ITEM 1 -- BUSINESS
GENERAL
Augat Inc. ("Augat") is a Massachusetts corporation organized in 1946. As used herein the term "Company" means Augat and, unless the context indicates otherwise, its consolidated subsidiaries.
Augat designs and manufactures a broad range of electromechanical components for the electronics industry. The Company's principal products are interconnection components, including integrated circuit sockets and accessories, coaxial cable network and fiber optic interconnection products, packaging panels and interconnection test probes and systems. The Company also makes terminals, custom connector assemblies, wiring harnesses and specialty wiring systems for the automotive, communications, information processing and business equipment markets.
INDUSTRY SEGMENTS
The Company operates within a single segment of the electronics industry defined as the electromechanical component and subsystem sector. Although the Company operates internally with several profit centers, the products of these centers all have similar purposes or end uses, i.e., interconnecting or controlling the flow of electricity among components or boards and other assemblies within electronic equipment or systems. These products are used by manufacturers of electronic equipment in their products to obtain specified interconnections of components, subassemblies or subsystems.
Each profit center is responsible for the manufacture of its own products within its own facilities. The manufacturing equipment and technology used by each profit center, while similar, are not interchangeable because they are customized for the particular product. However, Augat's manufacturing labor force, for the most part, is similar and interchangeable, as are the basic materials that make up the Company's products. Each profit center has comparable capital-to-labor ratios, as well as labor costs as a percentage of sales, with the exception of the Company's wire harness business, which consumes twice as much labor cost as a percentage of sales as the other profit centers.
Products of the various profit centers, while sold to different market segments, principally the automotive, computer, dataprocessing, telecommunications and CATV markets, are sold across the same geographic areas and marketed via similar methods. Augat's customers are primarily companies that manufacture or install electronic equipment.
NARRATIVE DESCRIPTION OF THE BUSINESS
The Company designs, manufactures and markets electromechanical products used for the interconnection of circuits in electronic applications. Passive components used in electronic equipment, such as resistors and capacitors, and more complex active components, such as transistors, integrated circuits, hybrid circuits and microprocessors, must be attached and electrically interconnected to perform their specified functions. The Company's products principally relate to mounting and interconnecting components, testing or controlling the flow of electricity among components, boards and/or other assemblies within electronic equipment or systems.
In general terms, the Company's products can be applied wherever computer logic is used, either in business or scientific systems or in the numerous products which incorporate computer functions. More specifically, the Company's products are used in computers, computer-aided engineering and manufacturing systems, industrial electronics, test equipment, medical electronics, business equipment, and additional applications in automotive, aerospace, telecommunications and broadband communications -- including CATV -- markets.
PRINCIPAL PRODUCTS
The Company's products include a broad range of integrated circuit sockets, miniature and subminiature switches, custom connector assemblies for the automotive and telecommunications industries, packaging panels, coaxial cable network and fiber optic products and related hardware accessories and wire harness assemblies for the automotive industry.
Integrated circuit sockets are mechanical devices into which integrated circuits are plugged to provide easy component replacement. The sockets are usually soldered to printed circuit boards by customers in order to connect integrated circuits, including microprocessors, large and very large scale integrated circuits and other dual-in-line packages, onto boards. Several thousand varieties of miniature and subminiature control switches of the toggle, slide, pushbutton and lighted types for use on printed circuit boards or elsewhere in electronic equipment are sold by the Company.
Packaging panels are used to interconnect integrated circuits and other components. Each panel consists of a board with one or more copper etched and plated power and ground planes and incorporates sockets in particular patterns for placement of integrated circuits or other components on one side and wire-wrappable interconnections on the other. The Company also provides design and wiring services for purchasers of packaging panels and for the wiring of back planes and interconnection panels manufactured by others and provides spring loaded test probes and test fixtures for use in conjunction with functional board and device testers.
The Company is a manufacturer of high density discrete connectors for both conventional board mounting and surface mounting.
The Company also manufactures a wide range of interconnection hardware accessories generally used on or in connection with printed circuit boards, such as test jacks and jumpers, relay and crystal sockets, breadboards, racks and enclosures, adaptor plugs and cable assemblies as well as marketing flat cable and related components manufactured by others.
The Company is also a major supplier of connectors and electronic packaging modules and wire harnesses to two major U.S. automotive manufacturers and is actively participating in the development of interconnection components for future automotive model years. Such automotive programs include a "mass air flow module", an "actuating assembly" that triggers automatic seatbelts and an "electronic search module" for a luxury car audio system.
Products manufactured for the telecommunication industry include central office distribution, remote-switching and cross-connect applications. The Company also is a leading supplier of coaxial connector, fiber optic and broadband products for the cable television and local area network (LAN) markets. Specifically in the CATV market, the Company provides single-part assemblies and connectors as well as line amplifiers to cable system operators who, in turn, construct cable television systems that distribute signals from the head-end to a home. The Company is pursuing market opportunities for its coaxial, broadband and fiber optic products in the rapidly evolving communications technology marketplace.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company's manufacturing operations utilize a wide variety of mechanical components, raw materials and other supplies. It has multiple commercial sources of supply for all materials which are important to its business.
PATENTS AND LICENSES
The Company owns a number of domestic and foreign patents and has filed a number of additional patent applications. The Company's general policy has been to seek patent protection for those inventions and improvements likely to be incorporated in its products. While the Company believes that its patents and patent applications have value, it considers that its competitive position in the marketplace is not materially
dependent upon patent protection and no individual patent or patent application is considered material to future operations.
