Item 1. DESCRIPTION OF BUSINESS
(a) General Development of Business.
Kysor Industrial Corporation ("Kysor", the "Company" or the "Registrant") is a Michigan corporation. It is the successor to a Delaware corporation of the same name organized in 1970 and also previously a Michigan corporation of the same name originally organized in 1925.
In April 1988, Kysor purchased an 80 percent interest in Kysor/Warren Refrigeration GmbH of Limburg, West Germany. In January 1989 the remaining 20 percent interest was acquired. Kysor/Warren Refrigeration GmbH designs, manufactures and markets refrigerated display cases for the European market.
In July 1990, Kysor acquired a portion of the truck and off-highway heater and air-conditioning business from Valeo Climate Control Ltd., located in South Wales, United Kingdom.
In February 1994, Kysor acquired Kalt Manufacturing Co., Inc., located in Portland, Oregon and Goodyear, Arizona. Kalt manufactures walk-in coolers and panels for the supermarket convenience store and food service industry.
The Aluminum Fabricated Products operations, located in Perry, Florida and Greeneville, Tennessee, were divested during 1990 in three separate transactions.
(b) Segment Information.
Kysor Industrial Corporation's operations include two segments: commercial products and transportation products. Operations in the commercial products segment design, manufacture and market refrigerated display cases, energy control systems, refrigerated building systems, and heating and air-conditioning systems. Operations in the transportation products segment design, manufacture and market engine performance systems, engine protection systems, and components and accessories for heavy-duty trucks, other commercial vehicles and marine equipment. The information in the following schedule excludes intercompany transactions which are deemed to be immaterial.
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Financial Information by Segment
Years Ended December 31, (amounts in thousands) ________________________________
NET SALES 1993 1992 1991 ________ ________ ________
Commercial products United States $166,347 $171,437 $135,433 Europe 19,398 16,234 18,287 _________ _________ _________
Total commercial products 185,745 187,671 153,720 _________ _________ _________
Transportation products United States 80,518 65,075 57,578 Europe 6,344 9,428 12,345 _________ _________ _________
Total transportation products 86,862 74,503 69,923 _________ _________ _________
NET SALES $272,607 $262,174 $223,643 _________ _________ _________ _________ _________ _________
OPERATING PROFIT (LOSS)* Commercial products United States $ 21,784 $ 22,651 $ 12,866 Europe (1,871) (1,599) (1,478) _________ _________ _________
Total commercial products 19,913 21,052 11,388 _________ _________ _________
Transportation products United States 11,859 8,210 5,017 Europe (412) (346) (1,991) _________ _________ _________
Total transportation products 11,447 7,864 3,026 _________ _________ _________
TOTAL OPERATING PROFIT 31,360 28,916 14,414
Corporate administrative expense (net) (11,190) (8,794) (6,732) Provision for litigation - (1,500) (4,000) Interest expense (2,162) (2,595) (3,748) _________ _________ _________
INCOME (LOSS) BEFORE INCOME TAXES AND BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 18,008 $ 16,027 $ (66) _________ _________ _________ _________ _________ _________
* Operating profit includes net sales less operating expenses. Excluded from the computation of operating profit are interest and other non- operating revenues, general corporate expenses and interest expense.
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Financial Information by Segment
Years Ended December 31, (amounts in thousands) ________________________________
1993 1992 1991 ________ ________ ________
ASSETS Commercial products United States $ 63,667 $ 65,718 $ 63,789 Europe 9,847 9,937 10,950 _________ _________ _________
Total commercial products 73,514 75,655 74,739 _________ _________ _________
Transportation products United States 29,542 26,921 29,383 Europe 2,938 4,356 5,880 _________ _________ _________
Total transportation products 32,480 31,277 35,263 ________ ________ ________
Subtotal 105,994 106,932 110,002
Cash and other corporate assets 50,461 28,918 23,008 ________ ________ ________
TOTAL ASSETS $156,455 $135,850 $133,010 ________ ________ ________ ________ ________ ________
DEPRECIATION AND AMORTIZATION
Commercial products $ 3,734 $ 3,784 $ 3,718 Transportation products 3,677 3,617 3,699 Corporate 243 249 296 ________ ________ ________
TOTAL DEPRECIATION AND AMORTIZATION $ 7,654 $ 7,650 $ 7,713 ________ ________ ________ ________ ________ ________
CAPITAL EXPENDITURES
Commercial products $ 3,829 $ 2,398 $ 2,864 Transportation products 4,758 1,379 2,005 Corporate 66 142 87 ________ ________ ________
TOTAL CAPITAL EXPENDITURES $ 8,653 $ 3,919 $ 4,956 ________ ________ ________ ________ ________ ________
(c) Narrative Description of Business.
At December 31, 1993, Kysor had approximately 1,904 employees. Information as of December 31, 1993 concerning Kysor's two industry segments is presented below. Certain financial information related to the individual industry segments is incorporated in response to Item 1.(b) above.
There were no material expenditures for compliance with federal, state or local provisions regulating the discharge of materials into the environment except with respect to ongoing proceedings relating to soil and groundwater contamination at the Cadillac Industrial Park in Cadillac, Michigan which is explained further under Note 11, Contingent Liabilities, to the Consolidated Financial Statements included under Part II, Item 8.
Commercial Products
The principal products of the commercial products group include supermarket refrigerated display cases, condensing units, insulated panels for refrigerated building systems and walk-in coolers, commercial vehicle heating, ventilating and air-conditioning (HVAC) units and truck trailer supports. The principal markets for Kysor's commercial products group include supermarkets, convenience stores and original equipment manufacturers for such vehicles as heavy-duty trucks, buses, vans, agriculture and military off-highway equipment and truck trailers. Refrigerated display equipment, refrigerated building systems, and sundry food store equipment are sold directly to supermarkets and convenience stores, as well as through independent commercial refrigeration distributors. Vehicle HVAC units and truck trailer support product sales are made directly to original equipment manufacturers and through a nationwide network of distributors.
The basic raw materials used by Kysor in this group are galvanized sheet and other types of steel, aluminum, glass, copper tubing, foam insulation, refrigerants, brass, copper, plastics and a variety of purchased electronic components. All raw materials used in this segment are readily available in adequate quantities from a number of sources.
Kysor holds or is licensed under a number of patents and trademarks relating to its commercial products. While none of these patents or trademarks are considered individually to be material, collectively these patents and trademarks are important to the business of the commercial products group.
There are no significant seasonal factors. Backlogs at year-end 1993 and 1992 were approximately $48.0 million and no material portion of this business is subject to renegotiation or termination by the government. There are no working capital requirements peculiar to this industry segment.
The commercial products industry is highly competitive. Kysor competes with numerous companies in this group, some of which are larger and have greater financial resources than Kysor. Kysor believes that it competes primarily on the basis of quality, service, product performance, and price for most of its products, and warrants the majority of its products in accordance with general industry practices.
The commercial products group generated $29.0 million, $48.4 million and $34.7 million of sales and revenues from Food Lion Stores in the years ended December 31, 1993, 1992 and 1991 respectively.
Transportation Products
The principal products of this group include engine performance systems consisting of radiator shutters, fan clutches and plastic fans; engine protection systems consisting of various engine monitoring devices, truck fuel tanks, and marine instruments. The principal markets for Kysor's transportation products group are original equipment manufacturers of such vehicles as medium- and heavy-duty trucks, buses, off-highway equipment and the marine industry. The majority of the group's sales are made directly to manufacturers. Additionally, Kysor utilizes a network of independent distributors to provide aftermarket and replacement parts service to end users.
The basic raw materials used by Kysor in this group are steel, brass, copper, aluminum, plastics and a variety of purchased electronic components which are widely available in adequate quantities from a number of sources.
Kysor holds or is licensed under a number of patents and trademarks relating to its transportation products. While none of these patents or trademarks are considered individually to be of material value, collectively these patents and trademarks are important to the business of the transportation products group.
There are no significant seasonal factors. Backlogs at year-end 1993 were approximately $16.0 million compared to $13.0 million in 1992 and no material portion of this business is subject to renegotiation or termination by the government. There are no working capital requirements peculiar to this industry segment. The Transportation Products Group generated $26.5 million of sales and revenue from Ford Motor Company in the year ended December 31, 1993.
The transportation products industry is highly competitive. Kysor competes with numerous companies in this group, some of which are larger and have greater financial resources than Kysor. Kysor believes that it competes primarily on the basis of quality, service, product performance, and price for most of its products, and warrants the majority of its products in accordance with general industry practices.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
This information is included in Item 1(b) above under the heading "Financial Information by Segment". The "Financial Information by Segment" does not include separately reported export sales as they are not significant.
Item 2.
