1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-------------------------------
For the Fiscal Year Ended June 30, 1995
Commission File Number 1-7635
TWIN DISC, INCORPORATED
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Wisconsin 39-0667110
- -------------------------------------- ---------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
1328 Racine Street, Racine, Wisconsin 53403
- -------------------------------------- ---------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (414) 638-4000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Common stock, no par value New York Stock Exchange
- ----------------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common stock, no par value
- ------------------------------------------------------------------------------
(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. Yes /X/ 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 the 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/.
At September 1, 1995, the aggregate market value of the common stock held by
non-affiliates of the registrant was $53,228,291. Determination of stock
ownership by affiliates was made solely for the purpose of responding to this
requirement and registrant is not bound by this determination for any other
purpose.
At September 1, 1995, the registrant had 2,790,111 shares of its common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
The incorporated portions of such documents being specifically identified in
the applicable Items of this Report.
Portions of the Annual Report to Shareholders for the year ended June 30, 1995
are incorporated by reference into Parts I, II and IV.
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Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held October 20, 1995 are incorporated by reference into Parts I, III and IV.
Portions of the Company's Annual Report on Form 10-K for the year ended June
30, 1988, are incorporated by reference into Part II.
(1)
PART I
Item 1. Business
The Company is engaged in one line of business. Twin Disc designs,
manufactures and sells heavy duty off-highway power transmission equipment.
Products offered include: hydraulic torque converters; power-shift
transmissions; marine transmissions and surface drives; universal joints; gas
turbine starting drives; power take-offs and reduction gears; industrial
clutches; fluid couplings and control systems. Principal markets are:
construction equipment, industrial equipment, government, marine, energy and
natural resources and agriculture. The Company's worldwide sales to both
domestic and foreign customers are transacted through a direct sales force and
a distributor network. There have been no significant changes in products or
markets since the beginning of the fiscal year. The products described above
have accounted for more than 90% of revenues in each of the last three fiscal
years.
The Company acquired certain assets of Southern Diesel Engine Repair during
fiscal year 1993. During 1995, the Company purchased the outstanding stock of
Marine Diffusion, S.R.L. The acquisition did not require significant capital
investment. A further description of these acquisitions appears in Note N to
the consolidated financial statements on page 37 of the 1995 Annual Report
which financial statements are incorporated by reference in this Form 10-K
Annual Report in Part II.
In July 1994, the Company acquired a minority interest in Palmer Johnson
Distributors, LLC, a major distributor of Twin Disc products. A further
description of this transaction appears in Note E to the consolidated
financial statements on page 29 of the 1995 Annual Report which financial
statements are incorporated by reference in this Form 10-K Annual Report in
Part II. The Company also began operations of a fully owned marketing
subsidiary in Madrid, Spain in fiscal year 1994. The establishment of this
subsidiary did not require significant capital investment.
The Company's products receive direct widespread competition, including from
divisions of other larger independent manufacturers. The Company also
competes for business with parts manufacturing divisions of some of its major
customers. Ten customers accounted for approximately 44% of the Company's
consolidated net sales during the year ended June 30, 1995. Caterpillar Inc.
accounted for approximately 12% of consolidated net sales in 1995.
Unfilled open orders for the next six months of $72,183,000 at June 30, 1995
compares to $47,395,000 at June 30, 1994. Since orders are subject to
cancellation and rescheduling by the customer, the six-month order backlog is
considered more representative of operating conditions than total backlog.
However, as procurement and manufacturing "lead times" change, the backlog
will increase or decrease; and thus it does not necessarily provide a valid
indicator of the shipping rate. Cancellations are generally the result of
rescheduling activity and do not represent a material change in backlog.
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Most of the Company's products are machined from cast iron, forgings, cast
aluminum and bar steel which generally are available from multiple sources and
which are believed to be in adequate supply.
The Company has pursued a policy of applying for patents in both the United
States and certain foreign countries on inventions made in the course of its
development work for which commercial applications are considered probable.
The Company regards its patents collectively as important but does not
consider its business dependent upon any one of such patents.
(2)
Engineering and development costs include research and development expenses
for new product development and major improvements to existing products, and
other charges for ongoing efforts to refine existing products. Research and
development costs charged to operations totalled $2,718,000, $2,649,000 and
$2,129,000 in 1995, 1994 and 1993, respectively. Total engineering and
development costs were $7,411,000, $6,843,000 and $7,093,000 in 1995, 1994 and
1993, respectively.
Compliance with federal, state and local provisions regulating the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, is not anticipated to have a material effect on capital
expenditures, earnings or the competitive position of the Company.
The number of persons employed by the Company at June 30, 1995 was 1,097.
The business is not considered to be seasonal except to the extent that
vacations are taken mainly in the months of July and August curtailing
production during that period.
Management recognizes that there are attendant risks that foreign governments
may place restrictions on dividend payments and other movements of money, but
these risks are considered minimal due to the political relations the United
States maintains with the countries in which the Company operates or the
relatively low investment within individual countries.
A summary of financial data by geographic area for the years ended June 30,
1995, 1994 and 1993 appears in Note D to the consolidated financial statements
on pages 27 through 29 of the 1995 Annual Report to Shareholders which
financial statements are incorporated by reference in this Form 10-K Annual
Report in Part II.
Item 2. Properties
The Company owns three manufacturing, assembly and office facilities in
Racine, Wisconsin, U.S.A. and one in Nivelles, Belgium. The aggregate floor
space of these four plants approximates 750,000 square feet. The Racine
facility includes office space which is the location of the Company's
corporate headquarters.
The Company also has operations in the following locations all of which are
used for sales offices, warehousing and light assembly or product service.
The following properties are leased except for the Johannesburg, South Africa
location, which is owned:
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Jacksonville, Florida, U.S.A. Brisbane, Queensland, Australia
Miami, Florida, U.S.A. Perth, Western Australia, Australia
Loves Park, Illinois, U.S.A. Viareggio, Italy
Coburg, Oregon, U.S.A. Singapore
Seattle, Washington, U.S.A. Johannesburg, South Africa
Madrid, Spain
The properties are generally suitable for operations and are utilized in the
manner for which they were designed. Manufacturing facilities are currently
operating at less than 70% capacity and are adequate to meet foreseeable needs
of the Company.
(3)
Item 3. Legal Proceedings
Twin Disc is a defendant in several product liability or related claims
considered either adequately covered by appropriate liability insurance or
involving amounts not deemed material to the business or financial condition
of the Company.
The Company has joined with a group of potentially responsible parties in
signing a consent decree with the Illinois Environmental Protection Agency to
conduct a remedial investigation and feasibility study at the Interstate
Pollution Control facility in Rockford, Illinois. The consent decree was
signed on October 17, 1991, and filed with the federal court in the Northern
District of Illinois. The Company's total potential liability on the site
cannot be estimated with particularity until completion of the remedial
investigation. Based upon current assumptions, however, the Company
anticipates potential liability of $300,000 to $400,000.
The Company also is involved with other potentially responsible parties in
various stages of investigation and remediation relating to other hazardous
waste sites, some of which are on the United States EPA National Priorities
List (Superfund sites). While it is impossible at this time to determine with
certainty the ultimate outcome of such environmental matters, they are not
expected to materially affect the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
(Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered Item in Part I of this Report in lieu of being
included in the Proxy Statement for the Annual Meeting of Shareholders to
be held on October 20, 1995.)
Principal Occupation
Name Last Five Years Age
- ------------------- ------------------------------------------ -----
Michael E. Batten Chairman, Chief Executive Officer since
October 1991;formerly Chairman, President,
Chief Executive Officer 55
Michael H. Joyce President-Chief Operating Officer since
October 1991; formerly President-North American
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Operations since January 1991; formerly President,
Mobile Fluid Products Division, Dana Corporation 54
James O. Parrish Vice President - Finance and Treasurer 55
Philippe O. Pecriaux Vice President - Europe 57
Lance J. Melik Vice President - Corporate Development since
September 1995; formerly Vice President -
Marketing 52
(4)
Michael J. Hablewitz Vice President - Quality Assurance since
February 1994; formerly Vice President -
Manufacturing Services 49
James McIndoe Vice President - International Marketing 56
John W. Spano Vice President - Sales and Marketing since
September 1995; formerly Director Mobile Market
Group, Trinova Corporation since June 1993;
formerly Director of Customer Service since
October 1991; formerly Marine Market Sales
Manager 51
Fred H. Timm Corporate Controller and Secretary since August
1994; formerly Controller and Secretary 49
Officers are elected annually by the Board of Directors at the first meeting
of the Board held after each Annual Meeting of the Shareholders. Each officer
shall hold office until his successor has been duly elected, or until he shall
resign or shall have been removed from office.
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
The dividends per share and stock price range information set forth under the
caption "Sales and Earnings by Quarter" on page 1 of the Annual Report for the
year ended June 30, 1995 are incorporated into this report
by reference.
As of June 30, 1995 there were 1,124 shareholder accounts. The Company's
stock is traded on the New York Stock Exchange. The market price of the
Company's common stock as of the close of business on September 1, 1995 was
$24.75 per share.
Pursuant to a shareholder rights plan (the "Rights Plan"), on June 17, 1988,
the Board of Directors declared a dividend distribution, payable to
shareholders of record on July 1, 1988, of one Preferred Stock Purchase Right
for each outstanding share of Common Stock. The Rights will expire 10 years
after issuance, and will be exercisable only if a person or group becomes the
beneficial owner of 20% or more (or 30% in the case of any person or group
which currently owns 20% or more of the shares or who shall become the
Beneficial Owner of 20% or more of the shares as a result of any transfer by
reason of the death of or by gift from any other person who is an Affiliate or
an Associate of such existing holder or by succeeding such a person as trustee
of a trust existing on the Record Date) of the Common Stock (such person or
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group, an "Acquiring Person") or commences a tender or exchange offer which
would result in the offeror beneficially owning 30% or more of the Common
Stock. A person who is not an Acquiring Person will not be deemed to have
become an Acquiring Person solely as a result of a reduction in the number of
shares of Common Stock outstanding due to a repurchase of Common Stock by the
Company until such person becomes beneficial owner of any additional shares of
Common Stock. Each Right will entitle shareholders to buy one newly issued
unit of one one-hundredth of a share of Series A Junior Preferred Stock at an
exercise price of $80, subject to certain antidilution adjustments. The
Company will generally be entitled to redeem the Rights at $.05 per Right at
any time prior to 10 business days after a public announcement of the
existence of an Acquiring Person.
(5)
If (i) a person or group accumulates more than 30% of the Common Stock (except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair to and otherwise in the best
interests of the Company and its shareholders and except solely due to a
reduction in the number of shares of Common Stock outstanding due to the
repurchase of Common Stock by the Company), (ii) a merger takes place with an
Acquiring Person where the Company is the surviving corporation and its Common
Stock is not changed or exchanged, (iii) an Acquiring Person engages in
certain self-dealing transactions, or (iv) during such time as there is an
Acquiring Person, an event occurs which results in such Acquiring Person's
ownership interest being increased by more than 1% (e.g., a reverse stock
split), each Right (other than Rights held by such Acquiring Person and
certain related parties which become void) will represent the right to
purchase, at the exercise price, Common Stock (or in certain circumstances, a
combination of securities and/or assets) having a value of twice the exercise
price. In addition, if following the public announcement of the existence of
an Acquiring Person the Company is acquired in a merger or other business
combination transaction, except a merger or other business combination
transaction that takes place after the consummation of an offer for all
outstanding shares of Common Stock that the independent directors have
determined to be fair, or a sale or transfer of 50% or more of the Company's
assets or earning power is made, each Right (unless previously voided) will
represent the right to purchase, at the exercise price, common stock of the
acquiring entity having a value of twice the exercise price at the time.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being
acquired. However, the Rights are not intended to prevent a take-over, but
rather are designed to enhance the ability of the Board of Directors to
negotiate with an acquiror on behalf of all of the shareholders. In addition,
the Rights should not interfere with a proxy contest.
The Rights should not interfere with any merger or other business combination
approved by the Board of Directors since the Rights may be redeemed by the
Company at $.05 per Right prior to 10 business days (as such period may be
extended) after the public announcement of the existence of an Acquiring
Person.
The press release announcing the declaration of the Rights dividend, dated
June 20, 1988, and a letter to the Company's shareholders, dated June 22,
1988, explaining the Rights, filed as Item 14(a)(3), Exhibits 4(a) and (b) of
Part IV of the Annual Report on Form 10-K for the year ended June 30, 1988 are
hereby incorporated by reference.
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Item 6. Selected Financial Data
The information set forth under the caption "Ten-Year Financial Summary" on
pages 40 and 41 of the Annual Report to Shareholders for the year ended June
30, 1995 is incorporated into this report by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth under the caption "Management's Discussion and
Analysis" on pages 19 through 21 of the Annual Report to Shareholders for the
year ended June 30, 1995 is incorporated into this report by reference.
(6)
Item 8. Financial Statements and Supplementary Data
The following Consolidated Financial Statements of Twin Disc, Incorporated and
Subsidiaries set forth on pages 22 through 39 of the Annual Report to
Shareholders for the year ended June 30, 1995 are incorporated into this
report by reference:
Consolidated Balance Sheets, June 30, 1995 and 1994
Consolidated Statements of Operations for the years ended June 30, 1995,
1994 and 1993
Consolidated Statements of Cash Flows for the years ended June 30, 1995,
1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity for the years
ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Accountants
The supplementary data regarding quarterly results of operations set forth
under the caption "Sales and Earnings by Quarter" on page 1 of the Annual
Report to Shareholders for the year ended June 30, 1995 is incorporated into
this report by reference.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
For information with respect to the executive officers of the Registrant, see
"Executive Officers of the Registrant" at the end of Part I of this report.
For information with respect to the Directors of the Registrant, see "Election
of Directors" on pages 5 through 7 of the Proxy Statement for the Annual
Meeting of Shareholders to be held October 20, 1995, which is incorporated
into this report by reference.
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Item 11. Executive Compensation
The information set forth under the captions "Compensation of Executive
Officers", "Stock Options" and "Compensation Pursuant to Plans" on pages 8
through 10 of the Proxy Statement for the Annual Meeting of Shareholders to be
held on October 20, 1995 is incorporated into this report by reference.
Discussion in the Proxy Statement under the captions "Board Executive
Selection and Salary Committee Report on Executive Compensation" and
"Corporate Performance Graph" is not incorporated by reference and shall not
be deemed "filed" as part of this report.
(7)
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security ownership of certain beneficial owners and management is set forth on
pages 3 and 4 of the Proxy Statement for the Annual Meeting of Shareholders to
be held on October 20, 1995 under the caption "Principal Shareholders and
Share Ownership of Directors and Executive Officers" and incorporated into
this report by reference.
There are no arrangements known to the Registrant, the operation of which may
at a subsequent date result in a change in control of the Registrant.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) The following Consolidated Financial Statements of Twin Disc,
Incorporated and Subsidiaries set forth on pages 22 through 39 of the Annual
Report to Shareholders for the year ended June 30, 1995 are incorporated by
reference into this report in Part II:
Consolidated Balance Sheets, June 30, 1995 and 1994
Consolidated Statements of Operations for the years ended June 30, 1995,
1994 and 1993
Consolidated Statements of Cash Flows for the years ended June 30, 1995,
1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity for the years
ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Accountants
The supplementary data regarding quarterly results of operations under the
caption "Sales and Earnings by Quarter" on page 1 of the Annual Report to
Shareholders for the year ended June 30, 1995 is incorporated by reference
into this report in Part II hereof.
Individual financial statements of the 50% or less owned entities accounted
for by the equity method are not required because such 50% or less owned
entities do not constitute significant subsidiaries.
(8)
9
(a)(2) Consolidated Financial Statement Schedule (numbered in accordance with
Regulation S-X) for the three years ended June 30, 1995:
Page
Report of Independent Accountants 13
Schedule II-Valuation and Qualifying Accounts 14
Schedules, other than those listed, are omitted for the reason that they are
inapplicable, are not required, or the information required is shown in the
financial statements or the related notes thereto.
The Report of the Independent Accountants of the Registrant with respect to
the above-listed consolidated financial statement schedule appears on page 13
of this report.
