-----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, NUOtd6iUFbb36zfUfhIZEmMlMwoVxW5shJoFUYN1AaVi04u/juo21GpZH66mfhgQ gPZGcARz39aW6REfi9rHxQ== 0000088790-03-000016.txt : 20031114 0000088790-03-000016.hdr.sgml : 20031114 20031114104350 ACCESSION NUMBER: 0000088790-03-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SELAS CORP OF AMERICA CENTRAL INDEX KEY: 0000088790 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL PROCESS FURNACES & OVENS [3567] IRS NUMBER: 231069060 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05005 FILM NUMBER: 031001028 BUSINESS ADDRESS: STREET 1: 2034 LIMEKILN PK CITY: DRESHER STATE: PA ZIP: 19025 BUSINESS PHONE: 2156466600 MAIL ADDRESS: STREET 1: 2034 LIMEKILN PIKE CITY: DRESHER STATE: PA ZIP: 19025 10-Q 1 aa10q093003.txt 10Q 09-30-2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2003 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM COMMISSION FILE NUMBER 1-5005 SELAS CORPORATION OF AMERICA (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) PENNSYLVANIA 23-1069060 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO) INCORPORATION OR ORGANIZATION) 1260 RED FOX ROAD, ARDEN HILLS, MINNESOTA 55112 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (651) 636-9770 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) N/A (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) 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 WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED BY RULE 12B-2 OF THE EXCHANGE ACT) ( ) YES (X ) NO INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. COMMON SHARES, $1.00 PAR VALUE 5,124,214 (exclusive of 515,754 CLASS treasury shares) OUTSTANDING AT NOVEMBER 3, 2003 SELAS CORPORATION OF AMERICA I N D E X Page Number PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed (Unaudited) Balance Sheets as of September 30, 2003 and December 31, 2002 3, 4 Consolidated Condensed (Unaudited) Statements of Operations for the Three Months Ended September 30, 2003 and 2002 5 Consolidated Condensed (Unaudited) Statements of Operations for the Nine Months Ended September 30, 2003 and 2002 6 Consolidated Condensed (Unaudited) Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 7 Notes to Consolidated Financial Statements 8-18 Item 2. Management's Discussion and Analysis 19-24 of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures 24 About Market Risk Item 4. Controls and Procedures 24-25 PART II: OTHER INFORMATION Item 1. Legal Proceedings 25 Item 2. Changes in Securities and Use of Proceeds 25 Item 3. Defaults Upon Senior Securities 25 Item 4. Submission of Matters to a vote of 25 security holders Item 5. Other Information 25 Item 6. Exhibits and Reports on Form 8-K 25-26 PART I: FINANCIAL INFORMATION ITEM 1. Financial Statements SELAS CORPORATION OF AMERICA Consolidated Condensed Balance Sheets Assets (Unaudited) September 30, December 31, 2003 2002 Current assets Cash, including cash equivalents of $423,000 in 2003 and $418,000 in 2002 (all $ 438,910 $ 1,319,207 cash equivalents are restricted) Accounts receivable (less allowance for doubtful accounts of $592,000 in 2003 and $434,000 in 2002) 7,589,646 6,996,896 Inventories 9,130,356 8,783,153 Refundable income tax 669,275 344,633 Deferred income taxes 854,964 1,591,160 Asset held for sale 540,175 540,175 Other current assets 711,311 726,729 Assets of discontinued operations -- 25,140,325 Total current assets 19,934,637 45,442,278 Property, plant and equipment Land 170,500 170,500 Buildings 1,614,518 1,614,518 Machinery and equipment 28,277,037 27,726,773 30,062,055 29,511,791 Less: Accumulated depreciation 20,158,800 18,684,119 Net property, plant and equipment 9,903,255 10,827,672 Goodwill 5,376,317 5,376,317 Deferred income taxes -- 466,164 Other assets, less amortization 1,820,563 1,568,291 $37,034,772 $63,680,722 (See accompanying notes to the consolidated condensed financial statements) SELAS CORPORATION OF AMERICA Consolidated Condensed Balance Sheets Liabilities and Shareholders' Equity (Unaudited) September 30, December 31, 2003 2002 Notes payable $4,935,048 $ 10,920,984 Current maturities of long-term debt 2,150,049 1,573,716 Accounts payable 3,577,727 4,094,908 Customers' advance payments on contracts 863,680 907,811 Guarantee obligations and estimated costs of service 498,300 544,735 Accrued salaries, wages, and commissions 1,924,762 1,289,120 Other accrued liabilities 3,848,022 2,668,869 Liabilities of discontinued operations -- 18,757,587 Total current liabilities 17,797,588 40,757,730 Long-term debt -- 2,736,236 Other postretirement benefit obligations 3,603,870 3,571,017 Deferred income taxes 127,746 -- Contingencies and commitments(Notes 13 and 14) Shareholders' equity Common shares, $1 par; 10,000,000 shares authorized; 5,639,968 and 5,634,968 5,634,968 5,634,968 shares issued, respectively Additional paid-in capital 12,012,541 12,012,541 (Accumulated deficit)retained earnings (634,133) 1,743,256 Accumulated other comprehensive loss (242,730) (1,509,948) Less: 515,754 common shares held in treasury, at cost (1,265,078) (1,265,078) Total shareholders' equity 15,505,568 16,615,739 $37,034,772 $63,680,722 (See accompanying notes to the consolidated condensed financial statements) SELAS CORPORATION OF AMERICA Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended September 30, September 30, 2003 2002 Sales, net $11,754,452 $10,356,927 Cost of sales 8,723,953 8,055,843 Gross margin 3,030,499 2,301,084 Selling, general and administrative 3,355,020 2,999,530 expenses Operating loss (324,521) (698,446) Interest expense (128,370) (185,940) Interest income 4,801 8,868 Other income (expense), net (46,647) 9,804 Loss from continuing operations before income taxes (494,737) (865,714) Income tax expense (benefit) 1,221,978 (297,336) Loss from continuing operations (1,716,715) (568,378) Income (loss) from discontinued operations, net of income tax expense (benefit)(note 3) 906,767 (5,935,268) Net loss $ (809,948) $ (6,503,646) Income (loss) per share Basic Continuing operations $ (.34) $ ( .11) Discontinued operations .18 (1.16) $ (.16) $(1.27) Diluted Continuing operations $ (.34) $ ( .11) Discontinued operations .18 (1.16) $ (.16) $(1.27) Average shares outstanding Basic 5,124,214 5,119,214 Diluted 5,124,214 5,119,214 (See accompanying notes to the consolidated condensed financial statements) SELAS CORPORATION OF AMERICA Consolidated Condensed Statements of Operations (Unaudited) Nine Months Ended September 30, September 30, 2003 2002 Sales, net $34,576,834 $33,544,367 Cost of sales 25,247,839 25,397,410 Gross margin 9,328,995 8,146,957 Selling, general and administrative 9,881,783 9,134,277 expenses Operating loss (552,788) (987,320) Interest expense (444,927) (525,629) Interest income 12,778 29,329 Other income, net 115,034 72,869 Loss from continuing operations before income taxes (869,903) (1,410,751) Income tax expense (benefit) 1,131,004 (488,674) Loss from continuing operations (2,000,907) (922,077) Loss from discontinued operations, net of income tax benefit (note 3) (376,482) (5,488,752) Net loss before change in accounting principle (2,377,389) (6,410,829) Cumulative effect of change in accounting principle -- (10,551,926) Net loss $(2,377,389) $(16,962,755) Loss per share Basic Continuing operations $ (.39) $( .18) Discontinued operations (.07) (1.07) Accounting principle change -- (2.06) $ (.46) $ ( 3.31) Diluted Continuing operations $ (.39) $( .18) Discontinued operations (.07) (1.07) Accounting principle change -- (2.06) $ (.46) $ ( 3.31) Average shares outstanding Basic 5,124,214 5,119,214 Diluted 5,124,214 5,119,214 (See accompanying notes to the consolidated condensed financial statements) SELAS CORPORATION OF AMERICA Consolidated Condensed Statements of Cash Flows (Unaudited) Nine Months Ended September 30, September 30, 2003 2002 Cash flows from operating activities: Net loss $ (2,377,389) $ (16,962,755) Adjustments to reconcile net loss to net cash provided by operating activities: Loss from discontinued operations 376,482 5,488,752 Cumulative effect of accounting principle change -- 10,551,926 Depreciation and amortization 2,036,099 2,040,962 Loss on sale of property and equipment 3,276 3,121 Provision for deferred taxes 1,118,315 3,468 Changes in operating assets and liabilities: Accounts receivable (677,249) (437,130) Inventories (314,976) 218,225 Other assets (884,654) 627,037 Accounts payable (272,701) 1,757,817 Accrued expenses 2,255,050 347,836 Customer advances (43,571) (957,108) Other liabilities 29,522 (137,186) Net cash provided by continuing operations 1,248,204 2,544,965 Net cash provided (used) by discontinued 277,701 (884,018) operations Net cash provided by operating activities 1,525,905 1,660,947 Cash flows from investing activities: Purchases of property, plant and equipment (1,048,473) (1,495,740) Proceeds from sale of subsidiary -- 9,256 Net cash used by investing activities (1,048,473) (1,486,784) Net cash provided (used) by discontinued 6,605,000 (855,980) operations Net cash provided (used) by investing activities 5,556,527 (2,342,764) Cash flows from financing activities: Proceeds from short-term bank borrowings -- 1,514,624 Proceeds from borrowings to acquire subsidiary company -- 955,378 Repayments of short-term bank borrowings (7,010,691) (1,644,242) Repayments of long-term debt (1,007,377) (999,487) Net cash used by financing activities (8,018,068) (173,727) Effect of exchange rate changes on cash 55,339 (3,183) Net decrease in cash and cash equivalents (880,297) (858,727) Cash and cash equivalents, beginning of period 1,319,207 1,902,569 Cash and cash equivalents, end of period $ 438,910 $ 1,043,842 (See accompanying notes to the consolidated condensed financial statements) SELAS CORPORATION OF AMERICA Notes to Consolidated Condensed Financial Statements (Unaudited) 1. In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly Selas Corporation of America's consolidated financial position as of September 30, 2003 and December 31, 2002, and the consolidated results of its operations for the three and nine months ended September 30, 2003 and 2002. Certain reclassifications have been made to the December 31, 2002 balance sheet related to discontinued operations at September 30, 2003. These reclassifications had no impact on net income. 2. New Accounting Standards The Company adopted the following new Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards (SFAS) accounting pronouncements: In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets. The Company also records a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company was required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 did not have a material effect on the Company's financial statements. In July 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses the accounting for costs associated with disposal activities covered by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and with exit (restructuring) activities previously covered by Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." This Statement nullifies EITF Issue No. 94-3 in its entirety and requires that a liability for all costs be recognized when the liability is incurred. Generally, the ability to accrue for the cost of a workforce reduction plan at the communication date will be limited. The cost of the plan will be recognized over the future service period of the employees. This Statement will be applied prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Company's financial statements In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34." This Interpretation elaborates on the disclosures to be made by a guarantor in its annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31,2002. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002, and did not have a material effect on the Company's financial statements. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51." This interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation will not have an effect on the Company's financial statements. The Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that the Company will consolidate or disclose information about variable interest entities when the Interpretation becomes effective. EITF 00-21, "Revenue Arrangements with Multiple Deliverable" provides revenue recognition guidance for arrangements with multiple deliverables, and the criteria to determine if items in a multiple deliverable agreement should be accounted for separately. In some arrangements, the different revenue-generating activities are sufficiently separable and there exists sufficient evidence of their fair values to separately account for some or all of the activities. In other arrangements, some or all of the deliverables are not independently functional, or there is not sufficient evidence of their fair values to account for them separately. This issue addresses when and, if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting. This issue does not change otherwise applicable revenue recognition criteria. The guidance in this issue is effective for revenue arrangements entered into in fiscal periods beginning after June 15,2003. The Company does not expect the adoption of EITF 00-21 to have a material effect on its financial statements, as it does not lead to a change in the allocation of revenue between the different elements of a sale, when applied to the Company. 3. Discontinued Operations On July 21, 2003, the Company sold 100 percent of the shares of its Tire Holders, Lifts and Related Products segment. This segment consisted of one wholly-owned subsidiary, Deuer Manufacturing, Inc. (Deuer), operating on a stand alone basis that sold tire holders, lifts and related products to automotive customers. The Company accounted for the plan to dispose of this subsidiary as a discontinued operation in December 2002 and reclassified the historical financial data. The subsidiary generated sales of $8.5 million, and $12.8 million and net income of $297,000, and $874,000 for the nine months ended September 30, 2003 and 2002, respectively. The net purchase price of approximately $6.6 million was determined by negotiations between the parties. Proceeds were used primarily to reduce the Company's outstanding bank debt. The company recognized a gain of approximately $1.2 million, net of tax, on the transaction. The Company's French subsidiary, Selas SAS, consisted of two components, a primary custom-engineered furnace business and a small furnace business: Primary Custom-Engineered Furnace Business In the fourth quarter of 2002, the Company disposed of the majority of the Company's primary custom-engineered furnace business, Selas SAS (Paris), along with a closely related subsidiary, Selas U.K. (Derbyshire). These subsidiaries formed the Company's large custom-engineered furnaces division used primarily in the steel and glass industries worldwide. The furnaces engineered by this division are custom-engineered to meet customer specific requirements. The purchase price was approximately $600,000 above the net asset value at the time of sale. In addition, the purchaser assumed $1,356,000 of a receivable on a completed construction contract which the Company guaranteed. See Note 15. Small Furnace Business In July, 2003, the remaining portion of Selas SAS, which made up the small furnace business, filed insolvency in France and is under the control of a French insolvency court administrator. As Selas SAS and its subsidiaries are no longer under the control of the Company, their results of operations are excluded from the continuing operations and the historical financial information has been restated to reflect these subsidiaries as discontinued operations. Additionally, the Company took a third quarter pre-tax charge totaling $2.2 million associated with the abandonment of this operation including the remaining translation adjustment and recording of corporate guarantees and joint liabilities. See Note 14 for further explanation. The consolidated condensed financial statements reflect the Company's presentation of discontinued operations. A recap of discontinued operations at September 30 is as follows: Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2003 2002 2003 2002 Income (loss) from operations Deuer $ $284,336 $297,087 $874,092 Europe (6,219,604)(1,580,336)(6,362,844) Gain on sale of Deuer 1,246,794 -- 1,246,794 -- Loss recorded on abandonment (2,176,929) -- (2,176,929) -- Tax benefit of European loss ** 1,836,902 -- 1,836,902 -- $ 906,767(5,935,268) (376,482)(5,488,752) ** See Note 10 4. Statements of Cash Flows Supplemental disclosures of cash flow information: Nine Months Ended ------------------------------- Sept 30, Sept 30, 2003 2002 Interest received $ 5,046 $ 3,294 Interest paid $ 394,217 $ 431,979 Income taxes paid $ 3,907 $ 11,426 5. Business Segment Information The Company has two operating segments. The Company is engaged in the manufacture of precision miniature medical and electronic products, and providing engineered heat technology equipment and services to industries throughout the world. The results of operations and assets of these segments are prepared on the same basis as the consolidated condensed financial statements for the three and nine months ended September 30, 2003 and 2002 and the consolidated condensed financial statements included in the Company's 2002 Annual Report on Form 10-K. The Company's reportable segments reflect separately managed, strategic business units that provide different products and services, and for which financial information is separately prepared and monitored. Precision For The Miniature Nine Months Medical General Ended and Heat Corporate Discontinued September30,2003 Electronic Technology Expenses Operations Total Products Sales, net $ 27,899,945 $ 6,676 889 $ -- $ -- $34,576,834 Net income (loss) 594,112 (1,313,314) (1,281,705) (376,482) (2,377,389) Depreciation