<PAGE> 1
[CEDAR GROUP LOGO]
[GLOBE]
ANNUAL REPORT 1995
<PAGE> 2
CEDAR GROUP, INC. CHAIRMAN'S LETTER
[PHOTO]
FINANCIAL OVERVIEW
Fiscal 1995 was a year of extraordinary expansion for Cedar Group, Inc.
Most importantly, the growth in revenues and in corporate activities was
achieved in the pursuit of our corporate mission. Principally, the company's
revenues grew by over 100% and Cedar completed the acquisition of Steen
Contractors Limited. For the fiscal year ended September 1995, sales were $155.8
million compared with $68.0 million in 1994. The increase was attributable to
the inclusion of the revenues of Dominion Bridge for a full year as compared to
seven months in 1994, to the inclusion of Steen since April 1, 1995 and to
strong internal growth.
As a result of the backlog of contracts booked in 1995 to be completed over
the next two years and to our subsequent acquisition of McConnell Dowell, we are
confident that Cedar will more than double its revenues for fiscal 1996.
Earnings in 1995 were $2.02 million or $0.11 per share fully diluted as
compared to $416,000 or $0.03 a share for the previous year. Operating earnings,
as measured by earnings before interest, taxes, depreciation and amortization
(EBITDA), rose from $3.5 million in 1994 to $7.5 million in 1995.
CORPORATE MISSION
Cedar's corporate mission is to become a world-scale provider of
infrastructure projects in target markets. Cedar's strategy is to finance (F),
build (B), own and operate (O) and transfer (T) its projects.
Cedar believes that it can differentiate itself by bringing value added to
FBOT projects through technology, management skill, and innovative financing.
Today it is clear that in any industrialized country, the infrastructure is
very much in need of rebuilding and in the developing world, it has yet to be
built. Both worlds have the same common problem, a lack of capital and a lack of
profitable technology. The FBOT concept, combined with advanced technology will
provide the market with a one-stop shopping solution. This approach gets the job
done and Cedar will be in that market, providing the solutions whether it
implements it single handedly using its delivery capability, or in joint
ventures with major industrial partners.
LOOKING AHEAD
In recognition of Dominion Bridge and its history and tradition, Cedar
proposes, subject to the approval of its shareholders at the 1996 annual
meeting, changing its name to Dominion Bridge Corporation. In the coming year,
we look forward to completing the implementation of our business strategy and to
consolidating the synergies among our units. We look forward to an exciting year
of managing growth at the new Dominion Bridge Corporation.
/s/ Michel L. Marengere
Michel L. Marengere
Chairman of the Board
and Chief Executive Officer
1
<PAGE> 3
CEDAR GROUP, INC. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------------
1995 1994 1993
-------- ------- ------
<S> <C> <C> <C>
(In thousands of U.S. dollars,
except per share data)
Sales....................................................... $155,750 $67,959 $7,003
======== ======= ======
Cost of Sales............................................... 139,407 59,295 4,755
Selling, general and administrative expenses................ 15,433 8,107 2,488
-------- ------- ------
154,840 67,402 7,243
-------- ------- ------
Profit (loss) from operations............................... 910 557 (240)
Interest expense, net....................................... (406) (341) (230)
Income from operations of joint venture..................... 2,165 -- --
Other income................................................ 1,236 767 --
-------- ------- ------
Income before income taxes and minority interest............ 3,905 983 (470)
-------- ------- ------
Income taxes
Current................................................... (300) 70 --
Deferred.................................................. 1,993 230 --
-------- ------- ------
1,693 300 --
-------- ------- ------
Income before minority interest............................. 2,212 683 (470)
Minority interest -- dividends on preferred shares.......... (70) (248) --
Minority interest -- common stock........................... (122) (19) --
-------- ------- ------
NET INCOME.................................................. $ 2,020 $ 416 $ (470)
======== ======= ======
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Primary................................................... 0.14 0.05 (0.14)
Fully diluted............................................. 0.11 0.03 (0.14)
======== ======= ======
</TABLE>
ERNST & YOUNG
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Cedar Group, Inc.
We have audited the accompanying consolidated balance sheets of Cedar
Group, Inc. as of September 30, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cedar Group,
Inc. as at September 30, 1995 and 1994, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
Ernst & Young
Montreal, Canada
December 20, 1995
2
<PAGE> 4
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
(IN THOUSANDS OF U.S.
DOLLARS, EXCEPT PER SHARE
DATA)
Sales............................................................. $ 155,750 $ 67,959
Cost of sales..................................................... 139,407 59,295
Selling, general and administrative expenses...................... 15,433 8,107
---------- ----------
154,840 67,402
Profit from operations............................................ 910 557
Interest expense, net............................................. (406) (341)
Income from operations of joint venture........................... 2,165 --
Other income...................................................... 1,236 767
---------- ----------
Income before income taxes and minority interest.................. 3,905 983
---------- ----------
Income taxes
Current......................................................... (300) 70
Deferred........................................................ 1,993 230
---------- ----------
1,693 300
---------- ----------
Income before minority interest................................... 2,212 683
Minority interest -- dividends on preferred shares................ (70) (248)
Minority interest -- common stock................................. (122) (19)
---------- ----------
Net income........................................................ $ 2,020 $ 416
========== ==========
Net income per common share and common share equivalent
Primary......................................................... 0.14 0.05
Fully diluted................................................... 0.11 0.03
Weighted average number of common shares and common share
equivalents outstanding
Primary......................................................... 14,929,000 8,912,000
Fully diluted................................................... 17,688,000 12,064,000
</TABLE>
See accompanying notes
3
<PAGE> 5
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS AT SEPTEMBER 30
-------------------
1995 1994
------- -------
<S> <C> <C>
(IN THOUSANDS OF
U.S. DOLLARS)
ASSETS
Current assets
Cash..................................................................... $ 4,765 $ 5,578
Term deposits collateralizing bank indebtedness.......................... 1,688 --
Investments.............................................................. 2,779 1,039
Accounts receivable, net of allowances of $1,138 in 1995 and $477 in
1994................................................................... 44,169 21,872
Inventories.............................................................. 12,746 8,293
Prepaid expenses and other assets........................................ 1,822 2,509
Current portion of assets transferred under contractual arrangements..... -- 739
Due from an officer...................................................... -- 565
Advances to shareholders................................................. 501 --
------- -------
Total current assets..................................................... 68,470 40,595
------- -------
Property, plant and equipment, net....................................... 20,661 24,957
Advances to a shareholder................................................ 697 781
Assets of business transferred under contractual arrangements [preferred
shares]................................................................ 3,640 3,792
Pension assets........................................................... 1,619 2,053
Other assets............................................................. 1,312 --
------- -------
$96,399 $72,178
======= =======
4
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank indebtedness........................................................ $ 1,688 --
Notes payable -- bank.................................................... 5,000 --
Accounts payable......................................................... 31,075 15,764
Accrued expenses......................................................... 916 2,034
Customer advances........................................................ 6,062 5,561
------- -------
Total current liabilities................................................ 44,741 23,359
------- -------
Advances from unincorporated joint venture............................... 750 --
Note payable............................................................. 488 --
Deferred income taxes.................................................... 5,994 4,984
Accrued post-retirement benefits other than pensions..................... 522 518
Minority interest........................................................ 10,161 15,464
Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none
issued
Common stock, $0.001 par value; 20,000,000 shares authorized; issued and
outstanding:14,990,188 shares in 1995 and 13,507,918 shares in 1994.... 15 13
Additional paid-in capital............................................... 36,345 31,927
Deficit.................................................................. (874) (1,860)
Cumulative translation adjustment........................................ 142 (342)
------- -------
35,628 29,738
Subscription receivable.................................................. (1,885) (1,885)
------- -------
Total stockholders' equity............................................... 33,743 27,853
------- -------
$96,399 $72,178
======= =======
Commitments and contingencies [note 12]
</TABLE>
See accompanying notes
5
<PAGE> 7
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1995 1994
-------- -------
(In thousands of U.S.