SEASONALITY
The only seasonal effect experienced by the Company is in the third quarter of the calendar year and is principally due to vacation shutdowns at selected Company locations and by many of its customers, particularly in Europe.
WORKING CAPITAL
The Company manufactures and markets a full line of standard catalog items and also an extensive line of special products to meet specific customer needs. In order to maximize its market opportunities, the Company maintains a high level of inventory of both raw materials and finished products. Sales by the Company are generally made on credit and customers typically take 30 to 70 days to make payment; thus, the Company also has significant amounts of money invested in accounts receivable. Despite the high level of accounts receivable and inventory required, the Company has generally been able to finance these assets from current operations. When additional working capital in excess of that generated by the business has been required, the use of short-term borrowings, long-term debt and equity financing have been utilized. The Company's payment terms and the rights of return offered by it to customers and to it by manufacturers vary among such customers and manufacturers, but do not differ substantially from industry practice. The Company has generally allowed credits for returns by customers under appropriate circumstances.
MARKETING
The Company sells to a broadly diversified group of customers located primarily in the United States, Western Europe, Far East and Canada. Sales are made to industrial and commercial customers within the computer, computer-aided engineering and manufacturing, industrial electronics, test equipment, telecommunications, aerospace, automotive and broadband communication markets. The Company's products are also widely used in both industrial and institutional research laboratories. During 1994 the Company's products and services were sold directly to approximately 5,400 customers and a substantial number of additional customers were served through a network of industrial electronic component distributors. Of total sales 19% was derived from sales through a number of distributors located throughout the world and no distributor accounted for as much as 2.5% of the Company's sales. One customer, Ford Motor Company, accounted for approximately 32% and another customer for 4.5% of the Company's sales in 1994; no other customer accounted for more than 4.3% of sales.
The Company markets its products and services through independent sales representatives and direct Company sales personnel working throughout the United States and abroad, including wholly owned marketing subsidiaries in the United Kingdom, France, Germany, Switzerland, Sweden, Italy, Japan, Canada and Australia and sales offices in other areas.
In 1994 the Company's international sales amounted to approximately 21% of total sales. Approximately 52% of these sales were derived from Western Europe. The overall net margins on international sales are somewhat less than those obtained on sales made in the United States. The Company's international business is subject to risks customarily encountered in foreign operations, including fluctuations in monetary exchange rates.
BACKLOG
The Company estimates that its backlog of unfilled orders at December 31, 1994 was $119 million compared with $104 million at December 31, 1993. Orders tend to fluctuate during the year according to customer requirements and business conditions, and the backlog level from quarter to quarter does not follow a consistent pattern. Although unfilled orders can be cancelled, the Company's experience has been that the dollar amount of cancelled orders is not material.
Substantially all of the backlog is reasonably expected to be shipped within twelve months.
GOVERNMENT CONTRACTS
The amount of the Company's business that may be subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government is insignificant.
COMPETITION
The Company encounters competition in all areas of its business activity from a number of competitors but does not compete with any one company in all areas. Competitors range from some of the country's largest diversified companies to small and highly specialized firms. The Company competes primarily on the basis of technology, innovation, performance and reliability. Price and company reputation are also important competitive factors. Although there are no precise statistics available, the Company believes it is a principal factor in the markets in which it competes.
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company maintains a continuous program of design, development and engineering of new products and improvement of existing products to meet the changing needs of its customers. The Company provides engineering assistance to its customers by designing products to fill their individual requirements. The majority of new product development, manufacturing research, quality control development, new equipment development and related research and development expenditures take place in product management groups involving engineering, marketing, manufacturing, quality control and general management personnel. These expenses are included in the categories of marketing, manufacturing and general administrative expenses. In calendar year 1994, 1993 and 1992 expenditures for such research, development and engineering were approximately $20 million, $19 million, and $19 million, respectively.
ENVIRONMENTAL AFFAIRS
The Company's manufacturing facilities are subject to numerous laws and regulations designed to protect the environment. The Company has spent sufficient amounts to purchase, install, and operate containment, remediation and other pollution control equipment and conduct appropriate environmental audits. The Company believes that its efforts in this regard places it in substantial compliance with existing environmental laws and regulations.
In connection with the acquisition of National Industries, Inc. in 1991, the Company determined that actual contamination at certain National facilities in Alabama warranted additional study. The Company informed the State of Alabama about the possible contamination and its desire to voluntarily proceed with further study and, if necessary, remediation of the possible contamination. The Company has completed its investigation and provided this information to the State. The Company has obtained the necessary permits and is in the process of remediating the site. The Company is keeping the State informed of its progress. The Company has included in its financial statements an allowance of $4.5 million for estimated environmental cleanup costs as of December 31, 1994.
EMPLOYEES
The Company had approximately 4,400 employees as of December 31, 1994. None of the employees are covered by collective bargaining agreements and operations have never been interrupted by a work stoppage. The Company believes that relations with its employees are good. The Company also contracts for manufacturing labor and as of December 31, 1994 had approximately 2,300 contract laborers.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Certain financial information concerning domestic and international operations and export sales can be found in Footnote number 8 to the accompanying financial statements of the Registrant which are included under Item 8 hereof.