and amortiza- tion 1,966,757 69,342 -- -- 2,036,099 Property, plant and equipment additions 726,586 21,454 -- -- 748,040 Total assets $ 30,313,712 $ 6,721,060 $ -- $ -- $37,034,772 Precision For The Miniature Nine Months Medical General Ended and Heat Corporate Discontinued September30,2002 Electronic Technology Expenses Operations Total Products Sales, net $26,106,611 $ 7,437,756 $ -- $ -- $33,544,367 Net income(loss) before change in accounting principle 461,464 (273,115) (1,110,426) (5,488,752) (6,410,829) Cumulative effect of change in accounting principle (9,428,354) (1,123,572) -- -- (10,551,926) Net income(loss) (8,966,890) (1,396,687) (1,110,426) (5,488,752)(16,962,755) Depreciation and amortiza- tion 1,910,294 130,668 -- -- 2,040,962 Property, plant and equipment additions 1,434,026 61,714 -- -- 1,495,740 Total assets $40,614,708 $ 7,569,076 $ -- $29,494,677 $77,678,461 Precision For The Miniature Three Months Medical General Ended and Heat Corporate Discontinued September 30,2003 Electronic Technology Expenses Operations Total Products Sales, net $ 9,232,049 $ 2,522,403 $ -- $ -- $11,754,452 Net income (loss) (31,537) (1,231,704) (453,474) 906,767 (809,948) Depreciation and amortiza- tion 707,988 23,196 -- 731,184 Property, plant and equipment additions 80,708 6,017 -- -- 68,727 Precision For The Miniature Three Months Medical General Ended and Heat Corporate Discontinued September 30, 2002 Electronic Technology Expenses Operations Total Products Sales, net $ 8,560,785 $ 1,796,142 $ -- $ -- $10,356,927 Net income (loss) 29,457 (216,472) (381,363) (5,935,268) (6,503,646) Depreciation and amortiza- tion 655,092 1,052 -- -- 656,144 Property, plant and equipment additions 449,253 16,404 -- -- 465,657 The Company has made a strategic decision to focus its future on the Precision Miniature Medical and Electronics business. As a result of this decision, the Company plans to sell its land and building in Pennsylvania, with a carrying value of $540,175. In addition, the Company will sell the remaining operations of its Heat Technology segment. However, as the Company is uncertain whether the segment operations sale will be completed within twelve months as required for discontinued operations accounting treatment, this segment has been included as part of continuing operations in the financial statements, except for the building which has been classified as held for sale. The Company expects to include this segment in discontinued operations in the fourth quarter of 2003. The following table provides a proforma statement of operations presentation as if the Heat Technology segment had been included in discontinued operations for the three and nine-months ended September 30, 2003. Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2003 2002 2003 2002 Sales, net $9,232,049 $8,560,785 $27,899,945 $26,106,611 Cost of Sales 6,897,910 6,654,804 20,317,220 19,749,679 Selling, general & administrative 2,844,595 2,298,640 8,075,687 6,913,599 expense Operating loss (510,456) (392,659) (492,962) (556,667) Other income (expense) (154,796) (180,925) (420,438) (437,251) Loss from contining operations before income taxes (665,252) (573,584) (913,400) (993,918) Income tax benefit (180,241) (221,678) (225,807) (344,956) Loss from continuing operations (485,011) (351,906) (687,593) (648,962) Loss from discontinued operations, (324,937)(6,151,740) (1,689,796) (6,885,439) net Net loss before cumulative effect in accounting change (809,948)(6,503,646) (2,377,389) (7,534,401) Cumulative effect of change in accounting principle -- -- -- (9,428,354) Net loss ($809,948)(6,503,646 (2,377,389)(16,962,755) 6. Accounts Receivable At September 30, 2003, the Company had $3,216,000 of trade accounts receivable due from hearing health manufacturers and $2,603,000 in trade accounts receivables from Heat Technology customers in the aluminum and glassware industry. The following analysis provides the detail of revenue recognition methodology by segment for the nine months ended September 30, 2003: Precision Miniature Medical and Electronic Heat Products Technology Total Upon shipment $ 27,899,945 $ 5,126,951 $33,026,896 Percentage of completion -- 1,549,938 1,549,938 Sales, net $ 27,899,945 $ 6,676,889 $34,576,834 7. Business Combinations and Goodwill and Other Intangible Assets As of January 1, 2002, the Company adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations entered into after September 2001 to be accounted for under the purchase method. SFAS No. 142 sets forth new financial and reporting standards for the acquisition of intangible assets, other than those acquired in a business combination,and for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill no longer be amortized but tested for impairment on a periodic basis. The Company discontinued the amortization of goodwill effective January 1, 2002. The provisions of SFAS No. 142 also required the completion of a transitional impairment test (with any impairment identified) accounted for as a cumulative effect of a change in accounting principle. As of the date of adoption, the Company had unamortized goodwill in the amount of $15,632,000. The Company determined the goodwill associated with the following operations had been impaired and wrote off: $1,528,000 remaining goodwill pertaining to its European Heat Technology operations; $404,000 of negative goodwill pertaining to its Asian Heat Technology operations, and the Company also recognized an impairment of, and wrote off $9,428,000 of goodwill associated with its Precision Miniature Medical and Electronics Products business. The net charge totaling $10,552,000 was recognized as a cumulative change in accounting principle in the 2002 consolidated statement of operations. The corresponding deferred tax asset of $743,000 was offset by a valuation allowance. Changes in the estimated future cash flows from these businesses could have a significant impact on the amount of any future impairment, if any. In accordance with SFAS No. 142, the Company's remaining unamortized goodwill will be tested for impairment on an annual basis in the fourth quarter. 8. Inventories consist of the following at: September 30, December 31, 2003 2002 Raw material $ 2,839,260 $ 1,812,364 Work-in-process 3,362,739 2,575,084 Finished products and components 2,928,357 4,395,705 $ 9,130,356 $ 8,783,153 9. Notes Payable and Long Term Debt Notes payable at September 30, 2003 and December 31, 2002 are summarized below: September 30, December 31, 2003 2002 Notes payable: Short term borrowings, Europe $ 1,567,079 $ 6,427,529 Short term borrowings, domestic 3,157,253 3,982,137 Short term borrowings, Asia 210,716 511,318 Total notes payable $ 4,935,048 $10,920,984 During the quarter ended September 30, 2003, the Company used a large portion of the proceeds from the sale of Deuer to pay down its European borrowings as required by the Company's bank agreement.This was a permanent reduction in these facilities. The European short term borrowings were liabilities of the Company's wholly owned subsidiary, Selas SAS, that filed insolvency in July 2003 (See Notes 3 and 14).This debt has now been recorded directly on the Company's US Parent's books, as a result of the bank calling upon the Company's corporate guarantee. At September 30, 2003 the Company was not in compliance with certain financial covenants contained in its credit facility. These covenants pertained to the Company's consolidated tangible capital funds, and its fixed coverage ratio. The Company has obtained waivers of these covenants from the bank. The Company and its domestic subsidiaries have a revolving credit loan facility and a supplemental facility. In March 2003, the Company amended these facilities to extend their maturities and allow the Company to have borrowings of $5,900,000 outstanding at any one time. The revolving credit loan facility, which had a maximum limit of $4,500,000, had borrowings of $1,797,253 as of September 30, 2003 bearing an interest rate of 3.62% (LIBOR plus 2.5%) and expires April 1, 2004. As of September 30, 2003 the supplemental facility, which had a maximum limit of $1,400,000, had borrowings of $1,360,000 bearing interest at a rate of 4.87% (LIBOR plus 3.75%).These facilities carry commitment fees of .25% per annum, payable on the unborrowed portion of the line.The domestic supplemental loan credit facility has been extended to the earlier of January 1, 2004 or the sale of land and building in Dresher, Pennsylvania (See Note 5). Long-term debt at September 30, 2003 and December 31, 2002 is summarized below: Sept 30, Dec 31, 2003 2002 Long Term Debt: Term loans, Europe $ -- $ 1,581,889 Term loans, domestic 2,147,076 2,722,247 Other borrowings 2,973 5,816 2,150,049 4,309,952 Less: current maturities 2,150,049 1,573,716 $ -- $ 2,736,236 The terms of the domestic loan agreements require monthly principal payments of approximately $64,000 through April 