dollars)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)................................................. $ 2,020 $ 416
Adjustments to reconcile net loss to net cash provided by (used
for) operating activities
Depreciation and amortization..................................... 3,217 2,224
Common stock issued for services.................................. 170 --
Deferred income tax............................................... 1,993 230
Deferred pension cost............................................. 434 --
Gain on sale of assets............................................ (689) (210)
Others -- net..................................................... 300 (263)
Income from operations of a joint venture......................... (2,165) --
Advances from a joint venture..................................... 1,189 --
(Increase) decrease in accounts receivable........................ (10,797) (6,594)
(Increase) decrease in prepaid expenses and other assets.......... 806 629
(Increase) decrease in inventories................................ (3,148) 2,390
(Decrease) increase in accounts payable........................... 5,660 (1,529)
(Decrease) increase in customer advances.......................... (3,263) (5,132)
-------- -------
Net cash used in operating activities............................. (4,273) (7,839)
-------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Decrease (increase) in investments................................ 2,696 (1,169)
Decrease (increase) in term deposits.............................. (1,688) --
Cash consideration paid for acquired businesses................... (4,476) (4,550)
Cash of acquired businesses....................................... 544 --
Purchase of minority interest of subsidiaries..................... (8,298) --
Repayment by (advance to) divested businesses..................... 739 (902)
Repayment by (advance to) to a shareholder........................ (417) (1,734)
Repayment by (advance to) to an officer........................... 565 (565)
Cash payment for purchase of equipment............................ (10) (94)
Proceeds from sale of property and equipment...................... 2,152 604
-------- -------
Net cash provided by (used in) investing activities............... (8,193) (8,410)
-------- -------
6
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock............................ 3,493 10,901
Proceeds from exercise of warrants................................ 757 13,195
Proceeds from exercise of options................................. -- 303
Net repayments on line of credit.................................. -- (3,408)
Issue of preferred shares of subsidiary to minority interest...... -- 200
Bank Indebtedness................................................. 1,688 --
Note payable...................................................... 488 --
Note payable-Bank................................................. 5,000 --
Payment of other obligations...................................... -- (592)
-------- -------
Net cash provided by financing activities......................... 11,426 20,599
-------- -------
Effect of foreign exchange rate changes on cash................... 227 93
-------- -------
Net change in cash................................................ (813) 4,443
Cash, at beginning of year........................................ 5,578 1,135
-------- -------
Cash, at end of year.............................................. $ 4,765 $ 5,578
======== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994
-------- -------
(In thousands of U.S.
dollars)
<S> <C> <C>
Supplemental cash flow information
Cash paid during the year for:
Interest........................................................ $ 406 $ 341
Taxes........................................................... 310 --
-------- -------
Non-cash investing and financing activities
Issuance of common stock for acquisition of businesses
Fair value of assets acquired [net of cash acquired]............ -- 2,771
Liabilities assumed and minority interest....................... -- 1,721
-------- -------
Net assets acquired............................................... -- 1,050
Cash outlays...................................................... -- 800
-------- -------
Issuance of common stock for acquisitions......................... -- 250
======== =======
Preferred shares received on transfer of assets of divested
businesses
Fair value of net assets divested............................... -- 4,531
Cash received................................................... -- 739
-------- -------
Preferred shares of the acquired of divested businesses........... -- 3,792
======== =======
Issuance of common stock for services............................. 170 --
-------- -------
Issuance of common stock in repayment of debt..................... -- 66
-------- -------
</TABLE>
See accompanying notes
7
<PAGE> 9
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994
---------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
--------- ------------ ---------- ------- ---------- ------------
(In thousands of U.S. dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1993........................ 5,544,532 $ 5 $ 7,220 $(2,276) $ (21) $ (1,885)
Issuance of common stock upon
exercise of options......... 162,500 1 302 -- -- --
Issuance of common stock upon
exercise of warrants........ 3,591,706 4 13,191 -- -- --
Issuance of common stock for
Unimetric Corp.............. 88,968 -- 250 -- -- --
Issuance of common stock for
stock issue expenses........ 295,000 -- -- -- -- --
Issuance of common stock
through private placement... 3,684,346 3 10,898 -- -- --
Issuance of common stock in
repayment of debt........... 140,866 -- 66 -- -- --
Translation adjustments, net
of income taxes of $0....... -- -- -- -- (321) --
Net income for the year....... -- -- -- 416 -- --
--------- --- ------- ------- ----- -------
Balance at September 30,
1994........................ 13,507,918 $ 13 $ 31,927 $(1,860) $ (342) $ (1,885)
========= === ======= ======= ===== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1995
---------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
--------- ------------ ---------- ------- ---------- ------------
(In thousands of U.S. dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1994........................ 13,507,918 $ 13 $ 31,927 $(1,860) $ (342) $ (1,885)
Issuance of common stock upon
conversion of Dominion
Bridge, Inc. Class A
preferred shares............ 643,200 1 2,848 -- -- --
Issuance of common stock upon
conversion of Unimetric
Corporation preferred
shares...................... 409,207 1 1,149 -- -- --
Issuance of common stock upon
exercise of warrants........ 284,863 -- 741 -- -- --
Issuance of common stock for
services rendered........... 45,000 -- 170 -- -- --
Issuance of common stock for
stock issue expenses........ 90,000 -- -- -- -- --
Issuance of common stock upon
exercise of warrants........ 10,000 -- 16 -- -- --
Share issue costs............. -- -- (506) -- -- --
Settlement on acquisition of
Minority Interest (note 3
ii)......................... -- -- -- (1,034) -- --
Translation adjustments, net
of income taxes of $0....... -- -- -- -- 484 --
Net income for the year....... -- -- -- 2,020 -- --
--------- --- ------- ------- ----- -------
Balance at September 30,
1995........................ 14,990,188 $ 15 $ 36,345 $ (874) $ 142 $ (1,885)
========= === ======= ======= ===== =======
</TABLE>
8
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
1. NATURE OF OPERATIONS
Cedar Group Inc., a Delaware corporation registered in Conshohocken,
Pennsylvania, with executive offices in Montreal, Canada, specializes in
international engineering, infrastructure development and project management and
in the manufacture and distribution of specialty industrial and aerospace
fasteners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States,
the most significant of which are outlined below. These principles require the
use of estimates to measure the financial effects of past transactions or events
and the present status of assets and liabilities.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in the consolidation.
