-----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, VKNbFhINCjdhY0+w6D+8BOZfnXr3iF5JXMHZtBDo1ruLyj0wWveI1XWZXDGnGPzQ VI5rsp7/t9p/BpesI6rH6g== 0000897069-99-000236.txt : 19990422 0000897069-99-000236.hdr.sgml : 19990422 ACCESSION NUMBER: 0000897069-99-000236 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDISON CONTROLS CORP CENTRAL INDEX KEY: 0000795968 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 222716367 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-14812 FILM NUMBER: 99598197 BUSINESS ADDRESS: STREET 1: W60 N151 CARDINAL AVENUE STREET 2: PO BOX 326 CITY: CEDARBURG STATE: WI ZIP: 53012 BUSINESS PHONE: (414) 377- MAIL ADDRESS: STREET 1: W60 N151 CARDINAL AVE. STREET 2: PO BOX 326 CITY: CEDARBURG STATE: WI ZIP: 53012 10-K405 1 FORM 10-K - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-14812 EDISON CONTROL CORPORATION (Exact name of registrant as specified in its charter) New Jersey 22-2716367 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 777 Maritime Drive 53074-0308 PO Box 308 (Zip Code) Port Washington, Wisconsin (Address of principal executive offices) Registrant's telephone number, including area code: 414-268-6800 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT Common stock, par value $.01 per share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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] Aggregate market value of Edison Control Corporation common stock, held by non-affiliates as of March 31, 1999 was $10,258,456. Indicate the number of shares outstanding of each of the issuer's classes of common stock as of March 31, 1999: 2,346,933 shares of common stock, par value $.01 per share. Documents Incorporated by Reference 1. Portions of Edison Control Corporation's 1998 Annual Report to Shareholders are incorporated by reference into Parts I, II and IV of this Form 10-K. 2. Portions of Edison Control Corporation's Notice of Annual Meeting and Proxy Statement for the Registrant's 1999 Annual Meeting scheduled to be held on June 8, 1999 are incorporated by reference into Part III of this Form 10-K. - -------------------------------------------------------------------------------- PART I Special Note Regarding Forward-Looking Statements Certain matters discussed in this Annual Report on Form 10-K are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes", "anticipates", "expects", or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, new product advancements by competition, significant changes in industry technology, economic or political conditions in the countries in which the Company does business, the continued availability of sources of supply, the availability and consummation of favorable acquisition opportunities, increasing competitive pressures on pricing and other contract terms and economic factors affecting the Company's security trading portfolio. These factors could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Item 1. Business Edison Control Corporation (the "Company") was incorporated under the laws of the State of New Jersey on June 18, 1986 to succeed a limited partnership organized on October 31, 1979. Until June 21, 1996, the principal operating business was involved in the design, development, manufacture and sale of electronic fault indicators. On June 21, 1996, the Company purchased, from unaffiliated persons, all of the issued and outstanding stock of Construction Forms, Inc. ("ConForms"), CF Ultra Tech, Inc. ("Ultra Tech") and CF Gilco, Inc. ("Gilco") and all of the issued and outstanding units of another affiliate, JABCO, LLC. On October 31, 1996, the Company sold certain net assets of the electronic fault indicators business to the manager of that operation. On February 1, 1998, Ultra Tech and Gilco were merged into ConForms. The Company conducts its business through its ConForms' divisions. ConForms, the Company's principal operating unit, designs, manufactures and distributes concrete pumping systems and accessories. Ultra Tech is engaged in the manufacturing and marketing of abrasion resistant piping systems. Abrasion resistant hardened pipe is used extensively in mining, pulp and paper mills, wastewater treatment plants and coal-fired electric utility plants, as well as in concrete pumping applications. Gilco is engaged in the manufacturing and marketing of a broad line of concrete and mortar/plaster mixers for a broad segment of industries. ConForms Most of ConForms' manufacturing operations and all of its administrative functions are located at the Company's headquarters in Port Washington, Wisconsin, which is approximately 25 miles north of Milwaukee. ConForms operates three branch warehouses for light manufacturing and distribution of its products. The warehouses are located in Gardena, California; Newport, Wales, United Kingdom; and Johor Bahru, Malaysia. ConForms also owns a 50% interest in South Houston Hose Company, a Houston, Texas based distributor of concrete pumping accessories, industrial hoses and a variety of fittings for other markets. 2 ConForms produces a standardized line of concrete pumping components and accessories compatible with many different types of concrete pumps in order to be in a position to provide concrete pumpers and distributors with a complete, high quality line of components and accessories priced lower than if each component were purchased individually. ConForms believes that a pumping system designed as a package helps improve the reliability and output of the pump. In the 1970s, as concrete pumps became more reliable, available and acceptable in the United States as the most efficient method of placing concrete, ConForms worked closely with pump manufacturers and contractors to develop better engineered products for the rapidly changing industry. The Company believes that industry standards were largely established based on ConForms' designs. ConForms' objective was, and continues to be, to provide high quality components and a superior level of service to stay at the forefront of the concrete pumping market. As ConForms continued to grow utilizing quality engineering, patent protection, tooling and fixtures, manufacturing methods and distribution, it became difficult for smaller manufacturers to match ConForms' total service level. The Company believes this strategy has allowed ConForms to increase its market share to over 50% of the North American market. ConForms manufactures concrete pumping systems and accessories for many applications, including use in high rise construction, airport and parking structures, and bridge and tunnel construction. In addition, ConForms' products are used extensively on mobile, truck-mounted concrete pumps equipped with articulating booms. Because of the inherent abrasiveness of concrete being conveyed under pressure, ConForms' products need to be replaced periodically and the end-user usually contacts ConForms or a distributor for high-quality, in-stock replacement components. ConForms manufactures over 7,000 finished products, although approximately 500 products constitute approximately 80% of ConForms' sales. To its knowledge, ConForms is the only complete source of system components and accessories needed to pump and place concrete. ConForms' products include straight pipe sections in a variety of lengths, diameters, wall thicknesses, degrees of hardness, and fittings. In addition, ConForms' products include couplings, reducers, bends, elbows and valves in various sizes and styles. Specially made rubber hose in a variety of sizes and configurations is included in ConForms' product base. The line also includes equipment, which is tailor-made for particular applications, such as bridge-deck spreaders, krete-placers, hydraulic diversion discharge valves, and customized equipment used in tunnel construction. Marketing ConForms' products, which account for approximately 77% of the Company's sales, are marketed principally through its own sales personnel and distributors. Besides contact from sales personnel, ConForms also attempts to maintain a prominent level of market visibility through active membership in the American Concrete Pumping Association, exhibits at industry trade shows, direct mail publications to end users and conducting industry safety seminars. Approximately 95% of all orders are received over the telephone. Export sales accounted for approximately 19.7% of ConForms' business for the year ended January 31, 1999, compared to 21.3% in the prior year. International markets are expected to be an increasing part of the business in future years. Customers ConForms' customer base consists of concrete pump manufacturers (19%), pumper/dealers (organizations which run a concrete pumping operation but also act as dealers of concrete pumps and systems) (33%), dealers (28%), pumping contractors (14%) and various other businesses such as rental yards, general contractors, pool contractors, ready mix operations, mines, fireproofers and precast companies (6%). No customer exceeded 10% of the Company's consolidated net sales for the year ended January 31, 1999. 3 Competition ConForms competes with a number of manufacturers in the concrete pumping components and accessories industry. However, the Company believes that this competition is very fragmented, with most competitors offering a limited selection of concrete pumping components and mainly selling against ConForms on price. ConForms competes by providing a complete line of products, quality, first class service and engineering assistance. Moreover, the Company believes that ConForms' patents, manufacturing methods and inventory stocking strategy provide it with a competitive advantage. Pump manufacturers also compete by actively promoting their internal wear parts and piping systems. Also, some customers develop their own in-house capability to produce some of the products. Miscellaneous Data Principal manufacturing operations include machining, welding, burning, bending, heat-treating, painting, sawing, hose coupling, assembly and fixture and tool making. Raw materials principally include steel pipe and tubing, rubber hose and castings. ConForms has long-term relationships with a select group of suppliers to control costs and ensure material quality and availability. ConForms does not have any written contractual agreements with any of its suppliers. The business has marginally lower sales volume in the fourth quarter; however working capital requirements are not significantly impacted. Terms of sale are generally net 30 days. ConForms has several patents and trademarks; only one, the method of heat-treating pipe with a wall thickness of under .200 inches, is considered of significant importance to the Company. ConForms order backlog on March 31, 1999 and 1998 was approximately $965,000 and $790,000, respectively; all of which should be completed prior to the end of the current fiscal year. Ultra Tech Ultra Tech was formed in 1989 to help assure ConForms an in-house supply of the highest quality, induction-hardened pipe for its concrete pumping systems. The Company believes its induction-hardened pipe will typically last 3 to 8 or more times longer than non-hardened pipe. Since its formation, Ultra Tech has attempted to establish its own identity in many other markets, primarily throughout the United States, including the mining industry to carry phosphate and coal slurries, the pulp and paper industry for various slurry mixes, the power industry to convey fly ash and coal and the waste treatment industry to convey sludge. Ultra Tech has developed a line of hardened and overlay pipe products available in varying diameters, lengths and configurations which prolong the life of a piping system, regardless of particular wear characteristics found in the pumping system. The Company uses low alloy steel pipe, advanced heat-treating technology and metallurgical principles to produce both UT600 and UT500 induction-hardened pipe. Both of these products have a hard, abrasion resistant inner wall and a more ductile outer layer. For pure abrasion applications, UT600 provides outstanding wear resistance. UT600 induction-hardened pipe is made from a raw steel pipe of a proprietary chemistry. The pipe is induction heated, then water quenched on the inner wall. In applications involving impact or shock loading, UT500 offers more ductility while maintaining a hard innerwear surface. For applications where abrasion from shear and erosion are extreme, UltraWeld Overlay is considered for superior wear resistance. The result is a surface possessing an excellent combination of high resistance to erosion, severe abrasion and moderate impact strength. 4 In August 1995, Ultra Tech began production at a new induction-hardening plant owned by its affiliate, JABCO, LLC in Port Washington, Wisconsin. Port Washington is approximately 25 miles north of Milwaukee. Ultra Tech's new equipment increased the size range of pipe it can process from 24 inches to 40 inches in diameter and reduced processing time by approximately 50%. Marketing Ultra Tech products, which account for approximately 14% of the Company's net sales, are marketed through Company sales and marketing personnel and distributors. Regular advertising is placed in various trade journals. Ultra Tech's export sales for the year ended January 31, 1999 and 1998 accounted for approximately 3.3% and 10.8% of Ultra Tech's net sales, respectively. Customers The market for Ultra Tech's products is primarily resource-based industries such as mining, paper and energy. Secondary influence is felt in the processing industries such as dredging, foundries, steel, cement, sludge and grain handling. However, any pneumatic or hydraulic pipeline transporting solids is a potential customer for Ultra Tech. No customer exceeded 10% of the Company's consolidated net sales for the year ended January 31, 1999. Competition There are a number of competitors in the piping industry, including mild steel, duplex steel, plastic pipe, rubber lined pipe, basalt lined pipe, ceramic lined pipe and cast alloy pipe. Ultra Tech is one of only three North American competitors in the manufacturing of hardened pipe. Ultra Tech relies on its efficient manufacturing processes, superior value, quality and engineering assistance to compete. Miscellaneous Data Principal manufacturing operations include machining, welding, burning, bending, heat-treating and sawing. Raw materials principally include steel pipe in lengths up to 50 feet and diameters from 2 1/2 to 40 inches. Ultra Tech does not have any written contractual agreements with any of its suppliers. Raw materials are readily available from various sources. Ultra Tech's business is not seasonal. Working capital requirements may be significant depending on the size of the order. Terms of sale are generally net 30 days. Ultra Tech does not depend on patents and trademarks. Ultra Tech's order backlog on March 31, 1999 and 1998 was approximately $705,000 and $1,025,000, respectively; all of which is to be completed prior to the end of the current fiscal year. Gilco In 1989, ConForms acquired the assets of the mixer division of the Gilson Brothers Company, a well-known manufacturer of construction and utility mixers. This acquisition allowed ConForms to diversify and expand its product line and market base in the concrete construction equipment industry. Gilco is engaged in the design, manufacture and marketing of concrete and mortar/plaster mixers. Gilco's product 5 lines include mortar/plaster mixers with capacities of six to sixteen cubic feet, concrete mixers with capacities of one and one-half to nine cubic feet and non-tilt mixers with capacities of six to sixteen cubic feet. Gilco's mixers are built to maintain high production with the densest mixes in the toughest conditions. The mixers feature a square paddle shaft, steel blades/adjustable wipers and a reinforced tubular steel frame. They also feature a dual-belt drive and a completely enclosed extra heavy-duty gear drive with automotive style clutch or a fully automatic hydraulic transmission. Gilco's new polyurethane liners can be ordered across several mixer lines. Mixers are driven by gas-powered engines or electric motors. Gilco occupies a 50,000 square foot factory owned by the Company in Grafton, Wisconsin. Grafton is approximately 20 miles north of Milwaukee. Marketing Gilco markets its products, which account for approximately 9% of the Company's sales, through inside sales personnel, direct mail, trade magazine advertisements and referrals. This is in addition to its existing distributor and retail channels. Gilson mixers are positioned at the high quality, high price end of the market. Gilco's export sales accounted for approximately 1% and 2% of Gilco's net sales volume during the years ended January 31, 1999 and 1998, respectively. Customers Approximately 48% of Gilco's