-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NlvDcNalORGDtYjOXqdmROuTztmVZsPBm+euTJh7Z/zSw8JEHMQmnH98ao9Jop7R f3GZCDiT9DkV2Qgd0nLKVg== 0000950109-96-006683.txt : 19961016 0000950109-96-006683.hdr.sgml : 19961016 ACCESSION NUMBER: 0000950109-96-006683 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960702 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961015 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANAHER CORP /DE/ CENTRAL INDEX KEY: 0000313616 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 591995548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08089 FILM NUMBER: 96642847 BUSINESS ADDRESS: STREET 1: 1250 24TH ST NW STREET 2: SUITE 800 CITY: WASHINGTON STATE: DC ZIP: 20037 BUSINESS PHONE: 2028280850 MAIL ADDRESS: STREET 1: 1250 24TH STREET NW STREET 2: SUITE 800 CITY: WASHINGTON STATE: DC ZIP: 20037 FORMER COMPANY: FORMER CONFORMED NAME: DMG INC DATE OF NAME CHANGE: 19850221 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K/A ---------------------------------- CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 2, 1996 --------------- DANAHER CORPORATION ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 1-8089 59-1995548 --------------------- -------------- ---------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 1250 24th Street, N.W. Washington, D.C. 20037 ------------------------------------------ ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 202-828-0850 -------------- -------------------------------------------------------------- (Former name or former address, if changed since last report.) Item 2. Acquisition of Assets On July 2, 1996, Danaher Corporation acquired controlling interest (100% ownership will be completed in 1996) of Acme-Cleveland Corporation. The total cost of acquisition will be approximately $210 million, inclusive of acquisition costs. The acquisition will be accounted for as a purchase. Acme-Cleveland is an Ohio corporation with its principal executive offices located at 30100 Chagrin Blvd., Suite 100, Pepper Pike, OH 14124-5705. The following description of the Company's business has been taken from Acme-Cleveland's 1995 10-K. Acme-Cleveland has two major business segments: (i) Telecommunication and Electronic Products and (ii) Precision Products. The Telecommunication and Electronic Products business segment is comprised of product businesses that are based largely on applied electronic technology. Products in this segment are used in the construction, maintenance, and operation of telecommunication networks, and in industrial process applications to collect and transmit information regarding the presence, location, and physical attributes of various objects or materials. The Precision Products business segment is comprised of product businesses that are based on, or relate to, precision measurement and analysis and other technologies having precision needs and requirements. This segment includes quality assurance products and system, motion and positioning components and systems, precision gauges, metal and punch form tooling, and specialty gears. Purchases of quality assurance products and systems and certain motion and positioning components are typically made as part of capital expenditure programs and can be deferred; the other products in this segment are usually purchased used in the course of day-to-day operations, and the purchase of such items cannot ordinarily be deferred. Item 7. Exhibits (a) Attachment 1 contains financial statements of Acme-Cleveland as specified under Rule 3.05(b) 1. Years ended September 30, 1995, 1994, 1993 2. Three Months Ended March 31, 1996 (b) Attachment 2 contains pro-forma financial statements and explanatory notes as per Article 11. 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. DANAHER CORPORATION By: /s/ C. Scott Brannan ------------------------ C. Scott Brannan Vice President and Controller
Year Ended September 30 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net Sales......................................................... $120,716 $ 77,200 $81,510 Cost of products sold............................................. 71,352 49,921 52,692 -------- -------- ------- Gross profit 49,364 27,279 28,818 Selling, general, and administrative expense...................... 30,282 21,281 19,152 Research and development expense.................................. 3,949 1,945 1,306 Amortization of goodwill and intangibles.......................... 1,210 259 225 -------- -------- ------- 35,441 23,485 20,683 -------- -------- ------- Earnings from operations 13,923 3,794 8,135 Other income (expense): Interest income.................................................. 1,743 986 684 Interest expense................................................. (144) (166) (205) Other income..................................................... 618 901 1,496 Other expense.................................................... (563) (899) (1,993) Purchased research and development write-off..................... (5,693) -0- -0- -------- -------- ------- (4,039) 822 (18) -------- -------- ------- Earnings from continuing operations before income taxes, minority interest, extraordinary item, and cumulative effect of accounting changes 9,884 4,616 8,117 Income taxes...................................................... 6,245 1,989 3,325 Minority interest................................................. 152 (116) -0- -------- -------- ------- Earnings from continuing operations before extraordinary item and cumulative effect of accounting changes 3,791 2,511 4,792 Discontinued operations before extraordinary item and cumulative effect of accounting changes: Earnings from operations, net of income taxes.................... 13,985 3,989 438 Net gain on sale (less income taxes of $1,500)................... 24,727 -0- -0- -------- -------- ------- 38,712 3,989 438 Extraordinary item-utilization of tax benefit carryforwards....... -0- -0- 1,900 Cumulative effect of accounting changes: From continuing operations....................................... -0- 3,389 -0- From discontinued operations..................................... -0- (33,310) -0- -------- -------- ------- -0- (29,921) -0- -------- -------- ------- Net earnings (loss) $ 42,503 $(23,421) $ 7,130 ======== ======== ======= Earnings (loss) per common share: Continuing operations before extraordinary item and cumulative effect of accounting changes......................... $ .56 $ .35 $ .71 Discontinued operations before extraordinary item and cumulative effect of accounting changes: Earnings from operations, net of income taxes................... 2.07 .63 .06 Net gain on sale................................................ 3.67 -0- -0- -------- -------- ------- 5.74 .63 .06 Extraordinary item............................................... -0- -0- .30 Cumulative effect of accounting changes: From continuing operations...................................... -0- .54 -0- From discontinued operations.................................... -0- (5.29) -0- -------- -------- ------- -0- (4.75) -0- -------- -------- ------- Net earnings (loss) per common share $ 6.30 $ (3.77) $ 1.07 ======== ======== =======
See notes to consolidated financial statements. 20
Foreign Currency Preferred Common Other Pension Translation Retained Shares Shares Capital Adjustment Adjustments Earnings - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT OCTOBER 1, 1992........................ $ 3,631 $ 6,291 $53,651 $(3,952) $ 343 $ 4,580 Net earnings...................................... 7,130 Cash dividends: Series A preferred shares, $1.80................. (290) Common shares, $.41.............................. (2,580) Foreign currency translation adjustments.......... (1,416) Pension adjustment................................ (2,565) ------- ------- ------- ------- ------- ------- BALANCE AT SEPTEMBER 30, 1993..................... 3,631 6,291 53,651 (6,517) (1,073) 8,840 Net loss.......................................... (23,421) Common shares issued under stock option plan...................................... 9 66 Cash dividends: Series A preferred shares, $1.80................. (290) Common shares, $.44.............................. (2,770) Foreign currency translation adjustments.......... 218 Pension adjustment................................ (4,922) ------- ------- ------- ------- ------- ------- BALANCE AT SEPTEMBER 30, 1994..................... 3,631 6,300 53,717 (11,439) (855) (17,641) Net earnings...................................... 42,503 Common shares issued under stock option plan...................................... 105 879 Tax benefit from exercise of stock options.......................................... 552 Cash dividends: Series A preferred shares, $1.80................. (290) Common shares, $.47.............................. (2,967) Foreign currency translation adjustments.......... 2,703 Pension adjustment................................ 7,703 ------- ------- ------- ------- ------- ------- BALANCE AT SEPTEMBER 30, 1995..................... $ 3,631 $ 6,405 $55,148 $(3,736) $ 1,848 $21,605 ======= ======= ======= ======= ======= =======
See notes to consolidated financial statements. - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries In thousands
Year Ended September 30 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Operating activities Earnings from operations before extraordinary item and cumulative effect of accounting changes: Continuing ............................................................. $ 3,791 $ 2,511 $ 4,792 Discontinued ........................................................... 38,712 3,989 438 Adjustments to reconcile earnings to net cash provided by operating activities: Depreciation and amortization .......................................... 4,091 2,884 2,437 (Gain)loss on sale of property, plant, and equipment ................... (287) (265) 119 Purchased research and development write-off ........................... 5,693 -0- -0- Undistributed loss of minority equity investments ...................... 505 274 404 Deferred income tax .................................................... (10,690) 1,402 109 Gain on sale of subsidiary ............................................. (24,727) -0- -0- Cash provided by discontinued operations ............................... 560 2,589 4,025 Extraordinary item - utilization of tax benefit carryforwards .......... -0- -0- 1,900 Changes in operating assets and liabilities excluding the effects of acquisitions and divestitures: (Increase) decrease in trade receivables ............................... (5,035) (80) (353) (Increase) decrease in inventories ..................................... (4,619) (3,132) 3,794 (Increase) decrease in other current assets ............................ 242 (350) 489 Increase (decrease) in payable to banks ................................ (232) (492) 425 Increase (decrease) in accounts payable ................................ 1,943 (1,112) (41) Increase (decrease) in other accrued liabilities ....................... (1,294) 1,559 (1,691) Increase (decrease) in accrued compensation ............................ 2,067 (1,091) 1,949 Increase (decrease) in income taxes payable ............................ 2,044 284 (301) Increase (decrease) in postemployment benefits other than pensions ..... (1,515) 54 -0- Increase (decrease) in unfunded pension costs .......................... 503 (284) (554) Other, net ............................................................. (1,196) (548) (686) ------- ------- ------- Net cash provided by operating activities 10,556 8,192 17,255