Item 2. PROPERTIES
Kysor and its subsidiaries owned or leased the following offices and manufacturing facilities as of December 31, 1993:
COMMERCIAL PRODUCTS GROUP
LOCATION DESCRIPTION INTEREST
GEORGIA:
Conyers Plant & office; 480,000 Owned in fee simple sq. ft. on 50-acre site
Columbus Plant & office; 295,826 Owned in fee simple sq. ft. on 22.7-acre site
TEXAS:
Fort Worth Plant & office; 100,162 Owned in fee simple sq. ft. on 11-acre site
ILLINOIS:
Byron Plant, warehouse & office; 176,716 sq. ft. on Owned in fee simple 		 31-acre site
W.GERMANY:
Limburg Plant & office; 52,096 Owned in fee simple sq. ft. on 6.9-acre site
TRANSPORTATION PRODUCTS GROUP
INDIANA:
Scottsburg Plant & office; 42,048 Owned in fee simple sq. ft. on 10.7-acre site
MICHIGAN:
Cadillac Plant, warehouse & office; Owned in fee simple 131,426 sq. ft. on 		 12.4-acre site 		 Spring Lake Plant & office; 80,000 Owned in fee simple sq. ft. on 8.l-acre site
Rothbury Plant, warehouse & office; Owned in fee simple 18,543 sq. ft. on 		 3.4-acre site
Walker Plant & office; 49,188 Owned in fee simple sq. ft. on 3-acre site
White Pigeon Plant & office; 42,000 Owned in fee simple sq. ft. on 5-acre site
N.CAROLINA:
Charlotte Plant & office; 91,150 Owned in fee simple sq. ft. on 3.5-acre site
SOUTH WALES:
Hengoed Plant & office; Leased 50,000 sq. ft.
CORPORATE
MICHIGAN:
Cadillac Executive office; Owned in fee simple 23,000 sq. ft. on 		 102-acre site
OKLAHOMA:
Duncan Vacant plant, wrhse. Owned in fee simple & office; 93,000 sq. ft. 		 on 22.1-acre site
It is believed that Kysor's facilities are generally adequate for its operations and such properties are maintained in a good state of repair.
Item 3.
Item 3. LEGAL PROCEEDINGS.
As previously reported, the Company is involved in the following legal proceedings:
The Company is involved in an environmental proceeding with respect to a site in Cadillac, Michigan. The description of such proceeding is set forth in Part II, Item 8 of this report, Note 11 to the Consolidated Financial Statements.
On July 3, 1991, the Michigan Attorney General and the Department of Natural Resources filed a lawsuit against the Company and various other parties in the United States Federal District Court for the Western District of Michigan. The description of such proceeding is set forth under Part II, Item 8 of this report, Note 11 to the Consolidated Financial Statements.
On December 31, 1991, General Electric ("GE") filed a third-party claim against the Company in the United States District Court for the Western District of Michigan. The dispute arose out of claims made by Midwest Aluminum Manufacturing Company ("Midwest") against GE. The description of such proceeding is set forth in Part I, Item 3 of the Company's 1991 Annual Report on Form 10-K filed with the Commission on March 25, 1992. In February 1993, an agreement-in- principle was reached settling the underlying dispute between Midwest and GE, which settlement was finanlized in early 1994. As part of the settlement, the Company has been released by Midwest from all past and future environmental claims with respect to the Midwest site, and by GE with respect to all claims for indemnity or contribution arising out of Midwest's underlying claims against GE. The settlement is without prejudice to GE's remaining claims against the Company, pursuant to which GE seeks to recover response costs associated with certain environmental cleanup at GE's property, formerly owned by Kysor, and its defense costs incurred in connection with the Midwest suit.
On December 4, 1992, Kysor was named as a defendant, together with over 30 other parties, in an action commenced by the Township of Oshtemo, City of Kalamazoo, Kalamazoo County and The Upjohn Company with respect to alleged contamination at the West KL Avenue Landfill site located in Kalamazoo, Michigan. On November 16, 1993 Kysor Industrial Corporation entered into a settlement agreement requiring the payment of $20,000 which dismisses Kysor from all claims.
On March 30, 1993, the Company received a notification from the Michigan Department of Natural Resources that it has been named as a potentially responsible party ("PRP") with respect to a site commonly referred to as the SCA Independent Landfill Superfund Site, located in Muskegon County, Michigan. The notice alleges that the Company, together with numerous other parties, was an owner, generator or transporter of waste materials deposited at the site. The PRP notice request the Company and the other named PRPs to conduct a Remedial Investigation/Feasibility Study to determine the extent of contamination at the site, and seeks recovery of investigative costs expended by the MDNR to date. No significant discovery has taken place with respect to this matter.
Other contingent liabilities include various legal actions, proceedings and claims which are pending or which may be instituted or asserted in the future against the Company. Litigation is subject to many uncertainties, the outcome of individual matters is not predictable with assurance and it is reasonably possible that some of these other legal actions, proceedings and claims could be decided unfavorable to the Company. Although the liability with regard to these matters at December 31, 1993 cannot be ascertained, it is the opinion of management, after conferring with counsel, that any liability resulting from these other matters should not materially affect the consolidated financial position of the Company and its subsidiaries at December 31, 1993.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
Item 5.
Item 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of December 31, 1993, Kysor Industrial Corporation had a total of 5,467,840 shares of Common Stock issued and outstanding and 1,396 shareholders of record. A large number of shares are held by brokerage firms and banks for the benefit of other shareholders in all 50 states of the United States and several foreign countries. In addition, the Corporation had 810,163 shares of Series A. Convertible Voting Preferred Stock outstanding, all of which are owned by the Kysor Industrial Corporation Employee Stock Ownership Plan.
The annual dividends declared amounted to $.44 and $.40 during 1993 and 1992, respectively. The quarterly rate was $.10 per share for all of 1992 and the first quarter 1993, $.11 for the second and third quarter, 1993, and $.12 for the fourth quarter.
A quarterly summary of Kysor Industrial Corporation's Common Stock trading range is as follows:
1993	 	 1992 High Low High Low First Quarter 		 21.75 16.125 8.875 6.875 Second Quarter		 20.875 15.875 11.25 8.625 Third Quarter 		 18.00 14.50 13.00 10.125 Fourth Quarter		 17.875 15.625 19.125 12.00
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Comparison of 1993 and 1992 Kysor Industrial Corporation's 1993 total sales and revenues were $273.9 million, up 3.8 percent from 1992. Net income, before the accounting change for postretirement benefits, was $10.1 million compared to $9.1 million reported in 1992. Primary earnings per share before the accounting change was $1.62 in 1993, compared to $1.52 per share in 1992. Primary earnings per share after the accounting change was $.27 per share in 1993. Included in 1993 results is a provision for environmental matters amounting to $.14 per share, which are described in greater detail under Note 11, while 1992 results include a provision for litigation equaling $.18 per share. The increase in 1993 profitability resulted primarily from the increases in the Transportation Products Group where they benefited from the best Class-8 heavy-duty truck market since 1979 and the increased market penetration of Kysor's injection molded polymer engine fans.
On December 21, 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard #106 ("SFAS #106"), effective for 1993. SFAS #106 requires employers to accrue the cost of postretirement benefits other than pensions during the working careers of active employees instead of expensing the benefits when paid as allowed under prior rules. Actuarial valuation of the Company's transition obligation is $7.5 million (net of tax). In addition to the transition obligation, the Company is now required to accrue recurring annual postretirement benefits higher than the "pay as you go" expense. This additional accrual was $564,000 for 1993. The Company elected to record the transition obligation as a charge against income during the first quarter, 1993.
In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard #112 ("SFAS #112") which requires employers, effective for fiscal years beginning after December 15, 1993, to recognize the liability for postemployment benefits provided to former or inactive employees. The Company has reviewed the requirements of SFAS #112 and determined that the impact on the Company was not material. The Financial Accounting Standards Board also has adopted SFAS #109, Accounting for Income Taxes effective for years beginning after December 15, 1992 which replaces SFAS #96. There was no material impact on the Company when this standard was adopted in 1993.
Sales backlogs at the end of 1993 were up 4.6 percent from record levels at year-end 1992.
The continued improvement in 1993 results allowed Kysor to reduce its long-term debt and improve its debt ratio from 40.8 percent to 38.1 percent at the end of the year, after giving consideration to the decrease in equity resulting from the accrual for postretirement benefits.
The Company is presently involved in certain environmental proceedings with respect to soil and groundwater contamination in Cadillac, Michigan, as described below under the heading "Liquidity and Capital Resources" and in Note 11, Contingent Liabilities. In addition, the Company is involved in various other legal proceedings including certain proceedings involving allegedly contaminated sites with respect to which the Company has been named a potentially responsible party under the Federal Superfund law or comparable state laws. Although discovery in certain of these proceedings has not been completed, subject to the contingencies discussed in Note 11, the information presently available to management does not cause management to believe that the ultimate aggregate cost to the Company of such proceedings will result in a material adverse effect on its future financial condition or results of operation.
Comparative summaries and review of operations for the two business groups follows:
TRANSPORTATION PRODUCTS
AMOUNTS IN THOUSANDS 1993 1992 1991
Net Sales $ 86,862 $ 74,503 $69,923 Operating Profit 11,447 7,864 3,026
Sales in the Transportation Products Group increased 16.6 percent and operating profit increased 45.6 percent compared to 1992. The increase in sales and the significant increase in operating profit are the result of improved market conditions in the heavy-duty truck market and the positive impact of cost containment measures initiated over the past years. Backlogs at year-end 1993 were 22.9 percent above year-end 1992 levels and set the stage for another outstanding year in 1994.
During 1993, the Company's Kysair injection molded fan continued to gain market share, both domestically and internationally. As a result of that success, Kysor approved capital expenditures for 1994 which will establish manufacturing capabilities in the United Kingdom and management is currently studying a similar expansion into Korea.
COMMERCIAL PRODUCTS
AMOUNTS IN THOUSANDS 1993 1992 1991
Net Sales $185,745 $187,671 $153,710 Operating Profit 19,913 21,052 11,388
Commercial Products Group sales and operating profits decreased slightly as a result of the trimming of expansion plans by a major customer in the Kysor/Warren division during 1993. Kysor/Needham, the group's walk-in cooler manufacturer, increased sales 13.8 percent and made significant inroads in Mexico where sales increased substantially year-over-year. Additionally, in February 1994, Kysor purchased another cooler and panel manufacturer, Kalt Manufacturing Co., Inc., with manufacturing facilities in Portland, Oregon and Phoenix, Arizona.
