<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended March 31, 1995
- --------------------------------------------------------------------------------
Commission File No. 0-2901
--------------------------
KRUG INTERNATIONAL CORP.
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(Exact name of registrant as specified in its charter)
Ohio 31-0621189
------------------------------ -----------------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
6 N. Main Street Suite 500, Dayton, Ohio 45402-1900
------------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (513) 224-9066
--------------
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON SHARES WITHOUT PAR VALUE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
At the close of business on June 13, 1995:
Number of Common Shares
without par value outstanding.... 5,011,523
Aggregate market value of Common
Shares without par value, held
by non-affiliates of the
Corporation...................... $10,679,262
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. KRUG International Corp. Proxy Statement for its Annual Meeting
of Shareholders on July 18, 1995, definitive copies of which
were filed with the Commission within 120 days after the end of
the Corporation's last fiscal year. Only such portions of the
Proxy Statement as are specifically incorporated by reference
under Part III of this Report shall be deemed filed as part of
this Report.
____________________
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PART I
------
ITEM 1. BUSINESS.
- ------ --------
KRUG International Corp., an Ohio corporation organized in June
1959, and its subsidiaries (sometimes collectively called the "Corporation")
operate primarily in three business segments: Life Sciences and Engineering,
Leisure Marine and Housewares. Information concerning the revenues, operating
profit and identifiable assets of the three business segments for the fiscal
years ended March 31, 1995, 1994, and 1993 is set forth at Note K of the Notes
to Consolidated Financial Statements of the Corporation, which is incorporated
herein by this reference.
LIFE SCIENCES AND ENGINEERING
-----------------------------
The Life Sciences and Engineering (formerly Aerospace) business
is comprised of the Corporation's KRUG Life Sciences Inc. subsidiary with
operations in Houston and San Antonio, Texas and the Technology/ Scientific
Services, Inc. subsidiary in Dayton, Ohio. KRUG Life Sciences Inc. was
organized by the Corporation as a subsidiary in May 1990 to carry on the
business formerly done by its Technology Life Sciences Division and Technology
Services Division.
KRUG LIFE SCIENCES INC. - HOUSTON OPERATIONS
- --------------------------------------------
KRUG Life Sciences has been conducting biomedical research,
technology development, and flight crew operations support at the National
Aeronautics and Space Administration Lyndon B. Johnson Space Center
continuously since 1967. From the original work of developing specialized
cardiovascular monitoring instrumentation, the research and development
activities have expanded to encompass those sciences necessary to assure that
man has the capability and capacity to explore and exploit the frontiers of
space. Such activities include the conceptualization and implementation of
ground based and in-flight medical experiments to develop the health care and
physiological deconditioning countermeasures required to offset the
microgravity of space and ensure the well-being and productivity of the flight
crews.
In March 1991, KRUG Life Sciences began work on a new $136
million five year contract with NASA, replacing the one which previously
started in January 1987. This contract has expanded support services provided
to the Medical Sciences Division at the Johnson Space Center. In April 1993,
NASA modified the contract and increased its value to $165 million. This
modification is to cover the cost of additional test equipment, supplies and
services for the remaining three years of the contract.
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Performance under this contract includes the areas of neurosensory
physiology, cardiovascular physiology, musculoskeletal physiology, regulatory
systems physiology, electrophysiology, cell biology, pharmacodynamics, remote
health care, bioengineering, applications of knowledge based systems, and
clinical laboratory operations. KRUG's work for the Johnson Space Center is
spread over a wide variety of programs, none of which comprise more than 20% of
the contract. Some of the major areas are Shuttle support, joint Russian MIR
space ventures, Shuttle extended duration mission research, Manned Flight
research and development, Space Station research and biotechnology research.
Prior to the current contract, KRUG Life Sciences began work in January 1987 on
a $35 million, multi-year contract with NASA at the Johnson Space Center. The
value of that contract more than doubled since its initiation to a final value
of $76.5 million when it was completed in February 1991.
KRUG LIFE SCIENCES INC. - SAN ANTONIO OPERATIONS
- ------------------------------------------------
KRUG Life Sciences also provides professional research support
services to the United States Air Force and commercial customers in the San
Antonio area. Such services include research into human tolerance to
gravitational forces generated by rapid onset and increasing acceleration. As
advances in aircraft development lead to increases in speed and mobility, this
research becomes increasingly more important. Engineering programs include the
design and production of variable profile breathing simulators, therapeutic
oxygen manifold systems and other similar devices. KRUG Life Sciences also
does repair, maintenance and calibration of sophisticated ground and airborne
electronics equipment.
TECHNOLOGY/SCIENTIFIC SERVICES, INC.
- ------------------------------------
Technology/Scientific Services provides a wide variety of
engineering and technical support services in various on-site governmental
research and experimental programs. Current activities are principally
contract services in support of laboratories at Wright-Patterson Air Force
Base and involve computer networking using fiber optics, satellite
communications, aircraft structural and environmental testing,
microelectronics, fabrication techniques for composite materials and aircraft
vulnerability investigations.
2
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GENERAL
- -------
In its Life Sciences and Engineering Segment, the Corporation
competes with practically all the large and small aerospace companies,
including other local companies competing for local services. The areas of
competition vary from contract to contract but most contracts are price
sensitive. Some business is obtained on a sole source basis, such as follow-on
business, where a unique capability or product has been developed and the
limited market precludes the development of a second source by the government.
The majority of the Corporation's Life Sciences and Engineering
business is with agencies of the U.S. Government and prime government
contractors (revenues from agencies of the U.S. Government amounted to $43.6
million during fiscal 1995) and, as a result, is subject to possible
termination.
The order backlog of the Life Sciences and Engineering Segment
was $89.1 million at March 31, 1995 and $129.8 million at March 31, 1994.
Approximately 49% of the backlog at March 31, 1995 is expected to result in
revenue during fiscal 1996.
LEISURE MARINE
--------------
Sowester Limited ("Sowester"), formerly South Western Marine
Factors Limited, a subsidiary of KRUG International (U.K.) Ltd., is engaged in
the Leisure Marine business. Sowester, located in the port of Poole, Dorset,
England, distributes sail and power boat equipment for the leisure marine
market. Sowester handles five principal product lines: marine chandlery, a
wide range of boat fittings, equipment and clothing; Mercury outboard engines;
Mercury Mercruiser sterndrive and inboard engines; Morse controls, a
comprehensive line of steering systems and controls for power and sail boats;
and diesel engines which provide auxiliary power for sailing yachts. Sowester
is the exclusive distributor of Mercury engines and Morse controls in the
United Kingdom and the Republic of Ireland.
Sowester sells its products in two principal markets - boat
manufacturers and marine retailers. It has a network of over 100 sales and
service dealers. The marine products business tends to be seasonal, with the
highest sales occurring in spring and summer.
Order backlog is not a factor in the Leisure Marine Segment
since virtually all orders are shipped within days of receipt.
3
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HOUSEWARES
----------
Beldray Limited ("Beldray"), a subsidiary of KRUG International (U.K.)
Ltd., operates the Corporation's Housewares business. Beldray, located in
Bilston, West Midlands, England, manufactures consumer durable products sold
under the "Beldray" name. Its products include ironing tables and accessories,
domestic aluminum ladders and work platforms, garden equipment, shower
screens, and indoor and outdoor racks for drying clothes. These products are
marketed through major retailers, wholesalers and mail order companies to the
housewares, do-it-yourself and garden markets. Beldray is a long established
name with significant recognition among the buying public throughout the
United Kingdom.
The Housewares Segment's firm order backlog is typically less
than one month's sales.
GENERAL INFORMATION
-------------------
The Corporation owns a number of patents and patent applications
but it is not possible to estimate their value. None of the Corporation's
present business is materially dependent on any patents or patent applications.
In the fiscal year ended March 31, 1995, revenues from agencies
of the U.S. Government were $43.6 million or 47.5% of consolidated revenues.
As of May 31, 1995, the Corporation employed 444 persons in the
United States and 471 in the United Kingdom. The Corporation's Life Sciences
and Engineering Segment employs numerous highly trained persons holding
bachelors and in some cases advanced degrees, in one or more of the following
disciplines - engineering, medicine, mathematics, physics and biology. None
of the Corporation's United States employees is represented by unions.
Compliance with federal, state, and local laws regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment has had no material effect upon the capital
expenditures, earnings, and competitive position of the Corporation. To the
best of management's knowledge, the Corporation is in compliance with federal,
state and local environmental regulations.
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ITEM 2. PROPERTIES
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The principal properties of the Corporation as of June 15, 1995
are listed below:
<TABLE>
<CAPTION>
Owned or Square
Location Leased Footage Use and Segment
- -------- ------ ------- ---------------
<S> <C> <C> <C>
A. UNITED STATES
-------------
Knoxville, Tennessee Leased 387,000 Plant-Subleased(1)
Houston, Texas Leased 62,300 Offices & Laboratories
Life Sciences & Eng.
San Antonio, Texas Leased 2,700 Office - Life
Sciences & Eng.
Dayton, Ohio Owned 67,600 Offices - Life
Sciences & Eng. (2)
B. ENGLAND
-------
Bilston, West Midlands Leased 105,000 Plant - Housewares
Owned 85,000 Plant - Housewares
Poole, Dorset Owned 71,000 Distribution-
Leisure Marine
C. CANADA
------
Toronto, Ontario Leased 62,900 Plant-Subleased (3)
<FN>
______________________
(1) 38% of this property is subleased and the remainder is available for
sublease.
(2) This property is subject to a $2.35 million mortgage granted
under the Corporation's Credit Agreement with its U.S. Banks dated
November 14, 1991 and subsequently amended under amendments 1 thru
4 with the final amendment #4 dated March 1995, putting the mortgage
into place. This property is excess to the Corporation's space needs
and is listed for sale.
(3) This facility is no longer needed and the Corporation has subleased
this property.
</TABLE>
The Corporation maintains its plants and offices in good repair.
In the opinion of management, the various facilities are adequate to the needs
of the businesses conducted therein.
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ITEM 3. LEGAL PROCEEDINGS
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In May 1991, the United States Customs Department commenced an
investigation of a subcontract between the Corporation's Technology Systems
Division and Tripod-Laing Joint Venture of the United Kingdom. The contract
relates to aeromedical equipment which was ultimately to be shipped to Iraq.
Performance under the contract was suspended when relationships between the
United States and Iraq changed, and no equipment was delivered to Iraq under
the contract. The criminal investigation appeared to be dormant from 1991
until May 1994 when a Customs Agent commenced interviewing certain present and
former employees of the Corporation. Since May 1994, the Corporation is not
aware of any additional activity in this investigation. The Corporation has
cooperated in the investigation.
Other than as indicated, neither the Corporation nor any of its
subsidiaries is a party to any other material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The executive officers of the Corporation, as of June 15, 1994,
their positions with the Corporation and their ages are as follows:
Name Offices Age
---- ------- ---
Maurice F. Krug Chairman, President and
Chief Executive Officer 66
Thomas W. Kemp Vice President-Finance/
Treasurer 59
W. E. Greenhalgh Director and KRUG
International (UK) Ltd.
subsidiaries' Chairman 64
6
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T. Wayne Holt Director and President
KRUG Life Sciences Inc. 68
James J. Mulligan Director and Secretary 73
All officers of the Corporation are elected annually by the
Board of Directors.
Mr. Krug is a founder of the Corporation and has been Chairman
of the Board and Chief Executive Officer of the Corporation since 1959. From
1959 until February 1987, and from 1989 to the present, he has also served as
President of the Corporation.
Mr. Kemp was elected Vice President-Finance/Treasurer of the
Corporation in May 1990. He previously was employed by Kodak Mining Company as
Vice President of Finance from 1977 to 1989. Prior thereto, Mr. Kemp was
employed by Mead Technology Laboratories as Vice President of Finance and
Administration.
Mr. Greenhalgh was elected Chairman of Sowester Limited and
Beldray Limited, subsidiaries of KRUG International (UK) Ltd., in March 1985.
He was Chief Executive Officer of KRUG International (UK) Ltd. from March 1985
to April 1989 and has been a Director of KRUG International (UK) Ltd. since
1970.
Mr. Holt, 68, was involved continuously with the Corporation's
life sciences, aerospace and engineering operations for 22 years commencing
with his initial employment in 1971 until his retirement in 1993. He held a
number of positions, including Vice President-Aerospace Group from 1981 to
1988, Assistant to the Chairman, Aerospace Group, from 1988 to 1990, Vice
President from May 1990 to February 1991, Executive Vice President from
February 1991 to December 31, 1992, and Advisor to the Chairman, Life Sciences
and Engineering from January 1, 1993 to May 1, 1993. On April 17, 1995, Mr.
Holt was named President of KRUG Life Sciences Inc., a position he had
previously held.
Mr. Mulligan has been a member of the law firm of Mulligan &
Mulligan since January 1993. He was a member of the law firm of Smith &
Schnacke from 1953 to 1989 and a member of the law firm of Thompson, Hine &
Flory from 1989 until his retirement in 1991. He became Secretary of the
Corporation in 1966.
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
- ------ ---------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
KRUG International's common stock is traded in the National Market System,
NASDAQ symbol, KRUG. The table below includes the high and low sale prices for
the common shares for fiscal 1995 and 1994. The number of shareholders of
record was 1,122 as of March 31, 1995. A 5% stock dividend was paid in April
1993, another 5% stock dividend in January 1994, and a 10% stock dividend in
December 1994. No cash dividends were paid in fiscal 1995 or 1994. Warrants to
purchase common shares were distributed on January 31, 1995 to shareholders of
record on December 23, 1994. One warrant was issued for every five common
shares owned.
<TABLE>
<CAPTION>
Quarter 4th 3rd 2nd 1st
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 High $ 4.75 $ 5.00 $ 4.25 $ 4.25
Low 3.38 3.38 3.00 2.50
- ---------------------------------------------------------------------------------------------------
1994 High $ 4.75 $ 6.88 $ 6.88 $ 4.63
Low 2.63 4.13 4.38 3.13
- ---------------------------------------------------------------------------------------------------
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
The following table summarizes certain selected financial data,
which should be read in conjunction with the Corporation's Consolidated
Financial Statements and related Notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein.