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ITEM 2
ITEM 2 -- PROPERTIES
Information regarding the Company's active properties appears below:
The Company believes that its existing facilities are adequate and suitable for the manufacture and sale of its products and have sufficient capacity to meet its current requirements. Machine capacity is adequate although additional machine capacity is currently being added in the business to meet increasing demands for the Company's new products and for ongoing cost reduction programs.
The Company anticipates no difficulty in retaining occupancy of any of its manufacturing, office or sales facilities through lease renewals prior to expiration or through month-to-month occupancy, or in replacing them with equivalent facilities.
In addition to the above listed properties, the Company leases a small amount of other office/warehouse space in the United States and foreign countries. The amount of such space is not significant.
See Note 5 -- "Commitments and Contingencies" to the accompanying financial statements of the Registrant which are included under Item 8 hereof for information concerning the Company's obligations under leases.
ITEM 3
ITEM 3 -- LEGAL PROCEEDINGS
On April 26, 1985, the Company and its subsidiary, Isotronics, Inc. ("Isotronics"), commenced an action in the Bristol County Superior Court of Massachusetts against Aegis, Inc. ("Aegis"), and a former employee of Isotronics (the "Employee"), seeking damages to be trebled under the Massachusetts statute relating to unfair trade practices (M.G.L. c. 93A) and injunctive relief. The complaint alleged wrongdoing by the defendants in connection with the organization and operation of Aegis, which competed with Isotronics in the manufacture and sale of microcircuit packages.
On May 21, 1985, the defendants filed a counterclaim, and added the Chairman of the Board of the Company as an additional defendant. The counterclaim alleged improper interference with a contract of Aegis; the making of disparaging remarks about the Employee and another officer of Aegis; that the action is groundless; and that it was commenced because of personal animosity toward the Employee. The counterclaim seeks damages of $7,500,000 for abuse of process, damages of $50,000 for interference with the contract, and damages of $7,500,000, to be trebled, for violation of the Massachusetts statute relating to unfair trade practices (M.G.L. c 93A). A reply was filed which denied the material allegations of the counterclaim.
On May 13, 1985, Aegis commenced an action in the U.S. District Court for the District of Massachusetts. The allegations of the amended complaint in the federal case generally are similar to those of the counterclaim in the Superior Court case, but include an additional claim that the Company and Isotronics had attempted to monopolize interstate commerce in violation of the Sherman Act. The allegations with respect to damages are similar to those of the Superior Court counterclaim.
Assets of Isotronics were sold by the Company in May 1989, but all claims relating to the litigation were retained by the Company.
On August 31, 1989 the Bristol County Superior Court ruled that Aegis and the Employee violated the Massachusetts statute relating to unfair trade practices. The court ruled further that Aegis and the Employee had failed to prove the counterclaims they had asserted against the Company, Isotronics and an officer of the Company.
Aegis and the Employee appealed the decision and on October 1, 1990, the case was argued to the Massachusetts Supreme Judicial Court. The court rendered a decision on January 16, 1991, affirming the trial court's finding of a knowing and willful violation of the Massachusetts Unfair Trade Practices statute. A further trial to determine the amount of damages to be awarded against Aegis and the Employee took place in the Bristol County Superior Court from January 6, 1992 until February 20, 1992.
On November 2, 1992, the Court issued a 173 page Memorandum of Decision and Order ("Order"). The Order concluded that the illegal conduct of defendants Aegis and Employee proximately caused the Company to suffer $14,140,000 in lost profits during the period January 1, 1985 until March 31, 1987.
In 1987, a joint venture owned by Olin Corporation ("Olin") and Asahi Glass Co., Ltd. purchased the stock of Aegis. Because of alleged indemnity obligations which may run from Olin to the defendant Employee, the Company moved to amend its Complaint and add Olin as a defendant. On November 25, 1992 the court allowed the Company's motion. Olin moved to dismiss that complaint. The Court denied Olin's motion on December 14, 1992. At the same time the Court granted the Company a preliminary injunction restraining Olin from modifying any obligation it may have to defendant Employee. Olin has renewed its objections to the Company's complaint.
On December 14, 1992, final judgment was entered entitling the Company to recover from the defendants jointly and severally, the sum of $14,140,000 in compensatory damages, plus costs of $376,632.98,
interest of $10,744,460.47, and attorneys' fees of $1,216,188.06, for a total of $26,477,281.51. The judgment also awarded the Company noncompensatory damages of $14,140,000. The judgment also found in favor of the former Chairman of the Board on all counts of the defendants' counterclaims against him.
In 1993, the defendants appealed the judgment, generally challenging the entire damages decision. The Company filed a cross appeal limited to the question of whether a portion of the damages award should be assessed against each of the defendants jointly instead of jointly and severally. The appeal of the damages decision was argued before the Supreme Judicial Court in early October 1993.
On September 28, 1994, following an April, 1994 opinion by the Massachusetts Supreme Judicial Court which vacated the 1992 damages award, the Company entered into mediation with Aegis, Inc., Jeremy D. Scherer and Olin Corporation regarding all open issues in the Augat Inc., et. al. v. Aegis, Inc., et. al. litigation that had been pending since April, 1985. As a result of that mediation, the Company and the defendants agreed to settle the case. Under the terms agreed upon, the Company received payment on October 20, 1994. A portion of the settlement (approximately $2 million) was recorded as a credit to selling, general and administrative expenses (S G & A), as such amounts represent a recovery of litigation costs charged to S G & A in the current and prior periods. In addition, other income in 1994 includes approximately $1 million from this settlement. Following receipt of the cash payment, stipulations of dismissal were filed in the state and federal courts, dismissing all pending claims. The Company and Isotronics also have exchanged releases with Aegis, Inc. and Scherer.