CASH AND INVESTMENTS
Cash includes short-term deposits with terms less than 90 days.
Short-term deposits with terms longer than 90 days are stated at cost which
approximate fair market value.
CONSTRUCTION CONTRACTS
Income on construction contracts is recognized on the percentage of
completion basis. Provisions for anticipated losses on uncompleted contracts are
made in the period in which losses are first determinable. Included in accounts
receivable are unbilled receivables related to these contracts of $5,898 and
$2,694 at September 30, 1995 and 1994 respectively.
INVENTORIES
Work in process related to construction contracts is stated at accumulated
costs less amounts charged to income based on the percentage of completion of
individual contracts. Raw materials are stated at the lower of cost (first-in,
first-out) or replacement cost. Finished goods comprise steel and steel hardware
products held for sale and are stated at the lower of cost (first-in, first-out)
or net realizable value.
INVESTMENT IN UNINCORPORATED JOINT VENTURE
The Company's investment in an unincorporated joint venture is accounted
for by the equity method whereby the investment is initially recorded at cost
and the carrying value adjusted thereafter to include the Company's pro rata
share of earnings less drawings received. The company recognized its share of
the unincorporated joint venture's income from acquisition, April 1, 1995 to
September 30, 1995.
9
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including assets that were acquired under
capital leases, are stated at cost. Maintenance and repairs are charged to
expense as incurred. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation are removed from their respective accounts and
the resulting gain or loss is reflected in current operations. Depreciation is
computed on the straight-line method over the estimated useful lives of the
assets, generally five to seven years for machinery and equipment and forty
years for buildings.
PENSION COSTS
The Company maintains defined benefit pension plans which cover
substantially all of its Canadian employees. Pension plan obligations are valued
using the projected benefit actuarial method and best estimate assumptions.
Pension plan assets are valued at market-related values.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company accrues for benefits such as health care and life insurance
coverage that retired employees are entitled to. The obligation is adjusted on
an annual basis to reflect the expected cost of providing post-retirement
benefits during the years an employee renders service.
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN EXCHANGE CONTRACTS
All assets and liabilities of the Company's subsidiaries operating outside
the United States are translated into U.S. dollars using current exchange rates
and income statement items are translated using weighted average exchange rates
for the year. The resulting translation adjustment is included as a component of
stockholders' equity. Other foreign currency transaction gains and losses are
included in determining net income.
The Company uses forward foreign exchange contracts primarily to offset the
effects of foreign currency fluctuations related to foreign-denominated
receivables and payables transactions and also to hedge firm sale and purchase
commitments. Gains or losses on forward foreign exchange contracts which hedge
an identifiable foreign currency commitment are deferred and recognized as the
related transactions are settled. Gains or losses on all other forward foreign
exchange contracts, both realized and unrealized, are recognized in determining
net income as incurred.
INCOME TAXES
The Company accounts for income taxes under the liability method. Deferred
taxes reflect the tax consequences on future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts.
NET INCOME PER SHARE
Primary net income per common share is computed by dividing the income
applicable to common shares by the weighted average number of shares of common
stock outstanding and common stock equivalents including the dilutive effect of
options and warrants from the date of grant.
Net income per common share on a fully diluted basis assumes that
convertible preferred shares were converted to common stock at either the
beginning of each year or the date of issuance.
10
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
3. ACQUISITIONS AND DIVESTED BUSINESSES
(I) ACQUISITION OF STEEN CONTRACTORS LIMITED
Effective April 1, 1995, the Company acquired 75% of the common stock of
Steen Contractors Limited ("Steen"), a Canadian Company engaged in construction
services provided in Canada. The acquisition has been accounted for by the
purchase method and earnings have been included in the results of operations
from the date of the acquisition.
The total cost of the acquisition was allocated to the net assets acquired
on the basis of their fair value as follows:
<TABLE>
<S> <C>
Current assets................................................................... $18,505
Fixed assets..................................................................... 255
Other assets..................................................................... 1,235
-------
Total assets..................................................................... 19,995
-------
Current liabilities.............................................................. 12,056
Other liabilities................................................................ 1,726
-------
Total liabilities................................................................ 13,782
-------
Net assets....................................................................... 6,213
Common shares held by minority shareholders at book value........................ 1,737
-------
NET CASH CONSIDERATION PAID...................................................... $ 4,476
=======
</TABLE>
The acquisition was financed by a term loan from Bankers Trust maturing
October 31, 1995.
The Company is required to purchase the remaining common shares of Steen in
two installments. The first installment amounting to 15% of Steen's outstanding
shares are to be acquired on May 1, 1996 at a price equal to the net book value
per share of Steen on December 31, 1995. The final installment, amounting to the
remaining 10% of Steen's outstanding shares is to be purchased on May 1, 1997 at
a price equal to the net book value per share of Steen on December 31, 1996.
11
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
(II) Acquisition of Dominion Bridge, Inc.
Effective March 9, 1994, the Company acquired from United Dominion
Industries Limited ("UDIL") 85% of the common stock of Dominion Bridge Inc.
("DB"), a Canadian company engaged in construction and engineering services
provided in Canada and Asia. The acquisition has been accounted for by the
purchase method and earnings have been included in the results of operations
from the date of the acquisition.
The total cost of the acquisition was allocated to the net assets acquired
on the basis of their fair value as follows:
<TABLE>
<S> <C>
Current assets................................................................... $23,381
Fixed assets..................................................................... 25,632
Other assets..................................................................... 3,525
-------
Total assets..................................................................... 52,538
Current liabilities.............................................................. 23,765
Other liabilities................................................................ 10,604
-------
Total liabilities................................................................ 34,369
Net assets....................................................................... 18,169
Preferred and common shares held by a minority shareholder....................... 14,419
-------
Net cash consideration paid...................................................... $ 3,750
=======
</TABLE>
The acquisition was financed from existing cash holdings.
The Cdn. $18,338 Class "A" Preferred Shares bearing a cumulative dividend
of 7.5%, to be held by UDIL in DB are convertible into the Company's common
stock at a rate of Cdn. $6.00 per share. UDIL shall have registration rights
with respect to such shares after 12 months from the date of issuance. The
Company has a call option after two years to purchase (or to cause DB to redeem)
the Class "A" Preferred Shares at the rate of Cdn. $2,000 per year. UDIL will
also have a put option whereby after two years UDIL shall have the right to put
the Class "A" Preferred Shares to DB at a rate of Cdn. $2,000 per year. The
Company also shall have the right on any day that the market value of the
Company's common stock equals or exceeds Cdn. $8.00 to exchange all or any part
of the Class "A" Preferred Shares held by UDIL for shares of the Company's stock
at a specified exchange rate. The minimum conversion value must equal the
initial face value of the Class "A" Preferred Shares plus a 15% premium. In the
event that the Company issues common equity into the public markets
(registered public equity offerings), the cash proceeds are required to be
utilized in the first instance to pay off one-third of UDIL's remaining
Class "A" Preferred Shares.