- ------------------------------------------------------------------------------
Year Ended September 30 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------- Investing activities Capital expenditures ..................................................... $ (4,233) $ (2,657) $ (1,873) Proceeds from sale of property, plant, and equipment ................. 1,031 793 51 Redemption of securities, net ............................................. 208 415 415 Net proceeds from sale of subsidiary ...................................... 38,624 -0- -0- Acquisitions-net of cash acquired ......................................... (35,816) -0- -0- Cash used for discontinued operations ..................................... (287) (1,742) (3,361) -------- -------- -------- Net cash used by investing activities (473) (3,191) (4,768) Financing activities Principal payments on long-term debt and notes payable............... (1,611) (282) (250) Principal borrowings on long - term debt and notes payable ......... 95 97 92 Exercise of stockoptions .................................................. 1,536 75 -0- Dividends paid ........................................................... (3,257) (3,060) (2,870) Cash used for discontinued operations ................................. (858) (759) (869) -------- -------- -------- Net cash used by financing activities (4,095) (3,929) (3,897) Effect of exchange rate changes on cash ................................... 315 98 (12) -------- -------- -------- Increase in cash and cash equivalents 6,303 1,170 8,578 Cash and cash equivalents at beginning of year ............................ 38,355 37,185 28,607 -------- -------- -------- Cash and cash equivalents at end of year $ 44,658 $ 38,355 $ 37,185 ======== ======== ========
See notes to consolidated financial statements. - ------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries In thousands, except share data
September 30 Assets 1995 1994 - ---------------------------------------------------------------------------------------------------- Current assets Cash and cash equivalents ..................................... $ 44,658 $ 38,355 Marketable securities ......................................... -0- 208 Trade receivables less allowance of $602 ($1,063 in 1994) ..... 18,633 14,745 Inventories: Finished goods .............................................. 5,231 7,550 Work in process ............................................. 8,430 4,581 Raw materials ............................................... 11,855 6,992 -------- -------- Total inventories .......................................... 25,516 19,123 Other current assets .......................................... 814 892 Deferred income taxes ......................................... 6,377 3,613 Net assets of discon tinued operations ........................ -0- 3,324 -------- -------- Total current assets 95,998 80,260 Property, plant, and equipment -- at cost Land .......................................................... 1,622 2,224 Buildings ..................................................... 13,917 18,728 Machinery and equipment ....................................... 28,500 40,073 -------- -------- 44,039 61,025 Less accumulated depreciation ................................. 28,044 45,256 -------- -------- Net property, plant, and equipment 15,995 15,769 Goodwill and intangibles ....................................... 24,456 2,059 Minority equity investments .................................... -0- 505 Other assets ................................................... 3,534 2,834 Deferred income taxes .......................................... 270 4,220 -------- -------- Total assets $140,253 $105,647 ======== ========
- -------------------------------------------------------------------------------- September 30 Liabilities and Shareholders' Equity 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Current liabilities Payable to banks................................................................................. $ 1,620 $ 1,634 Current portion of long-term debt................................................................ 306 630 Accounts payable................................................................................. 5,995 3,918 Other accrued expenses........................................................................... 8,857 6,200 Advance payments from customers.................................................................. 238 1,522 Accrued compensation............................................................................. 9,593 9,610 Postemployment benefits other than pensions...................................................... 401 3,567 Other accrued taxes.............................................................................. 1,665 1,686 Income taxes payable............................................................................. 4,470 1,896 Net liabilities of discontinued operations....................................................... 13,140 -0- -------- -------- Total current liabilities 46,285 30,663 Long-term debt.................................................................................... 687 1,219 Postemployment benefits other than pensions....................................................... 3,431 28,138 Unfunded pension costs............................................................................ 3,857 10,965 Other long-term liabilities....................................................................... 808 754 Deferred income taxes............................................................................. 284 195 Shareholders' equity Serial Preferred Shares, without par value: Authorized - 936,285 shares; issued and outstanding Series A, $1.80 cumulative, convertible 161,374 shares......................................................... 3,631 3,631 Common Shares, par value $1 per share: Authorized - 10,000,000 shares; issued and outstanding, excluding 115,056 held in treasury....................................................................... 6,405 6,300 Other capital.................................................................................... 55,148 53,717 Pension adjustment............................................................................... (3,736) (11,439) Foreign currency translation adjustments......................................................... 1,848 (855) Retained earnings................................................................................ 21,605 (17,641) -------- -------- Total shareholders' equity 84,901 33,713 -------- -------- Total liabilities and shareholders' equity $140,253 $105,647 ======== ========
See notes to consolidated financial statements. Notes To Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries Note A -- Accounting Policies Acme-Cleveland Corporation and its subsidiaries accounting and reporting policies conform to generally accepted accounting principles and to industry practices. Significant accounting policies and practices are described below: Consolidation -- The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. In addition, minority equity investments in other companies are stated at cost plus the Company's equity in undistributed earnings. Upon consolidation, all significant intercompany items are eliminated. Foreign Currency Translation -- Financial statements for the Company's subsidiaries outside the United States are translated into U.S. dollars at year-end exchange rates for assets and liabilities and weighted average exchange rates for income and expenses. The resulting translation adjustments are recorded as a separate component of shareholder's equity. Fair Values of Financial Instruments -- The carrying amount reported in the balance sheets for cash and cash equivalents approximates their fair value. All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. Cash Flow Information -- Payments for interest and income taxes were (in thousands):
1995 1994 1993 ------ ------ ------ Interest............................... $ 194 $ 332 $ 430 Income Taxes........................... 8,120 1,960 2,980