On September 4, 1992, the Company filed suit in the United States District Court for the District of Massachusetts against June M. Collier ("Collier"). This suit arises out of an Agreement of Merger which the Company entered into in August 1991, and through which an Alabama manufacturing company, National Industries, Inc. was merged into Augat National Inc., a wholly owned subsidiary of the Company. The Company alleges that the defendant, who was the sole stockholder of National Industries, breached certain warranties she made in connection with the merger and misrepresented certain aspects of the financial and operating conditions of National Industries. The suit also alleges a violation of Mass. Gen. Laws c. 93A. Collier has answered the Company's complaint and asserted counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, violation of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, duress, misrepresentation and violations of Mass. Gen. Laws c.93A. Both parties have brought claims for declaratory judgements on Collier's request for indemnification for her legal fees and costs in this case as a former officer and director of National Industries. The Company has responded to Collier's counterclaims and has denied all of the substantive allegations. Management believes that Collier's counterclaims are without merit and will defend them vigorously. Collier has voluntarily dismissed her breach of contract claim, security law claim and part of her misrepresentation claim. Both parties have now filed cross motions for partial summary judgement but no ruling has yet been made. No trial date has been set at this time.
There are no other material legal proceedings to which the Registrant is a party. Routine litigation incidental to its business is immaterial.
ITEM 4
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5
ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is currently traded on the New York Stock Exchange under the symbol "AUG".
The following table sets forth the range of high and low closing prices for its Common Stock on a quarterly basis for each of the Company's last three fiscal years.
The Company, in July 1994, reinstated its quarterly cash dividend. The current quarterly amount is $.04 per share on the Company's Common Stock.
The approximate number of holders of record of the Company's Common Stock at December 31, 1994 was 1,571.
ITEM 6
ITEM 6 -- SELECTED FINANCIAL DATA
ITEM 7
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As an aid to understanding the Company's operating results, the following table indicates the percentage of sales that each income statement item represents, and the percentage increase or decrease in such items for the years indicated.
SALES BY MAJOR PRODUCT AREA
A breakdown of sales for calendar years 1994, 1993 and 1992 by major product is as follows:
RESULTS OF OPERATIONS
The Company's sales growth and improved operating performance continued into 1994. The Company's results reflect increased market penetration in the fast growing U.S. cable television and telecommunications markets, the strength of the U.S. automotive industry and the improvement in the European automotive market. Overall focus on the Company's cost structure contributed to the improved operating efficiencies. The sales improvement in 1993 over 1992 was due to the significant improvement in the domestic automotive market and market share improvement in the cable television and telecommunication's markets of the communications industry. International sales were $109 million, $89 million and $92 million for the years 1994, 1993 and 1992, respectively.
The Interconnection Products Business sales have been relatively flat for the three years ended 1994. Increases in new product sales have been offset by reduction in sales of mature product lines, price reductions and the de-emphasizing of certain product lines during the three-year period. During the past two years, this business has reorganized and reengineered its domestic and international operations in order to be a more efficient and competitive player in the markets it serves. This business' future sales strategy is to focus on strengthening its relationships with selected customers by delivering innovative products.
Sales growth in the Wiring Systems and Components Business continued in 1994 increasing 34% with domestic sales increasing 34% and European sales increasing 41% compared with 1993. For 1993, domestic sales increased 27% and European sales decreased 22% compared with 1992. The continuing improvement in the U.S. economy, the rebound in the European economy and the increase in electronic systems content in automobiles all contributed to the significant sales improvement in this business. In addition, this business in 1994 benefitted from the strong domestic automotive market demand which included Ford's Mustang and Aerostar vehicles.
The Communications Products Business serves two primary markets: cable television (CATV) and telecommunications. This industry is aggressively building and upgrading its systems to accommodate new technologies and services. By servicing these markets effectively, this business' sales have grown 46% and 35% in 1994 and 1993. The Company in 1994 has invested over $11 million in new plant and equipment for this business in response to the significant sales growth. The Company is projecting to invest approximately $16 million in capital expenditures for this business in 1995 to accommodate the anticipated customer demand.
Overall sales in 1994 continued its upward trend due to the significant increase in the domestic automotive business, a rebound in the European automotive market and substantial sales growth in the CATV and telecommunications markets.
Gross margin decreased by 1% of sales in 1994 due to a shift in the Company's sales mix as the automotive division's sales increased by 3% of total Company sales. This business has higher labor and material costs compared to the other business units. In addition, gross margin was effected by selective selling price decreases which were offset by increases in new product offerings (approximately $138 million). For 1993, gross margin increased by 1.2% of sales as the Company benefitted from its cost control and productivity programs.
Selling, general and administrative expenses (SG&A) continued to be managed aggressively in 1994 as well as in 1993. The reduction in these costs as a percentage of sales in the past two years has been the result of the Company's concerted effort to maintain strong cost control in this area. In addition, the automotive business has a lower SG&A expense component compared to the other business units. In 1994, the Company also recorded a portion of the Aegis litigation settlement proceeds (approximately $2 million) as a credit to SG&A as such amounts represent a recovery of litigation costs charged to SG&A in the current and prior periods. Management intends to maintain SG&A expenses in the 13% to 15% range of sales.