<TABLE>
SELECTED FINANCIAL DATA
(all dollar amounts in thousands, except for per share amounts)
<CAPTION>
Fiscal Years 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 91,766 $ 90,188 $ 97,155 $ 99,145 $105,866
Earnings from
Continuing Operations 2,012 2,870 2,608 1,387(1) 2,168
Net Earnings 2,012 1,418 2,608 1,516(1) 2,168
Earnings Per Share from
Continuing Operations(2) .40 .57 .52 .28(1) .43
Net Earnings Per Share(2) .40 .28 .52 .30(1) .43
Total Assets 44,169 43,225 46,034 46,380 45,216
Long-Term Debt 13,612 12,932 14,912 16,622 2,351
Subordinated Long-Term Debt 300 300 350
<FN>
(1)The Corporation applied the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," in fiscal 1992. This
change in method increased fiscal 1992 net earnings by $583 ($.13 per
share).
(2)All share and per share data has been retroactively adjusted to reflect the
10% stock dividend paid in December 1994 and the 5% stock dividends paid in
January 1994 and April 1993.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Fiscal 1995 revenues of $91.8 million increased by 2% from fiscal 1994. Fiscal
1994 revenues of $90.2 million decreased by 7% from fiscal 1993. In fiscal
1995, revenues in the U.S. were $44.0 million, and revenues in the U.K. were
$47.8 million.
The fiscal 1995 revenues of $47.8 million for the U.K. businesses were $2.1
million higher than fiscal 1994. During fiscal 1995, sales volume of the U.K.
businesses increased by $0.6 million, or 1%, over fiscal 1994. The additional
$1.5 million revenue increase was due to favorable currency translation. In
fiscal 1995, the U.K. Leisure Marine Segment had a $0.4 million increase in
sales volume and an additional $0.7 million increase in revenue due to
favorable currency translation for a total increase of $1.1 million to $20.9
million. All Leisure Marine product areas had increases in revenue except for
outboard engines, for which there was decreased demand. Sales of the U.K.
Housewares Segment increased by $0.2 million due to increased demand and $0.8
million due to favorable currency translation for a total increase of $1.0
million to $26.9 million. The ironing table and the indoor airers product
groups had sales increases during the year. These increases were partially
offset by decreased ladder sales which were caused by lower consumer demand and
increased competition.
Fiscal 1994 U.K. revenues of $45.7 million were $1.3 million lower than
fiscal 1993, because of a $5.6 million unfavorable currency translation effect
which was only partially offset by sales volume increases of $4.3 million.
During fiscal 1994, the U.K. Leisure Marine Segment had a $3.4 million increase
in sales volume, but revenues increased by only $0.9 million to $19.8 million
after currency translation. Revenue increases in fiscal 1994 were experienced
in almost all Leisure Marine product areas due to increased market share and
improvement in the U.K. Leisure Marine economy. Sales volume of the U.K.
Housewares Segment increased by $0.9 million during fiscal 1994, but revenues
declined by $2.2 million to $25.9 million after currency translation. All major
Housewares market sectors recorded sales volume increases during fiscal 1994
with a significant increase in the export market.
Revenues for the U.S. Life Sciences and Engineering Segment (LS&E) were $44.0
million in fiscal 1995, $44.5 million in fiscal 1994 and $50.1 million in
fiscal 1993, respectively. In fiscal 1995, decreased material purchases and
subcontract support services contracts with the U.S. government by the
Corporation's Technology/Scientific Services Inc. (T/SSI) subsidiary and the
elimination of revenues of the Alpha Net Division which was sold in late fiscal
1994 resulted in the fiscal 1995 revenue decrease. These decreases were
partially offset by increased labor and subcontract revenue of the KRUG Life
Sciences Inc. (KLSI) subsidiary. In fiscal 1994, decreased material purchases
and subcontract support services contracts with the U.S. government accounted
for the reduction in revenues from fiscal 1993.
LS&E order backlog at March 31, 1995 was $89.1 million compared to $129.8
million at March 31, 1994 and $154.3 million at March 31, 1993. During the
second quarter of fiscal 1995, T/SSI was awarded a contract for support and
maintenance services at Wright-Patterson Air Force Base. The contract consists
of a one-year base period with four additional one-year options. The contract
value is estimated at $3.4 million for the first year and $17 million including
all the option years. The contract is a follow-on to one previously held by
T/SSI. During fiscal 1994, no significant individual contracts were added to
the order backlog. In the Leisure Marine and Housewares Segments, backlog is
not meaningful due to the short time between order placement and shipment.
KLSI is currently working on a $136 million five year contract at the
National Aeronautics and Space Administration's Johnson Space Center. This
contract ends on February 28, 1996 and represents approximately one-third of
the Corporation's revenues and a corresponding percentage of its net earnings.
The Corporation has held contracts for this or similar type work at the Johnson
Space Center continuously since 1967. The Corporation intends to aggressively
seek the follow-on contract to our existing contract at the Johnson Space
Center.
Gross profit margins were 13.7%, 13.3% and 13.0% in fiscal 1995, 1994 and
1993, respectively. The increase in gross profit margin in fiscal 1995 is
primarily due to the favorable resolution of certain LS&E prior year contract
issues in the amount of $0.4 million. The gross margin of LS&E increased only
slightly in fiscal 1995 without the favorable effect of these resolutions. The
margins of the Housewares Segment decreased in fiscal 1995 due to competitive
market conditions which reduced overall industry margins and because of very
significant increases in the cost of aluminum used in the ladder product group.
The Leisure Marine Segment gross profit margin remained constant in fiscal 1995
compared to the prior year. The fiscal 1994 increase in LS&E gross profit
margin was because no provision for contract losses in LS&E was required in
fiscal 1994 whereas a $1.1 million provision was required in fiscal 1993. The
gross profit margins of the Leisure Marine and Housewares Segments decreased
slightly in fiscal 1994
9
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as compared to fiscal 1993 as a result of selling a higher percentage of
lower margin products and decreased margins on certain product lines caused by
reduced selling prices necessary to meet market competition.
Selling and administrative expenses were $8.8 million, $8.3 million and $8.8
million in fiscal 1995, 1994 and 1993, respectively. The increase in fiscal
1995 was due primarily to an increase in LS&E bid and proposal expenses,
increased Leisure Marine selling expenses and a $0.2 million unfavorable
currency translation effect. The decrease in fiscal 1994 was primarily due to
the favorable effect of currency translation.
Interest expense increased by $0.2 million in fiscal 1995 due to an increase
in interest rates of 2 3/4% in the U.S. and 2% in the U.K. Interest expense
decreased by $0.1 million in fiscal 1994 compared to fiscal 1993 because of
lower debt in the U.S.
Other income was $0.5 million, $1.4 million and $1.3 million in fiscal 1995,
1994 and 1993, respectively. The decrease in other income in fiscal 1995 of
$0.9 million from fiscal 1994 was due to less gain on asset sales and no
foreign currency transaction gains. Other income was relatively unchanged in
fiscal 1994 as compared to fiscal 1993.
The effective income tax rate was 31.0% for fiscal 1995, 25.6% for fiscal
1994 and 33.8% for fiscal 1993. The effective rate for fiscal 1995 was slightly
lower than the statutory U.S. tax rate due to adjustments for long-term
deferred items. The effective rate for fiscal 1994 was lower than the statutory
tax rate due to a $0.6 million non-taxable gain on the sale of U.K. assets and
a $0.3 million non-taxable foreign currency transaction gain. The effective
income tax rate for fiscal 1993 was about the same as the statutory income tax
rate.
Earnings from continuing operations were $2.0 million in fiscal 1995, a $0.9
million decrease from fiscal 1994. The decrease was caused by less other income
in fiscal 1995 as compared to fiscal 1994. Earnings from continuing operations
were $2.9 million in fiscal 1994, an increase of $0.3 million from fiscal 1993.
The increase was due to the lower effective income tax rate for the year.
DISCONTINUED OPERATIONS
In fiscal 1989, the Corporation discontinued the operations of its Industrial
Segment. In fiscal 1989 and 1990, provisions for losses on discontinued
operations were taken and substantially all of the net assets were sold. The
remaining obligations related to this Segment include a leased property in
Knoxville, Tennessee, a leased property in Toronto, Canada and product
liability claims related to products manufactured and sold prior to the sale of
the domestic Industrial Segment.
In October 1993, the Corporation's major tenant of its leased facility in
Knoxville filed for bankruptcy. The potential loss of the future rental income
from this property caused the Corporation to determine that an additional
provision for expense related to discontinued operations was required.
Accordingly, an after tax loss of $1.452 million was recorded in the second
quarter of fiscal 1994. The Corporation does not anticipate any further
additions to this reserve.
LIQUIDITY AND CAPITAL RESOURCES
Under the Corporation's revolving credit facility with a U.S. business credit
corporation, the Corporation had a loan of $4.9 million outstanding at March
31, 1995. Availability under the revolving credit facility is based upon the
billed and unbilled accounts receivable of its U.S. operations up to a maximum
of $10.0 million. The credit facility expires March 15, 2000. Under the
agreement, the Corporation had borrowing capacity of less than $0.1 million
available at March 31, 1995. At March 31, 1995 the Corporation had a $2.35
million mortgage outstanding on its Dayton, Ohio real property. The mortgage
loan was provided by its five U. S. banks and matures on March 31, 1998. In the
U.K., at March 31, 1995, the Corporation had outstanding $7.6 million line of
credit bank borrowings and still had a line of credit borrowing availability of
$0.5 million. The Corporation believes it has adequate financing in the U.S.
and U.K. to support its operations.
The Corporation generated $1.2 million, $0.4 million and $3.5 million in cash
from operating activities for fiscal 1995, 1994 and 1993, respectively. The
$0.8 million increase in cash generated from operating activities in fiscal
1995 compared to fiscal 1994 was principally due to less need for working
capital. Cash generated from operations in fiscal 1993 was $3.1 million higher
than fiscal 1994 because in fiscal 1993 there was a $2.5 million reduction in
working capital as a result of lower government accounts receivables.
Capital expenditures in fiscal 1995, 1994 and 1993 were $0.4 million, $0.8
million and $1.2 million, respectively. In fiscal 1995 and 1994, the capital
expenditures represented normal replacement expenditures, whereas in fiscal
1993 the majority of the expenditures was for the purchase of a clothes airer
product line and electrostatic paint spraying facility for the Housewares
Segment. At March 31, 1995, there were no significant outstanding capital
commitments.
The Corporation monitors the effect of inflation on its businesses. Inflation
did not have a significant impact on operations during the past three years and
is not expected to have a significant impact in the foreseeable future.
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ITEM 8. FINANCIAL STATEMENTS AND
- ------ ------------------------
SUPPLEMENTARY DATA
------------------
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA Page
-----
Independent Auditors' Report. 12
Consolidated Balance Sheets - March 31, 1995 and 1994 13
Consolidated Statements of Earnings - for the fiscal 15
years ended March 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity - for 16
the fiscal years ended March 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - for the fiscal 17
years ended March 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements - for the fiscal 18
years ended March 31, 1995, 1994 and 1993.
Selected Quarterly Financial Data - for the fiscal years 28
ended March 31, 1995 and 1994
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
Board of Directors
KRUG International Corp.
We have audited the accompanying consolidated balance sheets of KRUG
International Corp. and subsidiaries as of March 31, 1995 and 1994 and the
related consolidated statements of earnings, shareholders' equity and cash
flows for each of the three years in the period ended March 31, 1995. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of KRUG International Corp. and
subsidiaries at March 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1995 in conformity with generally accepted accounting principles.
As discussed in Note I to the consolidated financial statements, the
Corporation has been the subject of an investigation by the United States
Customs Department.
DELIOTTE & TOUCHE LLP
Dayton, Ohio
May 19, 1995
12
<PAGE> 15
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994
(ALL DOLLAR AMOUNTS IN THOUSANDS)
- ----------------------------------------------------------------------------------------
<CAPTION>
ASSETS (NOTE D) 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 363 $ 1,186
Receivables (Note B) 17,205 16,829
Inventories (Note C) 9,992 8,883
Prepaid expenses 699 586
------- -------
TOTAL CURRENT ASSETS 28,259 27,484
PROPERTY, PLAN AND EQUIPMENT - at cost (Note 1)
Land 2,202 2,031
Buildings and improvements 6,555 6,172
Equipment 7,804 8,519
------- -------
16,561 16,722
Less accumulated depreciation 6,256 6,608
------- -------
10,305 10,114
OTHER ASSETS:
Pension asset (Note H) 2,185 2,042
Long-term receivables 240 260
Excess of purchase price over fair value of net assets acquired 102 147
Deferred tax assets (Note G) 3,078 3,178
------- -------
5,605 5,627
------- -------
TOTAL ASSETS $44,169 $43,225
======= =======
<FN>
See notes to consolidated financial statements.
