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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1995
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 0-19404
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AMERICAN UNITED GLOBAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4359228
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Highland Boulevard
Dix Hills, New York 11746
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (516) 595-9367
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of Class)
Check 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, and (2) has been subject to such filing requirements for
the past 90 days. Yes X NO
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Transitional Small Business Disclosure Format Yes X NO
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Check if there is no disclosure of delinquent filers in response to item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K/A or any amendment to this Form 10-K/A. X
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The issuer's net revenues for its most recent fiscal year was $86,173,000.00.
As of November 3, 1995: (a) 5,689,749 shares of Common Stock, $.01 par
value, of the registrant (the "Common Stock") were outstanding; (b) 4,239,480
shares of Common Stock were held by non-affiliates; and (c) the aggregate
market value of the Common Stock held by non-affiliates was $14,583,811 based
on the closing sale price of $3.44 per share on November 3, 1995.
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PART I
ITEM 1. BUSINESS
GENERAL
American United Global, Inc., a Delaware corporation (the
"Company"), through its operating subsidiaries, is engaged in two
distinct businesses: (i) the Distribution Business, comprising the
sale, service and lease of light and medium-sized construction
equipment, parts and other products manufactured principally by Case
Corporation ("Case"), as a retail distributor and (ii) the
Manufacturing Business, principally comprising the manufacture and
national distribution of sealing devices (o-rings, bonded rubber-to-metal
seals and molded rubber shapes) for the automotive, commercial aerospace,
defense and communications industries and for other industrial applications.
The Company's Distribution Business operates through Western
Power & Equipment Corp., a Delaware corporation ("Western"), its 56.6%
owned subsidiary. Western's principal business is operation as an
authorized Case dealer through fourteen retail distribution facilities
located in the States of Washington, Oregon, California and Nevada.
The construction equipment distributed by the Company is used in the
construction of residential and office buildings, roads, levees, dams,
underground power projects, forestry projects, municipal construction
and other construction projects.
The Company's Manufacturing Business operates through two
operating subsidiaries: (i) the National O-Ring division of American
United Products, Inc., a California corporation ("AUP"), which
manufactures and distributes standard-size, low Cost synthetic rubber
o-ring sealing devices for use in automotive and industrial
applications and (ii) the Stillman Seal division of American United
Seal, Inc., a California corporation ("AUS"), which specializes in the
design, manufacture and distribution of rubber-to-metal bonded sealing
devices for use in commercial, aerospace, defense and communications
industry applications. AUG California, Inc., a California corporation
("AUG"), the Company's wholly-owned subsidiary, together with AUG's
wholly-owned AUP and AUS subsidiaries, form the Manufacturing Business
of the Company. Each of the National O-Ring and Stillman Seal
operating businesses are vertically integrated, having the capacity to
design, develop and create its own synthetic rubber or elastomer
compounds for use in production, and to manufacture finished products.
HISTORY AND ACQUISITIONS
The Company was initially organized as a New York corporation on
June 22, 1988 under the name Alrom Corp. ("the Company"), and
completed an initial public offering of securities in August 1990.
Effective on May 21, 1991, the Company acquired by merger American
United Global, Inc. ("AUG") and the American United Products, Inc.
("AUP") and American United Seal, Inc. ("AUS") wholly-owned operating
subsidiaries of AUG (the "AUG Merger"). As a result of the AUG Merger,
AUG became the wholly-owned subsidiary of the Company, and the former
shareholders of AUG gained control of the Company through the
ownership of approximately 78% of the then outstanding Company Common
Stock. Prior to the AUG Merger, the Company had no operations. The
Company effected a statutory merger in December 1991, pursuant to
which the Company was reincorporated in the State of Delaware under
the name American United Global, Inc.
Effective November 1, 1992, the Company's newly-formed Western
Power & Equipment Corp. subsidiary ("Western"), an Oregon Corporation,
completed the acquisition from Case Corporation ("Case") of certain
assets used in connection with seven separate Case retail construction
equipment distribution operations located in the States of Washington
and Oregon.
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Effective June 1, 1992, through its wholly-owned subsidiary AEI
California, Inc., a Delaware corporation ("AEI"), the Company acquired
substantially all of the assets of Aerodynamic Engineering, Inc.
("Aero") and certain assets used in such company's operations which
were owned by the stockholders of Aero. Aero was engaged in the
business of precision machining metal parts for the aerospace and
defense industries. As more fully discussed in Note 9 to the Company's
Consolidated Financial Statements (see Part II, Item 8, "Financial
Statements and Supplementary Data") and in Part III, Item 13, "Certain
Relationships and Related Transactions," the Company sold the assets
of its AEI subsidiary on April 29, 1994.