(a)(3) List of Exhibits: (numbered in accordance with Item 601 of Regulation
S-K)
2 Not applicable
3 a) Articles of Incorporation, as restated October 21, 1988
(Incorporated by reference to Exhibit 3(a) of the Company's
Form 10-K for the year ended June 30, 1989).
b) Corporate Bylaws, amended through June 16, 1995.
4 Instruments defining the rights of security holders, including
indentures
a) Form of Rights Agreement dated as of June 17, 1988 by and
between the Company and the First Wisconsin Trust Company,
as Rights Agent, with Form of Rights Certificate
(Incorporated by reference to Exhibits 1 and 2 of the
Company's Form 8-A dated June 27, 1988).
b) Announcement of Shareholder Rights Plan per press release
dated June 20, 1988 and explanation of plan per letter to
Company's shareholders dated June 20, 1988 (Incorporated by
reference to Exhibit 4(a) and (b), respectively, of the
Company's Form 10-K for the year ended June 30, 1988).
9 Not applicable
(9)
10
10 Material Contracts
a) * The 1988 Incentive Stock Option Plan (Incorporated by
reference to Exhibit B of the Proxy Statement for the Annual
Meeting of Shareholders held on October 21, 1988).
b) * The 1988 Non-Qualified Stock Option Plan for Officers, Key
Employees and Directors (Incorporated by reference to
Exhibit C of the Proxy Statement for the Annual Meeting of
Shareholders held on October 21,1988).
c) * Amendment to 1988 Incentive Stock Option Plan of Twin
Disc, Incorporated (Incorporated by reference to Exhibit A
of the Proxy Statement for the Annual Meeting of
Shareholders held on October 15, 1993).
d) * Amendment to 1988 Non-Qualified Incentive Stock Option
Plan for Officers, Key Employees and Directors of Twin Disc,
Incorporated (Incorporated by reference to Exhibit B of the
Proxy Statement for the Annual Meeting of Shareholders held
on October 15, 1993).
e) * Form of Severance Agreement for Senior Officers and form
of Severance Agreement for Other Officers (Incorporated by
reference to Exhibit 10(c) and (d), respectively, of the
Company's Form 10-K for the year ended June 30, 1989).
f) * Supplemental Retirement Plan (Incorporated by reference to
Exhibit 10(a) of the Company's Form 10-K for the year ended
June 30, 1986).
g) * Director Tenure and Retirement Policy (Incorporated by
reference to Exhibit 10(f) of the Company's Form 10-K for
the year ended June 30, 1993).
h) * Form of Twin Disc, Incorporated Corporate Short Term
Incentive Plan (Incorporated by reference to Exhibit 10(g)
of the Company's Form 10-K for the year ended June 30,
1993).
* Denotes management contract or compensatory plan or arrangement.
11 Not applicable
12 Not applicable
13 Annual Report of the Registrant for the year ended June 30, 1995
is separately filed as Exhibit (13) to this Report (except for
those portions of such Annual Report separately incorporated by
reference into this Report, such Annual Report is furnished for
the information of the Securities and Exchange Commission and
shall not be deemed "filed" as part of this report).
18 Not applicable
21 Subsidiaries of the registrant
22 Not applicable
23 Consent of Independent Accountants
(10)
11
24 Power of Attorney
27 Financial Data Schedule for the year ended June 30, 1995 is
separately filed as Exhibit (27) to this report. (This schedule
is furnished for the information of the Securities and Exchange
Commission and shall not be deemed "filed" for purposes of Section
11 of the Securities Act or Section 18 of the Exchange Act.)
28 Not applicable
99 Foreign Affiliate Separate Financial Statements
a) Niigata Converter Co., Ltd. financial statements for the
year ended March 31, 1995 prepared in accordance with
Japanese Commercial Code are separately filed as Exhibit
(99a) to this report. (This schedule is furnished for the
information of the Securities and Exchange Commission.)
b) Niigata Converter Co., Ltd. financial statements for the
year ended March 31, 1994 prepared in accordance with
Japanese Commercial Code are separately filed as Exhibit
(99b) to this report. (This schedule is furnished for the
information of the Securities and Exchange Commission.)
c) Niigata Converter Co., Ltd. financial statements for the
year ended March 31, 1993 prepared in accordance with
Japanese Commercial Code are separately filed as Exhibit
(99c) to this report. (This schedule is furnished for the
information of the Securities and Exchange Commission.)
d) Niigata Converter Co., Ltd. financial statements for the
year ended March 31, 1992 prepared in accordance with
Japanese Commercial Code are separately filed as Exhibit
(99d) to this report. (This schedule is furnished for the
information of the Securities and Exchange Commission.)
Copies of exhibits filed as a part of this Annual Report on Form 10-K may be
obtained by shareholders of record upon written request directed to the
Secretary, Twin Disc, Incorporated, 1328 Racine Street, Racine, Wisconsin
53403. (11)
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TWIN DISC, INCORPORATED
By FRED H. TIMM
--------------------------------------
Fred H. Timm, Corporate Controller and
Secretary (Chief Accounting Officer)
September 15, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By MICHAEL E. BATTEN
--------------------------------------
Michael E. Batten, Chairman,
Chief Executive Officer and Director
September 15, 1995 By MICHAEL H. JOYCE
--------------------------------------
Michael H. Joyce, President,
Chief Operating Officer and Director
By JAMES O. PARRISH
--------------------------------------
James O. Parrish, Vice President-
Finance, Treasurer and Director
(Chief Financial Officer)
William W. Goessel, Director
Jerome K. Green, Director
John L. Murray, Director
Paul J. Powers, Director
September 15, 1995 Richard T. Savage, Director
David L. Swift, Director
Stuart W. Tisdale, Director
David R. Zimmer, Director
By JAMES O. PARRISH
--------------------------------------
James O. Parrish, Attorney in Fact
(12)
13
REPORT OF INDEPENDENT ACCOUNTANTS
(See Item 14)
Consolidated Financial Statement Schedule of
Twin Disc, Incorporated and Subsidiaries
To the Shareholders
Twin Disc, Incorporated
Racine, Wisconsin
Our report on the consolidated financial statements of Twin Disc, Incorporated
and Subsidiaries has been incorporated by reference in this Form 10-K from
page 39 of the 1995 annual report to shareholders of Twin Disc, Incorporated
and Subsidiaries. In connection with our audits of such financial statements,
we have also audited the related financial statement schedule listed in the
index on page 9 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L. L. P.
Milwaukee, Wisconsin
July 28, 1995
(13)
14
TWIN DISC, INCORPORATED AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended June 30, 1995, 1994 and 1993
(In thousands)
Additions
Balance at Charged to Balance
Beginning Costs and at end of
Description of Period Expenses Deductions Period
- ----------------------- ----------- ----------- -------------- ---------
1995:
Allowance for losses on
accounts receivable $ 441 $ 54 $ 87 $ 408
Reserve for inventory
obsolescence 1,586 886 891 1,581
1994:
Allowance for losses on
accounts receivable $ 416 $ 264 $ 239 $ 441
Reserve for inventory
obsolescence - 2,094 508 1,586
1993:
Allowance for losses on
accounts receivable $ 585 $ 20 $ 189 $ 416
Reserve for inventory
obsolescence 286 622 908 -
Accounts receivable written-off and inventory disposed of during the
year and other adjustments.
(14)
15
EXHIBIT INDEX
Exhibit Description Page
3a) Articles of Incorporation, as restated October 21, 1988
(Incorporated by reference to Exhibit 3(a) of the Company's
Form 10-K for the year ended June 30, 1989). -
b) Corporate Bylaws, amended through June 16, 1995. 17
4a) Form of Rights Agreement dated as of June 17, 1988 by and
between the Company and the First Wisconsin Trust Company,
as Rights Agent, with Form of Rights Certificate
(Incorporated by reference to Exhibits 1 and 2 of the
Company's Form 8-A dated June 27, 1988). -
b) Announcement of Shareholder Rights Plan per press release
dated June 20, 1988 and explanation of plan per letter to
Company's shareholders dated June 20, 1988 (Incorporated by
reference to Exhibit 4(a) and (b), respectively, of the
Company's Form 10-K for the year ended June 30, 1988). -
Material Contracts
10a) * The 1988 Incentive Stock Option Plan (Incorporated by
reference to Exhibit B of the Proxy Statement for the Annual
Meeting of Shareholders held on October 21, 1988). -
b) * The 1988 Non-Qualified Stock Option Plan for Officers, Key
Employees and Directors (Incorporated by reference to
Exhibit C of the Proxy Statement for the Annual Meeting of
Shareholders held on October 21,1988). -
c) * Amendment to 1988 Incentive Stock Option Plan of Twin Disc,
Incorporated (Incorporated by reference to Exhibit A of the
Proxy Statement for the Annual Meeting of Shareholders held
on October 15, 1993). -
d) * Amendment to 1988 Non-Qualified Incentive Stock Option Plan
for Officers, Key Employees and Directors of Twin Disc,
Incorporated (Incorporated by reference to Exhibit B of the
Proxy Statement for the Annual Meeting of Shareholders held
on October 15, 1993). -
e) * Form of Severance Agreement for Senior Officers and form of
Severance Agreement for Other Officers (Incorporated by
reference to Exhibit 10(c) and (d), respectively, of the
Company's Form 10-K for the year ended June 30, 1989). -
f) * Supplemental Retirement Plan (Incorporated by reference to
Exhibit 10(a) of the Company's Form 10-K for the year ended
June 30, 1986). -
g) * Director Tenure and Retirement Policy (Incorporated by
reference to Exhibit 10(f) of the Company's Form 10-K for the
year ended June 30, 1993). -
16
h) * Form of Twin Disc, Incorporated Corporate Short Term
Incentive Plan (Incorporated by reference to Exhibit 10(g) of
the Company's Form 10-K for the year ended June 30, 1993). -
(15)
13 Annual Report of the Registrant for the year ended June 30,
1995 31
21 Subsidiaries of the registrant 63
23 Consent of Independent Accountants 64
24 Power of Attorney 65
27 Financial Data Schedule for the year ended June 30, 1995 66
99a) Niigata Converter Co., Ltd. financial statements for the year
ended March 31, 1995 prepared in accordance with Japanese
Commercial Code. 67
b) Niigata Converter Co., Ltd. financial statements for the year
ended March 31, 1994 prepared in accordance with Japanese
Commercial Code. 73
c) Niigata Converter Co., Ltd. financial statements for the year
ended March 31, 1993 prepared in accordance with Japanese
Commercial Code. 79
d) Niigata Converter Co., Ltd. financial statements for the year
ended March 31, 1992 prepared in accordance with Japanese
Commercial Code. 85
(16)
17
EXHIBIT 3(b)
---------------
RESTATED BYLAWS
OF
TWIN DISC, INCORPORATED
ARTICLE I. OFFICE
------------------
The principal office of the Corporation in the State of Wisconsin shall
be located in the City of Racine, Racine County. The Corporation may have
such other offices, either within or without the State of Wisconsin, as the
Board of Directors may designate or as the business of the Corporation may
require.
The registered office of the Corporation required by the Wisconsin
Business Corporation Law to be maintained in the State of Wisconsin may be,
but need not be, identical with the principal office in the State of
Wisconsin, and the address of the registered office may be changed from time
to time by the Board of Directors.
ARTICLE II. SHAREHOLDERS
-------------------------
(1) ANNUAL MEETING. The Annual Meeting of the Shareholders, for the
purpose of electing directors and for the transaction of such other business
as may come before the meeting, shall be held during the months of September
or October in each year at such place, on such date and at such time as the
Board of Directors may designate, written notice of the place, date and time
of such meeting to be given each Shareholder not less than ten (10) days nor
more than sixty (60) days prior to the date of the meeting. If the place,
date and time of the Annual Shareholders Meeting for any year shall not have
been designated by the Board of Directors at least thirty (30) days prior to
the first day of September of such year, then the Annual Meeting of the
Shareholders shall be held at the registered office of the Corporation on the
third Friday of October in such year at 2 o'clock p.m., if not a legal
holiday, but if a legal holiday, then on the next business day following.
(2) SPECIAL MEETINGS. Special Meetings of the Shareholders may be
called by the Chairman and Chief Executive Officer, the President and Chief
Operating Officer or the Secretary, and shall be called by the President and
Chief Operating Officer or Secretary at the request in writing of a majority
of the Board of Directors, or at the request of Shareholders owning not less
than twenty-five percent (25%) of the outstanding shares of stock of the
Corporation entitled to vote at the meeting. Any such request shall state the
purpose, or purposes, of the proposed meeting. At any Special Meeting, the
order of business thereat shall be determined by the Chairman and Chief
Executive Officer, the President and Chief Operating Officer of the Company.
(3) PLACE OF MEETING. The Board of Directors may designate any place,
either within or without the State of Wisconsin, as the place of meeting for
any Annual Meeting, or for any Special Meeting called by the Board of
Directors. If no designation is made, or if a Special Meeting be otherwise
called, the place of the meeting shall be the registered office of the
Corporation, but any meeting may be adjourned to reconvene at any place
designated by a vote of a majority of the shares represented at such meeting.
(4) NOTICE OF MEETING. Written notice stating the place, date and time
of the meeting, and in case of a Special Meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) days
nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman and Chief
Executive Officer, President and Chief Operating Officer, Secretary, the Board
of Directors, or other person or persons calling the meeting, to each
Shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail, addressed, to the Shareholder at his address as it appears on the stock
record book or similar records of the Corporation, with postage thereon
prepaid. Notice of any meeting of the Shareholders shall clearly state that
proxy appointments will be ruled invalid unless received by the Secretary
before the deadlines prescribed in these By-Laws.
(5) RECORD DATE. The Board of Directors may fix in advance a record
date to determine the Shareholders entitled to notice of a Shareholders
meeting, which record date shall be not more than seventy (70) nor less than
five (5) days prior to the meeting or action requiring a determination of the
Shareholders. A determination of the Shareholders entitled to notice of or to
vote at a Shareholders' meeting is effective for any adjournment of the
meeting unless the Board of Directors fixes a new date, which it shall be
required to do only if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
(6) SHAREHOLDERS LIST. After fixing a record date for a Shareholders
meeting, the Secretary shall prepare a list of names of all its Shareholders
who are entitled to notice of the Shareholders meeting. The Secretary shall
make the list available for inspection by any Shareholder, beginning two (2)
days after notice of the meeting is given for which the list was prepared, at
the Corporation's principal place of business, or at a place designated in the
meeting notice. During the period specified in this By-Law, a Shareholder or
such Shareholder's agent may inspect the list during regular business hours on
written notice to the Secretary stating the date upon which the inspection is
requested to take place, which date shall be not less than five (5) days from
the date the request is made. The Corporation shall make the list available
at the meeting, and any Shareholder or his agent may inspect the list at any
time during the meeting or any adjournment thereof. Refusal or failure to
prepare or make available the Shareholders' list pursuant to this Bylaw shall
not affect the validity of any action taken at the meeting.
(7) QUORUM. Except as otherwise provided by law, these By-laws or the
Articles of Organization, a majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders, and a majority of votes cast
at any meeting at which a quorum is present shall be decisive of any motion or
election, unless a greater number is required by law, by these By-laws or by
the Articles of Organization. The meeting may be adjourned from time to time
by a majority of the votes cast. The Secretary must give proper notice of the
time, date, or place unless the new time, date, or place is announced at the
meeting. Once a share is represented for any purpose at a meeting other than
for the purpose of objecting to the holding of the meeting or the transaction
of business at the meeting, such share is considered present for the purpose
of determining whether a quorum exists for any adjournment of that meeting,
unless a new record date is set for that adjourned meeting.
(8) PROXIES. At any meetings of the Shareholders, any Shareholder is
entitled to vote by proxy. A Shareholder may appoint a person to vote or
otherwise act for him by signing an appointment form, either personally or by
19
his authorized agent. Such a proxy appointment form shall be delivered to
the Secretary of the Corporation in person, by mail or by messenger, not less
than forty-eight (48) hours prior to the date of any Shareholder meeting. No
proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided conspicuously on the face of the appointment form.
Appointment forms or revocations transmitted by facsimile, telex, telegram, or
electronic means shall not be accepted.