Other income (expense) has remained essentially constant as a percentage of sales for the three years ended 1994. Interest expense has decreased over the past three years due to the reduction in long-term debt and the improvement in cash flow which reduced the necessity of short-term borrowings. In 1994, other income includes the write-down of assets held for sale and lease termination costs of approximately $1 million. In addition, approximately $1 million from the Aegis litigation settlement was recorded under this caption.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". This change, as of that date, did not have a significant impact on the financial statements. Taxes in 1994 and 1993 were 34% of income compared to the statutory rate of 35% for both years. The effective statutory rate for 1994 and 1993 was negatively impacted by taxes imposed by various domestic tax entities. For 1994, these higher taxes were offset by the recognition of previously reserved and not realizable foreign operating loss carryforwards. For 1993, a tax benefit was recognized for prior years' restructuring costs. See Note 3 to the Consolidated Financial Statements for the reconciliation of the provision for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains sufficient liquidity and has the resources to fund its operations under current business conditions. In 1994, the Company completed a new revolving credit agreement with four banks by increasing its maximum borrowing to $100 million. As of December 31, 1994, the Company had no borrowings under this credit facility. During 1994, the Company reduced its total debt by $3 million. The Company's financial condition improved in 1994 as working capital increased to $127 million compared to $119 million in 1993. At December 31, 1994, long-term debt represented 14.7% of equity compared with 22.7% for 1993. Income generated from operations along with established credit facilities is sufficient to cover expected operating growth in the next few years. Capital expenditures in 1995 are projected to be in the $30 to $35 million range.
Since 1992, the Company has spent approximately $.9 million associated with site remediation for certain facilities. Future costs are expected to be $200,000 to $300,000 annually for at least the next fifteen years. See Note 5 to the Consolidated Financial Statements.
The Company, in July 1994, reinstated its quarterly common stock dividend. The current quarterly amount is $.04 per share.
The book value of the Company's common stock at December 31, 1994 was $12.21 per share.
ITEM 8
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and financial statement schedules are submitted herewith:
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of Augat Inc.:
We have audited the accompanying consolidated balance sheets of Augat Inc. and its subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the consolidated financial statement schedule listed at Item 8. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Augat Inc. and its subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts January 31, 1995
AUGAT INC. CONSOLIDATED BALANCE SHEETS
See notes to consolidated financial statements.
AUGAT INC. STATEMENTS OF CONSOLIDATED INCOME
See notes to consolidated financial statements.
AUGAT INC. STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
See notes to consolidated financial statements.
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and all majority-owned domestic and foreign subsidiaries. Foreign subsidiaries are included on the basis of fiscal years ended November 30. All material intercompany transactions and balances have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost (principally, first-in, first-out method) or market.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is recorded at cost. For financial reporting purposes, depreciation is provided using the straight-line method based on the estimated useful lives of the various classes of assets. The estimated useful lives for buildings and improvements are 5 to 40 years; for machinery and equipment 3 to 10 years; and for furniture and fixtures 3 to 10 years. Maintenance, repairs and minor improvements are charged to expense as incurred, while additions, major improvements and renewals of fixed assets are capitalized. The cost of property retired or sold together with the accumulated depreciation is removed from the respective accounts and any difference, less proceeds from sale, is charged or credited to income.
REVENUE RECOGNITION
Sales are recognized at the time of shipment.
INCOME TAXES
The Company, effective January 1, 1993, adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The cumulative effect on prior years at the date of adoption was not material to the results of operations or the financial position of the Company.
SFAS 109 uses an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. Previously, the Company used the Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" (SFAS 96), which employed an asset and liability approach that gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying amounts.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Such costs amounted to approximately $20,000, $19,000 and $19,000, in 1994, 1993 and 1992, respectively.
TRANSLATION OF FOREIGN CURRENCIES
Assets and liabilities of foreign operations are translated at year-end exchange rates. Revenues and expenses are translated using average exchange rates. The resulting translation adjustment is reported as a separate component of shareholders' equity. Gains and losses from foreign currency transactions are reflected in net income.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
OTHER ASSETS
The excess of the purchase price of acquired companies over the fair value of net identifiable assets at dates of acquisition has been recorded as goodwill and is being amortized on a straight-line basis over various periods not exceeding twenty-five years. The Company periodically reviews goodwill to assess recoverability, based upon expectations of nondiscounted cash flows and operating income for each subsidiary having a material goodwill balance. Impairments would be recognized in operating results if a permanent diminution in value were to occur. Accumulated amortization at December 31, 1994 and 1993, was $4,803 and $3,498, respectively. Amortization of goodwill was $1,305, $1,292 and $1,262, in 1994, 1993 and 1992, respectively.
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares outstanding during each year. The exercise of all presently outstanding stock options and the issuance of shares under the "Employee Stock Purchase Plan" would have no material dilutive effect on earnings per share.
STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the years ended 1994, 1993 and 1992 included interest of $4,391, $4,510 and $3,450, and income taxes of $11,326, $4,112 and $2,362, respectively.
OTHER MATTERS
During 1994, the Company received a cash settlement in connection with the Aegis litigation. A portion of the settlement (approximately $2 million) was recorded as a credit to SG&A, as such amounts represent a recovery of litigation costs charged to SG&A in the current and prior periods. Other income in 1994 includes approximately $1 million of the above settlement and the write-down of assets held for sale and lease termination costs of approximately $1 million.
