<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] 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)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2022285
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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:
COMMON STOCK $.10 PAR VALUE
(TITLE OF EACH CLASS)
NEW YORK STOCK EXCHANGE
(NAME OF EACH EXCHANGE ON WHICH REGISTERED)
</TABLE>
Indicate by check mark if disclosure of delinquent files pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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, 1995 was $316,400,697.
The number of shares of the Registrant's common stock outstanding on March
2, 1995 was 19,500,172.
DOCUMENTS INCORPORATED BY REFERENCE:
Information with respect to directors in Item 10 and other information
required by Items 11-13 is incorporated by reference into Part III of this Form
10-K, to the extent described in such Part III, from the Company's Proxy
Statement for its Annual Meeting of Shareholders scheduled for April 25, 1995.
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<TABLE>
<CAPTION>
FORM 10-K ANNUAL REPORT
TWELVE MONTHS ENDED DECEMBER 31, 1994
AUGAT INC.
PAGE
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<S> <C> <C>
PART I
Item 1. Business.............................................................. 1
Item 2. Properties............................................................ 6
Item 3. Legal Proceedings..................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders................... 8
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................................................. 10
Item 8. Financial Statements and Supplementary Data........................... 13
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.................................................. 31
PART III
Item 10. Directors and Executive Officers of the Registrant.................... 32
Item 11. Executive Compensation................................................ 34
Item 12. Security Ownership of Certain Beneficial Owners and Management........ 34
Item 13. Certain Relationships and Related Transactions........................ 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....... 35
SIGNATURES.............................................................................. 37
</TABLE>
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PART I
ITEM 1 -- BUSINESS
GENERAL
Augat Inc. ("Augat") is a Massachusetts corporation organized in 1946. As
used herein the term "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 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.
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.
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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 fiber optic 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.
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
2
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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
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 1994 the Company's products and services were sold
directly to approximately 5,400 customers and a substantial number of additional
customers were served through a network of industrial electronic component
distributors. Of total sales 19% was derived from sales through a number of
distributors located throughout the world and no distributor accounted for as
much as 2.5% of the Company's sales. One customer, Ford Motor Company, accounted
for approximately 32% and another customer for 4.5% of the Company's sales in
1994; no other customer accounted for more than 4.3% of sales.
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 1994 the Company's international sales amounted to approximately 21% of
total sales. Approximately 52% 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.
BACKLOG
The Company estimates that its backlog of unfilled orders at December 31,
1994 was $119 million compared with $104 million at December 31, 1993. 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.
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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 by 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 1994, 1993 and 1992
expenditures for such research, development and engineering were approximately
$20 million, $19 million, and $19 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
sufficient amounts to purchase, install, and operate containment, remediation
and other 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.
In connection with the acquisition of National Industries, Inc. in 1991,
the Company determined that actual 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 Company has obtained the necessary permits and is in the process of
remediating the site. The Company is keeping the State informed of its progress.
The Company has included in its financial statements an allowance of $4.5
million for estimated environmental cleanup costs as of December 31, 1994.
EMPLOYEES
The Company had approximately 4,400 employees as of December 31, 1994. 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, 1994 had approximately 2,300 contract
laborers.
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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 8 to the
accompanying financial statements of the Registrant which are included under
Item 8 hereof.
Balance of this page intentionally left blank.
5
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ITEM 2 -- PROPERTIES
Information regarding the Company's active properties appears below:
<TABLE>
<CAPTION>
APPROXIMATE FACILITY
SIZE DECEMBER 31, 1994
(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.................................. 111,000(2)
Kent, Washington...................................... 56,000(2)
Sydney, Australia..................................... 4,000(2)
Mississauga, Canada................................... 5,000(2)
Telford, England...................................... 41,000(1)
Rungis-Cedex, France.................................. 5,000(2)
Troisdorf, Germany.................................... 11,000(2)
Tsuen Wan, N.T., Hong Kong............................ 1,000(2)
Milan, Italy.......................................... 4,000(2)
Kawasaki, Japan....................................... 21,000(2)
Osaka, Japan.......................................... 1,000(2)
Empalme, Sonora, Mexico............................... 170,000(2)
Guaymas, Sonora, Mexico............................... 112,000(2)
Singapore............................................. 24,000(2)
Stockholm, Sweden..................................... 2,000(2)
Bioggio, Switzerland.................................. 188,000(1)
Zug, Switzerland...................................... 2,000(2)
---------
1,582,000
=========
Total facilities up for sale or inactive as accounted
for by valuation reserves............................. 317,000
=========
<FN>
- ---------------
(1) Company-owned facility
(2) Company-leased facility
</TABLE>
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.
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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 5 -- "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 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.
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,
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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.
In 1993, the defendants appealed the judgment, generally challenging the
entire damages decision. The Company 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.
On September 28, 1994, following an April, 1994 opinion by the
Massachusetts Supreme Judicial Court which vacated the 1992 damages award, the
Company entered into mediation with Aegis, Inc., Jeremy D. Scherer and Olin
Corporation regarding all open issues in the Augat Inc., et. al. v. Aegis, Inc.,
et. al. litigation that had been pending since April, 1985. As a result of that
mediation, the Company and the defendants agreed to settle the case. Under the
terms agreed upon, the Company received payment on October 20, 1994. A portion
of the settlement (approximately $2 million) was recorded as a credit to
selling, general and administrative expenses (S G & A), as such amounts
represent a recovery of litigation costs charged to S G & A in the current and
prior periods. In addition, other income in 1994 includes approximately $1
million from this settlement. Following receipt of the cash payment,
stipulations of dismissal were filed in the state and federal courts, dismissing
all pending claims. The Company and Isotronics also have exchanged releases with
Aegis, Inc. and Scherer.