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Bank borrowings (Note D) $ 1,106 $ 1,276
Accounts payable 7,529 6,540
Accrued payroll and related taxes 2,341 2,359
Other accrued expenses 2,951 3,291
Income taxes 567 1,268
Net current liabilities of discontinued operations (Note J) 600 750
Current maturities of long-term debt (Note D) 1,364 2,835
------- -------
TOTAL CURRENT LIABILITIES 16,458 18,319
LONG-TERM DEBT (NOTE D) 13,162 12,932
NET LONG-TERM LIABILITIES OF
DISCONTINUED OPERATIONS (NOTE J) 481 1,267
------- -------
TOTAL LIABILITIES 30,101 32,518
EXCESS OF NET ASSETS OF ACQUIRED
BUSINESS OVER PURCHASE PRICE 91
SHAREHOLDERS' EQUITY (NOTE E):
Preferred Shares, authorized and unissued, 2,000,000 shares
Common Shares, no par value; authorized, 12,000,000 shares;
issued and outstanding, 5,011,523 at March 31, 1995 and
4,999,395 at March 31, 1994 2,506 2,500
Additional paid-in capital 4,090 4,065
Retained earnings 6,699 4,690
Foreign currency translation adjustment 773 (639)
------- -------
TOTAL SHAREHOLDERS' EQUITY 14,068 10,616
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $44,169 $43,225
======= =======
</TABLE>
14
<PAGE> 17
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES $ 91,766 $ 90,188 $ 97,155
COSTS AND EXPENSES:
Cost of goods sold 79,214 78,219 84,538
Selling and admininstrative 8,816 8,327 8,768
Interest expense 1,307 1,135 1,205
Other income - net (Note F) (485) (1,353) (1,297)
----------- ----------- -----------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,914 3,860 3,941
INCOME TAXES (NOTE G) 902 990 1,333
----------- ----------- -----------
EARNINGS FROM CONTINUING OPERATIONS 2,012 2,870 2,608
(LOSS) FROM DISCONTINUED OPERATIONS (NOTE J) (1,452)
----------- ----------- -----------
NET EARNINGS $ 2,012 $ 1,418 $ 2,608
=========== =========== ===========
PER COMMON AND COMMON EQUIVALENT SHARE:
Earnings from continued operations $ 0.40 $ 0.57 $ 0.52
(Loss) from discontinued operations (0.29)
----------- ----------- -----------
Net Earnings $ 0.40 $ 0.28 $ 0.52
=========== =========== ===========
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING (NOTE E) 5,046,743 5,077,948 5,026,697
=========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
15
<PAGE> 18
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(ALL DOLLAR AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOREIGN
COMMON SHARES ADDITIONAL CURRENCY
---------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
<S> <C> <C> <C> <C> <C>
MARCH 31, 1992, as restated for fiscal 1995
stock dividend (Note E) 4,991,311 $2,496 $4,050 $ 668 $2,978
Net earnings 2,608
Common Shares issued under Incentive Stock
Options 8,084 4 15
Cash in lieu of fractional shares (Note E) (2)
Foreign currency translation adjustment (2,909)
---------- ------ ------ ------- -------
MARCH 31, 1993 4,999,395 2,500 4,065 3,274 69
Net earnings 1,418
Cash in lieu of fractional shares (Note E) (2)
Foreign currency translation adjustment (708)
---------- ------ ------ ------- -------
MARCH 31, 1994 4,999,395 2,500 4,065 4,690 (639)
Net earnings 2,012
Cash in lieu of fractional shares (Note E) (3)
Common Shares issued under Incentive Stock Options 12,128 6 25
Foreign currency translation adjustment 1,412
---------- ------ ------ ------- -------
MARCH 31, 1995 5,011,523 $2,506 $4,090 $6,699 $ 773
========== ====== ====== ======= =======
<FN>
See notes to consolidated financial statements.
</TABLE>
16
<PAGE> 19
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(ALL DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------
<CAPTION>
INCREASE (DECREASE) IN CASH 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,012 $ 1,418 $ 2,608
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 1,060 941 929
Amortization of intangibles (26) (13) (19)
Deferred income taxes 219 59 15
Loss from discontinued operations 1,452
Gain on sale of assets (360) (654)
Change in assets and liabilities:
Receivables 320 2,586 111
Inventories (288) (756) (684)
Prepaid expenses and other assets (22) 83 217
Accounts payable and accrued expenses 24 (2,532) 2,976
Income taxes (757) (1,116) (1,871)
Net cash used in discontinued operations (Note J) (935) (1,092) (821)
-------- -------- --------
Net cash provided by operating activities 1,247 376 3,461
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 448 687 5
Expenditures for property, plant and equipment (425) (802) (1,237)
-------- -------- --------
Net cash provided by (used in) investing activities 23 (115) (1,232)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Shares 31 17
Bank borrowings - net (229) 380 300
Additions to long-term debt 7,243
Payments on long-term debt (9,140) (2,052) (900)
-------- -------- --------
Net cash (used in) financing activities (2,095) (1,672) (583)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 2 (6) (788)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (823) (1,417) 858
CASH AT BEGINNING OF YEAR 1,186 2,603 1,745
-------- -------- --------
CASH AT END OF YEAR $ 363 $ 1,186 $ 2,603
======== ======== ========
CASH PAID FOR:
Income taxes $ 1,328 $ 2,227 $ 1,057
======== ======== ========
Interest $ 1,362 $ 1,186 $ 1,310
======== ======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital leases $ 139 $ 530 $ 865
======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
17
<PAGE> 20
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Corporation and its domestic and foreign subsidiaries.
All significant intercompany transactions and balances have been
eliminated.
REVENUE RECOGNITION - Revenues from fixed-price contracts are generally
recognized using the percentage-of-completion method for financial
accounting purposes. Revenues from cost reimbursement and time and material
contracts are recorded as costs are incurred and include estimated earned
fees in the proportion that costs incurred to date bear to total estimated
costs at completion. Claims for recovery of additional contract costs are
recognized only to the extent that the recoverable amounts can be
determined with reasonable certainty. Costs not recoverable upon completion
of contracts are immediately charged against earnings.
INVENTORIES - Inventories are valued at the lower of cost or market using
the first-in, first-out method.
DEPRECIATION - Property, plant and equipment, including capital leases,
is depreciated over its estimated useful life principally by the
straight-line method.
EXCESS OF PURCHASE PRICE OVER FAIR VALUE OF NET ASSETS ACQUIRED AND
EXCESS OF NET ASSETS OF ACQUIRED BUSINESS OVER PURCHASE PRICE - These
amounts are being amortized over five and ten-year periods.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - Net earnings per
share is computed by dividing net earnings by the weighted average number
of Common Shares outstanding during each period, adjusted for the dilutive
effect, if any, of stock options and stock warrants.
FOREIGN CURRENCY TRANSLATION - The assets and liabilities of the
Corporation's wholly-owned U.K. subsidiary are translated using exchange
rates in effect at the balance sheet date, and amounts for the
consolidated statements of earnings are translated using average exchange
rates for the period. Translation gains and losses are recorded in
shareholders' equity and transaction gains and losses are included in the
consolidated statement of earnings for the period.
18
<PAGE> 21
<TABLE>
B. RECEIVABLES
March 31
-----------------------
<CAPTION>
1995 1994
<S> <C> <C>
Trade accounts receivable $ 8,652 $ 8,697
Contract receivables:
Amounts billed 6,749 6,601
Recoverable costs and accrued profit on work
completed but not yet billed 2,290 2,094
Other 109 71
------- -------
17,800 17,463
Less allowance for doubtful accounts (595) (634)
------- -------
$17,205 $16,829
======= =======
C. INVENTORIES
March 31
-----------------------
1995 1994
Finished goods $ 7,105 $ 6,599
Work-in-process 1,107 886
Raw materials and supplies 1,780 1,398
------- -------
$ 9,992 $ 8,883
======= =======
D. LONG-TERM DEBT
March 31
-----------------------
1995 1994
U.S. Revolving Credit Line $ 4,879 $
U.S. Mortgage 2,350
U.S. Term Loan 10,795
U.K. Term Loan-Line of credit 6,484 3,683
Capital leases 813 989
Other 300
------- -------
14,526 15,767
Less current maturities (1,364) (2,835)
------- -------
$13,162 $12,932
======= =======
</TABLE>
The U.S. Revolving Credit Line is a revolving credit facility with a U.S.
business credit corporation which provides up to $10 million. The credit
facility expires March 15, 2000. Interest is paid monthly at the lender's
base rate plus 2%, (11% at March 31, 1995). Availability under the
facility is based upon the billed and unbilled accounts receivable of its
U.S. operations. At March 31, 1995, the availability under the revolving
credit facility was $28.
19
<PAGE> 22
The U.S. Mortgage is a mortgage on the Corporation's Dayton, Ohio real
property provided by five U.S. banks. The mortgage termination date is
March 31, 1998. Interest is paid monthly at the bank's base rate plus 2%
(11% at March 31, 1995). Annual payments under the mortgage are as
follows: 1996 - $333, 1997 - $183 and 1998 - $1,834.
Substantially all U.S. assets (except shares of foreign subsidiaries
and all related assets) are pledged as collateral for the revolving credit
line and mortgage.
The U.S. Term Loan was repald in total on March 16, 1995, by proceeds
from the U.S. Revolving Credit Line and the U.S. Mortgage.
The U.K. Term Loan-Line of credit, interest at the bank's base rate plus
1-1/2% (8-3/4% at March 31, 1995), is classified as long-term debt
at March 31, 1995 because of the Corporation's ability and intent to
convert the loan to a ten year term loan in fiscal 1996. Under the terms
of this ageement, quarterly principal payments of $162, plus interest are
expected to begin in Augnst 1995. Substantially all U.K. assets (except
shares of the U.K. subsidiaries and all related assets) are expected to be
pledged as collateral on this loan. In addition, at March 31, 1995, the
Corporation had $1,106 of U.K. operating line of credit borrowings with
$515 still available.
Annual payments of long-term debt incInding capital leases, for the next
five years are as follows: 1996 - $1,364; 1997 - $1,107; 1998 - $2,639;
1999 - $648 and 2000 - $5,527.
E. SHAREHOLDERS' EQUITY
The Corporation paid a 10% stock dividend on December 23, 1994 to
shareholders of record on November 28, 1994. This transaction has been
reflected in the financial statements retroactively for all periods
presented. As a result, Common Shares increased by 454,066 shares and
$227, additional paid-in capital increased by $1,873 and retained earnings
decreased by $2,103 (including $3 for cash paid in lieu of fractional
shares). A 5% stock dividend was also declared and paid at the end of
fiscal 1994 and 1993. Such dividends were also reflected retroactively in
the financial statements of fiscal 1994 and 1993.
The Corporation also issued warrants to shareholders of record on December
23, 1994. For each five common shares held, the Corporation distributed
one warrrant which may be used to purchase one common share. The warrants
entitle the holders to purchase in the aggregate 999,487 common shares.
The purchase price is $5.625 per share through January 31, 1996; $7.125
per share from February 1, 1996 through January 31, 1997; and $8.625 per
share from February 1, 1997 through January 31, 1998. The Corporation may
reduce the purchase price at any time. Prior to January 31, 1996, the
Corporation has the right to accelerate the expiration date of the warrants
on 30 days written notice if the closing price of the common shares on any
three consecutive trading days is at least $7.625.
The Corporation has three stock option plans permitting the grant of
options to purchase common shares to officers and key employees, namely,
the 1981 Incentive Stock Option Plan, the 1985 Incentive Stock Option
Plan, and the 1985 Incentive Stock Option Scheme for U.K. employees. The
U.K. Scheme has been administered as a part of the 1985 Incentive Stock
Option Plan. The authority to grant options under the 1981 Plan has
expired; however, 82,875 options granted thereunder are still outstanding.
Under the 1985 Plan and Scheme, which will expire on October 25 and August
21, 1995, respectively, the grant of options to purchase up to 303,187
Common Shares is authorized and 60,640 options are outstanding. Option
grants are made at the fair market value on the date of grant and expire
five to six years later. At March 31, 1995, there were 143,515 options
outstanding with an exercise price of $2.16 to $3.14, of which 80,850 were
exercisable at $2.16 to $3.14 per share. Options granted under the Plans
and Scheme will expire through February 1999.
20
<PAGE> 23
<TABLE>
F. OTHER INCOME - NET
<CAPTION>
Year Ended March 31
-----------------------------------
1995 1994 1993
<S> <C> <C> <C>
Gain on sale of assets $ 360 $ 654 $
Foreign currency transaction gain 309 661
U.K. tax rebates related to intercompany dividends 110 307 484
Other 15 83 152
------ ------ ------
$ 485 $1,353 $1,297
====== ====== ======
G. INCOME TAXES
The provisions for income taxes include the following:
Year Ended March 31
----------------------------------
1995 1994 1993
Domestic:
Long-term deferred $ 324 $ $
Benefit of current net operating loss carryforward (7) (295)
------ ------ ------
Total domestic tax provision 324 (7) (295)
------ ------ ------
Foreign:
Current 683 931 1,318
Long-term deferred (105) 66 310
------ ------ ------
Total foreign tax provision 578 997 1,628
------ ------ ------
$ 902 $ 990 $1,333
====== ====== ======
</TABLE>
21
<PAGE> 24
<TABLE>
Deferred tax assets recorded in the balance sheets include the following tax
effects:
<CAPTION>
March 31
1995 1994
<S> <C> <C>
Domestic:
Contract accounting $ 370 $ 861
Net operating loss carryforwards 4,259 4,502
Provision for loss on discontinued operations 700 875
Other (99) 34
------ ------
5,230 6,272
Less valuation allowance (3,921) (4,639)
------ ------
Total domestic deferred tax assets 1,309 1,633
Foreign:
Capital loss carryforward 7,149 6,500
Tax prepayments not currently utilized 2,313 2,144
Depreciation expense (662) (683)
Other 118 84
------ ------
8,918 8,045
Less valuation allowance (7,149) (6,500)
------ ------
Total foreign deferred tax assets 1,769 1,545
------ ------
$3,078 $3,178
====== ======
</TABLE>
At March 31, 1995, the Corporation has accumulated domestic net operating loss
carryforwards (expiring in 2005 through 2009) of approximately $12,500
available to offset future domestic taxable income.
<TABLE>
The differences between income taxes at the federal statutory rate and the
effective tax rate are as follows:
<CAPTION>
Year Ended March 31
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
Income taxes at federal statutory rate 34.0% 34.0% 34.0%
Non-taxable gain on sale of a U.K. building (3.8)
Currency (gain) (2.6) (2.6)
Foreign tax rate differential (0.7) (1.0) (1.2)
Other (2.3) (1.0) 3.6
------ ------ ------
Effective Tax Rate 31.0% 25.6% 33.8%
====== ====== ======
</TABLE>
Earnimgs from continuing operations before income taxes includes $1,962,
$3,882, and $4,809 in 1995, 1994 and 1993, respectively, of foreign earnings.
Domestic income taxes have not been provided on undistributed earnings of the
foreign subsidiaries aggregating $15,900 at March 31, 1995. Determination of
the amount of the unrecognized deferred tax liability for these undistributed
earnings is not practicable.