Effective September 10, 1994 Western purchased two retail
construction equipment distribution outlets located in Sparks, Nevada
and Fremont, California from Case. In December 1994 Western relocated
the Fremont outlet to Hayward, California. Under the terms of the 1994
Case transaction, Western was obligated to open two additional
distribution outlets in Northern California. In March 1995 Western
opened a retail store in Santa Rosa, California. In August 1995
Western opened a retail store in Salinas, California. See Part II,
Item 7, "Management's Discussion and Analysis of Results of Operations
and Liquidity and Capital Resources--Liquidity and Capital
Resources."
In March 1995 Western Power and Equipment Corp., a Delaware
Corporation was incorporated to act as the parent holding company of
all Western stock (collectively "Western"). At the time Western was
the wholly-owned subsidiary of the Company. Western completed an
initial public offering of 1,495,000 shares of WP&E common stock in
June 1995. This public offering reduced the Company's interest in
Western to 56.6%.
On July 21, 1995 the Company signed a letter of intent to sell
the operating assets and assign substantially all of the operating
liabilities of AUG, consisting of the Company's Manufacturing Group,
for $24,500,000 in cash. This transaction is subject to the
satisfaction of certain terms and conditions, including the completion
of due diligence by the purchaser and the preparation of a definitive
purchase agreement. There can be no assurances that this sale will be
consummated.
The following discussion first describes the operations of the
Distribution Business, followed by a discussion of the Manufacturing
Business.
PRODUCTS, MARKETS AND SERVICES
DISTRIBUTION BUSINESS
NEW CASE CONSTRUCTION EQUIPMENT.
The construction equipment (the "Equipment") sold, rented and serviced
by Western generally consists of: backhoes (used to dig large, wide
and deep trenches); excavators (used to dig deeply for the
construction of foundations, basements, and other projects); log
loaders (used to cut, process and load logs); crawler dozers
(bulldozers used for earth moving, leveling and shallower digging than
excavators); wheel loaders (used for loading trucks and other carriers
with excavated dirt, gravel and rock); roller compactors (used to
compact roads and other surfaces); trenchers (a small machine that
digs trenches for sewer lines, electrical power and other utility
pipes and wires); forklifts (used to load and unload pallets of
materials); and skid
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steer loaders (smaller version of a wheel loader, used to load and transport
small quantities of material--e.g., dirt and rocks around a job site). The
sale prices of this Equipment ranges from $15,000 to $350,000 per piece of
equipment.
Under the terms of standard Case dealer agreements, Western is an
authorized Case dealer for sales of Equipment and related parts and
services at locations in the states of Oregon, Washington, Nevada and
Northern California (the "Territory") . The dealer agreements have no
defined term or duration, but are reviewed on an annual basis by both
parties, and can be terminated without cause at any time either by
Western on 30 days' notice or by Case on 90 days' notice. Although the
dealer agreements do not prevent Case from arbitrarily exercising its
right of termination, based upon Case's established history of dealer
relationships and industry practice, Western does not believe that
Case would terminate its dealer agreement without good cause.
The dealer agreements do not contain requirements for specific minimum
purchases from Case. In consideration for Western's agreement to act
as dealer, Case supplies to Western items of Equipment for sale and
lease, parts, cooperative advertising benefits, marketing brochures
related to Case products, access to Case product specialists for field
support, the ability to use the Case name and logo in connection with
the Western's sales of Case products, and access to Case floor plan
financing for Equipment purchases. Such floor planning arrangements
currently provides Western with interest free credit terms of between
six months and nine months on purchases of specified types of
Equipment. Principal payments are generally due at the earlier of sale
of the equipment or twelve to fifteen months from the invoice date.
OTHER PRODUCTS.
Although the principal products sold, leased and serviced by
Western are manufactured by Case, Western also sells, rents and
services equipment and sells related parts (e.g., tires, trailers and
compaction equipment) manufactured by Hamm and by others.
Approximately 15% of Western's net sales for fiscal year 1995 resulted
from sales, rental and servicing of products manufactured by companies
other than Case.
Western's distribution business is generally divided into four
categories of activity: (i) New Equipment sales and rentals, (ii) used
Equipment sales and rentals, (iii) Equipment servicing, and (iv) parts
sales.
NEW EQUIPMENT SALES AND RENTAL.
At each of its distribution outlets, Western maintains a fleet of
various items of Equipment for sale or rental for periods ranging from
one week to up to nine months (customarily with purchase options at
the end of the rental period). The Equipment purchased for each outlet
is selected by Western's marketing staff based upon the types of
customers in the geographical areas surrounding each outlet,
historical purchases as well as anticipated trends. Each distribution
outlet has access to Western's full inventory of Equipment.