Backlogs at year-end 1993 and 1992 for the Commercial Products Group were approximately $48.0 million.
Comparison of 1992 and 1991 Kysor Industrial Corporation's 1992 total sales and revenues were $264 million, up 17.3 percent from 1991. Net income was $9 million compared to a loss of $726,000 in 1991. Primary earnings per share were $1.52 in 1992 compared to a loss of $.35 per share in 1991. 1991's loss was the result of establishing a $4.0 million provision for a judgment in a commercial lawsuit equaling $.49 per share. Although the Company was in the process of appealing the verdict in the lawsuit, the parties, on December 15, 1992, reached an acceptable settlement agreement. The settlement was adequately reserved in 1991 and had no adverse effect on income in 1992. The increase in 1992 sales and revenue and its positive impact on profits resulted from improvement in all six domestic divisions, particularly the commercial refrigeration division where Kysor's major customers continued to expand aggressively throughout the year. Included in 1992 results is a $1.5 million provision for litigation which relates primarily to certain environmental proceedings against the Company which is described in greater detail under Note 11, Contingent Liabilities of the 1993 Annual Report to Shareholders.
International Operations Kysor Industrial Corporation has two foreign manufacturing subsidiaries - Kysor/Warren Refrigeration GmbH, which is part of the Commercial Products Group, and Kysor/Europe, part of the Transportation Products Group.
Kysor/Warren Refrigeration GmbH, with manufacturing operations in Limburg, Germany, experienced a 19.5 percent increase in sales compared to 1992. The increase in sales was primarily the result of low margin sales to Eastern Europe which contributed to additional losses during 1993. A new German general manager has been hired during 1994 and stringent cost-containment programs have been implemented to stem losses in the future.
Kysor/Europe, serving the European commercial vehicle truck market, with manufacturing operations located in Hengoed, South Wales, experienced a 29 percent decrease in sales in 1993 compared to 1992. The decrease is primarily attributable to the significant recession in the European markets. Notwithstanding the significant decrease in sales, improved internal controls and cost-containment programs allowed Kysor/Europe to minimize its operating losses at $412,000 in 1993 compared to $346,000 in 1992.
Liquidity and Capital Resources The Company's debt to invested capital ratio decreased from 40.8 percent at December 31, 1992, to 38.1 percent at December 31, 1993. Working capital at December 31, 1993 was $45.1 million, an increase of $3.5 million from the same period last year. Cash flow generated from operating activities in 1993 was $27.6 million, an increase of $8.7 million over the cash flow generated during 1992. At December 31, 1993, the Company has current maturities of long-term debt amounting to $5.7 million. All temporary borrowings are executed under a $20 million, long-term, revolving credit facility of which none was utilized at December 31, 1993.
Corporate philosophy is that long-term debt, properly utilized, can contribute to the sustained long-term growth of the Company. In furtherance of this philosophy, the Company will use long-term debt to the point financial flexibility is preserved and undue financial risk is not incurred. The Company's long-term objective is to maintain debt at less than 40 percent of total capitalization.
Capital expenditures during 1993 were financed through internally generated funds. The Company's capital expenditures for the year were $8.7 million relating primarily to the replacement and improvement of manufacturing equipment. Depreciation and amortization were $7.7 million for 1993. Capital expenditures are expected to increase during 1994, while depreciation and amortization should remain at approximately the same levels.
The ultimate amount of the environmental cleanup costs associated with the Cadillac, Michigan site described in Note 11 to the financial statements, the amount of costs allocated to the Company and the other contingencies discussed in such note, could impact earnings and liquidity in a material way, could result in the violation of one or more loan covenants and could result in the limitation or discontinuance of the payment of future dividends. However, the Company believes, subject to the referenced contingencies, that anticipated cash flow from operations, available borrowings on the resolving line of credit, and other potential sources of borrowing will be adequate to meet its short- and long-term liquidity and capital resource needs.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
Kysor Industrial Corporation Cadillac, Michigan
We have audited the accompanying consolidated balance sheet of Kysor Industrial Corporation and Subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1993. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kysor Industrial Corporation and Subsidiaries as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, effective January 1, 1993, the Corporation changed its method of accounting for postretirement benefits other than pensions.
Detroit, Michigan February 14, 1994
KYSOR INDUSTRIAL CORPORATION Consolidated Balance Sheet (Dollars in thousands, except per share data)
December 31, December 31, ASSETS 1993 1992 ____________ ____________
CURRENT ASSETS Cash and equivalents $ 21,339 $ 6,913 Accounts receivable less $1,546 and $1,496 allowance for doubtful accounts 35,968 32,070 Inventories 28,409 34,435 Prepaid expenses 1,228 1,402 Deferred income taxes 6,266 5,695 __________ __________
TOTAL CURRENT ASSETS 93,210 80,515 __________ __________
PROPERTY, PLANT AND EQUIPMENT Land 2,616 2,628 Buildings 30,155 29,336 Machinery and equipment 61,970 55,180 __________ __________
94,741 87,144 Less accumulated depreciation 51,918 45,246 __________ __________
TOTAL PROPERTY, PLANT AND EQUIPMENT 42,823 41,898 __________ __________
OTHER ASSETS Goodwill, patents and other intangibles 2,806 3,046 Cash value of officers' life insurance 9,547 8,589 Deferred income taxes 4,031 - Miscellaneous receivables and other assets 4,038 1,802 __________ __________
TOTAL OTHER ASSETS 20,422 13,437 __________ __________
TOTAL ASSETS $ 156,455 $ 135,850 __________ __________ __________ __________
The accompanying notes are an integral part of the financial statements.
KYSOR INDUSTRIAL CORPORATION Consolidated Balance Sheet (Dollars in thousands, except per share data) (continued)
December 31, December 31, LIABILITIES 1993 1992 ____________ ____________
CURRENT LIABILITIES Current maturities of long-term debt $ 5,670 $ 1,595 Accounts payable 14,353 14,388 Accrued income taxes payable 2,426 1,719 Accrued expenses and contingent liabilities 25,699 21,204 __________ __________
TOTAL CURRENT LIABILITIES 48,148 38,906
Long-term debt, less current maturities, plus guarantee of ESOP indebtedness 33,673 36,521 Deferred income taxes - 1,108 Accumulated postretirement benefit obligation 12,628 - Other long-term liabilities 7,313 6,410 __________ __________
TOTAL LIABILITIES AND DEFERRED CREDITS 101,762 82,945 __________ __________
PREFERRED SHAREHOLDERS' EQUITY Employee Stock Ownership Plan Preferred Stock, shares authorized 5,000,000; outstanding 810,163 and 814,612 stated value of $24.375 19,748 19,856 Unearned deferred compensation under employee stock ownership plan (16,175) (17,039) __________ __________
TOTAL PREFERRED SHAREHOLDERS' EQUITY 3,573 2,817 __________ __________
COMMON SHAREHOLDERS' EQUITY Common stock, $1 par value, shares authorized 30,000,000, outstanding 5,467,840 and 5,332,201 5,468 5,332 Additional paid-in capital 3,386 1,631 Retained earnings 43,997 44,908 Translation adjustment 286 627 Notes receivable-common stock 99,116 and 104,188 shares (1,319) (1,364) Unearned deferred compensation under employee stock ownership plan (698) (1,046) __________ __________
TOTAL COMMON SHAREHOLDERS' EQUITY 51,120 50,088 __________ __________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 156,455 $ 135,850 __________ __________ __________ __________
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity (Dollars in thousands, except per share data) Unearned Total Deferred Preferred Preferred Compensation Shareholders' Stock ESOP Equity BALANCE, DECEMBER 31, 1990 $19,982 ($18,780) $1,202 Employee Stock Ownership Plan, deferred compensation earned 0 877 877 Purchase of common stock, returned to an unissued status (85,180 shares) 0 0 0 Preferred stock distributions (1,933 shares for 5,345 shares of common) (47) 0 (47) Exercise of employee stock options, 8,005 shares issued 0 0 0 Collections of notes receivable 0 0 0 Forfeitures of notes receivable 0 0 0 Translation adjustment on investments in foreign subsidiaries 0 0 0 Net income (loss) 0 0 0 Preferred stock dividends (net of income tax benefit of $542) 0 0 0 share 0 0 0 BALANCE, DECEMBER 31, 1991 19,935 (17,903) 2,032 Employee Stock Ownership Plan, deferred compensation earned 0 864 864 Preferred stock distributions (3,223 shares for 8,040 shares of common) (79) 0 (79) Exercise of employee stock options, 172,975 shares issued 0 0 0 Collections of notes receivable 0 0 0 Translation adjustment on investments in foreign subsidiaries 0 0 0 Net income 0 0 0 Preferred stock dividends (net of income tax benefit of $541) 0 0 0 Common dividends declared, $ .40 per share 0 0 0 BALANCE, DECEMBER 31, 1992 19,856 (17,039) 2,817 Employee Stock Ownership Plan, deferred compensation earned 0 864 864 Preferred stock distributions (4,449 shares for 6,528 shares of common) (108) 0 (108) Exercise of employee stock options, 129,111 shares issued 0 0 0 Collections of notes receivable 0 0 0 Translation adjustment on investments in foreign subsidiaries 0 0 0 Net income 0 0 0 Preferred stock dividends (net of income tax benefit of $601) 0 0 0 share 0 0 0 BALANCE, DECEMBER 31, 1993 $19,748 ($16,175) $3,573