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
OFF-BALANCE-SHEET RISK -- The Company enters into forward foreign exchange and commodity contracts to hedge foreign currency and inventory purchases, respectively, when deemed appropriate for periods consistent with its committed exposures. This hedging minimizes the impact of foreign exchange rate movements on the Company's operating results as gains and losses on contracts are offset by losses and gains on the assets, liabilities, and transactions being hedged. The foreign exchange contracts generally have maturities which do not exceed six months. Gains and losses on contracts which hedge specific foreign currency denominated commitments are deferred and recognized in the period in which the transaction is completed. As of December 31, 1994 and 1993, the Company had $6,800 and $3,500, respectively, of foreign exchange contracts outstanding.
CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The Company places its temporary cash investments with high credit qualified financial institutions. The investment policy limits the Company's exposure to concentrations of credit risk. Except for major domestic automotive manufacturers, credit risk with respect to trade receivables is limited due to the large number of customers comprising the Company's customer base, and its dispersion across many different industries and geographies. Sales to major domestic automotive manufacturers represent approximately 37%, 35% and 31% of total sales in 1994, 1993 and 1992, respectively.
The Company's financial instruments include cash, accounts receivable and payable, notes payable and long-term debt at December 31, 1994 and 1993. Cash, accounts receivable and payable are recorded at their net realizable value, which approximates market. Based on the borrowing rates currently available to the Company, Management believes the recorded value of notes payable and long-term debt approximates market.
In the normal course of its business activities, the Company is required under certain contracts to provide letters of credit which may be drawn down in the event the Company fails to perform under the contracts. Outstanding letters of credit amounted to $2,400 at December 31, 1994.
2. DEBT AND AVAILABLE CREDIT FACILITIES
Long-term debt at December 31, 1994 and 1993, exclusive of current maturities, consisted of the following:
Long-term borrowing maturities in each of the five years subsequent to December 31, 1995, are as follows: 1996, $10,365; 1997, $8,929; 1998, $8,931; 1999, $4,408 and 2000 and thereafter, $2,400. The industrial development and pollution control revenue bonds are collateralized by buildings and equipment with a net book value of approximately $6,672, of which $6,996 is guaranteed by a letter of credit at December 31, 1994.
The capitalized lease obligations, which are financed by proceeds from bonds, are secured by the leased facilities which had a net book value of $1,147 at December 31, 1994.
The private placement senior note agreement includes certain financial covenants and restrictions upon dividends, investments, indebtedness, and the sale of certain assets. Dividends cannot exceed $9,800 plus 50% of net income.
In 1994, the Company increased its borrowing limit from $40 million up to $100 million under a new unsecured revolving credit agreement with several banks. The agreement which expires no sooner than July 1, 1997 requires a commitment fee of approximately one-quarter percent per annum, payable on any available and unused portion. At December 31, 1993 the Company's borrowings under the revolving credit facility totaled $1 million, which was borrowed for working capital purposes. Interest on the working capital borrowings are at a variable base rate, approximately prime rate (8.5% at December 31, 1994 and 6% at December 31, 1993). At December 31, 1994, there were no borrowings under the revolving credit facility.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. INCOME TAXES
The geographic components of income before taxes on income were as follows:
The components of the provision for taxes on income were as follows:
Deferred income taxes result from timing differences in the recognition of revenues and expenses for financial statement and income tax purposes. Included in the deferred amounts for 1994 and 1993 are the benefits of operating losses of $740 and $882, respectively and a decrease in the valuation reserve of $1,496 and $513, respectively.
A reconciliation of the Company's provision for taxes on income and the amount computed by applying the statutory federal income tax rate to income before taxes is as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The components of the deferred tax assets and liabilities as of December 31, 1994 and 1993 were as follows:
The change in the deferred tax assets and liabilities relating to foreign currency translation was $474 in 1994.
The accumulated earnings of foreign subsidiaries on which federal income taxes have not been provided amounted to $48,109 through December 31, 1994. The Company's intention is to permanently reinvest these earnings at least until such time as they can be repatriated without a material incremental tax cost.
At December 31, 1994 the Company had foreign net operating losses amounting to approximately $17,786, of which $14,310 can be carried forward indefinitely and the balance expires at various dates through 1999. Additionally, there were available foreign tax credits of $1,192 that will expire at various dates through 1999.
4. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company sponsors noncontributory defined benefit pension plans that cover substantially all eligible U.S. employees. Benefits are based on employees' years of service and compensation during employment. The principal plan is funded on a current basis, in compliance with the requirements of the Employee Retirement Income Security Act.
The Supplementary Employee Retirement Plan (SERP) is a non-qualified plan providing certain elected officers with additional defined pension benefits.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Pension expense was $2,032, $1,155 and $875 in 1994, 1993 and 1992, respectively.
The following table sets forth the plans' funded status and amounts recognized in the consolidated financial statements:
The Company's foreign defined contribution pension plans are consistent with local practice and are principally funded through insurance programs. Pension expense in 1994, 1993 and 1992, for the foreign plans was $695, $800 and $857, respectively.
