 to February
1991. For twenty-
seven years he held
</TABLE>
35
<PAGE> 38
<TABLE>
<S> <C> <C> <C>
various management
positions with General
Electric Company, with
the last being General
Manager - Product
Support Operation,
Lighting Products
Division.
Richard J. Eaton 57 Vice President - Vice President, Human
Human Resources Resources since June,
1984. For the eleven
preceding years he
held various manage-
ment positions with
Itek Corporation, with
the latest being Vice
President Employee
Relations for Itek
Systems and Communi-
cations Industries.
Daniel J. Maher, Jr. 47 Corporate Controller Corporate Controller
since 1979.
John E. Lynch, Jr. 50 Treasurer Treasurer since
January, 1985;
Assistant Treasurer
from 1983 to 1985;
from August, 1979 to
December, 1982 Tax
Manager.
Larry E. Buffington 46 Vice President and Vice President and
General Manager, General Manager,
Communications Communications Pro-
Products Business ducts Business since
August 1991. Pre-
viously he was Chair-
man of the Board and
Chief Executive
Officer of Adaptive
Technologies, Inc.
from 1989 to 1991.
From 1988 to 1989 he
served as Vice
President and General
Manager, Cook Division
of Northern Telcom.
He was with AMP, Inc.
for 19 years serving
in various management
positions with the
last being General
Manager, Signal Trans-
mission Systems
Division.
</TABLE>
36
<PAGE> 39
<TABLE>
<S> <C> <C> <C>
L. Ronald Hoover 53 Vice President and Vice President and
General Manager, General Manager,
Interconnection Interconnection Pro-
Products Business ducts Business since
December 1991. Pre-
viously, he was
Managing Director and
Chief Operating
Officer of Diceon
Electronics, Inc. from
1989 to 1991. From
1979 to 1989 he served
AMP, Inc. in various
Management positions
with the last being
Group Vice President,
Signal Transmission
Products.
Gasper Buffa 41 Vice President and Vice President and
General Manager, General Manager, Auto-
Components Division motive Components
Division since
January, 1994. From
August 1992 to January
1994 he was Vice Pre-
sident, Engineering,
Sales & Marketing for
the Wiring Systems and
Components Division.
Previously, from
September 1991 to
August 1992 he was
Vice President &
General Manager, Com-
ponents Division and
from February 1991 to
September 1, 1991 he
was Vice President,
Manufacturing Opera-
tions for the Auto-
motive and Communica-
tions Division. From
March of 1989 to
February 1, 1991 he
was Vice President
Operations for the
Automotive Division.
He served the General
Electric Company from
1974 to 1989 in
various management
positions with the
last being Plant
Manager, Carolina
Products Plant.
James E. Finley 40 Vice President and Vice President and
General Manager, General Manager Augat
Augat Europe Europe since March
1992. Previously
Vice President and
General Manager,
European Automotive
Division from August
1991 to March 1992.
From February to
August 1991, Vice
President and General
Manager, Automotive
Division. From March
1989 to February 1991
was Vice President,
Sales and Marketing,
Automotive Division.
</TABLE>
37
<PAGE> 40
<TABLE>
<S> <C> <C> <C>
From 1986 to 1989 he
served as General
Marketing Manager with
Interconnect Products
Operation, GTE Pro-
ducts Corporation.
From 1978 to 1986 he
served in various
management positions
with AMP, Inc.
Ellen B. Richstone 42 Vice President and Vice President and
Chief Financial Chief Financial
Officer Officer since Novem-
ber, 1992. From March
1992 to October 1992
she was Senior Vice
President and Chief
Financial Officer of
Rohr, Inc. Prior to
that, she was Execu-
tive Vice President
and Chief Financial
Officer of Bull H.N.
Worldwide Information
Systems from 1989 to
1992. From 1981 to
1989, she served in
various positions at
Data General Corpora-
tion, the most recent
being Vice President
and Corporate
Treasurer.
Steven M. Abelman * 43 Vice President and Vice President and
General Manager, General Manager, Auto-
Wiring Systems motive Wiring Systems
Division Division since January
1994. Previously, he
was Vice President
Operations, Wiring
Systems and Components
Division from August
1992 to January 1994
and Vice President
Manufacturing, Wiring
Systems from March
1992 to August 1992.
From December 1991 to
March 1992 he was Vice
President U.S. Opera-
tions, Wiring Systems.
From 1990 to 1991 he
was Vice President
Connector Operations
for TriStar Inc. and
from 1985 to 1990 was
Director of Operations
for the Components
Division of I.T.T.
Cannon.
</TABLE>
The executive officers of the Company are elected annually.
* Effective, February, 1994
38
<PAGE> 41
ITEMS 11 AND 12 - EXECUTIVE COMPENSATION AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------
The information required by these items is incorporated herein by reference
pursuant to Rule 12b-23 to the Company's Proxy Statement dated March 24, 1994
for the Annual Meeting of Shareholders to be held April 26, 1994.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Not applicable.
The balance of this page intentionally left blank.
39
<PAGE> 42
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
- ----------------------------------------------------------------
(a) 1. Financial Statements
The Financial Statements listed below appear in Part II, Item
8 hereof.
Financial Statements:
---------------------
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
-----------------------------
The Financial Statement Schedules listed below appear in
Part II, Item 8 hereof.
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, and
Amortization of Property, Plant and
Equipment
Schedule VIII- Valuation and Qualifying Accounts
Schedule IX - Short-Term Borrowings
Schedule X - Supplementary Income Statement
Information
Schedules not included with this additional financial data
have been omitted because of the absence of conditions under
which they are required or because the required financial
information is included in the financial statements submitted.
(a) 3. Exhibits
--------
(3) Articles of Incorporation and By-Laws
(a) Restated Articles of Organization, as amended.
Incorporated by reference to Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1989.
(b) By-Laws, as amended. Incorporated by reference to
Exhibit 3(b) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987.