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity (Dollars in thousands, except per share data) Paid-In Retained Common Stock Capital Earnings BALANCE, DECEMBER 31, 1990 $5,264 $0 $44,948 0 0 0 Employee Stock Ownership Plan, deferred compensation earned 0 0 0 Purchase of common stock, returned to an unissued status (85,180 shares) (85) 0 (915) Preferred stock distributions (1,933 shares for 5,345 shares of common) 5 0 41 Exercise of employee stock options, 8,005 shares issued 8 0 36 Collections of notes receivable 0 0 0 Forfeitures of notes receivable (41) 0 (548) Translation adjustment on investments in foreign subsidiaries 0 0 0 Net income (loss) 0 0 (726) Preferred stock dividends (net of income tax benefit of $542) 0 0 (1,053) share 0 0 (2,869) BALANCE, DECEMBER 31, 1991 5,151 0 38,914 Employee Stock Ownership Plan, deferred compensation earned 0 0 0 Preferred stock distributions (3,223 shares for 8,040 shares of common) 8 70 0 Exercise of employee stock options, 172,975 shares issued 173 1,561 0 Collections of notes receivable 0 0 0 Translation adjustment on investments in foreign subsidiaries 0 0 0 Net income 0 0 9,127 Preferred stock dividends (net of income tax benefit of $541) 0 0 (1,050) Common dividends declared, $ .40 per share 0 0 (2,083) BALANCE, DECEMBER 31, 1992 5,332 1,631 44,908 Employee Stock Ownership Plan, deferred compensation earned 0 0 0 Preferred stock distributions (4,449 shares for 6,528 shares of common) 7 101 0 Exercise of employee stock options, 129,111 shares issued 129 1,654 0 Collections of notes receivable 0 0 0 Translation adjustment on investments in foreign subsidiaries 0 0 0 Net income 0 0 2,470 Preferred stock dividends (net of income tax benefit of $601) 0 0 (983) share 0 0 (2,398) BALANCE, DECEMBER 31, 1993 $5,468 $3,386 $43,997
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity (Dollars in thousands, except per share data) Unearned Notes Deferred Translation Receivable- Compensation Adjustment Common Stock ESOP BALANCE, DECEMBER 31, 1990 $1,632 ($2,042) ($1,744) Employee Stock Ownership Plan, deferred compensation earned 0 0 349 Purchase of common stock, returned to an unissued status (85,180 shares) 0 0 0 Preferred stock distributions (1,933 shares for 5,345 shares of common) 0 0 0 Exercise of employee stock options, 8,005 shares issued 0 0 0 Collections of notes receivable 0 38 0 Forfeitures of notes receivable 0 589 0 Translation adjustment on investments in foreign subsidiaries (347) 0 0 Net income (loss) 0 0 0 Preferred stock dividends (net of income tax benefit of $542) 0 0 0 share 0 0 0 BALANCE, DECEMBER 31, 1991 1,285 (1,415) (1,395) Employee Stock Ownership Plan, deferred compensation earned 0 0 349 Preferred stock distributions (3,223 shares for 8,040 shares of common) 0 0 0 Exercise of employee stock options, 172,975 shares issued 0 0 0 Collections of notes receivable 0 51 0 Translation adjustment on investments in foreign subsidiaries (658) 0 0 Net income 0 0 0 Preferred stock dividends (net of income tax benefit of $541) 0 0 0 Common dividends declared, $ .40 per share 0 0 0 BALANCE, DECEMBER 31, 1992 627 (1,364) (1,046) Employee Stock Ownership Plan, deferred compensation earned 0 0 348 Preferred stock distributions (4,449 shares for 6,528 shares of common) 0 0 0 Exercise of employee stock options, 129,111 shares issued 0 0 0 Collections of notes receivable 0 45 0 Translation adjustment on investments in foreign subsidiaries (341) 0 0 Net income 0 0 0 Preferred stock dividends (net of income tax benefit of $601) 0 0 0 share 0 0 0 BALANCE, DECEMBER 31, 1993 $286 ($1,319) ($698)
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity Dollars in thousands, except per share data) Total Common Total Stockholders' Shareholders' Equity Equity BALANCE, DECEMBER 31, 1990 $48,058 $49,260 Employee Stock Ownership Plan, deferred compensation earned 349 1,226 Purchase of common stock, returned to an unissued status (85,180 shares) (1,000) (1,000) Preferred stock distributions (1,933 shares for 5,345 shares of common) 46 (1) Exercise of employee stock options, 8,005 shares issued 44 44 Collections of notes receivable 38 38 Forfeitures of notes receivable 0 0 Translation adjustment on investments in foreign subsidiaries (347) (347) Net income (loss) (726) (726) Preferred stock dividends (net of income tax benefit of $542) (1,053) (1,053) share (2,869) (2,869) BALANCE, DECEMBER 31, 1991 42,540 44,572 Employee Stock Ownership Plan, deferred compensation earned 349 1,213 Preferred stock distributions (3,223 shares for 8,040 shares of common) 78 (1) Exercise of employee stock options, 172,975 shares issued 1,734 1,734 Collections of notes receivable 51 51
Translation adjustment on investments in foreign subsidiaries (658) (658) Net income 9,127 9,127 Preferred stock dividends (net of income tax benefit of $541) (1,050) (1,050) Common dividends declared, $ .40 per share (2,083) (2,083) BALANCE, DECEMBER 31, 1992 50,088 52,905 Employee Stock Ownership Plan, deferred compensation earned 348 1,212 Preferred stock distributions (4,449 shares for 6,528 shares of common) 108 0 Exercise of employee stock options, 129,111 shares issued 1,783 1,783 Collections of notes receivable 45 45 Translation adjustment on investments in foreign subsidiaries (341) (341) Net income 2,470 2,470 Preferred stock dividends (net of income tax benefit of $601) (983) (983) share (2,398) (2,398) BALANCE, DECEMBER 31, 1993 $51,120 $54,693
The accompanying notes are an integral part of the financial statements.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation The consolidated financial statements include the accounts of Kysor Industrial Corporation and all of its subsidiaries ("Kysor" or "Company").
Foreign Currency Translation Translation adjustments have been accumulated as a separate component of Shareholders' Equity.
Cash and Equivalents Kysor considers all highly-liquid debt instruments purchased with a maturity of less than one year to be cash equivalents.
Inventories Inventories are generally stated at the lower of FIFO (first in, first out) cost or market. Kysor has one subsidiary on LIFO (last in, first out), the inventory value of which was $828,000 and $735,000 lower than it would have been under FIFO at December 31, 1993 and 1992, respectively.
Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method based on the estimated useful lives of the assets.
Buildings are depreciated over lives ranging from 10 to 40 years. Machinery, equipment, and office furniture are depreciated over lives ranging from 3 to 25 years.
When properties are retired, the cost of such properties, net of accumulated depreciation and any salvage proceeds, is reflected in income.
Goodwill Goodwill, resulting from the excess of cost over the net assets of purchased companies, is amortized on a straight-line basis over periods not exceeding 20 years.
Income Taxes In 1993, the Company adopted Statement of Financial Accounting Standards # 109, "Accounting for Income Taxes," which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse (see Note 10).
Prior to 1993, the provision for income taxes was based on income and expenses included in the accompanying consolidated statements of operations. Differences between taxes so computed and taxes payable under applicable statutes and regulations were classified as deferred taxes arising from timing differences.
Financial Instruments The Company has cash, cash equivalents, and long-term debt which are considered financial instruments. The market values of these financial instruments, as determined through information obtained from banking sources and management estimates, approximate their carrying values.
Pension and Retirement Plans Annual provisions for pension and retirement plan costs recognize amortization of prior service costs over the expected service period of active employees. Accrued pension costs are funded annually to the extent deductible for federal income tax purposes.
In 1993, the Company adopted Financial Accounting Standards # 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" which requires the accrual of postretirement benefits such as health care and life insurance during the working careers of active employees instead of expensing the benefits when paid as allowed under prior rules (see Note 8).
Product Warranty Costs Anticipated costs related to product warranty are expensed in the period of sale.
Environmental Costs Environmental expenditures that relate to current or future revenues are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenues, are expensed. Liabilities are recorded when environmental assessments and/or cleanups are probable and the costs can be reasonably estimated. Generally, the timing of these accruals coincides with Kysor's commitment to a formal plan of action.
NOTE 2. BALANCE SHEET INFORMATION
(amounts in thousands)
The following information is provided as of December 31:
Inventories 1993 1992
Finished products $ 5,338 $ 7,442 Work-in-process 8,973 9,689 Raw materials 14,098 17,304 $28,409 $34,435
Nonoperating Properties Nonoperating properties included in property, plant and equipment are as follows:
1993 1992
Land $ 118 $ 134 Buildings 654 654 772 788 Less accumulated depreciation 100 100 $ 672 $ 688
Nonoperating properties held for resale are stated at cost less accumulated depreciation, which amounts are not in excess of net realizable value.