SAVINGS AND RETIREMENT PLAN
The Company sponsors the Augat Inc. Savings and Retirement Plan which covers substantially all eligible U.S. employees and allows employees to contribute from one to fourteen percent of salary through salary reduction, up to the Internal Revenue Service limit on salary reduction contributions. The Company will make matching contributions of 25% of the employees' contributions of up to 6% of salary in the form of Company common stock. Company contributions will vest 20% after two years of service increasing by 20% per year up to 100% after six years of service. The Plan will permit participants to elect to invest their contributions in a variety of savings and investment funds. For the years 1994, 1993 and 1992, the Company contributed 19,621, 17,390 and 19,820 shares, respectively, of Company common stock to the Plan at a cost of $397, $245 and $215, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
5. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company and its subsidiaries are obligated under facility and equipment leases which expire at various dates through 2002. These leases generally provide extension privileges and are exclusive of real estate taxes, insurance and other expenses. Rent expense in 1994, 1993 and 1992 was $7,184, $6,765 and $5,720, respectively. Annual minimum future rentals are $6,433, $5,306, $4,052, $1,483 and $1,279 for the years 1995 through 1999, and aggregate to $2,233 for all the years subsequent to 1999.
CONTINGENCIES
The acquisition of National Industries, Inc. in 1991 included a liability of approximately $5,400 to cover the estimated costs of site remediation for certain National facilities. Management estimated the liability using third-party consultants. Costs incurred as of December 31, 1994 (approximately $900) represent amounts expended for preliminary site evaluation and design and testing. The Company has obtained the necessary permits and is in the process of remediating the site. The Company is keeping the state informed of its progress. The Company believes the recorded liability of approximately $4,500 at December 31, 1994 to be adequate.
6. COMMON STOCK
In 1988, the Company's Board of Directors adopted a Shareholder Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock. Pursuant to the Plan, the Rights become exercisable when certain triggering events occur that involve an entity's attempt to acquire, or the acquisition of, at least 20 percent of the Company's Common Stock or announces a tender or exchange offer that would result in such entity owning 30 percent or more of the Company's Common Stock. Such percentages may, at the Board's discretion, be lowered.
If any entity becomes the beneficial owner of 25 percent or more of the Common Stock (except pursuant to a tender or exchange offer for all shares at a fair price as determined by the independent members of the Board), if a 20 percent or more shareholder consolidates or merges into or engages in certain self-dealing transactions with the Company, or if there occurs any reclassification, merger, or other transaction or transactions which increases by more than one percent of the proportionate share of the Company's outstanding Common Stock held by a 20 percent or more shareholder, then each holder of a Right will be entitled to purchase that number of shares of the Company's Common Stock which equals the exercise price of the Right divided by one-half of the current market price of such Common Stock at the date of the occurrence of the event. In addition, if the Company is involved in a merger or other business combination transaction with another entity in which it is not the surviving corporation or in connection with which its Common Stock is changed or converted, or it sells or transfers 50 percent or more of its assets or earning power to another entity, each Right that has not previously been exercised will entitle its holder to purchase the number of shares of common stock of such other person which equals the exercise price of the Right divided by one-half of the current market price of such Common Stock at the date of the occurrence of the event. The Company will generally be entitled to redeem the Rights at $.02 per Right at any time until the tenth day following a public announcement that a 20 percent stock position has been acquired and in certain other circumstances. The Rights will expire on August 23, 1998, unless earlier redeemed or exchanged.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. STOCK OPTION AND STOCK PURCHASE PLANS
STOCK OPTIONS, APPRECIATION RIGHTS AND RESTRICTED STOCK
The Company has three Stock Option and Appreciation Rights Plans, the 1987, the 1989 and the 1994 Plans, pursuant to which stock options and appreciation rights have been granted and will be granted in the future. In addition, restricted stock awards may be granted under the 1989 and 1994 Plans.
All Plans provide for the issuance of stock options and tandem appreciation rights to key employees of the Company and to directors of the Company. The options may be either incentive stock options or non-qualified options. No more than a total of 2,350,000 shares of common stock may be issued under all of the Plans. The period over which options must be exercised is determined on the date of grant and may not be later than 10 years or 10 years and 30 days in the case of incentive and non-qualified options, respectively.
Under the Plans, incentive stock options will be granted at fair market value as of the date of grant and may not be exercised until 12 months after the date of grant. Non-qualified options must equal at least 90% of the fair market value on the date of grant.
Stock appreciation rights may also be granted to holders of options. Under exercise of such rights, the holder will receive shares of common stock or a combination of cash and common stock at the election of the Board of Directors equal to the increase in the fair market value of the number of shares of common stock subject to such rights. Under the Plan, when both an option and an appreciation right are granted, the exercise of one cancels the other.
Restricted stock awards may be issued under the 1989 and the 1994 Plans and entitle the participant to purchase common stock from the Company under terms which provide for vesting over a specified number of years and a right of repurchase by the Company of non-vested stock when the recipient's relationship with the Company terminates. The price of the awards may be less than fair market value but not less than par value ($.10 per share). Compensation expense resulting from the grant of awards is recognized over the period from the award date to the date the forfeiture provisions lapse. Stock awards were issued in 1994, 1993 and 1992 amounting to 33,000, 26,500 and 10,500 shares, respectively, with a total value of $719, $321 and $108, respectively. In 1992, 4,500 shares were repurchased and none in 1993 and 1994. The net cost of stock awards in 1994, 1993 and 1992 was $304, $169 and $131, respectively.