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 certain aspects of 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. Both parties have brought claims for
declaratory judgements on Collier's request for indemnification for her legal
fees and costs in this case as a former officer and director of National
Industries. 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. Collier has
voluntarily dismissed her breach of contract claim, security law claim and part
of her misrepresentation claim. Both parties have now filed cross motions for
partial summary judgement but no ruling has yet been made. No trial date has
been set at this time.
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.
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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".
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.
<TABLE>
<CAPTION>
CLOSING PRICE RANGE
COMMON STOCK DIVIDENDS
------------------- ---------
HIGH LOW PAID
------ ------ ---------
<S> <C> <C> <C>
1994
1st Quarter................................................. $23.75 $17.50 --
2nd Quarter................................................. 21.75 18.75 --
3rd Quarter................................................. 24.38 20.25 $ .04
4th Quarter................................................. 21.38 16.00 .04
------ ------ -----
$24.38 $16.00 $ .08
1993
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 --
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 --
</TABLE>
The Company, in July 1994, reinstated its quarterly cash dividend. The
current quarterly amount is $.04 per share on the Company's Common Stock.
The approximate number of holders of record of the Company's Common Stock
at December 31, 1994 was 1,571.
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ITEM 6 -- SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Sales, Income and Dividends
Net sales......................... $530,706 $420,263 $361,718 $281,602 $299,193
Cost of products sold............. 420,647 328,964 287,524 219,358 212,437
Selling, general and
administrative expenses........ 66,219 63,492 60,920 62,301 63,940
Restructuring costs............... 22,000
Other income (expense) - net...... (4,140) (4,207) (3,519) 463 1,133
Income (loss) before taxes........ 39,700 23,600 9,755 (21,594) 23,949
Provision for taxes............... 13,500 8,000 3,169 468 6,816
Net income (loss)................. 26,200 15,600 6,586 (22,062) 17,133
Earnings (loss) per share......... 1.36 .83 .36 (1.21) .95
Cash dividends per share.......... .08 .40 .40
Net income (loss) as percent of
net sales...................... 4.9% 3.7% 1.8% (7.8)% 5.7%
Net income (loss) as percent of
shareholders' average equity... 11.9% 8.1% 3.7% (11.4)% 8.7%
Working Capital
Current assets.................... 198,460 176,508 157,641 154,941 153,582
Current liabilities............... 71,659 57,580 50,767 60,930 37,292
Working capital................... 126,801 118,928 106,874 94,011 116,290
Current ratio..................... 2.8 to 1 3.1 to 1 3.1 to 1 2.5 to 1 4.1 to 1
Other Data
Property, plant, and
equipment - net................ 120,839 99,999 98,262 101,795 105,468
Total assets...................... 355,974 317,860 295,448 293,229 272,541
Long-term debt.................... 35,033 45,797 56,939 50,236 12,864
Debt-to-equity ratio.............. 14.7% 22.7% 31.4% 28.4% 6.1%
Shareholders' equity.............. 237,521 201,611 181,481 176,633 209,389
Average common shares
outstanding.................... 19,280 18,789 18,370 18,182 18,050
</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.
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE
(DECREASE)
----------------
YEARS ENDED DECEMBER 31, 1994 1993
------------------------- VS. VS.
1994 1993 1992 1993 1992
----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Net sales....................................... 100.0% 100.0% 100.0% 26.3% 16.2%
Cost of products sold........................... 79.3 78.3 79.5 27.9 14.4
Gross Margin.................................... 20.7 21.7 20.5 20.5 23.0
Selling, general, etc. ......................... 12.5 15.1 16.8 4.3 4.2
Other (income) expense.......................... .8 1.0 1.0 (1.6) 19.6
Provision for taxes............................. 2.5 1.9 .9 68.7 152.4
----- ----- ----- ---- -----
Net income...................................... 4.9% 3.7% 1.8% 67.9% 136.9%
===== ===== ===== ==== =====
</TABLE>
10
<PAGE> 13
SALES BY MAJOR PRODUCT AREA
A breakdown of sales for calendar years 1994, 1993 and 1992 by major
product is as follows:
<TABLE>
<CAPTION>
NET SALES
-------------------------------------------
1994 % 1993 % 1992 %
----- --- ----- --- ----- ---
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Interconnection Products Business........... $131 25 $129 30 $127 35
Wiring Systems and Components Business...... 292 55 217 52 180 50
Communications Products Business............ 108 20 74 18 55 15
---- --- ---- --- ---- ---
Total............................. $531 100% $420 100% $362 100%
==== === ==== === ==== ===
</TABLE>
RESULTS OF OPERATIONS
The Company's sales growth and improved operating performance continued
into 1994. The Company's results reflect increased market penetration in the
fast growing U.S. cable television and telecommunications markets, the strength
of the U.S. automotive industry and the improvement in the European automotive
market. Overall focus on the Company's cost structure contributed to the
improved operating efficiencies. The sales improvement in 1993 over 1992 was due
to the significant improvement in the domestic automotive market and market
share improvement in the cable television and telecommunication's markets of the
communications industry. International sales were $109 million, $89 million and
$92 million for the years 1994, 1993 and 1992, respectively.
The Interconnection Products Business sales have been relatively flat for
the three years ended 1994. Increases in new product sales have been offset by
reduction in sales of mature product lines, price reductions and the
de-emphasizing of certain product lines during the three-year period. During the
past two years, this business has reorganized and reengineered its domestic and
international operations in order to be a more efficient and competitive player
in the markets it serves. This business' future sales strategy is to focus on
strengthening its relationships with selected customers by delivering innovative
products.
Sales growth in the Wiring Systems and Components Business continued in
1994 increasing 34% with domestic sales increasing 34% and European sales
increasing 41% compared with 1993. For 1993, domestic sales increased 27% and
European sales decreased 22% compared with 1992. The continuing improvement in
the U.S. economy, the rebound in the European economy and the increase in
electronic systems content in automobiles all contributed to the significant
sales improvement in this business. In addition, this business in 1994
benefitted from the strong domestic automotive market demand which included
Ford's Mustang and Aerostar vehicles.