2004, with a balloon payment due at the end of the loans. At September 30, 2003, the borrowings under the credit agreement bore interest, payable monthly, at an interest rate of 3.62% (LIBOR plus 2.50%). The credit agreement is subject to a prepayment penalty of 3%. Our ability to pay the principal and interest on our indebtedness as it comes due will depend upon our current and future performance. Our performance is affected by general economic conditions and by financial, competitive, political, business and other factors. Many of these factors are beyond our control. We believe that funds expected to be generated from operations, the available borrowing capacity through our revolving credit loan facilities, the potential sale of certain assets, and the control of capital spending will be sufficient to meet our anticipated cash requirements for operating needs through March 31, 2004. If, however, we do not generate sufficient cash from operations, or complete the sale of certain assets on a timely basis, or if we incur additional liabilities as a result of the Selas SAS insolvency, we may be required to seek additional financing or sell equity on terms which may not be as favorable as we could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition. While management believes that the Company will meet its liquidity needs through March 31,2004, no assurance can be given that the Company will be able to do so. 10. Income Taxes Income taxes reflected an expense for the nine months ended September 30, 2003 of $1,131,000 compared with a benefit of $489,000 for the nine months ended September 30, 2002. The effective rate in 2003 was the result of establishing approximately a $1.2 million net valuation reserve against prior deferred tax assets. This was due to the large tax net operating loss carry forward resulting from the write-off of the Company's investment in its European small furnace operations that filed insolvency in the quarter ended September 30, 2003. The rate of tax benefit in relation to pre-tax loss in 2002 at 34% is consistent with the expected statutory corporate rates. During the quarter ended September 30, 2003, the Company recognized a tax benefit of approximately $1.8 million related to tax deductions attributable to its discontinued operations and cash refunds received. 11. Accounting for Stock Options The Company applies APB Opinion No. 25 "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. Therefore, no compensation expense has been recognized for the stock option plans. SFAS No. 123 "Accounting for Stock-Based Compensation", amended by SFAS No. 148 "Accounting for Stock-Based Compensation-Transition and Disclosure", requires the Company to disclose pro forma net loss and pro forma loss per share amounts as if compensation expense was recognized for all options granted. The pro forma amounts are as follows: Three Months Ended September 30, 2003 2002 Net loss as reported $(809,948) $(6,503,646) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (21,711) (44,963) Pro forma net loss $(831,659) $(6,548,609) Loss per share: Basic and diluted - as reported $(.16) $(1.27) Basic and diluted - pro forma $(.16) $(1.28) Nine Months Ended September 30, 2003 2002 Net loss as reported $(2,377,389) $(16,962,755) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (65,133) (134,889) Pro forma net loss $(2,442,522) $(17,097,644) Loss per share: Basic and diluted - as reported $(.46) $(3.31) Basic and diluted - pro forma $(.48) $(3.34) 12. Loss Per Share Excluded from the computation of diluted earnings per share at September 30, 2003 were options to purchase approximately 429,000 common shares because the effect would have been anti-dilutive. 13. Legal Proceedings The Company is a defendant along with a number of other parties in approximately 143 lawsuits as of September 30, 2003(approximately 108 lawsuits as of December 31, 2002)alleging that plaintiffs have or may have contracted asbestos-related diseases as a result of exposure to asbestos products or equipment containing asbestos sold by one or more named defendants.-Due to the noninformative nature of the complaints, the Company does not know whether any of the complaints state valid claims against the Company.- The lead insurance carrier has informed the Company that the primary policy for the period July 1, 1972 - July 1, 1975 has been exhausted and that the lead carrier will no longer provide a defense under that policy.- The Company has requested that the lead carrier substantiate its position.- The Company has contacted representatives of the Company's excess insurance carrier for some or all of this period.- The Company does not believe that the asserted exhaustion of the primary insurance coverage for this period will have a material adverse effect on the financial condition, liquidity, or results of operations of the Company.- Management believes that the number of insurance carriers involved in the defense of the suits and the significant number of policy years and policy limits to which these insurance carriers are insuring the Company make the ultimate disposition of these lawsuits not material to the Company's consolidated financial position or results of operations. As more fully described in Note 14, the Company' wholly owned subsidiary, Selas SAS filed insolvency in France and is being managed by a court appointed judiciary administrator. The Company may be subject to additional litigation or liabilities as a result of the French insolvency. The Company is also involved in other lawsuits arising in the ordinary course of business. While it is not possible to predict with certainty the outcome of these matters, management is of the opinion that the disposition of these lawsuits and claims will not materially affect the Company's consolidated financial position, liquidity, or results of operations. 14. Subsidiary Insolvency On August 4, 2003 the Company's wholly owned subsidiary, Selas SAS, filed insolvency in the Commercial Court of Nanterre, France and is being managed through a court appointed judiciary administrator. At June 30, 2003, Selas SAS had total assets of $18.5 million and $29.0 million of liabilities. A portion of the liabilities, including approximately $7.5 million in bank debt and approximately $3.0 million of other liabilities, are either guaranteed by the Company or are a joint liability with the Company. The company took a charge of approximately $2.2 million in the third quarter as a result of the insolvency due primarily to the effect of corporate guarantees and the remaining translation adjustment. Historical financial information has been restated to include this European operation in discontinued operations. In addition, the Company may be subject to additional litigation or liabilities as a result of the French insolvency. The insolvency filing by Selas SAS was a default under the Company's banking agreement. The company obtained a waiver from the bank of this default. 15. Settlement Agreement with Andritz In September 2003, the Company entered into a settlement agreement with Andritz AG and Andritz Selas, SAS with respect to certain claims against the Company arising out of the sale of the large furnace operation of its wholly owned subsidiary, Selas SAS, in December 2002. Under the settlement agreement, the Company agreed to pay a maximum of E2,180,000 ($2,540,000), subject to certain possible credits, estimated at approximately E870,000 ($1,014,000). The Company paid E400,000 ($440,000) at the time of settlement, E100,000($116,000) on September 30, and will pay monthly installments of E100,000($116,000) beginning November 1,2003, and ending with a final payment of E80,000 ($93,000) plus accrued and unpaid interest, on March 1,2005, subject to receipt of the aforementioned credits, if any. Outstanding amounts bear interest at the rate of three-month E LIBOR. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking and Cautionary Statements Certain statements included in this Quarterly Report on Form 10-Q or documents the Company files with the Securities and Exchange Commission, which are not historical facts, are forward-looking statements (as such term is defined in the Securities Exchange Act of 1934, and the regulations thereunder), which are intended to be covered by the safe harbors created thereby. These statements may include, but are not limited to statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to the Consolidated Condensed Financial Statements contained in Item 1, Part I hereof. Forward-looking statements include, without limitation, statements as to the Company's expected future results of operations and growth, the Company's working capital requirements, the Company's business strategy, the expected benefits of reduction in employee headcount, the planned sale of the land and building in Dresher, Pennsylvania and the Company's remaining Heat Technology operations, and use of proceeds therefrom, the expected increases in operating efficiencies, anticipated trends in the hearing health market related to the Company's Precision Miniature Medical and Electronic Products segment, estimates of goodwill impairments and amortization expense of other intangible assets, the effects of changes in accounting pronouncements, the effects of litigation and the amount of insurance coverage, and statements as to trends or the Company's or management's beliefs, expectations and opinions. Forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. In addition to the factors discussed in this Report on Form 10-Q, certain risks, uncertainties and other factors can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements, including, without limitation, the following: o the ability to implement the Company's business strategy; o risks arising in connection with the insolvency of Selas SAS and potential liabilities and actions arising in connection therewith; o the ability of the Company to fund, or obtain financing for, its working capital requirements; o the volume and timing of orders received by the Company; o foreign currency movements in markets the Company services; o changes in global economy and financial markets; o changes in the mix of products sold; o acceptance of the Company's products; o pending and potential future litigation; o competitive pricing pressures; o availability of electronic components for the Company's products; o ability to create and market products in a timely manner; o ability to pay debt when it comes due; o ability to sell businesses marked for sale; and o the risks associated with terrorist attacks, war and threats of attacks and wars. For a description of other risks see "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2002 or in other filings the Company makes from time to time with the Securities and Exchange Commission. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company. 2003 compared with 2002 The Company has embarked on a strategy to focus on its Precision Miniature Medical and Electronics Products markets for future growth. As part of this strategy, in July 2003, the Company completed its planned sale of its Tire Holders, Lifts and Related Products segment.This segment consisted of one wholly-owned subsidiary, Deuer Manufacturing, Inc. (Deuer),that operated on a stand alone basis. Deuer generated approximately $8.5 million and $12.8 million of revenue and $297,000 and $874,000 of net income for the nine months ended September 30, 2003 and 2002, respectively. The net purchase price of $6.6 million was determined by negotiations between the parties. The Company recognized a gain of approximately $1.2 million, net of tax, on the transaction. The Company accounted for the plan to sell the subsidiary as a discontinued operation beginning December 2002. In July, 2003, Selas SAS, the Company's French subsidiary, filed insolvency in France and is under the control of a French insolvency court administrator. As Selas SAS and its subsidiariesare no longer under the control of the Company, their results of operations are excluded from the continuing operations and the historical financial information has been restated to reflect these subsidiaries as discontinued operations. See Notes 3 and 14 to the Consolidated Condensed Financial Statements included herein. Consolidated net sales for the three months ended September 30, were as follows (in thousands): 2003 2002 Change Precision Miniature Medical and Electronic Products $9,232 $8,561 $ 671 Heat Technology 2,522 1,796 726 Total $11,754 $10,357 $ 1,397 Consolidated net sales for the nine months ended September 30, were as follows (in thousands): 2003 2002 Change Precision Miniature Medical and Electronic Products $27,900 $26,107 $ 1,793 Heat Technology 6,677 7,438 (761) Total $34,577 $33,545 $ 1,032 Precision Miniature Medical and Electronic Products segment sales for both the three and nine months ended September 30, 2003 were up over the same year-ago period, primarily due to stronger sales in its electronics and medical markets, partially offset by lower sales in the hearing health market. Heat Technology segment sales for the three months ended September 30, 2003, were favorably impacted by a large order in Japan. For the nine months ended September 30, 2003 Heat Technology sales continue to be adversely impacted by the poor worldwide economy for capital goods. Gross margin for the three months ended September 30 was as follows (in thousands): 2003 2002 Change Precision Miniature Medical and Electronic Products $2,334 $1,906 $ 428 Heat Technology 696 395 301 Total $3,030 $2,301 $ 729 Gross margin for the nine months ended September 30 was as follows (in thousands): 2003 2002 Change Precision Miniature Medical and Electronic Products $7,583 $6,357 $1,226 Heat Technology 1,746 1,790 (44) Total $9,329 $8,147 $1,182 Gross margin, as a percent of segment sales for the three and nine months ended September 30, was as follows: 2003 2002 Change Quarter YTD Quarter YTD Quarter YTD Precision Miniature Medical 25.3 27.2 22.3 24.3 3.0 2.9 and Electronic Products Heat Technology 27.6 26.2 22.0 24.1 5.6 2.1 Total 25.8 27.0 22.2 24.3 3.6 2.7 During the three and nine month period ended September 30, 2003, the Precision Miniature Medical and Electronic Products segment's gross profit margins benefited from stronger sales in its electronics and medical markets, which are typically a higher margin business than the hearing health market. The Heat Technology segment gross profit margins vary markedly from contract to contract, depending on customer specifications and other conditions related to the project. The gross profit margin for the three months ended September 30, 2003 was higher due to the increase in sales as a result of a large order in Japan. Gross profit margins for the nine months ended September 30,2003 are slightly lower than the nine months ended September 30,2002 due to the lower sales volume for the period. Selling, general and administrative expenses (SG&A) were as follows: 2003 2002 Change Quarter YTD Quarter YTD Quarter YTD Dollars (thousands) $ 3,355 $9,882 $ 3,000 $ 9,134 $355 $748 Percent of Sales 28.5% 28.6% 28.9% 27.2% (.4%) 1.4% The higher SG&A expenses in both the three and nine months ended September 30, 2003, compared to the same year-ago period were due to higher research and development costs in the Precision Miniature Medical and Electronic Products business as the Company strives to introduce more products into the hearing health market. Additionally, one of the Company's hearing health customers in France filed for insolvency during the quarter. The customer had an outstanding receivable balance of $338,000, of which $168,000 had previously been reserved. The Company recorded an additional bad debt reserve of $170,000 for the quarter. Interest expense for the three and nine months ended September 30, 2003 was $128,000 and $445,000 compared to $186,000 and $526,000 for the same periods in 2002. The decrease over last year's expense was due to the lower outstanding debt balance. Other income (expense) included realized and unrealized gains (loss) on foreign exchange. The three months ended September 30, 2003 included a loss of $20,000 compared to a gain of $19,000 for the three months ended September 30, 2002 due to unfavorable foreign currency fluctuations. The nine months ended September 30, 2003 included a gain of $58,000 compared to a gain of $4,000 for the nine months ended September 30, 2002 due to favorable foreign currency fluctuations. Income taxes reflected an expense for the nine months ended September 30, 2003 of $1,131,000 compared with a benefit $489,000 for the nine months ended September 30, 2002, which results in effective tax rates of (130)% and 35%, respectively. The effective rate in 2003 was the result of establishing approximately a $1.2 million net valuation reserve against prior deferred tax assets. This was due to the large tax net operating loss carry forward resulting from the write-off of the Company's investment in its European heat technology operations, which filed insolvency in the quarter ended September 30, 2003. The rate of tax benefit at 34%, in relation to pre-tax loss in 2002, was consistent with the expected statutory corporate rates. For the three and six months ended September 30, 2003, the net loss from continuing operations was $1,717,000 and $2,000,907 compared with losses of $568,000 and $922,000 for the same periods last year. A large portion of the loss in the quarter ended September 30, 2003 was due to an increase in income taxes as a result of establishing a $1.2 million dollar valuation reserve; other factors included increased SG&A expenses, due to higher research and development costs, along with an increase in the bad debt reserve. Discontinued operations generated net income for the three months ended September 30, 2003 of $907,000 and a net loss