sales are to construction equipment dealers. Another 18% are sold direct to masons, plasterers, general contractors and other end users. Retail outlets account for about 20% of Gilco's business. The remaining 14% are sold to government agencies, rental yards, and other equipment manufacturers. No customer exceeded 10% of the Company's consolidated net sales for the year ended January 31, 1999. Competition Gilco has a few large competitors along with several competitors of similar size. While a few are only involved with mixers, most have a line of additional and some-what related construction equipment products. Gilco competes on the basis of its high quality. Miscellaneous Data Principal manufacturing operations include metal fabricating, welding, burning, bending, assembly and painting. Raw materials principally include sheet metal, steel, castings, tires and engines. Gilco does not have any written contractual agreements with any of its suppliers. All raw materials are readily available. The business is seasonal with slightly lower sales volume in the fourth quarter; however, working capital requirements are not significantly affected. Terms of sale are generally net 30 days. Gilco's patents and trademarks are not material to Gilco's business. Gilco's order backlog on March 31, 1999 and 1998 was approximately $85,000 and $80,000, respectively; all of which is to be shipped during the current fiscal year. 6 Year 2000 Matters During fiscal 1998, the Company engaged in a comprehensive project to select and implement a new enterprise resource planning ("ERP") system that will properly recognize the Year 2000 problem. This project involved replacing certain hardware and software maintained by the Company. The Company has received a representation from the ERP software provider that its software is Year 2000 compliant. On February 1, 1999, the Company started operating with the new ERP system. Contingency plans have been developed and will be implemented if Year 2000 problems are encountered with the new ERP system. The total cumulative cost of the project was approximately $530,000. Purchased ERP system hardware and software, approximately $385,000 of the total estimated cost, was capitalized in accordance with normal policy. Personnel and all other remaining costs related to the project were expensed as incurred. The Company has not formally communicated with all its customers and suppliers to determine the extent to which the Company is vulnerable to those third parties' failure to address Year 2000 issues. The Company's business operations could be affected by the year 2000 readiness of its customers and suppliers in such areas as the delay in receipt of cash from customers, the interruption of utilities and the inability of suppliers to deliver in a timely manner. The Company does not anticipate any materially adverse affect on its business due to Year 2000 problems encountered by its customers or suppliers; however, there can be no assurance that its business will not be materially adversely affected by such problems. General Matters Research and development expenditures are a part of the engineering department's budget and are expensed as incurred. The estimated total amount spent on research and development during the years ended January 31, 1999, 1998 and 1997 totaled approximately $212,000, $190,000 and $190,000, respectively. The Company believes that compliance with Federal, state and local environmental regulations will not require significant capital expenditures or materially affect future earnings in fiscal 1999. No portion of the business is subject to renegotiation of profits or termination of contracts at the election of the United States government. Industry Segments Information on industry segments is incorporated by reference to footnote 15 of the consolidated financial statements contained in the Company's 1998 Annual Report to Shareholders. Foreign Operations Information on foreign operations is incorporated by reference to footnote 14 of the consolidated financial statements contained in the Company's 1998 Annual Report to Shareholders. Employees As of January 31, 1999, the Company had 111 active full-time employees. 7 Item 2. Properties The following table sets forth certain information with respect to the Company's principal facilities as of January 31, 1999: Square Feet of Location Floor Space Description and Principal Use - -------- ----------- ----------------------------- Port Washington, WI (1) 95,000 One-story and partial mezzanine, masonry and metal clad, steel frame office and manufacturing facility on 15 acres used mainly for manufacturing of ConForms and Ultra Tech products and headquarters for all office personnel. Grafton, WI (1) 42,000 One and part two-story, masonry and metal clad, steel and wood framed office and manufacturing facility on 2.2 acres used mainly for manufacturing Gilco and Ultra Tech products. Cedarburg, WI (1) 53,000 One-story, masonry and metal-clad, steel frame office and manufacturing facility on 6.5 acres. Facility currently held for sale. Gardena, CA (2) 10,000 One-story office and manufacturing facility used for the distribution and light manufacturing of ConForms products. Newport, Wales, United 10,000 One-story office and manufacturing Kingdom (3) facility used for the distribution and light manufacturing of ConForms products. Johor Bahru, Malaysia(4) 10,000 One-story office and manufacturing facility used for the distribution and light manufacturing of ConForms products. - --------- (1) The Company owns these facilities, all of which are mortgaged under debt agreements. (2) The Company leases this facility. The lease expires November 30, 2003. (3) The Company leases this facility. The lease expires October 31, 2000. (4) The Company leases this facility. The lease expires January 31, 2001. The Company believes that all of its facilities are in good condition and are adequate for their intended uses. Item 3. Legal Proceedings There are currently no material legal proceedings pending to which the Company is a party nor were any material legal proceedings concluded during the fourth quarter of fiscal 1998. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1998. 8 Part II Item 5. Market for the Company's Stock and Related Stockholder Matters The Company's Common Stock trades on The Nasdaq Stock Market under the symbol EDCO. The following table sets forth the high and low bid quotation for the fiscal quarter shown. The prices quoted represent prices between dealers in securities without adjustments for mark-ups, mark-downs or commissions and do not necessarily reflect actual transactions. Fiscal 1997 Quarter High Low ------- ---- --- 1st 5 1/4 4 2nd 5 3 3rd 5 1/2 4 1/8 4th 4 1/2 3 7/8 Fiscal 1998 Quarter High Low ------- ---- --- 1st 6 1/2 4 2nd 11 1/2 6 3/4 3rd 9 1/8 6 3/4 4th 7 1/2 6 1/8 The approximate number of shareholders of record and beneficial shareholders of the Company's $.01 par value common stock as of January 31, 1999 was 33 and 600, respectively. The Company has not previously paid any dividends on its Common Stock. The Company intends to follow a policy of retaining all of its earnings to finance its business and any future acquisitions. The following information for this Part II is incorporated by reference to the Company's 1998 Annual Report to Shareholders, as follows: Information Incorporated by Item Caption Reference to: - ---- ------- --------------------------- 6. Summary of Selected Financial Data Annual Report, page 9 7. Management's Discussion and Annual Report, pages 4 - 8 Analysis of Financial Condition and Results of Operations 7A. Quantitative and Qualitative Annual Report, pages 6 - 7 Disclosures About Market Risk 8. Audited Financial Statements and Annual Report, pages 10 - 34 Supplemental Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. 9 Part III Item 10. Directors and Executive Officers of the Registrant At March 31, 1999, the names and ages of all executive officers and directors of the Company and all positions and offices held with the Company are listed below. There are no family relationships between such persons. All officers are elected annually by the Board of Directors at the first Board meeting following each annual meeting of the shareholders. There are no agreements between any of the officers and any other person pursuant to election as an officer. First Name Office Elected Age ---- ------ ------- --- William B. Finneran Chairman of the Board and Director 1991 57 Jay J. Miller Director 1991 66 John J. Delucca Director 1991 55 Mary E. McCormack Director 1995 45 Alan J. Kastelic President and Chief Executive Officer of Edison Control Corporation and Director 1996 55 Jay R. Hanamann Secretary, Treasurer and Chief 1996 39 Financial Officer Robert L. Cooney Director 1997 65 William C. Scott Director 1997 64 William B. Finneran is a Managing Director of CIBC Oppenheimer Corp., an investment-banking firm, and has been employed with them since 1972. Mr. Finneran is a Director of National Planning Association, a non-profit advisory board and Covenant House, a non-profit charitable institution. Mr. Finneran also serves on the Board of Operation Smile and Villanova University. Jay J. Miller has been a practicing attorney in the State of New York for more than thirty years. Mr. Miller is a Director of Total-Tel USA Communication, Inc., a provider of long distance telephone service. He is currently serving as Chairman of the Board of AmTrust Pacific Ltd., a New Zealand property company. John J. Delucca is Executive Vice President, Finance and Administration, and CFO of Coty, Inc., a cosmetics and fragrance company. Previously, Mr. Delucca served as Senior Vice President and Treasurer of RJR Nabisco from September 1993 to December 1998, Chief Financial Officer of the Hascoe Association, a private investment company from January 1991 to September 1993, President and Chief Financial Officer for The Lexington Group from October 1990 to January 1991, Senior Vice President of Finance and Managing Director of the Trump Group from May 1988 to October 1990, and Senior Vice President of Finance for International Controls Corporation from April 1986 to May 1988. In addition, Mr. Delucca is a director of Enzo Biochem, Inc., a genetic research/testing company and Elliot Company, a manufacturer of turbines and related equipment. Mary E. McCormack is Director of Acquisitions of The Hertz Corporation. She was President and Chief Executive Officer of the Edison Control Corporation from February 1995 to February 1998. Prior to working with the Company, Ms. McCormack was a Managing Director of Beechtree Capital Partners, Inc., 10 a boutique merchant banking firm which she co-founded in 1989. From 1983 to 1989, she served in a variety of capacities for the investment banking and brokerage firm of Advest, Inc., most recently as Vice President-Corporate Finance. Ms. McCormack is a Director of Star International Holdings, Inc., a manufacturer of commercial cooking appliances. Alan J. Kastelic was appointed President and Chief Executive Officer of Edison Control Corporation in June 1998 and President and Chief Executive Officer of Construction Forms, Inc. in June 1996 when Construction Forms, Inc. was acquired by the Company. Mr. Kastelic had previously been Executive Vice President and Chief Operating Officer of Construction Forms, Inc. which he joined in 1977. Prior to joining Construction Forms, Mr. Kastelic was Manufacturing Manager at Badger Dynamics and Chief Cost Accountant, Material Control Manager and Manager of Manufacturing at the PCM division of Koehring Corporation. Jay R. Hanamann was appointed Treasurer and Chief Financial Officer on July 1, 1996. Mr. Hanamann is the Chief Financial Officer of Construction Forms, Inc. He has served in various financial and management functions with ConForms since July 1990. From 1981 to 1990 he was employed by the international accounting firm of Deloitte & Touche LLP. Robert L. Cooney is a Partner of Cooney, Schroeder & Co., a consulting firm which he co-founded in February 1997. Mr. Cooney was a Managing Director-Equity Capital Markets at Credit Suisse First Boston from 1977 to January 1997. Mr. Cooney also serves as a director of Hoenig Group Inc., a Nasdaq-listed global securities brokerage firm located in Rye Brook, New York and Equity One, Inc., a NYSE-listed real estate investment trust located in Miami, Florida. William C. Scott was from 1988 to 1999 the Chairman and Chief Executive Officer of Panavision Inc., the leading designer and manufacturer of high-precision film camera systems for the motion picture and television industries. From 1972 until 1987, Mr. Scott was President and Chief Operating Officer of Western Pacific Industries Inc., a manufacturer of industrial products. Prior to 1972 Mr. Scott was a Group Vice President of Cordura Corporation (a business information company) for three years and Vice President of Booz, Allen & Hamilton (a management-consulting firm) for five years. He is currently Chairman of the Board of TeleCast Communications Limited, London, England, a director of Panavision Inc. and of Four Media Company. Certain other information is incorporated by reference to "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders. Item 11. Executive Compensation All information is incorporated by reference to "Executive Compensation" in the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management All information is incorporated by reference to "Share Ownership of Directors, Officers and Certain Beneficial Owners" in the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders. Item 13. Certain Relationships and Related Transactions There were no reportable transactions during the year. 11 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)(1) Financial Statements: The consolidated financial statements of the Company, together with the report thereon of Deloitte & Touche, LLP appear on pages 10 through 34 of the Company's 1998 Annual Report to Shareholders, and are incorporated herein by reference. (a)(2) Financial Statement Schedules: Schedules not included have been omitted because they are either not applicable or the information is presented in the consolidated financial statements or notes thereto. (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the fourth quarter. (c) Exhibits: The Exhibits filed or incorporated by reference herein are as specified in the Exhibit Index. 12 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By: /s/ Alan J. Kastelic Alan J. Kastelic President and Chief Executive Officer (Principal Executive Officer) April 21, 1999 By: /s/ Jay R. Hanamann Jay R. Hanamann Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) April 21, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of Edison Control Corporation and in the capacities and on the dates indicated: /s/ William B. Finneran William B. Finneran Chairman of the Board and Director April 21, 1999 /s/ Mary E. McCormack Mary E. McCormack Director April 21, 1999 /s/ Jay J. Miller Jay J. Miller Director April 21, 1999 /s/ John J. Delucca John J. Delucca Director April 21, 1999 /s/ Alan J. Kastelic Alan J. Kastelic Director and President and Chief Executive Officer of Construction Forms, Inc. April 21, 1999 /s/ Robert L. Cooney Robert L. Cooney Director April 21, 1999 /s/ William C. Scott William C. Scott Director April 21, 1999 13 EXHIBIT INDEX - ------------- Exhibit No. Description - ----------- ----------- 3.1 Certificate of Incorporation (incorporated by reference to the Company's Form 10-Q for the quarter ended July 31, 1998). 3.2 By-laws of the Company (incorporated by reference to the Company's Registration Statements on Form S-18 (File No. 33-6736-NY) filed on June 24, 1986). 4.1 Master Credit Agreement dated June 21, 1996 between Construction Forms, Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and LaSalle National Bank (incorporated by reference to the Company's Form 8-K dated July 8, 1996). 4.2 Loan Agreement dated June 21, 1996 between Construction Forms, Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and Bank Audi USA (incorporated by reference to the Company's Form 8-K dated July 8, 1996). 10.1 * 1986 Stock Option Plan of Company (incorporated by reference to the Company's Registration Statement on Form S-18 (File No. 33-6736-NY) filed June 24, 1986). 10.2 * Stock Warrant issued to William Finneran (incorporated by reference to the Company's 1997 Proxy Statement Exhibit 2). 10.3 * Edison Control Corporation 1999 Equity Incentive Plan, subject to shareholder approval at the Company's 1999 Annual Meeting of Shareholders. 10.4 Stock and Unit Purchase Agreement dated June 21, 1996 by and among Registrant, Construction Forms Acquisition Inc. and the Shareholders of Construction Forms, Inc., CF Gilco, Inc., and JABCO, LLC (incorporated by reference to Form 8-K dated July 8, 1996). 