-----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, Dh8850vaxzM4qaHiwgyFGNDzy62E2YE2Ki2U/jsckiTA2tAKf9/61G1MxBHqJzR+ pOg019KK4tmWxN6NCIVt1g== 0000059198-96-000003.txt : 19960315 0000059198-96-000003.hdr.sgml : 19960315 ACCESSION NUMBER: 0000059198-96-000003 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960314 SROS: CSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRINOVA CORP CENTRAL INDEX KEY: 0000059198 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 344288310 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00924 FILM NUMBER: 96534735 BUSINESS ADDRESS: STREET 1: 3000 STRAYER CITY: MAUMEE STATE: OH ZIP: 43537 BUSINESS PHONE: 4198672200 FORMER COMPANY: FORMER CONFORMED NAME: LIBBEY OWENS FORD CO DATE OF NAME CHANGE: 19860814 FORMER COMPANY: FORMER CONFORMED NAME: LIBBEY OWENS FORD GLASS CO DATE OF NAME CHANGE: 19681004 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission File No. 1-924 TRINOVA CORPORATION (Exact name of registrant as specified in its charter) Ohio 34-4288310 (State of Incorporation) (I.R.S. Employer Identification No.) 3000 Strayer, Maumee, Ohio 43537-0050 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (419) 867-2200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Shares, $5.00 Par Value Frankfurt Stock Exchange Chicago Stock Exchange New York Stock Exchange Pacific Stock Exchange The Stock Exchange (London) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] [Cover page continued] -2- The aggregate market value of the Common Shares held by non-affiliates of the registrant as of February 19, 1996, was $851,858,257. The number of Common Shares, $5 Par Value, outstanding as of February 19, 1996, was 28,825,194. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1995 Annual Report to Security Holders are filed as Exhibit (13) filed hereto and are incorporated by reference into Parts I, II and IV. Portions of the proxy statement for the annual meeting of security holders to be held on April 18, 1996, are incorporated by reference into Part III. This document, including exhibits, contains 68 pages. The cover page consists of 2 pages. The Exhibit Index is located at page 20. [End of cover page] -3- PART I ITEM 1. Business. (a) TRINOVA Corporation ("TRINOVA") is a world leader in the manufacture and distribution of engineered components and systems for industry, sold through its operating companies, Aeroquip Corporation ("Aeroquip") and Vickers, Incorporated ("Vickers"), to the industrial, automotive, and aerospace and defense markets. In 1995, TRINOVA increased its quarterly dividend to $.18 per share, or $.72 per share for the year, from $.17 per share in 1994, or $.68 per share for the year. In January 1996, TRINOVA announced an increase in the quarterly dividend to $.20 per share, or $.80 per share on an annualized basis. In October 1995, TRINOVA announced that it may purchase up to 2 million of its outstanding common shares pursuant to a previously authorized stock repurchase program. Under this authorization, common shares may be purchased from time to time in the open market and through privately negotiated transactions. Common shares purchased will be for the treasury and will be available for general corporate purposes. In the 1995 fourth quarter, TRINOVA purchased 186,200 of its common shares at a cost of $5.5 million. TRINOVA expects to make further purchases in 1996, but is not committed to purchase a specific number of shares. TRINOVA closed two of its automotive plastics plants in the 1995 fourth quarter and will be closing a third plant in 1996. On December 1, 1995, TRINOVA acquired certain assets and liabilities of the Dynapower/Stratopower unit of General Signal Corporation for approximately $5.6 million. The Dynapower/Stratopower product line includes axial piston hydraulic pumps, motors and starters for aerospace, military and commercial markets and hydrostatic transmissions for armored personnel carriers. Effective December 21, 1995, TRINOVA acquired the magnetic chip detector product line of Muirhead Vactric Components Ltd. for approximately $2.2 million. Effective December 30, 1995, TRINOVA acquired certain assets and liabilities and the business of the Electronic Systems Division (ESD) of Cincinnati Milacron Inc. for approximately $106 million. ESD designs and produces computer controls, software and drives used in the machine tool and plastics processing industry. On March 1, 1996, TRINOVA agreed to sell its 35% interest in Yokohama Aeroquip K.K. to Yokohama Rubber Company for approximately $34 million, which will result in a second-quarter 1996 pretax gain of approximately $27 million ($15.5 million, net or 50 cents per share) for TRINOVA. Yokohama Aeroquip K.K., a joint venture between Aeroquip and Yokohama Rubber Company, manufactures and sells fittings, couplings and hose and tube assemblies for industrial and automotive markets. (b) "Note 15 - Business Segments" on pages 55-56 of Exhibit (13) filed hereunder is incorporated herein by reference. (c) A description of the business done and intended to be done by TRINOVA and its subsidiaries in each industry segment follows. -4- (1) INDUSTRIAL: Aeroquip manufactures and sells hose and hose assemblies; hose fittings and adapters; tube fittings and adapters; couplings; refrigeration/air conditioning connectors; and molded, extruded and co- extruded plastic products. Vickers manufactures and sells hydraulic, electrohydraulic, pneumatic and electronic control devices; piston and vane pumps and motors; open architecture computer controls; hydraulic and pneumatic cylinders; hydraulic power packages; electric motors and drives; hydraulic and lubrication filtration; and fluid-evaluation products and services. Principal markets for these products include construction, mining, logging and farm equipment; machine tool; process industries; electrical machinery; air conditioning/refrigeration; appliances and communications equipment; electronics; lift truck; material handling; plant maintenance; and housing and commercial construction. Sales are dispersed geographically across a broad customer base. Products are sold directly to original equipment manufacturers ("OEMs") and through a worldwide network of distributors serving aftermarket and small- and medium-sized OEM customers. The industrial business is highly competitive in terms of price, quality and service. TRINOVA believes that Aeroquip has significant market position worldwide for industrial hose, fittings, couplings and adapters. TRINOVA also believes that Vickers has significant market position worldwide for hydraulic and electrohydraulic controls; piston and vane pumps and motors; hydraulic power packages; and electronic controls, drives and motors. TRINOVA serves many customers in the highly diverse and fragmented industrial markets. Due to the diversity of TRINOVA's products, there are a large number of competitors scattered across a wide variety of market segments, with no single competitor competing in each of TRINOVA's product lines. The order backlog for the industrial business was $201.5 million as of December 31, 1995, compared to $185 million as of December 31, 1994. Substantially all of the December 31, 1995, backlog is expected to be filled in 1996. (2) AUTOMOTIVE: Aeroquip manufactures and sells air conditioning, power steering, oil and transmission cooler, and fuel line components and assemblies; bodyside moldings; decorative bumper strips; roof moldings; spoilers; rocker panel claddings; engine components; louvers and trim plates; interior trim; garnish moldings; structural products such as bumper beams; interior engine covers; instrument clusters; radio bezels; and display products. The automotive operations of Aeroquip serve worldwide automobile, light truck and van manufacturers. Products are primarily sold directly to manufacturers. Approximately 51% of worldwide sales of TRINOVA's automotive business are made to three major U.S. automobile manufacturers. The automotive industry is highly competitive in terms of price, quality and service. Aeroquip is a preferred supplier to the major U.S. and European automobile manufacturers. Competition for products in the automotive industry is very fragmented. (3) AEROSPACE & DEFENSE: Aeroquip manufactures and sells hose, fittings, couplings, swivels, V-band couplings, fuel-handling products, high- pressure tube fittings, clamps and noise-reduction products. -5- Vickers manufactures and sells fixed- and variable-displacement pumps; fuel pumps; hydraulic motors and motor packages; electric motorpumps and generator packages; valves and valve packages; electrohydraulic and electromechanical actuators; sensors and monitoring devices; and electronic controllers. The aerospace & defense operations of Aeroquip and Vickers serve worldwide commercial aerospace and military markets including commercial aircraft, air defense, cargo handling, combat and support vehicles, commuter aircraft, engines, marine, military aircraft, military weaponry, missiles and naval machinery. Products are sold directly to OEM businesses and the Government and through a distributor network. Approximately 17% of TRINOVA's aerospace & defense business sales are made to two major U.S. airframe manufacturers. The aerospace & defense business is highly competitive in terms of price, quality and service. TRINOVA believes that Aeroquip has significant market position worldwide for aerospace hose, fittings and quick-disconnect couplings. TRINOVA also believes that Vickers has significant market position worldwide for aerospace fixed- and variable-displacement hydraulic pumps, hydraulic motors and motor packages, and aerospace sensors and monitoring devices. TRINOVA serves a large number of customers in the aerospace and defense market. Due to the diversity of TRINOVA's products, there are a large number of competitors scattered across a wide variety of market segments, with no single competitor competing in each of TRINOVA's product lines. The order backlog for the aerospace & defense business was $266.4 million as of December 31, 1995, compared to $267 million as of December 31, 1994. Approximately 20% of the December 31, 1995, backlog is not expected to be filled in 1996 because certain contracts require deliveries after 1996. Approximately 41% of the December 31, 1995, backlog represents direct Government contracts or subcontracts on Government programs, which are subject to termination for convenience by the Government. (4) OTHER INFORMATION: TRINOVA and its subsidiaries are generally not dependent upon any one source for raw materials or purchased components essential to their businesses, and it is believed that such raw materials and components will be available in adequate quantities to meet anticipated production schedules. Patents owned by TRINOVA are considered important to the conduct of its present businesses. TRINOVA is licensed under a number of patents, none of which are considered material to its businesses. TRINOVA is the owner of a number of U.S. and non-U.S. trademark registrations. TRINOVA has received notice of a claim of infringement concerning U.S. patents relating to machining system controls. Although TRINOVA has not been named as a party in any litigation relating to these patents, assertions of infringement have been made against TRINOVA by the owners of certain patents. Based on its evaluation to date, TRINOVA believes it has defenses to each of the claims and intends to assert them vigorously. TRINOVA devotes engineering, research and development efforts to new products and improvement of existing products and production processes. During 1995, 1994 and 1993, TRINOVA spent a total of $63 million, $55.5 million and $55.3 million, respectively, on these efforts. -6- TRINOVA employed 15,299 persons at December 31, 1995. (d) "Note 14 - Non-U.S. Operations" on page 54 of Exhibit (13) filed hereunder is incorporated herein by reference. TRINOVA believes the risk attendant to non-U.S. operations, which are primarily in developed countries, is not significantly greater than that attendant to its U.S. operations. ITEM 2. Properties. A description of TRINOVA's principal properties follows. Except as otherwise indicated, all properties are owned by TRINOVA or its subsidiaries. TRINOVA's executive offices (leased) are located in Maumee, Ohio. INDUSTRIAL: Aeroquip Corporation has executive and administrative offices in Maumee, Ohio (leased); technical centers in Ann Arbor, Michigan (leased) and Maumee, Ohio (leased); and manufacturing facilities throughout the United States and abroad, including plants in Mountain Home, Arkansas; Fitzgerald, Georgia; New Haven, Indiana; Williamsport, Maryland; Forest City and Norwood, North Carolina; Van Wert, Ohio; Gainesboro, Tennessee; Bassett, Virginia; Wausau, Wisconsin; Guaratingueta and Rio de Janeiro, Brazil; Chambray-Les- Tours, France; Baden-Baden and Hann-Muenden, Germany; Livorno, Italy; and Cardiff, United Kingdom. Aeroquip also owns or leases warehouse, assembly and distribution facilities and sales offices in the United States and abroad. Vickers, Incorporated has executive and administrative offices in Maumee, Ohio (leased); a technical center in Rochester Hills (leased), Michigan; and manufacturing facilities throughout the United States and abroad, including plants in Decatur, Alabama; Searcy, Arkansas; Carol Stream and Petersburg (leased), Illinois; Grand Blanc and Jackson, Michigan; South Lebanon, Ohio; Omaha, Nebraska; White City, Oregon; Sao Paulo, Brazil; Wehrheim, Germany; Casella and Vignate (leased), Italy; and Biggleswade (leased), Havant and Telford (leased), United Kingdom. Vickers also owns or leases warehouse, assembly and distribution facilities and sales offices in the United States and abroad. AUTOMOTIVE: Aeroquip has executive and administrative offices in Maumee, Ohio (leased); technical and administrative offices in Mt. Clemens, Michigan (leased); and manufacturing facilities throughout the United States and abroad, including plants in Atlanta, Georgia; Kendallville, Indiana; Henderson, Kentucky; Clinton Township (leased), Mt. Clemens, Port Huron and Spring Arbor, Michigan; Mooresville, North Carolina; Fremont, Ohio; Livingston, Tennessee; Baden-Baden, Beienheim (leased) and Frankfurt (leased), Germany; Chihuahua, Mexico; Alcala de Henares, Spain; and Brierley Hill, United Kingdom. Aeroquip also owns or leases warehouse, assembly and distribution facilities and sales offices in the United States and abroad. AEROSPACE & DEFENSE: Aeroquip Corporation has executive and administrative offices in Maumee, Ohio (leased); and manufacturing facilities throughout the United States and abroad, including plants in Toccoa, Georgia; Jackson, Michigan (leased); Middlesex, North Carolina; Pau, France (leased); and