(4) Instruments Defining the Rights of Security Holders, Including
Indentures
(a) Specimen certificate representing shares of the
Registrant's $.10 par value common stock.
Incorporated by reference to Exhibit 4(a) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988.
40
<PAGE> 43
(b) Trust Indenture dated as of August 2, 1988 between
Augat Inc. and The Chase Manhattan Bank, N.A. as
Trustee. Incorporated by reference to Exhibit 2 of
the Registrant's Registration Statement on Form 8-A
dated August 2, 1988.
(10) Material Contracts
(a) 1994 Stock Plan (Exhibit 10(a)).
(b) 1984 Stock Option and Appreciation Right Plan.
Incorporated by reference to Exhibit A to the Proxy
Statement dated March 12, 1984 for the Annual Meeting
of the Registrant's Shareholders on April 24, 1984.
(c) 1987 Stock Option and Appreciation Right Plan.
Incorp- orated by reference to Exhibit A to the
Registrant's Proxy Statement dated March 25, 1987 for
the Annual Meeting of the Registrant's Shareholders
held on April 28, 1987.
(d) 1989 Stock Plan. Incorporated by reference to
Exhibit 10(d) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990.
(e) Supplementary Employee Retirement Plan. Incorporated
by reference to Exhibit 10(c) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1986.
(f) Letter of Credit and Reimbursement Agreement among
Chemical Bank as Letter of Credit Issuer, Altair
International, Inc. as Borrower and Augat Inc. as
Guarantor dated as of December 1, 1986. Incorporated
by reference to Exhibit 10(f) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1986.
(g) Employment Agreement dated January 3, 1991 between
the Registrant and Marcel P. Joseph. Incorporated by
reference to Exhibit 10(g) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1990.
(h) Augat Inc. Savings and Retirement Plan. Incorporated
by reference to Exhibit 10(h) to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1988.
(i) Rights Agreement dated as of August 2, 1988 between
Augat Inc. and The Chase Manhattan Bank, N.A., Rights
Agent. Incorporated by reference to Exhibit 1 of the
Registrant's Registration Statement on Form 8-A
dated August 2, 1988.
(j) Severance Agreements. Incorporated by reference to
Exhibit 10(k) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989.
(k) Deferred Compensation Plan. Incorporated by
reference to Exhibit 10(1) to the Registrant's Annual
Report on Form 10-K for the year ended December 31,
1989.
41
<PAGE> 44
(l) Supplemental Disability Income Plan. Incorporated by
reference to Exhibit 10(m) to the Registrant's Annual
Report on Form 10-K for the year ended December 31,
1989.
(m) Supplemental Survivor Benefit Plan. Incorporated by
reference to Exhibit 10(n) to the Registrant's Annual
Report on Form 10-K for the year ended December 31,
1989.
(n) Agreement of Merger among Augat Inc., National
Industries, Inc. and June M. Collier dated August 30,
1991. Incorporated by reference to Exhibit 2 to the
Registrants' Form 8-K filed September 16, 1991.
(p) Note Agreement between Augat Inc., as Borrower and
Principal Mutual Life Insurance Company and Allstate
Life Insurance Company, as Lenders, dated as of
February 1, 1992. Incorporated by reference to
Exhibit 10(p) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991.
(q) Revolving Credit Agreement among Augat Inc., Augat
Wiring Systems Inc., Augat Automotive Inc., Augat
Communications Group Inc., LRC Electronics Inc., Reed
Devices Inc., The First National Bank of Boston,
Shawmut Bank, N.A., Chemical Bank and The First
National Bank of Boston, as agent, dated as of
September 14, 1992. Incorporated by reference to
the Exhibit (10.1) to the prospectus included in
Registration Statement No. 33-
53600 dated December 2, 1992.
(r) 1993 Employee Stock Purchase Plan. Incorporated by
reference to Exhibit 10(r) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1992.
(s) Amendment No. 3 to the Revolving Credit Agreement
among Augat Inc., Augat Wiring Systems Inc., Augat
Automotive Inc., Augat Communication Products Inc.,
LRC Electronics Inc., Reed Devices Inc., The First
National Bank of Boston, Shawmut Bank, N.A., Chemical
Bank and The First National Bank of Boston, as agent,
dated as of July 9, 1993.
(21) Subsidiaries of the Registrant. Exhibit 21.
(23) Independent Auditors' Consent. Exhibit 23.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed with the Commission during
the last quarter of calendar year 1993.
42
<PAGE> 45
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf of the undersigned thereunto duly authorized.
(Registrant) AUGAT INC.
---------------------------------------------------------
By /s/ MARCEL P. JOSEPH By /s/ ELLEN B. RICHSTONE
--------------------------- ---------------------------
Marcel P. Joseph Ellen B. Richstone
Chairman of the Board, Vice President &
Title Chief Executive Officer Title Chief Financial Officer
----------------------- -----------------------
& President
-----------
Date March 24, 1994
--------------------
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 date indicated.
<TABLE>
<S> <C>
/s/ MARCEL P. JOSEPH
- ------------------------------- -------------------------------
Marcel P. Joseph, Director Thomas L. King, Director
(Date) March 24, 1994 (Date) March , 1994
------------------------- -------------------------
/s/ VERNON R. ALDEN /s/ JOHN N. LEMASTERS
- ------------------------------- -------------------------------
Vernon R. Alden, Director John N. Lemasters, Director
(Date) March 24, 1994 (Date) March 24, 1994
------------------------- -------------------------
/s/ DAVID V. RAGONE
- ------------------------------- -------------------------------
Bruce L. Crockett, Director David V. Ragone, Director
(Date) March , 1994 (Date) March 24, 1994
------------------------- -------------------------
/s/ ALAN J. ZAKON
- ------------------------------- -------------------------------
John D. Curtin, Jr., Director Alan J. Zakon, Director
(Date) March , 1994 (Date) March 24, 1994
------------------------- -------------------------
- ------------------------------- -------------------------------
Samuel S. Dennis 3d, Director Norton Q. Sloan, Director
(Date) March , 1994 (Date) March , 1994
------------------------- -------------------------
/s/ JERALD G. FISHMAN
- -------------------------------
Jerald G. Fishman, Director
(Date) March 24, 1994
-------------------------
</TABLE>
43
<PAGE> 1
EXHIBIT 10(a)
AUGAT INC.