The Communications Products Business serves two primary markets: cable
television (CATV) and telecommunications. This industry is aggressively building
and upgrading its systems to accommodate new technologies and services. By
servicing these markets effectively, this business' sales have grown 46% and 35%
in 1994 and 1993. The Company in 1994 has invested over $11 million in new plant
and equipment for this business in response to the significant sales growth. The
Company is projecting to invest approximately $16 million in capital
expenditures for this business in 1995 to accommodate the anticipated customer
demand.
Overall sales in 1994 continued its upward trend due to the significant
increase in the domestic automotive business, a rebound in the European
automotive market and substantial sales growth in the CATV and
telecommunications markets.
Gross margin decreased by 1% of sales in 1994 due to a shift in the
Company's sales mix as the automotive division's sales increased by 3% of total
Company sales. This business has higher labor and material costs compared to the
other business units. In addition, gross margin was effected by selective
selling price decreases which were offset by increases in new product offerings
(approximately $138 million). For 1993, gross margin increased by 1.2% of sales
as the Company benefitted from its cost control and productivity programs.
11
<PAGE> 14
Selling, general and administrative expenses (SG&A) continued to be managed
aggressively in 1994 as well as in 1993. The reduction in these costs as a
percentage of sales in the past two years has been the result of the Company's
concerted effort to maintain strong cost control in this area. In addition, the
automotive business has a lower SG&A expense component compared to the other
business units. In 1994, the Company also recorded a portion of the Aegis
litigation settlement proceeds (approximately $2 million) as a credit to SG&A as
such amounts represent a recovery of litigation costs charged to SG&A in the
current and prior periods. Management intends to maintain SG&A expenses in the
13% to 15% range of sales.
Other income (expense) has remained essentially constant as a percentage of
sales for the three years ended 1994. Interest expense has decreased over the
past three years due to the reduction in long-term debt and the improvement in
cash flow which reduced the necessity of short-term borrowings. In 1994, other
income includes the write-down of assets held for sale and lease termination
costs of approximately $1 million. In addition, approximately $1 million from
the Aegis litigation settlement was recorded under this caption.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". This change, as of
that date, did not have a significant impact on the financial statements. Taxes
in 1994 and 1993 were 34% of income compared to the statutory rate of 35% for
both years. The effective statutory rate for 1994 and 1993 was negatively
impacted by taxes imposed by various domestic tax entities. For 1994, these
higher taxes were offset by the recognition of previously reserved and not
realizable foreign operating loss carryforwards. For 1993, a tax benefit was
recognized for prior years' restructuring costs. See Note 3 to the Consolidated
Financial Statements 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. In 1994, the Company completed
a new revolving credit agreement with four banks by increasing its maximum
borrowing to $100 million. As of December 31, 1994, the Company had no
borrowings under this credit facility. During 1994, the Company reduced its
total debt by $3 million. The Company's financial condition improved in 1994 as
working capital increased to $127 million compared to $119 million in 1993. At
December 31, 1994, long-term debt represented 14.7% of equity compared with
22.7% for 1993. Income generated from operations along with established credit
facilities is sufficient to cover expected operating growth in the next few
years. Capital expenditures in 1995 are projected to be in the $30 to $35
million range.
Since 1992, the Company has spent approximately $.9 million associated with
site remediation for certain facilities. Future costs are expected to be
$200,000 to $300,000 annually for at least the next fifteen years. See Note 5 to
the Consolidated Financial Statements.
The Company, in July 1994, reinstated its quarterly common stock dividend.
The current quarterly amount is $.04 per share.
The book value of the Company's common stock at December 31, 1994 was
$12.21 per share.
12
<PAGE> 15
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and financial statement schedules are
submitted herewith:
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Financial Statements:
Independent Auditors' Report..................................................... 14
Consolidated Balance Sheets at December 31, 1994 and 1993........................ 15
Statements of Consolidated Income for the years ended
December 31, 1994, 1993 and 1992............................................... 16
Statements of Consolidated Shareholders' Equity for the years ended
December 31, 1994, 1993 and 1992............................................... 17
Statements of Consolidated Cash Flows for the years ended
December 31, 1994, 1993 and 1992............................................... 18
Notes to Consolidated Financial Statements....................................... 19
Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts................................. 30
</TABLE>
13
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of
Augat Inc.:
We have audited the accompanying consolidated balance sheets of Augat Inc.
and its subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. Our audits also
included the consolidated financial statement schedule listed at Item 8. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Augat Inc. and its subsidiaries
as of December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 31, 1995
14
<PAGE> 17
AUGAT INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................... $ 20,535 $ 8,540
Accounts receivable -- less allowance for doubtful accounts, $1,276 in 1994
and $1,129 in 1993......................................................... 89,521 73,633
Refundable income taxes...................................................... 138
Inventories:
Finished goods............................................................. 33,359 33,493
Work in process............................................................ 20,894 26,415
Raw materials.............................................................. 28,698 26,654
--------- ---------
Total inventories............................................................ 82,951 86,562
Deferred income taxes........................................................ 2,873 4,556
Prepaid expenses............................................................. 2,580 3,079
--------- ---------
Total current assets.................................................. 198,460 176,508
--------- ---------
Property, Plant, and Equipment:
Land......................................................................... 3,826 3,528
Building and building improvements........................................... 63,365 54,674
Machinery and equipment...................................................... 137,978 115,155
Furniture and fixtures....................................................... 22,590 20,603
Construction in progress -- buildings and machinery.......................... 13,543 10,010
--------- ---------
Total........................................................................ 241,302 203,970
Less accumulated depreciation................................................ (120,463) (103,971)
--------- ---------
Property, plant, and equipment -- net.......................................... 120,839 99,999
--------- ---------
Other Assets:
Goodwill -- net.............................................................. 25,454 26,759
Property held for sale -- net................................................ 4,829 9,179
Other........................................................................ 6,392 5,415
--------- ---------
Total other assets.................................................... 36,675 41,353
--------- ---------
Total................................................................. $ 355,974 $ 317,860
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable................................................................ $ 1,000
Current maturities of long-term debt......................................... $ 10,884 2,130
Accounts payable............................................................. 32,744 28,353
Federal, state and foreign taxes payable..................................... 4,963 3,352
Accrued compensation and benefits............................................ 11,274 10,193
Other accrued expenses....................................................... 11,794 12,552
--------- ---------
Total current liabilities............................................. 71,659 57,580
--------- ---------
Long-Term Debt................................................................. 35,033 45,797
Deferred Income Taxes.......................................................... 11,761 12,872
Commitments and Contingencies
Shareholders' Equity:
Common stock -- par value $.10 per share:
Authorized 60,000,000 shares:
Issued and outstanding, 19,467,467 in 1994 and 19,032,767 in 1993.......... 1,947 1,903
Paid-in capital.............................................................. 75,730 69,262
Retained earnings............................................................ 143,526 118,878
Cumulative translation adjustment............................................ 17,088 11,923
Treasury stock, at cost:
16,700 shares at 1994 and 1993............................................. (110) (110)
Unearned compensation -- restricted stock awards............................. (660) (245)
--------- ---------
Shareholders' equity........................................................... 237,521 201,611
--------- ---------
Total................................................................. $ 355,974 $ 317,860
========= =========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 18
AUGAT INC.