Lakeside, United Kingdom (leased). Aeroquip also owns or leases warehouse, assembly and distribution facilities and sales offices in the United States and abroad. -7- Vickers, Incorporated has executive and administrative offices in Maumee, Ohio (leased); and manufacturing facilities throughout the United States and abroad, including plants in Los Angeles, California; Grand Rapids, Michigan; Jackson, Mississippi; Hi-Nella, New Jersey; Glenolden, Pennsylvania; Wehrheim, Germany; and Bedhampton, United Kingdom. Vickers also owns or leases warehouse, assembly and distribution facilities and sales offices in the United States and abroad. ITEM 3. Legal Proceedings. As previously reported, on March 26, 1992, the United States Environmental Protection Agency ("USEPA") issued an Administrative Order ("106 Order") under Section 106 of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") to TRINOVA's subsidiary, Aeroquip Corporation ("Aeroquip"), and five other Potentially Responsible Parties ("PRPs") relative to the San Fernando Valley Burbank Operable Unit ("BOU"), involving groundwater contamination. (Reference is made to Part I, Item 3, of TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1994.) The 106 Order requires the six PRPs to design and construct a water blending facility at a cost now estimated to be approximately $5.7 million. TRINOVA's portion of any such cost is estimated to be 18.33 percent based on a cost- sharing agreement among the six PRPs which was executed by TRINOVA on July 6, 1992. Construction of the blending facility is complete; however, the facility is not fully operational due to design issues which are being addressed by the design engineer and the construction contractor. Also related to the BOU, on May 15, 1994, USEPA issued to Lockheed Corporation ("Lockheed"), Aeroquip and other PRPs a Special Notice of Liability under CERCLA for the remaining 18 years of operation and maintenance (O&M) costs associated with the blending facility, as well as a water treatment facility constructed by Lockheed under its BOU Consent Decree with USEPA. The Special Notice of Liability also covers USEPA's past response costs. On April 26, 1994, Lockheed filed an action against Aeroquip and 105 other PRPs seeking contribution toward costs Lockheed incurred to construct the water treatment facility and related matters. In November 1995, a settlement agreement was entered into among Lockheed and most of the members of a joint defense group (the "Joint Defense Group"), including Aeroquip, which resolved this contribution action. The settlement requires the payment of $16 million by the Joint Defense Group. Aeroquip's portion of this amount is approximately $104,000. This amount reflects a credit to Aeroquip for its prior expenditures on the blending facility. The settlement also resolved Aeroquip's potential liability for the interim remedy at the Glendale Superfund site (see below), resolved Aeroquip's potential liability for a toxic suit brought against Lockheed, and resolved the claims by other Joint Defense Group members against Aeroquip. As previously reported, on November 13, 1992, the USEPA, Region IX, issued a General Notice of Liability letter to TRINOVA's subsidiary, Sterer Engineering and Manufacturing Company, now known as the Fluid Control and Actuation Division of Vickers, Incorporated ("Vickers"). (Reference is made to Part I, Item 3, of TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1994.) The letter notified Vickers of potential liability, as defined by Section 107(a) of CERCLA, that it may incur with respect to the San Fernando Valley Glendale South Operable Unit, involving groundwater contamination. The USEPA issued its Record of Decision ("ROD") on June 18, -8- 1993. Twenty-seven PRPs (the "PRP Group"), including Vickers, entered into an Administrative Order on Consent with the USEPA on March 21, 1994, to conduct the Remedial Design ("RD") of the interim remedy. The estimated cost of the RD is $4.7 million. Vickers' portion of the RD costs is estimated to be 2.95% based on an interim allocation agreement among the PRPs. The interim remedy for the Glendale Operable Units (including the North Operable Unit and the South Operable Unit) is projected to cost in the range of $46-58 million. The PRP Group has entered into an agreement to carry out an allocation of the costs for the Glendale Operable Units interim remedy. The allocation process must accommodate two separate allocations--first, the division of response costs for the Glendale Operable Units between the Glendale PRPs and Lockheed Corporation on behalf of all Burbank PRPs (see above) and, second, the internal division of response costs among the Glendale PRPs. As previously reported, on July 31, 1992, the Maine Department of Environmental Protection issued an Administrative Enforcement Order to TRINOVA and its wholly owned subsidiaries, Aeroquip Corporation and Sterling Engineered Products Inc. ("Sterling"), as well as one other party, Pioneer Plastics Corporation ("Pioneer Plastics"), (collectively the "respondents"), pursuant to Title 38, section 1304(12) of the Maine Revised Statutes. (Reference is made to Part I, Item 3, of TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1994.) The Order, which was issued without a prior hearing, required the respondents to conduct a complete Phase II environmental assessment of alleged soil and groundwater contamination at a manufacturing site in Auburn, Maine, which was formerly owned by Sterling and is now owned by Pioneer Plastics. The Order further required the respondents to remediate any environmental contamination identified in the Phase II assessment. On May 5, 1993, a Compliance Order on Consent ("COC") was entered into by the State of Maine, Sterling and Pioneer Plastics. The COC replaces and revokes the Order issued July 31, 1992. The COC requires Sterling to conduct a site investigation and to develop and implement a remedial work plan. The cost to Sterling to conduct the COC site investigation, develop the remedial work plan and complete a feasibility study (the "Feasibility Study") is estimated to be approximately $930,000. Sterling's remediation costs are undetermined at this time because the Feasibility Study has not been completed. TRINOVA and certain subsidiaries are defendants in various lawsuits. While the ultimate outcome of these lawsuits and the above environmental matters cannot now be predicted, management is of the opinion, based on the facts now known to it, that the liability, if any, in these lawsuits (to the extent not provided for by insurance or otherwise) and the above environmental matters will not have a material adverse effect upon TRINOVA's consolidated financial position. ITEM 4. Submission of Matters to a Vote of Security Holders. None. EXECUTIVE OFFICERS OF THE REGISTRANT The names, ages, positions and recent business experience of the executive officers of TRINOVA as of February 19, 1996, are listed below. Officers of TRINOVA are elected annually in April by the Board of Directors at the organization meeting immediately following the annual meeting of shareholders. -9- NAME AND POSITION AGE BUSINESS EXPERIENCE Darryl F. Allen, 52 Chairman of the Board, President Chairman of the Board, and Chief Executive Officer of President and Chief TRINOVA since 1991. President and Executive Officer Chief Executive Officer of TRINOVA from 1986 to 1991. William R. Ammann, 54 Vice President-Administration and Vice President-Administration Treasurer of TRINOVA since 1992. and Treasurer Vice President - Administration of TRINOVA from 1983 to 1992. Warren N. Bimblick 41 Vice President-Corporate Vice President-Corporate Communications of TRINOVA since Communications 1990. James E. Kline, 54 Vice President & General Counsel Vice President and of TRINOVA since 1989. General Counsel James McKee, 64 Executive Vice President of Executive Vice President of TRINOVA since 1989 and President TRINOVA and President of of Vickers, Incorporated since Vickers, Incorporated 1987. James M. Oathout, 51 Corporate Secretary and Senior Corporate Secretary and Attorney of TRINOVA since March Senior Attorney 1995. Secretary and Associate General Counsel of TRINOVA from 1988 to March 1995. Gregory R. Papp, 49 Corporate Controller of TRINOVA Corporate Controller since 1993. Vice President and Controller of Aeroquip Corporation from July 1991 to 1993. Vice President Planning and Control - Automotive Products Group of Aeroquip Corporation from January 1991 to July 1991. David M. Risley, 51 Vice President - Finance and Chief Vice President - Finance Financial Officer of TRINOVA since and Chief Financial Officer 1992. Group Vice President - Administration and Control of Aeroquip Corporation from 1991 to 1992. Vice President and Controller of Aeroquip Corporation from 1990 to 1991. Howard M. Selland, 52 Executive Vice President of Executive Vice President of TRINOVA and President of Aeroquip TRINOVA and President of Corporation since 1989. Aeroquip Corporation Philip G. Simonds, 55 Vice President-Taxation of TRINOVA Vice President-Taxation since 1983. -10- There are no family relationships among the persons named above. PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters. "Stock Exchanges," "Stock Ownership," "Dividend Information," "Quarterly Common Stock Information" and "Dividend Payments per Share of Common Stock" on page 58 of Exhibit (13) filed hereunder are incorporated herein by reference. ITEM 6. Selected Financial Data. "11-Year Summary of Selected Financial Data" on pages 24-26 of Exhibit (13) filed hereunder is incorporated herein by reference. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. "Analysis of Operations" and "Liquidity, Working Capital and Capital Investment" on pages 27-33 of Exhibit (13) filed hereunder are incorporated herein by reference. ITEM 8. Financial Statements and Supplementary Data. "Quarterly Results of Operations (Unaudited)" and the consolidated financial statements of the registrant and its subsidiaries on pages 34-57 of Exhibit (13) filed hereunder are incorporated herein by reference. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III ITEM 10. Directors and Officers of the Registrant. "Election of Directors" and "Section 16(a) Reporting Delinquencies" on pages 1-2 and 9, respectively, of the proxy statement for the annual meeting to be held on April 18, 1996, are incorporated herein by reference. Information regarding executive officers is set forth in Part I of this report under the caption "Executive Officers of the Registrant." -11- ITEM 11. Executive Compensation. "Compensation of Directors" and "Executive Compensation" (excluding material under the captions "TRINOVA Stock Performance Graph" and "Board Compensation Committee Report on Executive Compensation") on pages 3 and 5-9, respectively, of the proxy statement for the annual meeting to be held on April 18, 1996, are incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. "Security Ownership" on page 4 of the proxy statement for the annual meeting to be held on April 18, 1996, is incorporated herein by reference. ITEM 13. Certain Relationships and Related Transactions. None. PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The following documents are filed as a part of this report. (1) The following consolidated financial statements of TRINOVA and its subsidiaries, included on pages 35-57 of Exhibit (13) filed hereunder are incorporated by reference in Item 8. Report of Ernst & Young LLP, Independent Auditors Statement of Income - Years ended December 31, 1995, 1994 and 1993 Statement of Financial Position - December 31, 1995 and 1994 Statement of Cash Flows - Years ended December 31, 1995, 1994 and 1993 Statement of Shareholders' Equity - Years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements - December 31, 1995 (2) The following consolidated financial statement schedule of TRINOVA and its subsidiaries is filed under Item 14(d): SCHEDULE PAGE(S) Schedule II - Valuation and qualifying accounts 17-19 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are either not required under the related instructions or are inapplicable, and therefore have been omitted. -12- (3) The following exhibits are incorporated by reference hereunder, and those exhibits marked with an asterisk (*) are management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) of this report: EXHIBIT NUMBER (3)-1 Amended Code of Regulations (amended April 21, 1988), filed as Exhibit (3) to Form SE filed on March 18, 1993 (3)-2 Amended Articles of Incorporation (amended January 26, 1989), filed as Exhibit (3) to Form 10-K filed on March 18, 1994 (4)-1 First Supplemental Indenture, dated as of May 4, 1992, between TRINOVA Corporation and NBD Bank, with respect to the issuance of $75,000,000 aggregate principal amount of TRINOVA Corporation 7.95% Notes Due 1997, filed as Exhibit (4)-1 to Form SE filed on May 6, 1992 (4)-2 7.95% Notes Due 1997, issued pursuant to the Indenture, dated as of January 28, 1988, between TRINOVA Corporation and NBD Bank (formerly National Bank of Detroit), as supplemented by the First Supplemental Indenture, dated as of May 4, 1992, between TRINOVA Corporation and NBD Bank, filed as Exhibit (4)-2 to Form SE filed on May 6, 1992 (4)-3 Officers' Certificate of TRINOVA Corporation, dated May 4, 1992, pursuant to Section 2.01 of the Indenture, dated as of January 28, 1988, between TRINOVA Corporation and NBD Bank (formerly National Bank of Detroit), as supplemented by the First Supplemental Indenture, dated as of May 4, 1992, between TRINOVA Corporation and NBD Bank, filed as Exhibit (4)-3 to Form SE filed on May 6, 1992 (4)-4 Rights Agreement, dated January 26, 1989, between TRINOVA Corporation and First Chicago Trust Company of New York filed as Exhibit (2) to Form 8-A filed on January 27, 1989, as amended by the First Amendment to Rights Agreement filed as Exhibit (5) to Form 8 filed on July 1, 1992 (4)-5 Form of Share Certificate for Common Shares, $5 par value, of TRINOVA Corporation, filed as Exhibit (4)-2 to Form SE filed on July 1, 1992 (4)-6 Fiscal Agency Agreement, dated as of October 26, 1987, between TRINOVA Corporation, as Issuer, and Bankers Trust Company, as Fiscal Agent, with respect to $100,000,000 aggregate principal amount of TRINOVA Corporation 6% Convertible Subordinated Debentures Due 2002, filed as Exhibit (4)-1 to Form SE filed on March 18, 1993 (4)-7 Indenture, dated as of January 28, 1988, between TRINOVA Corporation and NBD Bank (formerly National Bank of Detroit), with respect to the issuance of $50,000,000 aggregate principal amount of TRINOVA Corporation 9.55% Senior Sinking Fund Debentures Due 2018, and the issuance of $75,000,000 aggregate -13- principal amount of TRINOVA Corporation 7.95% Notes Due 