(8.25) Revoking Proxies. A Shareholder may revoke a proxy appointment
form signed by him by:
(a) openly stating the revocation at the Shareholders meeting;
(b) voting at the Shareholders meeting in person;
(c) submitting a proxy appointment form bearing a later date to
the corporate Secretary pursuant to the provisions of these Bylaws; or
(d) delivering a signed written statement revoking the proxy to
the corporate Secretary prior to the date of the meeting.
(8.50) Proxy Validation. Any valid proxy appointment form must meet
the following standards:
(a) The proxy appointment form must be delivered to the Secretary
of the Corporation pursuant to the provisions of these Bylaws;
(b) The appointment form shall bear a signature in handwriting
sufficiently legible to allow the inspector to distinguish it as representing
the name of a registered Shareholder, or be accompanied by a rubber stamp
facsimile or hand-printed name, including the Shareholder's surname, and
either the Shareholder's first or middle name as represented on the corporate
records, and any titles, offices or words indicating agency which appear in
the corporate records;
(c) If the name appearing on the appointment form does not
correspond with the Shareholder's name in the corporate records, the signature
on the appointment form must then include some indication of the signator's
agency, office or authority allowing them to represent these Shareholder in
this particular matter;
(d) If the Shareholder is an entity, the person signing the form
must demonstrate their authority as officer or agent;
(e) If the person signing the appointment form purports to be a
personal representative, administrator, executor, guardian or conservator, the
person signing the form must demonstrate their authority to represent the
Shareholder in this matter; or
(f) If two or more persons are Shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners, the person signing the form must demonstrate their authority to
act on behalf of the other co-owners(s).
The inspector shall in good faith, considering the facts and
circumstances, determine whether each proxy appointment satisfies these
standards. In making his determination the inspector shall be entitled to
rely upon the genuineness of all signatures and purported authority of persons
designated as officers, agents, representatives or co-owners. The inspector's
20
determination shall be final.
(9) VOTING. Each outstanding share entitled to vote shall be entitled
to one (1) vote upon each matter submitted to a vote at a meeting of
Shareholders. Upon demand of any Shareholder, the vote for Directors shall be
by ballot.
(10) VOTING OF SHARES BY CERTAIN SHAREHOLDERS. Shares standing in the
name of another Corporation may be voted either in person or by proxy, by the
President of such Corporation or any other officer appointed by such
President. Shares held by an administrator, executor, guardian, conservator,
trustee in bankruptcy, receiver, or assignee for creditors may be voted by
him, either in person or by proxy, without a transfer of such shares into his
name. Shares standing in the name of a fiduciary may be voted by him, either
in person or by proxy. A Shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter, the pledgee shall be entitled to vote the
shares so transferred.
Shares of its own stock belonging to the Corporation shall not be voted,
directly or indirectly at any meeting, and shall not be counted in determining
the total number of outstanding shares entitled to vote at any given time, but
shares of its own stock held by it in a fiduciary capacity may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
(11) INSPECTORS OF ELECTION. Prior to the meeting, the Board of
Directors may appoint no fewer than one (1) but no more than seven (7)
inspectors to serve at any meeting of the Shareholders. The inspectors may be
selected from among the employees of the Corporation or any individuals not
affiliated with the Corporation. The inspectors shall determine the number of
shares outstanding and the voting power of each share, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxy appointments. The inspectors shall also receive votes,
ballots and consents, hear and determine challenges and questions in
connection with the right to vote, decide all questions relating to the
qualifications of voters and the validity of proxy appointments pursuant to
the provisions of these Bylaws, count and tabulate all votes, ballots or
consents, and do such acts as are proper to conduct the election with fairness
to all Shareholders. In the event the Board of Directors does not appoint any
inspector, the Secretary of the Corporation shall perform any duties and
exercise any authority provided to the inspector under these By-Laws.
(11.5) Procedures at the Shareholder Meeting. The Chairman of the
meeting shall follow the order of business prepared by the Secretary of the
Corporation pursuant to the provisions of these By-laws. The Chairman of the
meeting may rule out of order any motion from the floor to consider a matter
not appearing on the agenda. All matters on the agenda may be combined on a
single ballot, and in the case of an election for the Board of Directors, all
names of those candidates properly nominated under these By-laws may appear
together on a single ballot. The Chairman shall announce the outcome
following each vote, however the final count may be completed after the
meeting provided the inspectors of the election sign a supplemental
certification of election specifying the final count. The inspectors shall
determine that each individual admitted to the meeting is a Shareholder on or
prior to the record date, and no other individual shall participate in or
21
observe the meeting, otherwise than by direction of the Chairman. The Board
of Directors may provide for security to maintain reasonable decorum and
ensure the safety of the participants.
The Chairman of the meeting is responsible for enforcing the rules of
procedure on the floor of the meeting. Statements by Shareholders may not
exceed two (2) minutes, or three (3) minutes in the case of the proponent's
initial remarks on a matter before the Shareholders. The Chairman of the
meeting may rule out of order any statement that exceeds the allotted time,
goes beyond the matter before the Shareholders, repeats earlier statements at
the meeting, or relates to subject matters beyond the general interest of the
Shareholders. The Chairman of the meeting shall have the power to rule on any
other points of order and his decision shall be final.
(12) WAIVER OF NOTICE BY SHAREHOLDERS. Whenever any notice whatever is
required to be given to any Shareholder of the Corporation under the Articles
of Incorporation or By-laws or any provision of law, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by
the Shareholder entitled to such notice, shall be deemed equivalent to the
giving of such notice, provided that such waiver in respect to any matter of
which notice is required under any provision of Wisconsin law, shall contain
the same information as would have been required to be included in such
notice, except the time and place of meeting.
(13) INFORMAL ACTION BY SHAREHOLDERS. Any action required or permitted
by the Articles of Incorporation or By-laws or any provision of law to be
taken at a meeting of the Shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken shall be signed by all
of the Shareholders entitled to vote with respect to the subject matter
thereof.
ARTICLE III. BOARD OF DIRECTORS
--------------------------------
(1) GENERAL POWERS. The business and affairs of the Corporation shall
be managed by its Board of Directors.
(2) SPECIFIC POWERS. Without prejudice to such general powers and
subject to the laws of Wisconsin and the Articles of Organization, it is
hereby expressly declared that the Directors shall have the following powers,
to-wit: to adopt and alter a common seal of the Corporation; to make and
change regulations not inconsistent with these By-Laws, for the management of
the Corporation's business and affairs; to purchase or otherwise acquire for
the Corporation any property, rights or privileges which the Corporation is
authorized to acquire; to pay for any property purchased for the Corporation
either wholly or partly in money, stock, bonds, debentures or other securities
of the Corporation; to borrow money and to make and issue notes, bonds, and
other negotiable and transferable instruments, mortgages, necessary to
effectuate the same; to appoint and remove or suspend such subordinate
officers, agents or factors as they may deem necessary and to determine their
duties, and fix and from time to time change their salaries or renumeration,
and to require security as and when they think fit; to confer upon any officer
of the company the power to appoint, remove and suspend subordinate officers,
agents and factors; to determine who shall be authorized on the Corporation's
behalf to make and sign bills, notes, acceptances, endorsements, checks,
releases, contracts and other instruments.
(3) NUMBER, TENURE, RESIGNATION AND QUALIFICATIONS. The number of
directors of the Corporation shall be eleven (11). Directors need not be
22
residents of the State of Wisconsin nor Shareholders of the Corporation.
The Board of Directors shall be divided into three classes, consisting of
three, three and five Directors. The term of office of each Director elected
for a full term shall be the period of three years to expire at the Annual
Meeting of Shareholders three years after the date of his election. The
number of Directors to be elected at such meeting shall be equal to the number
whose term expires at the time of such meeting. Each Director shall hold
office for the term for which he is elected and until the next Annual Meeting
of Shareholders at which his successor shall be elected, or until his death,
or until he shall resign or shall have been removed in a manner provided in
these By-Laws.
(4) REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this By-Law immediately after and at
the same place as the Annual Meeting of Shareholders and each adjournment
thereof. The Board of Directors may provide by resolution the time and place,
either within or without the State of Wisconsin, for the holding of additional
regular meetings without other notice to Directors than such resolution.
(5) SPECIAL MEETINGS. Special Meetings of the Board of Directors may
be called by or at the request of the Chairman, President, Secretary, or any
five (5) Directors. Special Meetings of the Board of Directors shall be held
at such place, either within or without the State of Wisconsin, as the
majority of the members of the Board of Directors may from time to time
appoint.
(6) NOTICE. Notice of any Special Meeting shall be given at least
forty-eight (48) hours previously thereto by written notice, delivered
personally or mailed to each Director at his business address, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Whenever any notice whatever
is required to be given to any Director of the Corporation under the Articles
of Incorporation or By-Laws, or any provision of law, a waiver thereof in
writing, signed at any time whether before or after the time of meeting, by
the Director entitled to such notice, shall be deemed equivalent to the giving
of such notice. The attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting, except where a Director attends a meeting
and objects thereat to the transaction of any business because the meeting is
not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or Special Meeting of the Board of Directors
need to be specified in the notice or waiver of notice of such meeting.
(7) QUORUM. Except as otherwise provided by law or by these By-Laws, a
majority of the number of Directors fixed by Section (3) of this Article III
shall constitute a quorum for the transaction of business at any meeting of
the Board of Directors, but a majority of the Directors present (though less
than such quorum) may adjourn the meeting from time to time without further
notice.
(8) MANNER OF ACTING. The act of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law by the
Articles of Organization or by these By-Laws.
(8.5) Conducting Meetings. Any or all directors may participate in or
conduct a regular or Special Meeting of the Board of Directors through the use
23
of any means of communication by which all participating directors may
simultaneously hear each other during the meeting, and all communication
during the meeting is immediately transmitted to each participating director
and each participating director is able to send immediately messages to all
participating directors. If any means of communication as described above is
to be utilized at a meeting of the Board of Directors, all participating
directors must be informed that a meeting is taking place at which official
business may be transacted.
(9) VACANCIES. Any vacancy in the Board of Directors, including a
vacancy created by an increase in the number of Directors, may be filled until
the next succeeding annual election by the affirmative vote of a majority of
the Directors then in office, though less than a quorum of the Board of
Directors. In the event of removal of one or more Directors as provided by
these By-Laws, a new Director or Directors to fill such vacancy or vacancies,
as the case may be, may be elected at the same meeting of Shareholders at
which such action of removal is taken.
(10) COMPENSATION. The Board of Directors, by affirmative vote of a
majority of the Directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
Directors for services to the Corporation as Directors, officers or otherwise.
The Board of Directors also shall have authority to provide for reasonable
pensions, disability or death benefits, and other benefits or payments, to
Directors, officers and employees and to their estates, families, dependents
or beneficiaries on account of prior services rendered by such Directors,
officers and employees to the Corporation. Each Director shall also be
reimbursed for his necessary expenses in connection with attending meetings of
the Board of Directors.
(11) PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.
(12) INFORMAL ACTION BY DIRECTORS. Any action required or permitted by
the Articles of Incorporation, By-Laws, or other provision of law, which might
be taken at a meeting of the Board of Directors may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the Directors.
(12.5) Emergency By-Laws. In the event of an emergency, which, for
purposes of this By-Law, is defined as a catastrophic event including but
without limitation to, a fire, plane crash, tornado, flood, or snow storm,
preventing a quorum of the Board of Directors from being assembled, the
following emergency By-Law provisions shall become and remain effective until
such time as it is practicable for a normally constituted Board of Directors
to resume management of the business of the Corporation.
(a) Those members of the Board of Directors who are available
during the emergency shall continue to manage the business of the Corporation.
A director is unavailable under this By-Law if such director is unable to
receive notice of a Board of Directors meeting as provided in Article III,
Section (6) of the By-Laws, or having received notice is by reason of the
24
emergency unable to participate in the meeting so noticed.
(b) Three (3) directors shall constitute a quorum of the Board of
Directors during an emergency. If the number of available directors should
drop below three (3), additional directors may be appointed by the remaining
directors from the officers or employees of the Corporation. Not more than
three (3) directors shall be appointed under this provision.
(c) Meetings during an emergency may be called by any available
director, using any reasonable means of communication in an effort to contact
or give notice to each remaining director.
(d) During an emergency, any director may participate in or
conduct a meeting of the Board of Directors through any available means of
communication which allows all directors participating to simultaneously hear
each other, and such communication is immediately transmitted to each
director.
(e) The provisions of the Corporation's regular By-laws shall
remain effective during the emergency period except to the extent inconsistent
therewith.
(f) The emergency By-laws shall no longer be effective after the
emergency ceases and the term of any Director appointed to serve during such
emergency shall end.
(13) RESIGNATION AND REMOVAL FOR CAUSE. Any Director, member of a
committee or other officer may resign at any time. Such resignation shall be
made in writing, and shall take effect at the time specified therein, and if
no time be specified, at the time of its receipt by the President or
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
A Director may be removed from office during the term of such office but
only upon a showing of good cause, such removal to be by affirmative vote of a
majority of the outstanding shares entitled to vote for the election of such
Director and which action may only be taken at a Special Meeting of
stockholders called for that purpose.
A Special Meeting of the stockholders as herein referred to may only be
held after a hearing on the matter of cause claimed to exist has been held by
the full Board of Directors of the company at which hearing the Director or
Directors proposed for removal shall be given an adequate opportunity for
preparation and attendance in person (together with representation by
counsel); provided, however, that such hearing shall be held only after
written notice has been given to said Director or Directors proposed for
removal specifying the matters of cause claimed to exist. The conclusions of
said hearing shall be reported by the Board of Directors in writing
accompanying the notice of the special stockholders' meeting sent to each
stockholder eligible to vote at said Special Meeting.
(14) DIRECTORS EMERITUS. The Board of Directors may from time to time
name Directors Emeritus of the Board of Directors of the Corporation who shall
be entitled to receive notice of all meetings of the Board and to attend
thereat, provided that they shall not be entitled to a vote upon any
proposition to be voted by said Board of Directors. Director Emeritus shall
serve at the pleasure of the Board.
25
ARTICLE IV. OFFICERS
---------------------
(1) NUMBER AND QUALIFICATION. The principal officers of the
Corporation shall be a Chairman and Chief Executive Officer, at the option of
the Board, a President and Chief Operating Officer, an Executive Vice
President, one or more other Vice Presidents as the Board may choose to
select, a Secretary, a Treasurer, and at the option of the Board, a President
of North American Operations. The Chairman and Chief Executive Officer and
the President and Chief Operating Officer shall be selected from among the
membership of the Board of Directors and shall hold office until their
successors are elected and qualified notwithstanding any earlier termination
of their office as director, other than their removal for cause. Such other
officers and assistant officers that may be deemed necessary may be elected or
appointed by the Board and any two or more offices may be held by the same
person except the offices of President and Chief Operating Officer and Vice
President.
(2) ELECTION AND TERM OF OFFICE. The officers of the Corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each
Annual Meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected, or until his death, or until he shall resign, or shall
have been removed in a manner hereinafter provided.
(3) REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever, in its judgment,
the best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment shall not of itself create contract rights.
The Chairman and Chief Executive Officer or President and Chief Operating
Officer may suspend any officer until the next Board meeting.
(4) VACANCIES. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
(5) CHAIRMAN AND CHIEF EXECUTIVE OFFICER. The Chairman and Chief
Executive Officer shall preside at all meetings of the Board of Directors, and
shall have the general powers and duties of supervision and management of the
business of the Corporation, its officers and agents. He shall have authority
to sign certificates for shares of the Corporation as provided in ARTICLE VII
hereof. He shall have authority, subject to such agents and employees of the
Corporation as he shall deem necessary, to prescribe their powers, duties and
compensation and to delegate authority to them. Such agents and employees
shall hold office at the discretion of the Chairman and Chief Executive
Officer. In his capacity as Chairman and Chief Executive Officer, he shall
also appoint all Board committees and their chairmen and he shall have such
other power and duties as may from time to time be prescribed by the Board of
Directors.