1994 STOCK PLAN
FEBRUARY 15, 1994
1. PURPOSE.
The purpose of this plan (the "Plan") is to secure for Augat Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of the Company and its parent (if
any) and subsidiary corporations who are expected to contribute to the Company's
future growth and success.
2. OPTIONS, AWARDS, AND ADMINISTRATION.
(a) Options and Awards. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company and may be either
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or
nonstatutory options which are not intended to meet the requirements of Section
422. Awards granted pursuant to the Plan shall be authorized by action of the
Board of Directors of the Company and shall meet the requirements of Section 5
of the Plan.
(b) Administration. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Compensation Committee
of the Board of Directors, constituted in accordance with Section 2(d), below
(the "Committee") may in its sole discretion (i) make awards for the purchase of
shares of the Company's Common Stock, $.10 par value per share ("Common Stock"),
pursuant to Section 5, (ii) grant options to purchase shares of the Company's
Common Stock, pursuant to Section 6, and (iii) issue shares upon exercise of
options as provided in the Plan. The Committee shall have authority, subject to
the express provisions of the Plan, to construe the respective awards, option
agreements, and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
awards and option agreements, which need not be identical, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any award or option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination made in good faith.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
explicit reference to Rule 16b-3 shall apply only to such persons as are
required to file reports under Section 16(a) of the Exchange Act (a "Reporting
Person").
(d) Grants to Officers and Directors. The selection of a director or an
officer (as the terms "director" and "officer" are defined for purposes of Rule
16b-3) as a recipient of an award or stock option, the selection of an employee
as a recipient of an award or stock option, the timing of a grant of an option
or award, the exercise or purchase price related to the same and the number of
shares subject to the option or award, or any conditions or waivers thereof
shall be determined by the Committee, which shall consist of two or more
directors, each of whom shall be a "disinterested person"; provided, however,
that each non-employee director shall be granted "Mandated Options" (as
hereinafter defined) pursuant to the provisions set forth below and shall not be
eligible to receive any other options hereunder. No nonemployee director shall
be eligible to receive a restricted stock award under the Plan. For the purposes
of the Plan, a director shall be deemed to be "disinterested" only if such
person (i) qualifies as a "disinterested person" within the meaning of paragraph
A-1
<PAGE> 2
(d)(3) of Rule 16b-3 of the Exchange Act (or any successor rule), as such term
is interpreted from time to time and (ii) on or after the first meeting of
shareholders at which Directors are to be elected that occurs after July 1,
1994, qualifies as an "outside director" for purposes of Section 162(m) of the
Code. The term "Mandated Options" shall mean options to purchase 5,000 shares of
Common Stock, subject to adjustment as provided in Section 10, below, which
shall be granted, beginning in 1994, to each non-employee director on the date
he or she is elected or re-elected to the Board of Directors. Mandated Options
shall (a) be exercisable on a cumulative basis in installments of 1,250 shares
per year, commencing one year from the date of grant, (b) have a purchase price
per share of 100% of the fair market value of such stock, as determined by the
Board of Directors, at the time of grant of such option and (c) expire five
years from the date of grant. Notwithstanding the foregoing, if a nonemployee
director is granted an option in connection with his or her election or
re-election to the Board of Directors under any other stock option plan adopted
by the Company, the number of shares of Common Stock for which a Mandated Option
under this Plan is exercisable shall be reduced, share for share, by the number
of shares for which any such option is granted under such other plans.
3. ELIGIBILITY.
Options and awards may be granted or made to persons who are, at the time
of grant or award, officers, employees or directors of the Company or any Parent
Corporation or Subsidiary (as those terms are defined in Section 14 hereof);
provided that Incentive Stock Options shall be granted only to employees of the
Company. No person shall be granted any Incentive Stock Option under the Plan
who, at the time such option is granted, owns, directly or indirectly, capital
stock of the Company possessing more than 10% of the total combined voting power
of all classes of stock of the Company, unless the requirements of subparagraph
(g)(ii) of Section 6 are satisfied. The attribution of stock ownership
provisions of Section 424(d) of the Code, and any successor provisions thereto,
shall be applied in determining the shares of stock owned by a person for
purposes of applying the foregoing percentage limitation. A person who has been
granted an option or award may, if he or she is otherwise eligible, be granted
additional options or awards if the Committee shall so determine.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 9 below, the maximum number of
shares of Common Stock of the Company which may be issued and sold under the
Plan is 750,000 shares and the number of shares of Common Stock of the Company
for which options or restricted stock awards may be awarded in any calendar
year, in the aggregate, shall not exceed 70,000 shares for the Chief Executive
Officer or 30,000 shares for any other individual. Such shares may be authorized
and unissued shares or may be shares issued and thereafter acquired by the
Company. Any shares of Common Stock subject to an award which are not purchased
by the recipient of the award, or which are purchased by the recipient of the
award but later repurchased by the Company in accordance with the terms of the
award or the Plan, shall again be available for purposes of the Plan. If an
option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject to such option
shall again be available for purposes of the Plan.
5. AWARDS.
A restricted stock award ("award") shall consist of the sale and issuance
by the Company of shares of Common Stock, and purchase by the recipient of such
shares, subject to the terms, conditions and restrictions described in the
document evidencing the award and in this Section 5 and elsewhere in the Plan.
(a) Execution of Restricted Stock Award. As a condition to an award under
the Plan, each recipient of an award shall execute an agreement substantially in
the form set forth as Exhibit A to the Plan or in such
A-2
<PAGE> 3
other form, which may differ among recipients, as shall be specified by the
Board of Directors at the time of such award.