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $530,706 $420,263 $361,718
Cost of products sold...................................... 420,647 328,964 287,524
-------- -------- --------
Gross margin............................................... 110,059 91,299 74,194
Selling, general and administrative expenses............... 66,219 63,492 60,920
-------- -------- --------
Income from operations..................................... 43,840 27,807 13,274
Other income (expense):
Interest income, other................................... 71 386 1,486
Interest expense......................................... (4,211) (4,593) (5,005)
-------- -------- --------
Net........................................................ (4,140) (4,207) (3,519)
-------- -------- --------
Income before taxes on income.............................. 39,700 23,600 9,755
Provision for taxes on income.............................. 13,500 8,000 3,169
-------- -------- --------
Net income................................................. 26,200 15,600 6,586
-------- -------- --------
Earnings per share......................................... $ 1.36 $ .83 $ .36
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 19
AUGAT INC.
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
-------------------------------------------------------------
COMMON STOCK
---------------------
NUMBER OF CUMULATIVE
SHARES PAID-IN RETAINED TRANSLATION
OUTSTANDING AMOUNT CAPITAL EARNINGS ADJUSTMENT
----------- ------ -------- --------- -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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
Common stock issued under employee
benefit plans........................ 435 44 5,475
Tax benefit from exercise of stock
options.............................. 993
Net income.............................. 26,200
Dividends paid.......................... (1,552)
Foreign currency translation
adjustment........................... 5,165
--------- ------ ------- -------- -------
BALANCE, DECEMBER 31, 1994................ 19,468 $1,947 $75,730 $143,526 $17,088
========= ====== ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 20
<TABLE>
<CAPTION>
AUGAT INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
(IN THOUSANDS) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 26,200 $ 15,600 $ 6,586
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization....................... 18,421 15,758 16,040
Amortization of restricted stock awards............. 304 169 131
Provision for non-current asset write-down.......... 635 600
Gain on the sale of property, plant, and
equipment........................................ (226) (97) (213)
Deferred income taxes -- net........................ 98 2,055 831
Increase (decrease) in cash from changes in assets
and liabilities:
Accounts receivable................................. (15,888) (20,549) (2,496)
Refundable income taxes............................. 138 (25) 962
Inventories......................................... 3,611 (13,196) 117
Prepaid expenses.................................... 499 (324) (486)
Other assets........................................ (1,629) (703) (3,003)
Accounts payable.................................... 4,391 7,337 4,051
Income taxes payable................................ 2,604 1,991 598
Accrued compensation and other expenses............. 323 545 (9,266)
Effect of exchange rate changes on current assets
and liabilities (other than cash)................ 988 (693) (701)
-------- -------- --------
Net cash provided by operating activities.................. 40,469 8,468 13,151
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment............... (31,452) (20,377) (14,495)
Proceeds from the sale of property, plant, and
equipment............................................. 1,750 407 2,924
-------- -------- --------
Net cash used for investing activities..................... (29,702) (19,970) (11,571)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid...................................... (1,552)
Proceeds from short-term borrowings...................... 70,000 29,700 12,900
Payments for short-term borrowings....................... (71,000) (32,600) (58,000)
Proceeds from long-term debt............................. 49,000
Payments for long-term debt.............................. (2,010) (11,302) (4,269)
Common stock issued under employee benefit plans......... 4,800 6,560 592
-------- -------- --------
Net cash provided (used) by financing activities........... 238 (7,642) 223
-------- -------- --------
Effect of exchange rate changes on cash.................... 990 (639) (1,006)
-------- -------- --------
Net changes in cash and cash equivalents................... 11,995 (19,783) 797
Cash and cash equivalents beginning of year................ 8,540 28,323 27,526
-------- -------- --------
Cash and cash equivalents end of year...................... $ 20,535 $ 8,540 $ 28,323
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 21
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. Foreign
subsidiaries are included on the basis of fiscal years ended November 30. All
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 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 $20,000, $19,000 and $19,000, in 1994, 1993 and 1992,
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.
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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. The Company periodically reviews goodwill to assess
recoverability, based upon expectations of nondiscounted cash flows and
operating income for each subsidiary having a material goodwill balance.
Impairments would be recognized in operating results if a permanent diminution
in value were to occur. Accumulated amortization at December 31, 1994 and 1993,
was $4,803 and $3,498, respectively. Amortization of goodwill was $1,305, $1,292
and $1,262, in 1994, 1993 and 1992, 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
material dilutive effect on earnings per share.