Inventories -- Inventories are priced at the lower of cost or market. Inventories are principally valued on the first-in, first-out (FIFO) method. Inventories not valued by the FIFO method are valued using the last-in, first- out (LIFO) method which comprised 9% and 46% of consolidated inventories at September 30, 1995 and 1994, respectively. Goodwill and Intangibles -- Goodwill is the difference between the purchase price and the fair market value of net assets acquired in business combinations treated as purchases. Goodwill is amortized on a straight-line basis over the periods benefited, principally 10 to 40 years. The carrying value of goodwill is assessed for impairment on an ongoing quarterly basis and adjusted when appropriate. Other acquired intangible assets, to which acquisition cost has been allocated based on fair market value, include research and development, customer lists, trade names, assembled workforce, drawings and manuals, and patents. All other intangibles are amortized on a straight-line basis over the periods benefited, generally 5 to 20 years. The accumulated amortization of goodwill and intangibles at September 30, 1995 and 1994 was $2,378,000 and $1,168,000, respectively. Other Income -- Other income included a litigation settlement of $1,225,000 in 1993 and gains from sales of assets of $131,000 in 1995 and $202,000 in 1993. Depreciation -- Depreciation is generally computed using the straight-line method over the estimated useful lives of assets. Research and Development Expense -- Research and development expenditures are charged to continuing operations as incurred. Amounts expensed, portions of which were included in cost of products sold, were $5,343,000, $3,201,000, and $2,553,000, in 1995, 1994, and 1993, respectively. Provision for Warranty Claims -- Estimated warranty costs are provided at the time of sale of the warranted products. Income Taxes -- The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," effective October 1, 1993. The Company has elected not to restate the financial statements of years prior to 1994. This accounting statement requires the use of the liability Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries method for income taxes rather than the previously used deferred method. Under the liability method, deferred tax assets and liabilities are determined by the differences between the financial statement amounts of existing assets and liabilities and their respective tax bases. These differences are measured using the current enacted tax rates. Under the deferred method, deferred income taxes are provided on items recognized in different periods for financial reporting purposes than for income tax purposes. These differences were measured at the effective tax rate in the year of origination. The Company's subsidiaries outside the U.S. compute taxes at rates in effect in the various countries in which they operate. Earnings of these subsidiaries may also be subject to additional income and withholding taxes, when they are distributed as dividends. These additional taxes, net of applicable tax credits, are accrued currently, except with respect to earnings which are not expected to be remitted because they are permanently reinvested. Undistributed earnings of non-U.S. subsidiaries deemed to be permanently reinvested were approximately $1,800,000 at September 30, 1995. Net Earnings (Loss) per Common Share - Net earnings per common share are based on the weighted average number of common shares outstanding during the period, the dilutive effect of stock options and other common stock equivalents, and, if dilutive, the assumed conversion of the Series A Preferred Shares. Net loss per common share is based on the weighted average number of common shares outstanding after increasing the amount of the loss by the dividend requirements on the Series A Preferred Shares. Litigation -- The Company is subject to legal proceedings and claims which have arisen in the ordinary course of its business that have not been finally adjudicated. These actions, when ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the financial position or results of operations of the Company. Environmental Costs - Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Remediation costs that relate to an existing condition caused by past operations are accrued when it is probable that these costs will be incurred and can be reasonably estimated. Reclassifications -- Certain prior year amounts have been reclassified to conform with the current year presentation. Note B -- Discontinued Operations and Sale of Subsidiary Subsequent to Year-End On November 1, 1994 the Company sold all of the common shares of its wholly-owned subsidiary. The Cleveland Twist Drill Company (CTD). This sale resulted in a net gain of $24,727,000, or $3.67 per common share. Under the terms of the stock purchase agreement, the Purchaser paid $45,200,000 in cash and assumed substantially all liabilities related to the business. The purchase agreement provides for the Company to make contingent payments up to 20% of the purchase price, less a $750,000 deductible, for costs associated with a breach of any representation or warranty contained in the agreement. The contingency period ranges between 15 and 24 months subsequent to the sale date. The Company does not anticipate any material charges related to this contingency. CTD manufactured cutting tools used in a wide range of industrial, specialty aerospace, and special tool applications. CTD had operations in the United States, Mexico, and Canada. On October 23, 1995, subsequent to year-end, the Company sold all of the common shares of its wholly-owned second tier subsidiary. The National Acme Company (National Acme). This sale will result in an estimated net gain of $17,000,000, or $2.50 per common share; year-end shareholders' equity of $84,901,000 increasing, after recording the gain and related adjustments, to approximately $105,000,000; and cash increasing to over $50,000,000. Under the terms of the stock purchase agreement, the Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries Purchaser paid $9,600,000 in cash and assumed all liabilities related to the business. The purchase agreement provides for the Company to make contingent payments up to $3,000,000, less a $300,000 deductible, for costs associated with a breach of any representation or warranty contained in the agreement. The contingency period ranges between 18 and 24 months subsequent to the sale date. The Company does not anticipate any material charges related to this contingency. National Acme manufactures and sells multiple spindle bar and chucking machines and related parts and services. Accounting standards require that the results of a major line of business sold be condensed and shown separately as a discontinued operation in the consolidated statements of operations for all reported periods. The Company's consolidated results prior to such restatement are as follows (in thousands): 1995 1994 1993 -------- -------- -------- Net sales............................ $164,117 $176,445 $174,928 ======== ======== ======== Earnings before income taxes, minority interest, extraordinary item, and cumulative effect of accounting changes.................. $ 14,858 $ 10,371 $ 10,045 Income taxes (credit)................ (2,766) 3,755 4,815 Minority interest.................... 152 (116) -0- -------- -------- -------- Earnings before extraordinary item and cumulative effect of accounting changes.................. 17,776 6,500 5,230 Extraordinary item................... -0- -0- 1,900 Net gain on sale of subsidiary....... 24,727 -0- -0- Cumulative effect of accounting changes.................. -0- (29,921) -0- -------- -------- -------- Net earnings (loss).................. $ 42,503 $(23,421) $ 7,130 ======== ======== ======== Earnings (loss) per common share........................ $ 6.30 $ (3.77) $ 1.07 ======== ======== ========
Operational results of CTD (for one month in 1995) and National Acme, which are condensed and shown as discontinued operations in the accompanying consolidated statements of operations, are as follows (in thousands): CTD Results ----------------------------------- 1995 1994 1993 -------- ------- ------- Net sales............................ $ 5,764 $68,577 $65,777 ======== ======= ======= Earnings before income taxes........................ $ 261 $ 4,708 $ 2,151 Income taxes......................... 120 1,615 1,625 -------- -------- ------- Earnings from discontinued operations.......................... $ 141 $ 3,093 $ 526 ======== ======== ======= Earnings per common share............ $ .02 $ .49 $ .08 ======== ======== =======
National Acme Results ----------------------------- 1995 1994 1993 ------- ------- ------- Net sales............................ $37,637 $30,668 $27,641 ======= ======= ======= Earnings (loss) before income taxes........................ $ 4,713 $ 1,047 $ (223) Income taxes (credit) (includes $10.981 benefit related to change in valuation allowance in 1995)............................ (9,131) 151 (135) ------- ------- ------- Earnings (loss) from discontinued operations............. $13,844 $ 896 $ (88) ======= ======= ======= Earnings (loss) per common share (includes $1.63 related to tax benefits in 1995)................... $ 2.05 $ .14 $ (.02) ======= ======= =======
Net (liabilities) of National Acme at September 30, 1995 and assets of CTD at September 30, 1994 were (in thousands): 1995 1994 -------- -------- Net receivables...................... $ 5,594 $ 7,793 Net inventories...................... 5,093 4,733 Other current assets................. 50 321 Net property, plant, and equipment... 2,298 17,835 Other assets......................... 169 1,174 Current deferred income taxes........ 2,474 (815) Other current liabilities............ (9,627) (11,507) Long-term debt....................... -0- (211) Postemployment benefits other than pensions....................... (24,247) (12,004) Unfunded pension costs............... (6,006) (3,667) Deferred income taxes................ 11,062 (328) -------- ------- Net (liabilities) assets............ $(13,140) $ 3,324 ======== =======
At September 30, 1995, shareholders' equity includes a debit of $3,557,000 for the National Acme pension adjustment. Included in shareholders' equity at September 30, 1994 is a debit of $3,433,000 for foreign currency translation adjustments related to CTD and debits of $4,486,000 and $6,283,000 for pension adjustments related to CTD and National Acme, respectively. Notes to Consolidated Financial Statements - ----------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries Note C -- Acquisitions On November 1, 1994, the Company acquired all of the outstanding shares of common stock of Ball Screw & Actuators Co., Inc. (BSA) for a cash price of $6,500,000. Two payments of $750,000 each become payable if certain sales goals are achieved by BSA in calendar years 1995 and 1996. BSA, located in San Jose, California, develops, manufactures, and distributes motion and positioning system components including precision ball screws and nuts, lead screws, actuators, linear guides, and associated products. On November 21, 1994, the Company acquired for cash all of the outstanding shares of common stock of TxPort, Inc. (TxPort) for $26,250,000. TxPort, located near Huntsville, Alabama, develops, manufactures, and sells digital data access products that are used to connect high speed digital data equipment. The BSA and TxPort acquisitions were recorded under the purchase method of accounting: and accordingly, the results of operations of BSA and TxPort for the periods from November 1, 1994 and November 21, 1994, respectively, are included in the accompanying consolidated financial statements. The purchase prices have been allocated to assets acquired and liabilities assumed based on fair market value at the dates of acquisition. The fair value of assets acquired and liabilities assumed, after giving effect to the write-off of certain purchased research and development, is summarized as follows (in thousands):