Western's new Equipment rental business has historically been an
adjunct to its new Equipment sales. To assist customers, any new
Equipment can be rented generally for periods of up to nine months and
a portion of customer rental payments may be applied to the purchase
price down payment.
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Western provides only the standard manufacturer's limited
warranty for new equipment, generally a one-year parts and service
repair warranty. Customers can purchase extended warranty contracts.
Western maintains a separate fleet of new Equipment that it
generally holds solely for rental. Such Equipment is generally held in
the rental fleet for 12 months and then sold as used Equipment with
appropriate discounts reflecting prior rental usage. As rental
Equipment is taken out of the rental fleet, Western adds new Equipment
to its rental fleet as needed. The rental charges vary, with different
rates for different items of Equipment rented.
USED EQUIPMENT SALES AND RENTALS.
Western sells and rents used Equipment that has been
reconditioned in its own service shops. It generally obtains such used
Equipment as "trade-ins" from customers who purchase new items of
Equipment and from Equipment previously rented and not purchased.
Unlike new Equipment, Western's used Equipment is generally sold "as
is" and without manufacturer's warranty. Used Equipment is customarily
rented only after available new Equipment has been rented. The rental
charge for such used Equipment is equal to that of rented new
Equipment. Used rental Equipment is first reconditioned by Western
prior to being offered for rent, and is typically not more than three
years old.
EQUIPMENT SERVICING.
Western operates a service center and yard at each retail outlet
for the repair and storage of Equipment. Both warranty and
non-warranty service work is performed, with the cost of warranty work
being reimbursed by the manufacturer following the receipt of invoices
from Western. Western employs approximately 79 manufacturer-trained
service technicians who perform Equipment repair, preparation for sale
and other servicing activities. Equipment servicing is one of the
higher profit margin businesses operated by Western. Western has
expanded this business by hiring additional personnel and developing
extended warranty contracts for Equipment service terms, and
independently marketing such contracts to its customers. Western,
services items and types of Equipment which include those that are
neither sold by Western nor manufactured by Case.
PARTS SALES.
Western purchases a large inventory of parts, principally from
Case, for use in its Equipment service business, as well as for sale
to other customers who are independent servicers of Case Equipment.
Generally, parts purchases are made on standard net 30 days terms.
Western employs one or more persons who take orders from
customers for parts purchases at each retail distribution outlet, the
majority of such orders are placed in person by walk-in customers.
Western provides only the standard manufacturer's warranty on the
parts that it sells, which is generally a 90-day replacement guaranty.
SALES AND MARKETING.
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Western's customers are typically residential and commercial
building general contractors, road and bridge contractors, sewer and
septic contractors, underground power line contractors, persons
engaged in the forestry industry, equipment rental companies and state
and municipal authorities. Western estimates that it has approximately
15,000 customers, with most being small business owners, alone of
which accounted for more than 5% of its total sales.
For the fiscal year ended July 31, 1995, the revenue breakdown by
source for the business operated by Western was approximately as
follows:
New Equipment Sales 57%
Used Equipment Sales 13%
Rental Revenue 8%
Parts Sales 18%
Service Revenue 4%
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100%
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Western advertises its products in trade publications and appears
at trade shows throughout its territory. It also encourages its
salespersons to visit customer sites and offer Equipment
demonstrations when requested.
Western's sales and marketing activities do not result in an
significant backlog of orders. Although Western has commenced
acceptance of orders from customers for future delivery following
manufacture by Case, during fiscal 1995 substantially all of its sales
revenues resulted from products sold directly out of inventory, or the
providing of services upon customer request.
All of Western's sales personnel are employees of Western and all
are under the general supervision of C. Dean McLain, the President and
CEO of Western. Each Equipment salesperson is assigned a separate
exclusive territory, the size of which varies based upon the number of
potential customers and anticipated volume of sales, as well as the
geographical characteristics of each area. Western employed 42
Equipment salespersons on July 31, 1995.
On July 31, 1995, Western employed 3 product support salespersons
who sell Western's parts and repair services to customers in assigned
territories. Western has no independent distributors or non-employee
sales representatives.
SUPPLIERS
Western purchases approximately 85% of its inventory of Equipment
and parts from Case. No other supplier currently accounts for more
than 5% of such inventory purchases. While maintaining its commitment
to Case to primarily purchase Case Equipment and parts as an
authorized Case dealer, in the future Western plans to expand the
number of products and increase the aggregate dollar value of those
products which Western purchases from manufacturers other than Case.