1997, filed as Exhibit (4)-2 to Form SE filed on March 18, 1993 *(10)-1 TRINOVA Corporation 1982 Stock Option Plan, filed as Exhibit (10)-1 to Form SE filed on March 18, 1993 *(10)-2 TRINOVA Corporation 1984 Incentive Compensation Plan, filed as Exhibit (10)-2 to Form SE filed on March 18, 1993 *(10)-3 TRINOVA Corporation 1987 Stock Option Plan, filed as Exhibit (10)-3 to Form SE filed on March 18, 1993 *(10)-4 Change in Control Agreement for Officers, filed as Exhibit (10)- 4 to Form SE filed on March 18, 1993 (the Agreements executed by the Company and various executive officers of the Company are identical in all respects to the form of Agreement filed as an Exhibit to Form SE except as to differences in the identity of the officers and the dates of execution, and as to other variations directly necessitated by said differences) *(10)-5 Change in Control Agreement for Non-officers, filed as Exhibit (10)-5 to Form SE filed on March 18, 1993 (the Agreements executed by the Company and various non-officer employees of the Company are identical in all respects to the form of Agreement filed as an Exhibit to Form SE except as to differences in the identity of the employees and the dates of execution, and as to other variations directly necessitated by said differences) *(10)-6 TRINOVA Corporation 1994 Stock Incentive Plan, filed as Appendix A to the proxy statement for the annual meeting held on April 21, 1994 *(10)-7 TRINOVA Corporation 1989 Non-Employee Directors' Equity Plan, filed as Exhibit (10)-12 to Form 10-K filed on March 18, 1994 *(10)-8 TRINOVA Corporation Plan for Optional Deferment of Directors' Fees (amended and restated effective April 1, 1995), filed as Exhibit (10)-8 to Form 10-K filed March 20, 1995 *(10)-9 TRINOVA Corporation Directors' Retirement Plan (amended and restated effective January 1, 1990), filed as Exhibit (10)-9 to Form 10-K filed March 20, 1995 *(10)-10 TRINOVA Corporation Voluntary Deferred Compensation Plan (effective April 1, 1995), filed as Exhibit (10)-11 to Form 10-K filed March 20, 1995 *(10)-11 TRINOVA Corporation Supplemental Benefit Plan (amended and restated effective January 1, 1995), filed as Exhibit (10)-10 to Form 10-Q filed August 10, 1995 (99(i))-1 TRINOVA Corporation Directors' Charitable Award Program, filed as Exhibit (99(i))-2 to Form 10-K filed on March 18, 1994 (99(i))-2 Credit Agreement, dated as of August 31, 1994, among TRINOVA Corporation (borrower) and The Bank of Tokyo Trust Company; Chemical Bank; Citibank, N.A.; Dresdner Bank AG, New York and -14- Grand Cayman branches; The First National Bank of Chicago; Morgan Guaranty Trust Company of New York; NBD Bank; and Union Bank of Switzerland, Chicago branches (banks) and Citibank N.A. (administrative agent), filed as Exhibit (99(i))-2 to Form 10-Q filed November 3, 1994 The following exhibits are filed hereunder: (11) Statement re: Computation of Per Share Earnings (13) Portions of the 1995 Annual Report to Security Holders (to the extent incorporated by reference hereunder) (21) Subsidiaries of the Registrant (23) Consent of Independent Auditors (24) Powers of Attorney (27) Financial Data Schedule (b) TRINOVA did not file any reports on Form 8-K during the fourth quarter of 1995. (c) The exhibits which are listed under Item 14(a)(3) are filed or incorporated by reference hereunder. (d) The financial statement schedule which is listed under Item 14(a)(2) is filed hereunder. -15- 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. TRINOVA CORPORATION (Registrant) By: /S/ DARRYL F. ALLEN Darryl F. Allen Director, Chairman of the Board, President and Chief Executive Officer Date: March 14, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /S/ DARRYL F. ALLEN Darryl F. Allen 3/14/96 Director, Chairman of the (Date) Board, President and Chief Executive Officer (Principal Executive Officer) /S/ DAVID M. RISLEY David M. Risley 3/14/96 Vice President - Finance (Date) and Chief Financial Officer (Principal Financial Officer) /S/ GREGORY R. PAPP Gregory R. Papp 3/14/96 Corporate Controller (Principal Accounting Officer) PURDY CRAWFORD* Purdy Crawford* 3/14/96 Director (Date) -16- JOSEPH C. FARRELL* Joseph C. Farrell* 3/14/96 Director (Date) DAVID R. GOODE* David R. Goode* 3/14/96 Director (Date) PAUL A. ORMOND* Paul A. Ormond* 3/14/96 Director (Date) JOHN P. REILLY* John P. Reilly* 3/14/96 Director (Date) ROBERT H. SPILMAN* Robert H. Spilman* 3/14/96 Director (Date) WILLIAM R. TIMKEN, JR.* William R. Timken, Jr.* 3/14/96 Director (Date) *By James E. Kline, Attorney-in-fact /S/ JAMES E. KLINE James E. Kline 3/14/96 Vice President and General Counsel (Date) -17- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS TRINOVA CORPORATION
- ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at (1) (2) Balance DESCRIPTION Beginning Charged to Costs Charged to Other Deductions at End of of Period and Expenses Accounts-Describe Describe Period - ----------------------------------------------------------------------------------------------------------------------- (In Thousands) YEAR ENDED DECEMBER 31, 1995 Deducted from asset accounts: Allowance for doubtful accounts $ 15,179 $ 518 $ - $ (2,456)-A $ 13,241 Deferred tax valuation allowance 29,533 (16,142) - 2,562 -B 15,953 Note A - Doubtful accounts charged off Note B - Currency translation adjustments
-18- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS TRINOVA CORPORATION
- ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at (1) (2) Balance DESCRIPTION Beginning Charged to Costs Charged to Other Deductions at End of of Period and Expenses Accounts-Describe Describe Period - ----------------------------------------------------------------------------------------------------------------------- (In Thousands) YEAR ENDED DECEMBER 31, 1994 Deducted from asset accounts: Allowance for doubtful accounts $ 13,537 $ 2,384 $ - $ 742 -A $ 15,179 Deferred tax valuation allowance 29,962 (2,082) - (1,653)-B 29,533 Note A - Doubtful accounts charged off Note B - Currency translation adjustments
-19- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS TRINOVA CORPORATION
- ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at (1) (2) Balance DESCRIPTION Beginning Charged to Costs Charged to Other Deductions at End of of Period and Expenses Accounts-Describe Describe Period - ----------------------------------------------------------------------------------------------------------------------- (In Thousands) YEAR ENDED DECEMBER 31, 1993 Deducted from asset accounts: Allowance for doubtful accounts $ 13,705 $ 3,318 $ - $ 3,486 -A $ 13,537 Deferred tax valuation allowance 30,441 2,283 - 2,762 -B 29,962 Note A - Doubtful accounts charged off Note B - Currency translation adjustments
EX-99 2 EXHIBIT INDEX -20- EXHIBIT INDEX EXHIBIT PAGE(S) (3)-1 Amended Code of Regulations (amended April 21, Incorporated 1988), filed as Exhibit (3) to Form SE filed by Reference on March 18, 1993 (3)-2 Amended Articles of Incorporation (amended Incorporated January 26, 1989), filed as Exhibit (3) to by Reference Form 10-K filed on March 18, 1994 (4)-1 First Supplemental Indenture, dated as of May 4, Incorporated 1992, between TRINOVA Corporation and NBD Bank, by Reference with respect to the issuance of $75,000,000 aggregate principal amount of TRINOVA Corporation 7.95% Notes Due 1997, filed as Exhibit (4)-1 to Form SE filed on May 6, 1992 (4)-2 7.95% Notes Due 1997, issued pursuant to the Incorporated Indenture, dated as of January 28, 1988, between by Reference TRINOVA Corporation and NBD Bank (formerly National Bank of Detroit), as supplemented by the First Supplemental Indenture, dated as of May 4, 1992, between TRINOVA Corporation and NBD Bank, filed as Exhibit (4)-2 to Form SE filed on May 6, 1992 (4)-3 Officers' Certificate of TRINOVA Corporation, Incorporated dated May 4, 1992, pursuant to Section 2.01 of by Reference the Indenture, dated as of January 28, 1988, between TRINOVA Corporation and NBD Bank (formerly National Bank of Detroit), as supplemented by the First Supplemental Indenture, dated as of May 4, 1992, between TRINOVA Corporation and NBD Bank, filed as Exhibit (4)-3 to Form SE filed on May 6, 1992 (4)-4 Rights Agreement, dated January 26, 1989, between Incorporated TRINOVA Corporation and First Chicago Trust by Reference Company of New York filed as Exhibit (2) to Form 8-A filed on January 27, 1989, as amended by the First Amendment to Rights Agreement filed as Exhibit (5) to Form 8 filed on July 1, 1992 (4)-5 Form of Share Certificate for Common Shares, $5 Incorporated par value, of TRINOVA Corporation, filed as by Reference Exhibit (4)-2 to Form SE filed on July 1, 1992 (4)-6 Fiscal Agency Agreement, dated as of October 26, Incorporated 1987, between TRINOVA Corporation, as Issuer, by Reference and Bankers Trust Company, as Fiscal Agent, with respect to $100,000,000 aggregate principal amount of TRINOVA Corporation 6% Convertible Subordinated Debentures Due 2002, filed as Exhibit (4)-1 to Form SE filed on March 18, 1993 -21- (4)-7 Indenture, dated as of January 28, 1988, between Incorporated TRINOVA Corporation and NBD Bank (formerly by Reference National Bank of Detroit), with respect to the issuance of $50,000,000 aggregate principal amount of TRINOVA Corporation 9.55% Senior Sinking Fund Debentures Due 2018, and the issuance of $75,000,000 aggregate principal amount of TRINOVA Corporation 7.95% Notes Due 1997, filed as Exhibit (4)-2 to Form SE filed on March 18, 1993 (10)-1 TRINOVA Corporation 1982 Stock Option Plan, Incorporated filed as Exhibit (10)-1 to Form SE filed on by Reference March 18, 1993 (10)-2 TRINOVA Corporation 1984 Incentive Compensation Incorporated Plan, filed as Exhibit (10)-2 to Form SE filed by Reference on March 18, 1993 (10)-3 TRINOVA Corporation 1987 Stock Option Plan, Incorporated filed as Exhibit (10)-3 to Form SE filed on by Reference March 18, 1993 (10)-4 Change in Control Agreement for Officers, Incorporated filed as Exhibit (10)-4 to Form SE filed on by Reference March 18, 1993 (the Agreements executed by the Company and various executive officers of the Company are identical in all respects to the form of Agreement filed as an Exhibit to Form SE except as to differences in the identity of the officers and the dates of execution, and as to other variations directly necessitated by said differences) (10)-5 Change in Control Agreement for Non-officers, Incorporated filed as Exhibit (10)-5 to Form SE filed on by Reference March 18, 1993 (the Agreements executed by the Company and various non-officer employees of the Company are identical in all respects to the form of Agreement filed as an Exhibit to Form SE except as to differences in the identity of the employees and the dates of execution, and as to other variations directly necessitated by said differences) (10)-6 TRINOVA Corporation 1994 Stock Incentive Plan, Incorporated filed as Appendix A to the proxy statement for by Reference the annual meeting held on April 21, 1994 (10)-7 TRINOVA Corporation 1989 Non-Employee Directors' Incorporated Equity Plan, filed as Exhibit (10)-12 to by Reference Form 10-K filed on March 18, 1994 (10)-8 TRINOVA Corporation Plan for Optional Deferment of Incorporated Directors' Fees (amended and restated effective by Reference April 1, 1995), filed as Exhibit (10)-8 to Form 10-K filed on March 20, 1995 -22- (10)-9 TRINOVA Corporation Directors' Retirement Plan Incorporated (amended and restated effective January 1, 1990), by Reference filed as Exhibit (10)-9 to Form 10-K filed on March 20, 1995 (10)-10 TRINOVA Corporation Voluntary Deferred Compensation Incorporated Plan (effective April 1, 1995), filed as Exhibit by Reference (10)-11 to Form 10-K filed on March 20, 1995 (10)-11 TRINOVA Corporation Supplemental Benefit Plan Incorporated (amended and restated effective January 1, 1995), by Reference filed as Exhibit (10)-10 to Form 10-Q filed August 10, 1995 (11) Statement re Computation of Per Share Earnings 23 (13) Portions of the 1995 Annual Report to Security 24-58 Holders (to the extent incorporated by reference hereunder) (21) Subsidiaries of the Registrant 59 (23) Consent of Independent Auditors 60 (24) Powers of Attorney 61-67 (27) Financial Data Schedule 68 (99(i))-1 TRINOVA Corporation Directors' Charitable Award Incorporated Program, filed as Exhibit (99(i))-2 to Form 10-K by Reference filed on March 18, 1994 (99(i))-2 Credit Agreement, dated as of August 31, 1994, Incorporated among TRINOVA Corporation (borrower) and The Bank by Reference of Tokyo Trust Company; Chemical Bank; Citibank, N.A.; Dresdner Bank AG, New York and Grand Cayman branches; The First National Bank of Chicago; Morgan Guaranty Trust Company of New York; NBD Bank; and Union Bank of Switzerland, Chicago branches (banks) and Citibank N.A. (administrative agent), filed as Exhibit (99(i))-2 to Form 10-Q filed November 3, 1994 EX-11 3 -23- EXHIBIT (11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS TRINOVA CORPORATION (In thousands, except per share data)
Year Ended December 31 -------------------------------------- 1995 1994 1993 -------- -------- -------- Average shares outstanding 28,867 28,719 28,321 Assumed conversion of the 6% convertible debentures 1,905 1,905 - Net effect of dilutive stock options based upon treasury stock method using average market price 92 191 84 --------- --------- --------- Average shares of common stock and common stock equivalents outstanding 30,864 30,815 28,405 ========= ========= ========= Income before cumulative effect of accounting change $ 94,896 $ 65,855 $ 10,511 After-tax equivalent of interest expense on the 6% convertible debentures 3,720 3,720 - Cumulative effect to January 1, 1993, of accounting change, net of income tax benefit - - (70,229) --------- --------- --------- Net income (loss) for purposes of computing net income (loss) per share $ 98,616 $ 69,575 $ (59,718) ========= ========= ========= Income before cumulative effect of accounting change $ 3.20 $ 2.26 $ .37 Cumulative effect of accounting change, net of income tax benefit - - (2.47) --------- --------- --------- NET INCOME (LOSS) PER SHARE $ 3.20 $ 2.26 $ (2.10) ========= ========= ========= Note - Net income (loss) per share is computed using the average number of common shares outstanding, including common stock equivalents. For purposes of computing net income per share for 1995 and 1994, the assumed conversion of the Company's 6% convertible debentures was included in average shares outstanding, increasing the average number of shares outstanding by 1,904,762 shares, and net income was increased for the after-tax equivalent of interest expense on the debentures. The assumed conversion of the 6% convertible debentures was not included in average shares outstanding for 1993 because the effect of the inclusion would have been anti-dilutive.