BSA TxPort ------- -------- Current assets ................. $1,661 $7,511 Property, plant, and equipment.. 595 517 Intangibles .................... 850 3,360 Goodwill........................ 5,475 13,823 Current liabilities............. (2,018) (2,594) Long-term liabilities........... (63) (1,200) ------- -------- $6,500 $21,417 ======= ========
Also on November 21, 1994, the Company acquired for cash the product lines, assets, and related rights of Phoenix Microsystems, Inc. (Phoenix) located in Huntsville, Alabama, for $3,000,000. Phoenix manufactures and sells test instrumentation for the digital telecommunication and data market, primarily for the telephone operating companies. In connection with the Company's acquisition of TxPort and Phoenix, certain research and development projects acquired were determined to have no alternative future use. Accordingly, $5,693,000 of purchased research and development was expensed in the first quarter of 1995 as a nonrecurring cost. BSA is included within the Precision Products segment; TxPort and Phoenix are included within the Telecommunication and Electronic Products segment. The following unaudited pro forma financial information for the Company gives effect to the BSA and TxPort acquisitions as if they had occurred on October 1, 1993. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future. The 1995 pro forma information excludes the write-off of certain purchased research and development of $5,383,000, or $.80 per common share, and includes an additional $181,000, or $.02 per common share, for TxPort (for two months), and $58,000 or $.01 per common share, for BSA (for one month). The 1994 pro forma information includes the write-off of certain purchased research and development of $5,383,000, or $.85 per common share, and full year earnings of $1,087,000, or $.17 per common share, for TxPort, and $599,000, or $.10 per common share, for BSA. The 1995 and 1994 pro forma information includes sales of Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries $3,358,000 and $16,441,000, respectively, for TxPort and $715,000 and $7,282,000, respectively, for BSA. The pro forma results follow (in thousands, except per share data):
Year Ended September 30 ------------------- 1995 1994 -------- -------- Net Sales ............................. $124,789 $100,923 ======== ======== Earnings from continuing operations before cumulative effect of accounting changes ................... $ 9,413 $ (1,186) ======== ======== Net earnings (loss) ................... $ 48,125 $(27,118) ======== ======== Per share data: Earnings from continuing operations before cumulative effect of accounting changes .................. $ 1.39 $ (.23) ======== ======== Net earnings (loss) .................. $ 7.13 $ (4.35) ======== ========
Note D -- Income Taxes As discussed in Note A, the Company adopted SFAS No. 109, "Accounting for Income Taxes," as of October 1, 1993. The cumulative effect from the adoption of this standard increased 1994 earnings from continuing operations by $5,631,000, or $.89 per common share, and earnings from discontinued operations by $3,369,000, or $.54 per common share. On October 1, 1993, a valuation allowance of $20,400,000 was recorded due to the uncertainty of realizing temporary differences, principally related to deferred compensation and employee benefits, foreign and certain state and local net operating loss carryforward, capital loss carryforwards, and foreign tax credit carryforwards. The components of earnings from continuing operations before income taxes and minority interest are (in thousands):
1995 1994 1993 ------ ------ ------ Domestic ......................... $9,106 $4,240 $8,908 Foreign .......................... 778 376 (791) ------ ------ ------ $9,884 $4,616 $8,117 ====== ====== ======
Income taxes from continuing operations before extraordinary item included in the statements of consolidated operations are as follows (in thousands):
Deferred Liability Method Method ----------------- ------ 1995 1994 1993 ------ ------ ------ Federal: Current .................... $7,222 $1,600 $1,233 Deferred ................... (2,061) 67 -0- ------ ------ ------ 5,161 1,667 1,233 Foreign: Current .................... 167 204 (40) Deferred ................... 88 (54) 12 ------ ------ ------ 255 150 (28) State and local: Current .................... 881 300 220 Deferred ................... (52) (128) -0- ------ ------ ------ 829 172 220 Charge in lieu of income taxes ............... -0- -0- 1,900 ------ ------ ------ $6,245 $1,989 $3,325 ====== ====== ======
The 1993 provision for income taxes included charges in lieu of federal and state and local taxes representing taxes which have been provided in the absence of net operating loss and tax credit carryforwards from prior years. Income tax benefits resulting from the utilization of carryforwards for financial reporting purposes in 1993 are presented as an extraordinary item. For continuing operations, as September 30, 1995, the Company had available for federal income tax purposes foreign tax credit carryforwards of $215,000 which expire in 1998 through 2000 and $2,250,000 of net operating loss carryforwards available at certain foreign subsidiaries of which $306,000 expires in 2000 and $1,944,000 has no expiration date. A reconciliation of the statutory federal income tax rate for continuing operations and the effective rate follows:
Deferred Liability Method Method ---------------- ------ 1995 1994 1993 ------ ------ ------ Statutory federal income tax rate .................... 34.0% 34.0% 34.0% Effect of: Foreign income taxes ........ 2.3 .5 3.0 State income taxes .......... 5.9 2.6 2.2 Goodwill .................... 1.8 1.7 (.4) Purchased R&D ............... 16.6 -0- -0- Tax exempt interest ......... (2.2) (.4) -0- Minority equity investments . 1.7 .1 .8 Change in valuation allowance (2.4) -0- -0- Other items ................. 5.5 4.6 1.4 ----- ----- ----- 63.2% 43.1% 41.0% ===== ===== =====
Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries For 1993 the provision for deferred income taxes was based on the tax effects of the differences in the timing of income and expense recognition between financial reporting purposes and tax reporting purposes. The components of deferred income tax expense from continuing operations are summarized as follows (in thousands): Accelerated depreciation for tax purposes....................... $(16) Inventory, employee benefits, and other reserves deducted for tax returns in periods different than for financial reporting purposes....................................................... 31 Elimination of deferred items due to loss carryforwards......... (3) ---- $ 12 ==== Components of the Company's deferred tax assets and liabilities for continuing operations as of September 30, 1995 and 1994 are as follows (in thousands):
1995 1994 ------- ------ Deferred tax assets: Postretirement health care benefits.............. $ 1,283 $ 906 Pensions......................................... 927 973 Inventory........................................ 1,095 974 Compensation and other related accounts.......... 2,065 1,508 Tax credits and foreign losses not currently utilizable...................................... 1,265 2,904 State and local temporary differences and loss carryforwards, net of federal taxes........ 633 582 Other............................................ 3,347 1,761 ------- ------ Subtotal........................................ 10,615 9,608 Deferred tax liabilities: Tax over book depreciation....................... (1,892) (836) Foreign currency translation..................... (952) (876) Other............................................ (124) (124) ------- ------ Subtotal........................................ (2,968) (1,836) Valuation allowance............................... (1,284) (2,923) ------- ------ Net deferred tax asset........................... $ 6,363 $4,849 ======= ======
During 1995, the valuation allowance decreased by $14,149,000, of which $1,639,000 relates to continuing operations. The reduction in the valuation allowance resulted in an increase in net earnings from continuing operations of $235,000, or $.03 per common share, and $10,981,000, or $1.63 per common share, for discontinued operations. The remainder of the decrease in the valuation allowance did not impact net earnings and was principally related to expiring foreign tax credit carryforwards. Note E -- Credit Agreements and Borrowings Short-Term Borrowings -- The Company maintained agreements with several foreign banks providing lines of credit in the amounts of $852,000 and $1,201,000 in 1995 and 1994, respectively. These agreements are renewable annually or upon periodic review by the lending institutions. Long-Term Borrowings -- At September 30, 1995, the Company had a credit agreement with certain banking institutions which permitted borrowings up to $12,000,000 through November, 1997. Of such amount, $2,000,000 was for standby and commercial letters of credit and $1,000,000 was for foreign exchange transactions. The revolving credit notes permit borrowings at the base lending rate of the agent bank, or, alternatively at the Company's option, at 1.75% above an adjusted London Interbank Offered Rate (LIBOR). Such adjustment is defined in the agreement as the published LIBOR rate increased by the reserve percentage prescribed by the Board of Governors of the Federal Reserve System, or any successor. The credit agreement is secured by a first security interest in all domestic accounts receivable, inventory, and equipment. The agreement requires, among other terms, minimum amounts, as defined, of working capital and net worth, and minimum ratios of current assets to current liabilities and total indebtedness to net worth. There were no cash borrowings against the credit agreement at September 30, 1995 or 1994. At September 30, 1995 standby letters of credit of $288,000 were outstanding related to international shipments. Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries Long-term debt at September 30 consisted of the following (in thousands):
1995 1994 ---- ---- 7.125% Industrial Revenue Bonds, annual installments through 1996 ............................... $ -0- $ 365 7.4% to 8.25% notes and mortgages, annual installments through 1999 ............................... 687 854 ----- ------ $ 687 $1,219 ===== ======