22
<PAGE> 25
H. RETIREMENT PLANS
The Corporation has defined benefit retirement plans covering
substantially all of its employees. The domestic plan is
non-contributory and the foreign plans are contributory. Benefits are
principally based upon years of service and level of earnings. For the
domestic plan, the Corporation funds at a rate that meets or exceeds the
minimum amounts required by ERISA. The Corporation contributions to the
foreign plans are funded monthly based on actuarial determined
contribution rates. The employee contributions to the foreign plans are
voluntary.
<TABLE>
The components of net pension expense for all plans are as follows:
<CAPTION>
Year Ended March 31
--------------------------------------------------------------
1995 1994 1993
----------------- ----------------- ------------------
Domestic Foreign Domestic Foreign Domestic Foreign
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 492 $ 383 $ 444 $ 342 $ 419 $ 255
Interest cost 429 563 450 473 442 467
Actual (return) loss on assets (438) (566) 38 (458) (570) (403)
Net amortization and deferral 33 134 (475) 69 143 123
------ ------ ------ ------ ------ ------
Pension expense $ 516 $ 514 $ 457 $ 426 $ 434 $ 442
====== ====== ====== ====== ====== ======
</TABLE>
23
<PAGE> 26
<TABLE>
Summary information for the funded plans is as follows:
<CAPTION>
March 31
-------------------------------------------
1995 1994
------------------ ------------------
Domestic Foreign Domestic Foreign
<S> <C> <C> <C> <C>
Vested benefit obligation $3,603 $5,779 $3,976 $4,488
====== ====== ====== ======
Accumulated benefit obligation $4,171 $5,779 $4,482 $4,488
====== ====== ====== ======
Projected benefit obligation $5,483 $7,680 $5,914 $5,982
Fair value of plan assets 4,786 6,852 5,239 5,814
------ ------ ------ ------
Plan assets less than projected benefit obligation (697) (828) (675) (168)
Reconciliation of financial status of plans to
amounts recorded in the balance sheets:
Unamortized assets in excess of plan
liabilities (overfunding) to be recognized
as a reduction of future years' pension expense (305) (843) (440) (837)
Unrecogized net loss (gain) from experience
different than plan assumptions 592 2,452 529 1,672
Unamortized prior service cost from change in
benefit formula 455 1,404 550 1,375
------ ------ ------ ------
Pension asset (liability) included in the balance
sheets $ 45 $2,185 $ (36) $2,042
====== ====== ====== ======
</TABLE>
For the domestic plan, the weighted average discount rate used was 7.5% in 1995
and 1994. Where appropriate, the projected rate of compensation increases was
4.5% in 1995 and 5.5% in 1994. The expected rate of return on plan assets was 8%
in 1995 and 1994.
Domestic plan assets are primarily invested in listed stocks and bonds and
U.S. government obligations. Approximately 12% of the fair value of the assets
at March 31, 1995 is comprised of Common Shares of the Corporation.
For the foreign plans, the weighted average discount rate used was 9%
in 1995 and 1994. The projected rate of compensation increases was 7% in
1995 and 1994. The expected rate of return on plan assets was 9% in 1995 and
1994. Foreign plan assets are invested in managed fund units in the United
Kingdom.
Under an unfunded pension plan, the projected benefit obligation (which
approximated the accumulated benefit obligation) was $546 and $481 at March
31, 1995 and 1994, respectively. Unfunded accrued pension cost for this plan
was $354 and $276 at March 31, 1995 and 1994, respectively.
The Corporation has a defined contribution 401(k) savings plan covering
substantially all domestic employees. The Corporation's policy is to
contribute a specified percentage of the employees' contribution as determined
periodically by the Corporation. Plan expense was $170 in 1995, $135 in 1994 and
$145 in 1993.
24
<PAGE> 27
I. LEASES AND CONTINGENCIES
<TABLE>
The Corporation leases various land, buildings and equipment (principally
for the U.K. companies) under capital and operating lease obligations with
non-cancelable terms ranging from 2 to 30 years. Minimum lease commitments
as of March 31, 1995 are:
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1996 $417 $ 1,005
1997 300 862
1998 172 848
1999 753
2000 607
Later Years 7,343
---- -------
Total minimum lease payments 889 $11,418
=======
Amount representing interest (76)
----
Present value of minimum lease payments 813
Less current maturities of capital leases 382
Long-term portion of capital leases $431
====
</TABLE>
At March 31, 1995 and 1994, equipment under capital leases of $1,746 and
$1,874 (less accumulated depreciation of $795 and $802), respectively, is
included in property, plant and equipment. Rent expense under operating
leases was $922, $928 and $1,071 for the years ended March 31, 1995, 1994
and 1993, respectively.
The overhead rates for cost reimbursement and time and material contracts
are subject to possible renegotiation. Management does not believe any
renegotiations will have a material effect on the consolidated financial
statements.
In May 1991, the United States Customs Department commenced an
investigation of a subcontract between the Corporation's Technology Systems
Division and Tripod-Laing Joint Venture of the United Kingdom. The contract
relates to aeromedical equipment which was ultimately to be shipped to
Iraq. Performance under the contract was suspended when relationships
between the United States and Iraq changed, and no equipment was delivered
to Iraq under the contract. The criminal investigation appeared to be
dormant from 1991 until May 1994 when a Customs Agent commenced
interviewing certain present and former employees of the Corporation. Since
May 1994, the Corporation is not aware of any additional activity in this
investigation. The Corporation has cooperated in the investigation.
The Corporation is a party to other claims and litigation incidental to its
business. It is not possible to determine the ultimate liability, if
any, in these matters. Based upon an evaluation of information currently
available and consultation with legal counsel, management is of the opinion
that such litigation is not likely to have a material effect on the
financial position or results of operations of the Corporation.
25
<PAGE> 28
J. DISCONTINUED OPERATIONS
In fiscal 1989, the Corporation discontinued the operations of its
Industrial Segment. In fiscal 1989 and 1990, provisions for losses on
discontinued operations were recorded. Subsequently, the Corporation
disposed of substantially all of the net assets of the Segment; however,
remaining obligations related to this Segment includes a leased property
in Knoxville, Tennessee, a leased property in Toronto, Canada, and product
liability claims related to products sold prior to the sale of the domestic
Industrial Segment.
In October 1993, the Corporation's major tenant of the leased facility in
Knoxville filed for bankruptcy. The potential loss of future rental income
from this property caused the Corporation to determine that an additional
provision for loss related to discontinued operations was required.
Accordingly, an after-tax charge of $1,452 (net of a tax benefit of $748)
was recorded in the quarter ended September 30, 1993. The Corporation does
not anticipate any further additions to this reserve.
In the year ended March 31, 1993, the provision for losses on disposal
increased by $1,510 as a result of a favorable tax settlement. Charges to
the provision for the settlement of liabilities were $954 resulting in a
remaining balance of $1,608 at March 31, 1993. In the year ended March 31,
1994, the provision for losses on disposal increased by the $2,200 charge
previously discussed. Charges to the provision for the settlement of
liabilities was $1,236 resulting in a remaining balance of $2,572 at March
31, 1994. During the year ended March 31, 1995, the provision for losses
on disposal increased by $700 as a result of the favorable settlement with
the bankruptcy court related to the major tenant who filed bankruptcy in
1994. Charges to the provision for the settlement of liabilities was
$1,212 leaving a balance of $2,060 at March 31, 1995.
The Corporation is directly or contingently liable for lease and other
minimum commitments related to property formerly used by its
discontinued operations. Net of minimum sublease rentals to be received,
these commitments are as follows: 1996-$430; 1997-$497; 1998-$534 and
1999-$274.
K. INDUSTRY SEGMENTS
The Corporation's operations consist of three segments.
- Leisure Marine equipment distribution in the U.K.
- Housewares manufacturing and distribution in the U.K.
- Life Sciences and Engineering in the U.S.
The Life Sciences and Engineering segment is engaged in basic and applied
biotechnological research and supplies engineering technical services
pursuant to contracts primarily with agencies of the United States
Government.
26
<PAGE> 29
<TABLE>
Information concerning the Corporation's operations in different industry segments
is presented in the following table:
<CAPTION>
Year Ended March 31
-----------------------------
1995 1994 1993
<S> <C> <C> <C>
REVENUES FROM UNAFFILIATED CUSTOMERS (1):
Leisure Marine $20,923 $19,835 $18,902
Housewares 26,891 25,882 28,120
Life Sciences and Engineering (2) 43,952 44,471 50,133
------- ------- -------
$91,766 $90,188 $97,155
======= ======= =======
OPERATING PROFIT:
Leisure Marine $ 1,021 $ 1,225 $ 1,406
Housewares 599 1,310 2,100
Life Sciences and Engineering 3,894 2,949 2,153
------- ------- -------
5,514 5,484 5,659
0ther income - net 485 1,353 1,297
Interest expense (1,308) (1,135) (1,205)
Corporate expense (1,777) (1,842) (1,810)
------- ------- -------
Earnings before income taxes $ 2,914 $ 3,860 $ 3,941
======= ======= =======
IDENTIFIABLE ASSETS:
Leisure Marine $15,904 $15,433 $13,747
Housewares 11,583 10,415 11,347
Life Sciences and Engineering 10,331 10,370 13,105
Other 6,351 7,007 7,835
------- ------- -------
$44,169 $43,225 $46,034
======= ======= =======
DEPRECIATION:
Leisure Marine $ 363 $ 276 $ 301
Houseware 507 466 407
Life Sciences and Engineering 163 171 195
Other 27 28 26
------- ------- -------
$ 1,060 $ 941 $ 929
======= ======= =======
CAPITAL ADDITIONS:
Leisure Marine $ 87 $ 660 $ 103
Housewares 341 502 1,874
Life Sciences and Engineering 83 161 99
Other 53 9 26
------- ------- -------
$ 564 $ 1,332 $ 2,102
======= ======= =======
<FN>
(1) Revenues for tangible products were $57,747, $60,225 and $67,624, and
revenues from services were $34,019, $29,963 and $29,531 for the years
ended March 31, 1995, 1994 and 1993, respectively. Related cost of goods
sold for tangible products was $49,315, $51,531 and $57,103, and related
cost for services was $29,897, $26,688 and $27,435, respectively.
(2) Includes revenues from the U.S. Government of $43,637 in 1995, $42,406 in
1994 and $48,173 in 1993.
</TABLE>
27
<PAGE> 30
<TABLE>
L. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
FISCAL
YEAR
ENDED FOURTH THIRD SECOND FIRST
MARCH 31 QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C>
REVENUES 1995 $ 24,027 $ 22,698 $ 23,217 $ 21,824
1994 22,537 21,669 22,244 23,738
GROSS PROFIT 1995 2,780 3,013 3,370 3,389
1994 3,015 2,436 3,248 3,270
EARNINGS FROM CONTINUING 1995 252 405 604 751
OPERATIONS 1994 801 521 505 1,043
NET EARNINGS (LOSS) 1995 252 405 604 751
1994 801 521 (947) 1,043
EARNINGS PER SHARE FROM 1995 0.05 0.08 0.12 0.15
CONTINUING OPERATIONS (1) 1994 0.16 0.10 0.10 0.21
NET EARNINGS (LOSS) 1995 0.05 0.08 0.12 0.15
PER SHARE(1) 1994 0.16 0.10 (0.19) 0.21
AVERAGE COMMON AND
COMMON EQUIVALENT SHARES 1995 5,053,210 5,058,017 5,043,539 5,031,926
OUTSTANDING (1) 1994 5,054,604 5,092,916 5,110,935 5,053,336
<FN>
(1) All share and per share data has been retroactively adjusted to reflect
the 10% stock dividend paid in December 1994, and the 5% stock dividend
paid in January 1994.
</TABLE>
* * * * * *
28
<PAGE> 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ---------------------------------------------------------------------
AND FINANCIAL DISCLOSURE
- ------------------------
None
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
The information required by this Item 10 is incorporated herein by
reference from the Corporation's Proxy Statement for its Annual Meeting of
Shareholders on July 18, 1995, except for certain information concerning the
executive officers of the Corporation which is set forth in Part I of this
Report.
ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------
The information required by this Item 11 is set forth in the
Corporation's Proxy Statement for its Annual Meeting of Shareholders on July
18, 1995 and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
The information required by this Item 12 is set forth in the
Corporation's Proxy Statement for its Annual Meeting of Shareholders on July
18, 1995 and is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The information required by this Item 13 is set forth in the
Corporation's Proxy Statement for its Annual Meeting of Shareholders on July
18, 1995 and is incorporated herein by this reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation
and its subsidiaries are incorporated by reference as part of this Report at
Item 8 hereof.
Independent Auditors' Report.
Consolidated Balance Sheets - March 31, 1995 and 1994.
Consolidated Statements of Earnings - for the fiscal years ended
March 31, 1995, 1994 and 1993.
29
<PAGE> 32
Consolidated Statements of Shareholders' Equity - for the
fiscal years ended March 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows - for the fiscal years
ended March 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements - for the fiscal
years ended March 31, 1995, 1994 and 1993.
(a) (2) FINANCIAL STATEMENT SCHEDULES
Independent Auditors'
Report - At page 33 of this Report.
Schedule I - Condensed financial information of
registrant (at pages 34-36 of this
Report)
Schedule II - Valuation and qualifying
accounts (at p. 37 of this Report)
The information required to be submitted in Schedules III, IV and V
for KRUG International Corp. and consolidated subsidiaries has either been
shown in the financial statements or notes, or is not applicable or required
under Regulation S-X, and, therefore, those schedules have been omitted.
(b) REPORTS ON FORM 8-K
During the quarter ended March 31, 1995 the
Corporation filed one Report on Form 8-K, dated
March 17, 1995 reporting Item 5 - Other Events.
(c) EXHIBITS. See INDEX TO EXHIBITS
30
<PAGE> 33
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, KRUG International Corp. has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on this 26th day of June, 1995.
KRUG INTERNATIONAL CORP.