12
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
On October 21, 1994 the Company agreed to acquire the minority holdings of
common and Class "A" preferred shares of DB held by UDIL. The agreement provides
that these interests would be acquired for cash payments of Cdn. $18,000, the
transfer of assets having a book value of Cdn. $1,368 and the waiver of the
preferred dividend requirement for the Company's 1994 fourth quarter. As of
September 30, 1995 the Company has paid Cdn. $8,300, transferred the assets and
received all of the common shares of DB held by UDIL and Cdn. $8,786 face value
of preferred shares. The remaining balance of preferred shares of DB held by
UDIL may be purchased by the Company at face value plus a 15% premium at any
time to March 31, 1995. All other conditions applicable to the Class "A"
Preferred Shares remain in effect. On December 18, 1995 the Company accepted the
offer of UDIL to acquire all remaining preferred shares of DB and the waiver of
all claims and dividends for aggregate consideration of Cdn. $11,000 (U.S.
$8,200) consisting of a cash payment of Cdn. $4,500 and the issue of up to
1,158,334 common shares of the Company to realize Cdn. $6,500. The book value of
these minority interests at September 30, 1995 was $7,166. The excess of the
final settlement of $8,200 over the book value of $7,166 has been charged as a
capital transaction in the statement of stockholder's equity at September 30,
1995 and an increase in minority interest in the amount of $1,034.
The cash payment of $4,500 was paid with funds raised by the issuance of
preferred shares of a newly incorporated subsidiary which are convertible into
the Company's common stock.
(III)Acquisition of Unimetric Corporation
Effective January 1, 1994, the Company acquired from Ateliers de la
Haute-Garonne ("AHG") 70% of the common stock of Unimetric Corporation
("Unimetric"), a United States manufacturer of specialty fasteners for the
aerospace and industrial markets. The acquisition has been accounted for by the
purchase method and earnings have been included in the results of operations
from the date of the acquisition.
13
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<S> <C>
Current assets.................................................................... $1,136
Fixed assets...................................................................... 1,613
Other assets...................................................................... 22
------
Total assets...................................................................... 2,771
Current liabilities............................................................... 539
Long-term debt.................................................................... 356
------
Total liabilities................................................................. 895
------
Net assets........................................................................ 1,876
Preferred and common shares held by a minority shareholder........................ 826
------
Net consideration paid............................................................ $1,050
======
The acquisition was financed by:
Issuance of common shares......................................................... 250
Cash payment...................................................................... 800
------
$1,050
======
</TABLE>
The cash payment includes $200 which was invested by the minority interest
in preferred shares of Unimetric Corporation. The 409,207 preferred shares of
Unimetric which have a total face value of $1,150 and a non-cumulative dividend
of 4% to be held by AHG were convertible in whole into the Company's common
stock on a one-for-one basis until March 12, 1995.
14
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
(IV)Pro forma Results
Set forth below is the Company's unaudited pro forma combined summary of
operations for the years ended September 30, 1995 and 1994 as though each of the
acquisitions had been made on October 1, 1993.
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
(IN THOUSANDS EXCEPT PER
SHARE DATA)
Sales............................................................ $ 177,459 $ 159,162
Net income (loss)................................................ 1,114 (2,292)
Per common share
Primary........................................................ 0.07 (0.26)
Fully diluted.................................................. 0.06 (0.26)
Average number of common shares and common share equivalents
outstanding
Primary........................................................ 14,929,000 8,951,000
Fully diluted.................................................. 17,688,000 8,951,000
</TABLE>
The unaudited pro forma combined summary of operations has been prepared
utilizing the historical financial statements of the Company and the acquired
businesses. The unaudited pro forma combined summary of operations does not
purport to be indicative of the results which actually would have been obtained
if the acquisitions had been made at the beginning of the Company's 1994 year or
of future results of operations.
The unaudited pro forma combined summary of operations includes the effects
of the purchase price allocation adjustments. The purchase price allocation
adjustments include the adjustment of the net assets acquired to the price paid
for them, including the estimated costs associated with the integration of the
businesses.
15
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
(V) Divested Businesses
Effective July 1, 1994, the Company decided to divest the Canadian
commodity fastener distribution businesses, formerly conducted by Edinov. The
results of operations to June 30, 1994 are included in the consolidated
statements of operations and cash flows.
The transaction was completed on December 22, 1994 by the receipt of Cdn.
$1,000 cash and Cdn. $5,135 preferred shares of the acquirer. No gain or loss
was recognized on the transaction. The preferred shares bear a cumulative
dividend equal to the bank prime rate at the beginning of every fiscal year
where a dividend is declared and are collateralized by a pledge of Edinov's
assets. These preferred shares are redeemable at varying amounts annually
through 2009, commencing at Cdn. $250 in 1995 and 1996 and Cdn. $350 thereafter.
The Company's ability to realize the value of the preferred shares is dependent
on future operations of the divested businesses.
At September 30, 1994 the cash portion of the consideration received of
$739 is presented in current assets. The consideration applicable to the
preferred shares is presented as "Assets of business transferred under
contractual arrangements [preferred shares]".
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
NET
ACCUMULATED BOOK
COST DEPRECIATION VALUE
------- ----------- -------
<S> <C> <C> <C>
1995
Land........................................................ $ 7,157 $-- $ 7,157
Building.................................................... 4,079 540 3,539
Machinery and equipment..................................... 16,636 6,671 9,965
------- ------ -------
$27,872 $ 7,211 $20,661
======= ====== =======
1994
Land........................................................ $ 7,093 $-- $ 7,093
Building.................................................... 3,589 144 3,445
Machinery and equipment..................................... 18,705 4,286 14,419
------- ------ -------
$29,387 $ 4,430 $24,957
======= ====== =======
</TABLE>
16
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
5. INVENTORIES
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Raw materials........................................................... $ 3,443 $4,252
Construction contracts, work in process................................. 6,921 2,311
Finished goods.......................................................... 2,382 1,730
------- ------
$12,746 $8,293
======= ======
</TABLE>
6. FINANCING ARRANGEMENTS
DB has pledged and mortgaged all of its fixed and other assets as security
for a debenture of Cdn. $100,000 held by UDIL. This debenture secures any and
all indebtedness due by DB to UDIL including payments made by UDIL under letters
of credit and guarantees to which UDIL is a party. The debenture provides that
DB may not dispose of its land and buildings nor pledge its inventories or
receivables without the consent of UDIL.
The security interest in favor of UDIL is to be discharged upon redemption,
conversion or purchase of the outstanding preferred shares of DB [see note 3II].