(b) Price. The Board of Directors shall determine the price (which shall
be not less than the par value of Common Stock) at which shares of Common Stock
shall be sold to recipients of awards under the Plan. The Board of Directors
may, in its discretion, sell and issue shares pursuant to awards at a purchase
price below the then fair market value of the Common Stock, provided that the
price shall not be less than the par value of the Common Stock on the date of
grant. The purchase price shall be paid in cash or by check payable to the order
of the Company at the time that the award is accepted by the recipient.
(c) Number of Shares. The award shall specify the number of shares of
Common Stock granted thereunder.
(d) Restrictions on Transfer. In addition to such other terms, conditions
and restrictions upon awards as shall be imposed by the Board of Directors, all
shares issued pursuant to an award shall be subject to the following
restrictions:
(1) All shares of Common Stock subject to an award (including any
shares issued pursuant to paragraph (e) of this Section) shall be subject
to certain restrictions on disposition and obligations of resale to the
Company as provided in subparagraph (2) below, and shall not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of until
such restrictions lapse. The period during which such restrictions are
applicable is referred to as the "Restricted Period." The Restricted Period
applicable to an award shall end no earlier than the third anniversary of
the date the award is made. In addition, vesting of an award may be subject
to such additional conditions as the body established under the first
sentence of Section 2(d) deems appropriate, including conditions designed
to obtain a tax deduction for the Company.
(2) In the event that a recipient's employment with the Company, a
Parent Corporation or a Subsidiary is terminated within the Restricted
Period, whether such termination is voluntary or involuntary, with or
without cause, or because of the death or disability of the recipient, the
Company shall have the right and option for a period of three months
following such termination of employment to buy for cash that number of the
shares of Common Stock purchased under the award as to which the
restrictions on transfer and the forfeiture provisions contained in the
award have not then lapsed, at a price equal to the price per share
originally paid by the recipient. If such termination of employment occurs
within the last three months of the applicable restrictions, the
restrictions shall continue to apply until the expiration of the Company's
three month option period.
(3) Notwithstanding subparagraphs (1) and (2) above, the Board of
Directors may, in its discretion, either at the time that an award is made
or at any time thereafter, waive its right to repurchase shares of Common
Stock upon the occurrence of any of the events described in this paragraph
(d) or remove or modify any part or all of the restrictions. The preceding
sentence shall not be applicable with respect to awards which the Committee
intends to qualify as performance-based compensation for purposes of
Section 162(m) of the Code. In addition, the Board of Directors may, in its
discretion, impose upon the recipient of an award at the time of such
award, such other restrictions on any shares of Common Stock issued
pursuant to such award as the Board may deem advisable and in the best
interests of the Company and its shareholders.
(e) Additional Shares. Any shares received by a recipient of an award as a
stock dividend on, or as a result of stock splits, combinations, exchanges of
shares, reorganizations, mergers, consolidations or otherwise with respect to,
shares of Common Stock received pursuant to such award shall have the same
status and shall
A-3
<PAGE> 4
bear the same restrictions, all on a proportionate basis, as the shares
initially purchased pursuant to such award.
(f) Transfers in Breach of Award; Repurchased Shares. If any transfer of
shares purchased pursuant to an award is made or attempted contrary to the terms
of the Plan and of such award, the Board of Directors shall have the right to
purchase for the account of the Company those shares from the owner thereof or
his transferee at any time before or after the transfer at the price paid for
such shares by the person to whom they were awarded under the Plan. In addition
to any other legal or equitable remedies which it may have, the Company may
enforce its rights by specific performance to the extent permitted by law. The
Company may refuse for any purpose to recognize as a shareholder of the Company
any transferee who receives any shares contrary to the provisions of the Plan
and the applicable award, and the Company may retain and/or recover all
dividends on such shares which were paid or payable subsequent to the date on
which the prohibited transfer was made or attempted.
(g) Additional Award Provisions. The Committee may, in its sole
discretion, include additional provisions in any award granted under the Plan,
including without limitation commitments to pay cash bonuses, make or guarantee
loans or transfer other property to recipients upon the grant of awards, or such
other provisions as shall be determined by the Board of Directors.
(h) Restrictions. No award shall be made if the award would cause the
number of shares awarded under the Plan to exceed 3% of the total outstanding
shares of Common Stock of the Company.
6. OPTIONS.
(a) Execution of Option Agreements. As a condition to the grant of an
option under the Plan, each recipient of an option shall execute an option
agreement in such form not inconsistent with the Plan as may be specified by the
Board of Directors. Such option agreements may differ among recipients.
(b) Purchase Price; Payment for Stock. The purchase price per share of
stock deliverable upon the exercise of an option shall be determined by the
Committee, provided that (i) in the case of an Incentive Stock Option, the
exercise price shall not be less than 100% of the fair market value of such
stock, as determined by the Committee, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
subparagraph (g)(ii) of Section 6, and (ii) in the case of a non-statutory
option, the exercise price shall not be less than 100% of the fair market value
of such stock, as determined by the Committee, at the time of grant of such
option. Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or a check to the order of the Company in an
amount equal to the exercise price of such options, or by delivery to the
Company of shares of Common Stock of the Company already owned by the optionee
having a fair market value equal in amount to the exercise price of the options
being exercised, or by any combination of such methods of payment. The fair
market value of any shares of the Company's Common Stock which may be delivered
upon exercise of an option shall be determined by the Committee.
(c) Option Period. Each option and all rights thereunder shall expire on
such date as the Committee shall determine, but, in no event after the
expiration of five years from the day on which the option is granted and shall
be subject to earlier termination as provided in the Plan.
(d) Exercise of Options. Each option granted under the Plan shall be
exercisable either in full or in installments at such time or times and during
such period as shall be set forth in the agreement evidencing such option,
subject to the provisions of the Plan.