COMPETITION
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Western competes with distributors of construction equipment and
parts manufactured by companies other than Case on the basis of price,
the product support (including technical service) that it provides to
its customers, brand name recognition for its Case and other products,
the accessibility of its distribution outlets, the number of its
distribution outlets, and the overall quality of the Case and other
products that it sells. Western management believes that it is able to
effectively compete with distributors of products produced and
distributed by such other manufacturers primarily on the basis of
overall Case product quality, and the superior product support and
other customer services provided by the Company.
Case's two major competitors in the manufacture of a full line of
construction equipment of comparable sizes and quality are Caterpillar
Corporation and Deere & Company. In addition, other manufacturers
produce specific types of equipment which compete with the Case
Equipment AND other Equipment distributed by Western.
These competitors and their product specialties include JCB
Corporation--backhoes, Kobelco Corporation--excavators, Dresser
Industries--light and medium duty bulldozers, Komatsu Corporation--
wheel loaders and crawler dozers, and Bobcat, Inc.--skid steer
loaders.
Western is currently the only Case dealer for construction
equipment in the states of Washington and Nevada and in the Northern
California area (not including Sacramento), and is one of two Case
dealers in the State of Oregon. However, Case has the right to
establish other dealerships in the future in the same territories in
which the Company operates. In order to maintain and improve its
competitive position, revenues and profit margins, Western plans to
increase its sales of products produced by companies other than Case.
ENVIRONMENTAL STANDARDS AND GOVERNMENT REGULATION
Western operations are subject to numerous rules and regulations
at the federal, state and local levels which are designed to protect
the environment and to regulate the discharge of materials into the
environment. Based upon current laws and regulations, Western believes
that its policies, practices and procedures are properly designed to
prevent unreasonable risk of environmental damage and the resultant
financial liability to Western. No assurance can be given that future
changes in such laws, regulations, or interpretations thereof, changes
in the nature of Western's operations, or the effects of former occupants'
past activities at the various sites at which Western operates, will not
have an adverse impact on the Company's operations.
Western is subject to federal environmental standards because in
connection with its operations it handles and disposes of hazardous
materials, and discharges sewer water in its equipment, servicing
operations. Western internal staff is trained to keep appropriate
records with respect to its handling of hazardous waste, to establish
appropriate on-site storage locations for hazardous waste, and to
select regulated carriers to transport and dispose of hazardous waste.
Local rules and regulations also exist to govern the discharge of
waste water into sewer systems.
In September 1992, prior to Western becoming an authorized Case
dealer, Case received an environmental report indicating certain
contamination conditions which were to be rectified by Case in
connection with the selling of retail outlets to the Company in
connection with the 1992 Case Transaction. In addition, following the
1992 Case Transaction, additional environmental reports were prepared
or obtained
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concerning the progress and cost of remediation projects at those facilities.
Western did not assume any of Case's obligations for site remediation
when it completed the acquisition from Case of certain assets used in
connection with Western's retail facilities, and no accruals for such
clean-up costs appear on the Company's financial statements.
In July 1994, prior to Western's acquisition of the Sparks,
Nevada property, Case received an environmental report indicating
certain contamination conditions which were to be rectified by Case
in connection with the sale of that retail outlet to Western. Such
remediation was completed prior to November 22, 1994. Western did not
assume any of Case's obligations for site remediation when it
completed the acquisition from Case of certain assets used in
connection with Western's retail facilities, and no accruals for such
clean-up costs appear on Western's financial statements.
EMPLOYEES
At July 31, 1995, Western employed 233 full-time employees. Of
that number, 18 are in corporate administration for Western, 15 are
involved in administration at the branch locations, 55 are employed in
Equipment sales and rental, 49 are employed in parts sales, and 96 are
employed in servicing construction equipment. None of Western's
employees are covered by a collective bargaining agreement. Western
believes that its relations with its employees are satisfactory. Most
members of Western management were previously employed by Case.
INSURANCE
Western currently has product liability insurance policies
covering Western with $500,000 limits for each occurrence and
$1,000,000 in the aggregate under the general liability and products
liability policies. Western also has an umbrella liability insurance
policy with an annual aggregate coverage limit of $10,000,000. Western
believes that its product liability insurance coverage is reasonable
in amount and consists of such terms and conditions as are generally
consistent with reasonable business practice, although there is no
assurance that such coverage will prove to be adequate in the future.
An uninsured or partially insured claim, or a claim for which
indemnification is not available, could have a material adverse effect
upon Western.