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 1994, 1993 and 1992 included interest of
$4,391, $4,510 and $3,450, and income taxes of $11,326, $4,112 and $2,362,
respectively.
OTHER MATTERS
During 1994, the Company received a cash settlement in connection with the Aegis
litigation. A portion of the settlement (approximately $2 million) was recorded
as a credit to SG&A, as such amounts represent a recovery of litigation costs
charged to SG&A in the current and prior periods. Other income in 1994 includes
approximately $1 million of the above settlement and the write-down of assets
held for sale and lease termination costs of approximately $1 million.
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. This hedging minimizes the impact of foreign exchange rate movements
on the Company's operating results as 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, 1994 and 1993, the Company had
$6,800 and $3,500, respectively, of foreign exchange contracts outstanding.
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.
20
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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 37%, 35% and 31% of
total sales in 1994, 1993 and 1992, respectively.
The Company's financial instruments include cash, accounts receivable and
payable, notes payable and long-term debt at December 31, 1994 and 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. Outstanding letters of
credit amounted to $2,400 at December 31, 1994.
2. DEBT AND AVAILABLE CREDIT FACILITIES
Long-term debt at December 31, 1994 and 1993, exclusive of current maturities,
consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Senior notes due 1996-1999 at interest rate of 8.61%............. $31,100 $40,000
Industrial development and pollution control revenue bonds at
interest
rates ranging from 4.0% to 8.4%, due 1996-2009................. 3,800 5,376
Capitalized lease obligations:
Industrial development bonds due 1996 at interest rates ranging
from 70% to 75% of prime.................................... 133 421
------- -------
Total.................................................. $35,033 $45,797
======= =======
</TABLE>
Long-term borrowing maturities in each of the five years subsequent to December
31, 1995, are as follows: 1996, $10,365; 1997, $8,929; 1998, $8,931; 1999,
$4,408 and 2000 and thereafter, $2,400. The industrial development and pollution
control revenue bonds are collateralized by buildings and equipment with a net
book value of approximately $6,672, of which $6,996 is guaranteed by a letter of
credit at December 31, 1994.
The capitalized lease obligations, which are financed by proceeds from bonds,
are secured by the leased facilities which had a net book value of $1,147 at
December 31, 1994.
The private placement senior 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.
In 1994, the Company increased its borrowing limit from $40 million up to $100
million under a new unsecured revolving credit agreement with several banks. The
agreement which expires no sooner than July 1, 1997 requires a commitment fee of
approximately one-quarter percent per annum, payable on any available and unused
portion. At December 31, 1993 the Company's borrowings under the revolving
credit facility totaled $1 million, which was borrowed for working capital
purposes. Interest on the working capital borrowings are at a variable base
rate, approximately prime rate (8.5% at December 31, 1994 and 6% at December 31,
1993). At December 31, 1994, there were no borrowings under the revolving credit
facility.
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. INCOME TAXES
The geographic components of income before taxes on income were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
<S> <C> <C> <C>
United States.......................................... $28,455 $21,364 $6,456
Foreign................................................ 11,245 2,236 3,299
------- ------- ------
Income before taxes on income................ $39,700 $23,600 $9,755
======= ======= ======
</TABLE>
The components of the provision for taxes on income were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
CURRENT:
United States......................................... $ 8,509 $1,607 $ 189
Foreign............................................... 3,107 1,452 1,141
State................................................. 1,786 838 871
------- ------ ------
Total current................................. 13,402 3,897 2,201
======= ====== ======
DEFERRED:
United States......................................... (86) 3,611
Foreign............................................... 184 492 968
------- ------ ------
Total deferred................................ 98 4,103 968
------- ------ ------
Provision for taxes on income................. $13,500 $8,000 $3,169
======= ====== ======
</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 1994 and 1993 are the benefits of operating losses
of $740 and $882, respectively and a decrease in the valuation reserve of $1,496
and $513, respectively.
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 before
taxes is as follows:
<TABLE>
<CAPTION>
% OF PRETAX INCOME
------------------------
1994 1993 1992
---- ----- -----
<S> <C> <C> <C>
Statutory federal tax rate................................... 35.0 35.0 34.0
State income taxes -- net.................................... 2.9 2.3 5.9
Foreign income taxed at different rates, losses not tax
benefitted, or earnings of foreign subsidiaries expected to
be remitted................................................ 1.8 9.0 18.5
Utilization of domestic losses and tax credits............... (6.4) (12.8) (33.0)
Non-deductible expenses...................................... .8 .6 5.1
Other items -- net........................................... (.1) (.2) 2.0
---- ----- -----
Effective tax rate........................................... 34.0 33.9 32.5
==== ===== =====
</TABLE>
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The components of the deferred tax assets and liabilities as of December 31,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:
CURRENT:
Accrued liabilities............................................ $ (3,621) $ (3,883)
Alternative minimum tax credit carryforwards................... (2,616)
-------- --------
Current deferred tax assets.................................... (3,621) (6,499)
Valuation allowance............................................ 748
-------- --------
Current deferred tax assets -- net............................. (2,873) (6,499)
-------- --------
NON-CURRENT:
Pension costs.................................................. (3,339) (2,293)
Other liabilities.............................................. (2,349)
Operating loss carryforwards................................... (6,065) (6,665)
Foreign tax credit carryforwards............................... (1,192) (2,442)
-------- --------
Non-current deferred tax assets................................ (12,945) (11,400)
Valuation allowance............................................ 6,863 9,107
-------- --------
Non-current deferred tax assets -- net......................... $ (6,082) $ (2,293)
======== ========
</TABLE>
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
CURRENT:
Other liabilities.............................................. $ 1,943
--------
Current deferred tax liabilities............................... 1,943
--------
NON-CURRENT:
Depreciation & amortization.................................... $ 17,843 15,165
-------- --------
Non-current deferred tax liabilities........................... $ 17,843 $ 15,165
======== ========
</TABLE>
The change in the deferred tax assets and liabilities relating to foreign
currency translation was $474 in 1994.