(e) Nontransferability of Options. No option granted under the Plan shall
be assignable or transferable by the person to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of
A-4
<PAGE> 5
descent and distribution; provided however that non-statutory options may be
transferred pursuant to a qualified domestic relation order (as defined in Rule
16b-3). During the life of the optionee, the option shall be exercisable only by
such person.
(f) Effect of Termination of Employment or Directorship. No option may be
exercised unless, at the time of such exercise, the optionee is, and has been
continuously since the date of grant of his or her option, employed by, or a
director of, the Company, a Parent Corporation or a Subsidiary except that if
and to the extent the option agreement or instrument so provides:
(i) the option may be exercised within the period of three months
after the date the optionee ceases to be an employee of the Company (or
within such lesser period as may be specified in the option agreement or
instrument);
(ii) if the optionee dies while in the employ of the Company, a Parent
Corporation or a Subsidiary or within three months after the optionee
ceases to be such an employee, the option may be exercised by the person to
whom it is transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within such
lesser period as may be specified in the option agreement or instrument);
(iii) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, a Parent Corporation or a Subsidiary, the option may
be exercised within the period of six months after the date the optionee
ceases to be such an employee because of such disability (or within such
lesser period as may be specified in the option agreement or instrument);
and
(iv) if the optionee is a director of the Company, a Parent
Corporation or a Subsidiary, the option may be exercised within the period
of four and one-half years after the date of the optionee's termination or
retirement as a director;
provided that in no event may any option be exercised after the expiration date
of the option. For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
(g) Incentive Stock Options. Options granted under the Plan which are
intended to be Incentive Stock Options shall be specifically designated as
Incentive Stock Options and shall be subject to the following additional terms
and conditions:
(i) Dollar Limitation. Incentive Stock Options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company) shall not, in the aggregate, become exercisable for the first time
in any one calendar year for shares of Common Stock with an aggregate fair
market value (determined as of the respective date or dates of grant) of
more than $100,000.
(ii) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (after taking into
account the attribution of stock ownership rules of Section 424(d) of the
Code), then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(A) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(B) The option exercise period shall not exceed five years from the
date of grant.
A-5
<PAGE> 6
Except as modified by the preceding provisions of this paragraph 6(g), all
the provisions of the Plan shall be applicable to Incentive Stock Options
granted hereunder.
(h) Additional Option Provisions. The Committee may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, make or guarantee loans or transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Board of Directors; provided that such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
(i) Acceleration. The Board of Directors may, in its sole discretion,
accelerate the date on which all or any particular option or options granted
under the Plan may be exercised; provided, however, that no such acceleration
shall be permitted if it would cause the Plan to fail to comply with Section 422
of the Code or with Rule 16b-3 or if it would cause the disallowance of a
compensation deduction under Section 162(m) of the Code.
7. GENERAL RESTRICTIONS.
(a) Investment Representations. The Company may require any person to whom
an award is made or an option is granted, as a condition of purchasing the
shares subject to such award or exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the award or option for his
or her own account for investment and not with any present intention of selling
or otherwise distributing the same, and to such other effects as the Company
deems necessary or appropriate in order to comply with federal and applicable
state securities laws, or with covenants or representations made by the Company
in connection with any public offering of its Common Stock.
(b) Compliance With Securities Laws. Each award and option shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such award or option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
is necessary as a condition of, or in connection with, the issuance or purchase
of shares thereunder, such award or option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained on conditions acceptable to the Board of
Directors. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration or qualification.
8. RIGHTS AS A SHAREHOLDER.
The recipient of an award or the holder of an option shall have no rights
as a shareholder with respect to any shares covered by the award or option
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
9. ADJUSTMENT PROVISIONS.
(a) If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassifica-
A-6
<PAGE> 7
tion, stock dividend, stock split, reverse stock split or other distribution
with respect to such shares of Common Stock, or other securities, an appropriate
and proportionate adjustment may be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, (ii) the maximum number of shares
for which options or awards may be made to any individual, (iii) the number and
kind of shares or other securities subject to then outstanding options under
this Plan, and (iv) the price for each share subject to any then outstanding
options under the Plan, without changing the aggregate purchase price as to
which such options remain exercisable. Notwithstanding the foregoing, no
adjustment shall be made pursuant to this Section 10 if such adjustment would
cause the Plan to fail to comply with Section 422 of the Code or with Rule
16b-3.
(b) Adjustments under this Section 10 will be made by the Board of
Directors, whose determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No fractional shares
will be issued under the Plan on account of any such adjustments.
10. MERGERS, ETC.
(a) In the event of any merger or consolidation in which outstanding shares
of common stock are exchanged for securities, cash or property of a third party
(other than any merger or consolidation with any wholly-owned subsidiary of the
Company), or in the event that all or substantially all of the assets or more
than 50% of the outstanding voting stock of the Company is acquired by any other
person or entity, or in the event of a liquidation of the Company, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company, shall provide for the assumption by such
successor corporation of the obligations of the Company with regard to awards
and, as to outstanding options shall provide that all outstanding options shall
become exercisable in full immediately prior to such event (except as otherwise
provided in the option agreement) and shall either (i) provide that all
unexercised options shall be assumed, or equivalent options shall be substituted
by the acquiring or successor corporation (or an affiliate thereof), provided
that any such options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code; or (ii) upon written notice to the
optionees, provide that all unexercised options will terminate immediately prior
to the consummation of such merger, consolidation, acquisition, reorganization
or liquidation unless exercised by the optionee within a specified number of
days (but not less than fifteen days) following the date of such notice.
(b) The Company may grant options under the Plan in substitution for
options held by employees of another corporation who currently become employees
of the Company, or a subsidiary of the Company, as the result of a merger or
consolidation of the employing corporation with the Company or a subsidiary of
the Company, or as a result of the acquisition by the Company, or one of its
subsidiaries, of property or stock of the employing corporation. The Company may
direct that substitute options be granted on such terms and conditions as the
Board of Directors considers appropriate in the circumstances.
11. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any award or option shall confer upon
any recipient of an award or any optionee any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of the recipient or optionee. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board of
Directors at the time of such absence.
12. OTHER EMPLOYEE BENEFITS.
The value of an award granted to an employee, the amount of any
compensation deemed to be received by an employee as a result of the exercise of
an option or the sale of shares received pursuant to an award or
A-7
<PAGE> 8
upon the exercise of an option will not constitute compensation with respect to
which any other employee benefits of such employee are determined, including,
without limitation, benefits under any bonus, pension, profit-sharing, life
insurance or salary continuation plan, except as otherwise specifically
determined by the Board of Directors.
13. DEFINITION OF SUBSIDIARY AND PARENT CORPORATION.
(a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of an option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(b) Parent Corporation. The term "Parent Corporation" as used in the Plan
shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if, at the time of the granting of an
option, each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
14. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, except that without the approval of the
shareholders of the Company the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan, (b)
increase the maximum number of shares which may be issued under the Plan or any
limits applicable to individuals (except for adjustments specifically provided
in the Plan), (c) materially modify the requirements as to eligibility for
participation in the Plan or (d) modify or amend the Plan if the approval of the
shareholders is required under Section 422 of the Code or any successor
provisions with respect to Incentive Stock Options or under Rule 16b-3. The
termination or any modification or amendment of the Plan shall not, without the
consent of a recipient of an award or an optionee, affect his or her rights
under an award previously made or an option previously granted to him or her.
With the consent of the recipient of the award or of the optionee affected, the
Board of Directors may amend outstanding awards or option agreements in a manner
not inconsistent with the Plan but, except as provided in Section 10, above, may
not reduce the purchase or exercise price. The Board of Directors shall have the
right to amend or modify (i) the terms and provisions of the Plan and of any
outstanding Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code and (ii) the terms and
provisions of the Plan and of any outstanding option to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3.
15. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. With the consent of the Company, which may be
withheld in its sole discretion, the optionee may elect to satisfy such
obligations, in whole or in part, (i) by having the Company withhold shares of
Common Stock otherwise issuable pursuant to the exercise of an option or (ii)
delivering to the Company shares of Common Stock already owned by the optionee
having a fair market value equal to such withholding obligation. An optionee who
has made an election pursuant to this paragraph 14(a) may only satisfy his or
her withholding obligation with shares of Common Stock which are not subject to
any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
The fair market value of the shares
A-8
<PAGE> 9
used to satisfy such withholding obligation shall be determined in good faith by
the Board of Directors as of the date that the amount of tax to be withheld is
to be determined.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.
(c) If the recipient of an award under the Plan elects, in accordance with
Section 83(b) of the Code, to recognize ordinary income in the year of
acquisition of any shares awarded under the Plan, the Company will require at
the time of such election an additional payment for withholding tax purposes
based on the difference, if any, between the purchase price of such shares and
the fair market value of such shares as of the date immediately preceding the
date of the award.
16. NO REPRICING.
Neither the Committee nor the Board of Directors shall have any authority,
with or without the consent of the affected option holders, to cancel
outstanding options and issue new options with a lower exercise price in
substitution for the cancelled options.
17. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no options granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, no options shall be granted.
Amendments to the Plan not requiring shareholder approval shall become effective
when adopted by the Board of Directors. Amendments requiring shareholder
approval (as provided in Section 15) shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option issued after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Company to grant such Incentive Stock Option to
a particular optionee) unless and until such amendment shall have been approved
by the Company's shareholders. If such shareholder approval is not obtained
within twelve months of the Board's adoption of such amendment, any Incentive
Stock Options granted on or after the date of such amendment shall terminate to
the extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to these limitations,
options may be granted under the Plan at any time after the effective date and
before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 11,
the Plan shall terminate upon the earlier of (i) the close of business on the
day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors, or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the final vesting of awards or
the exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then awards and options outstanding
on such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such awards, options and stock
appreciation rights.
Adopted by the Board of Directors
on February 15, 1994
A-9
<PAGE> 1
EXHIBIT 10(s)
AMENDMENT NO. 3
DATED AS OF JULY 9, 1993
TO REVOLVING CREDIT AGREEMENT
DATED AS OF SEPTEMBER 24, 1992
AMENDMENT NO. 3 dated as of July 9, 1993 ("Amendment No. 3"), by and
among (a) AUGAT INC. (the "Company"), a Massachusetts corporation having its
principal place of business at 89 Forbes Boulevard, Mansfield, Massachusetts
02048 (b) the following wholly-owned subsidiaries of the Company (collectively,
the "Borrowing Subsidiaries"), AUGAT WIRING SYSTEMS INC., an Alabama
corporation, AUGAT AUTOMOTIVE INC., a Michigan corporation, AUGAT COMMUNICATION
PRODUCTS INC. (f/k/a AUGAT COMMUNICATIONS GROUP INC.), a Washington
corporation, LRC ELECTRONICS, INC., a New York corporation and REED DEVICES,
INC., a Delaware corporation, each having its principal place of business at 89
Forbes Boulevard, Mansfield, Massachusetts 02048 (the Company and the Borrowing
Subsidiaries are collectively referred to herein as the "Borrowers"), (c) THE
FIRST NATIONAL BANK OF BOSTON, SHAWMUT BANK, N.A and CHEMICAL BANK (the
"Banks") and (d) THE FIRST NATIONAL BANK OF BOSTON, as agent for the Banks (the
"Agent"), amending certain provisions of the Revolving Credit Agreement dated
as of September 24, 1992 (as heretofore amended and in effect, the "Credit
Agreement"), by and among the Borrowers, the Banks, and the Agent. Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.