By: /s/ Maurice F. Krug
----------------------------
Maurice F. Krug
Chairman, President 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
KRUG International Corp. and in the capacities and on the dates indicated:
- --------------------------------------------------------------------------------
Name Title Date
- --------------------------------------------------------------------------------
/s/ Maurice F. Krug Chairman, President June 26, 1995
- ---------------------- & Chief Executive Officer
Maurice F. Krug
/s/ Thomas W. Kemp Vice President- June 26, 1995
- ---------------------- Finance/Treasurer
Thomas W. Kemp (Principal Financial
and Accounting
Officer)
/s/ James J. Mulligan Director June 26, 1995
- ----------------------
James J. Mulligan
- --------------------------------------------------------------------------------
31
<PAGE> 34
* Marvin E. Bruce Director June 26, 1995
* Rex M. Fleet Director June 26, 1995
* W. Edward Greenhalgh Director June 26, 1995
* T. Wayne Holt Director June 26, 1995
* Earl T. O'Loughlin Director June 26, 1995
*The undersigned, by signing his name hereto, executes this Report on Form
10-K for the fiscal year ended March 31, 1995 pursuant to powers of attorney
executed by the above-named persons and filed with the Securities and Exchange
Commission.
/s/ James J. Mulligan
-------------------------------
James J. Mulligan
Their Attorney-in-Fact
32
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
Board of Directors
KRUG International Corp:
We have audited the consolidated financial statements of KRUG International
Corp. and subsidiaries as of March 31, 1995 and 1994 and for each of the three
years in the period ended March 31, 1995 and have issued our report thereon
dated May 19, 1995, which report includes an explanatory paragraph as to an
investigation by the United States Customs Department; such financial
statements and report are included elsewhere in this Form 10-K. Our audits also
included the financial statement schedules of KRUG International Corp. and
subsidiaries, listed in Item 14. These financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Dayton, Ohio
May 19, 1995
33
<PAGE> 36
<TABLE>
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
-----------------------------------------
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
--------------------------------------------
OF REGISTRANT, KRUG INTERNATIONAL CORP.
---------------------------------------
BALANCE SHEETS
--------------
(AMOUNTS IN THOUSANDS)
<CAPTION>
ASSETS
---------------
MARCH 31, MARCH 31,
1995 1994
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS $ 780 $ 1,970
PROPERTY, PLANT & EQUIP. - NET 836 1,035
RECEIVABLE FROM SUBSIDIARIES 4,087 821
INVESTMENT IN SUBSIDIARIES
ON THE EQUITY METHOD 27,255 27,266
OTHER ASSETS 1,642 1,693
--------------- ---------------
$ 34,600 $ 32,785
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------------------------------
CURRENT LIABILITIES $ 1,726 $ 4,921
PAYABLE TO SUBSIDIARIES 10,977 8,082
SUBSIDIARY LIABILITY GUARANTEED
BY REGISTRANT 934 171
LONG-TERM DEBT 6,895 8,995
--------------- ---------------
TOTAL LIABILITIES 20,532 22,169
--------------- ---------------
SHAREHOLDERS' EQUITY:
COMMON SHARES 2,506 2,500
ADDITIONAL PAID-IN CAPITAL 4,090 4,065
RETAINED EARNINGS 6,699 4,690
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT 773 (639)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 14,068 10,616
--------------- ---------------
$ 34,600 $ 32,785
=============== ===============
</TABLE>
34
<PAGE> 37
<TABLE>
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
-----------------------------------------
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
--------------------------------------------
OF REGISTRANT, KRUG INTERNATIONAL CORP.
---------------------------------------
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
--------------------------------------------
(AMOUNTS IN THOUSANDS)
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
NET SALES $ 187 $ 1,985 $ 3,080
DIVIDEND INCOME FROM KRUG
INTERNATIONAL (UK) LTD. 1,595 4,462 4,470
DIVIDEND INCOME FROM KRUG
LIFE SCIENCES INC. 4,614
------------ ------------ ------------
TOTAL REVENUES 6,396 6,447 7,550
COSTS AND EXPENSES:
COSTS OF GOODS SOLD (201) 2,501 3,704
SELLING AND ADMINISTRATIVE 1,697 1,712 1,766
INTEREST EXPENSE 1,284 1,272 1,791
OTHER (INCOME), NET (448) (434) (919)
------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES AND
EQUITY IN UNDISTRIBUTED NET
EARNINGS (LOSS) OF SUBSIDIARIES 4,064 1,396 1,208
INCOME TAXES - PROVIDED ON
SEPARATE RETURN BASIS 1,315 475 411
------------ ------------ ------------
EARNINGS BEFORE EQUITY IN
UNDISTRIBUTED NET EARNINGS (LOSS)
OF SUBSIDIARIES 2,749 921 797
EQUITY IN UNDISTRIBUTED NET
EARNINGS (LOSS) OF SUBSIDIARIES (737) 497 1,811
------------ ------------ ------------
NET EARNINGS 2,012 1,418 2,608
RETAINED EARNINGS, BEGINNING
OF YEAR 4,690 3,274 668
CASH PAID IN LIEU OF
FRACTIONAL SHARES (3) (2) (2)
------------ ------------ ------------
RETAINED EARNINGS, END
OF YEAR $ 6,699 $ 4,690 $ 3,274
============ ============ ============
</TABLE>
35
<PAGE> 38
<TABLE>
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
-----------------------------------------
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
--------------------------------------------
OF REGISTRANT, KRUG INTERNATIONAL CORP.
---------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(AMOUNTS IN THOUSANDS)
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
NET EARNINGS $ 2,012 $ 1,418 $ 2,608
ADJUSTMENTS TO RECONCILE
EARNINGS TO CASH PROVIDED
BY (USED IN) OPERATING
ACTIVIITES:
ACCOUNTS RECEIVABLE 424 130 990
OTHER (31) (1,355) (890)
------------ ------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,405 193 2,708
------------ ------------ ------------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
INCREASE (DECREASE) IN NET
PAYABLE TO SUBSIDIARIES (371) 304 (1,987)
BANK BORROWING - NET (1,000) 100 300
ADDITIONS TO LONG-TERM DEBT 4,879
PAYMENTS ON LONG-TERM DEBT (8,746) (1,665) (598)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,238) (1,261) (2,285)
------------ ------------ ------------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY, PLANT
AND EQUIPMENT (14) (16)
PROCEEDS FROM SALE OF ASSETS 422 39 5
CASH DIVIDENDS RECEIVED FROM
SUBSIDIARIES 1,595 967
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 2,017 992 (11)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (816) (76) 412
CASH AT BEGINNING OF YEAR 1,161 1,237 825
------------ ------------ ------------
CASH AT END OF YEAR $ 345 $ 1,161 $ 1,237
============ ============ ============
</TABLE>
36
<PAGE> 39
<TABLE>
KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
------------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-------------------------------------------------
(AMOUNTS IN THOUSANDS)
----------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- ------------------------- -------- --------
ADDITIONS
-------------------------
CURRENCY
ALLOWANCE FOR BALANCE AT CHARGED TO TRANSLATION DEDUCTIONS BALANCE
DOUBTFUL BEGINNING COSTS AND /FOREIGN FROM AT END
ACCOUNTS OF YEAR EXPENSES ACQUISITION RESERVES OF YEAR
------------- ---------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C>
YEAR ENDED
MARCH 31,1995 $ 634 $ (7) $ 54 $ 86 $ 595
========== ======== ========= ========== ========
YEAR ENDED
MARCH 31,1994 $ 597 $ 155 ($ 19) $ 99 $ 634
========== ======== ========= ========== ========
YEAR ENDED
MARCH 31,1993 $ 760 $ 115 ($ 82) $ 196 $ 597
========== ======== ========= ========== ========
</TABLE>
<TABLE>
DEFERRED INCOME CURRENCY
TAX ASSET BALANCE AT ADDITIONS TRANSLATION DEDUCTIONS BALANCE
VALUATION BEGINNING TO /FOREIGN FROM AT END
ALLOWANCE OF YEAR RESERVES ACQUISITION RESERVES OF YEAR
------------- ---------- -------- ----------- ---------- -------
<S> <C> <C> <C> <C>
YEAR ENDED
MARCH 31,1995 $11,139 $ 0 $ 649 $ 718 $11,070
========== ======== ======== ========== =========
YEAR ENDED
MARCH 31,1994 $11,527 $ 0 $ (200) $ 188 $11,139
========== ======== ======== ========== =========
YEAR ENDED
MARCH 31,1993 $13,100 $ 0 $ (956) $ 617 $11,527
========== ======== ======== ========== =========
</TABLE>
37
<PAGE> 40
INDEX TO EXHIBITS
-----------------
Located at
Numbered Page
-------------
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 Articles of Incorporation of
KRUG International Corp., as amended,
was filed as Exhibit 3.1 to the
Corporation's Report on Form 10-K
for the year ended March 31, 1992...... *
3.2 Code of Regulations of KRUG
International Corp., as amended,
was filed as Exhibit 3.2 to the
Corporation's Report on Form 10-K
for the year ended March 31, 1991...... *
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING INDENTURES:
4.1 Amended Founder's Agreement between the
Corporation and Maurice F. Krug dated
February 14, 1994 was filed as Exhibit
4.1 to the Corporation's Report on
Form 10-K for the year ended March
31, 1994............................... *
4.2 Amended Founder's Trust Agreement dated
March 17, 1994 between the Corporation
and Society National Bank, as Trustee
was filed as Exhibit 4.2 to the
Corporation's Report on Form 10-K for
the year ended March 31, 1994.......... *
38
<PAGE> 41
4.3 Credit Agreement among KRUG International
Corp., Technology/Scientific Services,
Inc., KRUG Life Sciences Inc. and
Society Bank, N.A., The Central Trust
Company, N.A., Comerica Bank,
CoreStates Bank, N.A. and Security
Pacific National Bank dated November
14, 1991 was filed as Exhibit 4.1 to the
Corporation's Report on Form 8-K dated
November 25, 1991, as well as the follow-
ing related documents: (i) Amendment No. 1
to the Credit Agreement, dated November 22,
1991; (ii) Form of Term Note, dated November
14, 1991; (iii) Form of Revolving Credit Note,
dated November 14, 1991; (iv) Form of
Security Agreement, dated November 14, 1991;
(v) Amendment No. 1 to Security Agreement;
(vi) Open-End Mortgage, dated November 14,
1991 and Amendment No. 1 to Open-End
Mortgage, dated November 22, 1991.......... *
4.4 Amendment No. 2 to the Credit Agreement
(listed at 4.3 immediately above)
dated July 31, 1992 was filed as Exhibit 4.4
to the Corporation's Report on Form 10-K for
the year ended March 31, 1993.............. *
4.5 Amendment to the Credit Agreement
(listed at 4.3 above) dated May 25, 1993
was filed as Exhibit 4.5 to the Corporation's
Report on Form 10-K for the year ended March
31, 1993.................................... *
4.6 Amendment No. 2 to the Credit Agreement
(listed at 4.3 above) dated June 10, 1994
was filed as Exhibit 4.6 to the Corporation's
Report on Form 8-K dated June 17, 1994...... *
4.7 Amendment No. 4 to the Credit Agreement
(listed as 4.3 above) dated March 16,
1995 is filed as an Exhibit to this report.. 42
4.8 Loan and Security Agreement dated March 16,
l995 among KRUG International Corp., KRUG Life
Sciences Inc., Technology/Scientific Services,
Inc. and Transamerica Business Credit
Corporation was filed as Exhibit A on Form
8-K dated March 17, 1995.................... *
39
<PAGE> 42
(10) MATERIAL CONTRACTS:
10.1 1981 Incentive Stock Option Plan, as
amended was filed as Exhibit 10.1 to the
Corporation's Report on Form 10-K for the
year ended March 31, 1993................... *
10.2 1985 Incentive Stock Option Plan, as
amended was filed as Exhibit 10.2 to the
Corporation's Report on Form 10-K for the
year ended March 31, 1993................... *
(21) SUBSIDIARIES:
The active subsidiaries of KRUG International
Corp. are listed below, do business under
the name under which they are organized, and
are included in the consolidated financial
statements of the Corporation. The names,
jurisdiction of incorporation of such
subsidiaries, and percentage of voting
securities owned by the Corporation
are set forth below.
Percentage of
Jurisdiction In Voting Securities
Name of Subsidiary Which Incorporated Owned
- ------------------ ------------------ -----------------
Technology/Scientific
Services, Inc. Ohio 100%
KRUG Life Sciences Inc. Ohio 100%
KRUG Properties Inc. Ohio 100%(1)
KRUG Properties Ltd. Ontario, Canada 100%(1)
KRUG International
(U.K.) Ltd. United Kingdom 100%
Beldray Limited United Kingdom 100%(2)
Sowester Limited United Kingdom 100%(2)
_______________
(1) Subsidiaries included within discontinued operations.
(2) Subsidiaries of KRUG International (U.K.) Ltd.
40
<PAGE> 43
(23) CONSENTS OF EXPERTS AND COUNSEL:
23.1 Consent of Deloitte & Touche LLP dated *
June 26, 1995 with respect to
material incorporated by reference
into KRUG International Corp. Post-
Effective Amendment No. 1 to the
Registration Statement on Form S-8
(No. 2-81404) relating to the
Corporation's 1981 Incentive Stock
Option Plan, the Registration
Statement on Form S-8 (No. 33-22847)
relating to the Corporation's 1985
Incentive Stock Option Plan and the
Registration Statement on Form S-8
(No. 33-67920) relating to the
Corporation's Incentive Share Option
Scheme 1985 filed as Exhibit 23.1
to the Corporation's Report on
Form 10-K for the year ended March
31, 1994........................... 56
(24) POWER OF ATTORNEY:
Powers of attorney of any person
who signed this Report on Form 10-K
by authorizing another person to sign
on his behalf pursuant to said power
of attorney.......................... 57
(27) FINANCIAL DATA SCHEDULE
Financial Data Schedule for fiscal year
ended March 31, 1995................. 62
____________________
"*" Indicates that the exhibit is incorporated by reference into this
Annual Report on Form 10-K from a previous filing with the
Commission.