Annual debt installments are $306,000 in 1996, $301,000 in 1997, $254,000 in 1998, and $132,000 in 1999. Note F -- Pension and Profit Sharing The Company has non-contributory defined benefit plans covering certain United States employees. Plans for salaried employees typically provide pay-related benefits based on years of service. Plans for hourly and certain salaried employees provide benefits based on flat-dollar amounts and years of service. The Company's current policy is to fund these plans in an amount that falls between the minimum contribution required by ERISA and the maximum tax deductible contribution. Plan assets include equity, fixed income, and money market funds, and individually managed fixed income securities. A summary of the components of net periodic pension cost are as follows (in thousands):
1995 1994 1993 ---- ---- ---- Service cost-benefits earned during the period ........... $ 846 $ 1,588 $ 1,420 Interest cost on projected benefit obligation ................. 3,334 5,191 5,199 Actual return on plan assets ............................. (4,892) (743) (5,993) Net amortization and deferral ........................... 2,491 (4,010) 1,168 ------ ------ ------ Net pension cost of defined benefit plans .............. $ 1,779 $ 2,026 $ 1,794 ======= ======= ======= Related to continuing ................ $ 511 $ 468 $ 356 ======= ======= ======= Related to discontinued .............. $ 1,268 $ 1,558 $ 1,438 ======= ======= =======
The following table sets forth the funded status and amounts recognized in the Company's balance sheet for its defined benefit plans at September 30 (in thousands):
1995 1994 ---- ---- Actuarial present value of: Vested accumulated benefit obligation ................................. $ 39,294 $ 63,906 ======== ======== Nonvested accumulated benefit obligation ......................... $ 1,069 $ 3,184 ======== ======== Projected benefit obligation ................ $ 41,450 $ 69,152 Fair value of plan assets .................... 32,702 54,175 -------- -------- Excess of projected benefit obligation over fair value of plan assets .............................. 8,748 14,977 Unrecognized net asset at transition to SFAS No. 87, net of amortization ............................. 175 987 Unrecognized net loss ........................ (6,348) (13,783) Unrecognized prior service cost ........................................ (168) (481) Additional minimum liability ................. 5,825 11,952 -------- -------- Accrued pension cost ......................... $ 8,232 $ 13,652 ======== ======== Related to continuing ........................ $ 1,169 $ 1,241 ======== ======== Related to discontinued ...................... $ 7,063 $ 12,411 ======== ========
The assumptions used to determine the projected benefit obligation for all periods presented follow: Discount rate .............................................. 7.75% Rate of increase in future compnsation levels ........................................ 4.50% Long-term rate of return on plan assets ............................................... 9.00%
The Company's minimum additional pension liability of $5,825,000 and $11,952,000 consists of intangible assets of $164,000 and $513,000 and reductions of shareholders' equity of $3,736,000 (net of tax) and $11,439,000 at September 30, 1995 and 1994, respectively. Included in unfunded pension costs is the additional minimum pension liability of $272,000 and $6,650,000 at September 30, 1995 and 1994, respectively; the remainder is in net liabilities and assets of discontinued operations. Included in other assets is the intangible asset of $1,000 and $225,000 at September 30, 1995 and 1994, respectively; the remainder is in net liabilities and assets of discontinued operations. Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries The Company has defined contribution retirement plans that cover its eligible employees. The purpose of these defined contribution plans is generally to provide additional financial security during retirement by providing employees with an incentive to make regular savings. The Company matches up to 6% of an employee's covered compensation in accordance with the formulas set forth in the plans. Matching contributions to the plans of continuing operations were $419,000, $272,000 and $234,000 in 1995, 1994, and 1993, respectively. Matching contributions to the plans of discontinued operations were $131,000, $433,000 and $398,000 in 1995, 1994, and 1993, respectively. Note G -- Nonpension Postretirement and Postemployment Benefits In addition to providing pension benefits, the Company provides health care insurance benefits for certain active eligible and retired employees. Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Under SFAS No. 106, the Company is required to accrue the estimated cost of retiree benefit payments other than pensions during employees' active service periods. The Company previously expensed the cost of these benefits as claims were paid. Costs charged to continuing operations were $273,000 and to discontinued operations were $3,595,000 in 1993. The Company elected to recognize this change in accounting on the immediate recognition basis. The cumulative effect of adopting SFAS No. 106 was an increase in accrued postemployment benefits and a decrease in 1994 earnings from continuing operations of $2,050,000, or $.32 per common share, and from discontinued operations of $36,364,000, or $5.78 per common share. In addition to the cumulative effect. the Company's 1995 and 1994 postretirement health care costs were accounted for under the new method and consisted of the following components (in thousands):
1995 1994 ------- ------- Service cost ................................. $ 40 $ 111 Interest cost................................. 1,663 3,296 Net amortization and deferral................. (809) -0- ------ ------ Net periodic postretirement benefit costs..... $ 894 $3,407 ====== ====== Related to continuing......................... $ 217 $ 287 ====== ====== Related to discontinued....................... $ 677 $3,120 ====== ======
The net amortization and deferral is related to a change in actuarial assumptions and is amortized over the remaining lives of retirees using the corridor approach. The Company continues to fund these benefit costs on a pay-as-you-go basis, with the retiree in most instances paying a portion of the costs. Summary information for the Company's plans is as follows at September 30, 1995, and 1994 (in thousands):
1995 1994 ------- ------- Accumulated Postretirement Benefit Obligation (APBO): Retirees..................................... $20,121 $39,717 Active participants eligible to receive benefits............................ 399 741 Other active plan participants............... 1,351 3,082 ------- ------- APBO......................................... 21,871 43,540 Unamortized gain............................. 7,944 1,129 ------- ------- Accrued cost................................. $29,815 $44,669 ======= ======= Related to continuing......................... $ 3,485 $ 3,611 ======= ======= Related to discontinued....................... $26,330 $41,058 ======= =======
The discount rate used in determining the APBO was 7.75% in 1995 and 1994. The assumed health care cost trend rate used in measuring the APBO was an average of 11.5% in 1995, declining to an ultimate rate of 6% in 2004 and thereafter. A 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at September 30, 1995 by approximately 4% and the aggregate of the service and interest cost components of net periodic postretirement benefit cost of 1995 by approximately 4%. Effective October 1, 1993 the Company adopted SFAS No. 112, "Employers' Accounting for Post-employment Benefits." This statement establishes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries financial accounting and reporting for the cost of benefits provided to former or inactive employees after employment but before retirement. Prior to 1994, the cost of such benefits was recorded at the time paid. The adoption resulted in a cumulative effect charge of $192,000 to earnings of continuing operations, or $.03 per common share, and $315,000 to earnings of discontinued operations, or $.05 per common share. At September 30, 1995 and 1994, accruals for continuing operations of $347,000 and $311,000, respectively, were included in postemployment benefits other than pensions. At September 30, 1995 and 1994, accruals for discontinued operations of $71,000 and $196,000, respectively were included in current (liabilities) assets of discontinued operations. Note H - Company Stock Plans With the adoption in 1994 of the Acme-Cleveland Corporation Performance and Equity Incentive Plan (the 1994 Plan) there will be no additional grants of stock options or stock appreciation rights under the Amended 1985 Employees Stock Option and Stock Appreciation Rights Plan. The 1994 Plan provides for the granting of director options, stock options, stock appreciation rights, stock awards, or cash awards. The number of common shares available for grant of awards is 1% of the number of common shares outstanding as of the first day of each fiscal year, plus up to an additional .5% consisting of shares available, but not granted, in prior years. At September 30, 1995, there were 21,860 shares available for grant under the 1994 Plan. Stock Options - The Company may grant nonqualified stock options to directors and non-qualified or incentive stock options to certain key employees of the Company. The aggregate number of common shares that may be issued upon exercise of incentive stock options is 360,000. Directors options granted during 1995 totaled 8,000 shares. No other options were granted during 1995. Summarized transactions are as follows (in thousands, except per share data):
Number of Exercise Price Options Range Per Share --------- --------------- Outstanding at Oct. 1, 1993................................. 436 $5.00 to $17.25 Granted....................................... 8 $10.3125 Exercised..................................... (9) $5.00 to $10.625 Canceled or expired........................... (8) $12.875 --- Outstanding at Sept. 30, 1994............................... 427 $5.00 to $17.25 Granted....................................... 8 $15.25 Exercised..................................... (105) $5.00 to $14.125 Canceled or expired........................... (14) $5.00 to $17.25 ----- Outstanding at Sept. 30, 1995............................... 316 $5.00 to $15.25 ===== Exercisable at Sept. 30, 1995............................... 298 ===