WHEREAS, the Borrowers, the Banks and the Agent desire to amend the
Credit Agreement as provided herein;
NOW THEREFORE, the parties hereto hereby agree as follows:
#1. AMENDMENT TO THE CREDIT AGREEMENT. From and after the Effective
Date, as defined in Section 2 hereof, the following sections of the Credit
Agreement are hereby amended as follows:
(a) Section 1 of the Credit Agreement is hereby amended by
deleting the following definitions in their entireties:
1
<PAGE> 2
"Accounts Receivable; Borrowing Base; Borrowing Base Report;
Determined Value; Eligible Accounts Receivable; Eligible
Inventory; Eligible Machinery and Equipment; Officer's
Certificate; and Security Fund.
(b) Section 1 of the Credit Agreement is hereby further amended by:
(i) amending the definition of "Commitment Percentage" by deleting
the existing table contained within such definition and substituting in lieu
thereof, the following table:
"Bank Percentage
----- ----------
FNBB 41.6666675%
Shawmut 41.6666675%
Chemical 16.6666650%"
(ii) amending the definition of "Company Commitment" by deleting the
existing table contained within such definition and substituting in lieu
thereof, the following table:
"Bank Amount
----- ------
FNBB $12,500,000
Shawmut $12,500,000
Chemical $ 5,000,000"
and (iii) amending the definition of "Working Capital Commitment" by deleting
the existing table contained within such definition and substituting in lieu
thereof, the following table:
"Bank Amount
----- -------
FNBB $4,166,667
Shawmut $4,166,667
Chemical $1,666,666"
(c) Section 2.1(a) of the Credit Agreement is hereby amended by (i)
deleting the words "the lesser of (i)" contained in the fourteenth line
thereof, (ii) deleting the words "and (ii) the Borrowing Base minus the Working
Capital Revolving Credit Loans minus the Working Capital Maximum Drawing
Amounts and the sum of Working Capital Unpaid
2
<PAGE> 3
Reimbursement Obligations" contained in the fifteenth through the
eighteenth lines thereof and (iii) deleting subsection (c) therefrom.
(d) Section 2.2(a) of the Credit Agreement is hereby amended by
(i) deleting the words "the lesser of (i)" contained in the fifteenth line
thereof, (ii) deleting the words "and (ii) the Borrowing Base" contained in the
sixteenth line thereof and (iii) deleting subsection (c) therefrom.
(e) Section 2.4 of the Credit Agreement is hereby amended by (i)
deleting the words "and (viii) that the aggregate amount of Loans (including
the Proposed Loan), Maximum Drawing Amount and Unpaid Reimbursement Obligations
do not exceed the Borrowing Base" from the sixteenth through nineteenth lines
thereof and (ii) deleting the last sentence of such section in its entirety.
(f) Section 3.2(a) of the Credit Agreement is hereby amended by
(i) deleting the words "the lesser of (i)" contained in the second and third
lines thereof and (ii) deleting the words "and (ii) the Borrowing Base minus,
the Working Capital Revolving Credit Loans minus the Working Capital Maximum
Drawing Amount and the Working Capital Unpaid Reimbursement Obligations"
contained in the fifth through the eighth lines thereof.
(g) Section 3.2(b) of the Credit Agreement is hereby amended by
(i) deleting the words "the lesser of (i)" contained in the fourth and fifth
lines thereof and (ii) deleting the words "and (ii) the Borrowing Base"
contained in the fifth and sixth lines thereof.
(h) Section 4.1(a) of the Credit Agreement is hereby amended by
(i) deleting the words "the lesser of (1)" contained in the twenty-third line
thereof and (ii) deleting the words "and (2) the Borrowing Base" contained in
the twenty-fourth line thereof.
(i) Section 7.20(c) of the Credit Agreement is hereby deleted in
its entirety.
(j) Sections 8.4(e) and (f) of the Credit Agreement are hereby
deleted in their entireties.
(k) Section 9.3(f) of the Credit Agreement is hereby deleted in
its entirety.
(l) Section 9.4 of the Credit Agreement is hereby amended by
inserting the words ", as amended by The First Amendment to Note Agreement
dated as of June 1, 1993," immediately following the word "Agreement" on the
fifth line thereof.
3
<PAGE> 4
(m) Section 12.5 of the Credit Agreement is hereby deleted in its
entirety.
(n) Exhibits A-1 and A-2 to the Credit Agreement are hereby
deleted and Exhibits A-l and A-2 attached hereto are hereby substituted in lieu
thereof.
#2. EFFECTIVENESS OF AMENDMENT. The amendments to the Credit
Agreement to be made pursuant to Section 1 of this Amendment No. 3 shall become
effective as of July 13, 1993 (the "Effective Date"), when the Agent shall have
received:
(a) this Amendment No. 3 signed by each of the Borrowers and each
of the Banks;
(b) new amended and restated Company Notes and Working Capital
Notes in the form of Exhibit A-1 and A-2 attached hereto with appropriate
insertions, signed by the applicable Borrowers;
(c) an amendment to the Security Agreement and Trust Indenture in
form and substance satisfactory to the Banks certified by the Borrowers;
(d) a certificate of the Secretary or Assistant Secretary of each
Borrower certifying as to (i) the articles of incorporation of such Borrower,
(ii) the by-laws of such Borrower and (iii) the names, titles, incumbency and
true signatures of such Borrower's officers authorized to sign this Amendment
No. 3; and
(e) a favorable opinion of counsel to the Borrowers addressed to
the Banks and satisfactory to the Agent and the Banks.