As at September 30, 1995, Steen had available a $2,000 Cdn. line of credit
bearing interest at prime plus .25%, none of which had been drawn during the
year. The line of credit is collateralized by Steen's Book Debts.
As at September 30, 1995, DB had available a $5,000 Cdn. line of credit
bearing interest at prime plus .75%. The terms of the line of credit require
that all outstanding balances be fully collateralized by cash term deposits. As
at September 30, 1995 $1,688 ($2,265 Cdn.) was outstanding. Subsequent to year
end DB entered into a new agreement replacing this line of credit with a $12,000
Cdn. operating loan bearing interest at prime plus 1%. The loan is
collateralized by a general assignment of DB's Inventory and Book Debts.
The highest and lowest drawings under the loan were $3,883 Cdn. and $1,598
Cdn. and the average balance outstanding during the year was $2,714 Cdn. The
average rate of interest was 8.2%.
On July 31, 1995 the Company entered into an agreement with Bankers Trust
Commercial Corporation to obtain a term loan in the amount of $5,000. This loan
bears interest at prime plus 2% and is collateralized by the Company's
investment in its subsidiary Steen Contractors Limited. Subsequent to year end,
the Company repaid the term loan at its maturity date of October 31, 1995.
17
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
7. ADVANCES FROM UNINCORPORATED JOINT VENTURE
Steen, a Company's subsidiary, owns a 15% interest in an unincorporated
joint venture, a mechanical contractor in the oil and gas industry.
The Company's share of assets, liabilities, revenue, expenses, gross
margin, and net earnings of this joint venture for the six month period ended
September 30, 1995 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------
<S> <C>
Assets...................................................................... $1,608
Liabilities................................................................. 2,358
Revenue..................................................................... 8,319
Expenses.................................................................... 6,400
Gross margin................................................................ 1,865
Net earnings................................................................ 1,919
</TABLE>
Steen is jointly and severally liable for all the liabilities of the joint
venture.
Steen's share, since acquisition by Cedar, of the income reported in the
statement of operations consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------
<S> <C>
Share of net earnings....................................................... $1,919
Technology fees............................................................. 246
------
$2,165
======
</TABLE>
At September 30, 1995 Steen had received cash advances of $750 in excess of
income recognized, which amount is presented in long-term liabilities.
18
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
8. INCOME TAXES
The provision for income taxes on income from operations comprises the
following elements:
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
CURRENT
United States -- Federal................................................ $ -- $ --
United States -- State.................................................. -- --
Canada.................................................................. (300) 70
------- ------
(300) 70
------- ------
DEFERRED
United States -- Federal................................................ $ (122) $ --
United States -- State.................................................. (17) --
Canada.................................................................. 2,132 230
------- ------
1,993 230
------- ------
$ 1,693 $ 300
======= ======
</TABLE>
The related income (loss) from operations before income taxes is as
follows:
<TABLE>
<S> <C> <C>
United States........................................................... $(1,246) $ (381)
Canada.................................................................. 5,151 1,364
------- ------
$ 3,905 $ 983
======= ======
</TABLE>
19
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
Deferred tax liabilities and assets comprise the following elements at
September 30:
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Deferred tax liabilities
Book over tax value of property and equipment......................... $ 4,443 $5,674
Pension asset......................................................... 615 788
Operating income from joint venture................................... 1,226 --
Completed Contracts basis............................................. 1,334 --
------ ------
$ 7,618 $6,462
------ ------
Deferred tax assets
OPEB obligation....................................................... $ 203 $ 199
Rationalization reserves.............................................. 481 781
Net operating loss carryforward....................................... 2,019 1,194
Valuation allowance for operating loss carryforward................... (1,533) (831)
Other -- net.......................................................... 454 135
------ ------
1,624 1,478
------ ------
Net deferred tax liabilities............................................ $ 5,994 $4,984
====== ======
</TABLE>
The difference between the Company's effective income tax rate and the
statutory rate on income from operations is reconciled below:
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Income tax expense at U.S. statutory rate............................... $ 1,367 $ 344
State tax, net of federal tax benefits.................................. 234 59
Foreign income taxes at less than statutory rate........................ (155) (35)
Operating losses without tax benefit.................................... 162 --
Difference in book-tax asset basis...................................... -- (15)
Other................................................................... 85 (53)
------ ------
$ 1,693 $ 300
====== ======
</TABLE>
20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
As at September 30, 1995, the Company had unused net operating loss
carryforwards for income tax purposes which expire as follows:
<TABLE>
<CAPTION>
UNITED STATES FEDERAL
---------------------
<S> <C>
September 30,
2006..................................................................... $ 600
2007..................................................................... 1,673
2008..................................................................... 1,465
2009..................................................................... 381
2010..................................................................... 340
------
$ 4,459
======
</TABLE>
The benefit of these losses has been recognized in the Company's books. For
financial reporting purposes, a valuation allowance of $1,533 [1994 -- $831] has
been recognized to offset the deferred tax assets related to the United States
losses since the use of these losses may be severely limited by the separate
return limitation year rules and change of ownership rules.
9. BENEFIT PLANS
PENSION PLANS
The Company maintains defined benefit pension plans covering employees at
most Canadian operations. The benefits are based on an average of the employee's
earnings in the years preceding retirement and on credited service. Certain
supplemental unfunded plan arrangements also provide retirement benefits to
specified groups of participants. The Company's funding policy for these plans
is to contribute amounts sufficient to meet the minimum funding requirements of
the regulatory authorities, plus any additional amounts which the Company may
determine to be appropriate.
The net pension expense for Company-sponsored pension plans consists of the
following components:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Service cost -- benefits earned during the year........................ $ 894 $ 881
Interest cost on projected benefit obligation.......................... 1,173 1,178
Return on plan assets.................................................. (1,280) (1,354)
Net amortization....................................................... 8 --
------- -------
Net pension expense.................................................... $ 795 $ 705
======= =======
</TABLE>
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
The reconciliation of the funded status of pension plans is as follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Plan assets at fair value.............................................. $17,305 $18,568
Actuarial present value of projected benefit obligations............... 16,155 15,997
Plan assets in excess of projected benefit obligation.................. 1,150 2,571
Unrecognized prior service cost for plan amendments.................... 361 --
Unrecognized net experience loss (gain)................................ 108 (518)
------- -------
Net pension asset recognized in the consolidated balance sheet......... $ 1,619 $ 2,053
======= =======
</TABLE>
The weighted average of assumptions used in the determination of the
projected benefit obligation is:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate.................................................................... 8.0 % 8.0 %
Rate of increases in compensation level.......................................... 6.0 6.0
Expected long-term rate of return on assets...................................... 8.0 8.0
</TABLE>
The assets of the Company-sponsored plans are invested primarily in
equities and bonds.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides post-retirement health care and life
insurance benefits to most Canadian retirees. In general, employees who retire
after attaining age 60 with five years of service are eligible for continued
health care and life insurance coverage. Dependent health care and life
insurance coverage are also available. Most retirees contribute toward the cost
of health care coverage, with the contributions generally varying based on
service. The Company accrues the expected cost of providing post-retirement
benefits during the years an employee renders service.