41
<PAGE> 1
Exhibit 4.7
AMENDMENT NO. 4 dated as of March 16, 1995 (this "Amendment") to
CREDIT AGREEMENT dated as of November 14, 1991 (as amended) among (i) KRUG
INTERNATIONAL CORP., TECHNOLOGY/ SCIENTIFIC SERVICES, INC. and KRUG LIFE
SCIENCES, INC. (collectively, "Borrowers"), (ii) SOCIETY NATIONAL BANK
("Society"), PNC BANK OHIO, NATIONAL ASSOCIATION, COMERICA BANK, CORESTATES
BANK, N.A. ("CoreStates"), and BANK OF AMERICA, N.T. & S. A. (collectively,
"Lenders" and each individually a "Lender"), (iii) CORESTATES BANK, N.A. as
Administrative Agent, and (iv) KRUG PROPERTIES, INC., KRUG PROPERTIES, LTD. and
TECHNOLOGY INCORPORATED (collectively, "Guarantors").
BACKGROUND
- ----------
The Borrowers, the Lenders, the Guarantors and the Administrative
Agent acknowledge that on or about November 14, 1991, the Borrowers, the
Lenders and the Administration Agent entered into, INTER ALIA, a Credit
Agreement. The Credit Agreement was amended and supplemented by Amendment No.
1 dated November 22, 1991, by Amendment No. 2 dated July 31, 1992, and by
Amendment No. 2 dated June 10, 1994 (collectively, the "Credit Amendment").
The parties now wish to amend and supplement the Credit Agreement to provide
that, INTER ALIA, (a) the amounts owing under the Revolving Credit Note have,
this date, been paid in full and the availability of Revolving Advances has
been terminated, (b) in connection with the establishment of a credit facility
by Transamerica Business Credit Corporation for the benefit of the Borrowers
and the resulting refinancing of certain of the Borrowers' indebtedness, a
prepayment, in the amount of $6,070,000, has been made by the Borrowers on the
Term Loans, (c) CoreStates (on behalf of itself and its participant, Society)
has established an additional short term credit facility for the Borrowers, and
(d) certain items of Collateral have been released by the Lenders, all on, and
subject to, the terms and conditions hereinafter set forth. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Credit Agreement.
AGREEMENTS
- ----------
The parties hereto, intending to be legally bound, hereby agree:
1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is
amended, effective as of the date hereof:
42
<PAGE> 2
(a) By deleting Section 1.72 in its entirety and
inserting, in its place, the following:
"1.72. "Termination Date" means the earlier to occur
of (i) March 31, 1998 or (ii) the date on which the
property described in Section 3.3 of the Credit
Agreement, and also referred to as the "Colonel Glenn
Property", is transferred, sold, conveyed or
otherwise disposed of by Krug International Corp."
(b) By deleting Section 2.3.1 in its entirety and
inserting, in its place, the following:
"2.3.1. INTEREST. Unless an Event of Default has
occurred and is continuing, the Borrowers shall pay
interest on the unpaid principal amount of all
Obligations of the Borrowers to the Lenders pursuant
to this Agreement from the respective dates on which
such loans are made, or Obligations incurred until
such principal amounts have been repaid in full at a
fluctuating annual rate equal to the Prime Rate plus
two percent (2%) through August 31, 1996, and equal
to the Prime Rate plus three percent (3%) thereafter;
provided, however, that if the Borrowers have paid to
the Lenders principal payments to be applied to the
Term Loans in an amount aggregating at least $350,000
(excluding the prepayment described in the Background
to Amendment No. 4 to the Credit Agreement) on or
before August 31, 1996, then the rate of interest
shall remain at the Prime Rate plus two percent (2%).
The Prime Rate means the rate of interest established
and so designated by CoreStates, from time to time,
as its prime rate (which may not necessarily be the
lowest rate of interest offered by CoreStates) with
changes therein effective immediately upon changes in
said Prime Rate."
(c) By deleting Section 2.5.1 in its entirety and
inserting, in its place, the following:
"2.5.1. MANDATORY PAYMENTS. (a) The Borrowers shall
make all of the following mandatory payments of the
Term Loans in the following amounts and at the
following times:
43
<PAGE> 3
(i) The sum of $15,278 per month, commencing
on April 1, 1995 and continuing on the first
day of each month thereafter until the
Termination Date; and
(ii) On the Termination Date, the then entire
outstanding balance of the Term Loans,
together with all interest accruing thereon.
(d) By deleting, in its entirety, the second sentence of
Section 3.3.
(e) By deleting, in its entirety, Section 5.3.
(f) By deleting Section 5.11 in its entirety, and
inserting, in its place, the following:
""5.11. ACCOUNTS. So long as any of the Credit
Facilities are in effect, KRUG, or one of the other
borrowers, shall maintain an account at CoreStates."
(g) By deleting, in its entirety, Section 5.16.
(h) By deleting Section 5.21 in its entirety and
inserting, in its place, the following:
"5.21. REDUCTION OF OBLIGATIONS. The Borrowers
shall use their best efforts to sell or lease the
Property (as that term is defined in the Second
Mortgage) described in Section 3.3 of the Credit
Agreement."
(i) By deleting Section 6.1 in its entirety and
inserting, in its place, the following:
"6.1. DEBT. Incur any Indebtedness other than (a)
the Credit Facility; (b) the existing Indebtedness
described in the Disclosure Schedule; (c) open
account obligations incurred in the ordinary course
of business; (d) rental and lease payments as
described in Section 6.11; (e) the Subordinated Debt;
(f) insurance premium financing with respect to
insurance required by Section 5.15 of this Agreement;
(g) subordinated debt provided that such debt is
subordinated in amount, repayment and in all other
respects in form and substance satisfactory to the
Majority Lenders
44
<PAGE> 4
(for purposes hereof debt will be considered
subordinated in form satisfactory to the Majority
Lenders if the Borrower(s) of such debt enters into a
Subordination Agreement with the creditor of such debt
in the form of Exhibit "M" attached hereto); (h)
normal and reasonable expense accruals in the ordinary
course of business; (i) any future amounts owed PNC
Bank Ohio, National Association, pursuant to Letter of
Credit Agreements; and (j) Indebtedness owing to
Transamerica Business Credit Corporation in an
aggregate amount not exceeding $10,000,000."
(j) By deleting Section 6.2 in its entirety and
inserting, in its place, the following:
"6.2. LIENS. Incur, create, assume, become or be
liable in any way, or suffer to exist any mortgage,
pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets, now or
hereafter owned other than (a) Permitted Liens and
(b) liens granted to Transamerica Business Credit
Corporation; provided, however, that nothing
contained herein shall permit the creation or
existence of any mortgage, pledge, lien, charge or
other encumbrance of any nature whatsoever on any
property or assets described in the Second Mortgage."
(k) By deleting Sections 6.3, 6.4, 6.5, 6.16 and 6.17 in their entirety.
2. TERMINATION OF REVOLVING CREDIT FACILITY. The Short Term
Revolving Credit Facility, as described in Section 2.2 of the Loan Agreement,
is hereby terminated. In connection with such termination, the Borrowers have
paid to the Lenders the sum of $1,000,000, which represents the repayment of
all amounts owed to the Revolving Credit Banks pursuant to the Revolving Credit
Note. As a result of the termination of the Short Term Revolving Credit
Facility, the Facility Fee, as described in Section 2.3.5 of the Credit
Agreement is, as of this date, terminated. The fee accruing during this
quarter, or the sum of $__________, shall be paid to the Lenders concurrently
with the execution hereof.
45
<PAGE> 5
3. ESTABLISHMENT OF BRIDGE FACILITY. CoreStates (on behalf of
itself and its participant, Society) hereby extends to the Borrowers a demand
loan in the aggregate amount of $150,000 (the "Bridge Loan") which shall be
evidenced by a demand note in the form of Exhibit A attached, payable to the
order of CoreStates (the "Demand Note"). Unless an Event of Default has
occurred and is continuing, the Borrowers shall pay interest on the unpaid
principal balance of the Bridge Loan from the date hereof until the principal
amount thereof has been repaid in full at a fluctuating annual rate equal to
the Prime Rate plus two percent (2%). All interest accrued will be payable by
the Borrowers in arrears (a) on April 1, 1995, and on the first Business Day of
each succeeding calendar month thereafter, and (b) on demand. Effective
immediately upon any Event of Default, and for so long thereafter as such Event
of Default shall be continuing, both before and after the entry of a judgment
and/or both before and after the commencement of a bankruptcy proceeding of any
Borrower, the principal balance of the Bridge Loan then outstanding, and to the
extent permitted by applicable law, any interest payments on the Bridge Loan
not paid when due, shall bear interest at the Default Rate set forth in the
Demand Note. The Borrowers will pay in full the outstanding principal balance
of, together with all accrued but theretofore unpaid interest on, the Bridge
Loan on demand (the "Bridge Loan Demand Date") by depositing such amount, in
immediately available funds, to KRUG's corporate account with the
Administrative Agent, by not later than 11:00 a.m. (Philadelphia time).
Amounts received by the Administrative Agent after 11:00 a.m. (Philadelphia
time) on the Bridge Loan Demand Date will be deemed to have been received on
the next Business Day. The Borrowers can prepay in full the Bridge Loan at any
time without penalty. In order to secure the payment of the Bridge Loan, the
Borrowers hereby grant to Administrative Agent, for the benefit of CoreStates
(and its participant, Society), a continuing lien on, and continuing security
interest in, the Noncompetition Proceeds (pursuant to, and in accordance with,
the terms of the Security Agreement between KRUG and CoreStates, as
Administrative Agent, dated November 14, 1991) and confirm to CoreStates, as
Administrative Agent for CoreStates (and its participant, Society), that the
term "Obligations", as set forth in (i) that certain Open-End Mortgage,
Assignment of Rents and Leases and Security Agreement between KRUG and
CoreStates, as Administrative Agent, (ii) the Credit Agreement, and (iii) the
Security Agreement between KRUG and CoreStates, as Administrative Agent, shall
include, but not be limited to, the Bridge Loan. The failure to pay, when due,
any interest payment accruing under the Bridge Loan, or to pay the entire
outstanding principal balance of the Bridge Loan, together with all interest
accruing thereon, on demand, or the occurrence of any other Event of Default as
set forth in the Demand Note, shall constitute an Event of Default
46
<PAGE> 6
under the Bridge Loan, and under the Credit Agreement. The Borrowers covenant
and agree that the Noncompetition Proceeds, if received by KRUG, or any other
Borrower, shall be held in trust for CoreStates, as Administrative Agent for
CoreStates (and its participant, Society), and that, immediately upon receipt
of the Noncompetition Proceeds, such proceeds shall be paid to the
Administrative Agent, for the benefit of CoreStates (and its participant,
Society). Alternatively, at the option of CoreStates, KRUG will instruct
Dempster, Inc., the Obligor under the Noncompetition Agreement, to pay the
Noncompetition Proceeds directly to CoreStates, by wire transfer to such
account as CoreStates shall designate. The parties acknowledge that the Bridge
Loan constitutes, in effect, a forebearance, by CoreStates (and its
participant, Society) of the pre-payment of a portion of the Term Loans.
4. RELEASE OF CERTAIN COLLATERAL. Notwithstanding the provisions
of the first sentence of Section 3 of the Credit Agreement, the Lenders hereby
release the liens and security interests granted to them in the Collateral
described in Section 3.2 of the Credit Agreement (with the exception of the
Noncompetition Proceeds and the Collateral described in the Second Mortgage),
which liens and security interest were granted pursuant to Security Agreements
executed by the Borrowers and the Guarantors. In connection therewith, the
Security Agreements, executed by (i) Krug Properties, Inc., (ii) Krug
Properties Ltd., (iii) Technology Incorporated, (iv) Krug Life Sciences, Inc.,
and (v) Technology/Scientific Services, Inc. on November 14, 1991, as each such
Agreement was amended by Amendment No. 1 dated November 22, 1991, are hereby
terminated. The Security Agreement executed by KRUG on November 14, 1991, as
amended on November 23, 1991, shall remain in full force and effect until such
time as the Bridge Loan has been indefeasibly paid in full. In order to
evidence further the release of such Collateral, CoreStates, as Administrative
Agent, will execute and deliver to the Borrowers certain UCC-3s, in order to
terminate (or, in the case of KRUG, to amend), of record, the security
interests heretofore granted to the Lenders in the Collateral described in the
Security Agreements. Nothing contained herein shall effect a (i) release of
any assets on which the Borrowers have granted the Lenders a lien or security
interest pursuant to the terms of that certain Second Mortgage executed by KRUG
and delivered to CoreStates as Administrative Agent in accordance with Section
3.3 of the Credit Agreement, which Second Mortgage shall remain in full force
and effect, and shall continue to secure the Obligations, or (ii) a release of
the security interest granted by KRUG in the Noncompetition Proceeds.
47
<PAGE> 7
5. CONDITIONS. As a condition of the execution and delivery of
this Amendment, the Borrowers and the Guarantors have delivered to CoreStates,
as Administrative Agent, in form and content satisfactory to CoreStates and its
counsel, the following documents, instruments or payments:
(a) A certified copy of resolutions adopted by the Board
of Directors of each Borrower and each Guarantor authorizing the execution,
delivery and performance of this Amendment and all other documents and
instruments required by the Lenders for the implementation of this Amendment,
together with a duly certified incumbency and signature certificate for each
Borrower and each Guarantor;
(b) A certificate of an executive officer of each
Borrower, with respect to the matters in paragraphs (a) through (c) of Section
5, below;
(c) The sum of $1,000,000, which represents the payment
in full of all amounts owing to the Revolving Credit Banks pursuant to the
Revolving Credit Note;
(d) The sum of $6,070,000, which represents a prepayment
on the outstanding principal balance owing to the Lenders under the Term Notes;
(e) A policy of title insurance, obtained by the
Borrowers at their expense, issued by a title insurance company acceptable to
the Lenders, providing insurance in the amount of $2,370,000 and insuring the
lien of the Second Mortgage as a first mortgage on the Colonel Glenn Property,
subject only to those exceptions approved by the Lenders;
(f) A survey of the Colonel Glenn Property, in such form,
and containing such certifications, as shall be acceptable to the Lenders and
to the title insurance company providing the title insurance described in
Subsection (e) above;
(g) An appraisal of the property, prepared by an
independent appraiser suitable to the Lenders, showing an appraised value of
the Colonel Glenn Property of at least $2,370,000;
(h) a Declaration of No Set-off, in form and substance
satisfactory to CoreStates relating to the Noncompetition Proceeds and executed
by Dempster, Inc. and by Waste-Quip, Inc., the guarantor of the payment of the
Noncompetition Proceeds; and
48
<PAGE> 8
(i) Such additional documents or instruments as may be
required by CoreStates under the terms of this Amendment or otherwise.
6. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lenders to enter into this Amendment, each Borrower and each Guarantor
represents and warrants to the Lenders as follows:
(a) The Borrowers and the Guarantors have the power and
authority to execute, deliver, and perform this Amendment and all other
documents and instruments required by the Lenders for the implementation of
this Agreement. The execution, delivery and performance by the Borrowers and
the Guarantors of this Amendment and all other documents and instruments
required by the Lenders for the implementation of this Agreement have been duly
authorized by all necessary corporate action and will not violate any provision
of law or of the charter or by-laws of any Borrower or any Guarantor or any
agreement, trust or other indenture or instrument to which any Borrower or any
Guarantor is a party, or by which it or its properties may be bound or
affected, or of any order or decree affecting any Borrower or any Guarantor or
its properties, so that this Amendment and all other documents and instruments
required by the Lenders for the implementation of this Amendment are valid and
legally binding obligations of the Borrowers and the Guarantors, enforceable in
accordance with their terms.
(b) There exists no "Event of Default" (as defined in
Section 1.24 of the Credit Agreement) and no event which, with notice or lapse
of time or both would, if unremedied, be an Event of Default.
(c) The representations and warranties made by the
Borrowers in Sections 4.1, 4.2 (with the operative date being March 31, 1994),
4.3 (with the relevant financial statements being those of March 31, 1994) and
4.4 through 4.12, inclusive, of the Credit Agreement are true and correct as of
the date of this Amendment with the same effect as though made on and as of the
date of this Amendment.
(d) The obligation of Dempster, Inc. to pay the
Noncompetition Proceeds, and the Noncompetition Agreement, and the guaranty of
Waste-Quip, Inc. of such payment, are genuine and enforceable in accordance
with their terms; the sum of $150,000 will be due and owing thereunder on June
30, 1995, without set-off, counterclaim or deduction of any type, and the
obligor
49
<PAGE> 9
thereunder do not have, and have not asserted, any claim, demand, set-off or
counterclaim with respect thereto.
7. CONSENT OF GUARANTORS. The Guarantors, by executing this
Amendment, hereby consent to the amendment, supplements and modifications to
the Credit Agreement contained herein, including, but not limited to, (i) the
release of the Collateral as described in Section 3 hereof, and (ii) the
establishment of the Bridge Loan. The Guarantors each hereby agree that the
respective Guarantee Agreements executed by each of them, and all documents
executed in connection therewith, shall remain in full force and effect, and
further agree that the term "Obligations", as set forth in the Guarantee
Agreement executed by each Guarantor, shall include, in addition to the items
set forth herein, the Bridge Loan.
8. RELEASE OF LENDER, ADMINISTRATIVE AGENT. Each of the
Borrowers and each of the Guarantors hereby acknowledge and agree that the
execution of this Amendment does not constitute a waiver of any right, power or
privilege of the Lenders or the Administrative Agent under the Credit
Agreement, nor does it preclude other or further exercise thereof, nor
constitute a waiver of any Default under the Credit Agreement. Moreover, each
of the Borrowers and each of the Guarantors hereby acknowledge and agree that
the Borrowers and the Guarantors have no claim, cause of action, defense,
set-off or counterclaim of any kind or nature whatsoever against the Lenders or
the Administrative Agent with respect to the Credit Agreement, the credit
facilities established thereunder, the Notes, the Second Mortgage, or with
respect to any action taken or not taken by the Lenders or the Administrative
Agent concerning the Credit Agreement, this Amendment or any other matter.
Without limiting the generality of the foregoing, each of the Borrowers and
each of the Guarantors hereby waives, releases and forever discharges the
Lenders and the Administrative Agent from and against any and all rights,
claims or causes of action (whether in contract, tort, equity or otherwise, and
whether known or unknown, absolute or contingent) against the Lenders or the
Administrative Agent arising out of any action taken or not taken by Lenders or
the Administrative Agent with respect to the Credit Agreement, the credit
facilities established thereunder, or this Amendment, and from any and all
rights of set-off, defenses, claims and causes of action against the Lenders or
the Administrative Agent, or any other bar to the enforcement of the Lenders'
or the Administrative Agent's rights under the Credit Agreement, or any other
matter. The Borrowers and the Guarantors acknowledge and
50
<PAGE> 10
agree that the Lenders and the Administrative Agent are relying on the
foregoing representations and agreements as an inducement to the Lenders and
the Administrative Agent to execute this Amendment Agreement.
9. KRUG INTERNATIONAL (U.K.) LTD. SUBORDINATION. The Lenders
shall, and hereby do, permit the Letter Agreement, dated November 14, 1991 from
Krug International (U.K.) Ltd. ("Krug U.K.") to the Lenders (or their
predecessors in interest) to be amended by deleting paragraph number 2, found
at the top of the second page of such Letter Agreement, in its entirety, and by
substituting therefor the following:
"Krug U.K. will not accept payment from KRUG or any other form
of reduction by KRUG of the U.K. Debt nor will Krug U.K.
accept any security from KRUG except as follows:
(i) Krug U.K. may receive from KRUG monthly cash
payments of interest only on a certain loan in the present
outstanding principal amount of pounds sterling 1,139,601
(Loan "A"), which loan may hereafter be increased principally
as a result of additional cash loans from Krug U.K. to KRUG.
No principal payments may be made under this exception;
(ii) Krug U.K. may continue to use dividends from
Krug U.K. to KRUG paid in the form of book-keeping reduction
of Krug U.K. Debt to KRUG, and Krug U.K. may also use the U.K.
Inland Revenue advance corporation tax refund to repay amounts
owing under the U.K. Debt; and
(iii) Krug U.K. may receive from KRUG the sum of
$100,000 payable against Loan A.
Except as set forth above, the aforesaid Letter Agreement shall remain in full
force and effect.
10. MISCELLANEOUS.
(a) This Amendment shall be deemed a modification of the
Credit Agreement to the extent inconsistent therewith. Subject to the
foregoing, the Credit Agreement, the Term Notes, the Second Mortgage, the
Guarantees and each of its and their terms and conditions (collectively, the
"Loan Documents") is ratified and confirmed and shall remain in full force and
effect.
(b) This Amendment shall be governed by the laws of the
Commonwealth of Pennsylvania; may not be amended or modified
51
<PAGE> 11
orally; and shall be binding on the Lenders, the Borrowers, and the Guarantors
and their respective successors and assigns.
(c) This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and
the same instrument.
(d) In the event of any inconsistency between the terms
of the Loan Documents and this Amendment, the terms of this Amendment shall
prevail.
(e) This Amendment constitutes and sets forth the entire
agreement and understanding of the parties pertaining to the subject matter
hereof, and there are no other prior or contemporaneous written or oral
agreements, understandings, undertakings, negotiations, promises, discussions,
warranties or covenants not specifically referred to or contained herein or in
the Credit Agreement, and the documents and instruments executed in connection
therewith.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have executed this Amendment as of the day and year written above.
KRUG INTERNATIONAL CORP., AS
BORROWER
By: /s/ Thomas W. Kemp
-------------------------------
Title: V.P.
----------------------------
TECHNOLOGY/SCIENTIFIC SERVICES,
INC., AS BORROWER
By: /s/ Thomas W. Kemp
-------------------------------
Title: V.P.
----------------------------
KRUG LIFE SCIENCES, INC., AS
BORROWER
By: /s/ Thomas W. Kemp
-------------------------------
Title: V.P.
----------------------------
(signatures continued on page 12)
52
<PAGE> 12
(signatures continued from page 11)
KRUG PROPERTIES, INC., AS
GUARANTOR
By: /s/ Thomas W. Kemp
-------------------------------
Title: V.P.
----------------------------
KRUG PROPERTIES, LTD., AS
GUARANTOR
By: /s/ Thomas W. Kemp
-------------------------------
Title: V.P.
----------------------------
TECHNOLOGY INCORPORATED, AS
GUARANTOR
By: /s/ Thomas W. Kemp
-------------------------------
Title: V.P.
----------------------------
CORESTATES BANK, N.A., ON
ITS OWN BEHALF AS LENDER AND
AS ADMINISTRATIVE AGENT
By: /s/ Thomas J. Young
-------------------------------
Title:
----------------------------
SOCIETY NATIONAL BANK, AS LENDER
By: /s/ Christine L. Gillespie
-------------------------------
Title: Vice President
----------------------------
PNC BANK OHIO, NATIONAL
ASSOCIATION, AS LENDER
By:
-------------------------------
Title: AVP
----------------------------
COMERICA BANK, AS LENDER
By: /s/ J E Pallock
-------------------------------
Title: Commercial Banking Officer
----------------------------
BANK OF AMERICA, N.T & S.A.,
AS LENDER
By:
-------------------------------
Title: Vice President
----------------------------
53
<PAGE> 13
For Bank Use Only
- ----------------- ----------------- ----------------- ------------------
- ----------------- ----------------- ----------------- ------------------
LIS NO. LOAN NO. BORROWER APPROVAL SIGNATURE
- ---------------------------------------------------------------------------
COMMERCIAL PROMISSORY NOTE [LOGO]
$150,000 _________________, 19____
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if
more than one (hereinafter collectively referred to as "Borrower"), promises
to pay to the order of CORESTATES BANK, N.A.*, a national banking association
(the "Bank"), at any of its banking offices in Pennsylvania, the principal
amount of ONE HUNDRED FIFTY THOUSAND DOLLARS, in lawful money of the United
States, plus interest, to be paid as follows:
Said principal shall be payable on demand. Interest shall accrue at a per
annum rate equal to 2% in excess of the Prime Rate. Interest shall be payable
monthly on the first day of each month begining on April 1, 1995, and on demand.
ADDITIONAL TERMS OF THIS NOTE - EACH OF THE FOLLOWING PROVISIONS SHALL APPLY TO
THIS NOTE, TO ANY EXTENSION OR MODIFICATION HEREOF AND TO THE INDEBTEDNESS
EVIDENCED HEREBY, EXCEPT AS OTHERWISE EXPRESSLY STATED ABOVE OR IN A SEPARATE
WRITING SIGNED BY BANK AND BORROWER.
INTEREST - Interest shall be calculated on the basis of a 360-day year and
shall be charged for the actual number of days elapsed. Accrued interest shall
be payable monthly. Accrued interest shall also be payable when the entire
principal balance of this Note becomes due and payable (whether by demand,
stated maturity or acceleration) or, if earlier, when such principal balance is
actually paid to Bank. If the rate at which interest accrues is based on the
"Prime Rate", that term is defined as the rate of interest for loans
established by Bank from time to time as its prime rate. Said per annum rate
of interest shall change each time Bank's prime rate shall change, effective on
and as of the date of the change. Interest shall accrue on each disbursement
hereunder from the date such disbursement is made by Bank, provided,
however, that to the extent this Note represents a replacement, substitution,
renewal or refinancing of existing indebtedness, interest shall accrue from the
date hereof. Interest shall accrue on the unpaid balance hereof at the rate
provided for in this Note until the entire unpaid balance has been paid in
full, notwithstanding the entry of any judgment against Borrower.
PREPAYMENT - If this Note bears interest at a floating variable rate and no
floor or minimum rate is specified, Borrower may prepay all or any portion of
the principal balance of this Note at any time, without premium or penalty. If
not permitted under the preceding sentence, any prepayment of principal
(including any principal repayment as a result of acceleration by Bank of
this Note) shall require immediate payment to Bank of a prepayment fee equal to
the amount, if any, by which the aggregate present value of scheduled principal
and interest payments eliminated by the prepayment exceeds the principal amount
being prepaid. Said present value shall be calculated by application of a
discount rate determined by Bank in its reasonable judgment to be the
yield-to-maturity at the time of prepayment on U.S. Treasury securities having a
maturity which most closely approximates the final maturity date of the
principal balance then outstanding. Whether or not a prepayment fee is required
hereunder, prepayments shall be applied to scheduled installments of principal
in the inverse order of their maturity, shall be accompanied by payment of
accrued interest on the principal amount being prepaid and, unless this Note
has been accelerated by Bank, shall not be permitted in an amount less than the
scheduled principal installment immediately prior to the final maturity of the
outstanding principal balance.
COLLATERAL - As security for all indebtedness to Bank now or hereafter incurred
by Borrower, under this Note or otherwise, Borrower grants Bank a lien upon and
security interest in any securities, instruments or other personal property of
Borrower now or hereafter in Bank's possession and in any deposit balances
now or hereafter held by Bank for Borrower's account, and in all proceeds of
any such personal property or deposit balances. Such liens and security
interest shall be independent of Bank's right of setoff. This Note and the
indebtedness evidenced hereby shall be additionally secured by any lien or
security interest evidenced by a writing (whether now existing or hereafter
executed) which contains a provision to the effect that such lien or security
interest is intended to secure (a) this Note or the indebtedness evidenced
hereby or (b) any category of liabilities, obligations or indebtedness of
Borrower to Bank which includes this Note or the indebtedness evidenced hereby,
and all property subject to any such lien or security interest shall be
collateral for this Note.