(6) PRESIDENT AND CHIEF OPERATING OFFICER. The President and Chief
Operating Officer shall, in general, supervise, direct and control the
operations and business of the Corporation subject to the supervision and
direction of the Chairman and Chief Executive Officer and the Board of
Directors and the provisions of these By-Laws. The President and Chief
Operating Officer shall also, subject to such rules as may be prescribed by
26
these By-laws, the Chariman and Chief Executive Officer, or the Board of
Directors, have the authority to sign, execute and acknowledge on behalf of
the Corporation all deeds, mortgages, contracts, leases, reports and all other
documents or instruments necessary or proper to be executed in the course of
the Corporation's regular business, including certificates for shares of the
Corporation. In the absence of the Chairman and Chief Executive Officer, he
shall preside at all meetings of the Shareholders and Board of Directors.
(7) VICE PRESIDENTS. In the absence of the President and Chief
Operating Officer, or in the event of his death, inability or refusal to act,
the Executive Vice President or in his absence the Vice President-Finance (or
should neither be available then the other Vice Presidents in the order
designated at the time of their election or in the absence of any designation,
then in the order of their election) shall perform the duties of the President
and Chief Operating Officer, and when so acting shall have all the powers of
and be subject to all the restrictions upon the President and Chief Operating
Officer. Any Vice President may sign, with the Chairman and Chief Executive
Officer and with the Secretary or Assistant Secretary, certificates for shares
of the Corporation; and shall perform such other duties and have such
authority as from time to time may be assigned to him by the Chairman and
Chief Executive Officer or President and Chief Operating Officer or by the
Board of Directors. Any Vice President is authorized to affix the seal of the
Corporation to any document which requires the same.
(8) SECRETARY. The Secretary shall: (a) keep the minutes of the
Shareholders' and of the Board of Directors' Meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents which require the
same, the execution of which on behalf of the Corporation under its seal is
duly authorized by another officer hereunder or by the Board of Directors; (d)
keep a register of the post office addresses of each Shareholder which shall
be furnished to the Secretary by such Shareholders; (e) sign with the Chairman
and with the President or a Vice President certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the Corporation; and (g) in general, perform all duties incident to the office
of Secretary and have such other duties, and exercise such authority as from
time to time may be delegated or assigned to him by the Chairman and Chief
Executive Officer or President and Chief Operating Officer or by the Board of
Directors.
(9) TREASURER. The Treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the Corporation; receive and
give receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article VI of these By-Laws; and (b) in
general, perform all of the duties incident to the office of Treasurer and
have such other duties and exercise such other authority as from time to time
may be delegated or assigned to him by the Chairman or President or by the
Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and
with such surety or sureties as the Board of Directors shall determine. The
Treasurer is authorized to affix the seal of the Corporation to any document
which requires the same.
(10) ASSISTANT AND ACTING OFFICERS. The Board of Directors shall have
27
the power to appoint any person to act as assistant to any officers when
deemed desirable, or to perform the duties of such officer whenever for any
reason it is impractical for such officer to act personally, and such
assistant or acting officer so appointed by the Board of Directors shall have
the power to perform all the duties of the office to which he is so appointed
to be assistant, or as to which he is so appointed to act, except as such
power may be otherwise defined, conditioned or restricted by the Board of
Directors.
(11) SALARIES. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from
receiving such salary by the reason of the fact that he is also a Director of
the Corporation.
ARTICLE V.
----------
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
----------------------------------------------------
To the fullest extent allowed by law, this Corporation shall indemnify
its directors and officers against expenses (including attorney's fees, court
costs, and disbursements) and liabilities (including ERISA excise taxes,
judgments, fines and amounts paid in settlement) incurred in connection with
any actual or threatened action, suit or proceeding to which such person is
made or threatened to be made a party by reason of being, or having been, a
director or officer or, upon written request of the Corporation pursuant to a
resolution of its Board of Directors, serving or having served any other
entity, including any benefit plan of the Corporation.
Prior to the final disposition of an action, the Corporation may advance
expenses for the defense thereof, provided it has received adequate assurances
of repayment if it is ultimately determined that the individual is not
entitled to repayment.
The Corporation shall have the power and authority to purchase and
maintain insurance on behalf of any person who is or was a director, officer
or employee of the Corporation or is or was serving at the request of the
Corporation in such capacity in any other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out
of his status as such whether or not the Corporation itself would have the
28
power to indemnify him against such liability under the remaining provisions
of this By-Law.
Indemnification pursuant to this By-Law shall not be exclusive and shall
be in addition to that granted from time to time by operation of law,
agreement, or vote of the Corporation's directors or Shareholders. With
respect to liabilities and/or expenses arising from or incurred in connection
with an individual serving, at the Corporation's request, any other entity,
indemnification by the Corporation shall be deemed to be excess and any
indemnification or insurance provided by such other entity shall be deemed to
be primary.
ARTICLE VI.
-----------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
(1) CONTRACTS. To the extent not otherwise authorized by these By-
28
Laws, the Board of Directors may authorize any officer or officers, or agent
or agents, or the Corporation to enter into any contract or execute and
deliver any instrument in the names of and on behalf of the Corporation, and
such authorization may be general or confined to specific instances.
(2) LOANS. No loans shall be contracted on behalf of the Corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by or under the authority of a resolution of the Board of Directors. Such
authorization may be general or confined to specific instances.
(3) CHECKS, DRAFTS, AND OTHER EVIDENCES OF INDEBTEDNESS. All checks,
drafts, or other orders for the payment of money issued in the name of the
Company shall be signed by such employee or employees, agent or agents, of the
Company as are appointed by the President, and in such manner, including
facsimile and printed signatures, as may be designed by the President. In
connection with the furnishing of authorizing resolution and signature card
forms needed by commercial banks, the Corporate Secretary, or any Assistant
Secretary, is authorized to execute and certify to such forms as he may deem
appropriate as adopted under the authority of this By-Law and as binding upon
the Company in acceptance therewith, thereby empowering employees or agents
appointed by the President to sign checks, drafts, or other orders for the
payment of money in the name of the Company.
(4) DEPOSITS. All funds of the Corporation, not otherwise employed,
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as may be selected by or under
the authority of the Board of Directors.
ARTICLE VII.
------------
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
(1) CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as shall be determined by the Board of
Directors. Such Certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and may be signed by
the Chairman of the Board and may be sealed with the seal of the Corporation
or a facsimile thereof. Signatures of the Chairman of the Board, the
President, the Vice President, the Secretary or Assistant Secretary on a
certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation or an
employee of the Corporation. In the event any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, such certificate may be
issued by the Corporation with the same effect as if such person were such
officer at the date of issue of such certificate. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address
of the person to whom the shares represented thereby are issued, with the
number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
(2) TRANSFER OF SHARES. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation by the holder of
29
record thereof or by his legal representative, who shall if so required
furnish proper evidence of incumbency or appointment and of authority to
transfer, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name
shares stand on the books of the Corporation is to be the owner thereof for
all purposes.
(3) LOST CERTIFICATES. A new certificate of stock may be issued in the
place of any certificate theretofore issued by the Corporation, alleged to
have been lost or destroyed, and the Board of Directors may, in their
discretion, require the owner of the lost or destroyed certificate or his
legal representatives to give the Corporation a bond, in such sum as they may
direct, not exceeding double the value of the stock evidenced by such
certificate, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss of any such certificate, or the
issuance of any such new certificate.
(4) STOCK REGULATIONS. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Wisconsin as they may deem expedient concerning
the issue, transfer and registration of certificates representing shares of
the Corporation.
ARTICLE VIII. FISCAL YEAR
--------------------------
The fiscal year of the Corporation shall begin on the 1st day of July in
each year and shall end on the 30th day of June in the following year.
ARTICLE IX. DIVIDENDS
----------------------
The Board of Directors may from time to time declare, and the Corporation
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law. Before declaring any dividends, there may be set
apart out of any funds of the Corporation available for dividends, such sum or
sums as the Board of Directors from time to time in their discretion deem
proper for working capital or as a reserve fund to meet contingencies or for
equalizing dividends, or for such other purposes as the Board of Directors
shall deem conducive to the best interest of the Corporation.
ARTICLE X. SEAL
----------------
The corporate seal shall be a round metallic disk with the words "TWIN
DISC, INCORPORATED, Racine, Wisconsin" around the circumference, and the words
"Corporate Seal" in the center. If a facsimile or printed seal is used on
stock certificates, it shall be similar in content and design to the above.
ARTICLE XI. AMENDMENTS
-----------------------
These By-laws may be amended, repealed or altered in whole or in part by
the affirmative vote of not less than two-thirds (2/3rds) of the shares of the
company entitled to vote thereon or by the affirmative vote of not less than
two-thirds (2/3rds) of the full Board of Directors of the Company at any
regular meeting of the Shareholders or Board of Directors, or at any Special
Meeting of the Shareholders or Board of Directors provided that such action
30
has been specified in the notice of any such Special Meeting.
31
EXHIBIT 13
FINANCIAL HIGHLIGHTS
1995 1994 1993
Net Sales $164,232 $141,193 $139,403
Earnings Before Accounting Changes 5,672 4,389 2,662
Earnings Per Share Before Accounting
Changes 2.03 1.57 .95
Dividends Per Share .70 .70 .70
Average Shares Outstanding For The Year 2,790,111 2,799,390 2,799,603
Sales and Earnings by Quarter
1995 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year
Net Sales $31,600 $41,102 $42,946 $48,584 $164,232
Gross Profit 6,444 9,246 9,502 11,154 36,346
Net Earnings 183 1,384 1,405 2,700 5,672
Net Earnings Per Share .07 .49 .50 .97 2.03
Dividends Per Share .175 .175 .175 .175 .70
Stock Price Range:
High 24 1/4 23 5/8 21 1/4 25 25
Low 19 3/8 17 18 3/8 21 3/8 17
Sales and Earnings by Quarter
1994 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year
Net Sales $30,355 $35,667 $34,147 $41,024 $141,193
Gross Profit 4,476 7,064 7,503 8,746 27,789
Net Earnings(Loss) (223) 763 942 2,907 4,389
Net Earnings(Loss)
Per Share (.08) .27 .34 1.04 1.57
Dividends Per Share .175 .175 .175 .175 .70
Stock Price Range:
High 20 1/8 20 1/8 21 1/4 20 1/2 21 1/4
Low 16 7/8 19 18 3/4 19 1/8 16 7/8
The 1993 Earnings are from operations and are stated before the cumulative
effect of adopting SFAS 106 and 109. The net cumulative effect of adopting
those standards was a charge of $14.44 million, or $5.16 per share.
Based on average shares outstanding for the period.
In thousands of dollars except per share and stock price range statistics.
(1)
32
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
NET SALES, NEW ORDERS AND BACKLOG
After two years of relatively flat growth, sales increased substantially in
1995. During the recovery period, the extent and timing of demand increases
varied by market with a strong, general improvement in the marine markets not
occurring until 1995. The favorable three year order rate and backlog trends
also showed sharp improvement in the year just completed.
Net sales for 1995 were $164 million, an increase of 16 percent over the $141
million reported in 1994, and 18 percent above the $139 million in 1993. For
several years there was modest demand improvement in diverse markets which
provided for some overall improvement in sales volume. Consolidated sales
increased slightly in 1994 primarily due to increased demand on our Belgian
plant. Shipments from domestic manufacturing operations were down 3 percent
in that year as the result of reduced demand for power take-offs and higher
horsepower marine transmissions and the transfer of the responsibility for
mobile torque converter production to Belgium. In that same year, shipments
from Europe increased sharply as a result of the new torque converter
production, enhanced by improved demand from the light construction equipment
market, and the beginning of recovery in the pleasure craft marine market.
The recovery expanded in 1995 with the pleasure craft and commercial marine,
light construction equipment, agricultural tractor, and specialty vehicle
markets all providing support for domestic and European volume increases of
about 12 percent.
Shipments from our overseas marketing subsidiaries in 1994 were about equal to
the previous year but increased by about 8 percent in the year just completed.
Sales gains were realized in Arneson surface drives and higher-horsepower
marine transmissions for the Australian fish boat market. And there was
continuing improvement in the volume of transmissions sold through our South
African subsidiary to the agricultural tractor market.
The backlog of orders to be shipped within the following six months, has been
on an improving trend the past several years, but until fiscal 1995 the
improvement had been modest and uneven from quarter to quarter. During fiscal
1995, the 53 percent improvement from $47 million to $72 million was
continuous and strong. Order rates improved steadily throughout the year.
For several years through fiscal 1994, the fluctuation in foreign currency
exchange rates had little impact on the dollar sales. However, in fiscal 1995
the dollar weakened significantly against most of the currencies in which we
operate, most notably about 15 percent against European currencies. That
decline in the dollar's value helped boost reported sales and accounted for
about one-half of the sales increase in 1995. On the other hand, it also made
selling into certain areas difficult and depressed profit margins at our
Belgian operation. Price increases, which were implemented selectively in each
year, had the effect of increasing revenues overall by a rate slightly greater
than the rate of inflation.
MARGINS, COSTS AND EXPENSES
From 1992 through 1994, with most markets relatively weak, our sales remained
flat and we concentrated on improving profitability at that level of business.
There have been continuing efforts to adjust manpower requirements and to
33
restructure manufacturing facilities to establish a foundation for more
efficient operations. Temporary reductions in our domestic work force in 1993
were made permanent in early 1994 with a voluntary separation program.
Related to that action and to some delays experienced in completing the
scheduled plant rearrangement, productivity and gross margins were adversely
affected through much of the fiscal year.
(19)
However, there was a slight improvement in the consolidated gross margin in
1994 as a result of cost reduction action, productivity improvements, and
volume increases at our Belgian operation. Steps were taken there in 1993 to
reduce manpower and improve productivity, with the result of being well
positioned to take advantage of the 1994 volume increase. The gross margin
increased by more than 2 percentage points in 1995, caused primarily by the
increased domestic sales volume. There also was further improvement in
margins in Belgium in 1995, but not as great as indicated by the volume
increase due to the drop in value of the U.S. dollar. The weak dollar put
pressure on profit margins since much of their incremental demand was in
dollar denominated sales. Fortunately, our Belgian employees were able to
generate greater productivity to offset some of the margin loss.
Marketing, engineering, and administrative (MEA)expenses increased slightly in
1994 with the addition of a full fiscal year of expense from Southern Diesel
Systems. In 1995, the MEA expenses increased by almost 16 percent but
remained constant as a percent of sales. Principal components of the increase
were computer leasing and training costs associated with the phase-in of new
business systems, weakness of the dollar exchange rates, and expenses
associated with domestic operational changes.
INTEREST, TAXES AND NET EARNINGS
Interest rates changed little between 1993 and 1994, but interest expense
declined since a higher proportion of borrowings were made at the lower rates
prevailing in the United States. The year-end borrowings were lower, but
average debt outstanding during the year was about the same as in 1993. The
effective income tax rate of 12 percent in 1994 was well below normal and
resulted from the utilization of foreign tax credit carryforwards to offset
the domestic tax liability.
Interest expense increased significantly in 1995 as a result of both higher
bank rates and greater domestic borrowings. The incremental debt was related
to the business acquisition made early in the fiscal year. The effective
income tax rate returned to a more normal range in 1995 but was still somewhat
below historical figures as we again were able to utilize a small amount of
foreign tax credit carryforwards. The realization of additional benefits from
foreign tax credits depends, in part, on the results of domestic operations
and cannot be determined accurately at this time.
ACCOUNTING CHANGES
As of the beginning of fiscal year 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Accounting for Postretirement
Benefits Other Than Pensions" and SFAS 109, "Accounting for Income Taxes".
The net cumulative effect of these accounting changes as of July 1, 1992, and
as included in the 1993 first quarter results, was $14.4 million. The SFAS
106 charge of $15.5 million was offset by $1.1 million, the favorable impact
of SFAS 109. The expense recognized upon the adoption of SFAS 106 related to
the Company's election to immediately expense the transition obligation rather
than amortize it over future periods. The income tax benefit relating to the
34
adoption of SFAS 109 is attributable to tax rate differences and the
recognition of alternative minimum tax credit carryforwards.
In connection with the adoption of SFAS 106, there were certain changes made
to Company pension plans to provide future retirees the means to purchase
health insurance made available through the Company. The cost of the plan
improvement is currently about $1.2 million pretax per year and is included in
operating costs.