Stock Awards - The Company may grant stock awards to certain key employees. Such awards may be made in common shares, restricted stock, or stock equivalent units, and may be subject to certain conditions, restrictions, and risks of forfeiture, as established by the Board of Directors. Such performance stock awards will vest 3 years from the date of grant and will be considered earned upon the achievement of predetermined financial objectives at the end of the designated three-year period. The value of these awards is charged to expense over the designated performance period. In 1995, 49,500 performance stock awards were granted relating to the three-year performance period ending September 30, 1997. Of the 42,500 performance stock awards issued in 1994, 4,000 were canceled in 1995, leaving 38,500 to cover the performance period ending September 30, 1996. Note 1 - Capital Stock Preferred Shares - The Series A Preferred Shares have voting rights on a share- for-share basis with the common shares, and the right to convert the shares on a share-for-share basis into common shares at any time. Liquidation preference is $26 per share. The Company has the right to redeem the shares at a price of $26 per share. Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries Reserved Shares -- 631,208 common shares are reserved for issuance under the Company stock plans and for conversion of the Series A Preferred Shares. Note J -- Leases The Company leases certain land, buildings, and equipment which are used in manufacturing and warehousing operations. Net liabilities of discontinued operations in 1995 and property, plant, and equipment in 1994 included the following amounts for capital leases at September 30 (in thousands):
1995 1994 ------ ------ Land ............................................. $ 98 $ 98 Buildings ........................................ 1,505 1,505 Machinery and equipment .......................... 2,564 2,805 ------ ------ 4,167 4,408 Less allowances for depreciation and amortization ................... 3,608 3,725 ------ ------ $ 559 $ 683 ====== ======
Future minimum lease payments for continuing operations non-cancelable operating leases with initial or remaining terms of one year or more consisted of the following at September 30, 1995 (in thousands): 1996 ...................................................... $1,288 1997 ...................................................... 669 1998 ...................................................... 425 1999 ...................................................... 263 2000 ...................................................... 182 Thereafter ................................................ 9 ------ Total minimum lease payments ............................. $2,836 ====== Lease amortization is included in depreciation expense. Rental expense for operating leases charged to continuing operations was $1,793,000, $1,265,000, and $974,000, in 1995, 1994, and 1993, respectively. Rental expense for operating leases charged to discontinued operations was $116,000, $383,000, and $478,000, in 1995, 1994, and 1993, respectively. Note K -- Business and Geographic Segment Information The Company has two business segments under continuing operations: Telecommunication and Electronic Products and Precision Products. The businesses in the Telecommunication and Electronic Products segment produce and sell products used by telephone operating companies, interexchange carriers, Fortune 500 type firms that operate private communication networks, and end-user customers in the automotive, material handling systems, power generation, and other industries. Telecommunication products include automated data transmission analyzers, single and multi-function test equipment, computerized cable test and data base management systems, digital data access devices, and molded cable closures and terminals. Electronic products include electronic and photoelectric sensors, encoders, intelligent laser scanners, and electromechanical limit switches. The businesses in the Precision Products segment produce and sell products used in a broad spectrum of industries including aerospace, air compression, automotive, off road vehicles, power transmission components, electronics, and medical industries. Such products include quality assurance products and systems, motion and positioning components and systems, precision gauges, metal and punch form tooling, and specialty gears. Identifiable assets are those assets used exclusively in the operation of each business segment or geographic area. Corporate assets consist primarily of cash and other investments. Financial information by business segment and geographic area follows (in thousands): Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Acme-Cleveland Corporation and Subsidiaries
Business Year Ended September 30 1995 1994 1993 -------- -------- -------- Net sales Telecommunications and electronic products ........ $ 82,940 $ 56,055 $ 58,533 Precision products .......... 37,776 21,145 22,977 -------- -------- -------- $120,716 $ 77,200 $ 81,510 ======== ======== ======== Earnings (loss) from continuing operations Telecommunications and electronic products ........ $ 11,752 $ 4,787 $ 8,348 Precision products .......... 5,440 2,717 2,596 Corporate ................... (3,269) (3,710) (2,809) -------- -------- -------- 13,923 3,794 8,135 Net interest ................ 1,599 820 479 Net other ................... 55 2 (497) Purchased R&D write-off ..... (5,693) -0- -0- -------- -------- -------- Earnings from continuing operations before income taxes, minority, interest, extraordinary item, and cumulative effect of accounting changes ........ $ 9,884 $ 4,616 $ 8,117 ======== ======== ======== Identifiable assets Telecommunications and electronic products ........ $ 66,374 $ 30,352 $ 23,160 Precision products .......... 26,480 14,771 15,205 Corporate ................... 47,399 32,864 33,278 Discontinued operations ..... -0-/(1)/ 27,660/(2)/ 52,246 -------- -------- -------- $140,253 $105,647 $123,889 ======== ======== ======== Depreciation Telecommunications and electronic products ........ $ 1,901 $ 1,807 $ 1,162 Precision products .......... 949 788 998 Corporate ................... 31 30 52 Discontinued operations ..... 560 3,187 4,027 -------- -------- -------- $ 3,441 $ 5,812 $ 6,239 ======== ======== ======== Capital additions Telecommunications and electronic products ........ $ 3,866 $ 1,716 $ 1,128 Precision products .......... 1,144 430 356 Corporate ................... 40 6 30 Discontinued operations ..... 297 2,431 4,187 -------- -------- -------- $ 5,347 $ 4,583 $ 5,701 ======== ======== ======== Geographic Year Ended September 30 1995 1994 1993 -------- -------- -------- Net sales United States Sales to unaffiliated customers ................. $106,263 $ 63,705 $ 69,719 Interarea sales ............ 2,093 1,967 1,267 -------- -------- -------- 108,356 65,672 70,986 International Sales to unaffiliated customers ................. 14,453 13,495 11,791 Interarea sales ............ 2,512 1,816 2,293 -------- -------- -------- 16,965 15,311 14,084 Eliminations Interarea sales ............. (4,605) (3,783) (3,560) -------- -------- -------- $120,716 $ 77,200 $ 81,510 ======== ======== ======== Earnings from continuing operations before income taxes, minority interest, extraordinary item, and cumulative effect of accounting changes United States ............... $ 9,106 $ 4,240 $ 8,908 International ............... 778 376 (791) -------- -------- -------- $ 9,884 $ 4,616 $ 8,117 ======== ======== ======== Identifiable assets United States ............... $130,522 $ 89,996 $106,337 International ............... 9,731 15,651 17,552 -------- -------- -------- $140,253 $105,647 $123,889 ======== ======== ========
Notes: (1) Net liabilities of discontinued operations are net of assets of $26,740 at September 30, 1995. (2) Amounts are net of liabilities of $28,532 at September 30, 1994. Report of Ernst & Young LLP, Independent Auditors - -------------------------------------------------------------- To the Board of Directors and Shareholders Acme-Cleveland Corporation We have audited the accompanying consolidated balance sheets of Acme-Cleveland Corporation and Subsidiaries as of September 30, 1995 and 1994, and the related statements of consolidated operations, shareholders' equity, and cash flows for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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 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 Acme-Cleveland Corporation and Subsidiaries at September 30, 1995 and 1994, and the consolidated results of their operations and cash flows for each of the three years in the period ended September 30, 1995 in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cleveland, Ohio October 30, 1995 FORM 10-Q PART 1 - FINANCIAL INFORMATION ACME-CLEVELAND CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED OPERATIONS (in thousands, except per share data)
Six Months Ended Three Months Ended March 31 March 31 ------------------------------ ------------------------------ 1996 1995 1996 1995 -------------- --------------- -------------- -------------- Net Sales $65,744 $56,804 $35,169 $32,113 Cost of products sold 38,859 33,586 20,740 18,595 -------------- --------------- -------------- -------------- Gross profit 26,885 23,218 14,429 13,518 Selling, general and administrative expense 17,295 14,441 8,398 8,439 Research and development expense 2,421 1,777 1,320 1,052 Amortization of goodwill and intangibles 826 521 469 344 -------------- --------------- -------------- -------------- Operating profit 6,343 6,479 4,242 3,683 Other income (expense) Interest income 950 1,033 389 545 Interest expense (65) (87) (26) (37) Other income 512 421 442 188 Other expenses (345) (670) (28) (401) Purchased research and development write-off -0- (5,693) -0- -0- Unsolicited tender offer expenses (1,250) -0- (1,250) -0- -------------- --------------- -------------- -------------- (198) (4,996) (473) 295 -------------- --------------- -------------- -------------- Earnings from continuing operations before income taxes 6,145 1,483 3,769 3,978 Income taxes 2,385 2,810 1,450 1,710 -------------- --------------- -------------- -------------- Earnings (loss) from continuing operations 3,760 (1,327) 2,319 2,268 Discontinued operations: Earnings from operations, net of tax benefit of $10,981 for the six months ended March 31, 1995 -0- 11,668 -0- 387 Gain on sale (less income taxes of $13,140 and $1,500 for the six months ended March 31, 1996 and 1995 respectively) 17,025 24,727 -0- -0- -------------- --------------- -------------- -------------- 17,025 36,395 -0- 387 -------------- --------------- -------------- -------------- Net earnings 20,785 $35,068 $2,319 $2,655 ============== =============== ============== ============== Earnings (loss) per common share. Continuing operations $0.55 ($0.20) $0.34 $0.34 Discontinued operations Earning from operations, net of taxes -0- 1.75 -0- 0.06 Gain on sale 2.49 3.71 -0- -0- -------------- --------------- -------------- -------------- 2.49 5.46 $0.34 0.06 -------------- --------------- -------------- -------------- Net earnings per common share $3.04 $5.26 -0- $0.40 ============== =============== ============== ============== Number of shares used in computation of net earnings per common share 6,827 6,666 6,663 8,508 ============== =============== ============== ============== Dividends per share $0.25 $0.23 $0.13 $0.12 ============== =============== ============== ==============