for the nine months ended September 30, 2003 of $376,000, compared to a net loss of $5,935,000 and $5,489,000 for the same three and nine-month periods last year, respectively. The income in the current quarter is a result of a $1.2 million gain on the sale of the Company's wholly owned subsidiary, Deuer Manufacturing, Inc., partially offset by accruals related to the insolvency of the Company's European Heat Technology operations, net of taxes. See Notes 3 and 14 of the Consolidated Condensed Financial Statements for further explanation. Liquidity and Capital Resources Consolidated net working capital decreased to $2.1 million at September 30,2003 from $4.7 million at December 31, 2002. The decrease was primarily from the reclassification of long term debt that is due April 1, 2004. The Company's cash flows from operating, investing and financing activities, as reflected in the statement of cash flows, are summarized as follows (in thousands): Nine Months Nine Months Ended Ended Sept 30, Sept 30, 2003 2002 Cash provided (used) by: Continuing operations $ 1,248 $ 2,545 Discontinued operations 6,883 (1,740) Investing activities (1,048) (1,487) Financing activities (8,018) (174) Effect of exchange rate changes on cash 55 (3) Decrease in cash $ (880) $ (859) The Company had the following bank arrangements (in thousands): Sept 30, December 31, 2003 2002 Total availability under existing facilities $10,610 $20,369 Borrowings and commitments: Notes payable 4,935 10,921 Long-term debt 2,150 4,310 Total borrowings 7,085 15,231 Advance payment guarantees (off-balance sheet) (a) 141 2,160 Total outstanding borrowings and commitments 7,226 17,391 Remaining availability under existing facilities $3,384 $2,978 (a)Advance Payment Guarantees (APG's) are required by some customers in the Heat Technology segment. The APG's provide a performance guarantee to the customer in the event of a default in delivery or a failure of the furnace being supplied. Although the guarantee period can vary widely, an APG is typically in force from six months to one year. Borrowings under the majority of the Company's credit facilities bear interest at LIBOR plus 2.5% to 3.75%. See Note 9 of the consolidated condensed Financial Statements for further explanation. The Company and its domestic subsidiaries entered into a revolving credit loan facility and a supplemental facility for which borrowings of $5,900,000 could be outstanding at any one time. The revolving credit loan facility, which had a maximum limit of $4,500,000, had borrowings of $1,797,253 as of September 30, 2003 bearing an interest rate of 3.62% (LIBOR plus 2.5%). The loan carries a commitment fee of .25% per annum, payable on the unborrowed portion of the line. The domestic revolving credit loan and supplemental facilities have been extended to April 1, 2004. The supplemental facility, which had a maximum limit of $1,400,000, had borrowings of $1,360,000 as of September 30, 2003 bearing interest at a rate of 4.87% (LIBOR plus 3.75%). The loan carries a commitment fee of .25% per annum, payable on the unborrowed portion of the line. The domestic supplemental loan credit facility has been extended to the earlier of January 1, 2004 or the sale of the land and building held for sale in Dresher, Pennsylvania. Our ability to pay the principal and interest on our indebtedness as it comes due will depend upon our current and future performance. Our performance is affected by general economic conditions and by financial, competitive, political, business and other factors. Many of these factors are beyond our control. We believe that funds expected to be generated from operations, the available borrowing capacity through our revolving credit loan facilities, the potential sale of certain assets, and the control of capital spending will be sufficient to meet our anticipated cash requirements for operating needs through March 31, 2004. If, however, we do not generate sufficient cash or complete such potential asset sales on a timely basis, obtain extensions of the maturities of our current loan facilities, or if we incur additional liabilities as a result of the Selas SAS insolvency, we may be required to seek additional financing or sell equity on terms which may not be as favorable as we could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition. While management believes that the Company will meet its liquidity needs through March 31, 2004, no assurance can be given that the Company will be able to do so. Critical Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Certain accounting estimates and assumptions are particularly sensitive because their significance to the consolidated condensed financial statements and the possibility that future events affecting them may differ markedly. The accounting policies of the Company with significant estimates and assumption include the Company's revenue recognition, discontinued operations, and deferred taxes policies. These and other significant accounting policies are described in and incorporated by reference from "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 1 to the financial statements contained in or incorporated by referenc in the Company's Annual Report on Form 10-K for the year ended December 31,2002. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk For information regarding the Company's exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. There have been no material changes in the Company's portfolio of financial instruments or market risk exposures which have occurred since December 31, 2002. ITEM 4. Controls and Procedures Quarterly evaluation of the Company's Disclosure Controls and Internal Controls. The Company evaluated the effectiveness of the design and operation of its "disclosure controls and procedures" ("Disclosure Controls") as of the end of the period covered by this Form 10-Q and any change in material controls over financial reporting that occurred during the period covered by this Form 10-Q. This evaluation ("Controls Evaluation") was done under the supervision and with the participation of management, including the Chief Executive Officer (principal executive officer) ("CEO") and Chief Financial Officer (principal financial officer) ("CFO"). Limitations on the Effectiveness of Controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls to enhance where necessary its procedures and controls. Conclusions. Based upon the Controls Evaluation, the CEO and CFO have concluded that, the Disclosure Controls are effective in reaching a reasonable level of assurance that management is timely alerted to material information relating to the Company during the period when its periodic reports are being prepared. In accordance with SEC requirements, the CEO and CFO conducted an evaluation of internal controls over financial reporting ("Internal Controls") to determine whether there have been changes in Internal Controls that have occurred during the period that have material affected or which are reasonably likely to material affect Internal Controls. Based on this evaluation, there has been no such change during the period covered by this report. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings The information contained in Notes 13 and 14 to the Consolidated Condensed Financial Statements in part 1 of this quarterly report is incorporated by reference herein. ITEM 2. Changes in Securities and Use of Proceeds None. ITEM 3. Defaults upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Settlement agreement between Andritz AG, Andritz SAS and Selas Corporation of America. 31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of principal executive officer pursuant to U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of principal financial officer pursuant to U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K Form 8-K filed on July 23, 2003 to report sale of its subsidiary Deuer Manufacturing Inc. Form 8-K filed on August 5, 2003 to report its French Subsidiary's insolvency filing. Form 8-K filed on November 11, 2003 to report announcement of results of operations for the three and nine months ended September 30, 2003 and discuss recent developments. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SELAS CORPORATION OF AMERICA (Registrant) Date: November 12, 2003 By: /s/ Mark S. Gorder Mark S. Gorder President and Chief Executive Officer (principal executive officer) Date: November 12, 2003 By: /s/ Robert F. Gallagher Robert F. Gallagher Chief Financial Officer and Treasure (principal financial officer) EXHIBIT INDEX 10.1 Settlement agreement between Andritz AG, Andritz SAS and Selas Corporation of America 31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of principal executive officer pursuant to U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of principal financial officer pursuant to U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 EXHIBIT 31.1 CERTIFICATIONS Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. I, Mark S. Gorder, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Selas Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)[Intentionally Omitted]; and (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (d) Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 __/s/ Mark S. Gorder__________ Mark S. Gorder Chief Executive Officer (principal executive officer) EXHIBIT 31.2 CERTIFICATIONS Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. I, Robert F. Gallagher, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Selas Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)[Intentionally Omitted]; and (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (d) Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 __/s/ Robert F. Gallagher_____ Robert F. Gallagher Chief Financial Officer and Treasurer (principal financial officer) EXHIBIT 32.1 CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Mark S. Gorder, Chief Executive Officer (principal executive officer) of Selas Corporation of America (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1) the quarterly report on Form 10-Q of the Company for the nine months ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 12, 2003 ____/s/ Mark S. Gorder_________ Mark S. Gorder President and Chief Executive Officer (principal executive officer) The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code and is not being filed as part of the Report or as a separate disclosure document. EXHIBIT 32.2 CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C.SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert F. Gallagher, Chief Financial Officer (principal financial officer)of Selas Corporation of America (the "Compan"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1) the quarterly report on Form 10-Q of the Company for the nine months ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 12, 2003 _/s/ Robert F. Gallagher_____ Robert F. Gallagher Chief Financial Officer and Treasurer (principal financial officer) The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code and is not being filed as part of the Report or as a separate disclosure document. EX-99.A4 3 aa10q093003andritz.txt EXHIBIT 10.1 SETTLEMENT AGREEMENT EXHIBIT 10.1 SETTLEMENT AGREEMENT THIS SETTLEMENT AGREEMENT is made as of September 12, 2003 by and between Andritz AG, ("AG"),Andritz Selas S.A.S., a French societe par actions simplifiee (formerly known as Andritz Acquisition S.A.A.( "Andritz") and Selas Corporation of America, a Pennsylvania corporation ("SCA"). WHEREAS A. AG, Andritz and SCA entered into an Asset and Share Purchase Agreement dated as of October 11, 2002 (the "Purchase Agreement") by and between AG, Andritz, SCA and Selas S.A.S., a French societe par actions simplifiee ("SAS"). SCA and SAS are sometimes referred to, collectively, as "Sellers." B. SCA's and Selas's liability to Andritz under the Purchase Agreement is joint and several pursuant to Section 10.15 of the Purchase Agreement. C. Andritz has claims against SCA under Sections 2.12, 5.12 and Section 5.14 of the Purchase Agreement as described in Paragraphs 1.1, 1.2 and 1.3 of this Settlement Agreement (the "Claims"). D. AG, Andritz and SCA desire to settle the Claims and certain other claims it may have under the Purchase Agreement. E. Terms used in this Settlement Agreement and not defined herein shall have the meaning specified in the Purchase Agreement. F. SAS has been put into Administration ("placee en redressement judiciaire") by judgment of the Commercial court of Nanterre on August 7, 2003. FOR GOOD AND VALUABLE CONSIDERATION AND IN CONSIDERATION OF THE MUTUAL PROMISES SET FORTH HEREIN, AG, ANDRITZ AND SCA AGREE AS FOLLOWS: 1.1 The Adjusted Net Asset Value of SAS is Negative Four Hundred SeventyThousand Euro (-E470,000) pursuant to Section 2.12(e)(ii) of the Purchase Agreement. Pursuant to Section 10.15 of the Purchase Agreement, SCA is jointly and severally liable for this amount with SAS. 1.2 Pursuant to Section 5.14 of the Purchase Agreement, SAS has received cash payments to date relating to Assets on the Value Date Balance Sheet totalling E420,000. Pursuant to Section 10.15 of the Purchase Agreement, SCA is jointly and severally liable for this amount with SAS. 1.3. Andritz has not received any payment on the ILVA Receivable and Sellers owe Andritz the principal sum of One Million Two Hundred Ninety Thousand Euro (E1,290,000) pursuant to Section 5.12 of the Purchase Agreement. Pursuant to Section 10.15 of the Purchase Agreement, SCA is jointly and severally liable for this amount with SAS. 2. In full satisfaction of the Claims, SCA agrees to pay Andritz the sum of Two Million One Hundred Eighty Thousand Euro E2,180,000 )(the "Settlement Amount"). Andritz acknowledges the receipt of $400,000 of the Settlement Amount on or before the date hereof. 3. The Settlement Amount shall accrue interest at the rate of three-month E LIBOR in effect from time to time commencing on September 1, 2003 until the Settlement Amount and all such accrued interest is fully paid. 4. For and in consideration of the mutual promises and agreements set forth herein: (a) AG and Andritz do each hereby remise, release and forever discharge SCA, its subsidiaries (other than SAS), affiliates (other than SAS), and their respective officers, agents, servants, employees, successors, assigns, heirs, executors and administrators (the "SCA Releasees") of and from all and all manner of actions and causes of action, liabilities, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands which against said SCA Releasees, AG and/or Andritz ever had, now has, or which any of their respective successors or assigns or any of them hereafter can, shall or may have, for or by reason of any cause, matter or thing whatsoever arising in connection only with: (i) Sections 2.12 and 5.12 of the Purchase Agreement; (ii) claims which AG and/or Andritz have as of the date hereof under Section 5.14 of the Purchase Agreement; and (iii) claims involving a breach of any of the representations and warranties set forth in Sections 3.6, 3.8, or 3.9 of the Purchase Agreement or any other representation and warranty in Section 3 of the Purchase Agreement to the extent based on the subject matter of the Claims (including any related claim for indemnity under section 9.2(a). (b) SCA hereby remises, releases and forever discharges AG and Andritz, their subsidiaries, affiliates, and their respective officers, agents, servants, employees, successors, assigns, heirs, executors and administrators (the "Andritz Releasees") of and from all and all manner of actions and causes of action, liabilities, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands which against said Andritz Releasees, SCA ever had, now has, or which any of their respective successors or assigns or any of them hereafter can, shall or may have, for or by reason of any cause, matter or thing whatsoever arising in connection only with Sections 2.12 and 5.12 of the Purchase Agreement and claims which SCA have as of the date hereof under Section 5.14 of the Settlement Agreement. SCA hereby indemnifies Andritz for any claims made by or on behalf of SAS under Section 2.12, 5.12 or (with respect to claims existing as of the date hereof), 5.14 of the Purchase Agreement based upon the subject matter of this Settlement Agreement. 5. SCA shall pay the Settlement Amount as follows: Due Date Amount Due Paid E400,000 October 1, 2003 E100,000 November 1, 2003 E100,000 December 1, 2003 E100,000 January 1, 2004 E100,000 February 1, 2004 E100,000 March 1, 2004 E100,000 April 1, 2004 E100,000 May 1, 2004 E100,000 June 1, 2004 E100,000 July 1, 2004 E100,000 August 1, 2004 E100,000 September 1, 2004 E100,000 October 1, 2004 E100,000 November 1, 2004 E100,000 December 1, 2004 E100,000 January 1, 2005 E100,000 February 1, 2005 E100,000 March 1, 2005 E 80,000 together with all accrued but unpaid interest The first E1,290,000 in payments made on the Settlement Amount shall be considered to have been made in respect of Andritz's claim against Selas under Section 5.12 of the Purchase Agreement in connection with the ILVA Receivables. If banks are not open for business in New York or Paris on any of the dates set forth above, any payment due on such date shall be due on the next business day in New York and Paris. 6. In the event of any default in payment to Andritz of all or any portion of the Settlement Amount on the due dates as set forth in Paragraph 5 hereof, whether in terms of the timing for any such payment or the amount actually paid, and failure by SCA to cure such default within 3 business days of the date of receipt of notice of such default, Andritz shall be entitled to declare by notice in writing to SCA that the balance of the Settlement Amount and all accrued interest is immediately due and payable ("Acceleration Notice"). The Acceleration Notice shall contain a certificate by Andritz of the balance of the Settlement Amount outstanding as at the date of such notice and such certificate shall absent manifest error be conclusive as to the amount then due and owing. Upon receipt of an Acceleration Notice, SCA shall pay the amount therein set out to Andritz within three business days of the date of receipt of the Acceleration Notice. Upon the delivery of an Acceleration Notice, the unpaid Settlement Amount shall accrue interest at the rate set forth in Paragraph 7 hereof. 