Goodwill, Patents and Other Intangible Assets 1993 1992
Goodwill 4,868 4,968 Less accumulated amortization 2,062 1,922 $ 2,806 $ 3,046
Accrued Expenses and Contingent Liabilities 1993 1992
Compensation $ 5,744 $ 3,689 Workers' compensation insurance 5,078 4,483 Warranty 4,120 4,010 Litigation 2,900 2,900 Other 7,857 6,122 $25,699 $21,204
NOTE 3. FINANCING (amounts in thousands)
Long-term debt consists of the following: Years Ended December 31, 1993 1992 Long-Term Debt Term note, $750 quarterly principal payments, beginning 1994, plus interest at 9.9% $ 15,000 $15,000 Loan agreement for Kysor Industrial Corporation Employee Stock Ownership Plan, $1,250 semiannual principal payments beginning 1996, plus interest at 8.36% 20,000 20,000 Other, $2,321 principal payments due in, 1994, plus interest at rates ranging from 5.0% to 8.0% 3,646 2,070
Loan Guarantee Loan guarantee for Kysor Industrial Corporation Employee Stock Ownership Plan, $174 semiannual principal payments, plus interest at 7.0% 697 1,046 39,343 38,116 Less current maturities 5,670 1,595 $33,673 $36,521
At December 31, 1993, the Company maintained revolving credit agreements with two banks which provide for borrowings up to $20 million. At December 31, 1993, there were no outstanding borrowings under this facility. Interest rates are fixed at the date of borrowing based on current LIBOR or CD rates plus a spread of .75 - 1.0 percent. An annual commitment fee of .375 percent is paid on the unused balance. In January 1994, the Company entered into a modification of the revolving credit terms which reduced the spread on LIBOR borrowing to .50 percent and reduced the annual commitment fee to .25 percent. The Company has an interest rate swap under which the variable rate of interest on the $15 million term note is converted to a fixed rate.
During the years ended December 31, 1993 and 1992, there was no short-term debt.
Aggregate maturities of obligations under long-term debt, during the next five years ended December 31, are as follows:
(amounts in thousands) 1994 1995 1996 1997 1998
Maturities of Long-Term Debt $5,670 $3,349 $4,250 $5,500 $5,500
Under various loan arrangements, Kysor is subject to certain restrictions relating, among other things, to the creation of indebtedness, the maintenance of minimum consolidated working capital, the payment of dividends, and the purchase of common stock.
Interest paid was $2,073,000, $3,039,000, and $3,348,000 for the years ended December 31, 1993, 1992, and 1991, respectively.
NOTE 4. STOCK OPTION PLANS As of December 31, 1993, Kysor administered its 1980 Nonqualified Stock Option Plan; 1983 Incentive Stock Option Plan; 1984 Stock Option Plan; 1987 Stock Option and Restricted Stock Plan, and 1993 Long-Term Incentive Plan which was approved by Shareholders on April 30, 1993. Options may be granted to officers, directors, and key employees to purchase common shares of the Company's stock at a price equal to the mean market value of such stock at the date of the grant. All options granted prior to January 1, 1990 are exercisable at the date of grant, except for a nonqualified stock option for 100,000 shares granted to the Chairman of the Board on January 30, 1987 which vested at the rate of 20 percent per year through January 30, 1991. All options granted after January 1, 1990 vest at the rate of 20 percent at time of grant and 20 percent each year thereafter, except for the final 20 percent which vests only upon exercise and retention for one year of the entire vested 80 percent.
Changes in options outstanding for the years ended December 31, 1992 and 1993 are as follows:
Number of Number of Shares Optioned Reserved Shares Option Price Range Total Balance December 31, 1991 574,391 1,587,256 $ 3.875 - $19.125 19,913,818 Granted [377,000] 377,000 7.8125- 16.1875 3,164,500 Terminated 114,950 [114,950] 7.25 - 18.6875 [1,337,576] Exercised - [207,156] 3.875 - 14.375 [1,753,905] Balance December 31, 1992 312,341 1,642,150 7.25 - 19.125 19,986,837 Granted [288,500] 288,500 16.3125- 18.9375 5,384,719 Terminated 59,700 [59,700] 7.25 - 19.125 [668,300] Exercised - [138,650] 7.25 - 18.6875 [1,488,494] 1993 Long-Term Incentive Plan 1,000,000 - - - - Balance December 31, 19931,083,541 1,732,300 $ 7.25 -$19.125 $23,214,762 At December 31, 1993, 1,179,470 of the shares granted were exercisable. The fair market value of options exercised in 1993 ranged from $15.50 to $20.4375 per share for a total market value of $2,591,225. The fair market value of options exercised in 1992 ranged from $9.0625 to $18.8125 for a total market value of $3,411,376.
In 1989, optionees executed 4.5 percent nonrecourse installment purchase agreements of $2,090,793 with respect to 157,128 shares previously granted under the nonqualified plans. During 1991, three optionee participants relinquished their stock option loans in the amount of $589,383 and forfeited the attendant 41,150 common shares. Under the terms of the installment purchase agreements, the shares are pledged as collateral and the extension of credit is subject to Federal Reserve Bank Regulation G. Required annual payments are calculated using a 15-year amortization with a balloon payment due within the original life of the option being exercised. The participants have limited rights of principal deferral in cases of hardship. The Board of Directors, in January 1992, passed a resolution to permit participants to defer the 1992 principal payments to the end of the loan. Dividends paid, in respect to the shares, are received by the Company and first applied to accrued interest and then to principal.
NOTE 5. COMMON STOCK REPURCHASED In October 1991, Kysor purchased 85,108 shares of its Common Stock for $11.75 per share in accordance with an agreement, granted in conjunction with restricted stock issued for the 1986 acquisition of Medallion Instruments, Inc.
NOTE 6. PREFERRED STOCK On February 24, 1989, Kysor sold 820,513 shares of newly issued 8 percent cumulative Series A Convertible Voting Preferred Stock, $24.375 stated value per share (the "Convertible Stock"), to the Kysor Industrial Corporation Employee Stock Ownership Plan (the "ESOP"). The Convertible Stock may be voluntarily converted at the option of the holder, unless previously redeemed, into shares of Kysor Industrial Corporation Common Stock (the "Common Stock") on a one-for-one basis, subject to certain antidilution adjustments, and will convert automatically into Common Stock (in certain instances subject to a conversion floor equal to liquidation value of $24.375 per share plus accrued and unpaid dividends) if transferred to a holder other than the ESOP or another Kysor Industrial Corporation employee benefit plan. The Convertible Stock is subject to redemption by the Company. Each share of Convertible
Stock entitles its holder to one vote on all matters submitted for a vote of shareholders, again subject to possible antidilution adjustments. The Convertible Stock ranks senior to the Common Stock and is at least on a parity with any other series of Preferred Stock that may be subsequently issued.
Preferred Stock issued and outstanding was 810,163 and 814,612 shares at December 31, 1993 and 1992, respectively. Preferred shares allocated to ESOP participants were 35,463 for each of the years ended December 31, 1993 and 1992.
NOTE 7. EARNINGS PER COMMON SHARE Primary earnings per common share have been computed using the weighted average shares of Common Stock and dilutive Common Stock equivalents outstanding during the year. The Convertible Stock has been determined not to be a Common Stock equivalent.
Fully diluted earnings per common share are calculated assuming the conversion of the Convertible Stock to Common Stock as well as other dilutive assumptions.
NOTE 8. PENSION AND RETIREMENT PLANS Kysor has several noncontributory defined benefit pension plans and defined contribution plans covering substantially all of its domestic employees. The defined benefit plans provide benefits based on the participants' years of service and compensation or stated amounts for each year's service. The Company's funding policy is to make annual contributions as required by contract or applicable regulations.
The pension cost components were:
(amounts in thousands) Years Ended December 31,
1993 1992 1991 Defined Benefit Plans: Service cost benefits earned during period $1,905 $1,497 $1,595 Interest cost on projected benefit obligation 3,388 3,024 2,858 Actual investment return on plan assets [6,001] [3,434] [6,937] Net amortization and deferral 2,967 670 4,347 Net periodic pension cost $2,259 $1,757 $1,863
Assumptions used in the accounting were: Years Ended December 31,
1993 1992 1991
Discount rates 8.0% 8.0% 8.0% Rates of increase in compensation levels 5.4% 5.3% 6.0% Expected long-term rate of return on assets 8.0% 8.0% 8.0%
The following table sets forth the funded status and amounts recognized in the Company's statement of financial position for defined benefit plans:
(amounts in thousands) Years Ended December 31,
1993 1992 Plans in Which Plans in Which Assets Accum. Assets Accum. Exceed Benefits Exceed Benefits Accum. Exceed Accum. Exceed Benefits Assets Benefits Assets
Actuarial present value of benefit obligations: Vested benefit obligation $[30,503] $[3,239] $[28,375] $[3,336]
Accumulated benefit obligation $[32,955] $[5,804] $[30,475] $[4,919]
Projected benefit obligation $[38,434] $[7,432] $[35,490] $[5,551]
Plan assets at fair market value 49,267 - 42,376 - Projected benefit obligation (in excess of) or less than plan assets 10,833 [7,432] 6,886 [5,551] Unrecognized net (gain) or loss [6,782] 1,678 [4,703] 677 Prior service cost not yet recognized in net periodic pension cost 778 82 966 98 Unrecognized net (asset) obligation at January 1, [1,980] 779 [2,229] 890 Pension asset (liability) recognized in the statement of financial position $ 2,849 $[4,893] $ 920 $[3,886]
At both December 31, 1993 and 1992, 100 percent of plan assets was invested in publicly traded stocks, bonds, and money market investments.
In 1985, Kysor adopted a nonqualified, unfunded supplemental executive retirement plan for senior management. Kysor has purchased life insurance policies on the lives of participants and is the sole owner and beneficiary of such policies. The amount of coverage is designed to provide sufficient revenues to cover all costs of the plan if the assumptions made as to mortality experience, policy earnings, and other factors are realized. The Company is charging earnings with the present value of the future cost of the plan over the remaining working life of the participants. In addition, life insurance premiums, in excess of the increase in cash value of the policies, are expensed as a period cost.