2 ACME-CLEVELAND CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
March 31 September 30 1996 1996 ------------- ------------- Assets Current assets Cash and cash equivalents, including restricted cash $ 25,877 $ 44,658 Trade receivables, less allowances of $753 and $802, respectively 23,802 18,633 Inventories: Finished goods 8,276 5,231 Work in process 9,734 8,430 Raw materials 15,550 11,855 ------------- ------------- Total inventories 33,560 25,516 Other current assets 1,044 814 Deferred income taxes 6,600 6,377 ------------- ------------- Total current assets 90,883 95,998 Property, plant, and equipment - at cost 47,543 44,039 Less accumulated depreciation 29,388 28,044 ------------- ------------- Net property, plant and equipment 18,155 15,995 Goodwill and intangibles 35,376 24,456 Other assets 4,078 3,534 Deferred income taxes 250 270 ------------- ------------- Total assets $ 148,742 $ 140,253 ============= =============
March 31 September 30 1996 1995 ------------- -------------- Liabilities and Shareholders' Equity Current liabilities Payable to banks $1,545 $1,620 Current portion of long-term debt 296 306 Accounts payable 7,550 5,995 Other accrued expenses 11,512 10,760 Accrued compensation 7,509 9,994 Income taxes payable 3,397 4,470 Net liabilities discontinued operations -0- 13,140 ------------- -------------- Total current liabilities 31,809 46,285 Long-term debt 524 687 Postemployment benefits other than pensions 3,374 3,431 Undetermined pension costs 3,770 3,857 Other long-term liabilities 1,437 1,092 Shareholders' equity Series Preferred Shares, without par value: Authorized - 936,285 shares; issued and outstanding Series A, $1.80 cumulative, convertible 161,374 shares, Liquidation preference $26 per share 3,631 3,631 Common Shares, par value $1 per share: Authorized - 10,000,000 shares; issued and outstanding, excluding 115,056 treasury shares 6,425 6,405 Other capital 55,543 55,148 Pension adjustment (179) (3,736) Foreign currency translation adjustments 1,764 1,848 Retained earnings 40,644 21,605 ------------- -------------- Total shareholders' equity 107,828 84,901 ------------- -------------- Total liabilities and shareholders' equity $148,742 $140,253 ============= ==============
ACME-CLEVELAND CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS (In thousands)
Six Months Ended March 31 ------------------------------ 1996 1995 ------------- --------------- Operating activities Earnings (loss) from operations: Continuing $3,760 ($1,327) Discontinued 17,025 36,395 Adjustments to reconcile earnings (loss) to net cash provided by operating activities: Depreciation and amortization 2,550 1,963 Cash on sale of property, plant, and equipment (7) (6) Purchased research and development write-off -0- 5,693 Undistributed earnings of minority equity investments -0- 12 Deferred income tax 87 (10,774) Gain on sale of subsidiaries (17,025) (24,727) Cash (used) provided by discontinued operations (100) 416 Changes in current assets and liabilities excluding the effects of acquisitions and divestitures: (Increase) decrease in trade receivables (3,188) (2,481) (Increase) decrease in inventories (6,234) (2,759) (Increase) decrease in other current assets (213) (86) Increase (decrease) in payable to banks (51) 190 Increase (decrease) in accounts payable 1,610 1,338 Increase (decrease) in other accrued liabilities (735) 437 Increase (decrease) in accrued compensation (2,487) 580 Increase (decrease) in income taxes payable (1,314) (385) Increase (decrease) in postemployment benefits other than pensions (97) 2 Increase (decrease) in unfunded pension costs 342 79 Other, net (888) (387) ---------- --------- Net cash (used) provided by operating activities (6,965) 4,173
Six Months Ended March 31 ---------------- 1996 1995 -------- ------ Investing activities Capital expenditures ($1,436) ($2,947) Proceeds from sale of property, plant, and equipment 8 9 Purchases of marketable securities, net -0- (46) Net proceeds from sale of subsidiaries 7,981 41,718 Acquistions - net of cash required (15,719) (35,816) Cash used for discontinued operations -0- (124) -------- -------- Net cash (used) provided by investing activities (9,166) 2,794 Financing activities Principal payments on long-term debt and notes payable (1,378) (1,434) Principal borrowings on long-term debt and notes payable -0- 28 Exercise of stock options 260 102 Issuance of common stock 155 -0- Dividends paid (1,746) (1,596) Cash used for discontinued operations -0- (518) -------- -------- Net cash used by financing activities (2,709) (3,418) Effect of exchange rate changes on cash 59 (272) -------- -------- (Decrease) increase in cash and cash equivalents (18,781) 3,277 Cash and cash equivalents at beginning of period 44,658 38,355 -------- ------- Cash and cash equivalents at end of period $25,877 $41,632 ======== =======
6 ACME-CLEVELAND CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 Note A - Basis of Presentation - ----------------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and consistent with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes that would be required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature. Certain 1995 amounts were reclassified to conform to the 1996 presentation. Operating results for the quarter and six months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended September 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1995. Note B - Restricted Cash - ------------------------ Cash and cash equivalents at March 31, 1996 includes $11.4 million held in a revocable benefits protection trust; in the event of a change of control, the trust becomes irrevocable. Trust assets fund certain supplemental pension benefits to certain employees and provide benefits pursuant to certain other deferred compensation and executive compensation arrangements. Note C - Goodwill and Intangibles - ---------------------------------- Goodwill is the excess of the purchase price over the fair market value of net assets acquired in business combinations treated as purchases. Goodwill is amortized on a straight-line basis over the periods benefited, principally 10 to 40 years. Other acquired intangible assets, to which acquisition cost has been allocated based on fair market value, include research and development, customer lists, trade names, assembled workforce, drawings and manuals, and patents. These intangibles are amortized on a straight-line basis over the periods benefited, generally 5 to 20 years. The carrying value of goodwill and intangibles is assessed for impairment on an ongoing basis and adjusted when appropriate. Note D - Acquisitions - --------------------- On January 24, 1996, the Company acquired all of the common stock of Dolan-Jenner Industries, Inc., through the purchase of the common stock of its parent holding company, Dolan-Clarkson Acquisition Corporation (collectively, Dolan-Jenner) for a cash price of $13.0 million. In a separate transaction, on January 29, 1996, the Company purchased land and a building from a realty trust for $2.0 million. Dolan-Jenner, located in Lawrence, Massachusetts, is a manufacturer of fiber optic photoelectric sensors and controls, measuring and machine safety devices, as well as fiber optic cable and fiber optic illumination systems. On November 21, 1994, the Company acquired all of the common stock of TxPort, Inc. for a cash price of $26.25 million. TxPort develops, manufactures, and sells digital data access products that are used to connect high speed digital data equipment. 7 ACME-CLEVELAND CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 Also on November 21, 1994, the Company acquired the product lines, assets and related rights of Phoenix Microsystems, Inc., for a cash price of $3.0 million. Phoenix manufactures and sells test instrumentation for the digital telecommunication and data market, primarily for the telephone operating companies. On November 1, 1994, the Company acquired all of the common stock of Ball Screws & Actuators Co., Inc. (BSA) for a cash price of $6.5 million. Two contingent payments of $.75 million each become payable if certain sales goals are achieved by BSA in calendar years 1995 and 1996. The goal for 1995 was achieved, and the payment for that year was made during the second quarter of 1996. BSA develops, manufactures, and distributes motion and positioning system components including precision ball screws and nuts, lead screws, actuators, linear guides, and associated products. These acquisitions were recorded under the purchase method of accounting; and accordingly, the results of operations, subsequent to the respective acquisition dates, were included in the accompanying consolidated financial statements. The purchase prices have been allocated to assets acquired and liabilities assumed based on fair market value at the dates of acquisition. Dolan-Jenner, TxPort, and Phoenix are included within the telecommunication and electronic products segment; BSA is included within the precision products segment. The following unaudited pro forma financial information gives effect to the acquisitions as if they had occurred on October 1, 1994 for Dolan-Jenner and October 1, 1993 for TxPort (at which date the write-off of certain purchased research and development is given effect) and BSA. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future (in thousands, except per share data).