The accumulated earnings of foreign subsidiaries on which federal income taxes
have not been provided amounted to $48,109 through December 31, 1994. 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, 1994 the Company had foreign net operating losses amounting to
approximately $17,786, of which $14,310 can be carried forward indefinitely and
the balance expires at various dates through 1999. Additionally, there were
available foreign tax credits of $1,192 that will expire at various dates
through 1999.
4. 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.
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Pension expense was $2,032, $1,155 and $875 in 1994, 1993 and 1992,
respectively.
The following table sets forth the plans' funded status and amounts recognized
in the consolidated financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
DEFINED BENEFIT
PLAN SERP
------------------- -----------------
1994 1993 1994 1993
------- ------- ------ ------
<S> <C> <C> <C> <C>
Plans' funded status:
Plan assets at fair value............................. $16,737 $13,954 $6,910 $6,152
Projected benefit obligation:
Vested.............................................. 11,481 13,206 5,183 3,767
Nonvested........................................... 603 469
Effect of future compensation increases............. 4,276 5,075 458 448
------- ------- ------ ------
Plan assets in excess of (less than) projected benefit
obligation.......................................... 377 (4,796) 1,269 1,937
Unrecognized net (gain) or loss....................... (1,747) 2,730 2,413 1,246
Unrecognized net transition obligation (asset) being
recognized over 15 years............................ (1,604) (1,834) 1,276 1,371
------- ------- ------ ------
Prepaid (accrued) pension liability................... $(2,974) $(3,900) $4,958 $4,554
------- ------- ------ ------
Pension cost-net:
Service cost-benefits earned during year.............. $ 1,663 $ 1,349 $ 514 $ 261
Interest cost on projected benefit obligation......... 1,262 1,195 348 261
Actual return on plan assets.......................... (1,007) (932) 7 (108)
Net amortization and deferral......................... (416) (694) (339) (177)
------- ------- ------ ------
Pension cost -- net................................... $ 1,502 $ 918 $ 530 $ 237
------- ------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Actuarial assumptions:
Discount rate.............................................................. 8.5% 7.5%
Long-term rate of compensation increases................................... 5.0% 5.0%
Long-term rate of return on plan assets.................................... 8.5% 8.5%
</TABLE>
The Company's foreign defined contribution pension plans are consistent with
local practice and are principally funded through insurance programs. Pension
expense in 1994, 1993 and 1992, for the foreign plans was $695, $800 and $857,
respectively.
SAVINGS AND RETIREMENT PLAN
The Company sponsors the Augat Inc. Savings and Retirement Plan which covers
substantially all eligible U.S. employees and allows employees to contribute
from one to fourteen 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 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 a variety of savings and investment funds. For the years 1994,
1993 and 1992, the Company contributed 19,621, 17,390 and 19,820 shares,
respectively, of Company common stock to the Plan at a cost of $397, $245 and
$215, respectively.
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
5. 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 1994, 1993 and 1992 was $7,184, $6,765 and
$5,720, respectively. Annual minimum future rentals are $6,433, $5,306, $4,052,
$1,483 and $1,279 for the years 1995 through 1999, and aggregate to $2,233 for
all the years subsequent to 1999.
CONTINGENCIES
The acquisition of National Industries, Inc. in 1991 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, 1994 (approximately
$900) represent amounts expended for preliminary site evaluation and design and
testing. The Company has obtained the necessary permits and is in the process of
remediating the site. The Company is keeping the state informed of its progress.
The Company believes the recorded liability of approximately $4,500 at December
31, 1994 to be adequate.
6. 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 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.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. STOCK OPTION AND STOCK PURCHASE PLANS
STOCK OPTIONS, APPRECIATION RIGHTS AND RESTRICTED STOCK
The Company has three Stock Option and Appreciation Rights Plans, the 1987, the
1989 and the 1994 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 and 1994 Plans.
All Plans provide for the issuance of stock options and tandem appreciation
rights to key employees of the Company and to directors of the Company. The
options may be either incentive stock options or non-qualified options. No more
than a total of 2,350,000 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 and the 1994 Plans 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 were issued in
1994, 1993 and 1992 amounting to 33,000, 26,500 and 10,500 shares, respectively,
with a total value of $719, $321 and $108, respectively. In 1992, 4,500 shares
were repurchased and none in 1993 and 1994. The net cost of stock awards in
1994, 1993 and 1992 was $304, $169 and $131, respectively.
The Compensation Committee of the Board of Directors administers all of the
Plans.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
A summary of options under the Plans is as follows:
<TABLE>
<CAPTION>
OPTION PRICE
NUMBER OF SHARES PER SHARE
---------------- -------------
<S> <C> <C>
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
Granted............................................ 579,000 .10 - 23.75
Exercised.......................................... (358,413) .10 - 14.00
Cancelled or expired............................... (75,150) 9.38 - 16.88
---------- -------------
Outstanding, December 31, 1994....................... 1,383,525
----------
Options exercisable at December 31, 1994........... 332,839 $9.38 - 18.38
---------- -------------
Options available for future grant at December 31,
1994............................................ 386,458
----------
</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 56,666, 25,818 and 5,380 shares in 1994, 1993 and
1992, respectively.