EX-13 4 -24- EXHIBIT (13) PORTIONS OF THE 1995 ANNUAL REPORT TO SHAREHOLDERS
11-Year Summary of Selected Financial Data Years Ended December 31 (1995-1990) (Dollars in millions, except per share data) 1995 1994 1993 1992 1991 1990 Continuing Operations Net sales $1,884.0 $1,794.7 $1,643.8 $1,695.5 $1,681.2 $1,955.4 Cost of products sold 1,407.7 1,351.4 1,247.4 1,307.4 1,309.1 1,477.7 Interest expense 19.2 21.1 25.5 26.3 26.5 31.7 Income taxes (credit) 33.3 35.4 6.6 9.6 (11.2) 29.6 Income (loss) from continuing operations before cumulative effect adjustment 94.9 65.9 10.5a 14.4 (184.1)c 45.5d Discontinued operations - - - - - - Cumulative effect adjustment - - (70.2) - - - Net Income (Loss) 94.9 65.9 (59.7) 14.4 (184.1) 45.5 Income (Loss) Attributable to Common Stock 94.9 65.9 (59.7) 14.4 (184.1) 45.5 Per Common Share Data Primary - - Continuing operations before cumulative effect adjustment 3.20 2.26 .37 .51 (6.52)c 1.51d - - Discontinued operations - - - - - - - - Cumulative effect adjustment - - (2.47) - - - - - Net income (loss) 3.20 2.26 (2.10) .51 (6.52) 1.51 - - Average shares outstanding (in millions) 30.9 30.8 28.4b 28.3b 28.2b 30.2b Financial Position Cash 16.2 27.9 20.5 26.3 26.6 25.5 Plants and properties-net 425.4 379.8 386.8 405.5 434.5 467.2 Total assets 1,224.2 1,001.0 972.2 1,017.4 1,070.4 1,314.2 Working capital 256.2 251.0 162.4 178.6 123.2 242.5 Long-term debt 302.4 234.9 246.2 239.1 177.3 195.6 Shareholders' equity 400.9 320.0 253.2 352.9 374.6 598.7 Other Data Cash dividends per share - - Common .72 .68 .68 .68 .68 .68 - - Preferred Shares outstanding at Dec. 31 (in millions) - - Common 28.8 28.8 28.4 28.2 28.2 28.2 - - Preferred Return on average shareholders' equity 25.7% 22.6% -a 4.0% -c 7.4% Debt-to-capitalization ratio 45.6% 42.6% 55.1% 50.3% 47.0% 35.5% Number of employees at Dec. 31 - - Non-U.S. 4,936 4,965 5,094 5,948 6,516 7,935 - - U.S. 10,363 10,059 9,918 9,975 11,180 11,486 - - Total 15,299 15,024 15,012 15,923 17,696 19,421
-25-
11-Year Summary of Selected Financial Data Years Ended December 31 (1989-1985) (Dollars in millions, except per share data) 1989 1988 1987h 1986 1985 Continuing Operations Net sales $1,942.3 $1,781.3 $1,533.2 $1,279.2 $1,114.7 Cost of products sold 1,441.4 1,294.8 1,105.6 909.7 788.2 Interest expense 28.6 31.8 30.3 23.2 24.1 Income taxes (credit) 29.6 51.5 51.7 24.7 35.3 Income (loss) from continuing operations before cumulative effect adjustment 33.4e 87.5g 68.3 31.4i 47.6 Discontinued operations (1.1)f .3 4.2 91.1j 27.1 Cumulative effect adjustment - - (12.5) - - Net Income (Loss) 32.3 87.8 59.9 122.6 74.6 Income (Loss) Attributable to Common Stock 32.3 91.6 58.9 118.1 69.9 Per Common Share Data Primary - - Continuing operations before cumulative effect adjustment .98e 2.53g 2.00 .80i 1.17 - - Discontinued operations (.03)f .01 .12 2.68j .73 - - Cumulative effect adjustment - - (.37) - - - - Net income (loss) .95 2.54 1.75 3.48 1.90 - - Average shares outstanding (in millions) 34.1b 36.1 33.7 33.9 36.7 Financial Position Cash 23.0 37.1 24.0 17.6 25.8 Plants and properties-net 455.8 464.1 437.0 354.8 291.5 Total assets 1,361.5 1,426.7 1,319.7 1,155.1 1,204.9 Working capital 322.5 407.9 283.0 240.7 410.3 Long-term debt 203.9 279.0 244.1 148.7 216.6 Shareholders' equity 651.3 679.2 614.4 549.7 716.3 Other Data Cash dividends per share - - Common .66 .60 .53 .476 .447 - - Preferred 1.1875 4.75 4.75 Shares outstanding at Dec. 31 (in millions) - - Common 33.0 34.2 34.1 30.2 41.5 - - Preferred .9 1.0 Return on average shareholders' equity 4.8%e 13.7% 10.4% 19.9%ij 12.2% Debt-to-capitalization ratio 30.4% 34.9% 35.7% 33.0% 27.8% Number of employees at Dec. 31 - - Non-U.S. 8,835 9,251 7,683 7,258 7,005 - - U.S. 12,762 12,979 11,964 10,828 10,592 - - Total 21,597 22,230 19,647 18,086 17,597 -26- (a) Includes a special charge for severance and other personnel-related costs amounting to $26 million pretax, $18.2 million net ($.64 per share), and a provision for unsuccessfully contested prior years' value-added taxes in Brazil amounting to $7 million pretax, $4.7 million net ($.17 per share). (b) The Company's 6% convertible debentures, which are common stock equivalents, have not been included in average shares outstanding because the effect of their inclusion would be anti-dilutive. (See Note 1, Net Income (Loss) per Share, of Notes to Financial Statements.) (c) Includes a special charge for the write-off of intangibles and other charges amounting to $166.4 million pretax, $156.4 million net ($5.54 per share), and a gain from settlement of outstanding litigation associated with the purchase and installation of automated factory equipment amounting to $2.3 million pretax, $1.4 million net ($.05 per share). (d) Includes settlement gains associated with terminated pension plans amounting to $5.2 million pretax, $2.8 million net ($.09 per share). (e) Includes a provision for restructuring amounting to $53 million pretax, $38.5 million net ($1.13 per share); a provision of $8 million pretax, $5 million net ($.15 per share), for costs associated with the write-down in value of a flexible manufacturing system; and a gain of $4 million pretax, $2.5 million net ($.07 per share) from the sale of certain investments. (f) Includes a loss on the sale of the Laminated Products Group business amounting to $1.7 million pretax, $1.1 million net ($.03 per share). (g) Includes settlement gains associated with terminated pension plans amounting to $6.1 million pretax, $3.3 million net ($.09 per share). (h) 1987 financial statements were restated to reflect the adoption of FASB Statement No. 96 retroactive to January 1, 1987. This change in accounting method decreased net income for the year ended December 31, 1987, by $2.7 million ($.08 per share). Net income for the year ended December 31, 1987, was also decreased $12.5 million ($.37 per share) for the cumulative effect of the change in accounting related to years prior to 1987 which were not restated. (i) Includes a provision for restructuring amounting to $49.1 million pretax, $28.4 million net ($.84 per share). (j) Includes a gain from disposal of the Glass business and other associated gains amounting to $99.4 million pretax, $85 million net ($2.50 per share). All applicable common share amounts and per share data have been adjusted to reflect the two- for-one common stock split in 1987 and the three-for-two common stock split in 1986.
-27- FINANCIAL REVIEW AND ANALYSIS OF OPERATIONS Analysis of Operations 1995 Compared with 1994 The following data provide highlights for the year 1995 compared with the year 1994. Percent (dollars in thousands, Year Ended December 31 Increase except per share data) 1995 1994 (Decrease) CONSOLIDATED Net sales $1,884,013 $1,794,695 5.0% Manufacturing income 476,343 443,292 7.5 Manufacturing margin 25.3% 24.7% Operating income 159,209 141,069 12.9 Operating margin 8.5% 7.9% Net income 94,896 65,855 44.1 Net income per share 3.20 2.26 41.6 Number of employees 15,299 15,024 1.8 INDUSTRIAL Net sales 1,051,106 963,446 9.1 Operating income 121,962 89,281 36.6 Operating margin 11.6% 9.3% Order intake 1,061,553 1,018,137 4.3 Order backlog at December 31 201,460 185,022 8.9 AUTOMOTIVE Net sales 494,016 514,273 (3.9) Operating income 24,107 46,841 (48.5) Operating margin 4.9% 9.1% AEROSPACE & DEFENSE Net sales 338,891 316,976 6.9 Operating income 38,631 28,114 37.4 Operating margin 11.4% 8.9% Order intake 327,827 312,251 5.0 Order backlog at December 31 266,423 267,019 (.2) Consolidated sales for 1995 increased $89.3 million, or 5%, over 1994. Sales for the industrial and aerospace & defense segments increased 9.1% and 6.9%, respectively, over 1994, but automotive sales declined 3.9%. U.S. sales increased $10.6 million, or nearly 1%, while non-U.S. sales increased $78.7 million, or 12.5%. Changes in currency exchange rates accounted for nearly $44 million of the non-U.S. sales increase. -28- Industrial segment sales increased $87.7 million, or 9.1%, over 1994 sales. U.S. industrial markets remained strong during the year, principally mobile equipment and machine tools, which contributed to a $45.4 million, or 7.3%, increase in sales over 1994. Industrial sectors in Europe and Asia/Pacific also continued to strengthen, resulting in increased sales in those regions of 16.4% and 11.6%, respectively, while sales in Brazil declined more than 8%, principally in the second half of the year. In December 1995, the Company acquired the Electronic Systems Division (ESD), a manufacturer of computer controls, software and drives, from Cincinnati Milacron Inc. ESD will expand the Company's 1996 sales to worldwide manufacturers of machine tools and plastics processing machinery. Order intake in 1995 was a record for the Company's industrial segment, increasing 4.3% over 1994. Order backlog at December 31, 1995, was $201.5 million. Automotive segment sales declined $20.3 million, or nearly 4%, from 1994 sales. U.S. automotive sales were $56 million, or 20%, lower in 1995, principally due to reduced production schedules by auto manufacturers and the conclusion of a number of vehicle contract programs which were significant to sales and earnings for the segment. This led to the closing of two of the Company's automotive plastics plants during 1995, with a third plant to be closed in 1996. Automotive segment sales in Europe improved in 1995, increasing $35.7 million. Nearly 70% of Europe's sales increase was due to changes in currency exchange rates. Aerospace & defense segment sales increased $21.9 million, or 6.9%, over 1994 sales. The increased sales were principally in the U.S., with only a modest increase in European sales. 1995 sales reflect an uptick in commercial and defense business to supply components against releases for new programs that had previously been awarded. The sales increase also reflects expanded sales of spare parts for both commercial and defense applications. 1995 order intake increased $15.6 million, or 5%, over 1994. Order backlog at December 31, 1995, was $266.4 million. The Company's aerospace & defense segment is a leading supplier of components for new commercial and defense programs that will begin full production over the next few years. As the industry continues to gain momentum, this is expected to boost the segment's sales and profitability. Consolidated manufacturing income and margin for 1995 increased over 1994, principally the result of process improvements giving rise to cost reductions and higher sales in the industrial and aerospace & defense segments. Manufacturing income increased $33 million over 1994, and manufacturing margin improved to 25.3% in 1995 from 24.7% in 1994. Manufacturing income and margin for the industrial segment improved in 1995, reflecting the benefit of both increased sales and continuing initiatives to improve manufacturing and distribution processes. Manufacturing income and margin for the automotive segment declined from 1994 due principally to the effects of lower sales in the U.S., including the phase-out of certain high-margin contract programs, and manufacturing inefficiencies in certain of the U.S. automotive plastics operations. Higher sales, continued cost-containment efforts and improved manufacturing processes in the aerospace & defense segment generated 1995 manufacturing income and margin exceeding that of 1994. -29- Selling and general administrative and engineering, research and development expenses were $14.9 million higher in 1995 than in 1994, but, as a percent of sales, were 16.8% in both 1995 and 1994. The higher costs include expenditures to position the Company for growth in the U.S. and abroad, in such areas as China and Japan. Higher costs also relate to initiatives for new business development and improvement to manufacturing processes. Interest expense for 1995 was $1.9 million lower than in 1994, reflecting the effects of lower debt levels in 1995. Other expenses - net were $6.9 million lower in 1995 due, in part, to lower exchange losses (principally in Brazil), reduced costs related to the program for the sale of accounts receivable that was terminated in the 1995 first quarter and higher income from unconsolidated affiliates. Net income for 1995 amounted to $94.9 million, or $3.20 per share, compared with $65.9 million, or $2.26 per share, in 1994. The effective income tax rate for 1995 was 26%, compared with 35% in 1994. The lower effective income tax rate in 1995 was attributable to several factors, including the effect of higher earnings in lower-tax-rate countries, higher after-tax earnings of investments in unconsolidated affiliates and greater utilization of tax loss carryforwards outside the U.S. for which deferred tax valuation allowances had previously been provided. The Company expects the effective income tax rate for years subsequent to 1995 to return to rates more comparable to the 35% rate that was reported for 1994. The Company evaluated the likelihood of realizing the future benefits of deferred tax assets recorded at December 31, 1995, and considered the adequacy of valuation allowances. Recorded valuation allowances relate to deferred tax assets in certain non-U.S. taxing jurisdictions. -30- 1994 Compared with 1993 The following data provide highlights for the year 1994 compared with the year 1993.