In September 1985, Kysor established an Employee Stock Ownership Plan ("ESOP") and trust for its domestic salaried employees. The ESOP authorized the trust to borrow $3,487,000 from a bank in September 1985. The proceeds were used to purchase 357,668 shares of common stock at $9.75 per share, that being the mean market price on the New York Stock Exchange on August 22, 1985, the day preceding the date the transaction was agreed upon. The Company has guaranteed the loan and is obligated to contribute sufficient cash to the ESOP to enable it to repay the loan principal ($349,000 annually) plus interest.
In February 1989, Kysor expanded the ESOP with the sale to the ESOP of $20 million of newly issued Series A Convertible Voting Preferred Stock from the Company (see Note 6). The ESOP purchase of Preferred Stock was financed by a loan from the Company which issued a $20 million, 15-year ESOP note to raise the necessary funds. In 1993, 1992, and 1991, dividends on Preferred Stock of $1,584,000, $1,591,000, and $1,595,000 plus interest expense of $88,000, $81,000, and $77,000, respectively, were used to service the debt obligation related to the ESOP. The Company amortized $864,000 in 1993 and 1992, and $877,000 in 1991, of unearned deferred compensation relating to the shares allocated for the year as a percentage of the total shares to be allocated.
Postretirement Health and Life Insurance Benefits Kysor provides certain defined health care and life insurance benefits for retired employees. All salaried and certain hourly employees may become eligible for these benefits if they reach retirement age while working for the Company. Effective January 1, 1993, the Company adopted Statement of Accounting Standards #106, "Employers accounting for Postretirement Benefits other than Pensions" ("'SFAS #106"). SFAS #106 requires the accrual method of accounting for postretirement health care and life insurance benefits based on actuarially determined cost to be recognized over the period from the date of hire to the full eligibility date of employees who are expected to qualify for such benefits. At January 1, 1993, the Company recognized the full amount of its estimated accumulated postretirement benefit obligation which represents the present value of the estimated future benefits payable to current retirees and a pro rata portion of estimated benefits payable to active employees after retirement. The pretax charge to 1993 earnings for this transition obligation was $12,063,000 ($7,628,000 net of income tax benefit) or $1.35 per share. This amount has been reflected in the consolidated statement of income as the cumulative effect of an accounting change.
The incremental cost in 1993 of accounting for postretirement health care and life insurance benefits under the new accounting method amounted to $564,000, less a deferred tax benefit of $212,000, or $.06 per share. In prior years, the Company expensed claims for postretirement benefits on a pay as you go method. The total pretax amount recognized for retiree health and life insurance benefits in 1993 was $1,352,000. The amounts included in expense for 1992 was $862,000. For the year ended December 31, 1993, the components of periodic expense for these postretirement benefits were as follows:
(amounts in thousands)
Service cost - benefits earned during the year $ 413 Interest cost on accumulated postretirement benefit obligation 939 Net periodic benefit costs $1,352
At December 31, 1993, the actuarial and recorded liabilities for these postretirement benefits, none of which have been funded, were as follows:
(amounts in thousands)
Accumulated postretirement benefit obligation (APBO): Retirees $10,191 Fully eligible active plan participants 1,146 Other active participants 1,429 Total APBO 12,766 Fair market value of plan assets - Accumulated postretirement benefit obligation in excess of plan assets 12,766 Unrecognized net (loss) [138] Accrued postretirement benefit liability at December 31, 1993 $12,628
The accumulated postretirement benefit obligation was determined using the unit credit method and an assumed discount rate of 8 percent. The assumed gross claim health care trend rate used for under age 65 claims was 10 percent in 1993, graded uniformly down to 5.5 percent in 2005 and level thereafter. For ages 65 and over claims, the assumed trend rate was 8 percent in 1993, graded uniformly down to 5.5 percent in 2005 and level thereafter. A 1 percent increase each year in the health care cost trend rate used would have resulted in a $129,000 increase in the aggregate service and interest components of expense for the year ended December 31, 1993, and a $1,279,000 increase in the accumulated postretirement benefit obligation at December 31, 1993.
The Company has a continuing deferred compensation arrangement with Raymond A. Weigel former chairman which provides for annual payments of $350,000.
NOTE 9. LEASE COMMITMENTS Kysor leases some real estate and equipment. In most cases, management expects that in the normal course of business these leases will be renewed and replaced by other leases. Kysor has future minimum rental payments required through 1998 under operating leases that have initial or remaining noncancelable lease terms in excess of one year in the following amounts:
(amounts in thousands) Years Ended December 31,
1994 1995 1996 1997 1998
Future minimum rental payments $966 $513 $368 $342 $475
In addition to fixed rentals, certain of these leases requires Kysor to pay maintenance, property taxes, and insurance.
Rental expense charged to operations is as follows:
(amounts in thousands) Years Ended December 31,
1993 1992 1991
Minimum rentals $1,829 $1,909 $1,811 Contingent rentals 53 30 31 $1,882 $1,939 $1,842
NOTE 10. INCOME TAXES The Company adopted Statement of Financial Accounting Standards #109, "Accounting for Income Taxes" ("SFAS #109"), as of January 1, 1993. The cumulative effect of this change in accounting principle was immaterial. Prior years' financial statements have not been restated to apply the provisions of SFAS #109. The adoption of SFAS #109 changes the Company's method of accounting for income taxes from the deferred method using Accounting Principles Board Opinion #11 ("APB #11") to an asset and liability approach.
The provision (credit) for income tax consists of the following:
(amounts in thousands) Year Ended December 31,
1993 1992 1991 	 Currently payable Federal $7,733 $7,318 $2,025 State and local 1,022 800 283 Foreign 55 28 - Total currently payable 8,810 8,146 2,308 Deferred Federal [790] [1,076] [1,268] State and local [110] [170] [154] Foreign - - [226] Total deferred [900] [1,246] [1,648] Total Provision $7,910 $6,900 $ 660
Deferred income taxes, on a SFAS #109 basis, reflect the estimated future tax effect of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations.
The components of deferred income tax assets and liabilities as of December 31, 1993 are as follows:
(amounts in thousands) Deferred tax Deferred tax assets liabilities Post-retirement health care $4,644 $ - Employee benefit plans 3,147 1,053 Workers' compensation/product liability 2,377 - Warranty 1,100 - Litigation expense 1,072 - Service contract 896 - Slow-moving inventory 704 - Bad debts 482 - Environmental costs 481 - Vacation pay 453 - Depreciation - 3,693 LIFO reserve at acquisition - 535 Other 297 75 $15,653 $ 5,356
Deferred income taxes for 1992 and 1991 were derived using guidelines in APB #11. Under APB #11 deferred income taxes result from timing differences in the recognition of revenues and expenses between financial statements and tax returns. The sources of these differences and the related effect of each on the Company's provision for income taxes were as follows:
(amounts in thousands) Year Ended December 31,
1992 1991
Slow-moving inventory $ [496] $148 Workers' compensation/product liability [433] 336 Depreciation [395] [58] Warranty [360] [61] Bad debts [156] 22 Service contract [99] [129] Reserves for self-insurance [72] 521 Foreign earnings - [226] Environmental costs 90 183 Employee benefit plans 127 [622] Interest 145 [145] Alternative minimum tax 150 [150] Litigation 407 [1,477] Other [154] 10 $[1,246] $[1,648]
Major differences between the income taxes computed using the United States statutory tax rate and the actual income tax expense were as follows:
(amounts in thousands) Years Ended December 31,
1993 1992 1991
Federal income taxes at statutory rate $ 6,303 $ 5,449 $[22]
Nondeductible losses related to foreign subsidiaries and other foreign expenses 1,071 981 728 Goodwill 84 82 82 State and local income taxes (net of Federal benefit) 593 472 85 Life insurance [165] [169] [161] Other 24 85 [52] Provision for income taxes $ 7,910 $ 6,900 $660
Income taxes paid were $7,427,000, $6,245,000, and $1,788,000 for the years ended December 31, 1993, 1992, and 1991, respectively. Income tax refunds were $71,000 in 1993, $283,000 in 1992, and $657,000 in 1991. Domestic operations contributed a profit of $15,305,000, $18,261,000, and $3,513,000 to income before income taxes and before cumulative effect of accounting change for 1993, 1992, and 1991, respectively. Foreign operations sustained a loss of $2,704,000, $2,234,000, and $3,579,000 for the same periods. Income tax benefits of $473,000 and $560,000 have been credited to shareholders' equity for the years ended December 31, 1993 and 1992, respectively, for deemed compensation deductions attributable to stock options. Income tax benefits of $601,000, $541,000, and $542,000 for preferred stock dividends related to the Company's ESOP have been credited to shareholders' equity in 1993, 1992, and 1991, respectively.
NOTE 11. CONTINGENT LIABILITIES As previously reported, the Company has been involved in ongoing proceedings relating to soil and groundwater contamination at the Cadillac Industrial Park in Cadillac, Michigan.
Since the Company's initial involvement in the referenced proceedings, extensive testing has been performed to determine the extent of contamination at the site. Based upon certain of those tests, in 1989 the United States Environmental Protection Agency ("U.S. EPA") issued a Record of Decision which selected certain cleanup methods for the site and estimated the present value of the costs for selected cleanups. In particular, the EPA estimated the cost for the Company's soil cleanup at $925,000, and estimated the costs for the areawide groundwater cleanup at $15,124,000.