(20)
ACQUISITIONS AND DIVESTITURES
The purchase of a minority interest in Palmer Johnson Distributors, LLC, was
completed on July 1, 1994. The limited liability company was established to
operate one of Twin Disc's independent distributors in the Midwest. It
operates with the same management as the predecessor organization and is
accounted for by the equity method. An operating agreement signed in
connection with the investment provides Twin Disc the potential for expanding
its investment in the future.
In May 1995, Twin Disc purchased the stock of Marine Diffusion, SRL, an
Italian company active in the distribution of the Arneson surface drive. The
company, renamed Twin Disc Italia S.R.L., will provide sales and service for
the full range of Twin Disc products and improve product visibility and
service capability for our European customers.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities in 1994 increased to $7.1 million,
primarily as a result of improved earnings and inventory reduction. Cash also
was generated through the sale of unused machine tools from the domestic
operation. Those cash flows more than covered equipment purchases, dividends,
and payments on long-term debt. Operating cash flows for 1995 increased to
$7.6 million with some working capital increases, primarily inventory,
partially offsetting the cash flow generated by improved net earnings. The
operating cash flows and $1.4 million of net additional borrowings provided
funds to invest in business acquisitions, purchase capital equipment and pay
dividends. Fixed asset purchases in both years were less than depreciation.
We will continue to make the changes necessary to enhance our manufacturing
capability but expect to be able to support our current products with capital
spending about equal to depreciation.
The current ratio at June 30, 1995 remained at 2.5, the same as at the
previous two year-ends. Working capital increased by $6 million in 1995,
generally reflecting the funds required to support the higher sales volume.
Accounts receivable average days outstanding continued a downward trend of the
past few years improving modestly to 54 days at the end of 1995. However, the
collection period is still somewhat higher than historical lows of about 50
days. Inventories increased at both domestic and overseas manufacturing
operations as a result of the higher sales volume and exchange rate changes,
but was stable or declined at the marketing subsidiaries. There was a small
improvement in inventory turnover, but we continue to focus efforts on
converting more of this major asset to cash.
The Company is involved in various stages of investigation relative to
hazardous waste sites on the United States EPA National Priorities List. It
is not possible at this time to determine the ultimate outcome of those
matters, but, as discussed further in Footnote P to the audited financial
35
statements, they are not expected to materially affect the Company's
operations or financial position. The Company believes the capital resources
available in the form of existing cash, lines of credit and funds provided by
operations will be adequate to meet anticipated requirements for capital
expenditures and other foreseeable business requirements in the future.
(21)
36
TWIN DISC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 and 1994
(In thousands) 1995 1994
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 3,741 $ 4,166
Trade accounts receivable, net 29,247 25,682
Inventories 47,157 41,569
Deferred income taxes 3,865 4,511
Other 6,480 4,482
------- -------
Total current assets 90,490 80,410
Property, plant and equipment, net 37,348 36,676
Investment in affiliates 14,249 9,569
Deferred income taxes 4,119 4,584
Intangible pension asset 8,293 9,606
Other assets 3,802 3,071
------- -------
$158,301 $143,916
------- -------
------- -------
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,415 $ 3,000
Accounts payable 12,395 7,890
Accrued liabilities 22,042 21,820
------- -------
Total current liabilities 36,852 32,710
Long-term debt 14,000 11,500
Accrued retirement benefits 32,827 34,309
------- -------
83,679 78,519
Shareholders' equity:
Common shares authorized: 15,000,000;
issued: 3,643,630; no par value 11,653 11,653
Preferred shares authorized: 200,000 - -
Retained earnings 67,054 63,353
Cumulative adjustments 13,797 7,778
------- -------
92,504 82,784
Less treasury stock, at cost 17,882 17,387
------- -------
Total shareholders' equity 74,622 65,397
------- -------
$158,301 $143,916
------- -------
------- -------
The notes to consolidated financial statements
are an integral part of these statements.
(22)
37
TWIN DISC, INCORPORATED and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 1995, 1994 and 1993
(In thousands, except per share data)
1995 1994 1993
---- ---- ----
Net sales $164,232 $141,193 $139,403
Cost of goods sold 127,886 113,404 112,197
------- ------- -------
Gross profit 36,346 27,789 27,206
Operating expenses:
Marketing, engineering and
administrative expenses 26,461 22,840 22,015
Restructuring costs - - 1,072
------- ------- -------
Earnings from operations 9,885 4,949 4,119
Other income (expense):
Interest income 186 173 158
Interest expense (1,281) (733) (782)
Equity in earnings of affiliates 118 522 264
Other, net (324) 56 265
------- ------- -------
(1,301) 18 (95)
Earnings before income
taxes and cumulative
effect of accounting
changes 8,584 4,967 4,024
Income taxes 2,912 578 1,362
------- ------- -------
Earnings before
cumulative effect
of accounting changes 5,672 4,389 2,662
Cumulative effect of
accounting changes - - (14,440)
------- ------- -------
Net earnings (loss) $ 5,672 $ 4,389 $(11,778)
------- ------- -------
------- ------- -------
38
Earnings (loss) per common share data,
based on weighted average shares outstanding:
Before cumulative effect of
accounting changes $ 2.03 $ 1.57 $ .95
Cumulative effect of
accounting changes - - (5.16)
------- ------- -------
Net earnings(loss)
per share $ 2.03 $ 1.57 $ (4.21)
------- ------- -------
------- ------- -------
Weighted average shares
outstanding 2,790 2,799 2,800
------- ------- -------
------- ------- -------
The notes to consolidated financial statements
are an integral part of these statements.
(23)
39
TWIN DISC, INCORPORATED and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 1995, 1994 and 1993
(In thousands) 1995 1994 1993
---- ---- ----
Cash flows from operating
activities:
Net earnings (loss) $ 5,672 $ 4,389 $(11,778)
Adjustments to reconcile
to net cash provided by
operating activities:
Cumulative effect of
accounting changes - - 14,440
Depreciation and amortization 4,847 4,726 5,088
Gain on disposals
of plant assets (3) (185) (194)
Equity in earnings of affiliates (118) (522) (264)
Provision for deferred income taxes 1,038 (161) (1,180)
Changes in operating assets and
liabilities:
Trade accounts receivable, net (2,266) (66) 341
Inventories (3,259) 1,969 (4,360)
Other assets (3,608) (1,842) (1,634)
Accounts payable 3,765 501 472
Accrued liabilities 1,170 (570) 4,502
Deferred retirement plan 337 (1,099) (282)
------- ------- -------
Net cash provided by
operating activities 7,575 7,140 5,151
------- ------- -------
Cash flows from investing activities:
Proceeds from sale of plant assets 39 1,126 1,739
Dividends received from affiliate 371 342 296
Acquisitions of plant assets (4,290) (4,216) (4,684)
Payments for business acquisitions
and investment in affiliate (3,172) - (3,460)
------- ------- -------
Net cash used by investing activities (7,052) (2,748) (6,109)
------- ------- -------
40
Cash flows from financing activities:
Increases (decreases) in notes
payable, net (1,113) 262 (9,980)
Proceeds from long-term debt 2,500 - 13,000
Principal payments on long-term debt - (1,500) -
Acquisition of treasury stock (586) - (6)
Proceeds from exercise of stock options 71 - -
Dividends paid (1,951) (1,960) (1,960)
------- ------- -------
Net cash provided (used) by
financing activities (1,079) (3,198) 1,054
------- ------- -------
Effect of exchange rate changes on cash 131 69 (180)
------- ------- -------
Net change in cash and cash equivalents (425) 1,263 (84)
Cash and cash equivalents:
Beginning of year 4,166 2,903 2,987
------- ------- -------
End of year $ 3,741 $ 4,166 $ 2,903
------- ------- -------
------- ------- -------
The notes to consolidated financial statements
are an integral part of these statements.
(24)
41
TWIN DISC, INCORPORATED and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended June 30, 1995, 1994 and 1993
<
(In thousands) 1995 1994 1993
---- ---- ----
Common stock
Balance, June 30 $ 11,653 $ 11,653 $ 11,653
------- ------- -------
Retained earnings
Balance, July 1 63,353 60,924 74,662
Net earnings (loss) 5,672 4,389 (11,778)
Cash dividends (1,951) (1,960) (1,960)
Stock options exercised (20) - -
------- ------- -------
Balance, June 30 67,054 63,353 60,924
------- ------- -------
Treasury stock, at cost
Balance, July 1 (17,387) (17,387) (17,381)
Shares acquired (586) - (6)
Stock options exercised 91 - -
------- ------- -------
Balance, June 30 (17,882) (17,387) (17,387)
------- ------- -------
Cumulative adjustments
Balance, July 1 7,778 6,219 7,505
Foreign currency translation adjustment 5,352 2,510 (1,286)
Minimum pension liability adjustment, net 667 (951) -
------- ------- -------
Balance, June 30 13,797 7,778 6,219
------- ------- -------
Shareholders' equity balance, June 30 $ 74,622 $ 65,397 $ 61,409
------- ------- -------
------- ------- -------
The notes to consolidated financial statements
are an integral part of these statements.
(25)
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed in
the preparation of these financial statements:
Consolidation Principles--The consolidated financial statements include the
accounts of Twin Disc, Incorporated and its subsidiaries, all of which are
wholly owned. Certain foreign subsidiaries are included based on fiscal years
ending May 31, to facilitate prompt reporting of consolidated accounts. All
significant intercompany transactions have been eliminated.
Revenue Recognition--Revenues are recognized when products are shipped.
Investment In Affiliates--The Company's 25% ownership of Niigata Converter
Company, Ltd., a Japanese manufacturer of power transmission equipment, and
the Company's 25% ownership of Palmer Johnson Distributors, LLC, a major
distributor of Twin Disc products, are stated at cost, adjusted for equity in
undistributed earnings since acquisition.
Translation Of Foreign Currencies--Substantially all foreign currency balance
sheet accounts are translated into United States dollars at the rates of
exchange prevailing at year-end. Revenues and expenses are translated at
average rates of exchange in effect during the year. Foreign currency
translation adjustments are recorded as a component of shareholders' equity.
Gains and losses from foreign currency transactions are included in earnings.
Cash Equivalents--The Company considers all highly liquid marketable
securities purchased with a maturity date of three months or less to be cash
equivalents.
Receivables--Trade accounts receivable are stated net of an allowance for
doubtful accounts of $409,000 and $441,000 at June 30, 1995 and 1994,
respectively.
Inventories--Inventories are valued at the lower of cost or market. Cost has
been determined by the last-in, first-out (LIFO) method for parent company
inventories, and by the first-in, first-out (FIFO) method for other
inventories.
Property, Plant And Equipment And Depreciation--Assets are stated at cost.
Expenditures for maintenance, repairs and minor renewals are charged against
earnings as incurred. Expenditures for major renewals and betterments are
capitalized and amortized by depreciation charges. Depreciation is provided
on the straight-line method over the estimated useful lives of the assets for
financial reporting and on accelerated methods for income tax purposes. The
lives assigned to buildings and related improvements range from 10 to 40
years, and the lives assigned to machinery and equipment range from 5 to 15
years. Upon disposal of property, plant and equipment, the cost of the asset
and the related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in earnings. Fully depreciated assets are
not removed from the accounts until physical disposition.
Fair Value of Financial Instruments -- The carrying amount reported in the
consolidated balance sheets for cash and cash equivalents, accounts
receivable, accounts payable and short-term debt approximates fair value
because of the immediate short-term maturity of these financial instruments.
43
The carrying amount reported for long-term debt approximates fair value
because the underlying instrument bears interest at a variable rate that
reprices frequently.
Income Taxes--Income taxes are provided in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future income tax consequences of events that have
been recognized in the company's financial statements. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the temporary differences are expected to reverse.
(26)
The Company does not provide for taxes which would be payable if undistributed
earnings of its foreign subsidiaries or its foreign affiliate were remitted
because the Company either considers these earnings to be invested for an
indefinite period or anticipates that if such earnings were distributed,
the U. S. income taxes payable would be substantially offset by foreign tax
credits.
B. INVENTORIES
The major classes of inventories at June 30 were as follows:
(In thousands) 1995 1994
---- ----
Finished parts $32,887 $30,315
Work-in-process 11,036 7,539
Raw materials 3,234 3,715
------- -------
$47,157 $41,569
------- -------
------- -------
Inventories stated on a LIFO basis represent approximately 36% and 32% of
total inventories at June 30, 1995 and 1994, respectively. The approximate
current cost of the LIFO inventories exceeded the LIFO cost by $16,782,000 and
$17,089,000 at June 30, 1995 and 1994, respectively.
44
C. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30 were as follows:
(In thousands) 1995 1994
---- ----
Land $ 1,406 $ 1,161
Buildings 19,366 17,786
Machinery and equipment 88,675 84,829
------- -------
109,447 103,776
Less accumulated depreciation 72,099 67,100
------- -------
$ 37,348 $ 36,676
------- -------
------- -------
D. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company and its subsidiaries are engaged in one line of business, the
manufacture and sale of power transmission equipment. Transfers among
geographic areas are made at established intercompany selling prices.
Principal products include industrial clutches, hydraulic torque converters,
fluid couplings, power-shift transmissions, marine transmissions, universal
joints, power take-offs, and reduction gears. The Company sells to both
domestic and foreign customers in a variety of market areas, principally
construction, industrial, marine, energy and natural resources and
agricultural.
One customer accounted for approximately 12%, 13% and 12% of consolidated net
sales in 1995, 1994 and 1993, respectively.
(27)
45
Information about the Company's operations in different geographic areas for
the years ended June 30, 1995, 1994 and 1993 is summarized as follows:
(In thousands) 1995 1994 1993
---- ---- ----
Sales to unaffiliated customers:
United States $108,607 $ 95,331 $ 94,637
Foreign:
Europe 35,572 27,222 26,126
Other 20,053 18,640 18,640
------- ------- -------
Total $164,232 $141,193 $139,403
------- ------- -------
------- ------- -------
Transfers between geographic areas:
United States $ 26,167 $ 24,003 $ 22,293
Foreign:
Europe 15,024 10,508 9,413
Other 361 132 224
------- ------- -------
Total $ 41,552 $ 34,643 $ 31,930
------- ------- -------
------- ------- -------
Net sales:
United States $134,774 $119,334 $116,930
Foreign:
Europe 50,596 37,730 35,539
Other 20,414 18,772 18,864
Eliminations (41,552) (34,643) (31,930)
------- ------- -------
Total $164,232 $141,193 $139,403
------- ------- -------
------- ------- -------
Earnings before income taxes
and cumulative effect of accounting
changes:
United States $ 4,332 $ 1,500 $ 1,548
Foreign:
Europe 2,635 1,513 341
Other 1,617 1,954 2,135
------- ------- -------
Total $ 8,584 $ 4,967 $ 4,024
------- ------- -------
------- ------- -------
Identifiable assets at June 30:
United States $106,971 $ 98,945 $ 91,787
Foreign:
Europe 39,537 30,778 28,968
Other 10,269 9,814 10,659
Eliminations 1,524 4,379 5,491
------- ------- -------
Total $158,301 $143,916 $136,905
------- ------- -------
------- ------- -------
46
Net earnings of the foreign subsidiaries were $2,480,000,$2,365,000 and
$1,673,000 in 1995, 1994 and 1993, respectively. The net assets of the
foreign subsidiaries were $32,368,000 and $29,580,000 at June 30, 1995 and
1994, respectively. Undistributed earnings of foreign subsidiaries, on which
no provisions for United States income taxes have been made, aggregated
approximately $22,897,000 (including
(28)
$7,246,000 translation component) at June 30, 1995. Included in earnings are
foreign currency transaction gains (losses) of $(248,000), $21,000 and
$226,000 in 1995, 1994 and 1993, respectively.
E. INVESTMENTS IN AFFILIATES
The Company's investments in affiliates consists of 25% interests in Niigata
Converter Company, Ltd., Japan and Palmer Johnson Distributors, LLC, a
domestic distributor of Twin Disc products. The Company acquired the interest
in Palmer Johnson Distributors, LLC, in July 1994.