Percent (dollars in thousands, Year Ended December 31 Increase except per share data) 1994 1993 (Decrease) CONSOLIDATED Net sales $1,794,695 $1,643,841 9.2% Manufacturing income 443,292 396,427 11.8 Manufacturing margin 24.7% 24.1% Special charge -- 26,000 -- Operating income 141,069 68,892* 104.8 Operating margin 7.9% 4.2%* Income before cumulative effect of accounting change 65,855 10,511* -- Cumulative effect to January 1, 1993, of accounting change, net of income tax benefit -- (70,229) -- Net income (loss) 65,855 (59,718)* -- Net Income (Loss) per Share Income before cumulative effect of accounting change 2.26 .37* -- Cumulative effect of accounting change, net of income tax benefit -- (2.47) -- Net income (loss) per share 2.26 (2.10)* -- Number of employees 15,024 15,012 .1 INDUSTRIAL Net sales 963,446 864,590 11.4 Special charge -- 19,200 -- Operating income 89,281 17,118* -- Operating margin 9.3% 2.0%* Order intake 1,018,137 898,140 13.4 Order backlog at December 31 185,022 148,399 24.7 AUTOMOTIVE Net sales 514,273 452,637 13.6 Special charge -- 2,600 -- Operating income 46,841 45,724* 2.4 Operating margin 9.1% 10.1%* AEROSPACE & DEFENSE Net sales 316,976 326,614 (3.0) Special charge -- 3,600 -- Operating income 28,114 26,016* 8.1 Operating margin 8.9% 8.0%* Order intake 312,251 297,869 4.8 Order backlog at December 31 267,019 278,351 (4.1) *After deducting the special charge.
-31- Consolidated sales for 1994 increased 9.2%. Sales for the industrial and automotive segments increased 11.4% and 13.6%, respectively, over 1993, but aerospace & defense sales declined 3%. U.S. sales increased $110.3 million, or 10.5%, and non-U.S. sales increased $40.6 million, or 6.9%. Changes in currency exchange rates accounted for nearly $8 million of the increase. The Company's industrial segment sales increased $98.9 million, or 11.4%. U.S. industrial markets continued to strengthen throughout the year, led by growing mobile equipment and machine tool markets, which contributed to an increase in the Company's U.S. industrial sales of 13.7%. Strengthening economies contributed to improved industrial sales for the Company in Europe in each of the last three quarters of 1994 compared with the prior year. Non- U.S. industrial sales increased nearly 7.5%, the result of increased sales in Asia/Pacific and Brazil in addition to the growth in Europe. Order intake continued to show strong improvement compared with the prior year, increasing 13.4%. This resulted in order backlog at December 31, 1994, of $185 million which was $36.6 million, or 24.7%, greater than at December 31, 1993. The Company's automotive segment sales increased $61.6 million, or 13.6%, over 1993. U.S. production of cars, vans and light trucks improved significantly, which contributed to an increase in TRINOVA's U.S. automotive sales of nearly 20%. Recovery of the automotive markets in Europe proceeded more slowly. As a result of this slower growth and the winding down of certain long-term supply contracts in the second half of the year, the Company's growth in automotive sales in Europe in 1994 was held to 7% over 1993. The Company's aerospace & defense segment sales declined $9.6 million, or 3%, from 1993. In addition to the effects of continued low levels of defense spending, the sale of a small electric motor business in the 1994 first quarter contributed to the sales decline. Nonetheless, the aerospace & defense segment had a strong fourth quarter, with increased sales over the 1993 fourth quarter and each of the previous 1994 quarters. This increase was due to improvements in both original equipment and spare parts sales. Order backlog at December 31, 1994, of $267 million was $11.3 million, or 4.1%, lower than at December 31, 1993. Consolidated manufacturing margin improved to 24.7% from 24.1% in 1993. Manufacturing margin for the industrial and aerospace & defense segments improved in 1994, while manufacturing margin for the automotive segment declined. In addition to the benefit of increased sales due to both increased volume and selective price increases in the industrial segment, each of the segments continued to realize the benefit of restructuring efforts. Restructuring initiatives to streamline operations and improve manufacturing and distribution processes have resulted in improved factory throughput and customer service which contributed to improved margins. Automotive segment margins, however, were adversely affected by the conclusion in 1994 of certain highly profitable vehicle contract programs, a shift in sales mix in Europe to lower margin business and program start-up inefficiencies. The effect of liquidation of LIFO inventory quantities on cost of products sold and manufacturing income in 1994 was not significant, while in 1993, liquidation of LIFO inventory quantities reduced cost of products sold by $7.6 million. -32- Selling and general administrative and engineering, research and development expenses were slightly higher in 1994 than in 1993, but, as a percent of sales, were 16.8% in 1994, compared with 18.3% in 1993. Operating income for 1994 was $141.1 million, compared with $68.9 million in 1993. Before deducting the special charge of $26 million in 1993, operating income was $94.9 million. Interest expense for 1994 of $21.1 million was $4.5 million lower than in 1993, reflecting the effect of lower average debt levels in 1994. Other expenses - net were $7.5 million lower than in 1993 when the Company recognized a charge of $7 million ($4.7 million after tax, or $.17 per share) to provide for unsuccessfully contested prior years' value-added taxes in Brazil. Net income for 1994 amounted to $65.9 million, or $2.26 per share, compared with income before cumulative effect of accounting change in 1993 of $10.5 million, or $.37 per share. After cumulative effect of change in accounting, net loss for 1993 was $59.7 million, or $2.10 per share. The effective tax rate for 1994 was 35%, compared with an effective rate in 1993 of 38.6%. Liquidity, Working Capital and Capital Investment Cash provided by operating activities during 1995 totaled $116.8 million, compared with $143 million in 1994. Cash provided from net income was $29 million higher in 1995. However, cash used to finance working capital requirements, principally inventories, accounts payable and income taxes, was $21.8 million higher in 1995. In 1995, the Company terminated its program for the sale of accounts receivable, resulting in an increase in receivables of $50 million during 1995. The program had been reduced by $25 million in 1994. Capital expenditures totaled $94 million in 1995. A modest increase in capital spending is projected for 1996 to support the Company's growth initiatives and continued manufacturing process improvements. Quarterly dividend payments were increased in 1995 to $.18 per share, or $.72 per share for the year, from $.17 per share in 1994, or $.68 per share for the year. In January 1996, TRINOVA's Board of Directors approved an increase in the quarterly dividend to $.20 per share, or $.80 per share on an annualized basis, reflecting confidence in the Company's ability to generate increased earnings and cash flow from operations in 1996. In 1991, TRINOVA's Board of Directors authorized a program for the Company to purchase up to 3 million shares of its common stock. Under this authorization, common shares may be purchased from time to time in the open market and through privately negotiated transactions. Shares purchased will be for the treasury and will be available for general corporate purposes. In the 1995 fourth quarter, the program was activated and the Company purchased 186,200 shares of its outstanding common stock at a cost of $5.5 million. The treasury stock purchases were financed by cash provided by operations and short-term borrowings. The Company expects to make further purchases in 1996, but is not committed to purchase a specific number of shares. -33- In the 1995 fourth quarter, the Company acquired certain net assets and the businesses of the Electronic Systems Division (ESD) of Cincinnati Milacron Inc. and the Dynapower/Stratopower unit of General Signal Corporation. The Company also acquired the magnetic chip detector product line of Muirhead Vactric Components Ltd. The aggregate purchase prices for these acquisitions amounted to $113.8 million. ESD, the most significant of the three businesses acquired in 1995, is a leader in the design and manufacture of open architecture computer controls, software and drives used primarily in the machine tool and plastics processing markets. The acquisition of ESD significantly expands the capabilities of the Company's electrics business. The net increase in short- and long-term debt totaled $97.6 million in 1995, principally to finance acquisitions. Debt payments included retirement of $8 million of the Company's 9.55% senior sinking fund debentures. The debt-to- capitalization ratio (debt divided by debt plus equity) was 45.6% at December 31, 1995, up from 42.6% at December 31, 1994. Under terms of a revolving credit agreement with a consortium of U.S. and non-U.S. banks expiring in 2000, the Company may borrow up to $175 million. The agreement is intended to support the Company's commercial paper borrowings and, to the extent not so utilized, provide domestic borrowing capacity. Borrowings supported by the long-term revolving credit agreement in the amount of $75 million were classified as long-term debt at December 31, 1995, because in 1996, the Company plans to refinance debt in the amount of $75 million or more on a long-term basis. The remaining borrowing capacity under this agreement at December 31, 1995, was $100 million. In addition to the revolving credit agreement, the Company has uncommitted arrangements with various banks to provide short-term financing as necessary. The Company expects that cash flow from operating activities will be sufficient to meet normal operating requirements over the near term. The Company or certain of its subsidiaries have been named potentially responsible parties (PRP) for site investigation and cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund) or similar state laws with respect to certain sites. In addition, the Company has undertaken corrective and preventive environmental projects of its own to achieve compliance with applicable environmental laws at certain of its facilities. The Company believes that the costs arising out of such PRP designations and the Company's compliance projects will not have a material adverse effect on the Company's consolidated financial position. The Company will adopt Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, effective January 1, 1996. The effect of adopting this standard is not expected to be significant to the Company's results of operations or consolidated financial position. -34- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the quarterly results of operations for the years ended December 31, 1995 and 1994.
1995 -------------------------------------------------------- Three Months Ended -------------------------------------------- Year Ended Mar 31 Jun 30 Sep 30 Dec 31 Dec 31 ------- ------- ------- ------- ---------- (In thousands, except per share data) Net sales $ 498,635 $ 501,617 $ 441,445 $ 442,316 $1,884,013 Manufacturing income 122,442 130,921 110,956 112,024 476,343 Net income 22,588 33,280 18,999 20,029 94,896 Net income per share .77 1.11 .64 .68 3.20 Average shares outstanding(a) 30,734 30,790 30,924 30,928 30,864
1994 -------------------------------------------------------- Three Months Ended -------------------------------------------- Year Ended Mar 31 Jun 30 Sep 30 Dec 31 Dec 31 ------- ------- ------- ------- ---------- (In thousands, except per share data) Net sales $ 439,831 $ 460,863 $ 437,587 $ 456,414 $1,794,695 Manufacturing income 108,465 115,426 106,481 112,920 443,292 Net income 13,274 19,324 15,131 18,126 65,855 Net income per share .46 .66 .52 .62 2.26 Average shares outstanding(a) 30,745 30,866 30,903 30,890 30,815 a) For purposes of computing net income per share, the assumed conversion of the Company's 6% convertible debentures was included in average shares outstanding, increasing the average number of shares outstanding by 1,904,762 shares, and net income was increased for the after-tax equivalent of interest expense on the debentures.
-35- REPORT OF ERNST & YOUNG LLP, Independent Auditors Shareholders and Board of Directors TRINOVA Corporation We have audited the accompanying statement of financial position of TRINOVA Corporation and subsidiaries as of December 31, 1995 and 1994, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 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 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 TRINOVA Corporation and subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 9 of Notes to Financial Statements, in 1993 the Company changed its method of accounting for postretirement benefits other than pensions. /S/ ERNST & YOUNG LLP Toledo, Ohio January 24, 1996 -36- STATEMENT OF INCOME Years ended December 31, 1995, 1994 and 1993 (In thousands, except per share data)
1995 1994 1993 -------- -------- -------- Net sales $1,884,013 $1,794,695 $1,643,841 Cost of products sold 1,407,670 1,351,403 1,247,414 ---------- ---------- ---------- MANUFACTURING INCOME 476,343 443,292 396,427 Selling and general administrative expenses 254,141 246,758 246,221 Engineering, research and development expenses 62,993 55,465 55,314 Special charge - - 26,000 ---------- ---------- ---------- OPERATING INCOME 159,209 141,069 68,892 Interest expense (19,199) (21,060) (25,516) Other expenses - net (11,814) (18,754) (26,265) ---------- ---------- ---------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 128,196 101,255 17,111 Income taxes 33,300 35,400 6,600 ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 94,896 65,855 10,511 Cumulative effect to January 1, 1993, of accounting change, net of income tax benefit - - (70,229) ---------- ---------- ---------- NET INCOME (LOSS) $ 94,896 $ 65,855 $ (59,718) ========== ========== ========== INCOME (LOSS) PER SHARE Income before cumulative effect of accounting change $ 3.20 $ 2.26 $ .37 Cumulative effect of accounting change, net of income tax benefit - - (2.47) ---------- ---------- ---------- NET INCOME (LOSS) PER SHARE $ 3.20 $ 2.26 $ (2.10) ========== ========== ========== Average number of common shares outstanding 30,864 30,815 28,405 ========== ========== ========== The Notes to Financial Statements are an integral part of this statement.
-37- STATEMENT OF FINANCIAL POSITION December 31, 1995 and 1994 (Dollars in thousands, except per share data)
1995 1994 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 16,186 $ 27,928 Receivables 292,146 247,531 Inventories 269,284 217,316 Other current assets 38,789 47,618 ----------- ----------- TOTAL CURRENT ASSETS 616,405 540,393 Plants and properties 959,286 869,831 Less accumulated depreciation 533,925 490,025 ----------- ----------- 425,361 379,806 Other assets 182,385 80,835 ----------- ----------- TOTAL ASSETS $ 1,224,151 $ 1,001,034 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 33,229 $ 1,755 Accounts payable 103,853 96,587 Income taxes 39,054 31,621 Other accrued liabilities 183,659 158,501 Current maturities of long-term debt 378 930 ----------- ----------- TOTAL CURRENT LIABILITIES 360,173 289,394 Long-term debt 302,352 234,914 Postretirement benefits other than pensions 120,478 120,848 Other liabilities 40,276 35,832 SHAREHOLDERS' EQUITY Common stock - par value $5 a share Authorized - 100,000,000 shares Outstanding - 28,825,187 and 28,795,909 shares, respectively (after deducting 5,384,709 and 5,413,987 shares, respectively, in treasury) 144,125 143,979 Additional paid-in capital 17,933 12,511 Retained earnings 254,484 184,930 Currency translation adjustments (15,670) (21,374) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 400,872 320,046 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,224,151 $ 1,001,034 =========== =========== The Notes to Financial Statements are an integral part of this statement.