Net periodic post-retirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Service cost -- benefits earned during the year.................................. $ 1 $ 1
Interest cost on accumulated post-retirement benefit obligation.................. 40 41
-- --
Net periodic post-retirement benefit cost........................................ $41 $42
== ==
</TABLE>
22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
At present, there is no prefunding of the postretirement benefits
recognized under FASB Statement No. 106. The following table presents the status
of the plans reconciled with amounts recognized in the consolidated balance
sheet for the Company's post-retirement benefits:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accumulated post-retirement benefit obligation
Active plan participants........................................................ 522 518
---- ----
Post-retirement benefit liability recognized in the consolidated balance
sheet......................................................................... 522 518
==== ====
</TABLE>
For measurement purposes, the assumed weighted average annual rate of
increase per capita cost of health care benefits is 12 percent for 1995 and
assumed to decrease one percent per year to 7 percent in the year 2000 and
remain constant thereafter. The weighted average discount rate used in
determining the accumulated post-retirement benefit obligation was 8 percent at
September 30, 1995. The rate of increase on compensation levels assumed was 6
percent.
OTHERS
The Company contributes to defined contribution plans for eligible Canadian
employees in its Steen subsidiary. Company contributions to the plan were $186
in 1995.
10. RELATED PARTY TRANSACTIONS
In 1995 the Company advanced $994 to a shareholder, Group Fidutech
International Inc. Of this amount $577 was repaid during the year. The balance
of $417 is non-interest bearing and has no fixed repayment terms and was repaid
in December 1995. In 1994 the Company advanced $1,734 to a shareholder, Fidutech
Technologies Ltd and its affiliates. Of this amount, $1,155 was assumed by the
acquired of Edinov as of July 1, 1994, [note 3V]. The balance of $781 is
non-interest bearing and has no fixed repayment terms. In December 1995,
Fidutech Technologies Ltd. repaid $84 of this balance.
The amount due from an officer of $565, outstanding as at September 30,
1994 was repaid in January 1995.
23
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
11. STOCKHOLDERS' EQUITY
1995
In December, 1994, the Company sold to Groupe Fidutech International, Inc.
("GFI") Cdn. $2,700 of Class A Preferred Shares of Dominion Bridge Inc. which it
held. Subsequently, pursuant to the terms of the Class A Preferred Shares, GFI
converted the Cdn. $2,700 of Class A Preferred Shares into 450,000 shares of
common stock of the Company. GFI is owned by certain officers and directors of
the Company. During the year the Company issued an additional 193,200 shares of
its common stock at a price of $4.43 per share upon conversion of Class A
Preferred Shares of Dominion Bridge Inc., in accordance with the terms of the
Preferred Shares. These conversion transactions of Dominion Bridge Inc. Class A
Preferred Shares provided total proceeds of $2,849.
In December 1994, the Company issued 409,207 shares of its common stock at
a price of $2.81 per share upon conversion of preferred shares of Unimetric
Corporation in accordance with the terms of the preferred shares for total
consideration of $1,150.
During the year the Company issued 262,363 shares of its common stock to
Fidutech Technologies Inc. a company owned by an officer of the Company and
22,500 shares to an individual at a price of $2.60 upon exercise of warrants
granted in connection with the September 30, 1993 private placement for
aggregate proceeds of $741.
During the year the Company issued 45,000 shares of its common stock to
various parties for services rendered aggregating $170. The amount has been
included in selling, general and administrative expenses for the year ended
September 30, 1995.
During the year the Company issued 90,000 shares of its common stock for
services rendered by underwriters and directors in May 1993.
On February 2, 1995 the Company issued 10,000 shares of its common stock at
a price of $1.68 upon exercise of warrants issued on September 30, 1993.
24
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
1994
On March 31, 1994, the Company issued 3,354,346 shares of its common stock
at a price of $3.25 per share, aggregating $10,901 and warrants to purchase
3,354,346 common shares at a price of $3.75 per share; these warrants were
exercised in July 1994, for proceeds aggregating $12,579. The Company issued to
an underwriter 200,000 warrants to purchase an equivalent number of common
shares at a price of $4.00 per share until January 31, 1999. The Company also
issued 330,000 shares of its common stock and 200,000 warrants to purchase
100,000 common shares at a price of $3.25 per share until March 31, 1995 and
100,000 common shares at a price of $3.75 and $4.00 per share if exercised
before March 31, 1995 and March 31, 1996 respectively, to two individuals for
services rendered in connection with the private placement.
On March 31, 1994, the Company issued 88,968 shares of its common stock at
a price of $2.81 per share, aggregating $250, as part of the consideration for
the purchase of 70% of the outstanding shares of Unimetric Corporation common
stock. On March 1, 1994, the Company issued 140,866 shares of its common stock
at a price of $0.47 per share pursuant to a convertible debenture issued to an
officer for aggregate proceeds of $66.
In 1994, the Company issued 295,000 shares of its common stock for services
rendered by underwriters and directors in connection with stock issuance for
funds raised in 1993.
In 1994, the Company issued 42,500 of its common stock upon exercise of
options granted to underwriters and advisers for aggregate proceeds of $102.
In 1994, the Company issued 237,360 shares of its common stock at a price
of $2.60 per share upon exercise of warrants granted in connection with the
September 30, 1993 private placement for aggregate proceeds of $616.
1993
On September 30, 1993, the company issued to Fidutech Technologies, Inc.
1,044,445 shares of its common stock at a price of $2.25 per share, aggregating
$2,350. The Company received $465 in cash and the balance has been reflected in
stockholders' equity in the accompanying consolidated balance sheets as a
subscription receivable amounting to $1,885.
25
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
INCENTIVE PLAN
During the year, the shareholders of the Company authorized the issuance of
options to purchase 800,000 shares of Common Stock to the two executive officers
of the Company and 535,000 shares of Common stock to the non-executive officers
and key employees of the Company exercisable over a three year period at a price
of $4.125 per share pursuant to the 1995 Stock Option Plan.
Transactions involving options are summarized as follows:
<TABLE>
<CAPTION>
OPTION PRICE
PER SHARE AGGREGATE
SHARES --------------- ---------
--------
#
<S> <C> <C> <C>
Outstanding September 30, 1993............................ 130,125 $ .59 to $1.68 $ 216
Granted................................................... 300,000 2.68 804
Cancelled................................................. 120,000 .59 to 1.68 201
Exercised................................................. 10,125 .59 to 1.68 15
--------- --------------- ------
Outstanding September 30, 1994............................ 300,000 2.68 804
Granted................................................... 1,535,000 4.125 6,332
Exercised................................................. -- -- --
Cancelled................................................. -- -- --
--------- --------------- ------
Outstanding September 30, 1995............................ 1,835,000 $2.68 to $4.125 $ 7,136
========= =============== ======
</TABLE>
As at September 30, 1995, all options outstanding are exercisable. The
options granted in 1994 were due to expire on November 19, 1995 but were
extended to November 19, 1996.