MANUFACTURING BUSINESS
The Manufacturing Business markets its products to a wide range
of customers principally located in the United States. Industries
represented by these customers include automotive, household
appliances, communications, military and commercial aerospace, weapons
systems and general industrial. Management estimates that the
automotive and commercial aerospace industries represent the
Manufacturing Business's principal customer groups and together
accounted for more than 85% of the Manufacturing group total revenues
for the 1995 Fiscal Year. Although the Manufacturing Group is not
generally a prime contractor under federal government defense
contracts, the Manufacturing Business does serve as a first and
second-tier subcontractor under federal defense programs. Management
estimates that sales of products used in connection with federal
defense programs accounted for approximately 10% of the Manufacturing
Groups total revenues for the 1995 Fiscal Year.
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The Manufacturing Business does not depend upon any one or a
limited number of customers for sales of its products. During the 1995
Fiscal Year, the five largest customers of the Manufacturing Business
together accounted for approximately 29% of the Manufacturing Group
consolidated net sales from its Manufacturing Business.
As of July 31, 1995, National O-Ring had a backlog of firm orders
of approximately $8,570,000, as compared with $9,952,000 as of July
31, 1994. Stillman Seal had a backlog of firm orders or approximately
$2,937,000 as of July 31, 1995, as compared with approximately
$2,432,000 as of July 31, 1994. All backlog orders are expected to be
filled during the succeeding twelve months.
Under regulations with respect to the acquisition of goods and
services by the federal government, sales to the federal government
may be subject to renegotiation of profits or termination of contracts
or subcontracts under certain circumstances at the election of the
federal government. These Federal procurement regulations give the
Federal government the power to cancel firm orders, seek reimbursement
of payments or renegotiate the prices upon which the Federal
government had previously agreed to effect a procurement order in the
event that the prices agreed to be paid by the Federal government are
unfair, based upon inaccurate calculations, or fraudulently
determined. Such regulations have not resulted in the cancellation of
material dollar amounts of orders to date.
In addition to its own employee sales personnel and national
sales director (see "Employees"), the Manufacturing Group also sells
its products through 16 distributors, under distribution agreements
whereby the distributors are granted non-exclusive territories.
Distributors may sell products manufactured by both Stillman Seal and
National O-Ring, distribution agreements are generally for initial
two-year terms, subject to automatic extensions for successive
one-year periods unless otherwise terminated.
John Shahid, the Company's President and Chief Executive Officer,
sets overall sales policy for the Manufacturing Business. The Company
also employs Ted Kasper as National Sales Director for the
Manufacturing Business. The National Sales Director is responsible for
supervising 16 distributors, as well as managing the Manufacturing
Business direct sales staff of 8 employees who operate throughout the
United States to sell Company products. The Manufacturing Business's
only sales office outside of California is in Michigan.
No customer of the Manufacturing Business, as applicable,
accounted for more than ten percent of overall annual company sales
revenues during the 1995 Fiscal Year.
COMPETITION.
All aspects of the Company's Manufacturing Business are highly
competitive, and the degree of competition varies with different
products. The market for sales of rubber and rubber to metal bonded
sealing devices is fragmented, and there are many competitors. Some of
those competitors, such as Parker-Hannifin Corporation ("Parker Seal")
and Wynn's International Inc. (Wynn's-Precision, Inc.), have
significantly greater resources than the Company.
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The Manufacturing Group competes with other producers based upon
competitive product pricing, its reputation in the industry, the
quality and/or precision of its products, its ability to provide
just-in-time delivery to customers, its customer service operations
and the ability of its staff to work with customers to develop new
compounds or to adjust existing compound formulas to meet the demands
of special customer applications. Like most of its competitors, the
Company is experiencing increased price competition in its mature
Manufacturing Business operations. Such operations already suffer from
increasing pressure on profit margins due to existing intense price
competition, and the Company expects such competitive conditions and
downward pressure on profit margins on Manufacturing Business products
to continue in the future.
Proprietary Technology, Patents and Trademarks
In 1989 the Company acquired from Federal-Mogul certain patents
(the "Owned Patents") which are not currently material to the
Manufacturing business, as well as a license of Federal Mogul's
"National" trademark for use in connection with sealing devices (the
"Trademark License"). As part of AUP's financing of its purchase of
the Manufacturing Business National O-Ring Division from
Federal-Mogul, it collaterally assigned the Owned Patents and its
rights under the Trademark License to its institutional lender. The
Company also owns all rights, title and interest in and to the
tradename "Still Seal" which is used to identify certain rubber to
metal bonded products manufactured and distributed by Stillman Seal.
Management of the Company does not believe that loss of the
Company's rights to use any of the Owned Patents, or the trademarks
covered by the Trademark License, would have a material adverse effect
on the Company.
All of the Manufacturing Business salaried employees and all
Stillman Seal employees are required to sign confidentiality and
patent assignment agreements which obligate them to protect the
Company's proprietary technology and know-how from unauthorized use
and disclosure. Management of the Company believes that with respect
to certain of its know-how and improvements, even if such materials,
products and processes were patentable, any patent protection which
could be obtained would not be as beneficial to the Company as the
continued maintenance of such proprietary information as confidential
material whenever possible.