-38- STATEMENT OF CASH FLOWS Years ended December 31, 1995, 1994 and 1993 (In thousands)
1995 1994 1993 -------- -------- -------- OPERATING ACTIVITIES Net income (loss) $ 94,896 $ 65,855 $ (59,718) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change, net of income tax benefit - - 70,229 Special charge - - 26,000 Depreciation 63,697 60,784 61,802 Deferred income taxes (7,051) 17,436 (5,465) Changes in certain assets and liabilities, excluding effects from special charge - -Receivables (38,820) (41,384) (15,041) - -Inventories (28,693) (3,570) 42,656 - -Accounts payable 1,483 13,116 5,016 - -Income taxes 15,216 10,631 (8,298) - -Other assets, payables and accruals 27,001 19,164 18,810 Restructuring payments - net (7,104) (5,978) (17,439) Other (3,840) 6,947 10,367 ---------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 116,785 143,001 128,919 INVESTING ACTIVITIES Capital expenditures (93,955) (55,154) (55,128) Businesses acquired (113,841) -- -- Other 697 1,840 1,904 ---------- ---------- ---------- NET CASH USED BY INVESTING ACTIVITIES (207,099) (53,314) (53,224) FINANCING ACTIVITIES Cash dividends (20,800) (19,553) (19,258) Increase (decrease) in notes payable 30,776 (57,862) (51,092) Repayments of long-term borrowings (9,041) (15,068) (15,261) Long-term borrowings 75,886 317 8,523 Purchase of common stock (5,473) -- -- Stock issuance under stock plans 6,087 12,304 2,528 ---------- ---------- ---------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 77,435 (79,862) (74,560) Effect of exchange rate changes on cash 1,137 (2,431) (6,870) ---------- ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,742) 7,394 (5,735) Cash and cash equivalents at beginning of year 27,928 20,534 26,269 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,186 $ 27,928 $ 20,534 ========== ========== ========== The Notes to Financial Statements are an integral part of this statement.
-39- STATEMENT OF SHAREHOLDERS' EQUITY Years ended December 31, 1995, 1994 and 1993 (Dollars in thousands, except per share data)
Additional Currency Common Paid-In Retained Translation Stock Capital Earnings Adjustments BALANCE AT JANUARY 1, 1993 $ 141,188 $ 470 $ 217,604 $ (6,402) Net loss (59,718) Cash dividends paid ($.68 a share) (19,258) Issuance of 168,254 shares, net of shares exchanged, under stock plans 841 1,687 Translation adjustments (23,180) --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1993 142,029 2,157 138,628 (29,582) Net income 65,855 Cash dividends paid ($.68 a share) (19,553) Issuance of 390,029 shares, net of shares exchanged, under stock plans 1,950 10,354 Translation adjustments 8,208 --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1994 143,979 12,511 184,930 (21,374) Net income 94,896 Cash dividends paid ($.72 a share) (20,800) Issuance of 215,478 shares, net of shares exchanged, under stock plans 1,077 5,422 Purchase of 186,200 treasury shares (931) (4,542) Translation adjustments 5,704 --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1995 $ 144,125 $ 17,933 $ 254,484 $ (15,670) ========= ========= ========= ========= The Notes to Financial Statements are an integral part of this statement.
-40- NOTES TO FINANCIAL STATEMENTS December 31, 1995 (Dollars in thousands, except per share data) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. Affiliated companies in which the Company's ownership is 20% to 50% are accounted for by the equity method. All other minority investments are carried at cost. All significant intercompany transactions, balances and profits are eliminated upon consolidation. Use of Estimates: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make certain estimates and exercise judgment affecting the reported statements of income, financial position and cash flows, including the disclosure of contingencies. Actual results may differ from those estimates. Cash Equivalents: Marketable securities that are highly liquid and have maturities of three months or less are classified as cash equivalents. The carrying amount approximates fair value. Inventories: Inventories are stated at the lower of cost or market. Inventory costs for U.S. operations are determined principally by the last-in, first-out (LIFO) method. The remaining inventory costs are determined primarily by the first-in, first-out (FIFO) method. Plants and Properties: Plants and properties are carried at cost. Depreciation is generally computed by the straight-line method over the estimated useful lives of the respective assets. In general, depreciation is provided at annual rates of 2.5% to 3% on buildings and 8% to 10% on equipment. Intangibles: Intangible assets are included in Other Assets at cost less accumulated amortization and consist principally of goodwill. Goodwill represents the excess of cost over fair value of assets acquired, primarily in 1995, for which the amortization periods are principally 40 years using the straight-line method. Other intangibles include software and patents for which the amortization periods range from five to 15 years on a straight-line basis. The carrying amounts for goodwill and other intangibles are reviewed for impairment whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable. Life Insurance: The Company's investment in corporate-owned life insurance is recorded net of policy loans. Net life insurance expense, including interest expense of $5,278 and $1,522 on policy loans in 1995 and 1994, is included in Other expenses - net in the Statement of Income. -41- NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting Change: The Company will adopt Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," effective January 1, 1996. The effect of adopting this standard is not expected to be significant to the Company's results of operations or consolidated financial position. Stock Options: The Company follows the intrinsic value method of accounting for stock options under Accounting Principles Board Opinion No. 25. When stock options are exercised, common stock is credited for the par value of shares issued, and additional paid-in capital is credited with the consideration received in excess of par value. The Company intends to adopt the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," in 1996. Net Income (Loss) per Share: Net income (loss) per share is computed using the average number of common shares outstanding, including common stock equivalents. For purposes of computing net income per share for 1995 and 1994, the assumed conversion of the Company's 6% convertible debentures was included in average shares outstanding, increasing the average number of shares outstanding by 1,904,762 shares, and net income was increased for the after-tax equivalent of interest expense on the debentures. The assumed conversion of the 6% convertible debentures was not included in average shares outstanding for 1993 because the effect of the inclusion would have been anti- dilutive. NOTE 2 - ACQUISITIONS Effective December 30, 1995, the Company acquired certain assets and liabilities and the business of the Electronic Systems Division (ESD) from Cincinnati Milacron Inc. for approximately $106,000. ESD designs and manufactures computer controls, software and drives used in machine tools and plastics processing equipment. The acquisition has been accounted for as a purchase. No operations for ESD were included in the Statement of Income for the year ended December 31, 1995. Also in December 1995, the Company acquired certain assets and liabilities and the businesses of the Dynapower/Stratopower unit (manufacturer of hydraulic pumps, motors, starters and hydrostatic transmissions) of General Signal Corporation, and the magnetic chip detector product line from Muirhead Vactric Components Ltd. for an aggregate purchase price of approximately $7,800. These acquisitions were accounted for as purchases, and operations of these businesses were not significant to the Statement of Income for the year ended December 31, 1995. -42- NOTES TO FINANCIAL STATEMENTS NOTE 2 - ACQUISITIONS (Continued) The following table presents the initial allocation of the aggregate purchase prices for the aforementioned acquisitions. The allocation is preliminary and subject to adjustment: Working capital $ 14,233 Plants and properties 19,726 Other assets including intangibles 81,142 Postretirement benefits other than pensions (810) Other liabilities (450) $113,841 Had these acquisitions occurred as of January 1, 1995 or 1994, the proforma results of operations giving effect to the acquisitions would not be materially different from the net sales, net income and net income per share presented in the Statement of Income. NOTE 3 - ACCOUNTS RECEIVABLE In 1995, the Company terminated its agreement with a financial institution to sell, on an ongoing basis, undivided percentage ownership interests in a designated pool of U.S. trade accounts receivable, up to a maximum of $75,000. Accounts receivable amounting to $50,000 had been sold under this agreement at December 31, 1994. NOTE 4 - INVENTORIES Inventory costs determined by the LIFO method accounted for approximately 60% and 59% of the total inventories at December 31, 1995 and 1994, respectively. If all inventories valued by the LIFO method had been valued at current costs, these inventories would have been approximately $33,444 and $33,047 higher than reported at December 31, 1995 and 1994, respectively. During 1994 and 1993 certain inventories were reduced, resulting in the liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years compared with current cost. The effect of these inventory liquidations in 1994 was not significant, and in 1993 the effect was to reduce cost of products sold by $7,615, increasing income before cumulative effect of accounting change by $4,653 ($.16 per share). -43- NOTES TO FINANCIAL STATEMENTS NOTE 5 - DEBT 1995 1994 ------ ------ 6% convertible subordinated debentures $100,000 $100,000 7.95% notes 75,000 75,000 9.55% senior sinking fund debentures 42,000 50,000 Borrowings supported by long-term revolving credit agreement - interest rates from 5.9% to 6.2% 75,000 - Industrial revenue bonds - interest rates from 5.8% to 7.625% - due at various dates to 2013 7,363 7,661 Other 3,367 3,183 -------- -------- 302,730 235,844 Less current maturities 378 930 -------- -------- $302,352 $234,914 ======== ======== The 6% convertible subordinated debentures are convertible into common stock at a conversion price of $52.50 per share. The debentures mature on October 15, 2002, and are subject to earlier redemption, at the option of the Company, in whole or in part, at specified declining redemption prices plus accrued interest. The 7.95% notes mature on May 1, 1997, are not redeemable prior to maturity, and are not subject to a sinking fund. The 9.55% senior sinking fund debentures mature on February 1, 2018, and are subject to earlier redemption, at the option of the Company, in whole or in part, at specified declining redemption prices plus accrued interest. In 1995, the Company retired $8,000 of the debentures. An annual mandatory sinking fund payment of $2,500 is required commencing February 1, 1999. The Company may increase its sinking fund payment in any year by an additional amount of up to $5,000. Under terms of a revolving credit agreement, expiring August 31, 2000, with a consortium of U.S. and non-U.S. banks, the Company may borrow up to $175,000. Borrowings under the credit line bear interest at rates agreed to by the Company and lendors. This agreement is maintained to support the Company's commercial paper borrowings and, to the extent not so utilized, to provide domestic borrowings. Borrowings supported by the long-term revolving credit agreement in the amount of $75,000 were classified as long-term debt at December 31, 1995, because in 1996, the Company plans to refinance debt in this amount, at a minimum, on a long-term basis. The remaining borrowing capacity under this agreement at December 31, 1995, was $100,000. Covenants of the revolving credit agreement and certain other debt instruments require the Company to maintain certain financial ratios, including a limitation that the Company's debt-to-capitalization ratio (exclusive of the effects of the change in accounting for postretirement benefit obligations) not exceed a specified amount. At December 31, 1995, under the most restrictive of these covenants, retained earnings of $160,000 were available for the payment of cash dividends. -44- NOTES TO FINANCIAL STATEMENTS NOTE 5 - DEBT (Continued) At December 31, 1995, long-term debt amounting to $302,730, including current maturities, had an estimated fair value of $305,832. Estimated fair value for long-term debt, including current maturities, at December 31, 1994, was $224,400. Fair value for notes payable at December 31, 1995 and 1994, was approximately equal to the carrying amount at those dates. Maturities of long-term debt in 1996 and in the four succeeding years are $378, $75,494, $647, $3,214 and $78,234. Interest paid on debt during 1995, 1994 and 1993 amounted to $19,250, $25,146 and $24,994, respectively. The weighted average interest rate of outstanding short-term notes payable was 6.3% and 9.4% at December 31, 1995 and 1994, respectively. NOTE 6 - INCOME TAXES The components of income before income taxes and cumulative effect of accounting change consist of the following: 1995 1994 1993 ------ ------ ------ U.S. $ 45,506 $ 45,562 $ 8,147 Non-U.S. 82,690 55,693 8,964 -------- --------- --------- $128,196 $101,255 $ 17,111 ======== ========= ========= Income tax expense, excluding taxes related to cumulative effect of accounting change, consists of the following: 1995 1994 1993 ------ ------ ------ Current: U.S. federal $ 21,131 $ 4,537 $ 4,841 State and local 1,810 954 299 Non-U.S. 17,410 12,473 6,925 -------- --------- --------- 40,351 17,964 12,065 Deferred: U.S. federal (6,787) 10,900 (2,050) Non-U.S. (264) 6,536 (3,415) -------- --------- --------- (7,051) 17,436 (5,465) -------- --------- --------- $ 33,300 $ 35,400 $ 6,600 ======== ========= ========= -45- NOTES TO FINANCIAL STATEMENTS NOTE 6 - INCOME TAXES (Continued) The effect of temporary differences and loss carryforwards giving rise to deferred tax assets and liabilities is as follows: 1995 1994 ------ ------ Gross Deferred Tax Assets Postretirement benefits other than pensions $ 42,021 $ 42,332 Tax loss carryforwards 25,487 30,572 Employee benefit accruals 10,913 6,311 Other 6,853 10,400 --------- --------- 85,274 89,615 Gross Deferred Tax Liabilities Depreciation (35,828) (37,737) Other (5,204) (1,157) --------- --------- (41,032) (38,894) Valuation allowances (15,953) (29,533) --------- --------- Net deferred tax assets $ 28,289 $ 21,188 ========= ========= The components of deferred tax assets (liabilities) net of valuation allowances are classified in the Statement of Financial Position as follows: 1995 1994 ---- ---- Current assets, net of current liabilities $ 1,326 $ 9,750 Non-current assets 35,368 19,120 Non-current liabilities (8,405) (7,682) --------- --------- Net deferred tax assets $ 28,289 $ 21,188 ========= ========= Valuation allowances decreased $13,580, $429 and $479 in 1995, 1994 and 1993, respectively. -46- NOTES TO FINANCIAL STATEMENTS NOTE 6 - INCOME TAXES (Continued) Reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate before cumulative effect of accounting change follows: 1995 1994 1993 ------ ------ ------ Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% Increase (decrease) resulting from: State and local taxes, net of federal benefit 1.0 .8 1.1 Special charge - basis differences and charges without tax benefits - - 15.6 Taxes in excess of (less than) the U.S. tax rate on non-U.S. earnings, including utilization of net operating loss carryforwards (9.1) 2.3 (6.0) Rate differential on temporary differences - - (6.5) Other (.9) (3.1) (.6) ---- ---- ----- Effective income tax rate 26.0% 35.0% 38.6% ==== ==== ===== At December 31, 1995, the Company had non-U.S. net operating loss carryforwards of $57,800 for income tax purposes. Loss carryforwards of approximately $23,000 have no expiration dates and the remainder expire in years through 1999. Non-U.S. net operating loss carryforwards amounting to $13,400 and $6,800 were utilized in 1995 and 1994, respectively, reducing current income tax expense for those years by $5,440 and $2,860, respectively. The Company does not provide deferred income taxes on undistributed earnings of certain of its non-U.S. subsidiaries which have been reinvested indefinitely. Undistributed earnings of non-U.S. subsidiaries for which U.S. income taxes have not been provided approximated $48,000 at December 31, 1995. Should these earnings be remitted, certain countries will impose withholding taxes that will be available for use as credits against any U.S. federal income tax liability, subject to certain limitations. It is not practical to estimate the amount of tax that would be payable should the Company remit these earnings. Income taxes paid during 1995, 1994 and 1993 amounted to $25,135, $7,333 and $20,363, respectively. -47- NOTES TO FINANCIAL STATEMENTS NOTE 7 - ENVIRONMENTAL The Company or certain of its subsidiaries have been named potentially responsible parties (PRP) for site investigation and cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund) or similar state laws with respect to certain sites. While the ultimate outcome of the PRP designations and other environmental matters cannot now be predicted, the Company believes that costs, in excess of amounts provided, arising out of these matters will not have a material adverse effect on the Company's consolidated financial position. NOTE 8 - RETIREMENT PLANS The Company has trusteed defined-contribution plans as its primary retirement vehicle covering most full-time U.S. employees and certain non-U.S. employees. Annual expense for the major defined-contribution plans is based primarily upon employee participation and earnings of the Company. The Company follows the policy of funding retirement plan contributions accrued. The Company has trusteed defined-benefit plans covering a limited number of full-time U.S. employees. The defined-benefit plans typically provide for full vesting after five years of service, and benefits are principally based on employee earnings and/or length of service. The Company's funding policy for these plans is to make annual contributions at least sufficient to meet minimum legal funding requirements. Various plans are also in effect for subsidiaries operating outside the U.S., including trusteed or insured, government-sponsored and unfunded plans. Components of net periodic pension cost for the defined-benefit plans and the total contributions charged to pension expense for the defined-contribution plans are summarized below. Net periodic pension cost for 1993 was reduced by settlement gains for certain non-U.S. plans aggregating $1,400. 1995 1994 1993 ------ ------ ------ Defined-benefit plans: Service cost - benefits earned $ 2,300 $ 2,700 $ 2,900 Interest cost 11,200 10,700 10,900 Actual return on plans' assets (22,700) 2,500 (23,500) Net amortization and deferral 10,900 (12,800) 12,300 -------- -------- -------- Net pension cost - defined-benefit plans 1,700 3,100 2,600 Defined-contribution plans 37,700 31,200 19,400 Other non-U.S. retirement plans 1,400 700 700 -------- -------- -------- Total pension expense $ 40,800 $ 35,000 $ 22,700 ======== ======== ======== -48- NOTES TO FINANCIAL STATEMENTS NOTE 8 - RETIREMENT PLANS (Continued) The defined-benefit plans' assets consist of equity securities, corporate and government bonds, and real estate. Following are assumptions used in determining the plans' net periodic pension cost and benefit obligations. The measurement dates for these plans were principally September 30. 1995 1994 1993 ------ ------ ------ Discount rates: U.S. 7.5% 8.25% 7.25% Non-U.S. 7.5 7.9 7.6 Rates of increase in future compensation: U.S. 4.0 4.0 4.0 Non-U.S. 3.0-6.0 3.0-5.5 3.0-5.5 Long-term rate of return on assets 10.0 10.0 10.0 The following table sets forth the funded status and amounts recorded in the Company's Statement of Financial Position for defined-benefit plans.