10.5 * Employment Agreement dated June 21, 1996 between the Company and Alan J. Kastelic (incorporated by reference to the Company's Form 10-K dated April 25, 1997). 10.6 * Employment Agreement dated June 21, 1996 between the Company and Jay R. Hanamann (incorporated by reference to the Company's Form 10-K dated April 25, 1997). 10.7 * Stock Option Plan dated June 21, 1996 between the Company and Alan J. Kastelic (incorporated by reference to the Company's Form 10-K dated April 25, 1997). 10.8 * Stock Option Plan dated June 21, 1996 between the Company and Jay R. Hanamann. (incorporated by reference to the Company's Form 10-K dated April 25, 1997). 10.9 * Nonqualified Stock Option Agreement dated May 29, 1997, between the Company and Robert Cooney (incorporated by reference to the Company's Registration Statement on Form S-8 (File No. 333-41483) filed December 4, 1997). 10.10 * Nonqualified Stock Option Agreement dated October 15, 1997, between the Company and William Scott (incorporated by reference to the Company's Registration Statement on Form S-8 (File No. 333-41483) filed December 4, 1997). 14 13. Pages from 1998 Annual Report to shareholders which are incorporated by reference to Form 10-K. 21. Subsidiaries of Edison Control Corporation. 23. Consent and Report of Independent Auditors. 27. Financial Data Schedule for the twelve-month period ended January 31, 1999. 99. Definitive Proxy Statement for 1999 Annual Meeting of Shareholders (to be filed within 120 days of January 31, 1999). * Represents a management compensation plan. EX-10.3 2 EQUITY INCENTIVE PLAN EXHIBIT 10.3 EDISON CONTROL CORPORATION 1999 EQUITY INCENTIVE PLAN Section 1. Purpose The purpose of the Edison Control Corporation 1999 Equity Incentive Plan (the "Plan") is to promote the best interests of Edison Control Corporation (together with any successor thereto, the "Company") and its shareholders by providing key employees and consultants of the Company and its Affiliates (as defined below), and members of the Company's Board of Directors who are not employees of the Company, with an opportunity to acquire a, or increase their, proprietary interest in the Company. It is intended that the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company by those key employees and consultants who are primarily responsible for shaping and carrying out the long-range plans of the Company and securing the Company's continued growth and financial success. Also, by encouraging stock ownership by directors, the Company seeks to attract and retain on its Board of Directors persons of exceptional competence and to furnish an added incentive for them to continue their association with the Company. Section 2. Definitions As used in the Plan, the following terms shall have the respective meanings set forth below: (a) "Affiliate" shall mean any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, the Company. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock or Performance Share or other award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Change in Control" will be deemed to have occurred if: (i) any entity not affiliated with the Company or any Affiliate is or becomes the beneficial owner of securities of the Company representing at least 25% of the combined voting power of the Company's then outstanding voting securities; (ii) there is consummated any business combination of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's capital stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's capital stock immediately prior to the merger have the same proportionate ownership of capital stock of the surviving corporation immediately after the merger, or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the consolidated assets of the Company; or (iii) the shareholders of the Company approve any plan for the liquidation or dissolution of the Company. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (f) "Commission" shall mean the Securities and Exchange Commission. (g) "Committee" shall mean the Compensation Committee of the Board of Directors of the Company (or any other committee thereof designated by such Board to administer the Plan) consisting of not less than two Independent Directors, each of whom shall qualify as a "non-employee director" within the meaning of Rule 16b-3 and as an "outside director" under Section 162(m)(4)(C) of the Code or any successor provisions thereto. (h) "Consultant" shall mean any consultant or advisor to the Company, any Subsidiary or any Affiliate who is not otherwise an employee of the Company or any Affiliate who is responsible for or contributes to the management, growth or profitability of the business of the Company or any Affiliate, as determined by the Committee in its discretion. (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (j) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (k) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code (or any successor provision thereto). (l) "Independent Directors" shall mean any member of the Company's Board of Directors who is not an employee of the Company or of any Affiliate. (m) "Key Employee" shall mean any officer or other key employee of the Company or of any Affiliate who is responsible for or contributes to the management, growth or profitability of the business of the Company or any Affiliate, as determined by the Committee in its discretion. (n) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (o) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. (p) "Participant" shall mean a Key Employee, Consultant or Independent Director designated to be granted an Award under the Plan. (q) "Performance Period" shall mean, in relation to Performance Shares, any period for which a performance goal or goals have been established. (r) "Performance Share" shall mean any right granted under Section 6(d) of the Plan that will be paid out as a Share (which, in specified circumstances, may be a Share of Restricted Stock). -2- (s) "Person" shall mean any individual, corporation, partnership, association, joint-stock company, limited liability company, trust, unincorporated organization or government or political subdivision thereof. (t) "Released Securities" shall mean Shares of Restricted Stock with respect to which all applicable restrictions have expired, lapsed or been waived. (u) "Restricted Securities" shall mean Awards of Restricted Stock or other Awards under which issued and outstanding Shares are held subject to certain restrictions pursuant to the Plan or an Award Agreement. (v) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan or, in specified circumstances, a Share paid in connection with a Performance Share under Section 6(d) of the Plan. (w) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto. (x) "Shares" shall mean shares of Common Stock of the Company, $.01 par value, and such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(b) of the Plan. (y) "Stock Appreciation Right" shall mean any right granted under Section 5(c) of the Plan. Section 3. Administration The Plan shall be administered by the Committee; provided, however, that if at any time the Committee shall not be in existence, the functions of the Committee as specified in the Plan shall be exercised by the Board of Directors of the Company (the "Board") and all references to the Committee herein shall include the Board. To the extent permitted by applicable law, the Board may delegate to another committee of the Board or to one or more senior officers of the Company any or all of the authority and responsibility of the Committee with respect to the Plan, other than with respect to Participants who are subject to Section 16 of the Exchange Act. To the extent that the Board has delegated to such other committee or one or more officers the authority and responsibility of the Committee, all references to the Committee herein shall include such other committee or one or more officers. Subject to the terms of the Plan and applicable laws and without limitation by reason of enumeration, the Committee shall have full discretionary power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) Awards granted to Participants; (iv) determine the terms and conditions of any Award granted to a Participant; (v) determine whether, to what extent and under what circumstances Awards granted to Participants may be settled or exercised in cash, Shares, other securities, other Awards or other property, and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares, other Awards and -3- other amounts payable with respect to an Award granted to Participants under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan (including, without limitation, any Award Agreement); (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time or from time to time, and shall be final, conclusive and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any shareholder and any employee of the Company or of any Affiliate. Section 4. Shares Available for Award (a) Shares Available. Subject to adjustment as provided in Section 4(b): (i) Number of Shares Available. The number of Shares with respect to which Awards may be granted under the Plan shall be 200,000, subject to the limitations set forth in Section 6(c)(i) and subject to the other provisions of this Section 4. If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which any Award relates, are forfeited or if an otherwise terminates, expires or is cancelled prior to the delivery of all of the Shares or of other consideration issuable or payable pursuant to such Award, then the number of Shares counted against the number of Shares available under the Plan in connection with the grant of such Award, to the extent of any such forfeiture, termination, expiration or cancellation, shall again be available for granting of additional Awards under the Plan. (ii) Accounting for Awards. The number of Shares covered by an Award under the Plan, or to which such Award relates, shall be counted on the date of grant of such Award against the number of Shares available for granting Awards under the Plan. (iii) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares and/or of treasury Shares. (b) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares subject to the Plan and which thereafter may be made the subject of Awards under the Plan; -4- (ii) the number and type of Shares subject to outstanding Awards; and (iii) the grant, purchase or exercise price with respect to any Award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, however, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b) of the Code (or any successor provision thereto); and provided further that the number of Shares subject to any Award payable or denominated in Shares shall always be a whole number. Section 5. Eligibility Any Key Employee, including any executive officer or employee-director of the Company or of any Affiliate, and any Consultant or Independent Director, shall be eligible to be designated a Participant. Section 6. Awards (a) Option Awards. The Committee is hereby authorized to grant Options to Key Employees, Consultants and Independent Directors with the terms and conditions as set forth below and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine in its discretion; provided, however, that Consultants and Independent Directors may not be granted Incentive Stock Options. (i) Exercise Price. The exercise price per Share of an Option granted pursuant to this Section 6(a) shall be determined by the Committee; provided, however, that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the Committee; provided, however, that in no event shall the term of any Option exceed a period of ten years from the date of its grant. (iii) Exercisability and Method of Exercise. An Option shall become exercisable in such manner and within such period or periods and in such installments or otherwise as shall be determined by the Committee; provided, however, that regardless of any other exercise or vesting period specified in any Award Agreement with respect to any Option, each Option granted under the Plan shall become immediately exercisable in full for the remainder of the Option term automatically upon the occurrence of a Change in Control. The Committee also shall determine the method or methods by which, and the form or forms, including, without limitation, cash, Shares, other securities, other Awards, other property or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect to any Option may be made or deemed to have been made. (iv) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code (or any successor provision thereto) and any regulations promulgated thereunder. Notwithstanding any provision in the Plan to the contrary, no Incentive Stock Option may be granted hereunder after the tenth anniversary of the adoption of the Plan by the Board. -5- (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Key Employees and Consultants. Independent Directors are not eligible to be granted Stock Appreciation Rights under the Plan. Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan, the grant price, term, methods of exercise, methods of settlement (including whether the Participant will be paid in cash, Shares, other securities, other Awards, or other property or any combination thereof), and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee in its discretion; provided, however, that regardless of any other exercise or vesting period specified in any Award Agreement with respect to any Stock Appreciation Right, each Stock Appreciation Right granted under the Plan shall become immediately exercisable in full for the remainder of the Stock Appreciation Right term automatically upon the occurrence of a Change in Control. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (c) Restricted Stock Awards. (i) Issuance. The Committee is hereby authorized to grant Awards of Restricted Stock to Key Employees and Consultants; provided, however, that the aggregate number of Shares of Restricted Stock granted under the Plan to all Participants as a group shall not exceed 20,000 Shares of the total number of Shares available for Awards under Section 4(a)(i), subject to Section 4(a)(ii) and the other provisions of Section 4. Independent Directors are not eligible to be granted Restricted Stock under the Plan. (ii) Restrictions. Shares of Restricted Stock granted to Participants shall be subject to such restrictions as the Committee may impose in its discretion (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate in its discretion; provided, however, that regardless of any other vesting or restriction period specified in any Award Agreement with respect to any Restricted Stock, each Share of Restricted Stock granted under the Plan shall become a Released Security automatically upon the occurrence of a Change in Control. (iii) Registration. Any Restricted Stock granted under the Plan to a Participant may be evidenced in such manner as the Committee may deem appropriate in its discretion, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares of Restricted Stock granted under the Plan to a Participant, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend (as determined by the Committee) referring to the terms, conditions and restrictions applicable to such Restricted Stock. -6- (iv) Payment of Restricted Stock. At the end of the applicable restriction period relating to Restricted Stock granted to a Participant, one or more stock certificates for the appropriate number of Shares of Released Securities, free of restrictions imposed under the Plan and the Award Agreement, shall be delivered to the Participant or, if the Participant received stock certificates representing the Restricted Stock at the time of grant, the legends placed on such certificates shall be removed. (v) Forfeiture. Except as otherwise determined by the Committee in its discretion, upon termination of employment or consultancy of a Participant (as determined under criteria established by the Committee in its discretion) for any reason during the applicable restriction period, all Shares of Restricted Stock still subject to restriction under the Plan or an Award Agreement shall be forfeited by the Participant; provided, however, that the Committee may, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock held by a Participant. (d) Performance Share Awards. (i) Issuance. The Committee is hereby authorized to grant Awards of Performance Shares to Key Employees and Consultants. Independent Directors are not eligible to be granted Performance Shares under the Plan. (ii) Performance Goals and Other Terms. The Committee shall determine in its discretion the Performance Period, the performance goal or goals to be achieved during any Performance Period, the proportion of payments, if any, to be made for