Environmental Standards and Government Regulation
The Manufacturing Group is subject to numerous rules and
regulations at the federal, state and local levels which are designed
to protect the environment and to regulate the discharge of materials
into the environment. Based upon current laws and regulations, the
Manufacturing Group believes that its policies, practices and
procedures are properly designed to prevent unreasonable risk of
environmental damage and the resultant financial liability to the
Manufacturing Group. No assurance can be given that future changes in
such laws, regulations, or interpretations thereof, changes in the
nature of the Manufacturing Group operations, or the effects of former
occupants' past activities at the various sites at which the
Manufacturing Group operates, will not have an adverse impact on the
Manufacturing Group operations.
The Manufacturing Group is subject to federal environmental
standards because in connection with its operations it generates,
handles and disposes of hazardous materials, discharges sewer water
and emits materials into the atmosphere. For example, the
Manufacturing Group handles and generates "hazardous materials" as
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defined by the Environmental Protection Agency ("EPA") at its Downey
and Carlsbad facilities in connection with its manufacturing
operations. The Manufacturing Group has obtained necessary generator
identification numbers from the EPA for each such facility pursuant to
the Resource Conservation and Recovery Act of 1976 ("RCRA"). As a
generator of hazardous waste, the Manufacturing Group is responsible
for manifesting and transporting all such waste to permitted
treatment, storage and disposal facilities in accordance with RCRA.
Pursuant to RCRA requirements, National O-Ring and Stillman Seal are
registered with the State of California as large producers of
hazardous waste. The Manufacturing Group internal staff is trained to
keep appropriate records with respect to its generation of hazardous
waste, to establish appropriate on-site storage locations for
hazardous waste to select regulated carriers to transact and dispose
of hazardous waste and to monitor all aspects of hazardous waste
handling under the requirements of RCRA. Hazardous wastes are
manifested and stored at each site for not more than 90 days, and
transported to licensed disposal facilities only by EPA-approved
transporters. Although the Manufacturing Group believes that in its
handling of hazardous wastes it has met all of its responsibilities in
accordance with RCRA, as a generator of hazardous substances the
Manufacturing Group could be potentially liable under the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), also known as the "Superfund Act."
Local rules and regulations also exist to govern the discharge of
waste water into sewer systems and the emission of pollutants into the
atmosphere. The Manufacturing Group holds permits to discharge waste
water from Downey, California and Carlsbad, California.
The Manufacturing Group is also subject to the federal Clean Air
Act Amendments of 1990 ("CAA"). The Manufacturing Group holds numerous
permits to operate sources for air contaminants at its Downey,
California facility which are issued by the South Coast Air Quality
Management District, as well as permits to operate sources for air
contaminants at its Carlsbad, California facility from the San Diego
Air Pollution Control District. The Manufacturing Group believes that
the air quality standards mandated by such California air quality
regulatory agencies are more demanding than those currently imposed
under CAA.
There are two existing contamination conditions at the Downey,
California facility which are the result of leakage for hydrocarbon
and chromium sumps (underground tanks). In each case, the cleanup
operations have been commenced and no evidence of water contamination
has been found. It is not anticipated that any remediation or removal
project finally implemented by the Manufacturing Group will result in
material suspension of manufacturing operations.
Under the terms of agreements with the Manufacturing Group,
Federal Mogul agreed to pay all costs related to the elimination of
environmental damage at the Downey, California facility which were
identified in an environmental report and existed at the time of the
Manufacturing Group acquisition of the National O-Ring Division.
Although the existing leakage and soil contamination problems
identified above were in existence prior to its acquisition, the
Manufacturing Group and Federal Mogul have agreed that the
Manufacturing Group will pay 50% of the first $150,000 of costs
related to remediation of the leakages (a maximum of $75,000), and
Federal Mogul shall be fully responsible for additional costs without
further contribution by the Company.
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Current estimates for the cost of remediation and/or removal of
contamination from both leakages range from $75,000 to $200,000; the
Manufacturing Group has accrued $75,000 as of July 31, 1995, for the
estimated cost of remediation.
Employees
As at September 30, 1995, the Manufacturing Group employed
approximately 767 full-time employees.
The Manufacturing Group operations at both its Downey, California
and Carlsbad, California facilities are covered by collective
bargaining agreements which expire on April 1, 1997 with respect to
National O-Ring hourly employees, and on October 12, 1996 with respect
to Stillman hourly employees. The Manufacturing Group relations with
its employees at both operating facilities, and at the Western
facilities, are believed to be good.