Six Months Ended March 31, ---------------- 1996 1995 ---- ---- Net assets $69,573 $67,951 ------- ------- Earnings from continuing operations before unusual items $4,276 $4,301 ------ ------ Net earnings $20,501 $40,696 ------- ------- Per share data: Earnings from continuing operations before unusual items $ .63 $ .65 ----- ----- Net earnings $ 3.00 $ 6.11 ------ ------
8 ACME-CLEVELAND CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31,1996 NOTE E - Write-Off of Certain Purchased Research and Development - ---------------------------------------------------------------- In connection with the Company's acquisition of TxPort and Phoenix, certain research and development projects acquired were determined to have no alternative future use. Accordingly, $5.7 million was expensed in the first quarter of 1995 ($5.4 million, or $.81 per common share, on an after tax basis). NOTE F - Unsolicited Tender Offer Expenses - ------------------------------------------ During 1996, the Company recorded charges of $1.25 million ($.8 million after taxes, or $.12 per common share)for costs incurred to date associated with an unsolicited tender offer to acquire the Company. These costs include investment banking fees, legal fees and public disclosure expenses. The Company expects to disburse this amount within 1996. While other costs are anticipated in the future, the timing and amounts are currently indeterminable. If no transaction is consummated, the maximum investment banking fee consists of a retainer, which has been incurred, plus quarterly financial advisory fees. If a transaction is consummated, the maximum amount of fees payable would be derived by a formula set forth in the contact between the Company and the investment banking firm. Components of this formula, which incorporates certain incentives, include the number of shares outstanding and the stock price at the time such fees become payable in full. Note G - Shareholder Rights Plan - -------------------------------- On March 11, 1996, the Board of Directors of the Company declared a dividend consisting of one Right for each outstanding common share of the Company. The distribution was credited March 23, 1996 to the shareholders of record on that date. Following the date on which a public announcement is given that a person or group of affiliated or associated persons (Acquiring Person) has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the common shares then outstanding (Share Acquisition Date), each Right entitles the registered holder (other than an Acquiring Person)to purchase from the Company one one-hundredth of a Series B Preferred Share at a price of $81.00, subject to adjustment, or to acquire one common share for an exercise price of $1.00 per share subject to antidilution adjustments. The Rights will expire at the close of business on March 23, 2006, unless earlier redeemed by the Company, at a price of $.05 per Right prior to the Share Acquisition Date. The description and terms of the Rights are set forth in a Rights Agreement between the Company and Society National Bank, as Rights Agent, adopted by the Company on March 11, 1996, and amended by a First Amendment to Rights Agreement, dated as of March 20, 1996, between the Company and the Rights Agent. Note H - Discontinued Operations - -------------------------------- On October 23, 1995, the Company sold all of the common shares of its wholly-owned second tier subsidiary, The National Acme Company, resulting in a gain on the sale of $17.0 million, or $2.49 per common share. The purchase agreement provides for the Company to make contingent payments up to $3.0 million, less a $.3 million deductible, for costs associated with a breach of any representation or warranty contained in the agreement. The contingency period ranges between 9 ACME-CLEVELAND CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 18 and 24 months subsequent to the sale date. The Company does not anticipate any material charges related to this contingency. On November 1, 1994, the Company sold all of the common shares of its wholly-owned subsidiary, The Cleveland Twist Drill Company, resulting in a gain on the sale of $24.7 million, or $3.75 per common share. The purchase agreement provides for the Company to make contingent payments up to 20% of the purchase price, less a $.75 million deductible, for costs associated with a breach of any representation or warranty contained in the agreement. The contingency period ranges between 15 and 24 months subsequent to the sale date. The Company does not anticipate any material charges related to this contingency. Note 1 - Subsequent Event - Acquisition - --------------------------------------- On April 1, 1996, the Company acquired product lines, assets, and related rights of Phoenix Data Communication Corporation (Phoenix DataCom) for a cash price of $2.7 million plus a future contingency payment which is based on 1998 net sales. Phoenix DataCom products directly serve the wide area networking segment of the telecommunication industry using frame relay service. ATTACHMENT 2 Pro Forma Income Statement Year Ended December 31, 1995 (amounts in thousands)
Danaher Acme Adjustments Combined ---------------------------------------------------------- Net revenues $1,486,769 $126,600 $1,613,369 Cost of sales 1,039,622 $74,480 (600) (f) 1,113,502 Selling, general and administrative expenses 266,890 $39,200 2,700 (g) 308,790 Other -- $0 -- -------------------------- ----------- Total operating expenses 1,306,512 113,680 1,422,292 Operating profit 180,257 12,920 191,077 Interest (income) expense, net 7,198 (5,249) 12,600 (h) 14,549 -------------------------- ----------- Earnings before income taxes 173,059 18,169 176,528 Income taxes 67,293 9,250 (7,700) (i) 68,843 -------------------------- ----------- Net earnings $105,766 $8,919 $107,685 ========================== ===========
Pro Forma Income Statement Three Months Ended March 31, 1996 Unaudited (amounts in thousands)
Adjust- Danaher Acme ments Combined ------------------------------------------------------- Net revenues $409,557 $35,169 $444,726 Cost of sales 285,264 20,740 (150) (f) 305,854 Selling, general and (1,250) (j) administrative expenses 77,165 11,023 670 (g) 87,608 ---------------------------- ------------- Total operating expenses 362,429 31,763 393,462 Operating profit 47,128 3,406 51,264 Interest (income) expense, net 2,983 (363) 3,150 (h) 5,770 ---------------------------- ------------- Earnings before income taxes 44,145 3,769 45,494 Income taxes 17,217 1,450 900 (i) 17,767 ---------------------------- ------------- Net earnings $ 26,928 $ 2,319 $ 27,727 ============================ =============
Pro Forma Balance Sheet As of March 31, 1996 Unaudited (amounts in thousands)
Adjust- Danaher Acme ments Combined ------------------------------------------------------------ ASSETS ------ Current Assets: Cash and cash equivalents $15,867 $25,877 $41,744 Accounts receivable, net 250,398 23,802 274,200 Total inventories 206,773 33,560 1,000 (a) 241,333 Prepaid expenses and other current assets 36,981 7,644 (5,605) (b) 39,020 ----------------------------- ------------- Total current assets 510,019 90,883 596,297 Property, plant and equipment 293,438 18,155 311,593 Other assets 83,594 4,328 87,922 Excess of cost over net assets of acquired companies, net 616,429 35,376 106,777 (c) 758,582 ----------------------------- ------------- Total assets $1,503,480 $148,742 $1,754,394 ============================= ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Notes payable and current portion of long-term debt $50,065 1,841 $51,906 Accounts payable 96,757 7,550 104,307 Accrued expenses 347,931 22,418 370,349 ----------------------------- ------------- Total current liabilities 494,753 31,809 526,562 Other liabilities 227,269 8,581 235,850 Long-term debt 101,680 524 210,000 (d) 312,204 Stockholders' equity: Common stock 634 6,425 (6,425) (e) 634 Additional paid-in capital 315,931 58,995 (58,995) 315,931 Retained earnings 409,939 40,644 (40,644) (e) 409,939 Cumulative foreign translation adjustment 2,873 1,764 (1,764) (e) 2,873 Treasury stock (49,599) - (49,599) ----------------------------- ------------- Total stockholders' equity 679,778 107,828 679,778 ----------------------------- ------------- Total liabilities and stockholders' equity $1,503,480 $148,742 $1,754,394 ============================= =============
EXPLANATORY NOTES TO PRO-FORMA FINANCIAL STATEMENTS: - ---------------------------------------------------- (A) Represents an increase in inventory amounts to fair value, principally the elimination of LIFO valuation allowances. (B) Represents elimination of Acme-Cleveland common stock reflected in the Danaher balance sheet as securities available for sale. (C) Represents the excess of cost over net assets of Acme-Cleveland Corporation. (D) Represents borrowings necessary to complete the transaction subsequent to March 31, 1996. (E) Represents elimination of historical equity balances for Acme-Cleveland. (F) Represents the effects to the inventory adjustments discussed in item (A) above and the change in depreciation associated with establishing new values and useful lives for the acquired fixed assets. (G) Represents amortization of the excess of cost over net assets of Acme- Cleveland. (H) Represents interest associated with the additional borrowings discussed in item (D) above. (I) Represents an adjustment to reflect an appropriate effective tax rate. (J) Represents elimination of costs of tender offer included in Acme- Cleveland's income statement. -----END PRIVACY-ENHANCED MESSAGE-----