Undistributed earnings of the affiliates included in consolidated retained
earnings approximated $3,623,000 and $3,980,000 at June 30, 1995 and 1994,
respectively.
Combined condensed financial data of the above-listed affiliates are
summarized in U.S. dollars as follows:
(In thousands)
1995 1994
---- ----
Current assets $111,393 $ 88,777
Other assets 63,898 30,804
------- -------
$175,291 $119,581
------- -------
------- -------
Current liabilities $100,836 $ 75,281
Other liabilities 24,693 6,022
Shareholders' equity 49,762 38,278
------- -------
$175,291 $119,581
------- -------
------- -------
1995 1994 1993
----- ---- ----
Net sales $169,256 $152,728 $129,734
Gross profit 26,173 21,864 16,627
Net earnings 742 2,087 1,054
47
F. ACCRUED LIABILITIES
Accrued liabilities at June 30 were as follows:
(In thousands) 1995 1994
---- ----
Salaries and wages $ 6,476 $ 4,858
Retirement plans 7,818 9,340
Marketing program 625 390
Other 7,123 7,232
------- -------
$ 22,042 $ 21,820
------- -------
------- -------
(29)
G. DEBT
Notes payable consists of amounts borrowed under line of credit agreements.
Unused lines of credit total $9,062,000 at June 30, 1995. These lines of
credit are available predominately at the prime rate and may be withdrawn at
the option of the banks. The weighted average interest rate of short term
lines outstanding at June 30, 1995 and 1994 was 9.4% and 5.9%, respectively.
The Company maintains a three-year revolving credit agreement (the
"Agreement") for borrowings of up to $16 million through April 1997 which may
be extended on an annual basis. The Agreement provides that the Company may
select among various loan arrangements with interest based on the LIBOR or
prime rates. The Company must pay a commitment fee of 3/8 of 1% annually on
the unused portion of the Agreement.
At June 30, 1995, the amount outstanding under the above Agreement was
$14,000,000, bearing interest at approximately 7.5%. Principal payment is
required upon final maturity of the Agreement.
Cash paid for interest on debt was $1,288,000, $771,000 and $768,000 in 1995,
1994 and 1993, respectively.
H. LEASE COMMITMENTS
Approximate future minimum rental commitments under noncancellable operating
leases are as follows:
Fiscal Year (In thousands)
----------- ------------
1996 $ 1,811
1997 1,704
1998 1,332
1999 990
2000 478
Thereafter 479
-----
$ 6,794
-----
-----
48
Total rent expense for operating leases amounted to approximately
$1,939,000, $1,633,000 and $862,000 in 1995, 1994 and 1993, respectively.
I. SHAREHOLDERS' EQUITY
At June 30, 1995 and 1994, treasury stock consisted of 868,606 and 844,240
shares of common stock, respectively. The Company purchased 28,766 shares of
treasury stock in 1995. The Company issued 4,400 shares of treasury stock in
1995 to fulfill its obligations under the stock option plans. The difference
between the cost of treasury shares issued and the option price is charged to
retained earnings.
Cash dividends per share were $.70, in 1995, 1994 and 1993.
(30)
In 1988, the Company's Board of Directors established a Shareholder Rights
Plan and distributed to shareholders of record on July 1, 1988, one preferred
stock purchase right for each outstanding share of common stock. Under
certain circumstances, a right may be exercised to purchase one one-hundredth
of a share of Series A Junior Preferred Stock at an exercise price of $80,
subject to certain anti-dilution adjustments. The rights become exercisable
ten (10) days after a public announcement that a party or group has either
acquired at least 20%, (or at least 30% in the case of existing holders who
currently own 20% or more of the common stock), or commenced a tender offer
for at least 30%, of the Company's common stock. Generally, after the rights
become exercisable, if the Company is a party to certain merger or business
combination transactions, or transfers 50% or more of its assets or earnings
power, or certain other events occur, each right will entitle its holders,
other than the acquiring person, to buy a number of shares of common stock of
the Company, or of the other party to the transaction, having a value of twice
the exercise price of the right. The rights expire June 30, 1998 and may be
redeemed by the Company for $.05 per right at any time until ten (10) days
following the stock acquisition date. The Company has designated 50,000
shares of the preferred stock for the purpose of a Shareholder Rights Plan.
J. STOCK OPTION PLANS
In 1989, the Company's shareholders adopted a non-qualified stock option plan
for officers, key employees and directors to purchase up to 75,000 shares of
common stock, and an incentive stock option plan for officers and key
employees to purchase up to 125,000 shares of common stock. In 1994, the
Company amended its stock option plans, increasing the shares of common stock
available for grant to 125,000 for the non-qualified stock option plan and to
225,000 for the incentive stock option plan.
The plans are administered by the Executive Selection and Compensation
Committee of the Board of Directors which has the authority to determine which
officers and key employees of the Company will be granted options. The grant
of options to non-employee directors is fixed and based on such directors'
seniority. All options allow for the purchase of common stock at prices not
less than the fair market value of such stock at the date of grant, except for
options under the incentive stock option plan if the optionee owns more than
10% of the total combined voting power of all classes of the Company's stock,
in which case the option price will be not less than 110% of the fair market
value of such stock. Options granted under the plans become exercisable
immediately and expire ten years after the date of grant, unless the employee
owns more than 10% of the total combined voting power of all classes of the
Company's stock, in which case they must be exercised within five years of the
date of grant.
49
Shares available for future options as of June 30 were as follows:
1995 1994
---- ----
Non-qualified stock
option plan 42,550 53,450
Incentive stock option plan 89,150 106,050
(31)
Stock option transactions under the plans during 1994 and 1993 were
as follows:
1995 1994
---- ----
Non-qualified stock
option plan:
Options outstanding
at July 1 71,550 50,150
Granted 12,600 21,400
Cancelled (1,700) -
Exercised ($17.88-$19.50
per share) (1,000) -
------- -------
Options outstanding
at June 30 81,450 71,550
------- -------
------- -------
Options price range
at June 30 $ 14.00 - $ 14.00 -
29.63 29.63
Incentive stock option plan:
Options outstanding
at July 1 118,550 101,600
Granted 24,450 20,250
Cancelled (7,550) (3,300)
Exercised ($14.00-$19.50
per share) (3,400) -
------- -------
Options outstanding
at June 30 132,050 118,550
------- -------
------- -------
Options price range
at June 30 $ 14.00 - $ 14.00 -
29.63 29.63
50
K. ENGINEERING AND DEVELOPMENT COSTS
Engineering and development costs include research and development expenses
for new products, development and major improvements to existing products, and
other charges for ongoing efforts to refine existing products. Research and
development costs charged to operations totalled $2,718,000, $2,649,000 and
$2,129,000 in 1995, 1994 and 1993, respectively. Total engineering and
development costs were $7,411,000, $6,843,000 and $7,093,000 in 1995, 1994 and
1993, respectively.
L. INCOME TAXES
United States and foreign earnings before income taxes and the cumulative
effect of accounting changes were as follows:
(In thousands) 1995 1994 1993
---- ---- ----
United States $ 4,332 $ 1,500 $ 1,548
Foreign 4,252 3,467 2,476
------ ------ ------
$ 8,584 $ 4,967 $ 4,024
------ ------ ------
------ ------ ------
(32)
The provision (credit) for income taxes, excluding the cumulative effect of
accounting changes, is comprised of the following:
(In thousands) 1995 1994 1993
---- ---- ----
Currently payable:
Federal $ 782 $ (112) $ 876
State 12 39 15
Foreign 1,007 812 898
------ ------ ------
1,801 739 1,789
------ ------ ------
Deferred:
Federal 452 (150) (248)
State 12 - 6
Foreign 647 (11) (185)
------ ------ ------
1,111 (161) (427)
------ ------ ------
$ 2,912 $ 578 $ 1,362
------ ------ ------
------ ------ ------
Effective July 1, 1992, the Company adopted the provisions of SFAS 109 and
recorded a tax benefit of approximately $1.1 million ($0.38 per share). This
is reflected in the consolidated statement of operations as part of the
cumulative effect of accounting changes.
The components of the net deferred tax asset as of June 30, were as
51
follows:
(In thousands) 1995 1994
---- ----
Deferred tax assets:
Retirement plans $10,874 $11,924
Inventory 435 772
Marketing program expenses 250 148
Employee benefits 589 614
Research and development expenses 216 513
Accrued liabilities 926 838
Other 92 75
------ ------
13,382 14,884
------ ------
Foreign net operating
loss carryfowards 1,823 2,120
Tax credit carryforwards, principally foreign 2,400 2,355
Alternative minimum tax credit
carryforwards 979 623
Valuation allowance (1,430) (2,453)
------ ------
17,154 17,529
------ ------
Deferred tax liabilities:
Fixed assets 7,041 6,540
State income taxes, net 423 494
Other 1,706 1,400
------ ------
9,170 8,434
------ ------
Total net deferred tax assets $ 7,984 $ 9,095
------ ------
------ ------
(33)
The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized due to the expiration
of tax credit carryforwards. The change in the valuation allowance for the
year ended June 30, is as follows:
(In thousands) 1995 1994
---- ----
Balance at July 1 $(2,453) $(4,324)
Increase in non-utilization of net operating
loss carryforwards, tax credits and
non-recognition of deferred tax asset due to
uncertainty of recovery - ( 70)
Utilization of foreign tax loss carryfowards 139 604
Utilization of foreign tax credit carryforwards 884 988
Expired foreign tax credit carryforwards - 349
------ ------
Balance at June 30 $(1,430) $(2,453)
------ ------
------ ------
52
Following is a reconciliation of the applicable U.S. federal income tax rates,
excluding the cumulative effect of accounting changes, to the effective tax
rates reflected in the statements of operations:
1995 1994 1993
---- ---- ----
U.S. federal income tax rate 34.0% 34.0% 34.0%
Increases (reductions)
in tax rate resulting from:
Utilization of net operating
loss carryforwards (1.6) (12.2) (2.9)
Foreign tax items (1.8) (13.8) 1.6
Employee benefits - foreign 1.8 3.2 3.4
Other, net 1.5 0.4 (2.3)
---- ---- ----
33.9% 11.6% 33.8%
---- ---- ----
---- ---- ----
At June 30, 1995, net operating loss carryforwards of approximately $4.5
million were available for reduction of future foreign income taxes payable at
Twin Disc International, S. A.
Cash paid for income taxes was $2,698,000, $1,636,000 and $1,438,000 in 1995,
1994 and 1993, respectively.
M. RETIREMENT PLANS
The Company has noncontributory, qualified defined benefit pension plans
covering substantially all domestic employees and contributory plans covering
certain foreign employees. Domestic plan benefits are based on years of
service, and for salaried employees on final average compensation. The
Company's funding policy for the plans covering domestic employees is to
contribute an actuarially determined amount which falls between the minimum
and maximum amount that can be contributed for federal income tax purposes.
Domestic plan assets consist principally of listed equity and fixed income
securities.
(34)
In addition, the Company has unfunded, non-qualified retirement plans for
certain management employees and directors. Benefits are based on final
average compensation and do not vest until such management employee reaches
normal retirement with the Company.
53
Net pension expense for the Company's domestic defined benefit plans
consists of the following components:
(In thousands) 1995 1994 1993
---- ---- ----
Service cost-benefits earned during the year $ 1,585 $ 1,382 $ 1,561
Interest cost on projected benefit obligation 6,643 6,518 6,388
Actual return on plan assets (3,835) (1,882) (5,486)
Net amortization and deferral ( 588) (2,432) 1,250
------ ------ ------
Net pension cost $ 3,805 $ 3,586 $ 3,713
------ ------ ------
------ ------ ------
The following table sets forth the Company's domestic defined
benefit plans' funded status and the amounts recognized in the Company's
balance sheet as of June 30:
(In thousands) 1995 1994
---- ----
Actuarial present value of
benefit obligations at
June 30:
Vested benefit obligation $ 63,804 $ 63,314
Non-vested benefit obligation 14,622 15,995
------- -------
Accumulated benefit
obligation 78,426 79,309
Effect of projected future
compensation levels 4,475 6,037
------- -------
Projected benefit obligation 82,901 85,346
Plan assets at fair value (64,110) (61,706)
------ ------
Deficiency of plan
assets over projected
benefit obligation 18,791 23,640
Unrecognized net loss (2,139) (3,992)
Unrecognized prior service
cost (9,651) (10,990)
Unrecognized transitional net
liability (799) (931)
Adjustment required to
recognize additional
minimum liability 8,758 10,557
------- -------
Accrued retirement cost
at June 30 $ 14,960 $ 18,284
------- -------
------- -------
54
Assumptions used in accounting for the retirement plans
are as follows:
1995 1994
---- ----
Discount rate 8.5% 8.0%
Rate of increase in compensation
levels 4.5% 5.5%
Expected long-term rate of return on
plan assets 9.0% 9.0%
(35)
Total accrued retirement costs at June 30 are summarized as follows:
(In thousands) 1995 1994
---- ----
Current:
Domestic defined benefit plans $ 3,907 $ 5,395
Foreign contributory benefit plans 1,092 1,104
------ ------
4,999 6,499
Long-term:
Domestic defined benefit plans 11,053 12,890
------ ------
$16,052 $19,389
------ ------
------ ------
Retirement plan expense for the Company's foreign plans was $307,000,
$246,000, and $352,000 in 1995, 1994 and 1993, respectively. The Company's
foreign contributory plans are not subject to the disclosure requirements of
SFAS 87.
The Company sponsors defined contribution plans covering substantially all
domestic employees. These plans provide for employer contributions based
primarily on employee participation. The total expense under the plans was
$906,000, $933,000, and $549,000 in 1995, 1994 and 1993, respectively.
In addition to providing pension benefits, the Company provides health care
and life insurance benefits for certain domestic retirees. In 1993, the
Company executed amendments to the health care insurance plan to require all
employees retiring after December 31, 1992, and electing to continue coverage
through the Company's group plan, to pay 100% of the premium cost.
Effective July 1, 1992, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" (SFAS 106), which requires that postretirement benefits be
accrued over the period in which employees provide services to the Company.
At July 1, 1992, the cumulative effect of recording these benefits was to
decrease 1993 net earnings by $15.5 million or $5.54 per share, which is net
of a $9.9 million income tax benefit.
Although the cumulative effect of adopting SFAS 106 unfavorably impacts 1993
55
net income, adoption has no effect on the Company's cash flows since the
Company plans to continue its current practice of paying the cost of
postretirement benefits when incurred.
The Company recognized $2,841,000, $2,193,000 and $2,206,000 in non-pension
postretirement benefit expense in 1995, 1994 and 1993, respectively which
consists primarily of interest cost.
The following table sets forth the status of the postretirement benefit
programs (other than pensions) and amounts recognized in the Company's
consolidated balance sheet at June 30:
(In thousands) 1995 1994
---- ----
Accumulated postretirement benefit obligation:
Retirees $29,993 $30,952
Fully eligible active plan participants 387 195
Other active participants 393 576
------ ------
30,773 31,723
Unamortized net amount resulting
from changes in plan experience and
actuarial assumptions (6,222) (7,463)
------ ------
Accrued postretirement benefit obligation $24,551 $24,260
------ ------
------ ------
(36)
The current portion of the accumulated postretirement benefit obligation of
$2,680,000 and $2,841,000 is included in accrued liabilities at June 30, 1995
and 1994, respectively.
The assumed weighted average discount rate used in determining the actuarial
present value of the accumulated postretirement benefit obligation was 8% at
June 30, 1995 and 1994. The assumed weighted average health care cost trend
rate was 11% in fiscal year 1995, decreasing by 1% each year thereafter until
it reaches 7% in fiscal year 1999, and remains constant thereafter. A 1%
increase in the assumed health care trend would increase the accumulated
postretirement benefit obligation by approximately $1.9 million and the
interest cost by approximately $162,000.
N. ACQUISITIONS
In May 1993, the Company purchased certain assets, primarily inventory, of
Southern Diesel Engine Repair, a former distributor of the Company, for
$3,460,000. The acquisition was funded through bank financing.
Effective January 1, 1995, the Company purchased all outstanding stock of
Marine Diffusion SRL, an Italian distributor of Twin Disc products and other
marine components and assemblies. The purchase price, $172,000, approximated
the fair value of assets acquired.