INSURANCE
The Company currently has in force product liability insurance
policies covering the Manufacturing Business. The aircraft products
liability policies have $10,000,000 limits for each occurrence and in
the aggregate, while there are coverage limits of $1,000,000 for each
occurrence and $2,000,000 in the aggregate under the general liability
and products liability policies for all operating businesses. The
Company also has an umbrella liability insurance policy with coverage
limits of $5,000,000 for each occurrence and $5,000,000 in the
aggregate, or products liability and central liability for the
Manufacturing Business.
The Company believes that its product liability insurance
coverage is reasonable in amount and consists of such terms and
conditions as are generally consistent with reasonable business
practice, although there is no assurance that such coverage will prove
to be adequate in the future. An uninsured or partially insured claim,
or a claim for which indemnification is not available, could have a
material adverse effect upon the Company.
The Company has in place Director and Officer Liability Insurance
in the amount of $1,000,000.
Should the Company experience significant claims or losses in the
future, the resulting increases in the Company's insurance premiums
could materially and adversely affect the Company or its financial
position.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers and directors of the Company are as
follows:
Name Age Position
- ---- --- --------
Robert M. Rubin 55 Chairman of the Board of Directors
and Director
John Shahid 53 President, Chief Executive Officer
and Director
John M. Palumbo 39 Chief Financial Officer, Treasurer
and Secretary
Lawrence E. Kaplan 52 Director
C. Dean McLain 42 Executive Vice President and Director;
President and Chief Executive Officer
of Western Power & Equipment
Ralph T. Beers 45 Director
Set forth below is a brief background of the executive officers
and directors of the Company, based on information supplied by them.
ROBERT M. RUBIN. Mr. Rubin has served as the Chairman of the
Board of Directors of the Company since November 20, 1992. Between
November 20, 1992 and March 7, 1993, Mr. Rubin served as Chief
Executive Officer of the Company. Between October, 1990 and January 1,
1994, Mr. Rubin served as the Chairman of the Board and Chief
Executive Officer of AUGI; since January 1, 1994, he has only been
Chairman of the Board of AUGI. Mr. Rubin was the founder, President,
Chief Executive Officer and a Director of Superior Care, Inc. ("SCI")
from its inception in 1976 until May 1986. Mr. Rubin, continued as a
director of SCI (now known as Olsten Corporation ("Olsten") until the
latter part of 1987. Olsten, a New York Stock Exchange listed company,
is engaged in providing home care and institutional staffing services
and health care management services. Mr. Rubin, is also a director,
Chairman and minority stockholder of Universal Self Care, Inc., a
public company engaged in the sale of products used by diabetics;
Response USA, Inc., a public company engaged in the sale and
distribution of personal emergency response systems; and Diplomat
Juvenile Products, Inc., a public company engaged in the manufacture
and distribution of baby products. Mr. Rubin is also a director and
minority shareholder of the following public companies: ERD Waste
Technology, Inc.; Help At Home, Inc.; Transcap Medical, Inc.; and Kaye
Kotts Associates, Inc.
Robert M. Rubin, together with several other individuals and
entities (including Solomon, Fornari, Weiss & Moskowitz, P.C., counsel
to the Company, and Stephen A. Weiss, one of its members, is a
defendant in an action involving United Health Program of American,
Inc. ("UHP"), a privately owned company in which Mr. Rubin is a
minority stockholder. This action entitled, Lorina v. United Dental
Program of America, Inc.,
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et al. was commenced in August 1993 by Messrs. Albert Loring and Robert
Rosenfeld and their affiliated companies as plaintiffs, and is pending in
the United States District Court for the Eastern District of New York. The
complaint alleges that Mr. Rubin and the other defendants engaged in the
planning or facilitating of a public offering of shares of UHP. Plaintiffs'
claim that through a reverse stock split of the UHP issued shares for
inadequate consideration to certain defendants and others. The
allegation found in securities and common law fraud, allege violations
of the Racketeer Influenced and Corrupt Organizations Act ("RICO"),
and other claims allegedly arising under Delaware and/or New York law.
Plaintiffs' original complaint was dismissed IN TOTO by order of
the Court dated October 29, 1993, and by order entered September 21,
1994, defendant's motion to dismiss plaintiffs, amended complaint was
granted to the extent that the securities fraud and RICO conspiracy
claims were dismissed as to all defendants, together with the
professional defendant RICO claims and all RICO claims as to certain
defendants, including UHP. However, RICO counts against certain other
individual defendants, including Robert M. Rubin, were not dismissed,
nor were any of the state causes dismissed, so that no defendant
has been dismissed from the action entirely. Reargument seeking
dismissal of all claims as to all defendants has been timely sought.