1995 1994 -------------------- -------------------- Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets ----------- ----------- ----------- ----------- Actuarial present value of benefit obligation: Vested benefit obligation $107,900 $ 37,500 $ 93,300 $ 31,200 ======== ======== ======== ======== Accumulated benefit obligation $108,800 $ 38,600 $ 94,600 $ 32,900 ======== ======== ======== ======== Projected benefit obligation $114,800 $ 41,600 $109,800 $ 35,800 Plans' assets at fair value 131,700 16,100 118,100 13,600 -------- -------- -------- -------- Projected benefit obligation (in excess of) less than plans' assets 16,900 (25,500) 8,300 (22,200) Unrecognized net gain (1,300) (7,000) (1,000) (8,100) Unrecognized net (asset) obligation less amortization (600) 1,800 1,800 2,400 Unrecognized prior service cost 3,200 2,100 8,800 2,200 Adjustment required to recognize minimum liability - (800) - (1,100) -------- -------- -------- -------- Net pension asset (liability) recorded in the Statement of Financial Position $ 18,200 $(29,400) $ 17,900 $(26,800) ======== ======== ======== ========
-49- NOTES TO FINANCIAL STATEMENTS NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company and its subsidiaries provide access to benefits under life insurance and health care plans for most retired U.S. and certain retired non- U.S. employees and eligible spouses (participants). Most retirees outside the U.S. are covered by government-sponsored or retiree-funded programs. Benefits for U.S. retirees are generally subject to participant contributions, deductibles, co-payment provisions and certain other limitations. The Company has reserved the right to amend or terminate these benefit plans at any time. Most U.S. health care plans recognize that the Company, as the secondary provider to Medicare, will contribute toward the cost of health care benefits for participants who retire at age 65 or older and have at least 10 years of service at retirement. The amount of the Company's contribution for participants retiring after January 1, 1995, is limited to fixed amounts (base-period costs) that now approximate the average current cost of claims. Accordingly, as medical costs escalate, those participants who retired in 1995 and those retiring thereafter will pay the difference between the Company's average annual per-capita claims costs and the base-period costs. During a transition period, the Company will also contribute toward the cost of health care for participants who retire prior to age 65, providing they had met certain age and service-period requirements as of January 1, 1995. The amount of the Company's contribution will not exceed the base-period costs. Those participants retiring before reaching age 65 who do not meet the age and service-period requirements will have the option to purchase health care benefits at full cost until becoming eligible for a Company contribution at age 65. The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," effective January 1, 1993. The Company elected to recognize the transition obligation as a cumulative effect adjustment to January 1, 1993, of a change in accounting principle resulting in a non-cash charge to income of $113,229 ($70,229 after tax, or $2.47 per share for the year). -50- NOTES TO FINANCIAL STATEMENTS NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued) Components of postretirement benefit cost are as follows: 1995 1994 1993 Service cost - benefits earned $ 1,426 $ 1,971 $ 3,121 Interest cost 7,586 7,352 9,093 Net amortization and deferral (1,664) (969) - --------- --------- --------- Postretirement benefit cost $ 7,348 $ 8,354 $ 12,214 ========= ========= ========= The decline in the 1995 and 1994 expense was principally due to plan amendments, reflecting reductions in service and interest costs, as well as amortization of unrecognized prior service cost. The Company's postretirement benefit plans are not funded. The status of the plans at December 31, 1995 and 1994 (based on measurement of the accumulated postretirement benefit obligation at September 30), is as follows: 1995 1994 Accumulated postretirement benefit obligation: Retirees $ 76,623 $ 64,622 Plans' participants fully eligible to receive benefits 13,183 13,108 Other active plan participants 22,917 20,942 --------- --------- 112,723 98,672 Unrecognized prior service cost 13,731 11,611 Unrecognized net gains (losses) (5,976) 10,565 --------- --------- Accrued postretirement benefits other than pensions $ 120,478 $ 120,848 ========= ========= Following are assumptions used in determining the postretirement benefit cost and the accumulated postretirement benefit obligation: 1995 1994 1993 Discount rate 7.5% 8.25% 7.25% Projected health care cost trend rates: Under age 65 9.6 10.1 10.6 Over age 65 7.0 7.4 7.7 Ultimate 5.25 5.25 5.25 Year ultimate health care cost trend rate is achieved 2008 2008 2008 -51- NOTES TO FINANCIAL STATEMENTS NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued) The projected health care cost trend rates listed above for under and over age 65 participants represent assumed increases in per capita cost of covered health care benefits for 1996, 1995 and 1994, respectively. For future years, the rates are assumed to decrease gradually and remain at the ultimate trend rate thereafter. A one-percentage-point increase in the projected health care cost trend rates would increase the 1995 postretirement benefit cost by $676 and the accumulated postretirement benefit obligation as of September 30, 1995, by $7,270. NOTE 10 - LEASES The Company and its subsidiaries lease a variety of real property and equipment. Rent expense under operating leases amounted to approximately $20,709, $21,908 and $22,470 for 1995, 1994 and 1993, respectively. Future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 1995, are as follows: 1996 $ 14,920 1997 11,913 1998 9,174 1999 7,327 2000 5,805 Thereafter 25,602 -------- $ 74,741 ======== NOTE 11 - FORWARD EXCHANGE CONTRACTS The Company enters into forward exchange contracts to limit its exposure to exchange rate fluctuations on anticipated future purchase and sales transactions. Forward exchange contracts are written on a short-term basis (generally 30 days), are not held for trading purposes, and are not held for purposes of speculation. The purpose of the forward exchange contracts is to limit the risk associated with the effects of changes in exchange rates as the future transactions materialize. Gains and losses on all forward exchange contracts described above are recognized in Other expenses - net in the Statement of Income in the periods the exchange rates change. Such gains and losses were not significant to the results of operations for the years ended December 31, 1995, 1994 or 1993. The Company's credit risk in these transactions is limited to the cost of replacing the contracts at current market rates in the event of non-performance by the counterparties. Since these contracts are written with major international financial institutions, the Company believes its risk of credit loss is remote, and any losses incurred would not be significant. At December 31, 1995, the Company had no forward exchange contracts outstanding. -52- NOTES TO FINANCIAL STATEMENTS NOTE 12 - SPECIAL CHARGE AND OTHER TRANSACTION In 1993, the Company recorded a special charge of $26,000 for severance and other personnel-related costs associated with worldwide work force reductions, primarily focusing on the Company's industrial operations in Europe. This special charge increased the net loss for the year ended December 31, 1993, by $18,200, or $.64 per share. Also in 1993, the Company recorded a charge in Other expenses - net of $7,000 ($4,700 after tax, or $.17 per share) to provide for unsuccessfully contested prior years' value-added taxes in Brazil. NOTE 13 - CAPITAL STOCK AND EMPLOYEE STOCK OPTIONS The Company has rights outstanding as set forth in a Rights Agreement, whereby holders of common stock have one right for each share of common stock outstanding. When exercisable, each right entitles its holder to buy one one- hundredth of a new preferred share for $125. The Company has 4,000,000 shares of serial preferred stock authorized, of which no shares were outstanding at December 31, 1995 or 1994. If a person or group acquires 20% or more of the Company's outstanding common stock without complying with the Ohio Control Share Acquisition Act, or engages in certain self-dealing transactions, holders of rights will be entitled to purchase (a) common stock of the Company at one-half the market price, or (b) shares of an acquiring company at one- half the market price, depending upon the circumstances of the transaction. The Company may redeem the rights at a price of $.01 per right at any time prior to the rights becoming exercisable. The rights expire in 1999. The Company's 1994 Stock Incentive Plan (the "1994 Plan") permits the issuance of stock options, stock appreciation rights ("SARs") and performance awards to selected salaried employees as approved by the Organization and Compensation Committee of the Board of Directors. The 1994 Plan replaced the Company's 1982 and 1987 Stock Option Plans ("Option Plans"). The number of shares of common stock that may be issued or transferred under the 1994 Plan may not exceed 1,419,900 shares, which include 419,900 shares that were available for grant under the Option Plans as of the date the 1994 Plan was approved by the Board of Directors. The aggregate number of shares that may be granted to any single individual through stock options or SARs under the 1994 Plan may not exceed 200,000. Shares subject to award under the 1994 Plan that expire, terminate or are canceled without exercise are available for the grant of new awards. In instances where SARs or performance awards are settled in cash, the shares covered by such settlements will remain available for issuance under the 1994 Plan. Common stock issued under the 1994 Plan may be shares of original issuance, treasury shares or a combination thereof. -53- NOTES TO FINANCIAL STATEMENTS NOTE 13 - CAPITAL STOCK AND EMPLOYEE STOCK OPTIONS (Continued) Options may be granted to selected employees to purchase common stock at a price not less than 100% of fair market value on the date of grant. The term of each award will be determined by the Organization and Compensation Committee. All options granted as of December 31, 1995, are exercisable one year after date of grant and expire 10 years after date of grant. Options granted may be incentive stock options or non-qualified options. SARs granted under the 1994 Plan may either be freestanding appreciation rights or may be granted in tandem with stock options. No SARs were issued or outstanding at December 31, 1995. Performance awards may be granted to selected employees to receive future payments contingent on continuous service with the Company and achievement of pre-established goals. Such awards may be settled in cash, common shares available under the 1994 Plan or a combination of both as determined by the Organization and Compensation Committee. In January 1996 and 1995, 40,977 and 17,049 shares, respectively, of common stock were distributed to participants as performance awards under provisions of the long-term incentive plan for the three-year periods ended December 31, 1995 and 1994, respectively. At December 31, 1995, options were outstanding with expiration dates ranging to September 28, 2005, to purchase 1,164,980 shares of common stock at a weighted-average exercise price of $30.63 per share. At December 31, 1995, the Company had 3,885,093 shares of common stock reserved for issuance in connection with stock options and performance awards and for conversion of 6% convertible subordinated debentures. The following table summarizes stock options for the years 1995 and 1994.