26
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
12. COMMITMENTS AND CONTINGENCIES
The Company's Canadian subsidiary, DB, periodically enters into forward
exchange contracts to hedge specific anticipated foreign currency inflows. It
does not engage in speculation. The foreign exchange contracts do not subject
the Company to operating risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the transactions being
hedged. As at September 30, 1995 and 1994, the Company had approximately NIL and
$5,040 of foreign exchange contracts outstanding, hedging specific transactions.
The forward exchange contracts generally have maturities which do not exceed one
year and exchange rates are agreed to at the inception of the contracts. No
significant gains or losses are deferred in the consolidated balance sheet.
The Company leases office and warehouse space under noncancelable operating
leases. Future minimum lease payments under all noncancelable leases for the
years subsequent to September 30, 1995 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
1996.............................................................................. $1,035
1997.............................................................................. 534
1998.............................................................................. 364
1999.............................................................................. 292
2000.............................................................................. 270
Subsequent to 2000................................................................ 203
</TABLE>
Total rent expense for all operating leases amounted to $976 and $834 for
the years ended September 30, 1995 and 1994, respectively.
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the Company. It is impossible at this time for the
Company to predict with any certainty the outcome of such litigation. However,
management is of the opinion, based upon information presently available, that
it is unlikely that any liability, to the extent not provided for through
insurance or otherwise, would be material in relation to the Company's
consolidated financial position.
27
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
During the year, the Company submitted a Claim Notification Letter to a
customer and issued invoices to another customer against which a cash advance
$2,100 was applied. These amounts were originated with a view to recovering
substantial cost increases pertaining to the design manufacture and delivery of
major infrastructure assets. The Company believes that its costs and expenses
claimed are justified and has obtained a third party analysis as to the
reasonability of its claim to the first customer. It has also received
acknowledgment of the invoices issued to the second customer. The value of these
claims has been recognized in sales in the amount of $3,672. While management
believes that the favorable outcome of these claims is probable, their
resolution will involve further negotiation with the clients, or arbitration,
and the ultimate realization may vary from the current estimates.
Effective July 4, 1994 the Company agreed to acquire 75% of the common
shares of Stelco Fasteners Limited ("Fasteners"), a manufacturer of fasteners
for the automotive industry from Stelco Inc. ("Stelco") for a purchase
consideration of Cdn. $2,000 in cash. Officers of the Company obtained operating
and management control of Fasteners on that date. The shares and consideration
were lodged with a trustee.
The acquisition agreement provided that the Company could propose certain
adjustments to the interest retained by Stelco while Cedar completed its
reorganization of the affairs of Fasteners. Negotiations on these adjustments,
which were agreed to by representatives of Stelco, continued to December 14,
1994.
On December 15, 1994, the Company agreed to all outstanding issues and
tendered the signed ancillary documents, a payment of Cdn. $2,000 and a Cdn.
$1,000 loan to Fasteners. Stelco refused to accept the tender.
On December 17, 1994 the Company obtained a Court Order requiring both
Stelco and the Company to remove themselves from operating control of Fasteners.
The Order expired January 5, 1995 at which time Stelco asserted operating
control of Fasteners. The Company maintains that it is the rightful owner of
75% of the common shares of Fasteners.
In light of these events, the Company adopted a conservative approach and
has not consolidated financial results of Fasteners.
The Company commenced an action against Stelco on December 20, 1994 to
obtain a declaration that the Company is the rightful owner of 75% of the common
shares of Fasteners and for damages and is presently pursuing this action. The
Company is not presently in any position to predict the conclusion of this
pending litigation.
28
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
13. CONCENTRATION OF CREDIT RISK Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising
the Company's customer base and their dispersion across many different
industries. The Company does not require collateral from its customers. As at
September 30, 1995 and 1994, the Company had no significant concentrations of
credit risk.
14. BUSINESS SEGMENTS
The Company operates in the following industry segments:
Construction Products and Services -- Design, engineering and construction
of large industrial and commercial structures and construction services.
Fasteners -- Design and manufacturing of specialty fasteners targeted at
the aerospace industry and distribution of imported fasteners for industry.
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESSES TOTAL
------------- --------- ---------- --------
<S> <C> <C> <C> <C>
1995
Assets(1)........................................ $ 79,400 $ 5,503 $ -- $ 84,903
========== ======= ======== ========
Sales............................................ 150,996 4,754 -- 155,750
========== ======= ======== ========
Segment operating income......................... 3,246 (1,316) -- 1,930
Corporate expenses............................... (1,020)
Interest -- net.................................. (406)
Other income..................................... 1,236
Income from operations of joint venture.......... 2,165
Income tax provision............................. (1,693)
Minority interest -- common stock................ (122)
Minority interest -- dividends................... (70)
------------- --------- ---------- --------
Net income....................................... 2,020
------------- --------- ---------- --------
Capital expenditures............................. 244 8 -- 252
------------- --------- ---------- --------
Depreciation and amortization.................... 2,687 378 -- 3,065
========== ======= ======== ========
</TABLE>
- ---------------
(1) Assets exclude $11,496 and $14,038 of corporate amounts in 1995 and 1994
respectively.
29
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of U.S. dollars unless otherwise indicated)
SEPTEMBER 30, 1995
Industry Segments (continued)
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESSES TOTAL
------------- --------- ---------- -------
<S> <C> <C> <C> <C>
1994
Assets(1)......................................... $52,990 $ 5,150 $-- $58,140
======= ====== ====== =======
Sales............................................. 58,181 4,842 4,936 67,959
======= ====== ====== =======
Segment operating income.......................... 860 (574) 380 666
Corporate expenses................................ (109)
Interest -- net................................... (341)
Other income...................................... 767
Income tax provision.............................. (300)
Minority interest -- common stock................. (19)
Minority interest -- dividends.................... (248)
------- ------ ------ -------
Net income........................................ 416
======= ====== ====== =======
Capital expenditures.............................. -- 94 -- 94
======= ====== ====== =======
Depreciation and amortization..................... 1,695 333 96 2,224
======= ====== ====== =======
</TABLE>
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
UNITED DIVESTED
STATES CANADA BUSINESSES TOTAL
------- -------- ---------- --------
<S> <C> <C> <C> <C>
1995
Assets(1).......................................... $ 5,503 $ 79,400 $-- $ 84,903
======= ======== ====== ========
Sales.............................................. 4,754 150,996 -- 155,750
======= ======== ====== ========
Segment operating income........................... (1,316) 3,246 -- 1,930
======= ======== ====== ========
1994
Assets(1).......................................... 5,150 52,990 -- 58,140
======= ======== ====== ========
Sales.............................................. 4,842 58,181 4,936 67,959
======= ======== ====== ========
Segment operating income........................... (574) 860 380 666
======= ======== ====== ========
</TABLE>
- ---------------
(1) Assets exclude $11,496 and $14,038 of corporate amounts in 1995 and 1994
respectively.