7. Any portion of the Settlement Amount owing by SCA hereunder and not timely paid, including for the avoidance of doubt the full sum due hereunder in the event of an acceleration pursuant to Paragraph 6 hereof, shall accrue interest at the rate equal to the sum of one-month EURIBOR, as in effect from time to time and 4%. 8. Nothing in this Settlement Agreement shall be deemed to waive or prejudice Andritz's independent claims against SAS under Sections 2.12, 5.12 and 5.14 of the Purchase Agreement (the "SAS Claims") or any claim or right SCA may have against SAS. Andritz shall file proofs of claim against SAS with the Commercial court of Nanterre with respect to Claims arising under Section 2.12 and 5.14 of the Purchase Agreement and shall use good faith efforts to pursue such proofs of claim. Andritz shall: (a) keep SCA informed as to the status of the SAS Claims, and (b) promptly forward copies of all correspondence and other communications received with respect to the SAS Claims or the bankruptcy proceedings to SCA subject to any confidentiality obligations Andritz may be under. Any amounts Andritz receives from SAS in connection with such SAS Claims shall be fully credited against the outstanding Settlement Amount by application against the instalments set forth in Paragraph 5 in reverse chronological order. No judgment or declaration in the French bankruptcy proceedings shall have any impact on Andritz's rights against SCA hereunder. SCA shall be subrogated to Andritz's rights in respect of the SAS Claims once Andritz has received the entire Settlement Amount together with interest owing hereunder. 9. Andritz has informed VAI Clecim that it is the owner of the ILVA receivable and that all payments thereof should be made to Andritz. Andritz shall use its good faith efforts to collect the ILVA Receivable, provided that Andritz shall not be obligated to perform any work on the project to which the ILVA Receivable relates. From time to time hereafter, Andritz shall make inquiries as appropriate of ILVA or VAI Clecim as to any Project Work (as defined below) and shall inform and discuss with SCA as to such work and the status of its efforts to collect the ILVA Receivable. AG and Andritz shall not, directly or indirectly through another person or entity, undertake any Project Work without conferring with SCA in advance. In event that Andritz, in its sole and absolute discretion, undertakes any work that is within the scope of the ILVA Order (other than work performed pursuant to Section 5.2(b) of the Purchase Agreement) ("Project Work"), SCA shall receive a credit against the Settlement Amount equal to the total amount paid to Andritz in connection with the Project Work minus 115% of Andritz's Direct Costs (including labor and overhead at its current rate) incurred in performing the Project Work. For the avoidance of doubt, Project Work includes punch list items, work relating to the addition of a movable cooler, work relating to modifying gas lines, and other remedial work relating to the ILVA Order. Andritz shall not settle or compromise the ILVA Receivable without the prior written consent of SCA, which consent shall not unreasonably be withheld or delayed. Any amounts Andritz receives in connection with the ILVA Receivable (whether from SAS or ILVA) shall be fully credited against the outstanding Settlement Amount by application against the instalments set forth in Paragraph 5 in reverse chronological order. The ILVA Receivable shall not be considered repurchased by SCA pursuant to Section 5.12 of the Purchase Agreement until Andritz has received the entire Settlement Amount together with interest owing hereunder, at which point Andritz shall transfer title of the then unpaid ILVA Receivable to SCA. 10. Andritz shall notify SCA promptly in writing of any moneys it recovers pursuant to Paragraphs 8 or 9. Such notice shall contain a certificate of the amounts credited against the Settlement Amount and the calculation of the outstanding Settlement Amount. In the event that the aggregate amount that Andritz receives from SCA, SAS and/or ILVA exceeds the Settlement Amount (excluding the Andritz Bonus, if any), such excess amount shall be promptly paid to SCA. 11. Intentionally Omitted. 12. This Settlement Agreement will be governed by the laws of the state of New York without regard to conflicts of laws principles. 13. Each party to this Settlement Agreement represents and warrants that the person(s) executing this Settlement Agreement on behalf of that respective party has actual authority to execute this Settlement Agreement and thereby bind that party. 14. This Settlement Agreement represents the entire and integrated agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior negotiations, representations or agreements either written or oral with respect to the subject matter hereof. Except as modified herein, the Purchase Agreement and the Andritz License Agreement shall remain in full force and effect in accordance with their respective terms. 15. Each of AG, Andritz and SCA hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the state and federal courts located in the State of New York, for any actions, suits, or proceedings arising out of or relating to this Settlement Agreement and the transactions contemplated hereby and further agrees that service of any process, summons, notice or document by registered mail to AG's, Andritz's address or SCA's address, as the case may be, set forth below shall be effective service of process of any action, suit or proceeding brought against AG, Andritz or SCA, as the case may be, in any such court. Each of AG, Andritz and SCA hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Settlement Agreement or the transactions contemplated hereby, in such state or federal courts as aforesaid and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 16. By signing this Settlement Agreement and by consenting to jurisdiction in the state and federal courts in the State of New York for the limited and specific purpose of resolving disputes under this Settlement Agreement pursuant to this Paragraph 16 hereof, AG and Andritz are not and do not intend to transact business directly in the United States or the State of New York and are not consenting to the general jurisdiction of any federal or state court in the United States. This Settlement Agreement may not, without AG's and Andritz's prior written consent, be relied on in any manner or for any purpose by any person other than SCA. 17. All notices and other communications under this Settlement Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier (with written confirmation of receipt), or (c) when received by the addressee, if sent by a governmental postal service or internationally recognized delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): If to SCA: Selas Corporation of America Arden Hills Office 1260 Red Fox Road Arden Mills, MN 55112 Attention: Robert F. Gallagher, Chief Financial Officer Tel: +1 651-604-9638 Fax: +1 651-636-3682 With a copy to: Blank Rome LLP One Logan Square Philadelphia, PA 19103 Attention: Francis E. Dehel, Esq. Tel: +1 215-569-5532 Fax: +1 215-832-5532 If to AG or Andritz Andritz AG Statteggerstrasse A-8045 Graz, Austria Attention: Dr. Wolfgang Leitner, Chief Executive Officer Tel: +43 316 6902 2400 Fax: +43 316 6902 425 With a copy to: Andritz (USA) Inc. 10745 Westside Parkway Alpharetta, GA 30004 Attention: David W. Bumsted, Group General Counsel Tel: +1 770-640-2590 Fax: +1 770-640-2598l 18. All payments to Andritz under this Settlement Agreement shall be made in EURO (E) by wire transfer of immediately available funds to the following bank account or such other bank account as Andritz may from time to time notify SCA: Bank name and address SOCIETE GENERALE Orleans BIC(Swift)-Code SOGEFRPP Account name ANDRITZ SELAS S.A.S. Account no./IBAN FR76 30003 01540 00020915640 84 19. This Settlement Agreement may be executed in more than one counterpart. Once the signature of each of the signatories set forth below has been affixed to one or more counterpart, this Agreement shall be deemed fully executed as if all the signatures were contained on a single document. ANDRITZ SELAS S.A.S. SELAS CORPORATION OF AMERICA By________________________ By________________________ By________________________ ANDRITZ AG. By________________________ By________________________ -----END PRIVACY-ENHANCED MESSAGE-----