The purchase method of accounting was applied to the above transactions. The
results of operations of the acquisitions are included in the accompanying
56
consolidated financial statements since the date of acquisition. Pro forma
results of operations are not presented as the amounts do not significantly
differ from historical results.
O. RESTRUCTURING COSTS
The Company recorded restructuring costs in 1993 for the streamlining of
certain Belgian and domestic manufacturing operations. These costs consist
primarily of employee related costs.
P. CONTINGENCIES
The Company is involved in various stages of investigation relative to
hazardous waste sites, two of which are on the United States EPA National
Priorities List (Superfund sites). The Company's assigned responsibility at
each of the Superfund sites is less than 2%. The Company has also been
requested to provide administrative information related to two other potential
Superfund sites but has not yet been identified as a potentially responsible
party. Additionally, the Company is subject to certain product liability
matters.
At June 30, 1995, the Company has accrued approximately $1,200,000, which
represents the best estimate available for the possible losses. This amount
has been accrued over the past several years. Based on the information
available, the Company does not expect that any unrecorded liability related
to these matters would materially affect the consolidated financial position,
results of operations or cash flows.
(37)
57
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders
Twin Disc, Incorporated
Racine, Wisconsin
We have audited the accompanying consolidated balance sheets of Twin Disc,
Incorporated and Subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of operations, changes in shareholders' equity, and
cash flows for each of the three years in the period ended June 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Twin Disc,
Incorporated and Subsidiaries as of June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995 in conformity with generally
accepted accounting principles.
As discussed in Notes A, L and M to the consolidated financial statements, in
1993 the Company changed its method of accounting for other postretirement
benefits and income taxes.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
July 28, 1995
(39)
58
FINANCIAL SUMMARY
1995 1994 1993 1992 1991
(In thousands of dollars, except where noted)
Statement of
Operations
Net sales $164,232 $141,193 $139,403 $136,255 $152,990
Costs and expenses,
including marketing,
engineering and
administrative 154,347 136,244 135,284 134,242 155,395
Earnings (loss)
from operations 9,885 4,949 4,119 2,013 (2,405)
Other income
(expense) (1,301) 18 (95) (162) (721)
Earnings (loss)
before income taxes 8,584 4,967 4,024 1,851 (3,126)
Income taxes (credits) 2,912 578 1,362 810 (711)
Net earnings (loss) 5,672 4,389 2,662 1,041 (2,415)
Overseas operations
Sales 71,010 56,502 54,403 53,699 64,090
Earnings (loss) 2,480 2,365 1,673 (478) (1,514)
Balance Sheet
Assets
Cash and equivalents 3,741 4,166 2,903 2,987 2,288
Receivables, net 29,247 25,682 25,106 26,026 24,567
Inventories 47,157 41,569 42,562 36,686 40,913
Other current assets 10,345 8,993 6,961 4,521 5,886
Total current assets 90,490 80,410 77,532 70,220 73,654
Investments and
other assets 30,463 26,830 21,813 10,554 9,648
Fixed assets less
accumulated
depreciation 37,348 36,676 37,560 38,724 42,877
Total assets 158,301 143,916 136,905 119,498 126,179
Net assets overseas 32,368 29,580 28,059 30,477 32,063
Liabilities and
Shareholders' Equity
Current liabilities 36,852 32,710 31,252 35,694 38,785
Long-term debt 14,000 11,500 13,000 - 4,309
Deferred liabilities 32,827 34,309 31,244 7,365 8,463
Shareholders' equity 74,622 65,397 61,409 76,439 74,622
Total liabilities and
shareholders' equity 158,301 143,916 136,905 119,498 126,179
1993 Net Earnings data and Return percentages reflect operating earnings
before the effect of adopting Financial Accounting Standards 106 and 109. The
cumulative effect of their adoption was a net loss of $14.44 million or $5.16
per share.
(40-41)
59
FINANCIAL SUMMARY (CONTINUED)
1995 1994 1993 1992 1991
(In thousands of dollars, except where noted)
Comparative Financial Information
Per share statistics
Net earnings (loss) 2.03 1.57 .95 .37 (.85)
Dividends .70 .70 .70 .70 .85
Shareholders' equity 26.75 23.36 21.93 27.10 26.42
Return on equity 7.6% 6.7% 4.3% 1.4% (3.2)%
Return on assets 3.6% 3.0% 1.9% .9% (1.9)%
Return on sales 3.5% 3.1% 1.9% .8% (1.6)%
Average shares
outstanding 2,790,111 2,799,390 2,799,603 2,820,513 2,824,815
Number of shareholder
accounts 996 1,058 1,139 1,214 1,271
Number of employees 1,097 1,099 1,114 1,221 1,483
Additions to plant
and equipment 4,290 4,216 4,684 4,390 8,218
Depreciation 4,792 4,670 4,958 5,452 5,568
Net working capital 53,638 47,700 46,280 34,526 34,869
1993 Net Earnings data and Return percentages reflect operating earnings
before the effect of adopting Financial Accounting Standards 106 and 109. The
cumulative effect of their adoption was a net loss of $14.44 million or $5.16
per share.
(40-41)
60
DIRECTORS
MICHAEL E. BATTEN
Chaiman, Chief Executive Officer
WILLIAM W. GOESSEL
Retired Chairman and former Chief Executive Officer, Harnischfeger
Industries, Incorporated, (Manufacturer of Cranes, Mining Equipment and
Papermaking Machines), Milwaukee, Wisconsin
JEROME K. GREEN
Former Group Vice President, The Marmon Group, (A Diversified Manufacturer),
Chicago, Illinois
MICHAEL H. JOYCE
President, Chief Operating Officer
JOHN L. MURRAY
Retired Chairman-Chief Executive Officer, Universal Foods Corporation,
(Manufacturer and Marketer of Food Ingredients and Specialty Foods),
Milwaukee, Wisconsin
JAMES O. PARRISH
Vice President-Finance & Treasurer
PAUL J. POWERS
Chairman, President-Chief Executive Officer, Commercial Intertech Corp.,
(Manufacturer of Hydraulic Components, Fluid Purification Products, Pre-
Engineered Buildings and Stamped Metal Products), Youngstown, Ohio
RICHARD T. SAVAGE
President-Chief Executive Officer, Modine Manufacturing Company,
(Manufacturer of Heat Exchange Equipment), Racine, Wisconsin
DAVID L. SWIFT
Chairman, President-Chief Executive Officer, Acme-Cleveland Corporation,
(Manufacturer of Diversified Industrial Products), Pepper Pike, Ohio
STUART W. TISDALE
Retired Chairman-Chief Executive Officer, WICOR, Inc. (Parent Company of
Wisconsin Gas Company, Sta-Rite Industries, Incorporated and WEXCO of
Delaware, Incorproated), Milwaukee, Wisconsin
DAVID R. ZIMMER
President-Chief Executvie Officer, Core Industries, Inc., (Manufacturer of
Specialized Products for Electronics, Fluid Controls, Construction and Farm
Equipment Markets), Bloomfield Hills, Michigan
(42)
61
OFFICERS
MICHAEL E. BATTEN
Chairman, Chief Executive Officer
MICHAEL H. JOYCE
President, Chief Operating Officer
JAMES O. PARRISH
Vice President-Finance & Treasurer
PHILIPPE PECRIAUX
Vice President-Europe
JAMES MCINDOE
Vice President-International Marketing
LANCE J. MELIK
Vice President-Marketing
MICHAEL J. HABLEWITZ
Vice President-Quality Assurance
FRED H. TIMM
Corporate Controller & Secretary
(43)
62
CORPORATE DATA
ANNUAL MEETING
Corporate Offices, 2:00 PM, October 20, 1995
SHARES TRADED
New York Stock Exchange: Symbol TDI
ANNUAL REPORT ON SECURITIES AND EXCHANGE COMMISSION FORM 10-K
SINGLE COPIES OF THE COMPANY'S 1995 ANNUAL REPORT ON SECURITIES AND EXCHANGE
COMMISSION FORM 10-K WILL BE PROVIDED WITHOUT CHARGE TO SHAREHOLDERS AFTER
SEPTEMBER 30, 1995, UPON WRITTEN REQUEST DIRECTED TO THE SECRETARY, TWIN DISC,
INCORPORATED, 1328 RACINE STREET, RACINE, WISCONSIN 53403.
TRANSFER AGENT & REGISTRAR
Firstar Trust Company, Milwaukee, Wisconsin
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., Milwaukee, Wisconsin
GENERAL COUNSEL
Gibbs, Roper, Loots & Williams, Milwaukee, Wisconsin
CORPORATE OFFICES
Twin Disc, Incorporated, Racine, Wisconsin 53403, Telephone: (414) 638-4100
WHOLLY OWNED SUBSIDIARIES
Twin Disc International S.A., Nivelles, Belgium
Twin Disc Spain, S.A., Madrid, Spain
Twin Disc Italia S.R.L., Viareggio, Italy
Twin Disc (Pacific) Pty. ltd., Brisbane, Queensland, Australia
Twin Disc (Far East) Ltd., Singapore
Twin Disc (South Africa) Pty. Ltd., Johannesburg, South Africa
Mill-Log Equipment Co., Inc., Coburg, Oregon
Southern Diesel Systems Inc., Miami, Florida
TD Electronics, Inc., Loves Park, Illinois
PARTIALLY OWNED AFFILIATES
Niigata Converter Company, Ltd., Kamo, Omiya and Tokyo, Japan
Palmer Johnson Distributors, LLC, Sturgeon Bay, Wisconsin
MANUFACTURING FACILITIES
Racine, Wisconsin; Nivelles, Belgium; Kamo and Omiya Japan
SALES OFFICES
DOMESTIC
Racine, Wisconsin; Coburg, Oregon; Seattle, Washington; Miami, Florida;
Jacksonville, Florida
OVERSEAS
Nivelles, Belgium; Brisbane and Perth Australia; Singapore; Johannesburg,
South Africa; Madrid, Spain; Viareggio, Italy
AFFILIATES
Tokyo, Japan; Sturgeon Bay, Wisconsin
MANUFACTURING LICENSES
Niigata Converter Company, Ltd., Tokyo, Japan; Transfluid S.R.L., Milan,
Italy; Nakamura Jico Co. Ltd., Tokyo, Japan; Hindustan Motors, Ltd., Madras,
India
63
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
--------------------------
Twin Disc, Incorporated, the registrant (a Wisconsin Corporation) owns 100% of
the following subsidiaries:
1. Twin Disc International, S.A. (a Belgian corporation)
2. Twin Disc Spain, S.A. (a Spanish corporation)
3. Twin Disc Italia S.R.L. (an Italian corporation)
4. Twin Disc (Pacific) Pty. Ltd. (an Australian corporation)
5. Twin Disc (Far East) Ltd. (a Delaware corporation operating in Singapore
and Hong Kong)
6. Twin Disc (South Africa) Pty. Ltd. (a South African corporation)
7. Mill-Log Equipment Co., Inc. (an Oregon corporation)
8. Southern Diesel Systems Inc. (a Florida corporation)
9. TD Electronics, Inc. (a Wisconsin corporation)
The registrant has no parent nor any other subsidiaries. All of the above
subsidiaries are included in the consolidated financial statements.
64
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Twin Disc, Incorporated on Form S-8 (Twin Disc, Incorporated 1988 Incentive
Stock Option Plan and Twin Disc, Incorporated 1988 Non-Qualified Stock Option
Plan for Officers, Key Employees and Directors) of our reports dated July 28,
1995, on our audits of the consolidated financial statements and financial
statement schedule of Twin Disc, Incorporated as of June 30, 1995 and 1994 and
for the years ended June 30, 1995, 1994 and 1993, which reports are
incorporated in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
September 15, 1995
65
EXHIBIT 24
POWER OF ATTORNEY
The undersigned directors of Twin Disc, Incorporated hereby severally
constitute Michael E. Batten and James O. Parrish , and each of them singly,
true and lawful attorneys with full power to them, and each of them, singly,
to sign for us and in our names as directors the Form 10-K Annual Report for
the fiscal year ended June 30, 1995 pursant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, and generally do all such things in our names
and behalf as directors to enable Twin Disc, Incorporated to comply with the
provisions of the Securities and Exchange Act of 1934 and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures so they may be signed by our attorneys, or either of them, as set
forth below.
WILLIAM W. GOESSEL
- -----------------------------
William W. Goessel, Director
JEROME K. GREEN
- -----------------------------
Jerome K. Green, Director
JOHN L. MURRAY
- -----------------------------
John L. Murray, Director
PAUL J. POWERS July 28, 1995
- -----------------------------
Paul J. Powers, Director
RICHARD T. SAVAGE
- -----------------------------
Richard T. Savage, Director
DAVID L. SWIFT
- -----------------------------
David L. Swift, Director
STUART W. TISDALE
- -----------------------------
Stuart W. Tisdale, Director
DAVID R. ZIMMER
- -----------------------------
David R. Zimmer, Director
5
1000
YEAR
JUN-30-1995
JUN-30-1995
3,741
0
29,656
409
47,157
90,490
109,447
72,099
158,301
36,852
14,000
11,653
0
0
62,969
158,301
164,232
164,232
127,886
127,886
0
0
1,281
8,584
2,912
5,672
0
0
0
5,672
2.03
0
67
EXHIBIT 99(a)
Century Audit Corporation
Certified Public Accountants
NIIGATA CONVERTER COMPANY LIMITED
Accountants' Report
Financial Statements - March 31, 1995
68
The Board of Directors of
Niigata Converter Company, Ltd
We have examined the balance sheet of Niigata Converter Company Limited as of
March 31, 1995 and the related statement of earnings and retained earnings for
the year then ended.
Our examination was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the accompanying balance sheet and statement of earnings and
retained earnings present fairly the financial position of Niigata Converter
Co., Ltd at March 31, 1995 and the results of its operation for the year then
ended, in conformity with Commercial Code in Japan applied on a basis
consistent with that of the preceding year.