The Compensation Committee of the Board of Directors administers all of the Plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
A summary of options under the Plans is as follows:
EMPLOYEE STOCK PURCHASE PLAN
The Company has an Employee Stock Purchase Plan which allows employees to purchase shares of common stock of the Company at a 15% discount from market value (subject to a minimum price and a maximum contribution per employee) pursuant to annual offerings. The maximum number of shares available for issuance under the current plan is 600,000 shares over a five-year period ending in 1997. Employees purchased 56,666, 25,818 and 5,380 shares in 1994, 1993 and 1992, respectively.
8. BUSINESS SEGMENT AND FOREIGN OPERATIONS
The Company operates within a single segment of the electronics industry defined as the electromechanical component and subsystem sector. The Company designs, manufactures and markets a broad range of electromechanical components and subsystems.
The sales and marketing operations outside the United States are conducted through marketing/warehousing subsidiaries in Australia, Canada, France, Germany, Italy, Japan, Singapore, Sweden, Switzerland, the United Kingdom and sales offices in other areas. The foreign manufacturing operations are in Mexico, Singapore, Switzerland and the United Kingdom. The products manufactured in Switzerland are sold to the parent company for further processing or to the foreign marketing/warehousing subsidiaries for further finishing or resale in local markets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Financial information concerning the Company's operations by major geographical area is as follows:
Operating income by geographical area does not include corporate expenses, other income or expense, or income taxes. Intersegment sales between areas are made at negotiated selling prices. One customer accounted for approximately 32%, 28% and 24% of sales and 23%, 26% and 13% of net receivables for 1994, 1993 and 1992, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
9. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
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SCHEDULE II
AUGAT INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (IN THOUSANDS)
ITEM 9
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
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PART III
ITEM 10
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning directors is incorporated herein by reference pursuant to Rule 12b-23 to the Company's Proxy Statement dated March 24, 1995 with respect to the Annual Meeting of Shareholders to be held April 25, 1995.
The following table sets forth the names of all executive officers of the Company and certain other information relating to the positions held by them with the Company and other business experience.
The executive officers of the Company are elected annually.
ITEMS 11 AND 12 -- EXECUTIVE COMPENSATION AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by these items is incorporated herein by reference pursuant to Rule 12b-23 to the Company's Proxy Statement dated March 24, 1995 for the Annual Meeting of Shareholders to be held April 25, 1995.
ITEM 13
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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PART IV
ITEM 14
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The Financial Statements listed below appear in Part II, Item 8 hereof.
FINANCIAL STATEMENTS:
Independent Auditors' Report Consolidated Balance Sheets Statements of Consolidated Income Statements of Consolidated Shareholders' Equity Statements of Consolidated Cash Flows Notes to Consolidated Financial Statements
(a) 2. FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedule listed below appears in Part II, It em 8 hereof.
Schedule II- Valuation and Qualifying Accounts
Schedules not included with this additional financial data have been omitted because of the absence of conditions under which they are required or because the required financial information is included in the financial statements submitted.
(a) 3. EXHIBITS
(3) Articles of Incorporation and By-Laws
(a) Restated Articles of Organization, as amended. Incorporated by reference to Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989.
(b) By-Laws, as amended. Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987.
(4) Instruments Defining the Rights of Security Holders, Including Indentures
(a) Specimen certificate representing shares of the Registrant's $.10 par value common stock. Incorporated by reference to Exhibit 4(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988.
(b) Trust Indenture dated as of August 2, 1988 between Augat Inc. and The Chase Manhattan Bank, N.A. as Tr17 ustee. Incorporated by reference to Exhibit 2 of the Registrant's Registration Statement on Form 8-A dated August 2, 1988.
(10) Material Contracts
(a) 1994 Stock Plan. Incorporated by reference to Exhibit 10 (a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
(b) Employment Agreement dated August 29, 1994 between the Registrant and William R. Fenoglio. Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994.
(c) 1987 Stock Option and Appreciation Right Plan. Incorporated by reference to Exhibit A to the Registrant's Proxy Statement dated March 25, 1987 for the Annual Meeting of the Registrant's Shareholders held on April 28, 1987.
(d) 1989 Stock Plan. Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990.
(e) Supplementary Employee Retirement Plan. Incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized.
AUGAT INC. (Registrant)
By: /s/ WILLIAM R. FENOGLIO ------------------------------------ William R. Fenoglio President & Chief Executive Officer
By: /s/ ELLEN B. RICHSTONE ------------------------------------ Ellen B. Richstone Vice President & Chief Financial Officer and Principal Accounting Officer
Date March 27, 1995 ----
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ----
/s/ MARCEL P. JOSEPH Director March 27, 1995 - ---------------------------------- Marcel P. Joseph
/s/ WILLIAM R. FENOGLIO Director March 27, 1995 - ---------------------------------- William R. Fenoglio
Director March , 1995 - ---------------------------------- Vernon R. Alden
- ---------------------------------- Director March , 1995 Bruce L. Crockett
/s/ JOHN D. CURTIN, JR. Director March 27, 1995 - ---------------------------------- John D. Curtin, Jr.
Director March , 1995 - ---------------------------------- Samuel S. Dennis 3d
/s/ JERALD G. FISHMAN Director March 27, 1995 - ---------------------------------- Jerald G. Fishman
Director March , 1995 - ---------------------------------- Thomas L. King
/s/ JOHN N. LEMASTERS Director March 27, 1995 - ---------------------------------- John N. Lemasters
/s/ DAVID V. RAGONE Director March 27, 1995 - ---------------------------------- David V. Ragone
/s/ ALAN J. ZAKON Director March 27, 1995 - ---------------------------------- Alan J. Zakon