performance between the minimum and full performance levels, the restrictions applicable to Shares of Restricted Stock received upon payment of Performance Shares (if Performance Shares are paid in such manner), and any other terms, conditions and rights relating to a grant of Performance Shares; provided, however, that regardless of any other requirements or restrictions specified in any Award Agreement with respect to any Performance Share, each Performance Share granted under the Plan shall become immediately payable in full (assuming the maximum performance goal and any other requirements have been fully satisfied) automatically upon the occurrence of a Change in Control. Performance goals established by the Committee may be based on one or more measures such as return on shareholders' equity, earnings or any other standard or standards deemed relevant by the Committee, measured internally or relative to other organizations and before or after extraordinary items. (iii) Rights and Benefits During the Performance Period. The Committee may provide that, during a Performance Period, a Participant shall be paid cash amounts, with respect to each Performance Share held by such Participant, in the same manner, at the same time, and in the same amount paid, as a cash dividend on a Share. Participants shall have no voting rights with respect to Performance Shares held by them. (iv) Adjustments with Respect to Performance Shares. Any other provision of the Plan to the contrary notwithstanding, the Committee may in its discretion at any time or from time to time adjust performance goals (up or down) and minimum or full -7- performance levels (and any intermediate levels and proportion of payments related thereto), adjust the manner in which performance goals are measured, or shorten any Performance Period or waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock issued in payment of Performance Shares, if the Committee determines that conditions, including but not limited to, changes in the economy, changes in competitive conditions, changes in laws or governmental regulations, changes in generally accepted accounting principles, changes in the Company's accounting policies, acquisitions or dispositions by the Company or its Affiliates, or the occurrence of other unusual, unforeseen or extraordinary events, so warrant. (v) Payment of Performance Shares. As soon as is reasonably practicable following the end of the applicable Performance Period, one or more certificates representing the number of Shares equal to the number of Performance Shares payable shall be registered in the name of and delivered to the Participant; provided, however, that any Shares of Restricted Stock payable in connection with Performance Shares shall, pending the expiration, lapse, or waiver of the applicable restrictions, be evidenced in the manner as set forth in Section 6(c)(iii) hereof. (e) Other Awards. (i) Other Stock-Based Awards. Other awards, valued in whole or in part by reference to, or otherwise based on, Shares may be granted either alone or in addition to or in conjunction with other Awards for such consideration, if any, and in such amounts and having such terms and conditions as the Committee may determine. (ii) Other Benefits. The Committee shall have the right to provide types of benefits under the Plan in addition to those specifically listed if the committee believes that such benefits would further the purposes for which the Plan was established. (f) General. (i) No Consideration for Awards. Awards shall be granted to Participants for no cash consideration unless otherwise determined by the Committee. (ii) Award Agreements. Each Award granted under the Plan shall be evidenced by an Award Agreement in such form or forms (consistent with the terms of the Plan) as shall have been approved by the Committee. (iii) Awards May Be Granted Separately or Together. Awards to Participants under the Plan may be granted either alone or in addition to, in tandem with, or in substitution for, any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to, or in tandem with, other Awards, or in addition to, or in tandem with, awards granted under any other plan of the Company or any Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iv) Forms of Payment Under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the -8- Company or an Affiliate upon the grant, exercise or payment of an Award to a Participant may be made in such form or forms as the Committee shall determine, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with rules and procedures established by the Committee in its discretion. Such rules and procedures may include, without limitation, provisions for the payment or crediting of interest on installment or deferred payments. (v) Limits on Transfer of Awards. No Award (other than Released Securities), and no right under any such Award, shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or by the laws of descent and distribution (or, in the case of an Award of Restricted Securities, to the Company); provided, however, that a Participant at the discretion of the Committee may be entitled, in the manner established by the Committee, (A) to designate a beneficiary or beneficiaries to exercise his or her rights, and to receive any property distributable, with respect to any Award upon the death of the Participant or (B) to transfer any Award. No Award (other than Released Securities), and no right under any such Award, may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (vi) Term of Awards. Except as otherwise provided in the Plan, the term of each Award shall be for such period as may be determined by the Committee. (vii) Share Certificates; Representation. In addition to the restrictions imposed pursuant to Section 6(c) and Section 6(d) hereof, all certificates for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Commission, the Nasdaq National Market or any other stock exchange or other market upon which such Shares are then listed or traded, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Committee may require each Participant or other Person who acquires Shares under the Plan by means of an Award originally made to a Participant to represent to the Company in writing that such Participant or other Person is acquiring the Shares without a view to the distribution thereof. (viii) Waiver of Conditions. The Committee may, in whole or in part, waive any conditions or other restrictions with respect to any award. Section 7. Amendment and Termination of the Plan; Correction of Defects and Omissions (a) Amendments to and Termination of the Plan. The Board may at any time amend, alter, suspend, discontinue or terminate the Plan; provided, however, that shareholder approval of any amendment of the Plan shall also be obtained if otherwise required by: (i) the Code or any rules promulgated thereunder (in order to allow for Incentive Stock Options to be granted under the Plan) or (ii) the quotation or listing requirements of the Nasdaq National Market or any other principal securities exchange or market on which the Shares are then traded (in order to maintain the quotation or the listing of the Shares thereon). To the extent permitted by applicable -9- law and subject to such shareholder approval as may be required above, the Committee may also amend the Plan, provided that any such amendments shall be reported to the Board. Termination of the Plan shall not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards shall continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions. (b) Correction of Defects, Omissions and Inconsistencies. The Committee may in its discretion correct any defect, supply any omission or reconcile any inconsistency in any Award or Award Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. General Provisions (a) No Rights to Awards. No Key Employee, Consultant, Independent Director, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Key Employees, Consultants, Independent Directors, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each Participant. (b) Withholding. No later than the date as of which an amount first becomes includable in the gross income of a Participant for federal income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising with respect to Awards to Participants under the Plan may be settled with Shares previously owned by the Participant; provided, however, that the Participant may not settle such obligations with Shares that are part of, or are received upon exercise of, the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and any Affiliate shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Committee may establish such procedures as it deems appropriate for the settling of withholding obligations with Shares. (c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) Rights and Status of Recipients of Awards. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ or consultancy of the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss a Participant from employment or consultancy, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. Except for rights accorded under the Plan and under any applicable Award Agreement, Participants shall have no rights as holders of Shares as a result of the granting of Awards hereunder. -10- (e) Unfunded Status of the Plan. Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company or the Committee and any Participant or other Person. To the extent Person holds any right by virtue of a grant under the Plan, such right (unless otherwise determined by the Committee) shall be no greater than the right of an unsecured general creditor of the Company. (f) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of Wisconsin and applicable federal law. (g) Severability. If any provision of the Plan or any Award Agreement or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan, any Award Agreement or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, any Award Agreement or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan, any such Award Agreement and any such Award shall remain in full force and effect. (h) No Fractional Shares. No fractional Shares or other securities shall be issued or delivered pursuant to the Plan, any Award Agreement or any Award, and the Committee shall determine (except as otherwise provided in the Plan) whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 9. Effective Date of the Plan The Plan shall be effective on the date the Plan is adopted by the Board, subject, however, to the approval of the Plan by the Company's shareholders within 12 months following the date of adoption of the Plan by the Board. Section 10. Term of the Plan No Award shall be granted under the Plan following the tenth anniversary of its effective date. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date and, to the extent set forth in the Plan, the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award, or to waive any conditions or restrictions with respect to any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date. -11- EX-13 3 FINANCIALS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain matters discussed in this Annual Report to Shareholders are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes", "anticipates", "expects", or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, new product advancements by competition, significant changes in industry technology, economic or political conditions in the countries in which the Company does business, the continued availability of sources of supply, the availability and consummation of favorable acquisition opportunities, increasing competitve pressures on pricing and other contract terms, economic factors affecting the Company's customer base and stock price variations affecting the Company's securities trading portfolio. These factors could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The year ended January 31, 1999 ("fiscal 1998") was the year for preparing for the future. Edison Control Corporation (the "Company") completed its move into its 95,000 square foot manufacturing faciltiy in Port Washington, Wisconsin, increased sales and marketing efforts in foreign countires, and implemented a new enterprise resource planning system ("ERP") that the Company believes is year 2000 compliant. Notwithstanding these expenditures, the Company was able to increase net sales by 4.9% and net income by 8.8%. Capital expenditures for the year were $3,082,725; however, debt only increased by $718,259. RESULTS OF OPERATIONS Fiscal 1998 versus Fiscal 1997 Net sales for fiscal 1998 increased 4.9% to $25,050,116 compared with $23,875,214 in the prior year. Strong domestic sales at Construction Forms ("ConForms"), the inclusion of sales from the Company's Malaysian operation and increased mortar-plaster mixer sales into the Florida market accounted for the increase. The lower percentage increase this year compared to last year was due to decreases in sales volume at the Company's Ultra Tech and ConForms Europe divisions. Fewer sales to mining industry customers and the slowing of the construction economies in Europe accounted for the decrease at Ultra Tech and ConForms Europe, respectively. As a percentage of net sales, gross profit margin decreased to 35.6% for fiscal 1998 as compared to 38.4% in the prior year. The decrease was due mainly to product mix variations, the increase of lower margin foreign sales and costs associated with the move from Cedarburg to Port Washington. Selling, engineering and administrative expenses represented 18.2% of net sales for fiscal 1998 and fiscal 1997, respectively. Selling, engineering and administrative expenses increased $209,984 in fiscal 1998 to $4,560,257 due to increased personnel in engineering, increased sales costs related to foreign sales, moving costs and training and other costs incurred in relation to the implementation of the new ERP system. Interest expense was $955,818 and $1,133,382 for fiscal 1998 and 1997, respectively. The decrease resulted from a reduction of the average outstanding debt from the previous year. Assuming rates remain stable, interest expense is expected to decrease in fiscal 1999 as further debt reduction is anticipated. 4 Net investment loss, which includes interest, dividends and realized and unrealized gains or losses on trading securities, was $152,947 for fiscal 1998 compared to last year's net loss of $173,366. A major reason for the net loss was the decrease in the market value of the Company's holdings in Glenayre Technologies, Inc. and VIVUS Inc. Although the Company has no established formal investment policies or practices for its trading securities portfolio, the Company generally pursues an aggressive trading strategy, focusing primarily on generating near-term capital appreciation from its investments in common equity securities. Securities held in the Company's portfolio at the end of each period are reported at fair value, with unrealized gains and losses included in earnings for that period. These factors, combined with the relative size of the Company's trading portfolio, has led, and will likely continue to lead, to significant period-to-period earnings volatility depending upon the capital appreciation or depreciation of the Company's trading securities portfolio as of the end of each reporting period. The Company does not use or buy derivative securities. See "Quantitative and Qualitative Disclosures about Market Risk". The amortization of goodwill, financing costs, stock options and stock warrants created a total non-cash charge of $1,301,863 for fiscal 1998 compared to $1,600,421 for the prior year. Goodwill from the June 1996 acquisition of ConForms is being amortized over a 40-year period. The stock option amortization was fully amortized as of June 21, 1997. The amortization of financing costs and stock warrants will continue principally until June 21, 1999. Excluding these items, the Company would have reported net income of approximately $1,983,000, or $.69 per diluted share. The total amortization of all these non-cash charges for the year ended January 31, 2000 is expected to approximate $660,000. The Company recorded tax expense of $850,000 for fiscal 1998, which represented the estimated annual effective rate of 41.4% applied to pre-tax book income. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement reporting purposes and the amounts used for income tax purposes. Net income of $1,202,330, or $.52 and $.42 per share, basic and diluted, respectively, for fiscal 1998 represented an increase of $97,168 from net income of $1,105,162, or $.49 and $.41 per share, basic and diluted, respectively, for the prior fiscal year. Fiscal 1997 versus Fiscal 1996 Net sales for fiscal 1997 increased 75.5% to $23,875,214 compared with $13,604,340 in the prior year. The increase was mainly attributable to the inclusion of the results of operations of ConForms and subsidiaries for the full year in fiscal 1997. On a pro-forma basis, ConForms and subsidiaries' net sales for fiscal 1997 increased $2,653,879 (12.5%) compared to fiscal 1996. Strong domestic sales at ConForms and large project sales to power and phosphate industry customers at Ultra Tech accounted for the increase. Gross profit margin increased to 38.4% for fiscal 1997 as compared to 32.4% in the prior year. The increase was due to better pricing on Ultra Tech sales, better fixed cost coverage from the increased volume at ConForms and Ultra Tech, the inclusion of the acquired companies for the full period, and the sale of the Company's electronic fault indicator business in late 1996. Selling, engineering and administrative expenses represented 18.2% and 23.8% of net sales for fiscal 1997 and 1996, respectively. The percentage decrease for fiscal 1997 was primarily attributable to the inclusion of the results of operations of the acquired companies and decreases in general insurance and ConForms' sales and marketing expenses. Selling, engineering and administrative expenses of the acquired companies on a pro-forma basis decreased to $3,815,658 in fiscal 1997 from $4,462,498 in fiscal 1996. This was mainly due to decreased personnel wages and benefits, general insurance and ConForms' sales and marketing expense. 5 Interest expense was $1,133,382 and $775,762 for fiscal 1997 and 1996, respectively. Debt was incurred to finance the acquisition on June 21, 1996. The increase in interest expense was due to a full year of outstanding debt. Net investment loss, which includes interest, dividends and realized and unrealized gains or losses on trading securities, was $173,366 for fiscal 1997 compared to last year's net gain of $33,279. A major reason for the decrease was related to the decrease in the market value of the Company's holdings in Glenayre Technologies, Inc. and VIVUS Inc. The amortization of goodwill, financing costs, stock options and stock warrants created a total non-cash charge of $1,600,421 for fiscal 1997 compared to $1,235,253 for the prior year. Excluding these items, the Company would have reported net income of approximately $2,065,000 or $.77 per diluted share. The Company recorded tax expense of $850,000 for fiscal 1997, which represented the estimated annual effective rate of 43.5% applied to pre-tax book income. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement reporting purposes and the amounts used for income tax purposes. Net income of $1,105,162, or $.49 and $.41 per share, basic and diluted, respectively, for fiscal 1997 represented an increase of $1,836,190 from a net loss of $731,028, or $.33 per share, basic and diluted, for the prior year. This change was principally due to the operating results of ConForms and subsidiaries. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate risk, foreign currency risk and equity price risk. These risks include changes in U.S interest rates, changes in foreign currency exchange rates as measured against the U.S. dollar and changes in the prices of stocks traded on the U.S. markets. Interest Rate Risk The Company's revolving credit borrowings and variable rate term loans, which total $14,741,601 as of January 31, 1999, are subject to interest rate risk. Most of the borrowings float at either the prime rate or LIBOR plus a certain amount of basis points. Based on the fiscal 1998 year end balance, an increase of one percent in the interest rate on the Company's loans would cause an increase in interest expense of approximately $147,000, or $.03 per diluted share, on an annual basis. The Company currently does not use derivatives to fix variable rate interst obligations. Foreign Currency Risk The Company has foreign operations in the United Kingdom and Malaysia. Sales and purchases are typically denominated in the British pound, Malaysian ringgit, German mark, Singapore dollar or U.S. dollar, thereby creating exposures to changes in exchange rates. The changes in exchange rates may positively or negatively affect the Company's sales, gross margins and retained earnings. The Company does not enter into foreign exchange contracts but attempts to minimize currency exposure risk through working capital management. There can be no assurance that such an approach will be successful, especially in the event of a significant and sudden decline in the value of a currency. Equity Price Risk Approximately 11% of the Company's total assets as of January 31, 1999 are invested in trading securities of various domestic companies. The market value of these investments is subject to fluctuation. This factor, combined with the relative size of the Company's trading portfolio ($3,616,314 at January 31, 1999), has led and will likely continue to lead, to significant period-to-period earnings volatility depending upon the capital 6 appreciation or depreciation of the Company's trading securities portfolio. A 10% decrease in the quoted market price of these trading securities would decrease the fair market value of these securities by approximately $360,000, or $0.07 per diluted share. Although the Company has no established formal investment policies or practices for its trading securities portfolio, the Company generally pursues an aggressive trading strategy, focusing primarily on generating near-term capital appreciation from its investments in common equity securities. Securities held in the Company's portfolio at the end of each period are reported at fair value, with unrealized gains and losses included in earnings for that period. These factors, combined with the relative size of the Company's trading portfolio, has led, and will likely continue to lead, to significant period-to-period earnings volatility depending upon the capital appreciation or depreciation of the Company's trading securities portfolio as of the end of each reporting period. The Company does not use or buy derivative securities. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities was $1,480,894 for fiscal 1998, compared to $3,671,674 for fiscal 1997. In fiscal 1997, the net sale of trading securities accounted for approximately $837,000 of the operating cash flow. Excluding the net trading securities activity from operating cash flow, the significant decrease in operating cash flow was due to the increase in purchases of raw materials in the last few months of fiscal 1998 compared to the same period last year. Net working capital of $12,730,093 at January 31, 1999 increased $1,856,761, or 17.1%, from the fiscal 1997 year-end level of $10,873,332. The current ratio at January 31, 1999 was 3.8:1 compared to 3.5:1 at prior year-end. The change was mainly due to the increase in inventories and in assets held for sale. Cash used in investing activities for fiscal 1998 was $2,962,272 compared to $470,364 in fiscal 1997. This increase was principally due to the $2,527,802 increase in capital expenditures for the year. During fiscal 1998, the Company constructed an addition to its Port Washington facility and implemented a new enterprise resource planning system. Due to the capital expenditures, the Company increased its debt by $718,259 in fiscal 1998, which accounted for most of the cash provided from financing activities. Cash used in financing activities in fiscal 1997 of $2,884,082 was due to repayment of debt. The Company has reduced its debt by $4,852,759 since the June 21, 1996 acquisition date. The Company's debt to capitalization ratio at January 31, 1999 and 1998 was 47.7% and 49.0%, respectively. The Company maintains various debt agreements, which are described in more detail in the footnotes to the consolidated financial statements. Required principal payments in fiscal 1999 are expected to be approximately $530,000. The Company believes that it can fund proposed capital expenditures and operational requirements from operations and currently available cash and cash equivalents, investments, trading securities and existing bank credit lines. Proposed capital expenditures for the fiscal year ending January 31, 2000 are expected to total approximately $900,000, compared to $3,082,725 for fiscal 1998. The significant decrease is due principally to the construction of an addition at the Company's Port Washington facility and the implementation of a new ERP system in fiscal 1998. The Company also intends to sell its Cedarburg facility which is classified as an asset held for sale in the consolidated balance sheet. The Company's asking price for the facility is $1,295,000, although there can be no assurance as to when or if this facility may be resold. The Company intends to continue to expand its businesses, both internally and through potential acquisitions. The Company currently anticipates that any potential acquisitions would be financed primarily by internally generated funds, additional borrowings or the issuance of the Company's stock. 7 Year 2000 During fiscal 1998, the Company engaged in a comprehensive project to select and implement a new enterprise resource planning ("ERP") system that will properly recognize the Year 2000 problem. This project involved replacing certain hardware and software maintained by the Company. The Company has received a representation from the ERP software provider that its software is Year 2000 compliant. On February 1, 1999, the Company started operating with the new ERP system. Contingency plans have been developed and will be implemented if Year 2000 problems are encountered with the new ERP system. The total cumulative cost of the project was approximately $530,000. Purchased ERP system hardware and software, approximately $385,000 of the total estimated cost, was capitalized in accordance with normal policy. Personnel and all other remaining costs related to the project were expensed as incurred. The Company has not formally communicated with all its customers and suppliers to determine the extent to which the Company is vulnerable to those third parties' failure to address Year 2000 issues. The Company's business operations could be affected by the Year 2000 readiness of its customers and suppliers in such areas as the delay in receipt of cash from customers, the interruption of utilities and the inability of suppliers to deliver in a timely manner. The Company does not anticipate any materially adverse affect on its business due to Year 2000 problems encountered by its customers or suppliers; however, there can be no assurance that its business will not be materially adversely affected by such problems. 8 SUMMARY OF SELECTED FINANCIAL DATA
EDISON CONTROL CORPORATION Year Ended January 31, Year Ended December 31 ---------------------------------------------- ----------------------------- 1999 1998 1997 1995 1994 ---- ---- ---- ---- ---- Statements of Operations Net sales $ 25,050,116 $ 23,875,214 $13,604,340 $ 791,502 $ 1,444,004 Cost of sales $ 16,125,601 $ 14,717,711 $ 9,191,243 $ 660,857 $ 1,005,326 Gross profit $ 8,924,515 $ 9,157,503 $ 4,413,097 $ 130,645 $ 438,678 Selling, engineering & administrative $ 4,560,257 $ 4,350,273 $ 3,238,168 $ 729,267 $ 676,857 Operating income (loss) $ 4,045,728 $ 4,190,142 $ 531,702 $ (598,622) $ (238,179) Realized gains (losses) on trading securities $ 161,598 $ (54,837) $ 2,802,490 $ 2,214,145 $ 712,530 Unrealized (losses) gains on trading securities $ (375,863) $ (205,618) $(2,854,059) $ 1,842,902 $ (193,830) Interest, dividends and other income $ 75,574 $ 63,276 $ 84,848 $ 39,598 $ 187,818 Income (loss) before cumulative effect $ 1,202,330 $ 1,105,162 $ (731,028) $ 2,082,582 $ 382,780 Cumulative effect of change in accounting principle, net of income taxes $ - $ - $ - $ - $ 1,447,567 Net income (loss) $ 1,202,330 $ 1,105,162 $ (731,028) $ 2,082,582 $ 1,830,347 Per Share Information Net income (loss) per share - basic $ 0.52 $ 0.49 $ (0.33) $ 0.98 $ 0.87 Net income (loss) per share - diluted $ 0.42 $ 0.41 $ (0.33) $ 0.94 $ 0.84 Book value at year end $ 6.90 $ 6.41 $ 5.98 $ 4.86 $ 3.89 At Year End Working capital $ 12,730,093 $ 10,873,332 $11,554,170 $ 10,299,875 $ 8,101,993 Property, plant and equipment-net $ 8,187,899 $ 6,945,103 $ 7,077,228 $ 65,687 $ 65,618 Total assets $ 34,902,997 $ 32,355,957 $34,060,105 $ 12,553,486 $ 9,332,572 Long-term debt $ 14,741,601 $ 14,023,342 $16,907,424 $ - $ - Shareholders' equity $ 16,183,272 $ 14,590,525 $13,601,241 $ 10,375,912 $ 8,176,330 Weighted average shares outstanding -assuming dilution 2,883,133 2,686,951 2,558,232 2,209,117 2,174,918 Common stock outstanding 2,346,933 2,275,933 2,275,933 2,136,000 2,100,000 Note: As discussed in the Management's Discussion and Analysis of Financial Condition and Results of Operations, significant changes were made to the Company's core business in fiscal 1996. Note: The Company adopted the provisions of FASB 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company adopted the provisions of the new standard for securities held as of or acquired after January 1, 1994. The cumulative effect as of January 1, 1994 of adopting Statement No. 115 increased net income by $1,447,567 (net of $962,635 in deferred income taxes), or $.69 per share-basic and $.67 per share-diluted.
9 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders Of Edison Control Corporation: We have audited the accompanying consolidated balance sheets of Edison Control Corporation and subsidiaries (the "Corporation") as of January 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended January 31, 1999. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Edison Control Corporation and subsidiaries as of January 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 1999, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Milwaukee, Wisconsin March 26, 1999 10 EDISON CONTROL CORPORATION
CONSOLIDATED BALANCE SHEETS JANUARY 31, 1999 AND 1998 - -------------------------------------------------------------------------------------------------------------- ASSETS (Note 8) 1999 1998 CURRENT ASSETS: Cash and cash equivalents (Note 1) $ 468,072 $ 1,037,288 Investments (Note 1) 190,000 190,000 Trading securities (Notes 1 and 3) 3,616,314 3,653,763 Accounts receivable, less allowance of $268,000 and $320,000, respectively (Note 1) 3,513,342 2,995,637 Receivable from affiliate (Note 5) 93,575 103,482 Inventories (Notes 1 and 4) 7,619,746 5,974,302 Prepaid expenses and other current assets 193,650 193,099 Deferred income taxes (Note 7) 2,000 Refundable income taxes (Note 7) 120,505 81,182 Assets held for sale (Note 1) 1,032,200 Deferred financing costs (Note 10) 389,236 983,333 ------------ ------------ Total current assets 17,238,640 15,212,086 INVESTMENT IN AND ADVANCES TO AFFILIATE (Note 5) 421,263 433,150 OTHER ASSETS: Prepaid pension (Note 9) 151,477 283,134 Deferred income taxes (Note 7) 129,000 Deferred financing costs (Note 10) 389,236 ------------ ------------ Total other assets 280,477 672,370 PROPERTY, PLANT AND EQUIPMENT (Note 1): Cost: Land 302,902 343,059 Buildings and improvements 3,603,659 2,788,014 Machinery and equipment 5,869,300 4,729,916 Construction in progress 10,908 47,014 ------------ ------------ 9,786,769 7,908,003 Less - accumulated depreciation (1,598,870) (962,900) ------------ ------------ 8,187,899 6,945,103 GOODWILL (net of amortization of $600,000 and 8,690,318 8,922,576 $367,741, respectively) (Note 1) ORGANIZATIONAL/FINANCE COSTS (net of amortization of $226,670 and $140,398, respectively)(Note 1) 84,400 170,672 ------------ ------------ TOTAL $ 34,902,997 $ 32,355,957 ============ ============
11
- ----------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 CURRENT LIABILITIES: Trade accounts payable $ 1,939,917 $ 1,261,244 Accrued compensation 739,938 781,566 Taxes other than income taxes 21,325 29,985 Other accrued expenses (Note 6) 522,694 555,045 Deferred income taxes (Note 7) 115,000 Deferred compensation (Notes 1 and 10) 754,250 754,250 Current maturities on long-term debt (Note 8) 530,423 841,664 ------------ ------------ Total current liabilities 4,508,547 4,338,754 LONG-TERM DEBT, LESS CURRENT MATURITIES (Note 8) 14,211,178 13,181,678 DEFERRED INCOME TAXES (Note 7) 245,000 ------------ ------------ Total liabilities 18,719,725 17,765,432 SHAREHOLDERS' EQUITY (Note 10): Preferred Stock, $.01 par value; 1,000,000 shares authorized, none issued Common Stock, $.01 par value; 20,000,000 shares authorized, 2,346,933 and 2,275,933 shares issued and outstanding, respectively 23,469 22,759 Additional paid-in capital 10,323,225 10,016,435 Retained earnings 5,760,823 4,558,493 Accumulated other comprehensive income 75,755 (7,162) ------------ ------------ Total shareholders' equity 16,183,272 14,590,525 ------------ ------------ TOTAL $ 34,902,997 $ 32,355,957 ============ ============ See notes to consolidated financial statements.