8. 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.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Financial information concerning the Company's operations by major geographical
area is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net Sales:
United States
Sales excluding export sales............................. $421,858 $331,200 $269,603
Export sales............................................. 7,873 9,181 9,304
Intersegment sales....................................... 24,488 18,464 18,914
-------- -------- --------
Total............................................ 454,219 358,845 297,821
======== ======== ========
Western Europe:
Sales excluding export sales............................. 55,761 44,979 55,914
Export sales............................................. 1,568 1,282 1,079
Intersegment sales....................................... 3,986 5,301 5,853
-------- -------- --------
Total............................................ 61,315 51,562 62,846
======== ======== ========
Other Areas:
Sales excluding export sales............................. 43,646 33,621 25,818
Export sales
Intersegment sales....................................... 10,302 3,942 984
-------- -------- --------
Total............................................ 53,948 37,563 26,802
======== ======== ========
Total...................................................... 569,482 447,970 387,469
Less eliminations........................................ 38,776 27,707 25,751
-------- -------- --------
Total...................................................... $530,706 $420,263 $361,718
======== ======== ========
Operating Income:
United States............................................ $ 47,713 $ 37,740 $ 17,036
Western Europe........................................... 2,970 (135) 4,309
Other Areas.............................................. 4,507 771 (1,596)
-------- -------- --------
Total............................................ $ 55,190 $ 38,376 $ 19,749
======== ======== ========
Identifiable Assets:
United States............................................ $251,358 $230,322 $211,087
Western Europe........................................... 72,338 58,027 62,757
Other Areas.............................................. 32,278 29,511 21,604
-------- -------- --------
Total............................................ $355,974 $317,860 $295,448
======== ======== ========
</TABLE>
Operating income by geographical area does not include corporate expenses, other
income or expense, or income taxes. Intersegment sales between areas are made at
negotiated selling prices. One customer accounted for approximately 32%, 28% and
24% of sales and 23%, 26% and 13% of net receivables for 1994, 1993 and 1992,
respectively.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
9. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
NET GROSS NET EARNINGS
1994 SALES MARGIN INCOME PER SHARE
---- -------- -------- ------- ---------
<S> <C> <C> <C> <C>
1st Quarter...................................... $127,403 $ 26,422 $ 5,700 $ .30
2nd Quarter...................................... 134,399 29,555 6,950 .36
3rd Quarter...................................... 127,709 27,304 6,400 .33
4th Quarter...................................... 141,195 26,778 7,150 .37
-------- -------- ------- -----
$530,706 $110,059 $26,200 $1.36
1993
----
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
</TABLE>
The balance of this page intentionally left blank.
29
<PAGE> 32
SCHEDULE II
AUGAT INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<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
- ----------------------------------------------------------- ---------- -------- ----------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
1994
VALUATION ACCOUNTS DEDUCTED FROM
ASSETS TO WHICH THEY APPLY --
- -- Allowance for doubtful accounts......................... $1,129 $326 Bad Debts $179(1) $ 1,276
- -- Reserve for assets held for resale...................... $ 600 $635 $ 1,235
------ ---- ---- ---- -------
1993
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
------ ---- ---- ---- -------
<FN>
- ---------------
Note 1. Amount is net of recoveries.
</TABLE>
30
<PAGE> 33
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
The balance of this page intentionally left blank.
31
<PAGE> 34
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, 1995 with respect to the Annual Meeting of Shareholders to be
held April 25, 1995.
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.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
EXECUTIVE OFFICER AGE POSITION FOR THE PAST FIVE YEARS
- ------------------------ --- ---------------------- -----------------------------------------
<S> <C> <C> <C>
William R. Fenoglio..... 55 President and Chief President and Chief Executive Officer
Executive Officer since December 20, 1994. President and
Chief Operating Officer from September 6,
1994 to December 20, 1994. Served as
President and Chief Executive Officer
with the Barnes Group Inc. from 1991 to
1994 and as President and Chief Operating
Officer with that Corporation from 1985
to 1991.
Marcel P. Joseph........ 59 Chairman of the Board Chairman of the Board of Directors since
February, 1989. President from February,
1988 to September 6, 1994. Chief
Executive Officer from February, 1988
until December 20, 1994 when he retired.
Anthony F. Lefkowicz.... 57 Vice President and Vice President, Automotive Business since
General Manager, September 1991. From February 1991 to
Wiring Systems and September 1991 he was Vice President of
Components Business Manufacturing Operations. Previously he
was Vice President and General Manager,
Automotive Division from May 1988 to
February 1991.
Richard J. Eaton........ 58 Vice President -- Vice President, Human Resources since
Human Resources 1984.
Daniel J. Maher, Jr..... 48 Corporate Controller Corporate Controller since 1979.
John E. Lynch, Jr....... 51 Vice President and Vice President and General Counsel since
General Counsel December, 1994. From June 1994 to
December 1994 he was General Counsel.
Previously from January, 1985 to June
1994 he was Treasurer.
Larry E. Buffington..... 47 Vice President and Vice President and General Manager,
General Manager, Communications Products Business since
Communications August, 1991. Previously he was Chairman
Products Business 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.
L. Ronald Hoover........ 54 Vice President Vice President Business and Technology
Business and Development since August, 1994. Vice
Technology Development President and General Manager,
Interconnection Products Business from
December 1991 to August 1994. Previously,
he was President and Chief Operating
Officer of Diceon Electronics, Inc. from
1989 to 1991.
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
EXECUTIVE OFFICER AGE POSITION FOR THE PAST FIVE YEARS
- ------------------------ --- ---------------------- -----------------------------------------
<S> <C> <C> <C>
Gasper Buffa............ 42 Vice President and Vice President and General Manager,
General Manager, Automotive Components Division since
Components Division January, 1994. From August 1992 to
January 1994 he was Vice President,
Engineering, Sales & Marketing for the
Wiring Systems and Components Division.
Previously, from September 1991 to August
1992 he was Vice President & General
Manager, Components Division and from
February 1991 to September 1, 1991 he was
Vice President, Manufacturing Operations
for the Automotive and Communications
Division. From March of 1989 to February
1, 1991 he was Vice President Operations
for the Automotive Division.
James E. Finley......... 41 Vice President and Vice President and General Manager Augat
General Manger, Augat Europe since March, 1992. Previously Vice
Europe 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.