To date, the Court has not ruled on the defendants motion.
Mr. Rubin and the other defendants expect to continue to
vigorously contest plaintiffs' claims and believe that such claims
are totally without merit.
Mr. Rubin is also a former director of American Complex Care,
Incorporated, a public company formerly engaged in the provision of
home healthcare infusion therapies and as a distributor of Medicare
Part B products. In March 1995, American Complex Care, Incorporated
and its operating subsidiaries made assignments of their assets for
the benefit of their creditors. None of American Complex Care,
Incorporated or its subsidiaries has been the subject of a petition
under Federal bankruptcy laws or any state insolvency laws.
JOHN SHAHID. Mr. Shahid has served as President and Chief
Executive Officer and a director of the Company since May, 1991, and
he has served as Chief Executive Officer of the Company since January
1, 1994. Since October 30, 1990 he has served as the President, Chief
Operating Officer and a director of each of AUG and its subsidiaries;
since January 1, 1994, he has served as Chief Executive Officer of
each of AUG and its subsidiaries. Mr. Shahid joined AUG in July 1989,
serving as Chief Operating Officer of one of AUG's wholly-owned
subsidiaries, American United Products, Inc. ("AUP") until he became
President of AUG. From September, 1981 to July, 1989, Mr. Shahid
served as Vice President and General Manager of the Precision
Aerospace Division of Wynn's International, Inc. From January, 1979 to
September, 1981, Mr. Shahid was Vice President of Operations for Furon
Corporation, being responsible for its O-ring and Seals Divisions. Mr.
Shahid received his B.S. degree in Industrial Engineering and his M.S.
degree in Mechanical Engineering from the University of Kentucky.
JOHN M. PALUMBO. Mr. Palumbo has served as Chief Financial
Officer, Secretary and Treasurer of the Company since May, 1991, and
he has held the same position with AUG since October, 1990. From
November, 1988 to October, 1990, Mr. Palumbo served as Controller for
AUG. Mr. Palumbo is a certified public accountant and received his
B.S. degree in Finance from Canisius College.
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LAWRENCE E. KAPLAN. Mr. Kaplan has served as a director of the
Company since February, 1993. Since January, 1987, Mr. Kaplan has been
an officer, director and principal stockholder of GroVest, Inc., an
investment banking firm located on Long Island, New York. Mr. Kaplan
is also a registered representative, officer director and principal
stockholder of G-V Capital. He is also a director of Analytical
Nursing Management Corp., a home health care deliverer in Baton Rouge,
Louisiana. He is also an officer and director of Saratoga
Standardbreds Inc., a blank check company which is looking for a
merger opportunity.
C. DEAN MCLAIN. Mr. McLain has served as an Executive Vice
President of the Company since March 1, 1993 and President and Chief
Executive Officer of Western since June 1, 1993. On March 7, 1994,
Mr. McLain was elected to the Company's Board of Directors. From 1989
to 1993, Mr. McLain served as Manager of Privatization of Case
Corporation. From 1985 to 1989, Mr. McLain served as General Manager
of Lake State Equipment, a distributor of John Deere construction
equipment. Mr. McLain holds a B.S. degree in Business and Economics,
and a Master's of Business Administration, from West Texas State
University.
RALPH T. BEERS. Mr. Beers has served as a director of the Company
since June 17, 1994. beginning in February 1993, Mr. Beers has been
Chief Executive Officer of Beers and Boost Insurance Services, which
provides risk management and brokerage services to large private and
small publicly-held companies. From November 1985 to February 1993,
Mr. Beers was a partner of Sullivan & Curtis Insurance Brokers, a full
service independent insurance brokerage firm. From June 1972 to
November 1985, Mr. Beers held various positions with Chubb Group of
Insurance Companies, rising to the level of Vice President and Branch
Manager for Chubb Group of Insurance in Boston, Massachusetts, which
branch employed 68 employees and generated $50,000,000 annual volume
of premium payments from insureds. Mr. Beers received a B.S. degree in
Business Administration from West Virginia Wesleyan College.
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SIGNATURES
Pursuant to the requirements 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 by the undersigned thereunto duly
authorized on May 20, 1996.
AMERICAN UNITED GLOBAL, INC.
By: /s/ Robert M. Rubin
---------------
Robert M. Rubin, Chairman
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Robert M. Rubin Chairman and Director and
- ---------------------- Acting Chief Financial and May 20, 1996
Robert M. Rubin Principal Accounting Officer
/s/ Lawrence E. Kaplan
- ---------------------- Director May 20, 1996
Lawrence E. Kaplan
/s/ C. Dean McLain
- ---------------------- Director May 20, 1996
C. Dean McLain
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