30
<PAGE> 32
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the over-the-counter market and is
included for quotation on the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"). Since
November 4, 1993, the Company's Common Stock has also traded on the Vancouver
Stock Exchange. The following table sets forth certain information with respect
to the high and low market prices of Cedar Group, Inc.'s Common Stock during
fiscal 1994 (October 1, 1993 to September 30, 1994) and fiscal 1995 (October 1,
1994 to September 30, 1995).
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1994
First Quarter................ 3 2 1/2
Second Quarter............... 4 5/8 2
Third Quarter................ 5 7/8 3 1/2
Fourth Quarter............... 7 3/4 5 1/8
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1995
First Quarter................ 8 5/32 5 3/4
Second Quarter............... 6 3/8 3 5/8
Third Quarter................ 5 3/4 3 5/8
Fourth Quarter............... 6 1/2 3 7/8
</TABLE>
[BAR CHART SHOWING SALES FOR THE YEARS 1993 TO 1995]
[BAR CHART SHOWING NET INCOME FOR THE YEARS 1993 TO 1995]
The Company's Common Stock was traded through the OTC electronic bulletin
board until March 14, 1994, when the Common Stock began trading on NASDAQ's
Small-Cap Market. On September 1, 1994, the Company's Common Stock was listed on
NASDAQ's National Market System.
The high and low prices for the Company's Common Stock are rounded to the
nearest 1/3. Such prices are inter-dealer prices without retail mark-ups or
commissions and may not represent actual transactions.
HOLDERS
As of December 20, 1995, the approximate number of holders of record of the
Company's Common Stock was 446. The Company believes the number of beneficial
owners of the Common Stock exceeds 1,100.
DIVIDENDS
The Company has not paid any cash dividends to date and does not anticipate
or contemplate paying cash dividends in the foreseeable future. It is the
present intention of management to utilize all available funds for working
capital.
31
<PAGE> 33
<TABLE>
<CAPTION>
CEDAR GROUP, INC. CORPORATE INFORMATION
<S> <C>
BOARD OF DIRECTORS CANADIAN SUBSIDIARIES
MICHEL L. MARENGERE (1) DOMINION BRIDGE, INC.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER 500 NOTRE DAME STREET
CEDAR GROUP, INC. LACHINE, QUEBEC H8S 2B2
RENE AMYOT (1) STEEN CONTRACTORS LTD.
DIRECTOR 37 DUFFLAW ROAD
LAWYER TORONTO, ONTARIO N6A 2W2
MICHELINE PRUD'HOMME AUSTRALIAN SUBSIDIARY
DIRECTOR McCONNELL DOWELL CORPORATION LTD.
VICE PRESIDENT, COMMUNICATIONS McCONNELL DOWELL HOUSE
LEVEL 4, 627 CHAPEL STREET
LOUIS BERLINGUET SOUTH YARRA, MELBOURNE, VICTORIA 3141
DIRECTOR AUSTRALIA
REYNALD LEMIEUX (1) SHAREHOLDER INFORMATION
DIRECTOR
PRESIDENT CEDAR GROUP, INC.
PLACEMENTS R.N.S. INC. INVESTOR RELATIONS
500 NOTRE DAME STREET
THE HONORABLE MARC LALONDE, CP., CR. LACHINE, QUEBEC H8S 2B2
DIRECTOR TEL.: (514) 634-3550
LAWYER FAX: (514) 636-6247
STIKEMAN, ELLIOTT STRATEGIC GROWTH INTERNATIONAL INC.
(1) MEMBERS OF THE AUDIT COMMITTEE CONTACT: STAN ALTSCHULER / RICHARD COOPER
111 GREAT NECK RD., SUITE 606
OFFICERS GREAT NECK, N.Y. 11021
TEL.: (516) 829-7111
MICHEL L. MARENGERE FAX: (516) 829-8319
CHAIRMAN CHIEF EXECUTIVE OFFICER
TRANSFER AGENT AND REGISTRAR
NICOLAS MATOSSIAN PACIFIC CORPORATE TRUST COMPANY
PRESIDENT AND CHIEF OPERATING OFFICER SUITE 830-625 HOWE STREET
VANCOUVER, B.C.
CHRIS THEODOROPOULOS V6C 3B8
VICE PRESIDENT AND GENERAL COUNSEL CONTINENTAL STOCK TRANSFER
AND TRUST COMPANY
J. ARTHUR GELINAS 2 BROADWAY
VICE PRESIDENT, CORPORATE SERVICES NEW YORK, NEW YORK 10004
ROBERT CHARTIER AUDITORS
VICE PRESIDENT, CORPORATE COMPTROLLER
ERNST & YOUNG
JACQUES R. DELORME 1 PLACE VILLE MARIE
VICE PRESIDENT, MARKETING SUITE 2400
MONTREAL, QUEBEC H3B 3M8
VITOLD JORDAN
VICE PRESIDENT, CEDAR GROUP, INC.
PRESIDENT, CEDAR TECHNOLOGY LEGAL COUNSEL
STEINAR KNAI BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
VICE PRESIDENT, CORPORATE DEVELOPMENT TWO LOGAN SQUARE 12TH FLOOR
PHILADELPHIA, PA 19103-6933
PIERRE SIMARD SMITH, LYONS, TORRANCE, STEVENSON & MAYER
PRESIDENT, CEDAR CAPITAL WORLD TRADE CENTRE
550-999 CANADA PLACE
EXECUTIVE HEADQUARTERS VANCOUVER, B.C.
V6C 3C8
CEDAR GROUP, INC.
500 NOTRE DAME STREET ANNUAL MEETING
LACHINE, QUEBEC H8S 2B2
TEL.: (514) 634-3550 THE ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD AT THE
FAX: (514) 636-6247 RITZ CARLTON HOTEL, 1228 RUE SHERBROOKE OUEST,
MONTREAL, QUEBEC, ON WEDNESDAY, MAY 15, 1996, AT 11:00
U.S.A. SUBSIDIARIES O'CLOCK A.M.
BANYON FASTENER CORP. SHARE LISTING
4851 HOMESTEAD AVENUE
SUITE 120 COMMON SHARES ARE TRADED ON NASDAQ, SYMBOL CGMV, AND
HOUSTON, TEXAS 77028 ON THE VANCOUVER STOCK EXCHANGE SYMBOL CGM.U
FORM 10-K
M.S.W. INTERNATIONAL, INC. COPIES OF THE CORPORATION'S FORM 10-K REPORT TO THE
2010 PRATT BLVD. SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED
ELK GROVE VILLAGE FROM CEDAR GROUP'S INVESTOR RELATIONS DEPARTMENT.
ILLINOIS 6007
UNIMETRIC CORP.
5 TRIPPS LANE
EAST PROVIDENCE
RHODE ISLAND 02916
</TABLE>
32