Ellen B. Richstone...... 43 Vice President and Vice President and Chief Financial
Chief Financial Officer since November, 1992. From March,
Officer 1992 to October, 1992 she was Senior Vice
President and Chief Financial Officer of
Rohr, Inc. Prior to that, she was
Executive Vice President and Chief
Financial Officer of Bull H.N. Worldwide
Information Systems from 1989 to 1992.
Steven M. Abelman....... 44 Vice President and Vice President and General Manager,
General Manager Wiring Automotive Wiring Systems Division since
Systems Division 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.
Operations, 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.
Lynda M. Avallone....... 39 Treasurer Treasurer since July, 1994. Previously,
she was Director of Taxes from March,
1994 to July, 1994. From 1991 to March,
1994 she was Corporate Tax Manager for
the Timberland Company and from 1983 to
1991 was in the Tax Department for the
Company.
</TABLE>
The executive officers of the Company are elected annually.
33
<PAGE> 36
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, 1995
for the Annual Meeting of Shareholders to be held April 25, 1995.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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34
<PAGE> 37
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
Statements of Consolidated Income
Statements of Consolidated Shareholders' Equity
Statements of Consolidated Cash Flows
Notes to Consolidated Financial Statements
(a) 2. FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedule listed below appears in Part II, It
em 8 hereof.
Schedule II- Valuation and Qualifying Accounts
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.
(b) Trust Indenture dated as of August 2, 1988 between Augat Inc.
and The Chase Manhattan Bank, N.A. as Tr17 ustee. 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. Incorporated by reference to Exhibit 10 (a) to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.
(b) Employment Agreement dated August 29, 1994 between the
Registrant and William R. Fenoglio. Incorporated by reference
to Exhibit 10(a) to the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1994.
(c) 1987 Stock Option and Appreciation Right Plan. Incorporated 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.
35
<PAGE> 38
<TABLE>
<S> <C> <C>
(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.
(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.
(o) 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.
(p) Revolving Credit Agreement among Augat Inc., The First National Bank of
Boston, Shawmut Bank, N.A., Nations Bank of North Carolina, N.A., National
Westminster Bank USA and The First National Bank of Boston, as agent,
dated as of July 22, 1994. Incorporated by reference to Exhibit 10(b) to
the Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994.
(q) 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.
(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 1994.
</TABLE>
36
<PAGE> 39
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.
AUGAT INC.
(Registrant)
By: /s/ WILLIAM R. FENOGLIO
------------------------------------
William R. Fenoglio
President & Chief Executive Officer
By: /s/ ELLEN B. RICHSTONE
------------------------------------
Ellen B. Richstone
Vice President & Chief Financial Officer
and Principal Accounting Officer
Date March 27, 1995
----
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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MARCEL P. JOSEPH Director March 27, 1995
- ----------------------------------
Marcel P. Joseph
/s/ WILLIAM R. FENOGLIO Director March 27, 1995
- ----------------------------------
William R. Fenoglio
Director March , 1995
- ----------------------------------
Vernon R. Alden
- ---------------------------------- Director March , 1995
Bruce L. Crockett
/s/ JOHN D. CURTIN, JR. Director March 27, 1995
- ----------------------------------
John D. Curtin, Jr.
Director March , 1995
- ----------------------------------
Samuel S. Dennis 3d
/s/ JERALD G. FISHMAN Director March 27, 1995
- ----------------------------------
Jerald G. Fishman
Director March , 1995
- ----------------------------------
Thomas L. King
/s/ JOHN N. LEMASTERS Director March 27, 1995
- ----------------------------------
John N. Lemasters
/s/ DAVID V. RAGONE Director March 27, 1995
- ----------------------------------
David V. Ragone
/s/ ALAN J. ZAKON Director March 27, 1995
- ----------------------------------
Alan J. Zakon
37
<PAGE> 1
EXHIBIT 21
AUGAT INC.
SUBSIDIARIES OF REGISTRANT
The subsidiaries listed below have been included in the consolidated
financial statements filed herewith.
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE
SUBSIDIARIES OF THE REGISTRANT INCORPORATION OWNED
------------------------------ --------------- ----------
<S> <C> <C>
Augat Components GmbH............................................. Germany 100
Augat AB.......................................................... Sweden 100
Augat AG.......................................................... Switzerland 100
Augat Communication Products Inc.................................. Washington 100
Augat Electronics Inc............................................. Canada 100
Augat International Ltd........................................... 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
Electroform SA.................................................... Switzerland 100
LRC Electronics, Inc.............................................. New York 100
Reliable Electronic Finishing Company, Inc........................ Massachusetts 100
A.O. Technologies Inc............................................. Arizona 100
</TABLE>
38
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
Augat Inc.:
We consent to the incorporation by reference in Registration Statement Nos.
33-16549, 33-37833, 33-65590 and 33-56117 of Augat Inc. all on Form S-8 of our
report dated January 31, 1995 appearing in this Annual Report on Form 10-K of
Augat Inc. and its subsidiaries for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 27, 1995
39
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AUGAT, INC. FOR THE QUARTER ENDED DECEMBER 31, 1994, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 20,535
<SECURITIES> 0
<RECEIVABLES> 89,521
<ALLOWANCES> (1,276)
<INVENTORY> 82,951
<CURRENT-ASSETS> 198,460
<PP&E> 241,302
<DEPRECIATION> (120,463)
<TOTAL-ASSETS> 355,974
<CURRENT-LIABILITIES> 71,659
<BONDS> 35,033
<COMMON> 1,947
0
0
<OTHER-SE> 235,574
<TOTAL-LIABILITY-AND-EQUITY> 355,974
<SALES> 530,706
<TOTAL-REVENUES> 530,706
<CGS> 420,647
<TOTAL-COSTS> 420,647
<OTHER-EXPENSES> 66,148
<LOSS-PROVISION> 326
<INTEREST-EXPENSE> 4,211
<INCOME-PRETAX> 39,700
<INCOME-TAX> 13,500
<INCOME-CONTINUING> 26,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,200
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