12
EDISON CONTROL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JANUARY 31, 1999, 1998 and 1997 - --------------------------------------------------------------------------------------------------------------- Year Ended January 31 -------------------------------------------------------- 1999 1998 1997 NET SALES $ 25,050,116 $ 23,875,214 $ 13,604,340 COST OF GOODS SOLD 16,125,601 14,717,711 9,191,243 ------------ ------------ ------------ GROSS PROFIT 8,924,515 9,157,503 4,413,097 OTHER OPERATING EXPENSES: Selling, engineering and administrative expenses 4,560,257 4,350,273 3,238,168 Stock option amortization (Note 10) 298,558 455,691 Goodwill and organizational/finance cost amortization (Note 1) 318,530 318,530 187,536 ------------ ------------ ------------ Total other operating expenses 4,878,787 4,967,361 3,881,395 ------------ ------------ ------------ OPERATING INCOME 4,045,728 4,190,142 531,702 OTHER EXPENSE (INCOME): Interest expense 955,818 1,133,382 775,762 Realized (gains) losses on trading securities (161,598) 54,837 (2,802,490) Unrealized losses on trading securities 375,863 205,618 2,854,059 Interest and miscellaneous income (75,574) (63,276) (84,848) Loss on sale of assets, net (Note 2) 434,166 Stock warrant amortization (Note 10) 983,333 983,333 594,097 Equity in earnings of affiliate (Note 5) (84,444) (78,914) (18,016) ------------ ------------ ------------ Total other expense (income) 1,993,398 2,234,980 1,752,730 ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES 2,052,330 1,955,162 (1,221,028) INCOME TAXES (CREDIT) (Note 7) 850,000 850,000 (490,000) ------------ ------------ ------------ NET INCOME (LOSS) 1,202,330 1,105,162 (731,028) OTHER COMPREHENSIVE INCOME (LOSS)- Foreign currency translation adjustments (Note 1) 82,917 (115,878) 108,716 ------------ ------------ ------------ COMPREHENSIVE INCOME (LOSS) $ 1,285,247 $ 989,284 $ (622,312) ============ ============ ============ NET INCOME (LOSS) PER SHARE (Note 1): Net Income (Loss) Per Share - Basic $ 0.52 $ 0.49 $ (0.33) ============ ============ ============ Net Income (Loss) Per Share - Diluted $ 0.42 $ 0.41 $ (0.33) ============ ============ ============ See notes to consolidated financial statements. See notes to consolidated financial statements.
13 EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED JANUARY 31, 1999, 1998 and 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated Common Stock Additional Other ------------------------- Paid-in Retained Comprehensive Shares Amount Capital Earnings Income Total BALANCES, JANUARY 31, 1996 2,136,000 $ 21,360 $ 6,143,334 $ 4,184,359 $ 10,349,053 Stock issued at acquisition (Note 10) 114,933 1,149 860,851 862,000 Stock warrants issued (Note 10) 2,950,000 2,950,000 Stock options exercised (Note 10) 25,000 250 62,250 62,500 Foreign currency translation adjustment $ 108,716 108,716 Net (loss) (731,028) (731,028) --------- -------- ----------- ----------- --------- ------------ BALANCES, JANUARY 31, 1997 2,275,933 22,759 10,016,435 3,453,331 108,716 13,601,241 Foreign currency translation adjustment (115,878) (115,878) Net income 1,105,162 1,105,162 --------- -------- ----------- ----------- --------- ------------ BALANCES, JANUARY 31, 1998 2,275,933 22,759 10,016,435 4,558,493 (7,162) 14,590,525 Stock options exercised (Note 10) 71,000 710 306,790 307,500 Foreign currency translation adjustment 82,917 82,917 Net income 1,202,330 1,202,330 --------- -------- ----------- ----------- --------- ------------ BALANCES, JANUARY 31, 1999 2,346,933 $ 23,469 $10,323,225 $ 5,760,823 $ 75,755 $ 16,183,272 ========= ======== =========== =========== ========= ============ See notes to consolidated financial statements.
14 EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JANUARY 31, 1999, 1998 and 1997 - --------------------------------------------------------------------------------------------------------------- Year Ended January 31 -------------------------------------------- 1999 1998 1997 OPERATING ACTIVITIES: Net income (loss) $ 1,202,330 $ 1,105,162 $ (731,028) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of plant and equipment 766,497 653,089 328,421 Amortization 1,301,863 1,600,421 1,235,253 Provision for doubtful accounts (39,931) 76,780 10,127 Realized (gain) loss on trading securities sales (161,598) 54,837 (2,802,490) Unrealized loss on trading securities 375,863 205,618 2,854,059 Purchases of trading securities (2,530,113) (3,768,475) (9,003,912) Proceeds from the sales of trading securities 2,353,297 4,605,945 15,409,029 Loss on sale of assets 26,202 19,973 396,318 Equity in earnings of affiliate (84,444) (78,914) (18,016) Changes in assets and liabilities, net of acquired companies: Accounts receivable (456,077) (377,314) (140,961) Receivable from affiliate 9,907 52,553 44,973 Inventories (1,611,616) (679,253) 1,417,211 Prepaid expenses and other assets 1,356 1,395 23,928 Prepaid pension 131,657 101,887 57,577 Trade accounts payable 676,489 388,713 (71,315) Accrued compensation (41,965) 175,254 78,084 Taxes other than income taxes 724 (2,223) (44,774) Other accrued expenses (43,183) 19,550 101,490 Income taxes 94,636 (97,324) (538,285) Deferred income taxes (491,000) (386,000) (1,370,871) ----------- ----------- ----------- Net cash provided by operating activities 1,480,894 3,671,674 7,234,818 ----------- ----------- ----------- INVESTING ACTIVITIES: Additions to plant and equipment (3,082,725) (554,923) (416,340) Maturity of certificate of deposit 94,000 Payments received from (advances to) affiliate 96,331 (14,182) 45,823 Proceeds from sale of assets 24,122 4,741 9,819 Payment for the purchase of acquired companies, net of cash acquired (18,914,093) ----------- ----------- ----------- Net cash used in investing activities (2,962,272) (470,364) (19,274,791) ----------- ----------- ----------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 2,175,000 600,000 16,540,000 Payments on long-term debt (1,456,741) (3,484,082) (4,531,936) Proceeds from issuance of common stock 95,724 Stock options exercised 177,500 62,500 ----------- ----------- ----------- Net cash provided by (used in) financing activities 895,759 (2,884,082) 12,166,288 ----------- ----------- ----------- (Continued)
15 EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JANUARY 31, 1999, 1998 and 1997 - ----------------------------------------------------------------------------------------------------------- Year Ended January 31 ----------------------------------------------------- 1999 1998 1997 EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 16,403 $ (51,948) $ 46,762 ----------- ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (569,216) 265,280 173,077 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,037,288 772,008 598,931 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 468,072 $ 1,037,288 $ 772,008 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 946,210 $ 1,111,901 $ 773,954 Income taxes, net of refunds $ 1,246,200 $ 1,336,130 $ 1,419,070 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock issued as part of purchase price of acquired companies $ 766,274 Notes receivable canceled as part of purchase price of acquired companies $ 332,400 Fair value of warrant issued in connection with financing of acquisition $ 2,950,000 See notes to consolidated financial statements.
16 EDISON CONTROL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JANUARY 31, 1999, 1998 and 1997 - -------------------------------------------------------------------------------- 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of Edison Control Corporation ("Edison") and subsidiaries, all of which are wholly owned (collectively, the "Company"). All material intercompany accounts and transactions have been eliminated in consolidation. Nature of Operations - The Company is currently comprised of the following operations. Construction Forms ("ConForms") is a leading manufacturer and distributor of systems of pipes, couplings and hoses and other equipment used for the pumping of concrete. ConForms manufactures a wide variety of finished products which are used to create appropriate configurations of systems for various concrete pumps. Ultra Tech manufactures abrasion resistant piping systems for use in industries such as mining, pulp and paper, power and waste treatment. Gilco produces a line of concrete and plaster/mortar mixers. JABCO primarily leases property and equipment to the Company. The Company's principal market is in North America with limited sales activity in Europe, South America and Asia. Cash Equivalents - The Company considers all temporary investments with maturities of three months or less when acquired to be cash equivalents. Investments - Investments consist of certificates of deposit with maturities in excess of three months and are recorded at cost which approximates market. The Company intends to hold the certificates until maturity. Trading Securities - Debt and equity securities purchased and held principally for the purpose of selling them in the near term are classified as "trading securities" and reported at fair value with unrealized gains and losses included in earnings. The cost of securities sold is based on the first-in, first-out method. Accounts Receivable - Accounts receivable are stated net of an allowance for doubtful accounts and finance charges. Inventories - Inventories are stated at the lower of cost (principally last-in, first-out method) or market. Assets held for sale - Assets held for sale consist of land and building, which are no longer in use as of January 31, 1999. These assets were reclassified from property, plant and equipment and are recorded at their net book value. No depreciation has been taken on these assets since they were taken out of service. The Company classifies these assets as current assets since it believes that these assets will be sold within the next twelve months. Property, Plant and Equipment - Property, plant and equipment is stated at cost. Expenditures for major renewals and improvements are capitalized, while maintenance and repairs, which do not significantly improve the related asset or extend its useful life, are charged to expense as incurred. 17 For financial reporting purposes, plant and equipment is depreciated primarily by the straight-line method over the estimated useful lives of the assets. Estimated useful lives of buildings and improvements range from 7 to 40 years and of machinery and equipment from 2 to 12 years. Depreciation claimed for income tax purposes is computed by accelerated methods. Goodwill and Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of acquired companies and is amortized on a straight-line basis over 40 years. The Company assesses the carrying value of goodwill at each balance sheet date. Consistent with Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", such assessments include, as appropriate, a comparison of the estimated future nondiscounted cash flows anticipated to be generated during the remaining amortization period of the goodwill to the net carrying value of goodwill. The Company recognizes diminution in value of goodwill, if any, on a current basis. Organizational/finance costs are amortized over their economic useful lives ranging from three to twenty years. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments - Management believes the carrying amount of financial instruments is a reasonable estimate of the fair value of these instruments. Translation of Foreign Currencies - Assets and liabilities of foreign operations are translated into United States dollars at current exchange rates. Income and expense accounts are translated into United States dollars at average exchange rates for the periods and capital accounts have been translated using historical rates. The resulting translation adjustments are recorded as other comprehensive income. Revenue Recognition - The Company recognizes revenue upon shipment of products. Research and Development - Amounts expended for research and development for the years ended January 31, 1999, 1998 and 1997 totaled approximately $212,000, $190,000 and $190,000, respectively, and are expensed as incurred. 18 Net income (loss) per share - Effective for 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share," which established new standards for the calculation of net income per share effective for interim and annual periods ending after December 1997. Income per share for the year ended January 31, 1997 has been restated to comply with SFAS No. 128. Reconciliation of the numerator and denominator of the basic and diluted per share computations are summarized as follows:
Year Ended January 31 ----------------------------------------------- 1999 1998 1997 ---- ---- ---- Net Income (Loss) Per Share - Basic: Net income (loss) (numerator) $ 1,202,330 $ 1,105,162 $ (731,028) Weighted average shares outstanding (denominator) 2,315,503 2,275,933 2,210,848 Net income (loss) per share - basic $ 0.52 $ 0.49 $ (0.33) Net Income (Loss) Per Share - Diluted: Net income (loss) (numerator) $ 1,202,330 $ 1,105,162 $ (731,028) Weighted average shares outstanding 2,315,503 2,275,933 2,210,848 Effect of dilutive securities: Stock options 178,257 99,224 - Stock warrants 389,373 311,794 - ----------- ----------- ---------- Weighted average shares outstanding (denominator) 2,883,133 2,686,951 2,210,848 Net income (loss) per share - diluted $ 0.42 $ 0.41 $ (0.33)