May 11, 1995
Century Audit Corporation
TOYOAKI SUZUKI
Representative Partner
69
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1995
----------------------------------
(In thousands of Yen)
CURRENT ASSETS
Cash on Hand or in Bank 1,319,798
Notes Receivable 1,575,199
Accounts Receivable-Trade 4,021,485
Marketable securities 50,226
Inventory 2,099,422
Finished Goods 521
Work in Process 1,215,198
Materials and Supplies 883, 703
Prepaid Expenses 54,615
Payment in Advance 3,057
Accrued Income 965
Accounts Receivable 3,395
Suspence Payment 6,550
Reserve for Bad Debts -64,200
TOTAL CURRENT ASSETS 9,070,516
FIXED ASSETS
(Tangible Fixed Assets) 4,727,543
Building 2,928,079
Structures 343,046
Machinery and Equipment 3,729,877
Cars and Carriers 81,781
Tools and Jig Fixtures 3,018,373
Land 670,598
Construction on Process 1,778,582
Less-Accumulated Depreciation - 7,822,793
(Intangible Fixed Assets) 8, 689
Telephone and Electric Utilization 8,689
(Investments) 315, 044
Investment Securities 27,514
Stock of Subsidiary Company 21,276
Capital 20
Long-term Loans 104,251
Long-term Accounts Receivable 2,371
Long-term Deposit as Guaranty 34,424
Other Investments 83,325
Reserve for Bad Debts -2,519
TOTAL FIXED ASSETS 5,051,278
DEFERRED ASSETS
Experimental and Research Expenses 15,676
TOTAL DEFERRED ASSETS 15,676
TOTAL 14,137,471
70
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1995
----------------------------------
(In thousands of Yen)
CURRENT LIABILITIES
Notes Payable 2,129,552
Accounts Payable-Trade 728,911
Short-term Borrowings 3,546,057
Accounts Payable-Other 142,646
Allowances for Corporate Income Taxes 3,362
Allowances for Enterprise Tax 13,942
Unpaid Consumption Taxes 71,325
Accrued Expenses 383,457
Advance received 756
Deposit Received 30,146
Employee's savings deposits 397,670
Reserve for Payment of Bonus 476,091
Reserve for Guarantee for Completed Work 34,000
Other current liabilities 273,422
TOTAL CURRENT LIABILITIES 8,231,342
FIXED LIABILITIES
Long-term Borrowings 1,684,284
Allowances for Officers' Retirement 235,993
TOTAL FIXED LIABILITIES 1,920,277
TOTAL LIABILITIES 10,151,620
CAPITAL
Capital 1,000,000
LEGAL RESERVE
Earned Surplus Reserve 231,368
SURPLUS
General Reserve 2,670,000
Unappropriated Earned Surplus 84,482
(Current Term Net Profit) (149,571)
TOTAL SURPLUS 2,754,482
TOTAL CAPITAL 3,985,851
TOTAL 14,137,471
71
PROFIT AND LOSS STATEMENT
FOR
THE FISCAL YEAR ENDED MARCH 31, 1995
------------------------------------
(In thousands of Yen)
Sales 15,208,501
Cost of Sales 13,111,239
Selling and Administrative Expenses 1,662,400 14,773,640
Operating Profit 434,861
Interest and Dividends Received 24,344
Miscellaneous Income 35,670 60,015
Interest Paid and Discount Charges 220,408
Other Losses 92,896 313,304
Profit before Tax 181,571
Allowances for Corporate Income Taxes 32,000
Current Term Net Profit 149,571
Profit brought forward from the prev. period 17,411
Less-Interim Dividend -75,000
Less-Earned Surplus Reserve - 7,500
Unappropriated Earned Surplus 84,482
72
Agenda No. 1
APPROPRIATION OF UNAPPROPRIATED
EARNED SURPLUS (PROPOSAL)
-------------------------------
(In thousands of Yen)
UNAPPROPRIATED EARNED SURPLUS 84,482
REVERSAL OF VOLUNTARY EARNED SURPLUS 110,000
TOTAL 194,482
APPROPRIATION
Earned Surplus Reserve 9,787
Dividend (37.50 yen per share a year) 75,000
Officers' Bonus 22,875
Profit carried forward 86,820
73
EXHIBIT 99 (b)
Century Audit Corporation
Certified Public Accountants
NIIGATA CONVERTER COMPANY LIMITED
Accountants' Report
Financial Statements - March 31, 1994
74
The Board of Directors of
Niigata Converter Company, Ltd
We have examined the balance sheet of Niigata Converter Company Limited as of
March 31, 1994 and the related statement of earnings and retained earnings for
the year then ended.
Our examination was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the accompanying balance sheet and statement of earnings and
retained earnings present fairly the financial position of Niigata Converter
Co., Ltd at March 31, 1994 and the results of its operation for the year then
ended, in conformity with Commercial Code in Japan applied on a basis
consistent with that of the preceding year.
June 28, 1994
Century Audit Corporation
TOYOAKI SUZUKI
Representative Partner
75
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1994
----------------------------------
(In thousands of Yen)
CURRENT ASSETS
Cash on Hand or in Bank 1,355,041
Notes Receivable 2,330,159
Accounts Receivable-Trade 3,591,081
Marketable securities 50,227
Inventory 1,995,247
Finished Goods 4,766
Work in Process 1,132,873
Materials and Supplies 857,608
Prepaid Expenses 35,727
Payment in Advance 3,360
Accrued Income 948
Accounts Receivable 2,701
Suspence Payment 3,386
Reserve for Bad Debts -68,000
TOTAL CURRENT ASSETS 9,299,877
FIXED ASSETS
(Tangible Fixed Assets) 2,906,350
Building 2,808,977
Structures 341,136
Machinery and Equipment 3,645,118
Cars and Carriers 87,611
Tools and Jig Fixtures 2,810,929
Land 662,446
Construction on Process 20,775
Less-Accumulated Depreciation - 7,470,642
(Intangible Fixed Assets) 8,698
Telephone and Electric Utilization 8,698
(Investments) 285,644
Investment Securities 26,661
Stock of Subsidiary Company 21,276
Capital 10
Long-term Loans 119,399
Reorganization Bond Discount 1,511
Long-term Deposit as Guaranty 33,428
Other Investments 83,359
TOTAL FIXED ASSETS 3,200,692
DEFERRED ASSETS
Experimental and Research Expenses 26,231
TOTAL DEFERRED ASSETS 26,231
TOTAL 12,526,800
76
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1994
----------------------------------
(In thousands of Yen)
CURRENT LIABILITIES
Notes Payable 2,231,354
Accounts Payable-Trade 762,711
Short-term Borrowings 3,305,103
Accrued Expenses 368,268
Advance received 543
Deposit Received 395,264
Reserve for Payment of Bonus 477,127
Allowances for Enterprise Tax 66,085
Allowances for Corporate Income Taxes 175,297
Unpaid Consumption Taxes 70,412
Reserve for Guarantee for Completed Work 34,000
TOTAL CURRENT LIABILITIES 7,886,164
FIXED LIABILITIES
Long-term Borrowings 216,048
Allowances for Officers' Retirement 413,468
TOTAL FIXED LIABILITIES 629,516
ALLOWANCES
Special Account Credit Amortization 1,290
TOTAL ALLOWANCES 1,290
TOTAL LIABILITIES 8,516,970
CAPITAL
Capital 1,000,000
LEGAL RESERVE
Earned Surplus Reserve 214,014
SURPLUS
General Reserve 2,650,000
Unappropriated Earned Surplus 145,816
(Current Term Net Profit) (223,933)
TOTAL SURPLUS 2,795,816
TOTAL CAPITAL 4,009,830
TOTAL 12,526,800
77
PROFIT AND LOSS STATEMENT
FOR
THE FISCAL YEAR ENDED MARCH 31, 1994
------------------------------------
(In thousands of Yen)
Sales 16,372,882
Cost of Sales 14,028,620
Selling and Administrative Expenses 1,517,588 15,546,208
Operating Profit 826,674
Interest and Dividends Received 22,303
Miscellaneous Income 71,931
Reserve for Bad Debts carried back 67,000 161,234
Interest Paid and Discount Charges 270,004
Other Losses 141,971
Reserve for Bad Debts 68,000 479,975
Profit before Tax 507,933
Allowances for Corporate Income Taxes 284,000
Current Term Net Profit 223,933
Profit brought forward from the prev. period 4,383
Less-Interim Dividend -75,000
Less-Earned Surplus Reserve - 7,500
Unappropriated Earned Surplus 145,816
78
Agenda No. 1
APPROPRIATION OF UNAPPROPRIATED
EARNED SURPLUS (PROPOSAL)
-------------------------------
(In thousands of Yen)
UNAPPROPRIATED EARNED SURPLUS 145,816
APPROPRIATION
Earned Surplus Reserve 9,855
Dividend (37.50 yen per share a year) 75,000
Officers' Bonus 23,550
General Reserve 20,000
Profit carried forward 17,411
79
EXHIBIT 99(c)
Century Audit Corporation
Certified Public Accountants
NIIGATA CONVERTER COMPANY LIMITED
Accountants' Report
Financial Statements - March 31, 1993
80
The Board of Directors of
Niigata Converter Company, Ltd
We have examined the balance sheet of Niigata Converter Company Limited as of
March 31, 1993 and the related statement of earnings and retained earnings for
the year then ended.
Our examination was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the accompanying balance sheet and statement of earnings and
retained earnings present fairly the financial position of Niigata Converter
Co., Ltd at March 31, 1993 and the results of its operation for the year then
ended, in conformity with Commercial Code in Japan applied on a basis
consistent with that of the preceding year.
June 22,1993
Century Audit Corporation
TOYOAKI SUZUKI
Representative Partner
81
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1993
----------------------------------
(In thousands of Yen)
CURRENT ASSETS
Cash on Hand or in Bank 1,334,056
Notes Receivable 1,765,177
Accounts Receivable-Trade 3,994,660
Marketable securities 50,227
Inventory 2,256,224
Finished Goods 21,034
Work in Process 1,301,224
Materials and Supplies 933,966
Prepaid Expenses 54,192
Payment in Advance 8,019
Accrued Income 1,769
Accounts Receivable 4,548
Suspence Payment 2,680
Reserve for Bad Debts -67,000
TOTAL CURRENT ASSETS 9,404,552
FIXED ASSETS
(Tangible Fixed Assets) 2,944,877
Building 2,793,388
Structures 338,621
Machinery and Equipment 3,672,802
Cars and Carriers 84,131
Tools and Jig Fixtures 2,575,786
Land 662,446
Construction on Process 6,365
Less-Accumulated Depreciation - 7,188,662
(Intangible Fixed Assets) 8,859
Telephone and Electric Utilization 8,859
(Investments) 314,051
Investment Securities 25,813
Stock of Subsidiary Company 21,276
Capital 10
Long-term Loans 145,136
Reorganization Bond Discount 2,650
Long-term Deposit as Guaranty 36,707
Other Investments 82,459
TOTAL FIXED ASSETS 3,267,787
DEFERRED ASSETS
Experimental and Research Expenses 15,140
TOTAL DEFERRED ASSETS 15,140
TOTAL 12,687,479
82
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1993
----------------------------------
(In thousands of Yen)
CURRENT LIABILITIES
Notes Payable 2,329,694
Accounts Payable-Trade 854,044
Short-term Borrowings 3,663,135
Accrued Expenses 361,864
Advance received 1,356
Deposit Received 358,660
Reserve for Payment of Bonus 465,282
Allowances for Enterprise Tax 51,647
Allowances for Corporate Income Taxes 107,885
Unpaid Consumption Taxes 84,277
Reserve for Guarantee for Completed Work 34,000
TOTAL CURRENT LIABILITIES 8,311,844
FIXED LIABILITIES
Long-term Borrowings 53,111
Allowances for Officers' Retirement 358,792
TOTAL FIXED LIABILITIES 411,903
ALLOWANCES
Special Account Credit Amortization 2,650
TOTAL ALLOWANCES 2,650
TOTAL LIABILITIES 8,726,397
CAPITAL
Capital 1,000,000
LEGAL RESERVE
Earned Surplus Reserve 196,495
SURPLUS
General Reserve 2,650,000
Unappropriated Earned Surplus 114,587
(Current Term Net Profit) (130,434)
TOTAL SURPLUS 2,764,587
TOTAL CAPITAL 3,961,082
TOTAL 12,687,479
83
PROFIT AND LOSS STATEMENT
FOR
THE FISCAL YEAR ENDED MARCH 31, 1993
------------------------------------
(In thousands of Yen)
Sales 16,076,089
Cost of Sales 14,016,029
Selling and Administrative Expenses 1,392,211 15,408,240
Operating Profit 667,849
Interest and Dividends Received 29,373
Miscellaneous Income 72,972
Reserve for Bad Debts carried back 71,000 173,345
Interest Paid and Discount Charges 379,133
Other Losses 89,627
Reserve for Bad Debts 67,000 535,760
Profit before Tax 305,434
Allowances for Corporate Income Taxes 175,000
Current Term Net Profit 130,434
Profit brought forward from the prev. period 66,653
Less-Interim Dividend -75,000
Less-Earned Surplus Reserve - 7,500
Unappropriated Earned Surplus 114,587
84
Agenda No. 1
APPROPRIATION OF NET PROFIT (DRAFT)
----------------------------------
(In thousands of Yen)
UNAPPROPRIATED EARNED SURPLUS 114,587
APPROPRIATED PROFIT
Earned Surplus Reserve 10,019
Dividend (15% per share a year) 75,000
Officers' Bonus 25,185
Profit carried forward 4,383
85
EXHIBIT 99(d)
Century Audit Corporation
Certified Public Accountants
NIIGATA CONVERTER COMPANY LIMITED
Accountants' Report
Financial Statements - March 31, 1992
86
The Board of Directors of
Niigata Converter Company, Ltd
We have examined the balance sheet of Niigata Converter Company Limited as of
March 31, 1992 and the related statement of earnings and retained earnings for
the year then ended.
Our examination was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the accompanying balance sheet and statement of earnings and
retained earnings present fairly the financial position of Niigata Converter
Co., Ltd at March 31, 1992 and the results of its operation for the year then
ended, in conformity with Commercial Code in Japan applied on a basis
consistent with that of the preceding year.
June 22,1992
Century Audit Corporation
TOYOAKI SUZUKI
Representative Partner
87
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1992
----------------------------------
(In thousands of Yen)
CURRENT ASSETS
Cash on Hand or in Bank 1,549,849
Notes Receivable 1,912,984
Accounts Receivable -Trade 3,538,768
Marketable securities 50,227
Inventory 2,773,123
Finished Goods 18,108
Work in Process 1,667,720
Materials and Supplies 1,087,295
Prepaid Expenses 75,685
Payment in Advance 7,029
Accrued Income 2,652
Accounts Receivable 47,748
Suspence Payment 2,750
Reserve for Bad Debts -71,000
TOTAL CURRENT ASSETS 9,889,815
FIXED ASSETS
(Tangible Fixed Assets) 3,055,084
Building 2,775,366
Structures 334,710
Machinery and Equipment 3,630,161
Cars and Carriers 83,746
Tools and Jig Fixtures 2,437,858
Land 662,446
Construction on Process 14,459
Less-Accumulated Depreciation - 6,883,662
(Intangible Fixed Assets) 8,792
Telephone and Electric Utilization 8,792
(Investments) 255,521
Investment Securities 27,968
Stock of Subsidiary Company 21,276
Capital 10
Long-term Loans 97,464
Reorganization Bond Discount 4,309
Long-term Deposit as Guaranty 41,100
Other Investments 63,394
TOTAL FIXED ASSETS 3,319,397
DEFERRED ASSETS
Experimental and Research Expenses 16,680
TOTAL DEFERRED ASSETS 16,680
TOTAL 13,225,892
88
NIIGATA CONVERTER CO., LTD
BALANCE SHEET AS OF MARCH 31, 1992
----------------------------------
(In thousands of Yen)
CURRENT LIABILITIES
Notes Payable 2,650,124
Accounts Payable-Trade 866,961
Short-term Borrowings 3,733,543
Accrued Expenses 396,972
Advance received 19,425
Deposit Received 342,223
Reserve for Payment of Bonus 455,835
Allowances for Enterprise Tax 54,839
Allowances for Corporate Income Taxes 132,381
Unpaid Consumption Taxes 104,033
Reserve for Guarantee for Completed Work 34,000
TOTAL CURRENT LIABILITIES 8,790,336
FIXED LIABILITIES
Long-term Borrowings 124,958
Allowances for Officers' Retirement 303,666
TOTAL FIXED LIABILITIES 428,624
ALLOWANCES
Special Account Credit Amortization 2,834
TOTAL ALLOWANCES 2,834
TOTAL LIABILITIES 9,221,794
CAPITAL
Capital 1,000,000
LEGAL RESERVE
Earned Surplus Reserve 179,150
SURPLUS
General Reserve 2,600,000
Unappropriated Earned Surplus 224,948
(Current Term Net Profit) (182,200)
TOTAL SURPLUS 2,824,948
TOTAL CAPITAL 4,004,098
TOTAL 13,225,892
89
PROFIT AND LOSS STATEMENT
FOR
THE FISCAL YEAR ENDED MARCH 31, 1992
------------------------------------
(In thousands of Yen)
Sales 17,072,712
Cost of Sales 14,762,885
Selling and Administrative Expenses 1,395,132 16,158,017
Operating Profit 914,695
Interest and Dividends Received 44,833
Miscellaneous Income 36,631
Reserve for Bad Debts carried back 76,000 157,464
Interest Paid and Discount Charges 562,735
Other Losses 109,224
Reserve for Bad Debts 71,000 742,959
Profit before Tax 329,200
Allowances for Corporate Income Taxes 147,000
Current Term Net Profit 182,200
Profit brought forward from the prev. period 125,248
Less-Interim Dividend -75,000
Less-Earned Surplus Reserve - 7,500
Unappropriated Earned Surplus 224,948
90
Agenda No. 1
APPROPRIATION OF NET PROFIT (DRAFT)
-----------------------------------
(In thousands of Yen)
UNAPPROPRIATED EARNED SURPLUS 224,948
APPROPRIATED PROFIT
Earned Surplus Reserve 9,845
Dividend (15% per share a year) 75,000
Officers' Bonus 23,450
Other Reserve 50,000
Profit carried forward 66,653