1995 1994 -------------------------- -------------------------- Option Range of Option Range of Shares Option Prices Shares Option Prices ----------- ------------- ----------- ------------- Outstanding at January 1 1,097,230 $15.96 to $33.13 1,271,892 $14.17 to $32.81 Granted 311,000 33.50 to 37.75 316,000 33.13 Exercised (200,350) 15.96 to 33.13 (416,312) 14.17 to 29.38 Expired or canceled (42,900) 28.13 to 33.75 (74,350) 14.17 to 29.25 Outstanding at December 31 1,164,980 22.50 to 37.75 1,097,230 15.96 to 33.13 Exercisable at December 31 862,980 22.50 to 33.13 781,230 15.96 to 32.81 Available for future awards at December 31 774,374 1,086,851
-54- NOTES TO FINANCIAL STATEMENTS NOTE 14 - NON-U.S. OPERATIONS U.S. sales include export sales to unaffiliated non-U.S. customers of $150,212, $133,769 and $81,650 in 1995, 1994 and 1993, respectively. Currency exchange losses charged to Other expenses - net amounted to $1,849, $7,834 and $16,398 in 1995, 1994 and 1993, respectively. The following summary of financial data pertains to the Company and its non- U.S. operations. The geographic groupings of non-U.S. operations have been based on similarities of business environments and geographic proximity.
United Elimina- Consoli- States Europe Other tions dated --------- --------- --------- --------- --------- 1995 Net sales $1,175,509 $ 592,799 $ 115,705 $ - $1,884,013 Operating income 111,029 35,707 12,473 - 159,209 Identifiable assets 909,539 335,518 96,384 156,279 1,185,162 Total assets 948,528 335,518 96,384 156,279 1,224,151 Total liabilities 767,023 120,090 14,631 78,465 823,279 1994 Net sales $1,164,914 $ 518,785 $ 110,996 $ - $1,794,695 Operating income 102,066 24,738 14,265 - 141,069 Identifiable assets 725,297 288,820 83,447 133,362 964,202 Total assets 781,188 288,820 86,153 155,127 1,001,034 Total liabilities 593,372 142,351 8,397 63,132 680,988 1993 Net sales $1,054,595 $ 486,829 $ 102,417 $ - $1,643,841 Operating income (loss)(a) 54,895 (876) 14,873 - 68,892 Identifiable assets 689,548 325,757 63,269 143,962 934,612 Total assets 727,550 325,757 63,269 144,375 972,201 Total liabilities 683,449 103,406 (1,139) 66,747 718,969 (a) Includes special charge amounting to: (10,775) (15,125) (100) - (26,000)
-55- NOTES TO FINANCIAL STATEMENTS NOTE 15 - BUSINESS SEGMENTS TRINOVA is a world leader in the manufacture and distribution of engineered components and systems for industry, sold through its companies, Aeroquip and Vickers, to the industrial, automotive, and aerospace and defense markets. The industrial business serves original equipment and aftermarket customers in various worldwide markets (principally in the U.S., Europe, Asia and Brazil) including construction, mining, logging and farm equipment; machine tool; process industries; electrical machinery; air conditioning/refrigeration; appliances and communications equipment; electronics; lift truck; material handling; plant maintenance; and housing and commercial construction. The automotive business serves worldwide automobile, light truck and van manufacturers (principally in the U.S. and Europe). The aerospace & defense business serves original equipment and aftermarket customers in worldwide commercial aerospace and military markets (principally in the U.S. and Europe) including commercial aircraft, air defense, cargo handling, combat and support vehicles, commuter aircraft, engines, marine, military aircraft, military weaponry, missiles and naval machinery. Products include all pressure ranges of hose, fittings, adapters and couplings; pumps; hydraulic and electric motors; electric drives; cylinders; hydraulic and electronic controls; filters; fluid-evaluation products and services; and a wide variety of custom-engineered molded and extruded automotive and industrial plastic products. Operating income is net sales less operating expenses. Operating expenses include cost of products sold; selling and general administrative expenses; and engineering, research and development expenses. For 1993, operating expenses included a special charge amounting to $26,000, allocated $19,200 to industrial, $2,600 to automotive, $3,600 to aerospace & defense and $600 to corporate. Identifiable assets by business segment include all assets directly identified with those operations. Corporate assets consist of cash, receivables, properties, deferred income taxes and deferred charges. -56- NOTES TO FINANCIAL STATEMENTS NOTE 15 - BUSINESS SEGMENTS (Continued) The following data relate to business segments:
Depreciation Identi- and Operating fiable Amortization Capital Net Sales Income Assets Expense Expenditures ----------- ----------- ----------- ----------- ----------- 1995 Industrial $1,051,106 $ 121,962 $ 709,503 $ 31,151 $ 58,298 Automotive 494,016 24,107 235,665 19,042 21,848 Aerospace & Defense 338,891 38,631 200,315 12,029 12,198 ---------- ---------- ---------- ---------- ---------- $1,884,013 184,700 1,145,483 62,222 92,344 ========== Corporate (25,491) 39,679 2,377 1,611 Investments in affiliates - 38,989 - - ---------- ---------- ---------- ---------- $ 159,209 $1,224,151 $ 64,599 $ 93,955 ========== ========== ========== ========== 1994 Industrial $ 963,446 $ 89,281 $ 517,383 $ 30,141 $ 25,682 Automotive 514,273 46,841 227,115 18,215 18,725 Aerospace & Defense 316,976 28,114 178,216 11,727 8,533 ---------- ---------- ---------- ---------- ---------- $1,794,695 164,236 922,714 60,083 52,940 ========== Corporate (23,167) 41,488 1,988 2,214 Investments in affiliates - 36,832 - - ---------- ---------- ---------- ---------- $ 141,069 $1,001,034 $ 62,071 $ 55,154 ========== ========== ========== ========== 1993 Industrial $ 864,590 $ 17,118 $ 477,182 $ 31,860 $ 29,115 Automotive 452,637 45,724 203,725 17,547 14,705 Aerospace & Defense 326,614 26,016 189,050 11,785 10,724 ---------- ---------- ---------- ---------- ---------- $1,643,841 88,858 869,957 61,192 54,544 ========== Corporate (19,966) 64,655 1,826 584 Investments in affiliates - 37,589 - - ---------- ---------- ---------- ---------- $ 68,892 $ 972,201 $ 63,018 $ 55,128 ========== ========== ========== ==========
-57- NOTES TO FINANCIAL STATEMENTS NOTE 16 - OTHER INFORMATION 1995 1994 ---------- ---------- Receivables Receivables $ 305,387 $ 262,710 Less allowance for doubtful accounts 13,241 15,179 --------- --------- $ 292,146 $ 247,531 ========= ========= Inventories In-process and finished products $ 215,365 $ 171,555 Raw materials and manufacturing supplies 53,919 45,761 --------- --------- $ 269,284 $ 217,316 ========= ========= Other Current Assets Deferred income taxes $ 1,784 $ 9,750 Prepaid expenses and other current assets 37,005 37,868 --------- --------- $ 38,789 $ 47,618 ========= ========= Plants and Properties - at Cost Land and improvements $ 22,877 $ 21,170 Buildings 202,940 188,891 Machinery and equipment 686,789 630,654 Construction in progress 46,680 29,116 --------- --------- $ 959,286 $ 869,831 ========= ========= Other Assets Goodwill and other intangibles $ 85,292 $ 4,737 Investments in and advances to affiliates 38,989 36,832 Deferred income taxes 35,368 19,120 Receivables, deposits and other assets 22,736 20,146 --------- --------- $ 182,385 $ 80,835 ========= ========= Other Accrued Liabilities Employees' compensation and amounts withheld therefrom $ 102,833 $ 83,289 Taxes, other than income taxes 12,052 10,341 Other accrued liabilities 68,774 64,871 --------- --------- $ 183,659 $ 158,501 ========= ========= -58- INVESTOR INFORMATION Stock Exchanges TRINOVA's common stock is traded on the New York, Chicago and Pacific Stock Exchanges, and on the London and Frankfurt Stock Exchanges. Our NYSE ticker symbol is TNV. TRINOVA's 6% convertible subordinated debentures are listed on the Luxembourg Stock Exchange. Stock Ownership On December 31, 1995, there were 10,526 record holders of TRINOVA's common stock. Although exact information is unavailable, TRINOVA estimates there are approximately 7,000 additional beneficial owners, based upon the 1995 proxy solicitation. Dividend Information In January 1996, the Board of Directors increased the quarterly cash dividend on TRINOVA's common stock to 20 cents per share. Cash dividends have been paid without interruption on common stock since 1933. The payment of dividends is subject to restrictions described in Note 5 of Notes to Financial Statements. Quarterly Common Stock Information 1995 1994 Quarter Ended High Low Close High Low Close March 31 31.13 23.50 30.63 40.00 31.38 34.63 June 30 35.50 30.00 35.00 37.25 32.50 34.63 September 30 38.75 31.75 33.75 39.00 33.75 34.88 December 31 33.75 26.38 28.63 35.25 28.50 29.38 Dividend Payments per Share of Common Stock 1995 1994 March $ .18 $ .17 June .18 .17 September .18 .17 December .18 .17 $ .72 $ .68 EX-21 5 EXHIBIT (21) -59- TRINOVA CORPORATION SUBSIDIARIES OF THE REGISTRANT The assets and business of all subsidiaries listed below are included in the 1995 consolidated financial statements of the Registrant. In addition to those named, 1 U.S. and 17 non-U.S. consolidated subsidiaries and 6 affiliated companies that are accounted for by the cost and/or equity methods are not disclosed. The undisclosed subsidiaries and affiliated companies in the aggregate do not constitute a significant subsidiary. Incorporated or Percent of Organized - Voting Securities Company State or Country Owned - ---------------------------------- ------------------ ----------------- TRINOVA Corporation Ohio Registrant SUBSIDIARIES OF REGISTRANT Aeroquip Corporation Michigan 100 Aeroquip International Inc. Delaware 100 Vickers, Incorporated Delaware 100 Vickers International Inc. Delaware 100 Aeroquip A.G. Switzerland 100 Aeroquip Iberica S.A. Spain 100 Aeroquip Inoac Co. Michigan 51 Aeroquip LTD Barbados 100 Sterling Engineered Products Inc. Delaware 100 TRINOVA do Brasil, S/A Brazil 99.5 TRINOVA Canada Inc. Canada 100 TRINOVA GmbH Germany 100 TRINOVA Export Trading Company Virgin Islands 100 TRINOVA Limited United Kingdom 100 TRINOVA Pte. Ltd. Singapore 100 TRINOVA S.A. France 100 TRINOVA S.p.A. Italy 100 Vickers E.S.D. Inc. Delaware 100 Vickers Systems Limited Hong Kong 100 Vickers Systems Limited New Zealand 100 Vickers Systems Pty. Ltd. Australia 100 Vickers Systems Sdn. Bhd. Malaysia 100 Vickers Systems OY Finland 100 EX-23 6 EXHIBIT (23) -60- CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of TRINOVA Corporation for the year ended December 31, 1995, of our report dated January 24, 1996, included in Exhibit 13 to Form 10-K. Our audits also included the financial statement schedule of TRINOVA Corporation listed in Item 14(a)(2). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 33-9127 on Form S-3 dated August 28, 1987, and in the related Prospectus dated April 21, 1992; Registration Statement No. 33-19555 on Form S-3 dated January 15, 1988, and in the related Prospectus; Post-Effective Amendment No. 2 to Registration Statement No. 33-14682 on Form S-8 dated April 28, 1989; Registration Statement No. 33-28638 on Form S-8 dated May 10, 1989; Registration Statement No. 33-54059 on Form S-8 dated June 10, 1994; and Registration Statement No. 33-55399 on Form S-8 dated September 8, 1994, of our report dated January 24, 1996, with respect to the financial statements of TRINOVA Corporation incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of TRINOVA Corporation. /S/ ERNST & YOUNG LLP Toledo, Ohio March 14, 1996 EX-24 7 EXHIBIT (24) -61- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 16th day of February, 1996. /S/ PURDY CRAWFORD Purdy Crawford Director cjk/wp -62- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 15th day of February, 1996. /S/ JOSEPH C. FARRELL Joseph C. Farrell Director cjk/wp -63- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 29th day of February, 1996. /S/ DAVID R. GOODE David R. Goode Director cjk/wp -64- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 15th day of February, 1996. /S/ PAUL A. ORMOND Paul A. Ormond Director cjk/wp -65- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 15th day of February, 1996. /S/ JOHN P. REILLY John P. Reilly Director cjk/wp -66- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 19th day of February, 1996. /S/ ROBERT H. SPILMAN Robert H. Spilman Director cjk/wp -67- DIRECTOR OF TRINOVA CORPORATION ANNUAL REPORT ON FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director of TRINOVA Corporation, an Ohio corporation ("TRINOVA"), does hereby constitute and appoint Darryl F. Allen, James E. Kline and William R. Ammann, and each of them, a true and lawful attorney in his name, place and stead, in any and all capacities, to sign his name to TRINOVA's Annual Report on Form 10-K for the year ended December 31, 1995, and any and all amendments to such Form 10-K, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on this 15th day of February, 1996. /S/ W. R. TIMKEN, JR. W. R. Timken, Jr. Director cjk/wp EX-27 8 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF FINANCIAL POSITION AND THE CONDENSED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 DEC-31-1995 16,186 0 305,387 13,241 269,284 616,405 959,286 533,925 1,224,151 360,173 302,352 144,125 0 0 256,747 1,224,151 1,884,013 1,884,013 1,407,670 1,407,670 0 0 19,199 128,196 33,300 94,896 0 0 0 94,896 3.20 3.20
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