Stock options and warrants were antidilutive for the year ended January 31, 1997 under the treasury stock method. Accounting Pronouncements - In 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company is in the process of evaluating the accounting and reporting requirements and does not believe the adoption of SFAS No. 133 will have a material impact on the Company's consolidated financial statements. Reclassifications - Certain reclassifications have been made to the prior years' financial statements to conform with the current year presentation. 19 2. ACQUISITIONS AND DISPOSITIONS On June 21, 1996, the Company purchased all of the issued and outstanding stock of Construction Forms, Inc. and subsidiaries and JABCO, LLC for an aggregate cash consideration of approximately $20,550,000. The acquisition was accounted for as a purchase transaction with the purchase price allocated to the fair value of specific assets acquired and liabilities assumed. Accordingly, the results of operations have been included since the date of the acquisition. Resultant goodwill is being amortized over 40 years. The purchase price was allocated as follows: Receivables $ 2,810,237 Inventory 6,699,256 Property, plant and equipment 6,990,408 Goodwill 9,290,317 Prepaid pension 442,598 Cash and other assets 1,714,648 Liabilities assumed (7,397,464) ------------ $ 20,550,000 ============ On October 31, 1996, the Company sold certain net assets of its electronic fault indicator operation. In return, the Company received cash of $10,000, a $275,000 promissory note bearing interest at an annual rate of 8.25%, and a five year warrant to purchase 20% of the capital stock of the new company. It is management's opinion that the possibility of collection of any future principal or interest on the note receivable is remote and, accordingly, has reserved the total balance of the note and will not record any interest income until received. The total loss on the sale of these net assets was $434,166, including the note receivable reserve. 20 3. TRADING SECURITIES Trading securities at January 31, 1999 consisted of the following: Number of Name of Issuer/ Shares or Title of Issue Units Cost Market Value Common Stocks: Cendant Corp. 20,000 $ 435,438 $ 435,000 Equity One, Inc. 9,500 104,500 85,500 Glenayre Technologies, Inc. 40,000 1,029,352 200,000 Microsoft 2,000 250,050 350,000 Panavision Inc. 304 8,150 3,420 Philip Morris 5,000 266,875 234,375 Sun International Hotels 10,100 448,250 431,144 US Trust Corporation 25,000 411,953 1,825,000 VIVUS, Inc. 20,000 621,350 51,875 ----------- ----------- Total $ 3,575,918 $ 3,616,314 =========== =========== Trading securities at January 31, 1998 consisted of the following: Number of Name of Issuer/ Shares or Title of Issue Units Cost Market Value Common Stocks: General Motors Corp. 5,000 $ 147,325 $ 173,125 Glenayre Technologies, Inc. 40,000 1,029,352 527,500 NCR Corp. 10,000 278,750 300,625 Oxford Health Plans, Inc. 10,000 160,000 175,000 Panavision Inc. 6,400 139,750 166,800 Raytheon 2,812 118,925 143,763 Sun International Hotels 10,100 330,100 386,325 US Trust Corporation 25,000 411,953 1,484,375 VIVUS, Inc. 20,000 621,350 296,250 ----------- ----------- Total $ 3,237,505 $ 3,653,763 =========== =========== 21 4. INVENTORIES Inventories consisted of the following: January 31, January 31, 1999 1998 Raw materials $ 4,158,860 $ 2,945,598 Work-in-process 992,073 818,003 Finished goods 2,631,813 2,325,701 ----------- ---------- 7,782,746 6,089,302 Less - reserve to reduce carrying value to LIFO cost (163,000) (115,000) ----------- ----------- Net inventories $ 7,619,746 $ 5,974,302 =========== =========== 5. INVESTMENT IN AND ADVANCES TO AFFILIATE The Company owns 50% of the outstanding common stock of South Houston Hose Company and accounts for the investment by the equity method. The Company had sales of approximately $900,000, $798,000 and $685,000 to the affiliate during 1998, 1997 and 1996, respectively. Summary unaudited financial information as of January 31, 1999, 1998 and 1997, and for the years then ended is as follows: 1999 1998 1997 Current assets $ 1,208,819 $ 1,130,349 $ 934,399 Noncurrent assets 60,439 45,878 49,930 Current liabilities 311,764 388,727 306,198 Noncurrent liabilities - - 41,555 Shareholders' equity 957,494 787,500 633,364 Net sales 3,278,014 2,749,253 2,239,949 Net income 169,994 154,136 90,858 22 6. ACCRUED EXPENSES Accrued expenses consisted of the following: Year Ended January 31, ------------------------------------ 1999 1998 Group benefits $ 130,000 $ 130,000 Warranty 207,500 240,000 Legal and professional 56,758 47,468 Interest 54,577 58,510 Selling commissions 25,188 28,519 Other 48,671 50,548 ---------- --------- Total $ 522,694 $ 555,045 ========== ========= 7. INCOME TAXES Deferred income taxes are provided on temporary differences relating to reporting expenses in different periods for financial statement and income tax purposes and differences in bases of assets and liabilities. Such differences relate primarily to unrealized gain (losses) on investments, depreciation expense, inventory costs, bad debt expense, warranty costs, insurance, compensation and pension expense. The provision for income taxes (credit) is as follows: Year Ended January 31 --------------------------------------------- 1999 1998 1997 Currently payable: Federal $ 1,144,000 $ 1,066,000 $ 718,871 State 197,000 170,000 162,000 ----------- ----------- ---------- 1,341,000 1,236,000 880,871 Deferred: Federal (416,000) (332,000) (1,120,871) State (75,000) (54,000) (250,000) ----------- ----------- ---------- (491,000) (386,000) (1,370,871) ----------- ----------- ---------- Total $ 850,000 $ 850,000 $ (490,000) =========== =========== ========== 23 Temporary differences which gave rise to the deferred tax assets (liabilities) included the following items at January 31, 1999 and 1998: 1999 1998 Deferred tax assets: Compensation and other employee benefits $ 313,000 $ 312,000 Book reserves and other items 18,000 97,000 Net operating loss carryforwards 3,000 Deferred financing 999,000 615,000 Vacation pay 73,000 67,000 --------- --------- 1,403,000 1,094,000 --------- --------- Deferred tax liabilities: Inventory items (642,000) (638,000) Unrealized gains (16,000) (162,000) Fixed assets (555,000) (544,000) Pension benefit (59,000) (110,000) --------- --------- (1,272,000) (1,454,000) --------- --------- Net deferred tax asset (liability) $ 131,000 ($360,000) ========== ========== The reconciliation of income tax computed at the U.S. federal statutory rates to income tax expense is: Year Ended January 31 --------------------------------- 1999 1998 1997 Statutory tax rate 34.0% 34.0% 34.0% State taxes, net of federal tax benefit 6.0 6.0 4.8 Goodwill 3.8 4.0 (3.8) Dividends received deduction (0.3) (0.3) 1.3 Reversal of provision for taxes not necessary in the future 0.0 0.0 4.5 Other, net (2.1) (0.2) (0.7) ----- ----- ----- Effective tax rate 41.4% 43.5% 40.1% ===== ===== ===== 24 8. LONG-TERM DEBT Long-term debt, less current maturities, consisted of the following at January 31, 1999 and 1998: 1999 1998 Industrial revenue bonds $ 2,750,000 $ 2,875,000 RLF term loan 96,582 Bank revolving credit loan 4,700,000 3,225,000 Bank overadvance term loan 396,984 1,125,278 Subordinated bank loan 6,798,035 6,798,064 ------------ ------------ Total debt 14,741,601 14,023,342 Less current portion (530,423) (841,664) ------------ ------------ Total long-term debt $ 14,211,178 $ 13,181,678 ============ ============ The Industrial Revenue Bonds ("IRB") were issued to finance construction of a new production facility in Port Washington, Wisconsin. A total of $3,000,000 was issued for the facility and is due in annual installments of $125,000 from February 1997 through February 2000, $150,000 from February 2001 through February 2005, and $175,000 from February 2006 through February 2015. The interest rate at January 31, 1999 was 3.75%. The Revolving Loan Fund (RLF) term loan was a loan issued by the City of Port Washington to finance the purchase of real estate for the construction of an addition at the Company's Port Washington facility. A total of $100,000 was issued for the facility and is due in monthly installments through September 4, 2008. The interest rate at January 31, 1999 was 4.0%. The master credit agreement, which expires June 21, 2000, allows for revolving credit borrowings not to exceed $6,000,000. Borrowings which are based on qualified assets bear interest at either the prime rate plus .50% or the LIBOR rate plus 1.25% on the first $1,800,000 of debt (6.33% at January 31, 1999) and the LIBOR rate plus 2.00% on amounts in excess of $1,800,000 (7.08% at January 31, 1999). Also under the master credit agreement, the Company maintains an overadvance term loan. Monthly principal payments of $59,722 are required by the agreement. Borrowings bear interest at either the prime rate plus .375% or the LIBOR rate plus 3.1%. The interest rate at January 31, 1999 was 8.125%. The agreement calls for additional principal payments based on excess cash flow as defined in the agreement. The terms under the master credit agreement, among other provisions, require the Company to maintain a minimum current ratio, tangible net worth, and fixed charge ratio, and restricts the Company to a maximum debt to worth ratio. Substantially all of the Company's assets are collateralized under the above debt agreements. 25 The Company has a loan agreement with a bank which provides for subordinated borrowings up to $6,800,000 through June 21, 2002. Borrowings bear interest at the bank's LIBOR rate plus 1.25%. On January 31, 1999, the interest rate was 6.31%. The loan is secured by substantially all of the assets of the Company and is guaranteed by the principal stockholder of Edison. Annual principal payments for the next five years on long-term debt are as follows:
Year Ending RLF Revolving Overadvance Subordinated January 31, IRB Term Loan Credit Loan Term Loan Bank Loan Total 2000 $ 125,000 $ 8,439 $ $ 396,984 $ $ 530,423 2001 125,000 8,784 4,700,000 4,833,784 2002 150,000 9,141 159,141 2003 150,000 9,514 6,798,035 6,957,549 2004 150,000 9,902 159,902 Thereafter 2,050,000 50,802 2,100,802 ------------ -------- ----------- --------- ------------ ------------ $ 2,750,000 $ 96,582 $ 4,700,000 $ 396,984 $ 6,798,035 $ 14,741,601 ============ ======== =========== ========= ============ ============
9. EMPLOYEE RETIREMENT PLANS The Company adopted SFAS No. 132, "Employer's Disclosures about Pensions and Other Postretirement Benefits," in fiscal 1998. SFAS No. 132 revises disclosure requirements for such pension and postretirement benefit plans to, among other things, standardize certain disclosures and eliminate certain other disclosures no longer deemed useful. SFAS No. 132 does not change the measurement or recognition criteria for such plans. The Company has a noncontributory defined benefit pension plan, which relates to the acquired companies, covering substantially all full-time employees. The plan provides for benefits based on years of service and compensation. The following tables set forth the plan's change in benefit obligation, change in plan assets and funded status at January 31, 1999 and 1998: 26
1999 1998 Change in benefit obligation: Benefit obligation at beginning of year $ 2,884,024 $ 2,843,888 Service cost 150,302 135,824 Interest cost 223,198 186,853 Acturial loss (gain) 335,398 (152,363) Benefits paid (187,124) (130,178) Assumption change 374,215 ---------- ----------- Benefit obligation at end of year 3,780,013 2,884,024 Change in plan assets: Fair value of plan assets at beginning of year 3,998,045 3,521,285 Actual return on plan assets 690,910 606,938 Benefits paid (187,124) (130,178) ----------- ----------- 4,501,831 3,998,045 Funded Status 721,818 1,114,021 Unrecognized net acturial gain (570,341) (830,887) ----------- ----------- Prepaid pension expense $ 151,477 $ 283,134 =========== ===========
Assumptions for the years ended January 31 were: 1999 1998 1997 Discount rate 6.75% 7.50% 7.50% Expected return on plan assets 8.00 8.00 8.00 Rate of compensation increase 6.00 6.00 6.00 The Company's funding policy is to contribute annually amounts within the limits which can be deducted for Federal income tax purposes. No contributions were made to the Plan during the years ended January 31, 1999, 1998 and 1997. Pension expense consisted of the following components for the years ended January 31:
1999 1998 1997 Service cost-benefits earned during the year $ 150,302 $ 135,824 $ 65,707 Interest cost on projected benefit obligation 223,198 186,853 119,475 Actual return on plan assets (gain) loss (690,910) (606,938) (369,579) Net amortization and deferral 449,067 386,148 241,974 ---------- ---------- -------- Net periodic pension expense $ 131,657 $ 101,887 $ 57,577 ========== ========== ========
The Company also has a retirement savings and thrift plan (401(k) plan), which relates to the acquired companies, covering substantially all of its employees. Under the 401(k) plan, the Company contributes amounts based on employee contributions. Amounts charged to earnings for the plan for the years ended January 31, 1999, 1998 and 1997 were $91,059, $80,943 and $42,831, respectively. 