EVENTS OF DEFAULT - Each of the following shall be an Event of Default
hereunder: (a) the nonpayment when due of any amount payable under this Note or
under any obligation or indebtedness to Bank of Borrower or any person liable,
either absolutely or contingently, for payment of any indebtedness evidenced
hereby, including endorsers, guarantors and sureties (each such person is
referred to as an "Obligor"); (b) if Borrower or any Obligor has failed to
observe or perform any other existing or future agreement with Bank of any
nature whatsoever; (c) if any representation, warranty, certificate, financial
statement or other information made or given by Borrower or any Obligor to Bank
is materially incorrect or misleading; (d) if Borrower or any Obligor shall
become insolvent or make an assignment for the benefit of creditors or if any
petition shall be filed by or against Borrower or any Obligor under any
bankruptcy or insolvency law; (e) the entry of any judgment against Borrower
or any Obligor which remains unsatisfied for 15 days or the issuance of any
attachment, tax lien, levy or garnishment against any property of material
value in which Borrower or any Obligor has an interest; (f) if any attachment,
levy, garnishment, or similar legal process is served upon Bank as a result of
any claim against Borrower or any Obligor or against any property of Borrower
or any Obligor; (g) the dissolution, merger, consolidation, or the sale or
change in control (as control is defined in Rule 12b-2 under Securities
Exchange Act of 1934) of any Borrower which is a coporation or partnership, or
transfer of any substantial portion of any of Borrower's assets, or if any
agreement for such dissolution, merger, consolidation, change in control, sale
or transfer is entered into by Borrower, without the written consent of
Bank; (h) the death of any Borrower or Obligor who is a natural person; (i) if
Bank determines reasonably and in good faith that an event has occurred or a
condition exists which has had, or is likely to have, a material adverse effect
on the financial condition or creditworthiness of Borrower or any Obligor, or
on the ability of Borrower or any Obligor to perform its obligation evidenced
by this Note; (j) if Borrower shall fail to remit promptly when due to the
appropriate government agency or authorized depository, any amount collected or
withheld from any employee of Borrower for payroll taxes, Social Security
payments or similar payroll deductions; (k) if any Obligor shall attempt to
terminate or disclaim such Obligor's liability for the indebtedness evidenced
by this Note; (l) if Bank shall reasonably and in good faith determine and
notify Borrower that any collateral for this Note or for the indebtedness
evidenced hereby is insufficent as to quality or quantity; (m) if Borrower shall
fail to pay when due any material indebtedness for borrowed money other than to
Bank; or (n) if Borrower shall be notified of the failure of Borrower or any
Obligor to provide such financial and other information promptly when
reasonably requested by Bank. IF THIS NOTE IS PAYABLE ON DEMAND, Bank's right
to demand payment hereof shall not be restricted or impaired by the absence,
non-occurrence or waiver of an Event of Default, and it is understood that if
this Note is payable on demand, Bank may demand payment at any time.
BANK'S REMEDIES - Upon the occurrence of one or more Events of Default
(including, if this Note is payable on demand, any Event of Default resulting
from Borrower's failure to make any payment hereunder when demanded), unless
Bank elects otherwise, the entire unpaid balance of this Note and all accrued
interest shall be immediately due and payable without notice to Borrower or any
Obilgor, and Bank may, immediately or at any time thereafter, exercise any or
all of its rights and remedies hereunder or under any agreement or otherwise
under applicable law against Borrower, any Obligor and any collateral. Bank
may exercise its rights and remedies in any order and may, at its option, delay
in or refrain from exercising some or all of its rights and remedies without
prejudice thereto. Upon the occurrence of any such Event of Default or at any
time thereafter, Bank may, at its option, and upon five days' written notice to
Borrower, begin accruing interest on this Note, at a rate not to exceed five
percent (5%) per annum in excess of the greater of (a) the rate of interest
provided for above, or (b) the Prime Rate in effect from time to time on the
unpaid principal balance hereof;
EXHIBIT "A"
- --------------------------------------------------------------------------------
* CoreStates Bank, N.A. also conducts business as Philadelphia National Bank,
as CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
8980-C 10/93
54
<PAGE> 14
provided, however, that no interest shall accrue hereunder in excess of the
maximum rate permitted by law. All such additional interest shall be payable
on demand.
CONFESSION OF JUDGEMENT - Borrower irrevocably authorizes and empowers any
attorney or any clerk of any court of record, to appear for and confess
judgement against Borrower for such sums as are due and owing on this Note,
with or without declaration, with costs of suit, without stay of execution and
with an amount not to exceed the greater of fifteen percent (15%) of the
principal amount of such judgment or $5,000 added for collection fees. If a
copy of this Note, verified by affidavit by or on behalf of Bank, shall have
been filed in such action, it shall not be necessary to file the original of
this Note. The authority granted hereby shall not be exhausted by the initial
exercise thereof and may be exercised by Bank from time to time. There shall
be excluded from the lien of any judgement obtained solely pursuant to this
paragraph all improved real estate in any area identified as having special
flood hazards under regulations promulgated under the Flood Disaster Protection
Act of 1973, if the community in which such area is located is participating in
the National Flood Insurance Program. Any such exclusion shall not affect any
lien upon property not so excluded.
NOTICE TO BORROWER - Any notice required to be given by Bank under the
provisions of this Note shall be effective as to each Borrower and each Obligor
when addressed to Borrower and deposited in the mail, postage prepaid, for
delivery by first class mail at Borrower's mailing address as it appears on
Bank's records.
DISBURSEMENT AND PAYMENTS - The proceeds of this Note, or any portion thereof,
may be credited by Bank to the deposit account of Borrower, or disbursed in any
other manner requested by Borrower and approved by Bank. If Borrower so
requests, Bank may, at its option, disburse the proceeds of this Note in more
than one disbursement on the same or different dates, but except as otherwise
agreed by Bank in writing, no action taken by Bank in response to any such
request shall be deemed to create or shall imply the existance of any
commitment or obligation to pay or credit the undisbursed portion of this Note.
All payments due under this Note are to be made in immediately available funds.
If Bank accepts payment in any other form, such payment shall not be deemed to
have been made until the funds comprising such payment have actually been
received or made available to Bank. If Borrower is not an individual, Borrower
authorizes Bank (but Bank shall have no obligation) to charge any deposit
account in Borrower's name for any and all payments of principal, interest, or
any other ammounts due under this Note.
PAYMENT OF COST - In addition to the principal and interest payable hereunder,
Borrower agrees to pay Bank, on demand, all costs and expenses (including
reasonable attorney fees and disbursements) which may be incurred by Bank in
the collection of this Note or the enforcement of Bank's rights and remedies
hereunder.
REPRESENTATIONS BY BORROWER - If Borrower is a corporation or a general or
limited partnership, Borrower represents and warrants that it is validly
existing and in good standing in the jurisdiction under whose laws it was
organized. If Borrower is a corporation, Borrower represents and warrants that
the execution, delivery and performance of this Note are within Borrower's
coporate powers, have been duly authorized by all necessary action by
Borrower's Board of Directors, and are not in contravention of the terms of
Borrower's charter, by-laws, or any resolution of its Board of Directors. If
Borrower is a general or a limited partnership, Borrower represents and
warrants that the execution, delivery and performance of this Note have been
duly authorized and are not in conflict with any provision of Borrower's
partnership agreement or certificate of limited partnership. Borrower futher
represents and warrants that this Note has been validly executed and is
enforcable in accordance with its terms, that the execution, delivery and
performance by Borrower of this Note are not in contavention of law and do not
conflict with any indenture, agreement or undertaking to which Borrower is a
party or otherwise bound, and that no consent or approval of any government
authority or third party is required in connection with the execution, delivery
and performance of this Note.
WAIVERS, ETC.- Borrower and each Obligor waive presentment, dishonor, notice of
dishonor, protest and notice of protest. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver or modification thereof. No consent, waiver or
modification of the terms of this Note shall be effective unless set forth in
writing signed by Bank. All rights and remedies of Bank are cumulative and
concurrent and no single or partial exercise of any power or privilege shall
preclude any other or further exercise of any right, power, or privilege.
MISCELLANEOUS - This Note is in the unconditional obligation of Borrower, and
Borrower agrees that Bank shall not be required to exercise any of its rights
or remedies against any collateral in which it holds a lien or security
interest or against which it has a right of setoff or against any particular
Obligor. All representations, warranties and agreements herein are made
jointly and severally by each Borrower. If any provision of this Note shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof. To the extent that this Note represents a
replacement, substituion, renewal or refinancing of a pre-existing note or
other evidence of indebtedness, the indebtedness represented by such
pre-existing note or other instrument shall not be deemed to have been
extinguished hereby. In the event that any due date specified or otherwise
provided for in this Note shall fall on a day on which Bank is not open for
business, such due date shall be postponed until the next banking day, and
interest and any fees or similar charges shall continue to accrue during such
period of postponement. This Note has been delivered in and shall by governed
by and construed in accordance to the laws of the Commonwealth of Pennsylvania
without regard to law conflicts. This Note shall be binding upon each Borrower
and each Obligor and upon their personal representatives, heirs, successors, and
assigns, and shall benefit Bank and its successors and assigns.
CONSENT TO JURISDICTION AND VENUE - IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA WHERE BANK MAINTAINS AN OFFICE
AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR
MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. EACH
UNDERSIGNED PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE
DULY EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE
PREPAID, TO EACH UNDERSIGNED PARTY.
WAIVER OF JURY TRIAL - EACH UNDERSIGNED PARTY HEREBY WAIVES, AND BANK BY ITS
ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BANK TO ENTER INTO, ACCEPT OR RELY UPON THIS NOTE.
IN WITNESS WHEREOF, Borrower intending this to be a sealed instrument and
intending to be legally bound hereby, has executed and delivered this Note as
of the day and year first above written.
- --------------------------------------------------------------------------------
<TABLE>
Name of Corporation
or Partnership KRUG INTERNATIONAL CORP. KRUG LIFE SCIENCES INC.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
By: By:
- -------------------------------------------------------- --------------------------------------------------------
(Signature of Authorized Signer) (Signature of Authorized Signer)
- -------------------------------------------------------- --------------------------------------------------------
(Print or Type Name and Title of Signer Above) (Print or Type Name and Title of Signer Above)
INDIVIDUALS SIGN BELOW
TECHNOLOGY/SCIENTIFIC SERVICES, INC.
- -------------------------------------------------------- -------------------------------------------------------- (Seal)
(Signature of Individual Borrower)
By:
- -------------------------------------------------------- --------------------------------------------------------
(Print or Type Name of Borrower Signing Above)
- -------------------------------------------------------- -------------------------------------------------------- (Seal)
(Signature of Witness) (Signature of Individual Borrower)
- -------------------------------------------------------- --------------------------------------------------------
(Print or Type Name of Above Witness) (Print or Type Name of Borrower Signing Above)
</TABLE>
55
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement No. 2-81404 of KRUG International Corp. on Form S-8,
in Registration Statement No. 33-22847 of KRUG International Corp. on Form S-8
and in Registration Statement No. 33-67920 of KRUG International Corp. on Form
S-8 of our reports, dated May 19,1995, which include an explanatory paragragh
as to an investigation by the United States Customs Department, appearing in
the Annual Report on Form 10-K of KRUG International Corp. for the year ended
March 31, 1995.
DELOITTE & TOUCHE LLP
Dayton, Ohio
June 26, 1995
56
<PAGE> 1
Exhibit 24
KRUG INTERNATIONAL CORP.
POWER OF ATTORNEY
WHEREAS, KRUG International Corp. (the "Company") intends to file with the
Securities and Exchange Commission its Annual Report on Form 10-K for the
fiscal year ended March 31, 1995;
NOW, THEREFORE, the undersigned in his capacity as a director of the Company
hereby appoints Maurice F. Krug and James J. Mulligan, and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute in his name, place and stead, the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995 (including any
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorneys shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th day
of June 1995.
/S/ Marvin E. Bruce
---------------------
Marvin E. Bruce
57
<PAGE> 2
KRUG INTERNATIONAL CORP.
POWER OF ATTORNEY
WHEREAS, KRUG International Corp. (the "Company") intends to file with the
Securities and Exchange Commission its Annual Report on Form 10-K for the
fiscal year ended March 31, 1995;
NOW, THEREFORE, the undersigned in his capacity as a director of the Company
hereby appoints Maurice F. Krug and James J. Mulligan, and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute in his name, place and stead, the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995 (including any
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorneys shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th day
of June 1995.
/S/ Rex M. Fleet
------------------
Rex M. Fleet
58
<PAGE> 3
KRUG INTERNATIONAL CORP.
POWER OF ATTORNEY
WHEREAS, KRUG International Corp. (the "Company") intends to file with the
Securities and Exchange Commission its Annual Report on Form 10-K for the
fiscal year ended March 31, 1995;
NOW, THEREFORE, the undersigned in his capacity as a director of the Company
hereby appoints Maurice F. Krug and James J. Mulligan, and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute in his name, place and stead, the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995 (including any
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorneys shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th day
of June 1995.
/S/ W. Edward Greenhalgh
------------------------
W. Edward Greenhalgh
59
<PAGE> 4
KRUG INTERNATIONAL CORP.
POWER OF ATTORNEY
WHEREAS, KRUG International Corp. (the "Company") intends to file with the
Securities and Exchange Commission its Annual Report on Form 10-K for the
fiscal year ended March 31, 1995;
NOW, THEREFORE, the undersigned in his capacity as a director of the Company
hereby appoints Maurice F. Krug and James J. Mulligan, and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute in his name, place and stead, the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995 (including any
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorneys shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th day
of June 1995.
/S/ T. Wayne Holt
---------------------------
T. Wayne Holt
60
<PAGE> 5
KRUG INTERNATIONAL CORP.
POWER OF ATTORNEY
WHEREAS, KRUG International Corp. (the "Company") intends to file with the
Securities and Exchange Commission its Annual Report on Form 10-K for the
fiscal year ended March 31, 1995;
NOW, THEREFORE, the undersigned in his capacity as a director of the Company
hereby appoints Maurice F. Krug and James J. Mulligan, and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute in his name, place and stead, the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995 (including any
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorneys shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th day
of June 1995.
/S/ Earl T. O'Loughlin
----------------------
Earl T. O'Loughlin
61
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 363
<SECURITIES> 0
<RECEIVABLES> 17,800
<ALLOWANCES> 595
<INVENTORY> 9,992
<CURRENT-ASSETS> 28,259
<PP&E> 16,561
<DEPRECIATION> 6,256
<TOTAL-ASSETS> 44,169
<CURRENT-LIABILITIES> 16,458
<BONDS> 13,162
<COMMON> 2,506
0
0
<OTHER-SE> 11,562
<TOTAL-LIABILITY-AND-EQUITY> 41,598
<SALES> 91,766
<TOTAL-REVENUES> 91,766
<CGS> 79,214
<TOTAL-COSTS> 79,214
<OTHER-EXPENSES> 8,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,307
<INCOME-PRETAX> 2,914
<INCOME-TAX> 902
<INCOME-CONTINUING> 2,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,012
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