Pursuant to a unilateral administrative order that was issued by the U.S. EPA in 1990 to the Company and other potentially responsible parties ("PRPs"), the Company is continuing to perform design work for remedial action for the area groundwater contamination and for the soil contamination at the Company site. The Company is the only PRP that is complying with the order. The order was issued pursuant to Section 106 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, which authorizes the U.S. EPA to seek treble damages and civil penalties of up to $25,000 per day for violation of an administrative order. The scope of the present order is limited to design work, and does not at this time require the Company or the other PRPs to undertake the construction or implementation of any remedial action.
The Company's design work plan has been approved by the U.S. EPA and, as required by the design work plan, the Company has submitted an Additional Studies Report to the U.S. EPA, which was also approved. As further required by the design work plan, the Company submitted to the U.S. EPA preliminary design documents, which EPA has reviewed up through 95% of the design. The current schedule calls for completion of design work in 1994. The costs presently estimated for completion of the remaining design work, including the incremental work described in the following paragraph, is $90,000. The costs to date for design work have been approximately $1,300,000. Approximately $255,000 of the total estimated design costs relate to the soil cleanup at the Company site, and the Company has previously accrued these estimated cleanup costs.
U.S. EPA recently requested that the Company include two additional areas of groundwater contamination within the area to be addressed by the remediation system which is the subject of the ongoing design work. These additional areas are immediately adjacent to the original area of groundwater contamination covered by the remedial design. Without admitting liability for the contamination, the Company has agreed to include these additional areas in the remedial design. The incremental design and remediation costs are estimated at $40,000 and $310,000, respectively. As a potential solution to the referenced groundwater contamination, the Company has become a limited partner in Beaver Michigan Associates, a Michigan limited partnership formed to construct a $58 million wood-fired cogeneration plant in Cadillac, Michigan. It is intended that the project would facilitate treatment of the groundwater contamination at the Cadillac Industrial Park. In that regard, the City of Cadillac, also a limited partner in the venture, has established a Local Development Finance Authority ("LDFA") which intends to use tax- generated revenues from the project to service bonds to be issued to pay the capital cost to build the groundwater cleanup facility. It is anticipated that assessments for operating and maintenance costs of the cleanup facility would be shared primarily by the PRPs, including Kysor, as well as other beneficiaries within the Cadillac Industrial Park. In January 1992, Beaver Michigan Associates obtained financing to construct the facility from General Electric Capital Corporation. In 1993, the cogeneration facility construction was completed and the plant began commercial operation. The LDFA is currently pursuing the permanent placement of bonds totally $7.4 million to fund the capital costs to build the cleanup facility.
With respect to the groundwater cleanup discussed above, there are a number of evolving factors that will affect the extent of the Company's liability for these costs. First, the U.S. EPA's cost estimate may be overstated. While detailed estimates cannot be made until completion of the ongoing design work, the initial modeling work performed by the Company's consultants indicates that the U.S. EPA's cost estimate is too high. In addition, the Company is continuing to pursue mixed funding (i.e., partial government funding) from the U.S. EPA and participation of others PRPs, and the extent of funding from these sources is not yet known. The regional office of the U.S. EPA has agreed that mixed funding should be provided for a portion of the remedial design and remedial action, although the actual amount of such funding, if any, is subject to further negotiation with the regional office of the U.S. EPA and final approval by the U.S. EPA headquarters. As described above, the LDFA is presently pursuing the permanent placement of bonds, the proceeds of which would pay the initial capital costs for the cleanup facility and certain future capital costs for continued operation of the facility. The bond debt would be serviced by tax increment revenues collected by the LDFA from the cogeneration facility. Possible insurance coverage for this matter remains unresolved.
On July 3, 1991, the Michigan Attorney General and Department of Natural Resources commenced a lawsuit in Federal District Court, Western District Michigan against the Company and various other parties seeking to recover expenses allegedly incurred by the State in investigating the nature and extent of contamination at the Cadillac site, incidental expenses associated therewith, fines, penalties, interest, attorneys' fees and damages for injury to the natural resources of the State. Discovery has commenced in this action although it is not yet complete. The suit also seeks a declaratay judgement holding Kysor and others jointly and severally liable for clean-up at the site. The Attorney General asserts that the Department of Natural Resources has expended approximately $3.0 million to date on tests and related studies at the site and provide city water to contaminated areas, for which the Attorney General claims Kysor and others are jointly responsible. The Attorney General also asserts that the State is entitled to statutory interest, which it claims is approximately $1.6 million as of Fall 1992, and noted that under the Michigan Water Resource Commission Act the court in its discretion may impose penalties of up to $10,000 a day ($25,000 a day from May 1990) dating back to the early 1980's. The Attorney General finally asserts that the Company may be responsible for injury to the State's natural resources as well as attorneys fees.
The Company continues to dispute the State's allegations and intends to vigorously defend against the damages sought. Though discovery is not yet complete, the Company believes that many of the costs claimed by the State were duplicative or related to areas of contamination for which the Company is not responsible. The Company also disputes the claimed interest calculation and believes that it is unlikely that material penalties would be imposed due to the continuing efforts of the Company to investigate and remediate the contamination at the site which date back to as early as 1980. If ongoing settlement negotiations are unsuccessful, the Company intends to vigorously defend against the claims to the extent they relate to the testing of contamination not caused by the Company or costs which were duplicative and unnecessary. The Company is investigating the possibility of insurance coverage of the matter and has made cross-claims and third-party claims for contribution against other parties located at this site, including parties involved in the referenced proceeding as a co-defendant.
While it is clear that the Company is responsible for the soil contamination at its site and the Company shares a portion of the responsibility for the groundwater contamination described above, it is presently impossible to provide a precise estimate of the Company's actual liability. Kysor has accrued its best estimate of the liability for soil cleanup costs. As noted above, the U.S. EPA cost figures on the groundwater cleanup are estimates that may be overstated, and the Company continues to aggressively promote the referenced cogeneration project as a means of facilitating a cleanup at the site. The Company is also pursuing insurance coverage as well as mixed funding from the EPA for this matter, but there has been no determination as to the availability or extent of such coverage or funding. Specifically, with respect to the referenced costs for design and the capital costs of the cleanup work, the Company is not only pursuing insurance coverage and mixed funding, but also intends to seek reimbursement and funding from a bond offering planned by the Cadillac LDFA in connection with the cogeneration project, as described above. The availability of this latter source of reimbursement would depend, among other things, upon the sale of the referenced bonds.
Other contingent liabilities include various legal actions, proceedings and claims which are pending or which may be instituted or asserted in the future against the Company. Litigation is subject to many uncertainties, the outcome of individual matters is not predictable with assurance and it is reasonably possible that some of these other legal actions, proceedings and claims could be decided unfavorable to the Company. Although the liability with regard to these matters at December 31, 1993 cannot be ascertained, it is the opinion of management, after conferring with counsel, that any liability resulting from these other matters should not materially affect the consolidated financial position of the Company and its subsidiaries at December 31, 1993.
NOTE 12. SEGMENT INFORMATION Kysor Industrial Corporation's operations include two segments: commercial products and transportation products. Operations in the commercial products segment design, manufacture and market refrigerated display cases, energy control systems, refrigerated building systems, and heating and air-conditioning systems. Operations in the transportation products segment design, manufacture and market engine performance systems, engine protection systems, and components and accessories for heavy-duty trucks, other commercial vehicles and marine equipment.
The commercial products segment generated $29.0 million, $48.4 million and $34.7 million of sales and revenues from one customer in the years ended December 31, 1993, 1992 and 1991, respectively. The transportation products segment generated $27.3 million of sales and revenues from one customer in the year ended December 31, 1993.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the caption "Directors and Executive Officers" in the Company's definitive Proxy Statement for its April 29, 1994 Annual Meeting of Shareholders is here incorporated by reference.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10 percent of the Company's Common Stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors and greater than 10 percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that all filing requirements applicable to its officers, directors, and greater than 10 percent beneficial owners, with respect to fiscal year 1992, were satisfied.
Item 11.
Item 11. EXECUTIVE COMPENSATION.
The information under the caption "Executive Compensation" in the Company's definitive Proxy Statement for its April 29, 1994 Annual Meeting of Shareholders is here incorporated by reference.
In lieu of filing Annual Reports on Form 11-K on behalf of the Kysor Industrial Corporation Employee Stock Ownership Plan, pursuant to Rule 15d-21 promulgated under the Securities Exchange Act of 1934, as amended, the report of Coopers & Lybrand, Certified Public Accountants, and Examination of Financial Statements and Supplemental Schedule of Reportable Transactions with respect to the Plan is included in the exhibits to this Form 10-K Annual Report.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the caption "Voting Securities" in the Company's definitive Proxy Statement for its April 29, 1994 Annual Meeting of Shareholders is here incorporated by reference.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the caption "Management Transactions", "Indebtedness of Management", and "Compensation Committee Interlocks and Insider Participation", in the Company's definitive Proxy Statement for its April 29, 1994 Annual Meeting of Shareholders is here incorporated by reference.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. The following financial statement schedules are filed as a part of this report:
II. Amounts Receivable From Related Parties, Underwriters, Promoters and Employees Other Than Related Parties - pages 45, 46 & 47.
V. Property, Plant and Equipment - pages 48, 49 & 50.
VI. Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment - pages 51, 52 & 53.