27 10. EMPLOYEE STOCK OPTION PLANS The Company adopted a 1986 Stock Option Plan (the "Plan") for the benefit of directors, officers and key employees of the Company. Pursuant to the Plan, as amended, these persons may be granted options to purchase up to an aggregate of 150,000 shares of Common Stock. The Board of Directors may authorize the granting of options under the Plan, and may determine to whom the options may be granted, the number thereof, the option price and the exercise period. The price for incentive stock options, which may be granted under the Plan and which meet the requirements of Section 422A of the Internal Revenue Code, as amended, will not be less than the fair market value of the Common Stock on the date the option is granted (100% of such fair market value for an optionee who holds more than 10% of the outstanding shares of the capital stock of the Company). The price for non-statutory options shall be fixed at the discretion of the Board of Directors and in no event will the option price for any non-statutory option granted be less than 85% of the fair market value of the Common Stock on the date of grant. The maximum exercise period for any option under the Plan is ten years from the date the option is granted (five years for an optionee who holds more than 10% of the outstanding shares of the capital stock of the Company). In November 1987, the Board of Directors issued non-statutory options to purchase an aggregate of 90,000 shares at an exercise price of $2.50 per share ("2.50 options"). In 1989, the Company issued non-statutory options to purchase an additional 60,000 shares at an exercise price of $1.22 per share. In November 1996, William Finneran purchased 25,000 shares of his options. In June 1993, the Board of Directors granted five-year non-statutory options to purchase 18,000 shares each to Clark H. Bailey, Gerald B. Cramer, John J. Delucca and Jay J. Miller, and 35,000 shares to William B. Finneran, Directors of the Company, at an exercise price of $2.50 per share, vesting 50% at June 5, 1994 and 50% at June 4, 1995 ("vesting $2.50 options"). In June 1995, Clarke H. Bailey exercised his option and purchased 18,000 shares. In September 1997, the options for Gerald B. Cramer expired. In May, 1998, John J. Delucca and Jay J. Miller exercised their options and purchased 18,000 shares each. Also, in May 1998, William B. Finneran exercised his options and purchased 35,000 shares. In July 1993, the Board of Directors granted non-statutory options to purchase 18,000 shares to John M. Sanzo, a Director of the Company, at an exercise price of $4.00 per share, vesting 50% at July 15, 1994 and 50% at July 15, 1995 ("vesting $4.00 options"). In October 1994, the Board of Directors resolved that the stock option, heretofore, granted to Mr. John M. Sanzo to be fully vested notwithstanding any term of said option to the contrary and that said option would expire 120 days following the effectiveness of a Registration Statement on Form S-8 under the Securities Act of 1993, as amended. In June 1995, John M. Sanzo exercised his option and purchased 18,000 shares. In October 1995, the 1986 Stock Option Plan was amended to increase by 200,000 the number of shares of common stock authorized for issuance, thereunder to a total of 350,000 shares. In February 1995, the Board of Directors authorized and on October 17, 1995, the stockholders approved a grant to the Company's President and Chief Executive Officer of a ten-year option to purchase up to 200,000 shares of common stock pursuant to the 1986 Option Plan at an exercise price of $4.00 per share, vesting 33% each at date of grant, on February 1, 1996, and on February 1, 1997, respectively. In February 1996, non-qualified options for 17,500 shares were granted to three individuals for services rendered at an exercise price of $4.50 per share. The options are exercisable up to the close of business on December 31, 1999. 28 In May 1997, five-year non-qualified options for 25,000 shares were granted to Robert Cooney, a member of the Board of Directors, at an exercise price of $3.50 per share, vesting 50% at November 29, 1997 and 50% on May 29, 1998. In October 1997, five-year non-qualified options for 25,000 shares were granted to William Scott, a member of the Board of Directors, at an exercise price of $3.50 per share, vesting 50% at April 15, 1998 and 50% on October 15, 1998. In connection with the issuance of the subordinated debt, the principal shareholder of the Company provided collateral to a bank to support a guaranty of repayment by the Company of the principal and interest on the loan. The arrangement was made to reduce the cost of borrowed funds from that which would have been otherwise obtainable by the Company from unaffiliated "mezzanine" lenders. In consideration of his providing such collateral, the Company issued a ten-year Warrant to purchase 500,000 shares of Common Stock exercisable at a price of $1.60 per share. At the time the transaction was negotiated, Common Stock was quoted at approximately $4.00 per share. On the date the ConForms acquisition was consummated, which was the grant date, the closing sale price for the Common Stock in the over-the-counter market was $7.50 per share. The difference between the Warrant price and the fair market value at the grant date is being amortized over the three-year term of the subordinated debt. In connection with the ConForms acquisition, the Company entered into agreements for the sale for investment of an aggregate of 114,933 shares of Common Stock for a total purchase price of $862,000 to key management personnel of ConForms and its affiliates. In addition, the Company granted ten-year nonqualified options to purchase an aggregate of 167,611 shares of Common Stock exercisable at $3.00 per share to key personnel. Such options vest fully on the first anniversary of the closing of the acquisition. On the date of the grant of the options, the closing sale price for the Common Stock was $7.50 per share. The difference between the option price and the fair market value at the time of grant was amortized over the one-year vesting period. In January 1999, the Board of Directors approved, subject to shareholder approval, the Edison Control Corporation 1999 Equity Incentive Plan. The Plan provides that up to a total of 200,000 shares of Common Stock will be available for the granting of stock options, stock appreciation rights, restricted stock or performance shares. No awards were granted under this Plan as of January 31, 1999. The Company has adopted the disclosure-only provisions of SFAS No.123, "Accounting for Stock-Based Compensation," but continues to apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for all of its plans. Compensation expense was $983,333, $1,281,891, and $1,049,788 for the years ended January 31, 1999, 1998 and 1997, respectively. If the Company had elected to recognize compensation costs for the options/warrants issued after December 15, 1994 in accordance with SFAS No. 123, net income (loss) and net income (loss) per share would have changed to the pro-forma amounts as follows:
1999 1998 1997 ---- ---- ---- Net income (loss) As reported: $ 1,202,330 $ 1,105,162 $ (731,028) Pro-forma: 1,754,989 1,240,831 (2,128,210) Net income (loss) per share -basic As reported: 0.52 0.49 (0.33) Pro-forma: 0.76 0.55 (0.96) Net income (loss) per share -diluted As reported: 0.42 0.41 (0.33) Pro-forma: 0.61 0.46 (0.96)
29 The fair value of stock options/warrants used to compute and disclose pro-forma net income (loss) and pro-forma net income (loss) per share is the estimated present value at grant date using the Black Scholes option pricing model with the following weighted average assumptions: Year Ended January 31, --------------------------------------------- 1999 1998 1997 Dividend yield 0% 0% 0% Expected volatility 51% 55% 53% Risk-free interest rate: 5 year - - 6.65% 4 year - 5.41% - 3 year 4.69% - - 2 year - - 6.29% 1 year - 5.35% - Stock option/warrant activity is summarized as follows:
Weighted Weighted Year Ended Average Year Ended Average January 31, Exercise January 31, Exercise 1999 Price 1998 Price ---- ----- ---- ----- Options/warrant outstanding, beginning of year 1,006,111 $ 2.52 974,111 $ 2.47 Options/warrant granted - - 50,000 3.50 Options/warrant exercised (71,000) 2.50 - - Options/warrant expired - - (18,000) 2.50 ------------- ------- ------------- -------- Options/warrant outstanding, end of year 935,111 $ 2.52 1,006,111 $ 2.52 ============= ======= ============= ======== Options/warrant exercisable, end of year 935,111 $ 2.52 968,611 $ 2.48 ============= ======= ============= ======== Price range per share $1.60 - $4.50 $1.60 - $4.50 ============= =============
30 Weighted Year Ended Average January 31, Exercise 1997 Price ---- ----- Options/warrant outstanding, beginning of year 314,000 $ 3.46 Options/warrant granted 685,111 2.02 Options/warrant exercised (25,000) 2.50 - - ------------- ------ Options/warrant outstanding, end of year 974,111 $ 2.47 ============= ====== Options/warrant exercisable, end of year 739,833 $ 2.21 ============= ====== Price range per share $1.60 - $4.50 ============= The weighted average remaining contractual life of stock options and warrants outstanding at January 31, 1999 is 6.8 years. The weighted average fair value of options granted and warrants issued during the years ended January 31, 1998 and 1997 was $1.98 and $6.11, respectively. No options or warrants were issued during the year ended January 31, 1999. 11. VALUATION ACCOUNTS Activity related to valuation accounts for the years ended January 31, 1999, 1998 and 1997 is as follows: 31
Additions Deductions for charged to bad debts written Balance, (deductions off, inventory Balance, Beginning Acquired from) costs disposed of or End of Valuation Accounts of Year Companies and expenses warranty claims Year Allowance for doubtful accounts and finance charges: 1/31/99 $ 320,000 $ (39,931) $ (12,069) $ 268,000 1/31/98 292,000 - 76,780 (48,780) 320,000 1/31/97 - 304,026 10,127 (22,153) 292,000 Excess and obsolete inventory reserve: 1/31/99 557,000 - (41,000) - 516,000 1/31/98 772,500 - (215,500) - 557,000 1/31/97 - 770,000 2,500 - 772,500 Notes receivable reserve: 1/31/99 275,000 - - - 275,000 1/31/98 275,000 - - - 275,000 1/31/97 - - 275,000 - 275,000 Warranty reserve: 1/31/99 240,000 - 188,895 (221,395) 207,500 1/31/98 151,000 - 164,000 (75,000) 240,000 1/31/97 - 174,466 42,360 (65,826) 151,000
12. COMMITMENTS The Company has employment agreements with two of its executives. Minimum salaries to be paid to these individuals for the year ended January 31, 2000 are $270,000. The Company has various warehouse and auto leases expiring at various dates through January 2004. Future minimum lease payments required under these noncancelable operating lease agreements are approximately as follows: Year Ending January 31, 2000 $ 158,000 2001 140,000 2002 62,000 2003 58,000 2004 49,000 --------- Total $ 467,000 ========= Total rent expense for the years ended January 31, 1999, 1998 and 1997 was approximately $181,000, $145,000 and $137,000, respectively. 13. RELATED PARTY TRANSACTIONS At January 31, 1999, Edison held in its investment portfolio 304 shares of Panavision Inc., which were purchased in 1998 at a cost of $8,150 and have a market value at January 31, 1999 of $3,420. A member of the Board of Directors of Panavision Inc. is a member of the Board of Directors of the Company. At January 31, 1999, Edison also held in its investment portfolio 9,500 shares of Equity One, Inc., which were purchased in 1998 at a cost of $104,500 and have a market value at January 31, 1999 of $85,500. A member of the Board of Directors of Equity One, Inc. is a member of the Board of Directors of the Company. 32 14. FOREIGN OPERATIONS Foreign operations information for the year ended January 31, 1999 follows:
United United States Kingdom Malaysia Total Net sales to unaffiliated customers $22,942,593 $ 1,652,010 $ 455,513 $25,050,116 Operating income (loss) 4,131,668 280 (86,220) 4,045,728 Identifiable assets 32,373,533 1,682,731 846,733 34,902,997 Depreciation and amortization 2,005,444 49,677 13,239 2,068,360 Capital expenditures 3,054,929 20,090 7,706 3,082,725
Foreign operations information for the year ended January 31, 1998 follows:
United United States Kingdom Malaysia Total Net sales to unaffiliated customers $21,852,948 $ 1,827,477 $ 194,789 $23,875,214 Operating income (loss) 4,328,227 (51,859) (86,226) 4,190,142 Identifiable assets 30,050,025 1,852,144 453,788 32,355,957 Depreciation and amortization 2,196,795 49,737 6,978 2,253,510 Capital expenditures 412,097 54,919 87,907 554,923
Foreign operations information for the year ended January 31, 1997 follows:
United United States Kingdom Malaysia Total Net sales to unaffiliated customers $21,852,948 $ 1,827,477 $ 194,789 $23,875,214 Operating income (loss) 4,328,227 (51,859) (86,226) 4,190,142 Identifiable assets 30,050,025 1,852,144 453,788 32,355,957 Depreciation and amortization 2,196,795 49,737 6,978 2,253,510 Capital expenditures 412,097 54,919 87,907 554,923
33 15. SEGMENT INFORMATION The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," in 1998. The Company's operating segments are organized based on the nature of products and services provided. A description of the nature of the segment's operations and their accounting policies are contained in Note 1. Segment information follows:
Edison Ultra Holding ConForms Tech Gilco Company Total Year ended January 31, 1999 Net sales to unaffiliated customers $ 19,424,098 $ 3,484,277 $ 2,141,741 $ - $ 25,050,116 Operating income (loss) 3,469,171 1,059,404 (139,172) (343,675) 4,045,728 Identifiable assets 23,518,902 5,302,383 1,593,897 4,487,815 34,902,997 Depreciation and amortization 722,534 317,691 44,240 983,895 2,068,360 Capital expenditures 2,996,112 72,143 14,470 - 3,082,725 Year ended January 31, 1998 Net sales to unaffiliated customers $ 18,050,120 $ 3,989,750 $ 1,835,344 $ - $ 23,875,214 Operating income (loss) 3,768,062 1,157,834 97,419 (833,173) 4,190,142 Identifiable assets 19,648,193 5,742,341 1,077,870 5,887,553 32,355,957 Depreciation and amortization 653,779 273,123 43,029 1,283,579 2,253,510 Capital expenditures 342,263 209,039 3,621 - 554,923 Year ended January 31, 1997 Net sales to unaffiliated customers $ 9,285,487 $ 1,882,030 $ 1,549,711 $ 887,112 $ 13,604,340 Operating income (loss) 691,941 733,550 170,871 (1,064,660) 531,702 Identifiable assets 19,758,720 5,541,593 1,223,550 7,536,242 34,060,105 Depreciation and amortization 356,165 134,398 21,468 1,051,643 1,563,674 Capital expenditures 341,009 70,004 2,936 2,391 416,340
16. CONTINGENCIES AND LITIGATION The Company is involved in various legal proceedings which have arisen in the normal course of business. Reserves are recorded when the occurrence of loss is probable and can be reasonably estimated. In the opinion of management, the resolution of these contingencies will not have a materially adverse effect on the Company's financial condition or results of operations. 34 EX-21 4 SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF EDISON CONTROL CORPORATION STATE OF TRADE NAME INCORPORATION NAMES Construction Forms, Inc. Wisconsin CF, ConForms, Construction Forms, CF Pipejoint, ConForms Europe, UTI, UT, Ultra Tech, GC, Gilco, Gilson JABCO, LLC Wisconsin JABCO EX-23 5 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference on Form S-8 of Edison Control Corporation 1986 Stock Option Plan of our report dated March 26, 1999, incorporated by reference in the Annual Report on Form 10-K of Edison Control Corporation for the year ended January 31, 1999. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Milwaukee, Wisconsin April 21, 1999 EX-27 6 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR THE YEAR ENDED JANUARY 31, 1999 AND IS QUAILIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JAN-31-1999 JAN-31-1999 468072 3806314 3874917 268000 7619746 17238640 9786769 1598870 34902997 450547 14211178 0 0 23469 16159803 34902997 25050116 25050116 16125601 4878787 1993398 (39931) 955818 2052330 850000 1202330 0 0 0 1202330 .52 .42
-----END PRIVACY-ENHANCED MESSAGE-----