#3. Existing Loans. Immediately prior to the Effective Date (a) the
sum of the aggregate principal amount of the Company Revolving Credit Loans
outstanding, plus the Company Maximum Drawing Amount, plus the Company Unpaid
Reimbursement Obligations is equal to $468,257.60, (b) the sum of the
aggregate principal amount of the Working Capital Revolving Credit Loans
outstanding, plus the Working Capital Maximum Drawing Amount, plus the Working
Capital Unpaid Reimbursement Obligations is equal to $9,200,000.00, and (c)
the amount of each Bank's Company Revolving Credit Loans and Working Capital
Revolving Credit Loans are as set forth on Schedule 1 hereto. On the Effective
Date FNBB and Shawmut severally agree to lend to the Company the amounts set
forth opposite their name under the captions "New Company Revolving Credit
Loans" and "New Working Capital Revolving Credit Loans" on Schedule 1 hereto.
On the Effective Date the Company agrees to pay to Chemical the
4
<PAGE> 5
amounts set forth opposite its name under the captions "Company Revolving
Credit Loan Payment" and "Working Capital Revolving Credit Loan Payment" on
Schedule 1 hereto.
#4. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby
repeats, on and as of the date hereof, each of the representations and
warranties made by it in the Credit Agreement, the other Loan Documents and any
documents, instruments and agreements related thereto (except to the extent of
changes resulting from transactions contemplated or permitted by the Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially adverse,
and to the extent that such representations and warranties relate expressly to
an earlier date), provided, that all references therein to the Credit Agreement
shall refer to the Credit Agreement as amended hereby.
#5. REFERENCE TO AND EFFECT ON CREDIT AGREEMENT.
(a) On and after the Effective Date, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," "herein"
or words of like import, shall mean and be a reference to the Credit
Agreement as amended and modified hereby.
(b) Except as specifically amended and modified hereby,
the Credit Agreement shall remain in full force and effect, and is
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment No. 3 shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Bank under
the Credit Agreement.
#6. GOVERNING LAW. This Amendment No. 3 shall be deemed to be a
contract under the laws of the Commonwealth of Massachusetts and shall for all
purposes be construed in accordance with and governed by the laws of said
Commonwealth.
#7. MISCELLANEOUS. The captions in this Amendment No. 3 are for
convenience of reference only and shall not define or limit the provisions
hereof. This Amendment No. 3 may be executed in separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment No. 3 it
shall not be necessary to produce or account for more than one such
counterpart.
5
<PAGE> 6
Signed, sealed and delivered, as of the date set forth at the beginning
of this Amendment No. 3 by each of the Borrowers, each of the Banks and the
Agent.
AUGAT INC.
By: Marcel P. Joseph
-------------------------------
Name: Marcel P. Joseph
Title: President
AUGAT WIRING SYSTEMS INC.
By: John E. Lynch, Jr.
-------------------------------
Name: John E. Lynch, Jr.
Title: Treasurer
AUGAT AUTOMOTIVE INC.
By: John E. Lynch, Jr.
-------------------------------
Name: John E. Lynch, Jr.
Title: Treasurer
AUGAT COMMUNICATION PRODUCTS INC.
By: John E. Lynch, Jr.
-------------------------------
Name: John E. Lynch, Jr.
Title: Treasurer
LRC ELECTRONICS, INC.
By: John E. Lynch, Jr.
-------------------------------
Name: John E. Lynch, Jr.
Title: Treasurer
REED DEVICES, INC.
By: John E. Lynch, Jr.
-------------------------------
Name: John E. Lynch, Jr.
Title: Treasurer
THE FIRST NATIONAL BANK OF
BOSTON, individually and as
Agent
By: Richard D. Hill, Jr.
-------------------------------
Name: Richard D. Hill, Jr.
Vice President
6
<PAGE> 7
SHAWMUT BANK, N.A.
By: David A. Splaine
-----------------------------------
Name: David A. Splaine
Title: Vice President
CHEMICAL BANK
By: Mary E. Cameron
-----------------------------------
Name: Mary E. Cameron
Title: Vice President
7
<PAGE> 8
Schedule 1
<TABLE>
<CAPTION>
New Company New Working Working Capital
Revolving Capital Revolving Company Revolving Revolving Credit
Bank Credit Loans Credit Loans Credit Loan Payment Loan Payment
---- ------------ ------------ ------------------- ------------
<S> <C> <C> <C> <C>
The First National $0 $624,999.75 N/A N/A
Bank of Boston
Shawmut Bank, N.A. $0 $625,000.50 N/A N/A
Chemical Bank N/A N/A $0 1,250,000.25
</TABLE>
8
<PAGE> 1
<TABLE>
Exhibit 21
Subsidiaries of the Registrant
- ------------------------------
The subsidiaries listed below have been included in the consolidated financial
statements filed herewith.
<CAPTION>
Jurisdiction of Percentage
Subsidiaries of the Registrant Incorporation Owned
- ------------------------------ --------------- -----------
<S> <C> <C>
Augat Automotive GmbH Germany 100
Augat AB Sweden 100
Augat AG Switzerland 100
Augat Communication Products Inc. Washington 100
Augat Electronics Inc. Canada 100
Augat International Limited Virgin Islands 100
Augat KK Japan 100
Augat Limited England 100
Augat Pte Limited Singapore 100
Augat Pty Limited Australia 100
Augat Realty Inc. Massachusetts 100
Augat SA France 100
Augat SA de CV Mexico 100
Augat SRL Italy 100
Augat Wiring Systems Inc. Alabama 100
AUG-ISO Inc. New Jersey 100
AUG-SEP Inc. California 100
Electroform SA Switzerland 100
Elfab Corp. Texas 100
LRC Electronics, Inc. New York 100
Reed Devices, Inc. Delaware 100
Reliable Electronic Finishing Company,
Inc. Massachusetts 100
Swiss/Pylon, Inc. Massachusetts 100
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
Augat Inc.:
We consent to the incorporation by reference in Registration Statement Nos.
2-99933, 33-16549, 33-37833 and 33-65590 of Augat Inc. all on Form S-8 of our
report dated January 27, 1994 appearing in this Annual Report on Form 10-K of
Augat Inc. and its subsidiaries for the year ended December 31, 1993.
DELOITTE & TOUCHE
Boston, Massachusetts
March 25, 1994