VIII. Valuation and Qualifying Accounts and Reserves - page 54.
X. Supplementary Income Statement Information from Continuing Operations - page 55.
Schedules other than those listed above are omitted because they are not required, not applicable, or the information is disclosed elsewhere in the financial statements.
Individual financial statements of the Company are omitted because the Company is primarily an operating Company and the subsidiaries included in the consolidated financial statements are wholly owned subsidiaries and are not indebted to any person other than the Parent or the consolidated subsidiaries in amounts exceeding five percent (5%) of the total assets as shown by the Consolidated Balance Sheet at December 31, 1993.
2. The following exhibits are filed as part of this report:
NUMBER EXHIBIT LOCATION
3(a) Restated Articles of Incorporation (8)
(b) Restated Bylaws (1)
(c) Certificate of Designations, Rights and Preferences - 	 Series A Convertible Voting 	 Preferred Stock (11)
4(a) Rights Agreement dated as of April 28, 1986 between Kysor Industrial Corporation and NBD, N.A. (5)
(b) Amendment dated as of May, 1988 to Rights Agreement dated as of April 28, 1986 between Kysor 	 Industrial Corporation and NBD Bank, N.A. (8)
(c) Revolving Credit Agreements between Kysor Industrial Corporation and NBD 	 Bank, N.A., and Old Kent Bank 	 and Trust Company (12)
(d) Amendment dated January 1994 to the Revolving Credit Agreements between 	 NBD Bank, N.A., and Old Kent Bank 	 and Trust Company (1)
(e) Term Note Agreement with NBD Bank, N.A. dated as of October4, 1988 (8)
(f) Note Agreement between Kysor Industrial Corporation and Massachusetts Mutual Life Insurance 	 Company dated February 24, 1989 (8)
(g) Loan Agreement between Kysor Industrial Corporation Employee Stock Ownership Plan and NBD Bank, 	 N.A. and Related Guaranty and Note Purchase Agreement (3)
(h) The Company has outstanding several classes of long-term debt instruments. 	 None of these classes of debt is 	 registered under the Securities Act of 1933. None of these classes of 	 debt outstanding at the date of 	 this report exceeds 10% of the Company's 	 total consolidated assets except for 	 the previously disclosed item included as 	 exhibit 4(d) and 4(f). The Company 	 agrees to furnish copies of the agreements 	 defining the rights of holders of such long-term indebtedness to the Securities 	 and Exchange Commission upon request
The following management contracts of compensatory plans or arrangements are included in the exhibits filed as part of this report:
10(a) Stock Option and Stock Appreciation Rights Plan of 1980 (2) 	 (b) Kysor Industrial Corporation amended 1983 Incentive Stock Option Plan (6) 	 (c) Kysor Industrial Corporation amended 1984 Stock Option Plan (6) 	 (d) Kysor Industrial Corporation 1987 Stock Option Plan (4) 	 (e) Kysor Industrial Corporation 1993 Long-Term Incentive Plan (14)
(f) Form of Termination Agreements with corporate officers David W. Crooks, 	 Thomas P. Forrestal, Jr., Timothy J. 	 Campbell, Timothy D. Peterson, 	 Peter W. Gravelle, Richard G. De Boer, 	 Ellen E. Hovey, Mary C. Janik, 	 Robert L. Joseph, Terry M. Murphy (3) 	 (g) Employment Contract with corporate officer George R. Kempton (4) 		 (h) Service Contract with Raymond A. Weigel (3)
(i) Form of Supplemental Executive Retirement Plan with George R. Kempton, 	 Peter W. Gravelle, Timothy J. Campbell, 	 Thomas P. Forrestal, Jr., David W. Crooks, 	 Timothy D. Peterson, Logan F. Wernz, Wilbert J. Venema, John B. Stevenson, 	 William G. Cobb (3)
(j) Amendment dated as of August 15, 1989 to Supplemental Executive Retirement 	 Plan dated July 10, 1985 (9)
(k) Amendment dated as of January 31, 1990 to Supplemental Executive Retirement Plan 	 dated July 10, 1985 (9)
(l) Kysor Industrial Corporation S.E.R.P. Irrevocable Trust (9)
(m) Form of Indemnity Agreement with directors and corporate officers; 	 William E. Callahan, Timothy J. Campbell, 	 Thomas P. Forrestal, Jr., Paul K. Gaston, 	 Grant C. Gentry, Peter W. Gravelle, George R. Kempton, Philip LeBoutillier, 	 Jr., Robert W. Navarre, Frederick W. 	 Schwier, John D. Selby, Raymond A. Weigel, 	 David W. Crooks, Terry M. Murphy, 	 Timothy D. Peterson, Richard G. De Boer, 	 Ellen E. Hovey, Mary C. Janik, 	 Robert L. Joseph (6) 	 (n) Kysor Industrial Corporation Pension Plan for Directors dated January 1, 1985, amended 	 January, 1989 (9)
(o) Amendment dated as of July 28, 1989 to Kysor Industrial Corporation Pension 	 Plan for Directors dated January 1, 1985 (8)
(p) Directors Pension Plan Trust (9)
(q) Kysor Industrial Corporation Corporate Management Variable Compensation Program (12) 	 (r) Form of Nonrecourse Promissory Note and Pledge Agreement - Stock Option 	 Loan Program; George R. Kempton, 	 Philip LeBoutillier,Jr., 	 Paul K. Gaston (12) 	
The Following are Other Material Contracts Included in the Exhibits Filed as Part of this Report:
(s) AFP Divestiture Agreements (10)
(t) Beaver Michigan Associates Limited Partnership Agreement (12) 	 (u) Development Agreement between Beaver Michigan Associates Limited Partnership, The City of 	 Cadillac and the Local Development Finance Authority of the 	 City of Cadillac (12) 	 (v) Kysor Industrial Corporation Employee Stock Ownership Plan Amended and 	 Restated effective January 1, 1989 (1)
(w) Employee Stock Ownership Trust between Kysor Industrial Corporation 	 and Old Kent Bank and Trust Co. 	 dated January 1, 1989 (1)
(x) Note Agreement between Employee Stock Ownership Plan and Kysor Industrial Corporation (7)
11 Computation of Consolidated Earnings Per Share (1)
22 Significant Subsidiaries (1)
24 Consent of Independent Accountants (1)
25 Power of Attorney (1)
28 Report of Coopers & Lybrand, Certified Public Accountants, on Examination of Financial Statements 	 and Supplemental Schedule of Reportable Transactions for the 	 Kysor Industrial Corporation Employee Stock Ownership Plan (1)
Notes
(1) Filed as a new exhibit to this report.
(2) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1981, and is here incorporated by reference.
(3) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1985, and is here incorporated by reference.
(4) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1986, and is here incorporated by reference.
(5) This exhibit was previously filed as an exhibit to the Registrant's Form 8-K Current Report dated May 1, 1986, and is here incorporated by reference.
(6) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1987, and is here incorporated by reference.
(7) This exhibit was filed as an exhibit to the Registrant's Form 8-K Current Report dated March 1, 1989, and is here incorporated by reference.
(8) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1988, and is here incorporated by reference.
(9) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1989, and is here incorporated by reference.
(10) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1990, and is here incorporated by reference.
(11) This exhibit was filed as an exhibit to the Registrant's Form 8-K Current Report dated February 28, 1989, and is here incorporated by reference.
(12) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1991, and is here incorporated by reference.
(13) This exhibit was previously filed as an exhibit to the Registrant's Form 10-K Annual Report for its fiscal year ended December 31, 1992, and is here incorporated by reference.
(14) This exhibit was previously filed as an exhibit to the Registrant's Proxy Statement for its fiscal year ended December 31, 1992 and is here incorporated by reference.
The Company will furnish a copy of any exhibit listed above to any shareholder of the Company without charge upon written request to Investor Relations, Kysor Industrial Corporation, One Madison Avenue, Cadillac, Michigan 49601-9785.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KYSOR INDUSTRIAL CORPORATION
By /s/ Terry M. Murphy Terry M. Murphy Vice President, Chief Financial Officer
Date: March 9, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Raymond A. Weigel * /s/ George R. Kempton * Raymond A. Weigel, Chairman George R. Kempton,Chairman of Emeritus, Director the Board, Chief Executive Officer, Director (Principal Executive Officer)
Date: March 9, 1994 Date: March 9, 1994
/s/ Peter W. Gravelle * /s/ Robert L. Joseph * Peter W. Gravelle, Executive Robert L. Joseph, Comptroller Vice President and Chief (Principal Accounting Officer) Operating Officer
Date: March 9, 1994 Date: March 9, 1994
/s/ William E. Callahan * /s/ Thomas P. Forrestal, Jr. * William E. Callahan, Director Thomas P. Forrestal, Jr., Group Vice President, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Paul K. Gaston * /s/ Grant C. Gentry * Paul K. Gaston, Director Grant C. Gentry, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Philip LeBoutillier, Jr. * /s/ Timothy J. Campbell * Philip LeBoutillier, Jr., Timothy J.Campbell, Group Director Vice President, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Frederick W. Schwier * /s/ John D. Selby * Frederick W. Schwier, Director John D. Selby, Director
Date: March 9, 1994 Date: March 9, 1994
/s/ Robert W. Navarre* Robert W. Navarre, Director
Date: March 9, 1994
*By /s/ Terry M. Murphy Terry M. Murphy Attorney-in-fact
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Kysor Industrial Corporation Cadillac, Michigan
Our report on the consolidated financial statements of Kysor Industrial Corporation and Subsidiaries is included in Item 8 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in Item 14(a)1 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
Detroit, Michigan February 14, 1994